<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
THE FIRST AUSTRALIA FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
GATEWAY CENTER 3
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
(800) 451-6788
APRIL 6, 1998
Dear Shareholder:
The Annual Meeting of Shareholders is to be held at 1:00 p.m. (Eastern
Time), on Thursday, May 14, 1998, at the offices of Prudential Securities
Incorporated, One Seaport Plaza, 35th Floor, New York, New York. A Proxy
Statement regarding the meeting, proxy card for your vote at the meeting and an
envelope--postage prepaid--in which to return your proxy are enclosed.
At the Annual Meeting, the shareholders will elect the Fund's Class I
Directors, consider the ratification of the selection of Price Waterhouse LLP as
independent public accountants, consider a proposal to amend the Fund's Articles
of Incorporation, consider a change of the Fund's sub-classification under the
Investment Company Act of 1940, as amended, and consider the elimination of the
Fund's investment restriction regarding diversification, and consider a proposal
to amend the Fund's policy on concentration to be implemented only upon the
concurrence of the Division of Investment Management of the Securities and
Exchange Commission. In addition, the shareholders present will hear a report on
the Fund. There will be an opportunity to discuss matters of interest to you as
a shareholder.
Your Directors recommend that the shareholders vote in favor of each of the
foregoing matters.
<TABLE>
<S> <C>
LAURENCE S. FREEDMAN BRIAN M. SHERMAN
CHAIRMAN PRESIDENT
</TABLE>
SHAREHOLDERS ARE URGED TO SIGN AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE SO AS TO ASSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT REGARDLESS
OF THE SIZE OF YOUR SHAREHOLDING.
<PAGE>
THE FIRST AUSTRALIA FUND, INC.
GATEWAY CENTER 3
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1998
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The First
Australia Fund, Inc. (the "Fund") will be held at the offices of Prudential
Securities Incorporated, One Seaport Plaza, 35th Floor, New York, New York, on
Thursday, May 14, 1998, at 1:00 p.m. (Eastern Time) for the following purposes:
(1) To elect four Directors to serve as Class I Directors for a
three-year term;
(2) To ratify the selection of Price Waterhouse LLP as independent public
accountants of the Fund for the fiscal year ending October 31, 1998;
(3) To amend the Articles of Incorporation to add supermajority 75% vote
requirements to approve certain business combinations, open-ending
and shareholder investment proposals;
(4) To change the Fund's sub-classification under the Investment Company
Act of 1940, as amended (the "1940 Act"), and eliminate the Fund's
investment restriction regarding diversification; and
(5) To amend the Fund's policy on concentration to be implemented only
upon the concurrence of the Division of Investment Management of the
Securities and Exchange Commission.
The Board of Directors has fixed the close of business on March 20, 1998 as
the record date for the determination of shareholders entitled to vote at the
meeting or any adjournment thereof.
The appointed proxies will vote in their discretion on any other business as
may properly come before the meeting or any adjournments or postponements
thereof.
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the meeting, the
persons named as proxies may propose one or more adjournments of the meeting, in
accordance with applicable law, to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of the holders of a majority
of the Fund's shares present in person or by proxy at the meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are entitled to vote in favor and will vote against any such adjournment those
proxies to be voted against that proposal.
By Order of the Board of Directors,
Roy M. Randall, SECRETARY
Newark, New Jersey
April 6, 1998
IMPORTANT: YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ADDRESSED ENVELOPE
WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT
RETURN OF THE ENCLOSED PROXY MAY SAVE THE FUND THE NECESSITY AND EXPENSE OF
FURTHER SOLICITATIONS TO ASSURE A QUORUM AT THE MEETING. THE ENCLOSED PROXY IS
BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE FUND.
<PAGE>
PROXY STATEMENT
THE FIRST AUSTRALIA FUND, INC.
GATEWAY CENTER 3
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1998
------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of The First Australia Fund, Inc., a
Maryland corporation (the "Fund"), to be voted at the Annual Meeting of
Shareholders of the Fund (the "Meeting") to be held at the offices of Prudential
Securities Incorporated, One Seaport Plaza, 35th Floor, New York, New York, on
Thursday, May 14, 1998, at 1:00 p.m. (Eastern Time). The approximate mailing
date for this Proxy Statement is April 7, 1998.
All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon or otherwise as
provided therein. Unless instructions to the contrary are marked, proxies will
be voted IN FAVOR of Proposals 1, 2, 3, 4 and 5. Any proxy may be revoked at any
time prior to the exercise thereof by giving written notice to the Secretary of
the Fund (addressed to the Secretary at the principal executive office of the
Fund, Gateway Center 3, 100 Mulberry Street, Newark, New Jersey 07102).
The Board of Directors has fixed the close of business on March 20, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting and at any adjournment thereof. Shareholders on the
record date will be entitled to one vote for each share held. As of March 20,
1998, the Fund had 17,189,998 shares of common stock outstanding, par value $.01
per share. To the knowledge of management of the Fund, as of the record date, no
persons or group beneficially own more than five percent of the outstanding
shares of common stock of the Fund.
The Board of Directors of the Fund knows of no business other than that
mentioned in the Notice of the Meeting which will be presented for consideration
at the Meeting. If any other matter is properly presented, it is the intention
of the persons named in the enclosed proxy to vote in accordance with their best
judgment.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE FUND'S ANNUAL REPORT
FOR ITS FISCAL YEAR ENDED OCTOBER 31, 1997, AND ANY MORE RECENT REPORTS, TO ANY
FUND SHAREHOLDER UPON REQUEST. TO REQUEST A COPY, PLEASE CALL OR WRITE TO THE
FUND'S ADMINISTRATOR, PRUDENTIAL MUTUAL FUND MANAGEMENT, INC., GATEWAY CENTER 3,
100 MULBERRY STREET, NEWARK, NEW JERSEY 07102, TELEPHONE: 1-800-451-6788.
PROPOSAL 1: ELECTION OF CLASS I DIRECTORS
The Fund's By-laws provide that the Board of Directors will be divided into
three classes of Directors, as nearly equal in number as possible, each of
which, after a transition period, will serve for three years with one class
being elected each year. Each year the term of office of one class will expire.
Anthony E. Aaronson, Roger C. Maddock, Neville Miles and John T. Sheehy,
Directors who were elected to serve until the Meeting, have been nominated for a
three-year term to expire at the Annual Meeting of Shareholders to be held in
2001 and until their successors are duly elected and qualified. The nominees
have indicated an intention to serve if elected and have consented to be named
in this Proxy Statement.
It is the intention of the persons named in the enclosed proxy to vote in
favor of the election of persons listed below under Class I. The Board of
Directors of the Fund knows of no reason why any of
1
<PAGE>
these nominees will be unable to serve, but in the event of any such inability,
the proxies will be voted for such substituted nominees as the Board of
Directors may recommend.
The following table sets forth certain information concerning each of the
nominees for election as a Director of the Fund and each Director of the Fund.
Each of the nominees is currently a Director of the Fund.
<TABLE>
<CAPTION>
SHARES OF
BENEFICIALLY
PRESENT OFFICE WITH OWNED AND %
NAME AND ADDRESS THE FUND, PRINCIPAL OF TOTAL
OF EACH DIRECTOR OR OCCUPATION OR EMPLOYMENT DIRECTOR OUTSTANDING
NOMINEE AND DIRECTORSHIPS AGE SINCE ON 10/31/97 (1)
- -------------------------------------------------------------------------- ----- -------- ---------------
<S> <C> <C> <C> <C>
CLASS I (CURRENT DIRECTORS AND NOMINEES FOR A TERM EXPIRING
AT THE ANNUAL MEETING TO BE HELD IN 2001)
Anthony E. Aaronson (++) Director, The First Australia Prime Income Fund, 61 1985 --
116 South Anita Avenue Inc. (since 1986); Tony Aaronson (textile
Los Angeles, CA 90049 agency) (since 1993); Vice President, Fortune
Fashions (1992-1993); President, Fashion Fabric
Division, Forrest Fabrics (textiles) (August
1991-1992); Director, PKE Incorporated
(consulting company) (1988-1990); Director,
Textile Association of Los Angeles (1990-1993);
Vice President, Textile Association of Los
Angeles (1996-1997); Director, O.T.C. Sales,
Emday Fabrics Co. (textiles) (1986-1991);
Executive Vice-President and
Secretary-Treasurer, J&J Textiles Inc.
(1982-1986).
Roger C. Maddock (*) Director, The First Australia Prime Income Fund, 47 1992 --
Union House, Union Inc. and The First Commonwealth Fund, Inc.
Street (since 1992); Chairman and Managing Director,
St. Helier, Jersey EquitiLink International Management Limited
Channel Islands JE4 8TQ (since 1985); Partner, Jackson Fox, Chartered
United Kingdom Accountants (since 1981); Director, Worthy Trust
Company Limited (since 1993); Director,
Professional Consultancy Services Limited (since
1983); Director, Hollywell Spring Limited (since
1987); Director, The EquitiLink Private Gold
Investment Fund Limited (since 1992); Director,
CentraLink-EquitiLink Investment Company Limited
(since 1994).
Neville Miles Director, The First Australia Prime Income Fund, 51 1996 --
23 Regent Street Inc. (since 1996); Director, MaxiLink Limited
Paddington N.S.W. 2021 (investment company); Director, Walker Corp.
Australia Limited (property development); Director, First
Resources Development Fund Limited (investment
company); Executive Director, EL&C Baillieu
Limited (stock broker) (1994-1996); Executive
Director, Old Minnett Securities Limited
(stockbroker) (1988-1994).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIALLY
PRESENT OFFICE WITH OWNED AND %
NAME AND ADDRESS THE FUND, PRINCIPAL OF TOTAL
OF EACH DIRECTOR OR OCCUPATION OR EMPLOYMENT DIRECTOR OUTSTANDING
NOMINEE AND DIRECTORSHIPS AGE SINCE ON 10/31/97 (1)
- -------------------------------------------------------------------------- ----- -------- ---------------
<S> <C> <C> <C> <C>
John T. Sheehy (++)(*) Director, The First Australia Prime Income Fund, 55 1985 --
2700 Garden Road Inc. (since 1986), First Australia Prime Income
Suite G Investment Company Limited (since 1986) and The
Monterey, CA 93940 First Commonwealth Fund, Inc. (since 1992);
Managing Director, The Value Group LLC (merchant
banking) (since 1997); Director, Greater Pacific
Food Holdings, Inc. (food industry investment
company) (since 1993); Director, Video City,
Inc. (video retail merchandising); Partner,
Sphere Capital Partners (corporate consulting)
(since 1987); Director, Sphere Capital Advisors
(investment adviser); Director, Sandy
Corporation (corporate consulting, communication
and training) (since 1986); Managing Director,
Black & Company (broker-dealer and investment
bankers); Associate Director, Bear, Stearns &
Co. Inc. (1985-1987); previously, Limited
Partner, Bear, Stearns & Co. Inc.
CLASS II (TERM EXPIRING AT THE ANNUAL MEETING TO BE HELD IN 1999)
Harry A. Jacobs, Jr.(*) Director, The First Australia Prime Income Fund, 76 1985 3,979
One New York Plaza Inc. (since 1986); Senior Director, Prudential
New York, NY 10292 Securities Incorporated (since 1986); Chairman
and Chief Executive Officer, Prudential Mutual
Fund Management, Inc. (June-September 1993);
previously, Chairman of the Board, Prudential
Securities Incorporated (1982-1985); Chairman of
the Board and Chief Executive Officer, Bache
Group, Inc. (1977-1982); Trustee, The Trudeau
Institute (eleemosynary); Director of 11
investment companies affiliated with Prudential
Securities Incorporated.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIALLY
PRESENT OFFICE WITH OWNED AND %
NAME AND ADDRESS THE FUND, PRINCIPAL OF TOTAL
OF EACH DIRECTOR OR OCCUPATION OR EMPLOYMENT DIRECTOR OUTSTANDING
NOMINEE AND DIRECTORSHIPS AGE SINCE ON 10/31/97 (1)
- -------------------------------------------------------------------------- ----- -------- ---------------
<S> <C> <C> <C> <C>
Rt. Hon. Malcolm Fraser, Director, The First Australia Prime Income Fund, 67 1985 --
A.C., C.H. (+) Inc. (since 1986), First Australia Prime Income
55 Collins Street Investment Company Limited (since 1986) and The
Melbourne, Victoria 3000 First Commonwealth Fund, Inc. (since 1992);
Australia International Consultant on Political, Economic
and Strategic Affairs (since 1983); Partner,
Nareen Pastoral Company (agriculture); Fellow,
Center for International Affairs, Harvard
University; International Council of Associates,
Claremont University; Member, ANZ International
Board of Advice (1987-1990); InterAction Council
for Former Heads of Government (since 1987,
Chairman since 1997); Co-Chairman, Commonwealth
Eminent Persons Group on Southern Africa
(1985-1986); Chairman, United Nations Committee
on African Commodity Problems (1989-1990);
Consultant, The Prudential Insurance Company of
America; Parliamentarian--Prime Minister of
Australia (1975-1983).
Howard A. Knight Director, The First Australia Prime Income Fund, 56 1993 --
36 Ives Street Inc. (since 1993); Director, Vice Chairman and
London SW3 2ND Chief Operating Officer, Scandinavian
United Kingdom Broadcasting System SA (television and radio
broadcasting) (since 1996); Private Investor and
Consultant (1994-1996); President of Investment
Banking, Equity Transactions and Corporate
Strategy, Prudential Securities Incorporated
(1991-1994); formerly Chairman and Chief
Executive Officer, Avalon Corporation
(1984-1990); Managing Director, President and
Chief Executive Officer, Weeks Petroleum Limited
(1982-1984); General Counsel, member of the
Executive Committee and Director, Farrell Lines
Incorporated (1976-1982); Partner, Cummings &
Lockwood (1963-1976).
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIALLY
PRESENT OFFICE WITH OWNED AND %
NAME AND ADDRESS THE FUND, PRINCIPAL OF TOTAL
OF EACH DIRECTOR OR OCCUPATION OR EMPLOYMENT DIRECTOR OUTSTANDING
NOMINEE AND DIRECTORSHIPS AGE SINCE ON 10/31/97 (1)
- -------------------------------------------------------------------------- ----- -------- ---------------
<S> <C> <C> <C> <C>
Brian M. Sherman (*) President of the Fund; President and Director, The 54 1985 --
Level 3 First Australia Prime Income Fund, Inc. (since
190 George Street 1986); Joint Managing Director (since 1986) and
Sydney, N.S.W. 2000 Chairman (since 1995), First Australia Prime
Australia Income Investment Company Limited; Director and
Vice President (since 1992) and Chairman (since
1995), The First Commonwealth Fund, Inc.;
Chairman and Joint Managing Director, EquitiLink
Limited (since 1986); Chairman and Joint
Managing Director, EquitiLink Australia Limited
(since 1981); Director, EquitiLink Interna-
tional Management Limited (since 1985); Joint
Managing Director, MaxiLink Limited (since
1987); Executive Director, MaxiLink Securities
Limited (since 1987); Joint Managing Director,
First Resources Development Fund Limited (since
1994); Director, Ten Group Limited (since 1994);
Director, telecasters North Queensland Limited
(since 1993); Director, Sydney Organizing
Committee for the Olympic Games.
Richard H. McCoy (++)(*) Director, the First Australia Prime Income 55 1993 --
55 King Street West Investment Company Limited (since 1993); Vice
Toronto, Ontario M5K 1A2 Chairman, TD Securities, Inc. (since May 1997);
Canada Deputy Chairman, CIBC Wood Gundy Securities Inc.
(investment dealer) (1978-February 1997).
CLASS III (TERM EXPIRING AT THE ANNUAL MEETING TO BE HELD IN 2000)
Sir Roden Cutler, V.C., Chairman (1986-1995) and Director (since 1986), 81 1985 --
A.K., K.C.M.G., The First Australia Prime Income Fund, Inc.;
K.C.V.O., C.B.E., Chairman (1986-1995) and Director (since 1986),
K.St.J. (+) First Australia Prime Income Investment Company
22 Ginahgulla Road Limited; Chairman (1992-1995) and Director
Bellevue Hill, N.S.W. (since 1992), The First Commonwealth Fund, Inc.;
2023 Australia Director, Rothmans Holding Ltd.
Australia (formerly Rothmans Pall Mall) (tobacco)
(1981-1994); Chairman, State Bank of New South
Wales (1981-1986);
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIALLY
PRESENT OFFICE WITH OWNED AND %
NAME AND ADDRESS THE FUND, PRINCIPAL OF TOTAL
OF EACH DIRECTOR OR OCCUPATION OR EMPLOYMENT DIRECTOR OUTSTANDING
NOMINEE AND DIRECTORSHIPS AGE SINCE ON 10/31/97 (1)
- -------------------------------------------------------------------------- ----- -------- ---------------
<S> <C> <C> <C> <C>
Governor of New South Wales, Australia
(1966-1981).
David Lindsay Elsum, Director, The First Australia Prime Income Fund, 60 1985 --
A.M. (+) Inc. (since 1986), First Australia Prime Income
9 Maygrove Investment Company Limited (since 1986) and The
South Yarra, Victoria First Commonwealth Fund, Inc. (since 1992);
3141 Director, MaxiLink Ltd.; Chairman, Stodart
Australia Investment Pty. Ltd.; Chairman, Queen Victoria
Market; Chairman, Melbourne Wholesale Fish
Market Ltd.; Director Stateguard Friendly
Society; Director, First Resources Development
Fund; Member, Corporations and Securities Panel
of the Australian Securities Commission; Member,
Federal Administrative Appeals Tribunal;
Adviser, TASA International Executive Search;
Chairman, Health Computing Services Limited;
President, State Superannuation Fund of Victoria
(1986-1993); Director, IlTec Limited
(1993-1996); Managing Director, The MLC Limited
(insurance) (1984-1985); Managing Director,
Renison Goldfields Consolidated Limited (mining)
(1983-1984).
Laurence S. Freedman (*) Vice President (since 1985) and Chairman (since 54 1985 --
Level 3 1995) of the Fund; Vice President and Director
190 George Street (since 1986) and Chairman (since 1995), The
Sydney, N.S.W. 2000 First Australia Prime Income Fund, Inc.; Joint
Australia Managing Director, First Australia Prime Income
Investment Company Limited (since 1986);
President and Director, The First Commonwealth
Fund, Inc. (since 1992); Founder and Director,
EquitiLink Limited (since 1986); Joint Managing
Director, EquitiLink Australia Limited (since
1982); Director, EquitiLink International
Management Limited (since 1985); Chairman and
Joint Managing Director, MaxiLink Limited (since
1987); Executive Director, MaxiLink Securities
Limited (since 1987); Chairman and Joint
Managing Director, First Resources Development
Fund Limited (since 1994);
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIALLY
PRESENT OFFICE WITH OWNED AND %
NAME AND ADDRESS THE FUND, PRINCIPAL OF TOTAL
OF EACH DIRECTOR OR OCCUPATION OR EMPLOYMENT DIRECTOR OUTSTANDING
NOMINEE AND DIRECTORSHIPS AGE SINCE ON 10/31/97 (1)
- -------------------------------------------------------------------------- ----- -------- ---------------
<S> <C> <C> <C> <C>
Director, Ten Group Limited (since 1994);
Director, Telecasters North Queensland Limited
(since 1993); Managing Director, Link
Enterprises (International) Pty. Limited
(investment management company) (since 1980);
Manager of Investments, Bankers Trust Australia
Limited (1978-1980); Investment Manager,
Consolidated Goldfields (Australia) Limited
(natural resources investments) (1975-1978).
Michael R. Horsburgh Director, The First Australia Prime Income Fund, 52 1985 --
21,22/FI Ssang Yong Inc. (since 1986); Director, The First
Tower Commonwealth Fund, Inc. (since 1994); Executive
23-2 Yuido-dong Vice President, Hannuri Securities & Investment,
Youngdungpo-gu, Ltd. (since October 1997); Managing Director,
Seoul 150-010, Korea Carlson Investment Management, Inc.
(1996-October 1997); Director and Chief
Executive Officer, Horsburgh Carlson Investment
Management, Inc. (1991-1996); Director, The
First Hungary Fund; Managing Director, Barclays
de Zoete Wedd Investment Management (U.S.A.)
(1990-1991); Special Associate Director, Bear,
Stearns & Co. Inc. (1989-1990); Senior Managing
Director, Bear, Stearns & Co. Inc. (1985-1989);
General Partner, Bear, Stearns & Co. Inc.
(1981-1985); previously, Limited Partner, Bear,
Stearns & Co. Inc.
William J. Potter (+) Director, The First Australia Prime Income Fund, 49 1985 1,000
380 Lexington Avenue Inc. (since 1986), First Australia Prime Income
Suite 1511 Investment Company Limited (since 1986) and The
New York, NY 10168 First Commonwealth Fund, Inc. (since 1992);
President, Ridgewood Group International Ltd.
(investment banking) (since 1989); Director and
Chairman of Finance, National Foreign Trade
Association (USA); Director, Ridgewood Capital
Funding, Inc. (NASD); Director, Impulsora del
Fondo Mexico; Director, International Panorama
Resources Ltd.; Director, Voicenet, Inc.;
Director, Alexandria Bancorp (banking group in
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
BENEFICIALLY
PRESENT OFFICE WITH OWNED AND %
NAME AND ADDRESS THE FUND, PRINCIPAL OF TOTAL
OF EACH DIRECTOR OR OCCUPATION OR EMPLOYMENT DIRECTOR OUTSTANDING
NOMINEE AND DIRECTORSHIPS AGE SINCE ON 10/31/97 (1)
- -------------------------------------------------------------------------- ----- -------- ---------------
<S> <C> <C> <C> <C>
Cayman Islands); Director, Battery Technologies,
Inc.; Consultant, Trieste Futures Exchange,
Inc.; Advisor, Guardian Capital Group; Partner,
Sphere Capital Partners (corporate consulting)
(1989-1997); Director, Alexandria Bancorp
Limited; Director, Canadian Health Foundation;
Managing Director, Prudential-Bache Securities
Inc. (1984-1989); First Vice President, Barclays
Bank, plc (1982-1984); previously, various
positions with Toronto Dominion Bank.
</TABLE>
- ------------------------
* Directors considered by the Fund and its counsel to be persons who are
interested persons (which as used in this Proxy Statement is as defined in
the Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund
or of the Fund's investment manager or investment adviser. Mr. Jacobs is
deemed to be an interested person because of his affiliation with Prudential
Securities Incorporated, a broker-dealer registered under the Securities
Exchange Act of 1934. Messrs. Freedman, Sherman and Maddock are deemed to be
interested persons because of their affiliation with the Fund's investment
manager and investment adviser, or because they are officers of the Fund or
both. Mr. McCoy may be deemed to be an interested person because of his
affiliation with TD Securities Inc.
+ Messrs. Cutler, Elsum, Fraser and Potter are members of the Contract Review
Committee.
++ Messrs. Aaronson, McCoy and Sheehy are members of the Audit Committee.
(1) The information as to beneficial ownership is based on statements furnished
to the Fund by the Directors and nominees. All shares listed in this table
are owned with sole voting and investment power and in the aggregate
represent less than 1/4 of 1% of the total shares outstanding as of October
31, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of
the Securities Exchange Act of 1934 (the "Exchange Act") and Section 30(h) of
the 1940 Act, as applied to the Fund, require the Fund's officers, Directors,
investment manager or adviser, affiliates of the investment manager or adviser,
and persons who beneficially own more than 10% of a registered class of the
Fund's outstanding securities ("Reporting Persons"), to file reports of
ownership of the Fund's securities and changes in such ownership with the
Securities and Exchange Commission and the American Stock Exchange. Such persons
are required by Securities and Exchange Commission regulations to furnish the
Fund with copies of all such filings.
Based solely upon its review of the copies of such forms received by it and
written representations from certain Reporting Persons that no year-end reports
were required for those persons, the Fund believes that during the fiscal year
ended October 31, 1997, all filing requirements applicable to its Reporting
Persons were complied with except that a Form 5 on behalf of Richard P.
Strickler, an officer of an affiliate of the investment manager, was filed late.
COMMITTEES AND BOARD OF DIRECTOR MEETINGS. The Board of Directors has a
standing Audit Committee, which consists of certain Directors who are not
interested persons of the Fund as defined in the 1940 Act. The principal purpose
of the Audit Committee is to review the scope and results of the annual audit
conducted by the Fund's independent public accountants and the evaluation by
such accountants of the
8
<PAGE>
accounting procedures followed by the Fund. The Board of Directors also has a
standing Contract Review Committee that reviews and makes recommendations to the
Board with respect to entering into, renewal or amendment of the Management
Agreement, the Advisory Agreement, the Consultant Agreement and the
Administration Agreement. The Board of Directors does not have a standing
nominating committee.
During the Fund's fiscal year ended October 31, 1997, the Board of Directors
held four meetings, the Audit Committee held two meetings and the Contract
Review Committee held one meeting. Each of the Directors then in office attended
at least 75% of the aggregate number of meetings of the Board of Directors and
all meetings of the Committees of the Board on which he served, except Mr.
Jacobs, who attended two of the four meetings of the Board of Directors.
OFFICERS OF THE FUND. The officers of the Fund, all of whom serve at the
pleasure of the Board of Directors, and, with the exception of Messrs. Manor,
Sechos and Kozlowski, and Mesdames Bancroft and Sananikome-Fletcher, all of whom
have served since the Fund was organized in 1985, are as follows: Brian M.
Sherman, President; Laurence S. Freedman, Vice President; David Manor (age 57),
Treasurer; Ouma Sananikome-Fletcher (age 39), Assistant Vice President-Chief
Investment Officer; Barry G. Sechos (age 36), Assistant Treasurer; Kenneth T.
Kozlowski (age 36), Assistant Treasurer; Roy M. Randall (age 61), Secretary;
Allan S. Mostoff (age 65), Assistant Secretary; and Margaret A. Bancroft (age
59), Assistant Secretary.
The respective principal occupations during the past five years of the
Fund's officers are as follows: Messrs. Sherman and Freedman, shown above in the
table of nominees and Directors under "Proposal 1: Election of Class I
Directors"; David Manor, Executive Director, EquitiLink Limited, Executive
Director, EquitiLink Australia Limited, Director, EquitiLink International
Management Limited, Director, EquitiLink U.S.A., Inc. and Director, President
and Chairman of the Board of First Australia Mutual Funds, Inc. (1989-1991);
Ouma Sananikome-Fletcher, Investment Director, EquitiLink Australia Limited
(since 1994) and Executive Director, Banque Nationale de Paris (1986-1994);
Barry G. Sechos, General Counsel to the EquitiLink Group (since 1993), Director,
EquitiLink Australia Limited (since 1994) and Soliciter, Allen, Allen, & Hemsley
(1986-1993); Kenneth T. Kozlowski, Vice President, Prudential Mutual Fund
Management, Inc. (since 1992) and Fund Accounting Manager, Pruco-Life Insurance
Company (1990-1992); Roy M. Randall, Partner of Stikeman, Elliott (Australian
law firm); Allan S. Mostoff and Margaret A. Bancroft, Partners of Dechert Price
& Rhoads (U.S. law firm).
RELATIONSHIP OF DIRECTORS OR NOMINEES WITH THE INVESTMENT ADVISER AND THE
INVESTMENT MANAGER. EquitiLink International Management Limited (the "Investment
Manager") serves as investment manager to the Fund and EquitiLink Australia
Limited (the "Investment Adviser") serves as investment adviser to the Fund
pursuant to a management agreement dated February 1, 1990 and an advisory
agreement dated February 1, 1990.
The Investment Manager is a Jersey, Channel Islands corporation organized in
October 1985 with its registered office located at Union House, Union Street,
St. Helier, Jersey, Channel Islands. The Investment Adviser is a wholly owned
subsidiary of EquitiLink Limited, an Australian corporation. The registered
offices of both the Investment Adviser and EquitiLink Limited are located at
Level 3, 190 George Street, Sydney, N.S.W., Australia. EquitiLink Limited is a
public company whose ordinary shares are listed on the Australian Stock Exchange
Limited.
Messrs. Freedman and Sherman, both Directors of the Fund, serve as directors
of the Investment Manager. Mr. Maddock, a Director of the Fund, is also chairman
and managing director of the Investment Manager. In addition, Messrs. Freedman
and Sherman are the principal shareholders of the Investment Manager. Messrs.
Freedman and Sherman also serve as, respectively, joint managing director, and
joint managing director and chairman, of the Investment Adviser, and are the
principal shareholders of EquitiLink Limited. Mr. Maddock is also a shareholder
of EquitiLink Limited.
9
<PAGE>
During the fiscal year ended October 31, 1997, Professional Consultancy
Services Limited, a limited company organized under the laws of Jersey, Channel
Islands, provided administrative services to the Investment Manager in
connection with its activities on behalf of the Fund and other U.S. and foreign
investment companies and entities in return for a fee in the amount of $930,000.
Mr. Maddock is a director and a principal shareholder of Professional
Consultancy Services Limited.
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS. The following table sets
forth information regarding compensation of Directors by the Fund and by the
fund complex of which the Fund is a part for the fiscal year ended October 31,
1997. Officers of the Fund and Directors who are interested persons of the Fund
do not receive any compensation from the Fund or any other fund in the fund
complex. In the column headed "Total Compensation From Registrant and Fund
Complex Paid to Directors," the number in parentheses indicates the total number
of boards of funds in the fund complex on which the Director serves.
COMPENSATION TABLE
FISCAL YEAR ENDED 10/31/97
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
AGGREGATE BENEFITS ANNUAL FROM REGISTRANT
COMPENSATION ACCRUED BENEFITS AND FUND
FROM AS PART OF UPON COMPLEX PAID
NAME OF PERSON, POSITION REGISTRANT FUND EXPENSES RETIREMENT TO DIRECTORS
- ---------------------------------------------------- ------------- -------------- ---------- ---------------
<S> <C> <C> <C> <C>
Anthony E. Aaronson................................. $ 7,500 N/A N/A $ 21,250(2)
Sir Roden Cutler.................................... 7,500 N/A N/A 29,250(3)
David Lindsay Elsum................................. 7,500 N/A N/A 29,250(3)
Rt. Hon. Malcolm Fraser............................. 7,500 N/A N/A 29,250(3)
Laurence S. Freedman................................ 0 N/A N/A 0(3)
Michael R. Horsburgh................................ 7,500 N/A N/A 29,250(3)
Harry A. Jacobs, Jr................................. 0 N/A N/A 0(2)
Howard A. Knight.................................... 7,500 N/A N/A 21,250(2)
Richard H. McCoy.................................... 7,500 N/A N/A 7,500(1)
Roger C. Maddock.................................... 0 N/A N/A 0(3)
Neville Miles....................................... 7,500 N/A N/A 21,250(2)
William J. Potter................................... 7,500 N/A N/A 29,250(3)
John T. Sheehy...................................... 7,500 N/A N/A 29,250(3)
Brian M. Sherman.................................... 0 N/A N/A 0(3)
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF COMMON STOCK VOTE FOR THE
ELECTION OF THE FOUR NOMINEES TO THE FUND'S BOARD OF DIRECTORS.
PROPOSAL 2: SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Fund, including a majority of the Directors
who are not interested persons of the Fund, has selected the firm of Price
Waterhouse LLP, independent public accountants, to examine the financial
statements of the Fund for the fiscal year ending October 31, 1998. Such
appointment is now subject to ratification or rejection by the shareholders of
the Fund.
Audit services performed by Price Waterhouse LLP during the most recent
fiscal year included examination of the financial statements of the Fund,
services related to filings with the Securities and Exchange Commission and
consultation on matters performed by such firm related to the preparation and
filing of tax returns. The Fund knows of no direct or indirect financial
interest of such firm in the Fund.
10
<PAGE>
Representatives of Price Waterhouse LLP are expected to be present at the
Meeting and will have the opportunity to respond to questions from shareholders
and to make a statement if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF
THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING OCTOBER 31, 1998.
PROPOSAL 3: AMENDMENT OF THE FUND'S ARTICLES OF
INCORPORATION TO ADD SUPERMAJORITY 75% VOTE REQUIREMENTS
TO APPROVE CERTAIN BUSINESS COMBINATIONS, OPEN-ENDING AND
SHAREHOLDER INVESTMENT PROPOSALS
The Board of Directors has approved and recommends the adoption by
shareholders of an amendment to the Fund's Articles of Incorporation to add a
new Article Ninth, as set forth in Appendix A, requiring that a "fair price" be
paid for the Fund's shares in the event of a proposed merger or other business
combination which is not approved by either 75% of the "Continuing Directors" of
the Board or the holders of 75% of the outstanding shares of the Fund (the "Fair
Price Provision"). Proposed Article Ninth would require the same supermajority
vote of either the Fund's Continuing Directors or its shareholders to amend the
Articles of Incorporation to "open-end" the Fund by making the Fund's shares
redeemable and a 75% vote of its shareholders to adopt any shareholder proposal
as to specific investment decisions with respect to the Fund's assets.
"Continuing Directors," for purposes of the supermajority vote required of
Directors, is defined in the proposed amendment. It generally refers to persons
who are not affiliated with a party proposing to enter into a Business
Combination (other than the Fund's current investment manager or its affiliates)
and who have been Board members for at least 12 months. The detailed definition
of Continuing Directors is spelled out in the proposed amendment.
"Fair price" is also defined in the proposed amendment. It generally
provides that the value of any cash, stock or other property received in a
Business Combination by the Fund's shareholders be equal in value to the higher
of (1) the highest per share price paid by the purchaser in a Business
Combination in the two-year period before its first public announcement of a
proposed Business Combination or the date on which the purchaser first became a
beneficial owner of the Fund's voting stock (whichever is higher) and (2) the
net asset value per share of the Fund's Common Stock on the public announcement
date of a proposed Business Combination or the date on which the purchaser first
became a beneficial owner of the Fund's voting stock (whichever is higher).
Your attention is directed to Appendix A which spells out the details of the
proposed amendment and sets forth the exact wording of such definitions as "Fair
Price," "Business Combination" and "Continuing Directors."
Generally speaking, business combinations subject to the supermajority vote
provisions would include mergers and consolidations, sales and leases of the
Fund's assets in excess of $1,000,000 (except in the ordinary course of business
or in portfolio transactions) and the sale by the Fund of its securities with a
value of $1,000,000 or more (except in connection with public offerings,
dividend reinvestment plans or pursuant to stock subscription rights).
An open-ending of the Fund means an amendment to the Fund's Articles which
would permit the Fund's shareholders to present their shares to the Fund and
receive a proportionate share of the Fund's current net assets or the cash
equivalent.
The shareholder proposals which are contemplated to be subject to approval
by a 75% shareholder vote are proposals that relate to specific investment
decisions to be made with respect to the Fund's assets, such as a buyback of
shares, a merger or liquidation of the Fund or a proposal to, for example, amend
the Fund's investment objective or investment policies.
11
<PAGE>
At present, under the Fund's Articles, any open-ending or business
combination which, under Maryland law or otherwise, must be voted on by
shareholders, requires the approval of a majority of all of the Fund's
outstanding common shares. Under the proposed amendment to the Articles, the
requisite shareholder vote would be raised to 75% of the Fund's outstanding
common shares unless 75% of the Continuing Directors were to approve the
open-ending or the business combination. Similarly, under the proposed amendment
to the Articles, the requisite vote to approve shareholder proposals relating to
specific investment decisions to be made with respect to the Fund's assets would
be raised from the affirmative vote of a majority of the Fund's outstanding
common shares to the affirmative vote of 75% of the Fund's outstanding common
shares.
REASONS FOR THE PROPOSED AMENDMENT TO THE ARTICLES. In recent years,
attempts have been made to open-end or acquire closed-end investment companies
contrary to a determination by the Board of Directors of such funds that any
such open-ending or acquisition would not be in the best interests of fund
shareholders. For example, open-ending a closed-end fund can lead to the
downsizing of its assets below an amount which permits it to provide investors
with the efficiencies of scale that pooled investment vehicles, such as the
Fund, provide. If assets shrink substantially because of redemptions, it can
lead to a decision to close the Fund down, thereby leaving investors who, in the
case of the Fund, have chosen to access the Australian securities market through
a closed-end investment company registered under the Investment Company Act of
1940 with few, or no, other such options. Shareholder proposals could be crafted
to lead to the same result. At present, according to Lipper Closed-End Fund
Performance Analysis Service, there are no other closed-end registered
investment companies that are organized to invest primarily in equity securities
listed on the Australian Stock Exchange.
Although there are no pending proposals for conversion of the Fund to an
open-end company, for specific investment decisions or for a takeover of the
Fund, Management and the Board believe that it is important to ensure that any
proposal to takeover or open-end the Fund receives the overwhelming support of
shareholders since any such proposal could represent a very fundamental or
controversial change in the Fund's established operations and objectives and
shareholders may clearly differ on whether such a proposal is favorable based on
their own circumstances. For this reason, Management and the Board believe that
the affirmative vote of more than a simple majority of the shareholders should
be required and that any such proposal should receive the overwhelming support
of either the Board of Directors or the Fund's shareholders. In the case of any
proposed merger or other specified business combination, the same supermajority
voting provisions would apply unless the proposal provides for the payment of at
least the full net asset value to shareholders. However, the proposed amendment
could impede or prevent transactions in which shareholders might obtain prices
for their shares, including prices at or above net asset value, in excess of
then current market prices at which the Fund's shares were then trading.
The By-Laws of the Fund currently provide for the staggered election of the
Board of Directors, with directors divided into three classes, each having a
term of three years. This provision ensures the continuity of the Fund's Board,
and also tends to impede, for up to two years, the replacement of a majority of
the Board. The Fair Price Provision would also discourage prospective acquirers
from attempting to take advantage of any market discount from net asset value on
the Fund's shares. Accordingly, Management and the Board believe that the
adoption of the Fair Price Provision should serve to ensure continuity of the
Fund and permit the Investment Manager to manage the Fund's assets in a manner
consistent with the Fund's investment objective, without concern as to actions
that could impede investment flexibility by requiring premature liquidation of
the Fund's assets.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
TO THE FUND'S ARTICLES OF INCORPORATION TO ADD SUPERMAJORITY 75% VOTE
REQUIREMENTS TO APPROVE CERTAIN BUSINESS COMBINATIONS, OPEN-ENDING AND
SHAREHOLDER INVESTMENT PROPOSALS.
12
<PAGE>
PROPOSAL 4: CHANGE OF THE FUND'S SUB-CLASSIFICATION
AND ELIMINATION OF THE FUND'S INVESTMENT
RESTRICTION REGARDING DIVERSIFICATION
Under Section 5(b) of the 1940 Act, the Fund is currently sub-classified as
a "diversified company." In connection with this sub-classification, the Fund is
currently subject to an investment restriction which reads as follows:
[The Fund may not] purchase any securities (other than obligations of
the U.S. Government, its agencies or instrumentalities) if as a result
(a) more than 25% of the Fund's total assets would then be invested in
securities of any single issuer, or (b) as to 75% of the Fund's total
assets (i) more than 5% of the Fund's total assets would then be
invested in securities of any single issuer, or (ii) the Fund would own
more than 10% of the voting securities of any single issuer. For
purposes of these restrictions, the Commonwealth of Australia and each
of its States is each considered a single issuer.
The Board of Directors has approved, and recommends that the shareholders
also approve, a change in the Fund's sub-classification under Section 5(a) from
"diversified" to "non-diversified" and the elimination of the investment
restriction quoted above. However, the Fund intends to comply with the
diversification and other requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), applicable to regulated investment companies so that the
Fund will not be subject to U.S. federal income taxes on its net investment
income. In this regard, the applicable diversification requirements imposed by
the Code provide that the Fund must diversify its holdings so that at the end of
each quarter of the taxable year (i) at least 50% of the market value of the
Fund's assets is represented by cash and cash items, U.S. government securities,
the securities of other regulated investment companies and other securities,
with such other securities of any one issuer limited for purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities or the securities of other
regulated investment companies).
Although the Fund will be subject to the diversification standards imposed
by the Code, a change in the Fund's classification to a non-diversified
investment company will permit the Fund to concentrate its investments in fewer
issuers than is now the case. While greater concentration may prove beneficial
when the companies that the Fund invests in outperform the market, greater
concentration in fewer issuers will also magnify negative performance by
portfolio companies. In general, the Fund's net asset value and related market
price may become more volatile.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE CHANGE OF
THE FUND'S SUB-CLASSIFICATION UNDER THE 1940 ACT FROM "DIVERSIFIED" TO
"NON-DIVERSIFIED" AND THE ELIMINATION OF THE FUND'S INVESTMENT RESTRICTION
RELATING TO DIVERSIFICATION.
PROPOSAL 5: AMENDMENT TO THE FUND'S
POLICY ON CONCENTRATION
The Board of Directors has approved and recommends the adoption by
shareholders of an amendment to the Fund's policies on concentration.
Currently, it is the policy of the Fund not to invest more than 25% of its
total assets in a particular industry or group of industries. If this Proposal
is approved by shareholders, the concentration policy of the Fund would be:
"The Fund may invest between 25% and 35% of its total assets in the
securities of any one industry sector if, at the time of investment,
that industry sector represents 20% or more of the Australian All
Ordinaries Index."
13
<PAGE>
As discussed below, the Board of Directors is mindful of the position of the
Division of Investment Management of the Securities and Exchange Commission and
the Proposal, if approved by shareholders, will not be implemented without the
concurrence of the Division.
The Australian All Ordinaries Index (the "Index") is an index made up from
various sub-indices, such as banks and finance, transport, oil and gas, and
building and construction, all of which are constructed to be representative of
particular industry sectors. Although the Fund is not an index fund which seeks
to replicate the Index, if it cannot, when the Investment Manager deems
advisable, at least match or "overweight" industry sectors in the Index, its
inability to concentrate in leading sectors may negatively impact the Fund's
performance.
In making the recommendation, the Board was aware of the fact that the Staff
of the Division of Investment Management of the Securities and Exchange
Commission has adopted guidelines which would permit the Fund to implement the
proposal change to its concentration policy because, in the view of the Staff,
statements of a concentration policy pursuant to which a fund reserves the right
to concentrate in particular industries "without limitation if deemed advisable
and in the best interest of the shareholders" fail to comply with Section
8(b)(1) of the 1940 Act.
The Fund's Investment Manager believes that the proposal to permit it to
invest more than 25% of its total assets (but not more than 35%) in the
securities of any one industry sector within the Index if, at the time of
investment, that industry sector represents 20% or more of the Index, would give
the Investment Manager useful flexibility to position the Fund's portfolio by
reference to the relative weightings of Australian industry sectors within the
Index. While it should be recognized that concentration in one or more industry
sectors can expose the Fund to greater risk should those sectors underperform,
the Investment Manager is of the view that it is important to have the
flexibility to concentrate in those industry sectors that currently represent
the Index.
While the Investment Manager agrees that a concentration policy which has no
objective perimeters can be viewed as the equivalent of no policy and thus not
in compliance with Section 8(b)(1) of the 1940 Act, it is the Investment
Manager's position that limiting its freedom to concentrate only in industry
sectors that represent at least 20% of the Index and then only in an amount up
to 35% of its total assets articulates a policy on concentration that can be
meaningfully evaluated by shareholders in determining to approve the policy and
in determining to invest in the Fund.
The Board recognized that the Division of Investment Management's guideline
is of a long standing nature and represents the Division's concern that
concentration in any particular industry should not be left to the general
discretion of the Fund and its Investment Manager. Therefore, if shareholders
approve the proposed amendment, it will not be implemented without the
concurrence of the Staff of the Division of Investment Management. It should be
noted that the Staff has given no indication that it would be willing to change
its guideline.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
TO THE FUND'S POLICIES ON CONCENTRATION.
OTHER MATTERS
The Board of Directors knows of no business to be brought before the Meeting
other than as set forth above. If, however, any other matters properly come
before the Meeting, it is the intention of the persons named in the enclosed
proxy form to vote such proxies on such matters in accordance with their best
judgment.
ADDITIONAL INFORMATION
EXPENSES. The expense of preparation, printing and mailing of the enclosed
form of proxy and accompanying Notice and Proxy Statement will be borne by the
Fund. The Fund will reimburse banks,
14
<PAGE>
brokers and others for their reasonable expenses in forwarding proxy
solicitation material to the beneficial owners of the shares of the Fund. In
order to obtain the necessary quorum at the Meeting, supplementary solicitation
may be made by mail, telephone, telegraph or personal interview. Such
solicitation may be conducted by, among others, officers and employees of the
Fund, the Investment Manager, the Investment Adviser or State Street Bank and
Trust Company, the Transfer Agent of the Fund. It is anticipated that the cost
of such supplementary solicitation, if any, will be nominal. Shareholder
Communications Corporation ("SCC") may be retained to assist in the solicitation
of proxies. If retained, SCC will be paid approximately $10,000 by the Fund and
the Fund will reimburse SCC for its related expenses.
SOLICITATION AND VOTING OF PROXIES. Solicitation of proxies is being made
primarily by the mailing of this Proxy Statement with its enclosures on or about
April 7, 1998. As mentioned above, SCC may be engaged to assist in the
solicitation of proxies. As the meeting date approaches, certain shareholders of
the Fund may receive a call from a representative of SCC if the Fund has not yet
received their vote. Authorization to permit SCC to execute proxies may be
obtained by telephonic or electronically transmitted instructions from
shareholders of the Fund. Proxies that are obtained telephonically will be
recorded in accordance with the procedures set forth below. Management of the
Fund believes that these procedures are reasonably designed to ensure that the
identity of the shareholder casting the vote is accurately determined and that
the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask the shareholder for such shareholder's full name, address,
social security or employer identification number, title (if the person giving
the proxy is authorized to act on behalf of an entity, such as a corporation),
the number of shares owned and to confirm that the shareholder has received the
Proxy Statement in the mail. If the information solicited agrees with the
information provided to SCC by the Fund, then the SCC representative has the
responsibility to explain the process, read the proposals listed on the proxy
card, and ask for the shareholder's instructions on each proposal. The SCC
representative, although he or she is permitted to answer questions about the
process, is not permitted to recommend to the shareholder how to vote, other
than to read any recommendation set forth in the proxy statement. SCC will
record the shareholder's instructions on the card. Within 72 hours, SCC will
send the shareholder a letter or mailgram to confirm the shareholder's vote and
asking the shareholder to call SCC immediately if the shareholder's instructions
are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting of shareholders, but
does not wish to give a proxy by telephone, such shareholder may still submit
the proxy card originally sent with the Proxy Statement or attend in person. Any
proxy given by a shareholder, whether in writing or by telephone, is revocable.
A shareholder may revoke the accompanying proxy or a proxy given telephonically
at any time prior to its use by filing with the Fund a written revocation or
duly executed proxy bearing a later date. In addition, any shareholder who
attends the Meeting in person may vote by ballot at the Meeting, thereby
canceling any proxy previously given.
VOTE REQUIRED. The presence at any shareholders' meeting, in person or by
proxy, of the holders of a majority of the shares entitled to be cast shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that the necessary quorum to transact business or the vote required
to approve or reject any proposal is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law, to permit further solicitation of proxies with
respect to any proposal which did not receive the vote necessary for its passage
or to obtain a quorum. With respect to those proposals for which there is
represented a sufficient number of votes in favor, actions taken at the Meeting
will be effective irrespective of any adjournments with respect to any other
proposals. Any such adjournment will require the affirmative vote of the holders
of a majority of the Fund's shares present in person or by proxy at the Meeting.
The persons names as proxies will vote in favor of such adjournment those
proxies which they are entitled to vote in favor and will vote against any such
adjournment those proxies to be voted against that proposal. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" will be treated as
15
<PAGE>
shares that are present but which have not been voted. Broker non-votes are
proxies received by the Fund from brokers or nominees when the broker or nominee
has neither received instructions from the beneficial owner or other persons
entitled to vote nor has discretionary power to vote on a particular matter.
Accordingly, shareholders are urged to forward their voting instructions
promptly.
Approval of both the election of Class I Directors of the Board of Directors
(Proposal 1) and the ratification of the selection of independent public
accountants (Proposal 2) will require the affirmative vote of the holders of a
majority of the outstanding shares of common stock present or represented by
proxy at the Meeting. Approval of the proposed amendment to the Fund's Articles
of Incorporation to add supermajority 75% vote requirements to approve certain
business combinations, open-ending and shareholder investment proposals
(Proposal 3) will require the affirmative vote of a majority of the outstanding
shares of common stock. Approval of the proposed change of the Fund's
sub-classification and the proposed elimination of the Fund's investment
restriction regarding diversification (Proposal 4) and approval of the proposed
amendment to the Fund's policy on concentration (Proposal 5) will require the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund. The term "majority of the outstanding voting securities" as defined in the
1940 Act and as used in this Proxy Statement means: the affirmative vote of the
lesser of (1) 67% of the voting securities of the Fund present at the meeting if
more than 50% of the outstanding shares of the Fund are present in person or by
proxy or (2) more than 50% of the outstanding shares of the Fund.
Abstentions will have the effect of a "no" vote on all proposals. Broker
non-votes will have the effect of a "no" vote for Proposals 4 and 5 if such vote
is determined on the basis of obtaining the affirmative vote of more than 50% of
the outstanding shares of the Fund. Broker non-votes will not constitute "yes"
or "no" votes and will be disregarded in determining the voting securities
"present" if such vote is determined on the basis of the affirmative vote of 67%
of the voting securities of the Fund present at the Meeting with respect to
Proposals 4 and 5 and a majority of the applicable voting securities of the Fund
present at the Meeting with respect to Proposals 1, 2 and 3.
SHAREHOLDER PROPOSALS. If a shareholder intends to present a proposal at
the Annual Meeting of Shareholders of the Fund to be held in 1999 and desires to
have the proposal included in the Fund's proxy statement and form of proxy for
that meeting, the shareholder must deliver the proposal to the offices of the
Fund within a reasonable time before the solicitation of proxies for such
meeting.
By Order of the Board of Directors,
Roy M. Randall, SECRETARY
Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
April 6, 1998
16
<PAGE>
APPENDIX A
THE PROPOSED AMENDMENT TO THE FUND'S ARTICLES OF INCORPORATION IS SET OUT BELOW.
NINTH: Special Vote of Stockholders.
(a) Except as otherwise provided in this Article Ninth, the vote of the
holders of at least 75% of the voting power of the then outstanding shares of
Voting Stock (as hereinafter defined), in addition to any vote of the Directors
of the Corporation as may be required by law or by the By-Laws, shall be
necessary to effect any of the following actions:
(i) any amendment to these Articles of Incorporation to make the
Corporation's Common Stock a "redeemable security" (as such term is defined
in the Investment Company Act of 1940) unless the Continuing Directors (as
hereinafter defined) of the Corporation, by a vote of at least 75% of such
Directors, approve such amendments;
(ii) any stockholder proposal as to specific investment decisions made
or to be made with respect to the Corporation's assets; or
(iii) any Business Combination (as hereinafter defined) unless either the
condition in clause (A) below is satisfied or the conditions in clauses (B),
(C), (D), (E) and (F) below are satisfied:
(A) The Business Combination shall have been approved by a vote of at
least 75% of the Continuing Directors.
(B) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of any class of outstanding Voting Stock in such Business
Combination shall be at least equal to the higher of the following:
(x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by an
Interested Party (as hereinafter defined) for any shares acquired by
it (aa) within the two-year period immediately prior to the first
public announcement of the proposal of the Business Combination (the
"Announcement Date"), or (bb) in the Threshold Transaction (as
hereinafter defined), whichever is higher; and
(y) in the case of Common Stock, the net asset value per share
of such Common Stock on the Announcement Date or on the date of the
Threshold Transaction, whichever is higher, and in the case of any
Preferred Shares, the highest preferential amount per share to which
the holders of shares of such class of Preferred Shares would be
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Fund, regardless of
whether the Business Combination to be consummated constitutes such
an event.
(C) The consideration to be received by holders of the particular
class of outstanding Voting Stock shall be in cash or in the same form as
the Interested Party has previously paid for shares of any class of
Voting Stock. If the Interested Party has paid for shares of any class of
Voting Stock with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such class of Voting
Stock previously acquired by it.
(D) After the occurrence of the Threshold Transaction, and prior to
the consummation of such Business Combination, such Interested Party
shall not have become the beneficial owner of any additional shares of
Voting Stock except by virtue of the Threshold Transaction.
A-1
<PAGE>
(E) After the occurrence of the Threshold Transaction, such
Interested Party shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder of the Corporation),
of any loans, advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(F) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the Investment Company Act of 1940
and the rules and regulations thereunder (or any subsequent provisions
replacing such Acts, rules or regulations) shall be prepared and mailed
by the Interested Party, at such Interested Party's expense, to the
shareholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
(b) For the purposes of this Article Ninth:
(i) "Business Combination" shall mean any of the transactions described
or referred to in any one or more of the following subparagraphs:
(A) any merger or consolidation of the Corporation with or into any
other person;
(B) any sales, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any other person of any assets of the Corporation having an aggregate
Fair Market Value of $1,000,000 or more except for portfolio transactions
of the Corporation effected in the ordinary course of the Corporation's
business;
(C) the issuance or transfer by the Corporation (in one transaction
or a series of transactions) of any securities of the Corporation to any
other person in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value of $1,000,000
or more excluding (x) sales of any securities of the Corporation in
connection with a public offering thereof, (y) issuance of any securities
of the Corporation pursuant to a dividend reinvestment plan adopted by
the Corporation and (z) issuances of any securities of the Corporation
upon the exercise of any stock subscription rights distributed by the
Corporation;
(ii) "Continuing Director" means any member of the Board of
Directors of the Corporation who is not an Interested Party or an
Affiliate of an Interested Party and has been a member of the Board
of Directors for a period of at least 12 months, or is a successor of
a Continuing Director who is unaffiliated with an Interested Party
and is recommended to succeed a Continuing Director by a majority of
the Continuing Directors then on the Board of Directors.
(iii) "Interested Party" shall mean any person, other than an
investment company advised by the Corporation's initial investment
manager or any of its Affiliates, which enters, or proposes to enter,
into a Business Combination with the Corporation.
(iv) "Person" shall mean an individual, a corporation, a trust
or a partnership.
(v) "Voting Stock" shall mean capital stock of the Corporation
entitled to vote in the election of Directors, as well as any class
of capital stock of the Corporation entitled, as a class, to elect
one of more Directors.
(vi) A Person shall be a "beneficial owner" of any Voting Stock:
(A) which such Person or any of its Affiliates or Associate
(as hereinafter defined) beneficially owns, directly or
indirectly; or
A-2
<PAGE>
(B) which such Person or any of its Affiliates or Associates
has the right to acquire (whether such rights is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options; or
(C) which is beneficially owned, directly or indirectly, by
any other Person with which such Person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares of Voting Stock.
(vii) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
(viii) "Fair Market Value" means:
(A) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the relevant date
of a share of such stock on any principal United States
securities exchange registered under the Securities Exchange Act
of 1934 on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period
preceding the relevant date on the National Association of
Securities Dealers, Inc. Automated Quotation Systems (NASDAQ) or
any system then in use, or if no such quotation are available,
the fair market value on the relevant date of a share of such
stock as determined by 75% of the Continuing Directors in good
faith, and
(B) in the case of property other than cash or stock, the
fair market value of such property on the relevant date as
determined by 75% of the Continuing Directors in good faith.
(ix) "Threshold Transaction" means the transaction by or as a
result of which an Interested Party first become the beneficial owner
of Voting Stock.
(x) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in subparagraph (a)(iii)(B) above shall include the
shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.
(xi) Continuing Directors of the Corporation, acting by a vote
of 75% shall have the power and duty to determine, on the basis of
information known to them after reasonable inquiry, all facts
necessary to determine (a) the number of shares of Voting Stock
beneficially owned by any person, (b) whether a person is an
Affiliate or Associate of another, (c) whether the requirements of
subparagraph (a) (iii) above have been met with respect to any
Business Combination, and (d) whether the assets which are the
subject to any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the
Corporation in any Business Combination has, an aggregate Fair Market
Value of $1,000,000 or more.
(c) The provisions of this Article Ninth may not be amended, altered
or repealed except by the approval of both (i) 75% of the outstanding
shares of the Fund voting as a single class, and (ii) 75% of the
outstanding shares of each class of shares voting separately, with shares
of Preferred Stock of all series voting separately as a single class.
A-3
<PAGE>
PROXY THE FIRST AUSTRALIA FUND, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders - May 14, 1998
The undersigned hereby appoints Sir Roden Cutler, Brian M. Sherman and
Laurence S. Freedman, and each of them, the proxies of the undersigned, with
power of substitution to each of them, to vote all shares of the common stock
of The First Australia Fund, Inc., which the undersigned is entitled to vote at
the Annual Meeting of Shareholders of The First Australia Fund, Inc. to be held
at One Seaport Plaza, New York, New York on May 14, 1998 at 1:00 p.m., New York
City time, and at any adjournment or postponement thereof.
_______________________________________________________________________________
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
_______________________________________________________________________________
_______________________________________________________________________________
Please sign exactly as your name(s) appear(s) on the books of the Fund. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature should be
that of an authorized officer who should state his or her title.
_______________________________________________________________________________
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
____________________________________ ________________________________
____________________________________ ________________________________
____________________________________ ________________________________
[TRFCM - THE FIRST AUSTRALIA FUND, INC.] [FILE NAME: TRFCM2.ELX]
[VERSION - F] [4/6/98]
<PAGE>
<TABLE>
<CAPTION>
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
<S>
___________________________________________ <C> <C>
THE FIRST AUSTRALIA FUND, INC. 1. The election of four Directors to serve as Class
___________________________________________ I Directors for a three-year term.
COMMON STOCK Nominees:
For All With- For All
Anthony E. Aaronson Nominees hold Except
Roger C. Maddock ____ ____ ____
Neville Miles ____ ____ ____
John T. Sheehy
Unless otherwise specified in the boxes,
provided, the undersigned's vote will INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
be cast FOR items 1, 2, 3, 4 and 5. "For All Except" box and strike a line through the name(s) of the nominee(s) in
list above.
For Against Abstain
2. Ratification of the selection of Price ___ ___ ___
Waterhouse LLP as independent public ___ ___ ___
accountants.
___
Mark box at right if an address change ___ 3. Approval of an amendment to the Fund's ___ ___ ___
or comment has been noted on the reverse charter to add supermajority 75% vote ___ ___ ___
side of this card. requirements to approve certain business
combinations, open-ending and shareholder
investment proposals.
4. Approval of a change to the Fund's ___ ___ ___
sub-classification and elimination ___ ___ ___
of the Fund's investment restriction
regarding diversification.
5. Approval of an amendment to the Fund's ___ ___ ___
policy on concentration. ___ ___ ___
_________________
Please be sure to sign Date The appointed proxies will vote in their discretion on any other business as may
and date this Proxy. properly come before the meeting or any adjournments or postponements thereof.
_____________________________________________
_____________________ __________________
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
</TABLE>
[TRFCM - THE FIRST AUSTRALIA FUND, INC.]
[FILE NAME: TRFCM1.ELX] [VERSION - F] [4/6/98]
