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))
/ / Definitive Proxy Statement
/x/ Definitive Additional Materials
/ / Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-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):
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/ / 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.
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<PAGE>
WHY YOU SHOULD SUPPORT
THE FIRST AUSTRALIA FUND
[OBJECT OMITTED]
[Graph Depicting the Total Market Return with Distributions
Reinvested for the First Australia Fund (+63.0%) VERSUS S&P 500 (+36.6%)
From August 31, 1998 Through March 11, 1999 (Quoted in US$)]
TO PROTECT YOUR INVESTMENT:
+ Vote FOR Proposals 1 and 2
and
X Vote AGAINST DDA's Proposals 3, 4, 5, and 6
<PAGE>
Dear First Australia Fund Shareholder:
We recently mailed you proxy material for The First Australia Fund, Inc. Annual
Meeting of Shareholders, which will be held on April 23, 1999. Please read the
material carefully. It contains important information to help you decide how to
vote.
Since the end of August 1998, the First Australia Fund share price is up 53% and
at the same time the discount has narrowed, from as high as 28% to recently as
low as 12.6%. Both management and the Board continue to work hard at maximizing
returns for investors. In addition to the 53% share price increase, investors
have also received two cash distributions over the period, totaling 40.5 cents
per share, paid out of income plus realized capital gains. The total return to
our shareholders over the period was over 63%. (Performance figures to 3/11/99.)
This performance has been achieved drawing on the expertise of EquitiLink
International Management Limited, the Fund's investment manager, and the
direction of an experienced and independent Board of Directors committed to
maximizing long-term value for all shareholders.
As you know, Deep Discount Advisors and Ron Olin Investment Management Company
(together, "DDA") -- short-term market opportunists -- have submitted a series
of proposals that, if adopted, could radically change your Fund and negatively
affect the value of all shareholders' investments. We and your Board of
Directors unanimously believe that DDA's proposals would harm the interests of
all shareholders and could lead to the liquidation of your Fund.
We strongly urge you to support the Fund's position by voting on the enclosed
WHITE proxy card:
+ For Proposals 1 (Election of Directors)
and 2 (Ratification of Selection of Independent Public Accountants)
and
X AGAINST DDA'S Proposals 3, 4, 5 and 6
Remember, to support Management's recommendations, you must vote both FOR
Proposals 1 and 2 as well as AGAINST Proposals 3, 4, 5 and 6.
If you have not already done so, please sign, date and return the enclosed WHITE
proxy card today in the postage paid envelope provided.
Sincerely,
/s/ Laurence S. Freedman /s/ Brian M. Sherman
- ------------------------ ---------------------
LAURENCE S. FREEDMAN BRIAN M. SHERMAN
Chairman President
<PAGE>
THE FIRST AUSTRALIA FUND, INC.
+ Vote FOR highly qualified Directors who will continue to act in the best
interests of all shareholders.
+ Vote FOR expertise and continuity.
+ Vote FOR a strategy designed for long-term growth in Australia, recently
dubbed "The Miracle Economy."
If your shares are held in the name of your bank or broker, only they can vote
your shares. Please return the enclosed WHITE proxy card to your bank or broker
in the envelope provided or contact the person responsible for your account and
give instructions to vote:
+ For Proposals 1 (Election of Directors)
and 2 (Ratification of Selection of Independent Public Accountants)
and
X AGAINST DDA'S Proposals 3, 4, 5 and 6
Remember, to support Management's recommendations, you must vote both FOR
Proposals 1 and 2 as well as AGAINST Proposals 3, 4, 5 and 6.
If you have any questions or require any assistance in voting your shares,
please contact our proxy solicitor:
INNISFREE M&A INCORPORATED
1-888-750-5834
501 Madison Avenue
New York, New York 10022
VOTE TODAY!
<PAGE>
Vote FOR:
+ Highly qualified Directors who act in
the best interests of all shareholders, not
just professional market opportunists.
Your Fund Directors have outstanding qualifications - in Australia and North
America, in business and in the community. They know Australia's economy. They
know Australia's business environment. They know your Fund and the challenges
and opportunities of managing a portfolio of Australian equity securities. They
are uniquely qualified to help the Fund achieve its long-term growth objective
in the robust Australian economy. A substantial majority - 11 of 13 - of these
Directors are independent of the Fund's Manager. All Directors are committed to
act solely in the best interests of all shareholders.
In contrast, four out of five of DDA's hand-picked nominees for the Board are
DDA's own employees. We believe they represent the interests of DDA only, and
not your long-term interests. They have little or no qualifications to manage a
specialized international fund such as The First Australia Fund and have little
experience in Australian investment markets.
DDA is one of the most active "closed-end fund opportunists," that is,
professional investors who look to make short-term profits without regard to the
effect on long-term shareholders and their investment objectives.
If you are an investor who wants long-term growth in Australian equities guided
by an experienced, knowledgeable Board, to protect the future performance of
your Fund...
...We strongly urge you to vote FOR all of the Director nominees listed in
Proposal 1 and vote FOR Proposal 2 on the enclosed WHITE proxy card.
We strongly urge you to vote FOR all of the Director nominees listed in Proposal
1 on the enclosed WHITE proxy card.
<PAGE>
LOOK
Compare The First Australia Fund's market performance
with the S&P 500.
[OBJECT OMITTED]*
[Graph Depicting the Total Market Return with Distributions
Reinvested for the First Australia Fund (+63.0%) VERSUS S&P 500 (+36.6%)
From August 31, 1998 Through March 11, 1999 (Quoted in US$)]
Under the direction of the Board of Directors, this outstanding performance has
been achieved by a new portfolio management team. In addition, last year the
Fund increased cash distributions to shareholders through the Fund's managed
distribution policy, initiated by the Board. The Board will continue this
distribution policy.
* The S&P 500 is an index of 500 large U.S. stocks. While it is not directly
comparable to the Fund, this chart shows the performance of an investment
in the Fund compared with an investment in the S&P 500.
Total return for the S&P 500 is calculated based on the increase in share
prices, assuming the reinvestment of all distributions. Total return for
the Fund is calculated based on the increase in the Fund's share price
assuming reinvestment of all distributions, which consist of income and
realized capital gains.
<PAGE>
LOOK
The First Australia Fund recently received recognition
from Lipper for Five-Year Performance
------------------------------------------------------------------------------
| |
| 1998 LIPPER |
| |
| Performance Achievement Certificate |
| |
| The First Australia Fund, Inc. |
| |
| Ranks NUMBER ONE in the |
| Lipper Closed-End Fund Performance Analysis Service |
| |
| |
| Period Ending |
| December 31, 1998 Investment Objective |
| |
| 5 years Pacific Ex Japan Funds [OBJECT OMITTED] |
| |
| /s/ S. S. Thomas LIPPER /s/ A. Michael Lipper |
| ----------------- ---------------------- ---------------------- |
| |
| SIMON THOMAS, The Analytical Standard A. MICHAEL LIPPER, CFA |
| PRESIDENT and CEO for Investment Companies CHAIRMAN |
| |
------------------------------------------------------------------------------
<PAGE>
SUPPORT
Expertise and Continuity.
Investment managers with unparalleled knowledge and experience in Australia.
EquitiLink International Management Limited is uniquely qualified to continue as
the Fund's investment manager. The EquitiLink Group has A$5.5 billion under
management and 300,000 investors around the world. EquitiLink specializes in
investing in Australian securities. The First Australia Fund is the only
publicly traded fund available to U.S. investors who wish to invest exclusively
in a managed portfolio of Australian equities.
Look at what the Fund has accomplished for you, the shareholder:
1. Since August 31, 1998, The First Australia Fund's share price is up
53% and at the same time the discount has narrowed, from as high as
28% to recently as low as 12.6%. (Performance figures to 3-11-99.)
2. In addition to the 53% share price increase, investors have also
received two cash distributions over the period, totaling 40.5 cents
per share, paid out of income plus realized capital gains. The total
return to our shareholders over the period was over 63%.
3. First in its category in the Lipper Closed-End Funds Performance
Survey over five years.
DDA wants you to terminate the Fund management contract, but doesn't even
suggest who would take your investment manager's place. We don't see how that's
in the best interests of all shareholders -- or consistent with the objectives
of the Fund.
X The Directors strongly recommend that you vote AGAINST Proposal 3 on the
enclosed WHITE proxy card.
<PAGE>
SUPPORT
A strategy designed for long-term growth in Australia, dubbed
"The Miracle Economy."
You invested in The First Australia Fund to benefit from the strongly growing
Australian economy and stock market. The First Australia Fund is the best
vehicle for investing for long-term growth in Australian equities. The Board
believes that the best way to achieve this objective is to operate as a
closed-end fund.
What Does DDA Really Want?
DDA is demanding that the Board find ways to realize net asset value within 60
days, a totally impractical and arbitrary time frame. It also insists that any
Director who doesn't agree with that program resign immediately. It is clear to
us that DDA is acting as market opportunists by looking to pressure the Fund to
engage in a large-scale share repurchase program, convert to an open-end
structure or liquidate, just so that DDA can capture short-term profits at the
expense of serious, long-term investors. That could jeopardize you and all
shareholders.
X Vote AGAINST DDA's attempts to force the Board into open-ending or
liquidating the Fund despite the harm to long-term investors.
<PAGE>
We believe there are serious negative consequences for you, the shareholder, if
this happens. A 1998 study by CDA Wiesenberger* on open-ending concluded:
"When closed-end funds convert to open-end funds, long-term investors
lose the benefits they sought and may incur significant expenses. Based
on the data examined in this study, conversion from closed-end to
open-end structure is generally not in the long-term interest of
shareholders in the fund."
Morgan Stanley Dean Witter* reached the same conclusion in a report issued in
1998.
X The Directors unanimously recommend you vote AGAINST Proposals 4 and 5 on
the enclosed WHITE proxy card.
DDA wants you, the shareholder, to reimburse them for certain expenses in
connection with its solicitation of proxies. In fact, by engaging in its
self-serving solicitation, DDA has already caused the Fund to incur significant
costs. The Board thinks DDA's proposal to add to this burden is just plain
unfair.
X The Directors unanimously recommend you vote AGAINST Proposal 6 on the
enclosed WHITE proxy card.
* Permission to include neither sought nor granted.
<PAGE>
LET'S ANSWER SOME OF YOUR QUESTIONS
Q. What am I being asked to vote on?
A. You are being asked to re-elect the Fund's nominees for Director and to
reject DDA's proposals.
The Board of Directors strongly urges you to vote FOR the Fund's five
nominees for Director in Proposal 1 and the ratification of the selection
of independent public accountants in Proposal 2 - and to vote AGAINST
Proposals 3, 4, 5 and 6.
Q. Why should I vote to re-elect the Fund's current Directors?
A. The five current Fund Directors have broad and deep experience with the
Fund and the Australian and world economies. They are committed to
represent the best interests of all shareholders. In contrast, DDA's
nominees, four out of five of whom are employees of DDA, appear to have
little or no experience with investing in Australian securities. We believe
they have been hand-picked to represent only the interests of DDA.
Q. Why is EquitiLink uniquely qualified to manage the Fund?
A. EquitiLink has managed the Fund since its inception in 1985. The EquitiLink
Group is an expert on the Australian economy and investment markets.
EquitiLink International Management Limited is uniquely qualified to
continue as the Fund's investment manager. The EquitiLink Group has A$5.5
billion under management and 300,000 investors around the world. EquitiLink
specializes in investing in Australian securities. The First Australia Fund
was the first closed-end fund to invest solely in Australian securities. It
is still the only publicly traded fund available to U.S. investors who wish
to invest exclusively in Australian equities.
The Board and management have also worked hard to keep costs as low as
possible--Lipper reports that the The First Australia Fund's expense ratio
is among the lowest in its category - Pacific Ex Japan.*
The Board of Directors believes that the Fund would be seriously harmed if
EquitiLink were removed as Fund manager.
Q. What will happen if EquitiLink is removed?
A. While DDA has been vocal in proposing the termination of EquitiLink as
investment manager, they have not offered any alternative. It is clearly
DDA's
* Lipper Inc.
<PAGE>
attack strategy to use this proposal as a threat to coerce you and your
Board to agree to DDA's self-serving agenda.
Q. Why is "closed-end" the best structure for the Fund?
A. The Directors believe that the closed-end structure is the best way to
achieve the Fund's objective of long-term appreciation and current income
through investment primarily in equity securities of Australian companies
listed on Australian stock exchanges. The closed-end structure lets the
Fund make investment decisions based on longer-term expectations of
substantial capital growth, without having to keep lots of short-term
low-yielding investments on hand to meet redemption requests. The
closed-end structure also gives the Fund more flexibility to invest, when
appropriate, in less liquid stocks of smaller companies which may have
better growth potential.
Q. What could happen if the Fund were open-ended?
A. 1998 study by CDA Wiesenberger * of closed-end funds that did convert to
the open-end structure, showed that selling pressure caused by redemptions
following open-ending caused the following:
o Net assets plunge due to large redemptions
o Portfolio holdings are liquidated to meet redemptions
o The fund realizes significant capital gains
o The expense ratio increases due to reduction in total assets
o The investment style of the fund may be altered
DDA's proposal 4 recommends that the Board "take whatever steps necessary"
to give shareholders the option of receiving net asset value within 60 days
of the Annual Meeting. That suggestion, and the arbitrary, limited
time frame, is in our view fundamentally inconsistent with the best
interests of all shareholders of The First Australia Fund.
As we see it, "take whatever steps necessary" can only be considered a way
of seeking to open-end or liquidate the Fund, which could have dire
consequences for all shareholders.
Q. What do I need to do now?
A. Here is all you need to do:
+ Vote FOR Proposals 1 and 2 and
X Vote AGAINST DDA's Proposals 3, 4, 5 and 6
Sign, date and mail the enclosed WHITE proxy card TODAY
* Permission to include neither sought nor granted.
<PAGE>
The Board of Directors of The First Australia Fund Urges You To:
+ Vote FOR Proposals 1 and 2
and
X Vote AGAINST DDA's Proposals 3, 4, 5, and 6
Remember, to support Management's recommendations, you must vote both FOR
Proposals 1 and 2 as well as AGAINST Proposals 3, 4, 5 and 6.
Please sign, date and return the enclosed WHITE proxy card TODAY
If your shares are held in the name of your bank or broker, only they can vote
your shares. Please return the enclosed WHITE proxy card to your bank or broker
in the envelope provided or contact the person responsible for your account and
give instructions to vote FOR Proposals 1 and 2 and AGAINST Proposals 3, 4, 5
and 6.
If you have any questions or require any assistance in voting your shares,
please contact our proxy solicitor:
INNISFREE M&A INCORPORATED
1-888-750-5834
501 Madison Avenue
New York, New York 10022
VOTE TODAY!
<PAGE>
Read About First Australia Fund's Nominees for Fund Directors
Rt. Hon. Malcolm Fraser Independent Director
Former Prime Minister of Australia. Mr. Fraser has over 20 years of experience
in economics, global financial markets and management of private investments. He
has been a member of the Advisory Board of the Investment Company of America, a
company in the Capital Group of funds, a consultant to the Prudential Insurance
Company of America, a member of the Consultative Board of Directors for ANZ Bank
and a consultant to Nomura Securities. Mr. Fraser is a specialist in world
economic relationships, geo-political affairs and government and private sector
interrelationships.
Harry A. Jacobs, Jr. Independent Director
Former Chairman of the Board of Prudential Securities. Mr. Jacobs has 40 years
of experience in fund management, investment markets and closed-end funds, with
extensive knowledge of international equity, fixed income and commodity markets.
Howard A. Knight Independent Director
Mr. Knight has over 30 years of experience in financial markets and has been
actively involved in the Australian financial markets for more than 25 years.
From 1991 to 1994, he served as President of Investment Banking, Equity
Transactions and Corporate Strategy at Prudential Securities. Since 1996, Mr.
Knight has served as Vice Chairman and Chief Operating Officer of SBS
Broadcasting SA, where he has been actively involved in investment management
and capital markets.
Richard H. McCoy Independent Director
Mr. McCoy has over 30 years of experience in the securities industry and
investment markets. Since May 1997, he has been Vice Chairman of TD Securities,
Inc. Before that, he was Deputy Chairman of CIBC Wood Gundy Securities and was
primarily involved in the firm's investment banking activities. Mr. McCoy has
extensive experience in managing a wide range of debt and equity financings.
Brian M. Sherman President of the Fund
Mr. Sherman is President of The First Australia Fund and Chairman of EquitiLink
Australia Limited, the Fund's Investment Adviser. He has 35 years experience in
international funds management, stockbroking and in particular 23 years in the
funds management industry in Australia, managing money in equities and bonds.
<PAGE>
THE FIRST AUSTRALIA FUND, INC.
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders - April 23, 1999
The undersigned hereby appoints William J. Potter, 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 April 23, 1999 at 10:00 a.m. (Eastern
time) and at any adjournment or postponement thereof. By signing this proxy card
on the reverse side, the undersigned authorizes the appointed proxies to vote in
their discretion on any other business which may properly come before the
meeting or any adjournments or postponements thereof.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS:
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
<PAGE>
(X) Please mark your votes as in this example
This proxy, when properly executed, will be voted in the manner directed. If no
direction is made, this proxy will be voted FOR Items 1, and 2 and AGAINST Items
3, 4, 5 and 6.
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote FOR Proposals 1 & 2 below
---
- --------------------------------------------------------------------------------
1. Election of 5 Directors for a three year term:
FOR ALL / / WITHHOLD ON ALL / /
FOR ALL EXCEPT / /
Nominees: M. Fraser, H.A. Jacobs, Jr., H.A. Knight, R.H. McCoy, B.M. Sherman
FOR, except withhold vote from following nominees:___________________________
2. Ratification of selection of independent public accountants
FOR / / AGAINST / / ABSTAIN / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Your Board of Directors recommends a vote AGAINST Proposals 3-6 below
- --------------------------------------------------------------------------------
3. Shareholder proposal to terminate the Investment Management Agreement with
EquitiLink
FOR / / AGAINST / / ABSTAIN / /
4. Shareholder proposal that the Board take whatever steps necessary for
shareholders to receive net asset value for their shares within 60 days
of the Meeting
FOR / / AGAINST / / ABSTAIN / /
5. Shareholder proposal that all Directors not standing for reelection who
oppose Item 4 resign
FOR / / AGAINST / / ABSTAIN / /
6. Shareholder proposal to reimburse shareholder proponent's fees and expenses
FOR / / AGAINST / / ABSTAIN / /
DATE ____________________, 1999
_______________________________
_______________________________
Signatures(s)
Please sign exactly as name(s) appear(s) on this proxy card. If signing for a
corporation or partnership or as an agent or attorney, indicate the capacity in
which you are signing. If signing as trustee, custodian or other fiduciary,
please state your title.
2
