(R)
The First Australia
Prime Income
Fund, Inc.
- - -------------------------------------------------------------------
Semi-Annual Report
April 30, 1995
Highlights
- - ----------------------------------------------------
-Rights offering oversubscribed.
-Australian bond market rallies.
-Cash distribution rate of 12.9% over past twelve months.
-98% of Fund assets rated AA or better.
<PAGE>
<PAGE>
LETTER TO SHAREHOLDERS
June 8, 1995
Dear Shareholder,
We are pleased to present this Semi-Annual Report which covers the activities
of The First Australia Prime Income Fund, Inc. for the six months ended April
30, 1995. Included in this report is a review of the Australian and New Zealand
economies and investment markets, along with an overview of the Fund's
investments, prepared by the Investment Manager, EquitiLink International
Management Limited.
The Fund recently completed a highly successful one for five rights offering,
which resulted in primary and over-subscription requests totalling approximately
124% of the 24,871,150 new shares offered and generated net proceeds of
approximately $224.8 million. The new shares were issued at a price of $7.64,
which represented a 5% discount on the average closing price on April 20, 1995,
the final day of the offering period, and the three preceding business days. The
offering gives the Fund greater flexibility to take advantage of investment
opportunities in the Australian and New Zealand fixed income markets.
Global fixed income markets were considerably stronger over the past few
months. Markets generally took their lead from a firmer U.S. market after signs
of moderating economic growth became more apparent. The Australian market shared
in the global rally after a period of consolidation in February and early March.
Signs of slower economic growth in the December quarter National Accounts and
continued subdued inflation provided the market with the impetus to follow the
U.S. lead. The Australian bond market continued to rally strongly during May
with the announcement of a projected government budget surplus for fiscal 1996.
The strength of the Australian dollar against the U.S. dollar in the latter
part of 1994 was reversed somewhat during the past three months, to finish at
very similar levels to that prevailing six months ago. This recent weakness of
the Australian dollar was due to a pause in the rising commodity market trend
and cyclical deterioration in the Australian current account deficit. Moving
forward, stronger commodity prices are expected to create a broadly favorable
outlook for the Australian dollar.
Assuming reinvestment of dividends, the Fund's Net Asset Value (NAV)
increased by 6.5% over the six months to the end of April 1995. During the same
period, the Fund's share price return, assuming reinvestment of dividends was
- - -12.5%. At the share price of US$7.875 the shares were trading at a discount of
10.9% on April 30, 1995. Since April 30, the share price has risen and had
reached US$8.50 on the date of this report.
Distributions over the last twelve months totalled US$1.0125, consisting of
five payments of US8.25 cents per share and seven payments of US7.5 cents per
share and a special payment of US7.5 cents per share in January, 1995. Based
upon the share price of US$7.875 at April 30, 1995, the cash distribution rate
over the past twelve months was 12.9%. At the April 30, 1995 share price of
US$7.875, the monthly distribution of US7.5 cents per share represents an
annualized cash distribution rate of 11.4%. Since all distributions are paid
after the deduction of Australian and New Zealand withholding taxes, the
effective yield is higher for those U.S. investors who are able to claim a tax
credit. The Board's policy is to facilitate payment of a stable monthly
distribution out of current income and supplemented by realized capital gains
if
required. The dividend is reviewed on a quarterly basis with the next review to
take place at the Board's meeting in September 1995.
1
<PAGE>
<PAGE>
Dividend Reinvestment and Cash Purchase Plan
If you have not yet done so, we invite you to consider joining the Fund's
Dividend Reinvestment and Cash Purchase Plan to automatically reinvest your
dividends in shares of the Fund's common stock. The following chart shows that
shareholders who invested US$10,000 on April 30, 1990, and have taken advantage
of the Dividend Reinvestment Plan, have achieved an outstanding compounded
return.
A brochure containing information and an authorization form can be obtained
by contacting State Street Bank and Trust Company, PO Box 8200, Boston, MA
02266-8200, or by telephone at 1-800-451-6788.
If you wish to participate and your shares are held in your own name, simply
complete and mail the enrollment form in the back of the brochure or call State
Street Bank and Trust Company at the toll-free number and enroll by telephone.
If your shares are held in the name of a brokerage firm, bank or other nominee,
you should instruct your nominee to participate on your behalf. If your nominee
is unable to participate on your behalf, you should request it to re-register
your shares in your own name which will enable you to participate in the Plan.
The automatic reinvestment feature was designed because we believe that it
will allow individual investors the opportunity to use the Fund's monthly
distributions to maximize their total earnings efficiently and simply. The
potentially high current income earned by the Fund's investments in Australia
can be multiplied for you through the compounding effect created by reinvestment
of distributions.
[Chart to come]
2
<PAGE>
<PAGE>
Other advantages of participation in the Plan include:
- Lower costs--You will build holdings in the Fund automatically, at reduced
or no brokerage cost.
- Convenience--You will receive a detailed account statement from State
Street Bank, your Plan Agent, showing total dividends and distributions,
date of investment, shares acquired and price per share, as well as the
total shares of record held by you and by the Plan Agent for you.
- Safety--As long as you participate in the Plan, State Street Bank, as your
Plan Agent, will hold the shares it has acquired for you in safekeeping,
in
non-certificated form. This convenience provides added protection against
loss, theft or inadvertent destruction of certificates.
Toll Free Information
Information on The First Australia Prime Income Fund, Inc. is available on
a
recorded message from a toll-free number in the United States. The message
includes weekly updates of share price, NAV, and details of recent distributions
and announcements by the Directors. The number is 1-800-323-9995 (outside New
York) and is toll-free for calls made from within the United States.
Sincerely,
Sir Roden Cutler Brian M. Sherman
Chairman Joint Managing Director
REPORT BY THE INVESTMENT MANAGER
PERFORMANCE
Distributions
During the twelve months ended April 30, 1995, the Fund paid a total of
US$1.0125 in distributions, consisting of five payments of US8.25 cents per
share, seven payments of US7.5 cents per share and a special payment of US7.5
cents per share in January, 1995. The Board's policy is to facilitate payment
of
a stable monthly distribution out of current income and supplemented by realized
capital gains if required. The next dividend review is scheduled for the meeting
of the Board of Directors in September 1995.
Based upon the April 30, 1995 share price of US$7.875, and total
distributions paid over the past twelve months, the Fund offered an annual cash
distribution rate of 12.9%. All distributions are paid after the deduction of
Australian and New Zealand withholding taxes.
Net Asset Value (NAV) Performance
The Net Asset Value (NAV) per share of the Fund at April 30, 1995 was
US$8.84. Assuming reinvestment of dividends, NAV increased by 6.5% over the six
months to April 30, 1995 and by 0.9% over the quarter. At the date of this
report, NAV per share was US$8.67.
3
<PAGE>
<PAGE>
Share Price Performance
At April 30, 1995 the share price was US$7.875, representing a 10.9% discount
to the NAV. At the date of this report, the share price closed at US$8.50,
representing a 1.96% discount to the NAV. The Fund's share price return,
assuming reinvestment of dividends, was -4.8% over the quarter ended April 30,
1995 and -12.5% over the six months ended April 30, 1995.
Auction Market Preferred Stock (AMPS)
The Fund's AMPS continue to be well bid with an average interest rate over
the quarter of 6.0%, compared with 6.1% for 30 day U.S. Commercial Paper.
Quality of Investments
The Fund has maintained a high credit quality. At April 30, 1995, 98% of the
Fund was invested in securities rated ``AA'' or better by S&P Australian Ratings
Pty Limited, Moody's Investors Service, Inc. or Standard & Poor's Corporation.
The remaining 2% of investments were rated ``A''. The table below shows the
ratings of securities held by the Fund as of April 30, 1995.
<TABLE>
<CAPTION>
Rating Australia U.S.
- - ---------------------------------------
<S> <C> <C>
AAA 63% 100.0%
AA 35% --
A 2% --
- - ---------------------------------------
100.0% 100.0%
<CAPTION>
- - ---------------------------------------
</TABLE>
PORTFOLIO COMPOSITION
The following table displays the geographical composition of the Fund's
investment portfolio over the twelve months ended April 30, 1995.
<TABLE>
<CAPTION>
United
Date Australia New Zealand States
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
April 30, 1995 97% 2% 1%
January 31, 1995 97% 2% 1%
October 31, 1994 96% 2% 2%
July 31, 1994 97% 2% 1%
April 30, 1994 97% 1% 2%
- - ------------------------------------------------------------------------
</TABLE>
The table following shows the maturity composition of the Fund's investments.
<TABLE>
- - -----------------------------------------------------------------------------
- - ---------------
<CAPTION>
Under 1 year to 6 years to
9 years
Date 1 year 6 years 9 years
and over
- - -----------------------------------------------------------------------------
- - ---------------
<S> <C> <C> <C>
<C>
April 30, 1995 7% 44% 33%
16%
January 31, 1995 6% 46% 33%
15%
October 31, 1994 5% 40% 40%
15%
July 31, 1994 4% 42% 36%
18%
April 30, 1994 4% 35% 39%
22%
- - -----------------------------------------------------------------------------
- - ---------------
</TABLE>
4
<PAGE>
<PAGE>
At April 30, 1995 the average maturity of the Fund's Australian dollar
denominated assets, including cash, was 6.0 years. This compares with an average
maturity of 6.4 years at October 31, 1994.
The sectoral composition of the portfolio at April 30, 1995 was as follows:
<TABLE>
- - -----------------------------------------------------------------------------
- - ------
<CAPTION>
State and Eurobonds &
Commercial
Government* Semi Govt. Corporates
Banks**
- - -----------------------------------------------------------------------------
- - ------
<S> <C> <C> <C> <C>
Australia 28.9% 30.5% 37.9%
- - --
New Zealand 1.8% -- 0.3%
- - --
United States -- -- --
0.6%
----------- ---------- -----------
- - ----------
Total 30.7% 30.5% 38.2%
0.6%
- - -----------------------------------------------------------------------------
- - ------
</TABLE>
* Includes supranational issues.
** Includes cash held by the Fund's custodian and repurchase agreements.
- - --------------------------------------------------------------------------------
REVIEW AND OUTLOOK FOR THE AUSTRALIAN AND NEW ZEALAND
FINANCIAL MARKETS
- - --------------------------------------------------------------------------------
AUSTRALIA
Economy
Economic activity in Australia peaked in the second half of 1994. Monetary
policy tightening has had a significant effect on consumer and business
confidence. Housing sector indicators and consumption spending are softening.
Employment growth has been very strong, but leading indicators, such as overtime
and job advertisements, point to a slowdown over the course of the next few
months. Business expectations surveys are also softer. Price pressures remain
well contained, with underlying inflation at an annual rate of 1.9% and headline
inflation of 3.9%.
Fixed Income
Increasing evidence that economic growth is moderating and that monetary
policy is on hold, encouraged Australian ten year Government bonds to move lower
over the past three months. Yields have declined from around 10.4% at the end
of
January to be trading at 9.7% at the end of April. As evidence mounts in the
period ahead that economic growth is continuing at a slower pace, we expect
continuing firm bond market conditions. Indeed, the market made further gains
in
May with the Federal Government announcing a projected Budget surplus for fiscal
1996.
Currency
Stronger commodity prices underpinned the Australian dollar in February and
the early part of March. However, concerns over the size of the Australian
current account deficit saw the currency weaken in April. Over the past six
months the Australian dollar has depreciated by 2% against the U.S. dollar. As
of the end of April the currency was trading at US$0.7275. On the date of this
report it was trading at US$0.7208.
5
<PAGE>
<PAGE>
NEW ZEALAND
Economy
Growth in New Zealand continues at a healthy pace. Investment continues to
grow strongly, while consumption has been supported by stronger employment
growth. However, business and consumer confidence are now easing back and some
moderation in economic growth is anticipated. Inflation is edging up with the
underlying rate now at 1.9%, close to the top of the Reserve Bank's 0% to 2%
target range.
Fixed Income
The New Zealand bond yield curve remains inverted. The Reserve Bank has
pushed short rates above 9.0%, while long bonds have participated in the global
rally. Government ten year bond yields have fallen around 90 basis points over
the past six months to be trading at 7.8% at the end of April. The curve is
expected to remain inverted during the rest of 1995.
Currency
The New Zealand dollar continued its upward trend, reflecting tight monetary
policy settings and the Reserve Bank's commitment to contain inflation. Over the
past six months the New Zealand dollar has appreciated by 9.3% against the U.S.
dollar. As of the end of April 1995 the currency was trading at US$0.6722 and
at
the time of this report it was trading at US$0.6693.
The following table summarizes the movements of key interest rates in
Australia and New Zealand over the last six and three month periods.
<TABLE>
- - -----------------------------------------------------------------------------
- - ------
<CAPTION>
October 31, 1994 January 31, 1995 April 30,
1995
- - -----------------------------------------------------------------------------
- - ------
<S> <C> <C> <C>
Australia:
90 day Bank Bills 6.78% 8.31% 7.88%
10 year Bonds 10.51% 10.39% 9.67%
New Zealand:
90 day Bank Bills 8.20% 9.25% 9.15%
10 year Bonds 9.03% 8.57% 7.85%
- - -----------------------------------------------------------------------------
- - ------
</TABLE>
EquitiLink International Management Limited
6
<PAGE>
<PAGE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Portfolio of Investments
April 30, 1995
(Unaudited)
<TABLE>
- - ---------------------------------------------------------
<CAPTION>
Principal
Amount
Local
Currency Value
(000) Description (US$)
- - ---------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--124.3%
AUSTRALIA--121.6%
Government and Semi-government--74.3%
Commonwealth of Australia--35.4%
Commonwealth of Australia,
A$ 20,000 12.00%, 11/15/96............. $ 15,194,279
4,000 13.50%, 5/15/97.............. 3,150,454
25,000 12.50%, 1/15/98.............. 19,686,702
5,000 13.00%, 4/15/98.............. 3,989,866
25,000 6.25%, 3/15/99............... 16,473,697
15,000 14.00%, 4/15/99.............. 12,553,417
35,000 12.00%, 7/15/99.............. 27,875,845
50,000 7.00%, 4/15/00............... 33,037,604
49,900 13.00%, 7/15/00.............. 41,636,516
5,000 13.00%, 12/15/00............. 4,170,068
30,000 12.00%, 11/15/01............. 24,401,449
36,000 9.50%, 8/15/03............... 25,984,155
10,000 9.00%, 9/15/04............... 6,977,528
100,000 7.50%, 7/15/05............... 62,510,458
Commonwealth Bank of
Australia,
70,000 12.00%, 7/15/99.............. 55,359,567
Telecom,
1,000 12.50%, 10/1/96.............. 755,713
45,000 12.00%, 9/1/98............... 35,359,130
--------------
389,116,448
--------------
New South Wales--8.7%
New South Wales Treasury Corporation,
50,000 12.50%, 4/1/97............... 38,585,885
45,000 12.00%, 12/1/01.............. 36,174,949
20,000 12.60%, 5/1/06............... 20,731,429
--------------
95,492,263
--------------
Northern Territory--2.9%
Northern Territory Authority,
40,000 12.50%, 7/15/01.............. 32,121,754
--------------
Queensland--1.5%
Queensland Treasury
Corporation,
A$ 21,000 12.00%, 7/15/99.............. $ 16,558,371
--------------
South Australia--6.5%
Electricity Trust of South
Australia,
5,000 13.00%, 10/1/05.............. 4,228,632
South Australian Financing
Authority,
30,000 12.50%, 3/15/98.............. 23,654,816
60,000 10.00%, 1/15/03.............. 43,648,704
--------------
71,532,152
--------------
Tasmania--6.5%
Tasmanian Public Finance Corporation,
62,750 12.50%, 1/15/01.............. 51,006,830
24,000 9.00%, 11/15/04.............. 16,165,346
5,000 11.00%, 4/15/06.............. 3,805,117
--------------
70,977,293
--------------
Victoria--6.2%
Treasury Corporation of
Victoria,
5,000 12.50%, 9/15/97.............. 3,900,201
50,000 12.50%, 7/15/00.............. 40,627,251
22,600 12.50%, 10/15/03............. 18,767,814
7,000 10.25%, 11/15/06............. 5,109,154
--------------
68,404,420
--------------
Western Australia--6.6%
Western Australia Treasury Corporation,
10,000 12.50%, 4/1/98............... 7,886,466
18,000 9.00%, 4/15/99............... 12,934,722
64,000 12.00%, 8/1/01............... 51,440,436
--------------
72,261,624
--------------
Total Australian government
and semi-government
(cost US$842,447,542)........ 816,464,325
--------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
<TABLE>
- - ---------------------------------------------------------
<CAPTION>
Principal
Amount
Local
Currency Value
(000) Description (US$)
- - ---------------------------------------------------------
<C> <S> <C>
Eurobonds--33.3%
Diversified Industrials--1.0%
Australian National Railway,
A$ 2,138 9.50%, 2/25/99............... $ 1,539,602
BMW Australia Finance,
1,700 10.25%, 3/17/97.............. 1,248,499
EksportFinans,
4,000 7.00%, 6/28/00............... 2,592,054
Federal Airports Corporation,
7,000 7.00%, 2/16/04............... 4,044,582
Finnish Eksport Credit,
2,925 9.25%, 12/30/99.............. 2,058,887
--------------
11,483,624
--------------
Natural Resources--0.8%
Mobil Australia Corp.,
1,000 12.00%, 4/18/97.............. 756,971
Shell Australia,
5,000 10.125%, 4/1/97.............. 3,673,658
1,786 10.00%, 12/19/97............. 1,308,346
State Electricity Commission of Victoria,
1,000 12.25%, 5/30/01.............. 790,007
3,000 11.00%, 4/9/02............... 2,252,799
--------------
8,781,781
--------------
Services--21.8%
Banque National de Paris,
14,000 9.00%, 8/13/02............... 9,588,213
Commonwealth Bank of
Australia,
1,000 12.75%, 1/7/98............... 778,360
2,000 8.75%, 9/14/00............... 1,389,291
Credit Lyonnais Australia,
5,000 8.625%, 12/29/97............. 3,517,515
GG Securities,
5,000 9.25%, 3/24/03............... 3,405,225
International Bank for
Reconstruction & Development,
1,000 14.50%, 6/7/96............... 767,047
McDonald's Australia,
1,000 10.50%, 11/5/98.............. 739,235
New South Wales Treasury Corporation,
10,000 7.50%, 2/1/98................ 6,990,040
5,000 11.50%, 7/1/99............... 3,898,965
12,000 12.00%, 12/1/01.............. 9,679,478
5,000 6.50%, 5/1/06................ 2,788,945
32,000 12.60%, 5/1/06............... 26,923,096
Province Aples Cotes D'Azur,
A$ 12,000 8.25%, 9/15/99............... $ 8,187,608
Province of Quebec,
390 9.50%, 10/2/02............... 263,335
Queensland Treasury
Corporation,
40,000 8.00%, 5/14/97............... 28,599,780
40,000 8.00%, 7/14/99............... 27,740,821
55,000 8.00%, 8/14/01............... 36,904,559
3,000 12.00%, 8/15/01.............. 2,417,294
30,000 8.00%, 5/14/03............... 19,607,768
15,000 10.50%, 5/15/03.............. 11,222,310
Rural & Industries Bank,
5,000 8.75%, 9/9/99................ 3,492,976
2,000 7.75%, 6/9/03................ 1,254,290
South Australia Financing
Authority,
2,000 10.50%, 11/6/98.............. 1,483,126
1,500 12.00%, 6/12/01.............. 1,174,283
State Bank of New South
Wales,
1,000 14.25%, 9/28/99.............. 827,066
5,500 12.25%, 2/26/01.............. 4,364,445
3,000 10.75%, 3/12/02.............. 2,247,932
5,000 9.00%, 9/17/02............... 3,429,014
10,000 9.25%, 2/18/03............... 6,965,233
State Bank of South
Australia,
7,500 9.50%, 10/15/02.............. 5,227,646
Tasmanian Public Finance
Authority,
2,000 10.75%, 11/20/01............. 1,485,264
Toronto-Dominion Bank,
1,000 11.25%, 7/15/98.............. 752,541
Treasury Corporation of
Victoria,
2,000 11.00%, 3/12/02.............. 1,501,750
--------------
239,614,451
--------------
Supranational Global--9.7%
Credit Locale de France,
10,000 7.50%, 9/15/97............... 7,047,658
Eurofima,
40,000 9.875%, 1/17/07.............. 28,445,259
European Bank of
Reconstruction &
Development,
45,000 9.00%, 10/15/02.............. 31,206,705
European Investment Bank,
38,000 10.25%, 10/1/01.............. 28,816,052
Swedish National Housing,
15,000 7.50%, 8/22/96............... 10,709,531
--------------
106,225,205
--------------
Total Australian Eurobonds
(cost US$385,682,204)........ 366,105,061
--------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<PAGE>
<TABLE>
- - ---------------------------------------------------------
<CAPTION>
Principal
Amount
Local
Currency Value
(000) Description (US$)
- - ---------------------------------------------------------
<C> <S> <C>
Corporate Bonds--14.0%
Diversified Industrials--0.9%
Federal Airports Corporation,
A$ 5,000 10.50%, 7/15/99.............. $ 3,729,275
10,000 8.25%, 6/2/03................ 6,458,893
--------------
10,188,168
--------------
Services--13.1%
Australian & Overseas
Telecommunication
Corporation,
55,350 12.50%, 11/15/00............. 44,904,704
40,000 11.50%, 10/15/02............. 31,084,630
2,000 7.80%, 7/17/03............... 1,391,752
41,000 12.00%, 5/15/06.............. 32,707,952
20,000 10.50%, 12/15/17............. 13,679,915
2,000 8.75%, 1/15/20............... 1,373,695
10,000 10.50%, 1/15/20.............. 6,831,300
2,000 12.50%, 1/15/20.............. 1,676,292
FANMAC Limited,
Mortgage Series 25,
770 10.33%, 6/15/02.............. 569,530
Premier Trust 22,
3,530 11.40%, 12/15/01............. 2,692,576
Macquarie Bank Limited,
1,000 9.75%, 8/1/00................ 705,493
Primary Industry Bank of
Australia,
5,000 8.00%, 5/15/98............... 3,497,203
5,000 6.75%, 2/25/99............... 3,275,657
--------------
144,390,699
--------------
Total Australian corporate
bonds
(cost US$157,679,735)........ 154,578,867
--------------
Total Australian long-term investments
(cost US$1,385,809,481)...... 1,337,148,253
--------------
NEW ZEALAND--2.7%
Government--2.3%
New Zealand Government Bonds,
NZ$ 5,000 6.50%, 2/15/00............... 3,164,276
30,000 10.00%, 3/15/02.............. 22,364,131
--------------
Total New Zealand
government bonds
(cost US$23,687,142)....... 25,528,407
--------------
Eurobonds--0.1%
Telecom New Zealand Finance,
1,500 9.25%, 7/1/02,
(cost US$996,653).......... 1,051,155
--------------
Corporate Bonds--0.3%
Electric Corporation of New
Zealand,
NZ$ 5,000 10.00%, 10/15/01,
(cost US$3,275,590)........ $ 3,617,652
--------------
Total New Zealand long-term
investments
(cost US$27,959,385)......... 30,197,214
--------------
Total long-term investments
(cost US$1,413,768,866)...... 1,367,345,467
--------------
SHORT-TERM INVESTMENTS--7.2%
Australia--6.4%
Government and Semi-government--4.8%
Commonwealth of Australia--2.7%
Telecom,
A$ 30,000 12.00%, 9/1/95............... 22,094,982
10,000 13.00%, 2/1/96............... 7,489,979
--------------
29,584,961
--------------
New South Wales--2.1%
New South Wales Treasury Corporation,
10,500 8.50%, 3/1/96................ 7,628,211
State Bank of New South
Wales,
20,000 13.00%, 3/15/96.............. 15,068,567
--------------
22,696,778
--------------
Total Australian government
and semi-government
(cost US$55,833,503)......... 52,281,739
--------------
Eurobonds--0.4%
Diversified Industrials--0.1%
Amro Australia Limited,
1,300 14.75%, 5/15/95.............. 947,485
--------------
Services--0.3%
General Electric of Canada,
1,000 14.25%, 8/8/95............... 736,390
McDonald's Canada,
3,000 15.00%, 6/28/95.............. 2,200,856
Tasmanian Public Finance
Authority,
1,000 13.00%, 12/22/95............. 745,826
--------------
3,683,072
--------------
Total Australian Eurobonds
(cost US$5,193,416).......... 4,630,557
--------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
<PAGE>
<TABLE>
- - ---------------------------------------------------------
<CAPTION>
Principal
Amount
Local
Currency Value
(000) Description (US$)
- - ---------------------------------------------------------
<C> <S> <C>
Corporate Bonds--1.2%
Services--1.2%
Australian & Overseas
Telecommunication
Corporation,
A$ 2,800 12.50%, 8/15/95.............. $ 2,063,074
Ford Credit Australia
Limited,
5,000 12.25%, 9/15/95.............. 3,686,898
Macquarie Bank Limited,
10,000 14.20%, 1/3/96............... 7,296,392
--------------
Total Australian corporate
bonds
(cost US$15,001,265)......... 13,046,364
--------------
Total Australian short-term
investments
(cost US$76,028,184)......... 69,958,660
--------------
United States--0.8%
US$ 8,982 Repurchase Agreement, State
Street Bank and Trust
Company, 5.87% 4/28/95, due
5/1/95 in the amount of
$8,986,394 (cost
$8,982,000; collateralized
by $8,590,000 U.S. Treasury
Note, 8.25%, due 7/15/98;
value including
accrued
interest-US$9,164,765)..... 8,982,000
--------------
Total short-term investments
(cost US$85,010,184)......... 78,940,660
--------------
Total Investments--131.5%
(cost US$1,498,779,050; Note
3)......................... 1,446,286,127
Other assets in excess of
liabilities--4.8%.......... 53,313,323
Liquidation value of
preferred stock--(36.3%)... (400,000,000)
--------------
Net Assets Applicable to
Common Shareholders--100%.. $1,099,599,450
--------------
--------------
</TABLE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Statement of Assets and Liabilities
April 30, 1995
(Unaudited)
- - ----------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (cost
$1,498,779,050)..................... $1,446,286,127
Foreign currency, at value (cost
$26,384,127)........................ 26,219,853
Cash.................................. 493,615
Interest receivable................... 41,631,189
Other assets.......................... 36,157
--------------
Total assets...................... 1,514,666,941
--------------
Liabilities
Dividends payable-common stock........ 9,326,681
Withholding taxes payable............. 2,851,872
Dividends payable-preferred stock..... 1,100,147
Accrued expenses and other
liabilities......................... 991,990
Investment management fee payable..... 665,411
Administration fee payable............ 131,390
--------------
Total liabilities................. 15,067,491
--------------
Total Net Assets...................... $1,499,599,450
--------------
--------------
Total net assets were composed of:
Common stock:
Par value ($.01 per share,
applicable to
124,355,752 shares)............. $ 1,243,558
Paid-in capital in excess of
par............................... 1,147,485,322
Preferred stock ($.01 par value per
share and
$100,000 liquidation value per
share
applicable to 4,000 shares; Note
4)................................ 400,000,000
--------------
1,548,728,880
Undistributed net investment
income.............................. 5,513,483
Accumulated net realized losses on
investments....................... (1,155,824)
Net unrealized depreciation on
investments......................... (64,827,446)
Accumulated net realized and
unrealized foreign exchange
gains............................. 11,340,357
--------------
Total net assets.................... $1,499,599,450
--------------
--------------
Net assets applicable to common
shareholders...................... $1,099,599,450
--------------
--------------
Net asset value per common share:
($1,099,599,450 / 124,355,752 shares
of common stock issued and
outstanding)........................ $8.84
--------------
--------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
10
<PAGE>
<PAGE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Statement of Operations
Six Months Ended April 30, 1995
(Unaudited)
- - ----------------------------------------------------------
<TABLE>
<S> <C>
Net Investment Income
Income
Interest and discount earned (net of
foreign
withholding taxes of $5,649,683)... $ 68,700,321
------------
Expenses
Investment management fee............ 4,164,289
Custodian's fees and expenses........ 1,109,000
Administration fee................... 975,222
Auction agent's fees and expenses.... 585,000
Reports to shareholders.............. 392,000
Transfer agent's fees and expenses... 326,000
Directors' fees and expenses......... 199,000
Independent accountant's fees and
expenses............................. 106,000
Legal fees and expenses.............. 80,000
Insurance expense.................... 71,000
Miscellaneous........................ 42,219
------------
Total operating expenses............. 8,049,730
------------
Net investment income before excise
tax.................................. 60,650,591
Excise tax........................... 252,248
------------
Net investment income.................. 60,398,343
------------
Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currencies
Net realized loss on investment
transactions......................... (1,128,829)
Net change in unrealized appreciation
on investments....................... 46,320,112
------------
Net gain on investments................ 45,191,283
------------
Net increase in total net assets from
operations before net foreign
exchange losses...................... 105,589,626
Net realized and unrealized foreign
exchange losses...................... (25,507,752)
------------
Net Increase In Total Net Assets
Resulting From Operations.............. $ 80,081,874
------------
------------
</TABLE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Statement of Cash Flows
Six Months Ended April 30, 1995
(Unaudited)
- - ----------------------------------------------------------
<TABLE>
<S> <C>
Increase (Decrease) in Cash
(Including Foreign Currency)
Cash flows provided from operating
activities
Interest received (net of foreign
withholding taxes)................. $ 70,368,558
Expenses paid........................ (8,183,453)
Sales of short-term portfolio
investments, net..................... 17,712,000
Purchases of long-term portfolio
investments.......................... (262,538,407)
Proceeds from sales of long-term
portfolio
investments........................ 272,159,901
Other................................ 67,098
-------------
Net cash provided from operating
activities......................... 89,585,697
-------------
Cash flows used for financing
activities
Dividends and distributions paid to
preferred shareholders............. (13,694,295)
Dividends and distributions paid to
common
shareholders (net of $7,688,453
paid in the issuance of shares).... (55,244,891)
-------------
Net cash used for financing
activities......................... (68,939,186)
-------------
Effect of changes in exchange rate..... 1,421,363
-------------
Net increase in cash................... 22,067,874
Cash at beginning of period.......... 4,645,594
-------------
Cash at end of period................ $ 26,713,468
-------------
-------------
Reconciliation of Net Increase in Total
Net Assets from Operations to Net Cash
(Including Foreign Currency) Provided
From Operating Activities
Net increase in total net assets
resulting from
operations........................... $ 80,081,874
-------------
Decrease in investments.............. 27,333,494
Decrease in interest receivable...... 1,842,949
Net decrease in other assets......... 67,098
Decrease in accrued expenses and
other liabilities.................. (56,187)
Net realized loss on investment
transactions......................... 1,128,829
Net change in unrealized appreciation
on
investments........................ (46,320,112)
Net realized and unrealized foreign
exchange losses.................... 25,507,752
-------------
Total adjustments.................. 9,503,823
-------------
Net cash provided from operating
activities............................. $ 89,585,697
-------------
-------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
11
<PAGE>
<PAGE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Statement of Changes
in Net Assets
(Unaudited)
- - ----------------------------------------------------------
<TABLE>
<CAPTION>
Six months
ended Year ended
Increase (Decrease) April 30, October 31,
in Total Net Assets 1995 1994
-------------- --------------
<S> <C> <C>
Operations
Net investment income... $ 60,398,343 $ 125,416,048
Net realized gain (loss)
on investment
transactions.......... (1,128,829) 29,213,379
Net change in unrealized
appreciation
(depreciation) on
investments........... 46,320,112 (310,171,836)
-------------- --------------
Net increase (decrease)
in total net assets
resulting from
operations before net
foreign exchange gains
(losses).............. 105,589,626 (155,542,409)
Net realized and
unrealized foreign
exchange gains
(losses).............. (25,507,752) 156,775,702
-------------- --------------
Net increase in total net
assets resulting from
operations.............. 80,081,874 1,233,293
-------------- --------------
Dividends to shareholders
from net investment
income:
Common shares........... (55,868,136) (102,870,871)
Preferred shares........ (11,660,124) (14,114,110)
-------------- --------------
(67,528,260) (116,984,981)
-------------- --------------
Distributions to
shareholders
from net realized
capital gains:
Common shares........... (7,131,198) (21,110,324)
Preferred shares........ (2,142,800) (1,577,675)
-------------- --------------
(9,273,998) (22,687,999)
-------------- --------------
Fund share transactions
Net proceeds from
issuance of preferred
shares................ -- 48,885,000
Net proceeds from rights
offering of Fund
shares................ -- 156,956,449
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions and in
connection with
dividends paid in
stock................. 7,688,453 21,145,354
-------------- --------------
7,688,453 226,986,803
-------------- --------------
Total increase............ 10,968,069 88,547,116
Total Net Assets
Beginning of period....... 1,488,631,381 1,400,084,265
-------------- --------------
End of period............. $1,499,599,450 $1,488,631,381
-------------- --------------
-------------- --------------
</TABLE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME FUND, INC.
Notes to Financial Statements
(Unaudited)
- - ----------------------------------------------------------
The First Australia Prime Income Fund, Inc. (the ``Fund'') was incorporated
in Maryland on March 14, 1986 as a closed-end, non-diversified investment
company. The Fund's investment objective is current income through investment
primarily in Australian debt securities. The Fund may also achieve incidental
capital appreciation. It is expected that normally at least 65% of the Fund's
total assets will be invested in Australian dollar denominated debt securities
of Australian banks, federal and state governmental and corporate entities. To
achieve its investment objective, the Fund may invest the remainder of its
assets in debt securities of comparable quality which are denominated in
Australian or New Zealand dollars of other issuers, whether or not domiciled in
Australia or New Zealand, and in U.S. Government securities and corporate and
bank debt securities of U.S. issuers rated Aa or Prime-2 or better by Moody's
Investors Service, Inc. (``Moody's'') or AA or A-2 or better by Standard &
Poor's Corporation (``S&P''). It is the Fund's policy to limit its investments,
as to 65% of its total assets, to issuers of debt securities rated AA or better
by S&P--Australian Ratings Pty. Ltd. or S&P or Aa or better by Moody's or which,
in the judgement of the Investment Manager, are of equivalent quality. The
remainder of the Fund's investments will be rated A by those rating agencies or,
if unrated, will in the Investment Manager's judgement be of equivalent quality.
The ability of issuers of debt securities, including foreign currency balances
on deposit with the Fund's Australian and New Zealand subcustodian banks, held
by the Fund to meet their obligations may be affected by economic or political
developments in a specific industry or region.
Note 1. Accounting The following is a summary of
Policies significant accounting policies
followed by the Fund in the preparation of its
financial statements.
Basis of Presentation: The financial statements of the Fund are prepared in
accordance with United States generally accepted accounting principles using the
United States dollar as both the functional and reporting currency.
Security Valuation: Investments are stated at value. Investments for which
market quotations are readily available are valued based on prices provided by
a
pricing service or the lower of the quotations from two leading Australian or
New Zealand brokers in the debt securities market, in the event that
See Notes to Financial Statements.
12
<PAGE>
<PAGE>
a price cannot be obtained by the pricing service. Securities for which market
quotations are not readily available are valued at fair value using methods
determined in good faith by or under the direction of the Fund's Board of
Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian take possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the collateral is
valued on a daily basis to determine its adequacy. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Fund may be delayed or limited.
Foreign Currency Translation: Australian dollar (``A$'') and New Zealand dollar
(``NZ$'') amounts are translated into United States dollars on the following
basis:
(i) market value of investment securities, other assets and liabilities
at
the exchange rates at the end of the fiscal period;
(ii) purchases and sales of investment securities, income and expenses at
the rates of exchange prevailing on the respective dates of such
transactions.
The Fund isolates that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of the securities held at fiscal period end.
Similarly, the Fund isolates the effect of changes in foreign exchange rates
from the fluctuations arising from changes in the market prices of portfolio
securities sold during the fiscal period.
Net realized and unrealized foreign exchange losses of $25,507,752 include
realized foreign exchange gains and losses from sales and maturities of
portfolio securities, sales of foreign currencies, currency gains or losses
realized between the trade and settlement dates on securities transactions, the
difference between the amounts of interest, discount and foreign withholding
taxes recorded on the Fund's books and the US dollar equivalent amounts actually
received or paid and changes in unrealized foreign exchange gains and losses in
the value of portfolio securities and other assets and liabilities arising as
a
result of changes in the exchange rate.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin, including
unanticipated movements in the value of the foreign currency relative to the
U.S. dollar.
The exchange rate at April 30, 1995 was US$.7275 to A$1.00 for the Australian
dollar and US$.6722 to NZ$1.00 for the New Zealand dollar.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses from
security and currency transactions are calculated on the identified cost basis.
Interest income is recorded on an accrual basis. Discounts on short-term
securities are accreted over the life of the security.
Dividends and Distributions: It is the Fund's current policy to pay dividends
from net investment income. The Fund will also declare and pay distributions at
least annually from net realized gains on investment transactions and net
realized foreign exchange gains, if any. Dividends and distributions to common
shareholders are recorded on the ex-dividend date. Dividends and distributions
to preferred shareholders are accrued on a weekly basis and are determined as
described in Note 4.
Income distributions and capital and currency gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due
to
differing treatments for foreign currencies, loss deferrals and recognition of
market discount.
Taxes: For federal income and excise tax purposes, substantially all of the
Fund's transactions are accounted for using the Australian dollar as the
functional currency. Accordingly, only realized currency gains and losses
resulting from the repatriation of A$ into US$ or NZ$ into US$ are recognized
for tax purposes.
No provision has been made for United States income taxes because it is the
Fund's policy to continue to meet the requirements of the United States Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to shareholders. Australia and New Zealand impose a
withholding tax of 10% on most interest and discount earned.
Cash Flow Information: The Fund invests in securities and distributes dividends
from net investment income and net realized gains from investment and currency
transactions which are paid in cash or are reinvested at the discretion of
shareholders. These activities are reported in the Statement of Changes in Net
Assets and additional information on cash receipts and cash payments is
presented in the Statement of Cash Flows. Cash includes domestic and foreign
currency.
13
<PAGE>
<PAGE>
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
During the fiscal period ended April 30, 1995, the Fund increased undistributed
net investment income by $4,805,946, decreased accumulated net realized gains
on
investments by $3,328,506 and decreased accumulated net realized foreign
exchange gains by $1,477,440. Net investment income, net realized gains and net
assets were not affected by this change. Accumulated realized and unrealized
foreign exchange gains shown in the composition of net assets at April 30, 1995
represent foreign exchange gains for book purposes that have not yet been
recognized for tax purposes.
Note 2. Agreements The Fund has agreements
with EquitiLink International Management Limited
(the ``Investment Manager''), EquitiLink Australia Limited (the ``Investment
Adviser''), The Prudential Insurance Company of America (the ``Consultant''),
and Prudential Mutual Fund Management, Inc. (the ``Administrator''). The
Investment Manager and the Investment Adviser are affiliated companies; the
Administrator is an indirect wholly-owned subsidiary of the Consultant.
The Investment Manager makes investment decisions on behalf of the Fund on
the basis of recommendations and information furnished to it by the Investment
Adviser and the Consultant, including the selection of and the placement of
orders with brokers and dealers to execute portfolio transactions on behalf of
the Fund.
The management agreement provides the Investment Manager with a fee, computed
weekly and payable monthly, at the following annual rates: 0.65% of the Fund's
average weekly total net assets of common and preferred shareholders up to $200
million, 0.60% of such assets between $200 million and $500 million, 0.55% of
such assets between $500 million and $900 million and 0.50% of such assets in
excess of $900 million. The administration agreement provides the Administrator
with a fee at the annual rate of 0.15% of the Fund's average weekly total net
assets of common and preferred shareholders up to $900 million and 0.10% of such
assets in excess of $900 million. The Investment Manager pays fees to the
Investment Adviser and the Consultant for their services rendered. The
Investment Manager informed the Fund that it paid $1,814,561 to the Investment
Adviser and $319,767 to the Consultant during the fiscal period ended April 30,
1995.
Note 3. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for the fiscal period
ended April 30, 1995 aggregated $262,538,407 and $272,159,901, respectively.
The United States federal income tax basis of the Fund's investments at April
30, 1995 was $1,509,759,807 and accordingly, net unrealized depreciation for
United States federal income tax purposes was $63,473,680 (gross unrealized
appreciation--$24,855,883; gross unrealized depreciation--$88,329,563).
Note 4. Capital There are 200 million shares
of common stock authorized. Of the 124,355,752
common shares outstanding at April 30, 1995, the Investment Manager owned 39,782
shares.
In connection with a rights offering, shareholders of record on March 17,
1995 were issued one-fifth of a non-transferable right for each full share of
common stock owned, entitling shareholders the opportunity to acquire one newly
issued share of common stock for every whole right held at a subscription price
equal to a 5% discount from the lesser of net asset value on the expiration date
(April 20, 1995) or the average market value on that date and the three business
days preceding the expiration date. On May 5, 1995 the Fund issued 30,723,350
shares of common stock at $7.64 per share and rights offering costs of
$1,105,345 ($.01 per share) and brokerage and dealer-manager commissions of
$8,802,239 ($.07 per share) were charged to paid-in capital of common
shareholders resulting in net proceeds to the Fund of $224,818,810. The net
asset value per share of the Fund's common shareholders was reduced by
approximately $0.38 per share as a result of this share issuance. Prudential
Securities Incorporated, an affiliate of the Consultant and the Administrator,
and its financial advisors earned approximately $1,772,000 of the aforementioned
commissions with respect to its participation in the rights offering.
The Fund issued 177,377 shares during the fiscal period ended April 30, 1995
in connection with the reinvestment of dividends and distributions paid to
shareholders enrolled in the dividend reinvestment plan and 702,496 shares in
connection with a cash dividend paid in stock.
The Fund also issued 2,128,167 shares during the fiscal year ended October
31, 1994 in connection with the reinvestment of dividends and distributions paid
to shareholders enrolled in the dividend reinvestment plan.
There are 100 million shares of $.01 par value of preferred stock authorized
with an aggregate liquidation preference of up to $500 million. The preferred
shares have rights as determined by the Board of Directors. The 4,000 shares of
Auction Market Preferred Stock (``Preferred Stock'') outstanding consist of six
series as follows: Series A--750 shares, Series
14
<PAGE>
<PAGE>
B--750 shares, Series C--500 shares, Series D--1,000 shares, Series E--500
shares and Series F--500 shares. Series F preferred shares were issued on
December 20, 1993 (net proceeds $48,885,000). The Preferred Stock has a
liquidation value of $100,000 per share plus any accumulated but unpaid
dividends.
Dividends on each series of preferred shares are cumulative at a rate
established at the initial public offering and are typically reset every 28 days
for Series A through D and every seven days for Series E and F based on the
results of an auction. Dividend rates ranged from 4.80% to 6.625% during the
fiscal period ended April 30, 1995. Under the Investment Company Act of 1940,
the Fund may not declare dividends or make other distributions on shares of
common stock or purchase any such shares if, at the time of the declaration,
distribution or purchase, asset coverage with respect to the outstanding
Preferred Stock would be less than 200%.
The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at $100,000 per share plus any accumulated
but unpaid dividends. The Preferred Stock is also subject to mandatory
redemption at $100,000 per share plus any accumulated but unpaid dividends if
certain requirements relating to the composition of the assets and liabilities
of the Fund as set forth in the Articles of Incorporation are not satisfied.
The holders of Preferred Stock have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Fund's directors.
Note 5. Dividends On May 15, 1995 the Board of
and Distributions Directors of the Fund declared
a distribution from undistributed net investment
income of $.075 per common share payable on June 9, 1995 to common shareholders
of record on May 31, 1995.
Subsequent to April 30, 1995, dividends and distributions declared and paid
on preferred shares totalled approximately $2,806,900 for the six outstanding
preferred share series in the aggregate through June 8, 1995.
Note 6.
Quarterly Data
<TABLE>
<CAPTION>
Net realized and
Net increase
unrealized
(decrease)
gains (losses) on
in net assets Dividends
Net investment investments and
resulting from and
income foreign currencies
operations distributions
Per Per
Per Common
Quarterly Total common
common common shares
period income Amount share Amount share
Amount share Amount
- - ----------- ----------- ----------------------
- - ----------------------- ----------------------- -----------
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
11/1/92 to
1/31/93 $35,252,188 $31,740,904 $.31 $(19,945,575)
$(.19) $ 11,795,329 $ .12 $35,186,719
2/1/93 to
4/30/93 34,157,242 30,529,286 .30 112,827,754 1.09
143,357,040 1.39 27,857,287
5/1/93 to
7/31/93 34,139,795 30,389,017 .29 (10,743,276)
(.10) 19,645,741 .19 27,919,578
8/1/93 to
10/31/93 33,702,339 30,003,723 .29 (22,476,390)
(.22) 7,527,333 .07 28,045,576
11/1/93 to
1/31/94 35,611,751 31,643,294 .26 96,221,242 .78
127,864,536 1.04 32,858,529
2/1/94 to
4/30/94 35,940,426 31,877,989 .26 (134,738,538)
(1.10) (102,860,549) (.84) 31,166,968
5/1/94 to
7/31/94 35,375,916 31,328,526 .25 (35,788,451)
(.29) (4,459,925) (.04) 30,382,609
8/1/94 to
10/31/94 35,030,311 30,566,239 .24 (49,877,008)
(.42) (19,310,769) (.18) 29,573,089
11/1/94 to
1/31/95 34,633,348 30,535,230 .24 35,683,598 .29
66,218,828 .53 34,967,014
2/1/95 to
4/30/95 34,066,973 29,863,113 .24 (16,000,067)
(.13) 13,863,046 .11 28,032,320
<CAPTION>
Common
share price
on the
Preferred shares American
Per Per Stock
Quarterly common common Exchange
period share Amount share High Low
- - ----------- ------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
11/1/92 to
1/31/93 $.35 $3,579,387 $.03 $10 1/2 $8 7/8
2/1/93 to
4/30/93 .27 2,836,895 .03 11 3/8 9 9/16
5/1/93 to
7/31/93 .27 2,828,903 .03 11 10 1/8
8/1/93 to
10/31/93 .27 2,844,597 .03 11 5/16 9 3/4
11/1/93 to
1/31/94 .27 3,056,070 .03 11 10
2/1/94 to
4/30/94 .25 3,507,996 .03 11 9 7/8
5/1/94 to
7/31/94 .25 4,301,424 .03 10 13/16 10
8/1/94 to
10/31/94 .24 4,826,295 .04 10 5/8 9
11/1/94 to
1/31/95 .30 7,742,677 .06 9 9/16 8
2/1/95 to
4/30/95 .22 6,060,247 .04 8 7/8 7 1/2
</TABLE>
15
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME FUND, INC.
Financial Highlights
(Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months
ended
Years ended October 31,
April 30,
- - ----------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1995 1994 1993
1992 1991 1990
----------- ----------
- - ---------- -------- -------- --------
<S> <C> <C> <C>
<C> <C> <C>
Net asset value per common share,
beginning of period.................. $ 8.82 $ 10.09 $
9.61 $ 11.31 $ 10.02 $ 9.31
----------- ----------
- - ---------- -------- -------- --------
Net investment income.................. .48 1.01
1.19 1.29 1.40 1.49
Net realized and unrealized gain (loss)
on investments and foreign
currencies........................... .16 (1.03)
.58 (1.42) 1.37 .73
----------- ----------
- - ---------- -------- -------- --------
Total from investment operations..... .64 (.02)
1.77 (.13) 2.77 2.22
----------- ----------
- - ---------- -------- -------- --------
Dividends from net investment income to
preferred shareholders............... (.08) (.12)
(.11) (.14) (.24) (.30)
Dividends from net investment income to
common shareholders.................. (.45) (.84)
(1.08) (1.10) (1.24) (1.13)
Distributions from net capital and
currency gains to preferred
shareholders......................... (.02) (.01)
(.01) (.01) -- --
Distributions from net capital and
currency gains to common
shareholders......................... (.07) (.17)
(.08) (.29) -- (.08)
----------- ----------
- - ---------- -------- -------- --------
Total dividends and distributions.... (.62) (1.14)
(1.28) (1.54) (1.48) (1.51)
----------- ----------
- - ---------- -------- -------- --------
Capital charge in respect to issuance
of shares............................ -- (.11)
(.01) (.03) -- --
----------- ----------
- - ---------- -------- -------- --------
Net asset value per common share, end
of period............................ $ 8.84 $ 8.82 $
10.09 $ 9.61 $ 11.31 $ 10.02
----------- ----------
- - ---------- -------- -------- --------
----------- ----------
- - ---------- -------- -------- --------
Market price per common share, end of
period............................... $ 7.88 $ 9.56 $
10.25 $ 10.00 $ 10.94 $ 8.94
----------- ----------
- - ---------- -------- -------- --------
----------- ----------
- - ---------- -------- -------- --------
TOTAL INVESTMENT RETURN BASED ON(D):
Market value........................... (12.47)% 3.32%
15.00% 4.11% 38.36% 14.95%
Net asset value........................ 6.53% (3.19)%
17.80% (3.22)% 27.62% 22.88%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS/SUPPLEMENTAL DATA#:
Expenses............................... 1.50%(D)(D)/* 1.41%(D)(D)
1.44%(D)(D) 1.43%(D)(D) 1.59%(D)(D) 1.54%(D)(D)
Net investment income before preferred
stock dividends...................... 10.93%* 10.68%
12.13% 12.14% 13.42% 15.47%
Preferred stock dividends.............. 2.11%* 1.20%
1.13% 1.25% 2.31% 3.11%
Net investment income available to
common shareholders.................. 8.82%* 9.48%
11.00% 10.89% 11.11% 12.36%
Portfolio turnover rate................ 18% 34%
23% 17% 83% 80%
Net assets of common shareholders, end
of period (000 omitted).............. $ 1,099,599 $1,088,631
$1,050,084 $977,933 $972,569 $861,379
Average net assets of common
shareholders (000 omitted)........... $ 1,114,561 $1,174,394
$1,011,324 $938,072 $899,175 $826,862
Senior securities (preferred stock)
outstanding (000 omitted)............ $ 400,000 $ 400,000 $
350,000 $300,000 $300,000 $300,000
Asset coverage of preferred stock at
period end........................... 374% 372%
400% 426% 424% 387%
</TABLE>
- - ---------------
* Annualized.
(D) Total investment return is calculated assuming a purchase of common
stock on the first day and a sale on the last day of each period
reported. Dividends and distributions are assumed, for purposes of this
calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Total investment return does not reflect
brokerage commissions. Total returns for periods of less than a full
year are not annualized.
(D)(D) Includes expenses of both preferred and common stock.
# Ratios calculated on the basis of income, expenses and preferred share
dividends applicable to both the common and preferred shares relative to
the average net assets of common shareholders.
NOTE: Contained above is operating performance for a share of common stock
outstanding, total investment return, ratios to average net assets of
common shareholders and other supplemental data for each of the
periods indicated. This information has been determined based upon
financial information provided in the financial statements and market
value data for the Fund's common shares.
See Notes to Financial Statements.
16
<PAGE>
<PAGE>
OTHER INFORMATION
Dividend Reinvestment and Cash Purchase Plan. Shareholders may elect to have
all distributions of dividends and capital gains automatically reinvested in
Fund shares pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan
(the Plan). Shareholders who do not participate in the Plan will receive all
distributions in cash paid by check in United States dollars mailed directly to
the shareholders of record (or if the shares are held in street or other nominee
name, then to the nominee) by the custodian, as dividend disbursing agent.
Shareholders who wish to participate in the Plan should contact the Fund at
(800) 451-6788.
State Street Bank & Trust Co. (the Plan Agent) serves as agent for the
shareholders in administering the Plan. If the Fund declares a dividend or
capital gains distribution payable either in cash or in shares of the Fund and
the market price of shares on the payment date equals or exceeds the net asset
value, the Fund will issue new shares to Plan participants at the higher of (i)
net asset value on the payment date or (ii) market value on the payment date
less a discount not to exceed 5% of the market price of the shares on the
payment date. If the market price is lower than net asset value on the payment
date, then Plan participants will receive shares purchased on the American or
Pacific Stock Exchanges, or otherwise on the open market. If the market price
exceeds net asset value before the Plan Agent has completed its purchases, the
average purchase price may exceed net asset value resulting in fewer shares
being acquired than if the Fund had issued new shares. All reinvestments are in
full and fractional shares, carried to three decimal places.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage commissions
charged with respect to shares issued directly by the Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. The automatic reinvestment of
dividends and distributions will not relieve participants of any federal income
tax that may be payable on such dividends and distributions.
The Plan also allows participants to make optional cash investments in Fund
shares through the Plan Agent on the open market.
The Fund reserves the right to amend or terminate the Plan upon 90 days'
written notice to shareholders of the Fund.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Shares and cash for
fractional Shares.
All correspondence concerning the Plan should be directed to the Plan Agent,
State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200.
17
<PAGE>
<PAGE>
Supplemental Proxy Information
The Annual Meeting of Shareholders of The First Australia Prime Income Fund,
Inc. (Fund) was held on Thursday, March 16, 1995 at the offices of Prudential
Securities Incorporated, One Seaport Plaza, New York, New York. The meeting was
held for the following purposes:
<TABLE>
<S> <C>
(1) To elect the following four Directors to serve as Class I Directors
for a three-year term expiring in 1998:
- Anthony E. Aaronson
- Roger C. Maddock
- John A. Calvert-Jones
- John T. Sheehy
(2) To elect the following two Directors to represent the interests of the
holders of preferred stock for the ensuing year:
- David Manor
- Marvin Yontef
Directors whose term of office continued beyond this meeting are as
follows:
Sir Roden Cutler, David L. Elsum, Rt. Hon. Malcolm Fraser, Laurence S.
Freedman, Michael R. Horsburgh, Harry A. Jacobs, Jr., Howard A.
Knight, William J. Potter, Peter D. Sacks and Brian M. Sherman.
(3) To ratify the selection of Price Waterhouse LLP as independent public
accountants of the Fund for the fiscal year ending October 31, 1995;
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
</TABLE>
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Director/Auditor Votes for Votes against Votes
withheld Abstentions
----------------------- ---------------- -------------
- - --------------- ---------------
<S> <C> <C> <C> <C>
<C>
(1) Anthony E. Aaronson 73,581,788.6026 --
2,155,492.9331 --
Roger C. Maddock 73,612,044.4244 --
2,125,277.1113 --
John A. Calvert-Jones 73,596,307.2612 --
2,140,974.2745 --
John T. Sheehy 73,604,412.3830 --
2,132,869.1527 --
(2) David Manor 2,533 -- 31
--
Marvin Yontef 2,533 -- 31
--
(3) Price Waterhouse LLP 73,739,299.9344 681,215.3948 --
1,319,330.2065
(4) There was no other business voted upon at the Annual Meeting of
Shareholders.
</TABLE>
18
<PAGE>
<PAGE>
Directors
Anthony E. Aaronson
John A. Calvert-Jones
Sir Roden Cutler
David Lindsay Elsum
Rt. Hon. Malcolm Fraser
Laurence S. Freedman
Michael R. Horsburgh
Harry A. Jacobs, Jr.
Howard A. Knight
Roger C. Maddock
David Manor
William J. Potter
Peter D. Sacks
John T. Sheehy
Brian M. Sherman
Marvin Yontef
Officers
Brian M. Sherman, President
Laurence S. Freedman, Vice President
David Manor, Treasurer
Roy M. Randall, Secretary
Eugene S. Stark, Assistant Treasurer
Kenneth T. Kozlowski, Assistant Treasurer
Allan S. Mostoff, Assistant Secretary
Margaret A. Bancroft, Assistant Secretary
The accompanying financial statements as of April 30, 1995 were not audited and
accordingly, no opinion is expressed on them.
This report, including the financial statements herein, is transmitted to the
shareholders of The First Australia Prime Income Fund, Inc. for their
information. This is not a prospectus, circular or representation intended for
use in the purchase of shares of the Fund or any securities mentioned in this
report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, shares of its
common stock in the open market.
<PAGE>
<PAGE>
- - -------------------------------------------------------------------
- - -------------------------------------------------------------------
Investment Manager
EquitiLink International Management Limited
Union House, Union Street
St. Helier, Jersey, Channel Islands
Investment Adviser
EquitiLink Australia Limited
44 Pitt Street
Sydney, NSW 2000, Australia
Consultant
The Prudential Insurance Company of America
Prudential Plaza
Newark, New Jersey 07101
Administrator
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, New York 10292
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Auction Agent
Chemical Bank
55 Water Street
New York, New York 10041-0199
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
Legal Counsel
Dechert Price & Rhoads
1500 K Street N.W.
Washington, D.C. 20005
Freehill, Hollingdale and Page
19-29 Martin Place
Sydney, NSW 2000, Australia
One Seaport Plaza
New York, NY 10292
for information call toll-free (800) 451-6788
collect (212) 214-5572
or for information regarding net asset value
(800) 451-6788
The common shares of The First Australia Prime Income Fund, Inc. are
traded on the American Stock Exchange and on the Pacific Stock Exchange
under the symbol ``FAX''. Information about the Fund's net asset value and
market price is published weekly in Barron's and in the Monday edition of
The Wall Street Journal.
For a weekly update of the Fund's net asset value and share price, or to
receive more information on the Fund, call toll-free:
1-800-323-9995
318653102
