The First Australia Prime Income Fund, Inc.
(AMEX: FAX)
THE NEED FOR HIGH YIELDS
[LOGO]
THE NEXT DECADE
EquitiLink International Management Limited - April 1998
<PAGE>
WHAT FIRST AUSTRALIA PRIME INCOME
FUND HAS DELIVERED [LOGO]
- --------------------------------------------------------------------------------
Australian 10-yr government
o High income bond yields
o Capital gains
12% -
o Minimum discount | ---------------
| | |
10% - | 11.9% |
| | |
| | |
8% - | |
| | |
| | |
6% - | |
BUT: | | |
| | | -------------
Yields have halved -------- 4% - | | | |
| | | | 5.7% |
| | | | |
2% - | | | |
| | | | |
| | | | |
0% -----------------------|-----------------------
1988 1998
2
<PAGE>
LONG TERM PERFORMANCE [LOGO]
- --------------------------------------------------------------------------------
Period NAV Market Price
Return % Return %
---------------------------------------------------------------
10 years 10.59 pa 11.48 pa
173.70 196.45
5 years 6.20 pa 6.06 pa
35.07 34.21
3 years 8.54 pa 8.22 pa
27.29 26.75
1 year -4.28 -2.00
As of February 28, 1998 (assuming reinvestment of distributions)
3
<PAGE>
OUTSTANDING PERFORMANCE HISTORY [LOGO]
- --------------------------------------------------------------------------------
Year Ranking Period Lipper Category
1997 1st 10 years World Income Funds: Developed Nations
" 1st 7 years " " " " "
1996 1st 10 years " " " " "
" 1st 7 years " " " " "
" 1st 5 years " " " " "
1995 1st 5 years " " " " "
1994 1st 5 years " " " " "
1993 1st 7 years All Funds
" 1st 5 years General World Income Funds
1992 1st 5 years All Funds
[SEAL]
4
<PAGE>
THE CURRENT SITUATION .... [LOGO]
- --------------------------------------------------------------------------------
o Annualized cash distribution rate = 9.52%*
o Australian/US bond spread narrowed
o Bull market may continue
o Distributions to remain competitive
but two year horizon
* Based on market price of $7.5625 as of March 31, 1998
5
<PAGE>
... THE OPPORTUNITY - ASIA [LOGO]
- --------------------------------------------------------------------------------
o Yields are high
o Currencies have already fallen
o Governments undertaking major
economic reform
o Markets opening to foreign investors
6
<PAGE>
HIGH YIELDS [LOGO]
- --------------------------------------------------------------------------------
Substantial pick-up for US investors
24% -|
|
|
| ----------
18% -| | |
| ---------- | |
| --------- | | | |
| --------- | | | | | |
| | | | | | | | 20.50% |
12% -| -------- | | | | | 16.80% | | |
| | | | | | 15.59%| | | | |
| | | | 14.49%| | | | | | |
| | | | | | | | | | |
6% -| -------- |10.86%| | | | | | | | |
| | | | | | | | | | | | |
| | 4.79%| | | | | | | | | | |
| | | | | | | | | | | | |
0% -|-----------|----------|-----------|-----------|-------------|------------|
Australia Malaysia Thailand India Philippines S. Korea
As of March 31, 1998
7
<PAGE>
ASIAN CURRENCIES HAVE FALLEN [LOGO]
- --------------------------------------------------------------------------------
Lower currency risk now
0%-| | | | | | | | | | | | |
| |-6.83%| | | | | | | | | | |
| -------- |-28.48%| | | | | | | | |
| | | |-28.61%| | | | | | |
| | | | | |-34.27%| | | | |
- -20%-| | | | | | | |-34.49%| | |
| --------- | | | | | | |-72.03%|
| --------- | | | | | |
| --------- | | | |
| --------- | |
- -40%-| | |
| | |
| | |
| | |
| | |
- -60%-| | |
| | |
| | |
| | |
| ---------
|
- -80%-|
India Philippines Malaysia S. Korea Thailand Indonesia
Currency movements June 30, 1997 to March 31, 1998
8
<PAGE>
THE INVESTMENT OUTLOOK [LOGO]
- --------------------------------------------------------------------------------
o Near-term
- Yields to remain high
- Currencies oversold
- Liquidity growing
o Medium- to long-term
- Major economic reforms
- Expanding debt markets
- High relative yields to be maintained
- Long-term capital gain potential
9
<PAGE>
THE "NEW LOOK" PRIME [LOGO]
- --------------------------------------------------------------------------------
o Minimum 65% in Australia
o Maximum 35% in Asia/New Zealand
o Minimum 85% investment grade
RESULT:
o New dynamics
o Consistent distribution potential
o Long-term capital gain potential
10
<PAGE>
The Board Unanimously
Backs This Proposal [LOGO]
- --------------------------------------------------------------------------------
o The proposal represents an opportunity for Prime
to grow and prosper
-----------------------------------------------------------------------
| |
| AGM: May 14, 1998 |
| |
| MAIL PROXIES BY: MAY 11, |
| 1998 |
| |
| Note: This is a proposal that cannot be voted on by |
| brokers unless they obtain instructions from their |
| clients. |
| |
| |
-----------------------------------------------------------------------
11
<PAGE>
S & P RATINGS [LOGO]
- --------------------------------------------------------------------------------
Country LT Foreign Rating
Japan AAA
New Zealand AA+
Taiwan AA+ Investment
Australia AA grade
Hong Kong A+
Malaysia A
China BBB+
Thailand BBB-
- --------------------------------------------------------------------------------
South Korea BB+
India BB+
Philippines BB+
Indonesia B-
Standard & Poor's Ratings as of March 31, 1998
12
<PAGE>
PRIORITY COUNTRIES [LOGO]
- --------------------------------------------------------------------------------
o Philippines: Graduated from IMF program
o India: Relative currency stability
o South Korea: New Issue oversubscribed
o Malaysia: Banking sector reform
13
<PAGE>
YIELD PICKUP FROM ASIA [LOGO]
- --------------------------------------------------------------------------------
o Philippines 15 - 20%
o India 16 - 20%
o South Korea 17 - 30%
o Malaysia 11 - 15%
14