FIRST AUSTRALIA PRIME INCOME FUND INC, N-30D, 1999-07-07

FIRST AUSTRALIA PRIME INCOME FUND INC
N-30D, 1999-07-07

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<PAGE>
(R)
The First Australia
Prime Income
Fund, Inc.
- -------------------------------------------------------------------
Semi-Annual Report
April 30, 1999

Highlights

- --New distribution policy: to maintain monthly
distribution level for next twelve months.

- --10.8% cash distribution rate.

- --9.7% per annum NAV return since inception.

- --Australian dollar and Asian bond markets rally.

ALL AMOUNTS ARE US DOLLARS UNLESS OTHERWISE STATED.

Managed by EquitiLink International Management Limited.

<PAGE>
LETTER TO SHAREHOLDERS
June 11, 1999
Dear Shareholder,
We are pleased to present this Semi-Annual Report which covers the activities
of The First Australia Prime Income Fund, Inc. (the 'Fund') for the six months
ended April 30, 1999. Included in this report is a review of the Australian and
selected Asian economies and investment markets, together with an overview of
the Fund's investments prepared by the Investment Manager, EquitiLink
International Management Limited.

Annual General Meeting - New distribution policy
At the Fund's annual general meeting of shareholders, the Board announced
that it intends to maintain its monthly distribution of 6 cents per share for at
least the next twelve months. It also announced that the Board intends to review
the level of monthly distribution on an annual basis, subject to market
conditions, with the next review expected to take place in March 2000.

Investment Performance - 9.7% per annum return since inception
The Fund's Net Asset Value (NAV) in U.S. dollar terms returned 6.4% over the
three months and 0.9% over the six months to April 30, 1999. Performance was
supported by the appreciation of the Australian dollar against the U.S. dollar
and also by Asian bond investments, which have rallied over the six months.
Since inception, the Fund's NAV has returned 9.7% per annum to April 30, 1999.

The Fund's share price return was 17.1% over the three months and 26.0% over
the six months to April 30, 1999. Since inception the share price return was
9.4% per annum. The NAV and share price returns both assume reinvestment of
distributions.

Investment Markets - Australian dollar and Asian bond markets rally
Australia
The improving expectations for global economic prospects over the next year
has seen a significant correction to the U.S. and Australian bond markets in the
past few months. Australian ten-year government bond yields have risen from
4.97% on October 31, 1998, to 5.67% on April 30, 1999. This correction largely
reflects an unwinding of perceptions that the global economy was on the verge of
deflation.

The Australian dollar strengthened against the U.S. dollar during the
reporting period. Expectations of stronger global industrial production and
firmer commodity prices have induced positive sentiment towards the currency,
which closed the quarter at 66.12 cents. This represented a gain of 5.8% against
the U.S. dollar over the six months.

The Fund reduced its exposure to the Australian bond market over the six
months, from 96.7% of the portfolio on October 31, 1998, to 77.5% on April 30,
1999.

Asia
Large balance of payments surpluses, a strong build up in foreign exchange
reserves, declining inflation, stabilizing currencies and falling interest rates
all point to the Asian economy, as a whole, as having passed the worst point of
the 1997-1998 crisis. Easier monetary and fiscal policy settings along with more
competitive exchange rates are aiding the reliquification of the region
following the credit crunch of a year ago.

<PAGE>
These conditions have generally seen Asian domestic bond markets rally, but
the improvement in Asian currencies has been limited by weakness in the Japanese
yen.

The U.S. dollar denominated (Yankee) bond market is driven primarily by
credit considerations. Economic growth in the Asian region has improved credit
conditions, leading Yankee bonds to rally.

As of April 30, 1999, the Fund had invested 19.6% of the portfolio in Asian
bonds, a significant increase from 2.7% on October 31, 1998. 13.7% of the
portfolio was held in Asian Yankee bonds at the end of the period.
Distributions - 10.8% cash distribution rate

Distributions for the year totalled 72 cents per share. Based upon the share
price of $6.69 as of April 30, 1999, the cash distribution rate for the year was
10.8%. Since all distributions are paid after deducting Australian and New
Zealand withholding taxes, the effective yield is higher for those U.S.
investors who are able to claim a tax credit. At its meeting held on March 26,
1999 the Board of Directors resolved to continue paying a monthly distribution
of 6 cents per share through to March 2000 when the Board will review the
position.

Dividend Reinvestment and Cash Purchase Plan
We invite you to participate in the Fund's Dividend Reinvestment and Cash
Purchase Plan ('the Plan') which allows you to automatically re-invest your
distributions in shares of the Fund's common stock at favorable commission
rates. The Plan also enables you to make additional cash investments in shares
of at least $100 per month. Under this arrangement, the Plan Agent will purchase
shares for you on the stock exchange or otherwise on the open market on or about
the 15th of each month.

As a Participant in the Plan, you will have the convenience of:

Automatic reinvestment -- the Plan Agent will automatically reinvest your
distributions, allowing you to gradually grow your holdings in the Fund;

Lower costs -- shares purchased on your behalf under the Plan will be at
reduced brokerage rates;

Convenience -- the Plan Agent will hold your shares in non-certificated form
and will provide a detailed record of your holdings at the end of each
distribution period.

To request a brochure containing information of the Plan, together with an
authorisation form, please telephone the Plan Agent, State Street Bank & Trust
Company, toll-free on 1-800-451-6788.

For information on the Fund, please telephone Investor Relations at Dewe
Rogerson, toll-free on 1-800-323-9995.

Sincerely,
Laurence S. Freedman Brian M. Sherman
Chairman President

2
<PAGE>
REPORT OF THE INVESTMENT MANAGER
Distributions
During the 12 months to April 30, 1999, the Fund paid a total of 72 cents per
share in distributions, consisting of twelve monthly payments of 6 cents per
share. The Board's policy is to provide investors with a stable monthly
distribution out of current income supplemented by realized capital gains if
required.

To confirm this policy, on March 26, The Board announced that it intends to
maintain the Fund's current monthly distribution rate of 6 cents per share for
at least the next twelve months. The next review of this level will take place
at the meeting of the Board of Directors to be held in March 2000 with following
reviews to take place on an annual basis, subject to market conditions.

Based upon the April 30, 1999 share price of $6.69 and total distributions
paid over the past 12 months, the shares provided a cash distribution rate of
10.8%. All distributions are paid after deducting Australian and New Zealand
withholding taxes.

Net Asset Value Performance
The NAV per share of the Fund as of April 30, 1999 was $6.98. The Fund's NAV
return in U.S. dollar terms, assuming reinvestment of distributions was 6.4% for
the three months and 0.9% for the six months to April 30, 1999. Performance was
supported by the appreciation of the Australian dollar against the U.S. dollar
and also by Asian bond investments, which have rallied over the six months.
Since inception, the Fund's NAV has returned 9.7% per annum to April 30, 1999.
As of the date of this report, the NAV per share was $6.70.

Share Price
The Fund's total investment return, based on share price and assuming
reinvestment of distributions, was 17.1% for the three months and 26.0% for the
six months to April 30, 1999. Since inception the share price return was 9.4%
per annum. On April 30, 1999, the share price was $6.69, representing a discount
of 4.2% to the NAV. As of the date of this report, the share price was $6.56,
representing a 2.0% discount to NAV.

Auction Market Preferred Stock (AMPS)
The Fund's AMPS continued to be well bid with a 4.80% average dividend rate
over the quarter compared to an average rate of 4.82% for 30 day U.S. Commercial
Paper over the same period.

Quality of Investments
The Fund has maintained a high credit quality. As of April 30, 1999, 80.8% of
the Fund's investments were in securities where either the issue or the issuer
was rated A or better by Standard & Poor's, and Moody's Investors Service, Inc.
or, if unrated, were judged to be of equivalent quality by the Investment
Manager. The following table shows the ratings of securities held by the Fund as
of April 30, 1999.

<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A BBB/Baa BB/Ba B
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Total Portfolio 59.2 19.5 2.1 12.6 5.6 1.0
- ---------------------------------------------------------------------------------------
</TABLE>
3

<PAGE>
Interest Rate Exposure
The table below shows the country composition of the Fund's total investments
according to interest rate risk, as of April 30, 1999:
<TABLE>
<CAPTION>
Asia
Australia (including NZ) United States
Date % % %
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
April 30, 1999 77.5 5.9 16.6
- -----------------------------------------------------------------------------
</TABLE>

Geographic Composition / Credit Exposures
The table below shows the geographical composition (i.e. currency composition
with U.S. Yankees reallocated into country of issuance) of the Fund's total
investments as of April 30, 1999, compared to the six months and one year ago:

<TABLE>
<CAPTION>
Asia
Australia (including NZ) United States
Date % % %
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
April 30, 1999 77.5 19.6 2.9
October 31, 1998 96.7 2.7 0.6
April 30, 1998 96.0 3.0 1.0
- -------------------------------------------------------------------------------
</TABLE>

Currency Composition
The table below shows the currency composition of the Fund's total
investments as of April 30, 1999, compared to the six months and one year ago:

<TABLE>
<CAPTION>
Australian Asian currencies United States
Dollar (including NZ) Dollar
Date % % %
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
April 30, 1999 77.5 6.1 16.4*
October 31, 1998 96.7 0.3 3.0
April 30, 1998 96.0 3.0 1.0
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
* Includes 13.7% Asian Yankee Bonds
</TABLE>

Maturity Composition
On April 30, 1999 the modified duration of the portfolio was 4.1 years and
the average maturity was 6.4 years. The average maturity has been lengthened
slightly from 4.8 years on October 31, 1998. The following table shows the
maturity composition of the Fund's investments as of April 30, 1999:

<TABLE>
<CAPTION>
Under 3 to 5 5 to 10 10 Years
3 Years Years Years and Over
Date % % % %
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
April 30, 1999 36.2 25.6 36.4 1.8
- ---------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Sectoral Composition
The following shows the sectoral composition of the portfolio at April 30,
1999:
<TABLE>
<CAPTION>
Ex-Australia
Australia (i.e. NZ and Asia) United States
% % %
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
Government* 19.9 8.1 0.0
Semi Government** 34.3 0.2 0.0
Government Bank 4.9 1.6 0.0
Government Corporation 2.0 4.1 0.0
Utility 0.0 0.8 0.0
Supernational 4.3 0.2 0.0
Bank/Finance Company*** 7.6 0.9 2.9
Corporate 4.5 3.7 0.0
<CAPTION>
- ------------------------------------------------------------------------------------
* Includes government guaranteed debt.
** Includes State Government Guaranteed Banks.
*** Includes cash held by the Fund's custodian and repurchase agreements.
</TABLE>

- --------------------------------------------------------------------------------
MARKET REVIEW AND OUTLOOK
- --------------------------------------------------------------------------------
AUSTRALIA
Economy
The growth performance of the Australian economy exceeded most expectations
in 1998. This appears to have continued through early 1999 to date, with
surprisingly strong data continuing to build a positive picture. Domestic demand
has been the key driver of the economy, more than offsetting the Asian-induced
drag from net exports. This has been buoyed by high consumer confidence, falling
interest rates and rising household wealth.

As with the U.S., inflation has remained lower than generally expected, well
below 2% over the last year, despite strong growth. A further moderation in
wages growth recently, suggests that the positive inflation outlook is unlikely
to be disrupted soon.

Fixed Income
The improving expectations for global economic prospects over the next year
has resulted in a significant correction in the U.S. and Australian bond markets
over the past few months. Australian ten-year government bond yields have risen
from 4.97% on October 31, 1998, to 5.67% on April 30, 1999. This correction
largely reflects an unwinding of perceptions that the global economy was on the
verge of deflation.

Given the backdrop of improving global prospects and strong domestic growth
but low inflation, Australia's central bank has indicated that monetary policy
could well be on hold for the foreseeable future.
5
<PAGE>
Currency
The Australian dollar strengthened against the U.S. dollar during the
reporting period. Expectations of stronger global industrial production and
firmer commodity prices have induced positive sentiment towards the currency,
which closed the quarter at 66.10 cents. This represented a gain of 5.8% against
the U.S. dollar over the six months.

The resilience of Australian economic growth is a key positive for the
currency in the near-term. Looking further out, improving global growth should
lead commodity prices higher, supporting the Australian dollar.

ASIA
Economies
Large balance of payments surpluses, a strong build up in foreign exchange
reserves, declining inflation, stabilizing currencies and falling interest rates
all point to the Asian economy as a whole as having passed the worst point of
the 1997-1998 crisis. Easier monetary and fiscal policy settings along with more
competitive exchange rates are aiding the reliquification of the region
following the credit crunch of a year ago.

South Korea's prospects for economic growth have improved markedly over
recent months. Industrial production has continued a strong rebound into 1999
reflecting the benefits of a weaker Korean Won. This has largely been driven by
export growth to date but there are early signs now of a recovery in consumer
demand off an extremely weak base.

Thailand and the Philippines also appear to be entering a recovery phase that
extends to their domestic economies.

Malaysia appears to have stabilized in early 1999 benefiting from easier
monetary settings and a more competitive currency following the recovery in
other Asian currencies since mid 1998. The prospect appears for some positive
growth in 1999, although the upside is likely to be limited by restructuring in
the financial sector and relatively cautious foreign capital inflows.

Hong Kong's fortunes are closely linked to the Chinese economy, however the
rebound in intra-regional trade expected in 1999 along with the reflux of
capital back into the region, much of which will be channelled through Hong
Kong, suggests the Hong Kong economy should stabilize.
Domestic Bond and Currency Markets

The Manager's preferred bond markets of South Korea, Thailand, Philippines,
Hong Kong and Malaysia rallied over the six months to April 30, 1999. All of
these markets benefited from monetary policy easings recently.

Asian currencies have been stalled by weakness of the Japanese yen. The
Korean won and the Philippines peso performed strongly over the six months
however, returning 12.3% and 6.1% respectively against the U.S. dollar.

US$ Yankee Bond Market
The U.S. dollar denominated (Yankee) bond market is driven primarily by
credit considerations. Economic growth in the Asian region has improved credit
conditions, leading Yankee bonds to rally. Additional support was provided by
the major credit rating agencies upgrading of South Korean long-term foreign
debt to investment grade and also the raising of Malaysia's credit outlook.
6
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF KEY RATES
- --------------------------------------------------------------------------------
The following table summarizes the movements of key interest rates and
currencies over the last six and twelve month periods.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
April 30, 1999 October 31, 1998 April 30, 1998
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Australia:
90 day bank
bills 4.81% 4.82% 4.97%
10 year Bonds 5.67% 4.97% 5.77%
Australian
Dollar US$0.66 US$ 0.62 US$0.65
New Zealand:
90 day Bank
Bills 4.64% 4.62% 8.93%
10 year bonds 5.77% 5.38% 6.76%
NZ Dollar US$0.56 US$ 0.53 US$0.55
South Korea
90 day bank
bills 6.02% 8.00% 18.20%
5 year bond 7.12% 8.50% N/A
South Korean
Won* W1175 W1319 W1335
Thailand
90 day bank
bills 3.63% 6.50% 15.75%
10 year bond 7.55% N/A N/A
Thai Baht* B37 B37 B39
Philippines
90 day bank
bills 10.88% 15.31% 17.69%
10 year bond 14.94% 18.46% 19.83%
Philippines
Peso* P38 P40 P39
Hong Kong
90 day bank
bills 4.94% 7.25% 6.63%
5 year bond 6.52% 7.37% 8.26%
Hong Kong
dollar* HK$7.80 HK$ 7.70 HK$7.70
US$ Yankee Bonds**
South Korea 7.43% 10.22% 9.13%
Thailand 7.21% 9.90% 8.45%
Philippines 8.57% 10.54% 9.01%
- ---------------------------------------------------------------------------------
* These currencies are quoted Asian currency per US dollar. The Australian and
New Zealand dollars are quoted US dollars per currency.
** Ten-year sovereign issues.
</TABLE>
EquitiLink International Management Limited

7
<PAGE>
- ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Portfolio of Investments
April 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--116.4%
AUSTRALIA--91.4%
Government and Semi-Government--54.9%
Commonwealth of Australia--29.8%
Australia Post,
A$ 17,000 6.00%, 3/25/09........... $ 11,272,778
Australian Capital
Territory,
10,000 12.00%, 11/15/01......... 7,673,959
Commonwealth Bank of Australia,
10,000 5.50%, 3/1/02............ 6,659,797
5,000 6.00%, 8/1/03............ 3,379,790
12,000 5.25%, 12/1/04........... 7,832,970
8,000 6.00%, 9/1/05............ 5,407,152
4,000 6.25%, 2/10/09........... 2,665,558
Commonwealth of
Australia,
54,900 13.00%, 7/15/00.......... 39,741,135
5,000 13.00%, 12/15/00......... 3,717,202
50,000 8.75%, 1/15/01........... 35,098,752
48,000 12.00%, 11/15/01......... 36,943,186
10,000 9.75%, 3/15/02........... 7,434,596
55,000D 9.50%, 8/15/03........... 42,363,269
30,000 9.00%, 9/15/04........... 23,285,298
20,000 7.50%, 7/15/05........... 14,719,024
20,000 10.00%, 2/15/06.......... 16,657,986
10,000 6.75%, 11/15/06.......... 7,154,749
76,000D 10.00%, 10/15/07......... 65,542,964
72,000 8.75%, 8/15/08........... 58,763,812
107,000 7.50%, 9/15/09........... 81,686,675
70,000 5.75%, 6/15/11........... 46,951,236
Northern Territory
Authority,
40,000 12.50%, 7/15/01.......... 30,446,789
--------------
555,398,677
--------------
New South Wales--4.3%
New South Wales Treasury
Corporation,
57,000 12.00%, 12/1/01.......... 43,838,010
25,000 7.00%, 4/1/04............ 17,616,710
20,000 12.60%, 5/1/06........... 18,482,988
--------------
79,937,708
--------------
- ---------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
Queensland--3.4%
Queensland Treasury Corporation,
A$ 20,000 8.00%, 5/14/03........... $ 14,506,396
20,000 6.50%, 6/14/05........... 13,886,861
15,200 6.00%, 7/14/09........... 10,210,195
10,000 6.00%, 10/14/15.......... 6,755,979
27,000 6.00%, 6/14/21........... 18,310,205
--------------
63,669,636
--------------
South Australia--5.1%
Electricity Trust of South Australia,
5,000 13.00%, 10/1/05.......... 4,568,122
South Australian
Financing
Authority,
30,000 12.50%, 10/15/00......... 21,900,971
50,000 10.00%, 1/15/03.......... 38,167,378
40,000 7.50%, 10/15/07.......... 29,415,971
--------------
94,052,442
--------------
Tasmania--4.2%
Tasmanian Public Finance
Corporation,
28,000 12.50%, 1/15/01.......... 20,737,012
75,000 9.00%, 11/15/04.......... 57,543,537
--------------
78,280,549
--------------
Victoria--5.3%
Treasury Corporation of
Victoria,
36,000 12.50%, 10/15/03......... 30,452,645
50,500 10.25%, 11/15/06......... 42,699,936
25,000 7.50%, 8/15/08........... 18,587,068
10,000 5.50%, 9/15/10........... 6,432,728
--------------
98,172,377
--------------
Western Australia--2.8%
Western Australia
Treasury
Corporation,
40,000 10.00%, 7/15/05.......... 32,541,075
26,000 8.00%, 10/15/07.......... 19,750,802
--------------
52,291,877
--------------
Total long-term
Australian
government and
semi-government
(cost
US$1,043,166,609)...... 1,021,803,266
--------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
<C> <S> <C>
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
Eurobonds--31.8%
Banking and Finance--11.4%
Australia Industrial
Development
Corporation,
A$ 5,000 8.75%, 7/20/04........... $ 3,765,349
Bank Austria AG,
21,278 10.875%, 11/17/04........ 17,421,103
Banque National de Paris,
14,000 9.00%, 8/13/02........... 10,137,831
CitiGroup,
5,000 14.00%, 1/15/01.......... 3,769,133
Commonwealth Bank of Australia,
10,000 9.00%, 8/15/05........... 7,715,863
Credit Locale de France,
5,000 10.25%, 4/12/05.......... 4,033,738
Federal National Mortgage
Association Global,
60,000 5.75%, 9/5/00............ 40,034,488
25,000 6.50%, 7/10/02........... 17,078,268
52,065 6.375%, 8/15/07.......... 35,743,082
GMAC Australia Finance
Limited,
6,500 9.00%, 5/22/01........... 4,577,325
Northern Territory
Authority,
5,000 10.03%, 8/01/05.......... 4,058,097
Jem Bonds Limited,
10,000 9.00%, 7/15/06........... 7,803,968
Priority Trust,
2,000 6.00%, 10/15/30.......... 1,323,446
State Bank of New South
Wales,
5,000 12.25%, 2/26/01.......... 3,690,344
20,000 11.75%, 8/16/01.......... 14,956,040
28,000 10.75%, 3/12/02.......... 21,014,352
10,000 9.25%, 2/18/03........... 7,388,514
State Bank of South
Australia,
10,000 11.00%, 4/10/02.......... 7,557,784
--------------
212,068,725
--------------
Diversified Industrials--0.4%
Federal Airports
Corporation,
10,000 7.00%, 2/16/04........... 6,972,023
--------------
Semi-Government and Local
Government--13.1%
New South Wales Treasury
Corporation,
25,000 8.00%, 12/1/01........... 17,658,268
50,000 12.00%, 12/1/01.......... 38,309,746
10,000 7.00%, 4/1/04............ 7,036,307
7,000 10.50%, 12/7/04.......... 5,657,221
- ---------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
A$ 10,000 10.00%, 6/6/05........... $ 8,033,026
50,000 6.50%, 5/1/06............ 33,613,102
34,000 12.60%, 5/1/06........... 31,354,921
7,000 9.25%, 6/20/05........... 5,450,632
55,000 8.00%, 3/1/08............ 41,939,584
Queensland Treasury
Corporation,
25,000 8.00%, 5/14/03........... 18,133,028
20,000 12.00%, 6/15/05.......... 17,659,391
20,000 8.00%, 9/14/07........... 15,262,258
South Australia Financing Authority,
5,000 11.25%, 10/23/01......... 3,732,500
--------------
243,839,984
--------------
Supranational Global--6.9%
Asian Development Bank,
10,000 5.25%, 9/15/04........... 6,510,951
Eksport Finans,
19,000 11.00%, 12/29/04......... 15,730,274
Eurofima,
58,170 9.875%, 1/17/07.......... 47,974,735
European Bank of
Reconstruction &
Development,
69,000 9.00%, 10/15/02.......... 50,743,919
European Investment Bank,
3,000 10.25%, 10/1/01.......... 2,199,853
Kingdom of Sweden,
8,287 7.875%, 4/23/07.......... 6,150,445
--------------
129,310,177
--------------
Total long-term
Australian eurobonds
(cost US$601,566,866).... 592,190,909
--------------
Corporate Bonds--4.7%
Asset Backed--0.1%
FANMAC 22,
1,515 11.40%, 12/15/01......... 1,115,862
FANMAC 25,
366 10.33%, 6/15/02.......... 268,208
--------------
1,384,070
--------------
Floating Rate Notes*--0.2%
Crusade Trust,
2,870 5.0183%, 7/10/29......... 1,890,666
Initial Corporate
Obligation,
3,000 5.0483%, 9/19/03......... 2,066,784
--------------
3,957,450
--------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
<C> <S> <C>
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
Services--4.4%
ANZ Banking Group,
A$ 5,000 5.50%, 9/15/03........... $ 3,286,210
Macquarie Bank Limited,
1,000 9.75%, 8/1/00............ 695,485
Merrill Lynch & Co.
Australia,
10,000 7.625%, 3/15/02.......... 6,954,627
Telstra Corporation,
30,000 12.50%, 11/15/00......... 21,983,696
18,000 11.50%, 10/15/02......... 14,146,244
2,000 7.80%, 7/17/03........... 1,441,122
7,000 8.00%, 9/15/04........... 5,119,665
31,000 12.00%, 5/15/06.......... 27,618,135
2,000 8.75%, 1/15/20........... 1,725,806
--------------
82,970,990
--------------
Total Australian
corporate bonds
(cost US$87,981,939)..... 88,312,510
--------------
Total Australian
long-term
investments
(cost
US$1,732,715,414)...... 1,702,306,685
--------------
JAPAN--0.9%
Government Bonds--0.9%
Inchon Metropolitan City,
JYP 500,000 3.70%, 4/26/06........... 4,107,352
PTT Exploration &
Production,
1,700,000 3.35%, 9/19/07........... 13,419,779
--------------
Total Japan long-term investments
(cost US$19,183,475)..... 17,527,131
--------------
KOREA--2.1%
Government Bonds--2.1%
Korea Credit Insurance
Fund Bond,
KRW20,000,000 8.72%, 3/12/04........... 17,582,970
2,000,000 15.00%, 7/3/04........... 2,164,916
5,000,000 15.00%, 1/3/05........... 6,098,696
Korea Deposit Insurance
Fund Bond,
5,000,000 9.99%, 10/23/03.......... 4,592,545
Korea Monetary
Stabilization Bond,
5,000,000 6.70%, 4/19/01........... 4,222,179
Korea Treasury Bond,
5,000,000 7.10%, 12/9/01........... 4,246,454
--------------
Total Korea long-term investments
(cost US$37,026,939)..... 38,907,760
--------------
- ---------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
NEW ZEALAND--0.3%
Eurobond--0.3%
International Bank of
Reconstruction & Development,
NZD 10,000 7.00%, 9/18/00
(cost $5,397,004)...... $ 5,738,347
--------------
PHILIPPINES--1.6%
Government Bonds--1.6%
Philippine Government
Bond,
PHP 436,000 14.00%, 1/14/01.......... 11,792,134
574,500 18.00%, 11/26/08......... 17,519,990
--------------
Total Philippines
long-term
investments
(cost US$26,047,855)..... 29,312,124
--------------
SINGAPORE--0.2%
Government Bond--0.2%
Singapore Government
Bond,
SGD 5,000 4.375%, 10/15/05
(cost $3,004,147)...... 3,067,265
--------------
THAILAND--2.0%
Government Bonds--2.0%
Thailand Government Bond,
THB 808,100 8.50%, 10/14/05.......... 23,762,335
415,000 8.00%, 12/8/06........... 11,724,107
100,000 8.50%, 12/8/08........... 2,899,979
--------------
Total Thailand long-term
investments
(cost US$38,126,897)..... 38,386,421
--------------
UNITED STATES--17.9%
Yankee Bonds--17.9%
Bangkok Bank Public
Company,
US$ 7,000 8.75%, 3/15/07........... 6,180,072
6,000 9.025%, 3/15/29.......... 4,619,220
Dao Heng Bank Limited,
19,000 7.75%, 1/24/07........... 16,660,625
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
<C> <S> <C>
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
UNITED STATES--(cont'd.)
Export-Import Bank Korea,
US$ 23,000 7.10%, 3/15/07........... $ 22,750,772
Honam Oil Refinery
Company
Limited,
6,000 7.125%, 10/15/05......... 5,527,800
JG Summit Philippines,
5,000 8.375%, 3/17/04.......... 4,507,420
Kingdom of Thailand,
4,000 8.09%, 8/15/04........... 4,184,800
5,000 7.75%, 4/15/07........... 5,115,450
Korea Development Bank,
15,000 7.125%, 4/22/04.......... 14,962,500
Korea Electric Power Corporation,
21,000 10.00%, 4/1/01........... 21,902,464
3,000 7.00%, 10/1/02........... 2,956,275
16,000 6.375%, 12/1/03.......... 14,980,000
8,500 7.75%, 4/1/13............ 8,130,505
Korea Telecom,
9,500 7.625%, 4/15/07.......... 9,398,417
LG Caltex Oil
Corporation,
5,500 7.875%, 7/1/06........... 5,248,100
3,500 7.50%, 7/15/07........... 3,247,650
National Power
Corporation,
8,000 8.40%, 12/15/16.......... 6,940,000
4,500 9.625%, 5/15/28.......... 4,227,755
People's Republic of
China,
16,000 7.30%, 12/15/08.......... 16,346,736
Petroliam Nasional
Berhad,
8,500 7.125%, 10/18/06......... 8,808,125
7,000 7.75%, 8/15/15........... 6,394,500
Philippines Republic,
28,500 9.875%, 1/15/19.......... 29,714,869
Pohang Iron & Steel
Limited,
4,000 7.125%, 7/15/04.......... 3,897,360
7,500 7.125%, 11/1/06.......... 7,159,650
PTT Exploration &
Production,
24,500 7.625%, 10/1/06.......... 22,620,870
Ras Laffan Liquified
Natural Gas,
7,000 8.294%, 3/15/14.......... 6,926,500
Reliance Industries
Limited,
12,000 10.25%, 1/15/97.......... 9,796,320
- ---------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
Republic of Philippines,
US$ 11,500 8.875%, 4/15/08.......... $ 11,732,633
Republic of South Korea,
3,000 8.875%, 4/15/08.......... 3,283,386
Samsung Electronics
America
Incorporated,
1,000 7.45%, 10/1/02........... 964,266
3,000 9.75%, 5/1/03............ 3,105,429
Shinhan Bank,
9,000 7.25%, 6/26/02........... 8,302,500
Sterlite Industries
Limited,
6,000 Zero Coupon, 6/5/07...... 4,614,000
Telekom Malaysia,
13,000 7.875%, 8/1/25........... 12,023,700
Tenaga Nasional Berhad,
9,000 7.20%, 4/29/07........... 7,486,875
7,000 7.50%, 1/15/96........... 5,463,500
Windsor Petroleum
Transport
Corporation,
4,000 7.84%, 1/15/21........... 3,466,640
--------------
Total United States
long-term
investments
(cost US$316,851,055).... 333,647,684
--------------
Total long-term
investments
(cost
US$2,178,352,786)...... 2,168,893,417
--------------
SHORT-TERM INVESTMENTS--14.3%
Australia--10.1%
Corporate Bond--0.5%
Services--0.5%
Federal Airports
Corporation,
A$ 15,000 10.50%, 7/15/99
(cost US$11,675,143)... 10,018,864
--------------
Demand Deposits--1.5%
Banque National de Paris,
40,872 4.35%, 12/31/99.......... 27,014,066
State Street Call
Account,
27 4.05%, 12/31/99.......... 17,887
--------------
Total Australian demand
deposit
(cost US$26,564,197)..... 27,031,953
--------------
Government and Semi-Government--5.2%
Commonwealth of Australia--2.2%
Commonwealth Bank of
Australia,
45,000 12.00%, 7/15/99.......... 30,151,529
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
<C> <S> <C>
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
Commonwealth of Australia--(cont'd.)
Commonwealth of
Australia,
A$ 15,000 12.00%, 7/15/99.......... $ 10,053,246
--------------
40,204,775
--------------
New South Wales--2.0%
New South Wales Treasury
Corporation,
50,000 11.50%, 7/1/99........... 33,391,949
5,000 7.00%, 2/1/00............ 3,352,486
--------------
36,744,435
--------------
Queensland--0.4%
Queensland Treasury
Corporation,
10,000 8.00%, 7/14/99........... 6,650,617
--------------
Tasmania--0.5%
Tasmanian Public Finance
Corporation,
15,000 8.25%, 11/15/99.......... 10,090,643
--------------
Victoria--0.2%
Treasury Corporation of
Victoria,
5,000 10.25%, 9/15/99.......... 3,369,030
--------------
Total short-term
Australian government
and semi-government
(cost
US$120,494,561)........ 97,059,500
--------------
Eurobonds--2.9%
Banking and Finance--0.8%
Commerzbank Overseas Finance,
5,000 10.50%, 1/19/00.......... 3,424,190
10,000 10.25%, 4/28/00.......... 6,924,223
Finnish Eksport Credit,
2,925 9.25%, 12/30/99.......... 1,982,591
Rural & Industries Bank
of Western Australia,
5,000 8.75%, 9/9/99............ 3,344,049
--------------
15,675,053
--------------
Semi-Government and Local
Government--2.0%
New South Wales Treasury
Corporation,
44,000 11.50%, 7/1/99........... 29,375,318
Province Aples Cotes
D'Azur,
12,000 8.25%, 9/15/99........... 8,016,645
--------------
37,391,963
--------------
- ---------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$)
- ---------------------------------------------------------
Total short-term
Australian eurobonds
(cost US$64,793,855)..... $ 53,067,016
--------------
Total Australian
short-term
investments
(cost
US$223,527,756)........ 187,177,333
--------------
Korea--0.1%
Government Bond--0.1%
Republic of South Korea,
KRW 500,000 7.494%, 11/3/99
(cost US$413,601)...... 422,381
--------------
Philippines--0.6%
Government bonds--0.6%
Philippine Treasury Bill,
PHP 409,228 Zero Coupon, 7/7/99
(cost $10,362,695)..... 10,481,950
--------------
UNITED STATES--3.6%
US$ 67,429 Repurchase Agreement,
State Street Bank &
Trust Company, 4.70%,
dated 4/30/99, due
5/04/99 in the amount
of $67,464,213 (cost
$67,429,000;
collateralized by
$50,760,000 United
States Treasury Bond,
due 8/15/17; value
including accrued
interest-US$68,779,800)... 67,429,000
--------------
Total short-term
investments
(cost US$301,733,052).... 265,510,664
--------------
Total Investments--130.7%
(cost US$2,480,085,838;
Note 3)................ 2,434,404,081
Other assets in excess of
liabilities--1.5%...... 27,531,460
Liquidation value of
preferred
stock--(32.2%)......... (600,000,000)
--------------
Net Assets Applicable to
Common Sharehold-
ers--100%.............. $1,861,935,541
--------------
--------------
</TABLE>
- ---------------
* The interest rate reflected for floating rate notes is the rate in effect at
April 30, 1999.
D Portion of securities on loan; see Note 3.

See Notes to Financial Statements.
12
<PAGE>
- ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Statement of Assets and Liabilities
April 30, 1999
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments, at value (cost
$2,480,085,838)..................... $2,434,404,081
Currency, at value (cost
$5,020,588)......................... 4,748,263
Cash.................................. 1,329,120
Interest receivable................... 53,028,036
Receivable for investments sold....... 7,527,500
Unrealized appreciation on currency
swaps............................... 4,403,360
Prepaid and other assets.............. 51,150
Forward currency contracts - net
amount receivable from
counterparties...................... 22,694
--------------
Total assets...................... 2,505,514,204
--------------
Liabilities
Payable for investments purchased..... 20,844,381
Dividends payable-common stock........ 16,004,175
Withholding taxes payable............. 2,876,538
Accrued expenses and other
liabilities......................... 1,259,014
Investment management fee payable..... 1,232,540
Dividends payable-preferred stock..... 1,101,920
Administration fee payable............ 237,314
Due to broker-variation margin........ 22,781
--------------
Total liabilities................. 43,578,663
--------------
Total Net Assets...................... $2,461,935,541
--------------
--------------
Total net assets were composed of:
Common stock:
Par value ($.01 per share,
applicable to
266,736,249 shares)............. $ 2,667,362
Paid-in capital in excess of
par............................... 2,037,085,126
Preferred stock ($.01 par value per
share and
$25,000 liquidation value per
share
applicable to 24,000 shares; Note
4)................................ 600,000,000
--------------
2,639,752,488
Distributions in excess of net
investment income................. (16,154,069)
Accumulated net realized gains on
investments....................... 18,991,868
Net unrealized appreciation on
investments......................... 91,088,653
Accumulated net realized and
unrealized foreign exchange
losses............................ (271,743,399)
--------------
Total net assets.................... $2,461,935,541
--------------
--------------
Net assets applicable to common
shareholders...................... $1,861,935,541
--------------
--------------
Net asset value per common share:
($1,861,935,541 / 266,736,249 shares
of
common stock issued and
outstanding)........................ $6.98
--------------
--------------
</TABLE>

- ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Statement of Operations
Year Ended April 30, 1999
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Net Investment Income
<S> <C>
Income
Interest (net of foreign withholding
taxes of $4,947,964)............... $ 100,959,555
Income from securities loaned -
net................................ 15,131
-------------
100,974,686
-------------
Expenses
Investment management fee............ 6,192,145
Custodian's fees and expenses........ 1,415,000
Administration fee................... 1,318,487
Auction agent's fees and broker
commissions.......................... 847,000
Shareholder relations and
communications....................... 460,000
Transfer agent's fees and expenses... 325,000
Directors' fees and expenses......... 302,500
Independent accountant's fees and
expenses............................. 115,000
Legal fees and expenses.............. 100,000
Insurance expense.................... 95,000
Miscellaneous........................ 37,610
-------------
Total operating expenses............. 11,207,742
-------------
Net investment income.................. 89,766,944
-------------
Realized and Unrealized
Gains (Losses) on Investments
and Foreign Currencies
Net realized gains on investment
transactions......................... 22,303,546
Net change in unrealized appreciation
on:
Investments.......................... (28,995,384)
Currency swaps....................... 4,403,360
Financial futures contracts.......... (22,781)
-------------
(24,614,805)
-------------
Net loss on investments................ (2,311,259)
-------------
Net increase in total net assets from
operations before net foreign
exchange gains....................... 87,455,685
Net realized and unrealized foreign
exchange gains....................... 92,165,969
-------------
Net Increase In Total Net Assets
Resulting From Operations.............. $ 179,621,654
-------------
-------------
</TABLE>

See Notes to Financial Statements.
13
<PAGE>
- ----------------------------------------------------------
THE FIRST AUSTRALIA PRIME INCOME
FUND, INC.
Statement of Cash Flows
Year Ended April 30, 1999
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
(Including Foreign Currency)
<S> <C>
Cash flows used for operating
activities
Interest received (net of foreign
withholding taxes)............... $ 92,462,607
Expenses paid...................... (9,747,826)
Purchases of short-term portfolio
investments, net................. (86,599,282)
Purchases of long-term portfolio
investments........................ (1,271,003,989)
Proceeds from sales of long-term
portfolio
investments...................... 1,011,277,330
Other.............................. 83,555
---------------
Net cash provided from operating
activities....................... (263,527,605)
---------------
Cash flows provided from financing
activities
Dividends and distributions paid to
preferred shareholders........... (15,444,234)
Dividends and distributions paid to
common
shareholders..................... (91,703,523)
Net proceeds from rights
offering......................... 365,420,287
---------------
Net cash used for financing
activities....................... 258,272,530
---------------
Effect of changes in exchange rate... 10,551,743
---------------
Net increase in cash................. 5,296,668
Cash at beginning of period........ 780,715
---------------
Cash at end of period.............. $ 6,077,383
---------------
---------------
Reconciliation of Net Decrease 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......................... $ 179,621,654
---------------
Increase in investments............ (355,532,666)
Net realized gain on investment
transactions....................... (22,303,546)
Net change in unrealized
appreciation on
investments...................... 24,614,805
Net realized and unrealized foreign
exchange gains................... (92,165,969)
Increase in interest receivable.... (8,872,141)
Increase in receivable for
investments sold................... (7,527,500)
Net decrease in other assets....... 83,555
Decrease in payable for investments
purchased........................ 16,734,225
Increase in accrued expenses and
other liabilities................ 1,819,978
---------------
Total adjustments................ (443,149,259)
---------------
Net cash provided from operating
activities........................... $ (263,527,605)
---------------
---------------
</TABLE>

- ----------------------------------------------------------
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 1999 1998
-------------- --------------
<S> <C> <C>
Operations
Net investment income... $ 89,766,944 $ 159,330,220
Net realized gains on
investment
transactions.......... 22,303,546 38,070,936
Net change in unrealized
appreciation
(depreciation) on
investments, currency
swaps & financial
futures contracts..... (24,614,805) (44,145,814)
-------------- --------------
Net increase in total
net assets resulting
from operations before
net foreign exchange
gains/losses.......... 87,455,685 153,255,342
Net realized and
unrealized foreign
exchange
gains/losses.......... 92,165,969 (275,093,837)
-------------- --------------
Net increase/decrease in
total net assets
resulting from
operations.............. 179,621,654 (121,838,495)
-------------- --------------
Dividends to shareholders
from net investment
income
Common shares........... (78,937,020) (99,121,808)
Preferred shares........ (10,829,924) (32,832,845)
-------------- --------------
(89,766,944) (131,954,653)
-------------- --------------
Distributions to common
shareholders in excess
of net investment
income.................. (17,086,017) --
-------------- --------------
Distributions to
shareholders from net
realized capital gains
Common shares........... -- (41,090,710)
Preferred shares........ (4,395,043) --
-------------- --------------
(4,395,043) (41,090,710)
-------------- --------------
Fund share transactions:
Net proceeds from rights
offering of Fund
shares................ 365,420,287 --
-------------- --------------
Total increase/decrease... 433,793,937 (294,883,858)
Total Net Assets
Beginning of period....... 2,028,141,604 2,323,025,462
-------------- --------------
End of period(a).......... $2,461,935,541 $2,028,141,604
-------------- --------------
-------------- --------------
(a) Including
undistributed net
investment income
of.................... $ (16,154,069) $ 4,605,692
-------------- --------------
</TABLE>

See Notes to Financial Statements.
14

<PAGE>
- ----------------------------------------------------------
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, nondiversified management 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 and federal and state governmental and corporate entities
and companies, and in Australian dollar denominated global or Euro Bonds,
whether or not the issuer is domiciled in Australia, which expose the Fund to
the Australian interest rate structure and which are traded by reference to
similar debt securities of Australian domiciled issuers. To achieve its
investment objective, the Fund may invest the remainder of its assets in debt
securities of Asian country issuers, including securities issued by Asian
country governmental entities, as well as by banks, companies and other entities
which are located in Asian countries, whether or not denominated in an Asian
country currency. The Fund may also invest in debt securities of other issuers,
denominated in, or linked to, the currency of an Asian country, including
securities issued by supranational issuers, such as The World Bank and
derivative debt securities that replicate or substitute for, the currency of an
Asian country; in debt securities which are denominated in New Zealand dollars
of issuers, whether or not domiciled in New Zealand; and in U.S. debt
securities. It is the Fund's policy to limit its investments, as to at least 50%
of its total assets, to issuers or debt securities which are, at the time of
investment, rated AA or better by S&P, or Aa or better by Moody's or which, in
the opinion of the Investment Manager, are of equivalent quality. In addition,
at least 65% of the Fund's investments must be rated, at the time of investment,
A- or better by S&P or A3 or better by Moody's or be, in the Investment
Manager's judgement, 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 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$'), New Zealand dollar
('NZ$') and Asian dollar 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 reporting periods;

(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 April 30, 1999.
Similarly, the Fund isolates the effect of changes in foreign exchange rates
15

<PAGE>
from the fluctuations arising from changes in the market prices of portfolio
securities sold during the reporting periods.

Net realized and unrealized foreign exchange gains of $92,165,969 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 U.S. dollar equivalent amounts
actually received or paid and changes in unrealized foreign exchange gains and
losses in the value of portfolio securities and other assets and liabilities
arising as a result of changes in the exchange rate. Accumulated net realized
and unrealized foreign exchange losses shown in the composition of net assets at
April 30, 1999 represent foreign exchange losses for book purposes that have not
yet been recognized for tax purposes.

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, 1999 was US$.6610 to A$1.00 for the Australian
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. Discounts on long-term
securities are recognized upon disposition. Expenses are recorded on the accrual
basis which may require the use of certain estimates by management. Actual
results could differ from those estimates.

Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The Fund enters into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date of
the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on foreign currency transactions. Risks may
arise upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.

Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities or commodities at
a set price for delivery on a future date. Upon entering into a financial
futures contract, the Fund is required to pledge to the broker an amount of cash
and/or other assets equal to a certain percentage of the contract amount. This
amount is known as the 'initial margin.' Subsequent payments, known as
'variation margin,' are made or received by the Fund each day, depending on the
daily fluctuations in the value of the underlying security or commodity. Such
variation margin is recorded for financial statement purposes on a daily basis
as unrealized gain or loss. When the contract expires or is closed, the gain or
loss is realized and is presented in the statement of operations as net realized
gain (loss) on financial futures contracts.

The Fund invests in financial futures contracts in order to hedge existing
portfolio securities, or securities the Fund intends to purchase, against
fluctuations in value. Under a variety of circumstances, the Fund may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts and the underlying
assets.

Currency Swap: A currency swap is an agreement between two parties which
involves exchanging principal and fixed rate interest payments in one currency
for principal and fixed rate interest payments in another currency for a
specified period of time. Currency swaps involve the accrual and exchange of
interest payments between the parties.

During the term of the swap, changes in the value of the swap are recognized
as unrealized gains or losses by 'marking-to-market' to reflect the market value
of the swap. When the swap is terminated, the Fund will record a realized gain
or loss equal to the difference, if any, between the proceeds from (or cost of)
the closing transaction and the Fund's basis in the contract.

The Fund is exposed to credit loss in the event of non-performance by the
other party to the currency rate swap. However, the Fund does not anticipate
non-performance by any counterparty.

Securities Lending: The Fund may lend its securities to approved borrowers. The
loans are secured by collateral at least equal at all times to the market value
of the securities loaned. The Fund may bear the risk of delay in recovery of, or

16
<PAGE>
even loss of rights in, the securities loaned should the borrower of the
securities fail financially. The Fund receives compensation for lending its
securities in the form of fees or it retains a portion of interest on the
investment of any cash received as collateral. The Fund also continues to
receive interest and dividends on the securities loaned and any gain or loss in
the market price of the securities loaned that may occur during the term of the
loan will be for the account of the Fund.

Dividends and Distributions: It is the Fund's current policy to pay dividends
from net investment income supplemented by net realized foreign exchange gains
and net realized short-term capital gains if necessary, on a monthly basis. 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, realized currency gains and losses resulting
from the repatriation of Australian dollars into United States dollars or
transactions in New Zealand or Asian country currencies 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. Provision has been made for United States
excise taxes relating to the prior fiscal year. 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 and excludes deposits received in advance from the rights offering.

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. To
reflect reclassifications arising from permanent book/tax differences for the
six months ended April 30, 1999, the Fund decreased undistributed net investment
income by $3,673,743, decreased accumulated net realized gains on investments by
$2,147,732, increased accumulated net realized foreign exchange gains by
$5,821,475. Net realized gains and net assets were not affected by this change.

Note 2. Agreements The Fund has agreements
with EquitiLink International Management Limited
(the 'Investment Manager'), EquitiLink Australia Limited (the 'Investment
Adviser') and Prudential Investments Fund Management, LLC. (the
'Administrator'). The Investment Manager and the Investment Adviser are
affiliated companies.

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, 0.50% of such assets between
$900 million and $1,750 million and 0.45% of such assets in excess of $1,750
million.

The Investment Manager pays fees to the Investment Adviser for services
rendered. The Investment Manager informed the Fund that it paid $2,703,093 to
the Investment Adviser during the six months ended April 30, 1999.

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, 0.10% of such assets between $900
million and $1,750 million and 0.07% of such assets in excess of $1,750 million.
During the six months ended April 30, 1999, the Administrator remitted $120,000
to Professional Consulting Services Limited for administrative services
provided.

Note 3. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for
17
<PAGE>
the six months ended April 30, 1999 aggregated $1,283,706,930 and $996,501,284,
respectively.

At April 30, 1999, the Fund had securities on loan with an aggregate market
value of $102,268,547. As of this date, the collateral held for securities on
loan was comprised of securities with an aggregate market value of $110,086,611.

The Fund entered into two currency swaps on February 16, 1999. Under the
terms of the first swap, the Fund receives interest at a rate of 11.50% based on
a notional amount of KRW5,124,367,250 and pays interest at a rate of 3.70% based
on a notional amount of JPY500,000,000. Under the terms of the second swap, the
Fund receives interest at a rate of 13.05% based on a notional amount of
THB549,515,918 and pays interest at a rate of 3.35% based on a notional amount
of JPY1,700,000,000. Net receipts on payments of such amounts are exchanged
semi-annually. At April 30, 1999 the unrealized appreciation on currency swaps
was $4,403,360. The swaps are scheduled to terminate on April 26, 2006.

At April 30, 1999 the Fund had an outstanding forward currency contract to
sell foreign currency as follows:

<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Current
Sale Contract Date Payable Value Depreciation
- ----------------------- ------------ ---------- ------------
<S> <C> <C> <C>
Singapore Dollar
expiring 5/18/99 $3,060,714 $3,033,270 $ 27,444
</TABLE>
- ----------------------------------------------------------

During the six months ended April 30, 1999, the Fund entered into financial
futures contracts. Details of open contracts at April 30, 1999 are as follows:
<TABLE>
<CAPTION>
Value at Value at Unrealized
Number of Expiration Trade April 30, Appreciation
Contracts Type Date Date 1999 /(Depreciation)
- --------- -------------- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Short position:
40 U.S. Treasury 10 year $4,593,750 $4,587,500 $ 6,250
30 U.S. Treasury 10 year 3,434,062 3,440,625 (6,563)
29 U.S. Treasury 10 year 3,299,656 3,325,938 (26,281)
1 U.S. Treasury 10 year 113,813 114,688 (875)
50 U.S. Treasury 10 year 5,750,000 5,734,375 15,625
50 U.S. Treasury 10 year 5,746,875 5,734,375 12,500
30 U.S. Treasury 10 year 3,417,188 3,440,625 (23,437)
-------
$ (22,781)
-------
-------
</TABLE>

The United States federal income tax basis of the Fund's investments at April
30, 1999 was $2,355,873,220 and accordingly, net unrealized appreciation for
United States federal income tax purposes was $78,530,861 (gross unrealized
appreciation--$107,162,743; gross unrealized depreciation--$28,631,882).

Note 4. Capital There are 400 million shares
of common stock authorized. Of the 266,736,249
common shares outstanding at April 30, 1999, the Investment Manager owned 83,556
shares.
In connection with a rights offering, shareholders of record on September 25,
1998 were issued one-third of a nontransferable 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
(October 22, 1998) or the average market value on that date and the four
business days preceding the expiration date. On November 2, 1998 the Fund issued
71,991,921 shares of common stock at $5.30 per share and estimated rights
offering costs of $1,828,500 ($.01 per share) and brokerage and dealer-manager
commissions of $14,308,394 ($.02 per share) were charged to paid-in capital of
the common shareholders resulting in net proceeds to the Fund of $365,420,287.
The net asset value per share of the Fund's common shareholders was reduced by
approximately $.61 per share as a result of this share issuance. Prudential
Securities Incorporated, an affiliate of the Administrator, earned approximately
$4,100,000 of the aforementioned commissions with respect to its participation
in the rights offering.

During the six months ended April 30, 1999 and the fiscal year ended October
31, 1998 the Fund did not issue any shares in connection with the reinvestment
of dividends and distributions paid to shareholders enrolled in the dividend
reinvestment plan.

The Preferred Stock shareholders have rights as determined by the Board of
Directors. The 24,000 shares of Auction Market Preferred Stock ('Preferred
Stock') outstanding consist of nine series as follows: Series A--3,000 shares,
Series B--3,000 shares, Series C--2,000 shares, Series D--4,000 shares, Series
E--2,000 shares, Series F--2,000 shares, Series G--3,000 shares, Series H--2,500
shares and Series I--2,500 shares.

Dividends on each series of Preferred Stock 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 through I based on the
results of an auction. Dividend rates ranged from 4.50% to 6.00% during the
fiscal year ended October 31, 1998. 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%.

<PAGE>
The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at liquidation value plus any accumulated but
unpaid dividends. The Preferred Stock is also subject to mandatory redemption at
liquidation value 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 17, 1999 and June
And Distributions 10, 1999 the Board of
Directors of the Fund declared distributions from
ordinary income of $.06 per common share payable on June 11, 1999 and July 16,
1999 to shareholders of record on May 28, 1999 and June 30, 1999, respectively.

Subsequent to April 30, 1999, dividends and distributions declared and paid
on Preferred Stock totaled approximately $3,707,055 for the nine outstanding
preferred share series in the aggregate through June 11, 1999.

<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: 1999* 1998* 1997* 1996* 1995*
<S> <C> <C> <C> <C> <C>
----------- ---------- ---------- ---------- ----------
Net asset value per common share, beginning of
period.......................................... $ 7.33 $ 8.85 $ 9.93 $ 9.36 $ 8.82
----------- ---------- ---------- ---------- ----------
Net investment income............................. .34 .82 .87 .87 .93
Net realized and unrealized gain (loss) on
investments and foreign currencies.............. .34 (1.45) (.96) 1.13 1.16
----------- ---------- ---------- ---------- ----------
Total from investment operations................ .68 (.63) (.09) 2.00 2.09
----------- ---------- ---------- ---------- ----------
Dividends from net investment income to preferred
shareholders.................................... (.04) (.17) (.17) (.14) (.17)
Dividends from net investment income to common
shareholders.................................... (.30) (.51) (.82) (.83) (.83)
Dividends in excess of net investment income to
common shareholders............................. (.06) -- -- -- --
Distributions from net capital and currency gains
to preferred shareholders....................... (.02) -- -- (.02) (.01)
Distributions from net capital and currency gains
to common shareholders.......................... -- (.21) -- (.03) (.15)
----------- ---------- ---------- ---------- ----------
Total dividends and distributions............... (.42) (.89) (.99) (1.02) (1.16)
----------- ---------- ---------- ---------- ----------
Capital charge in respect to issuance of shares... (.61) -- -- (.41) (.39)
----------- ---------- ---------- ---------- ----------
Net asset value per common share, end of period... $ 6.98 $ 7.33 $ 8.85 $ 9.93 $ 9.36
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------
Market price per common share, end of period...... $ 6.688 $ 5.625 $ 8.125 $ 8.94 $ 9.31
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN BASED OND:
Market value...................................... 26.03 % (23.19)% (.42)% 5.59% 8.78%
Net asset value................................... .94 % (8.10)% (2.37)% 16.73% 18.54%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS/SUPPLEMENTAL DATAPound:
ExpensesDD........................................ 1.25 %** 1.47% 1.25% 1.29% 1.47%
Net investment income before preferred stock
dividends....................................... 10.04 %** 10.72% 9.17% 9.16% 10.83%
Preferred stock dividends......................... 1.21 %** 2.21% 1.78% 1.45% 1.87%
Net investment income available to common
shareholders.................................... 8.83 %** 8.51% 7.39% 7.71% 8.96%
Portfolio turnover rate........................... 45 % 61% 85% 63% 50%
Net assets of common shareholders, end of period
(000 omitted)................................... $1,861,936 $1,428,142 $1,723,025 $1,931,894 $1,452,205
Average net assets of common shareholders (000
omitted)........................................ $1,803,093 $1,485,690 $1,848,378 $1,627,916 $1,201,383
Senior securities (preferred stock) outstanding
(000 omitted)................................... $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 475,000
Asset coverage of preferred stock at period-end... 411 % 338% 387% 422% 406%
<CAPTION>
PER SHARE OPERATING PERFORMANCE: 1994
<S> <C>
----------
Net asset value per common share, beginning of
period.......................................... $ 10.09
----------
Net investment income............................. 1.01
Net realized and unrealized gain (loss) on
investments and foreign currencies.............. (1.03)
----------
Total from investment operations................ (.02)
----------
Dividends from net investment income to preferred
shareholders.................................... (.12)
Dividends from net investment income to common
shareholders.................................... (.84)
Dividends in excess of net investment income to
common shareholders............................. --
Distributions from net capital and currency gains
to preferred shareholders....................... (.01)
Distributions from net capital and currency gains
to common shareholders.......................... (.17)
----------
Total dividends and distributions............... (1.14)
----------
Capital charge in respect to issuance of shares... (.11)
----------
Net asset value per common share, end of period... $ 8.82
----------
----------
Market price per common share, end of period...... $ 9.56
----------
----------
TOTAL INVESTMENT RETURN BASED OND:
Market value...................................... 3.32%
Net asset value................................... (3.19)%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS/SUPPLEMENTAL DATAPound:
ExpensesDD........................................ 1.41%
Net investment income before preferred stock
dividends....................................... 10.68%
Preferred stock dividends......................... 1.20%
Net investment income available to common
shareholders.................................... 9.48%
Portfolio turnover rate........................... 34%
Net assets of common shareholders, end of period
(000 omitted)................................... $1,088,631
Average net assets of common shareholders (000
omitted)........................................ $1,174,394
Senior securities (preferred stock) outstanding
(000 omitted)................................... $ 400,000
Asset coverage of preferred stock at period-end... 372%
</TABLE>

<TABLE>
<C> <S>
- ---------------
* Calculated based upon weighted average shares outstanding during the period.
** 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 year 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.
DD Includes expenses of both preferred and common stock.
Pound 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. Expense ratios relative to the average
net assets of common and preferred shareholders are .94%, 1.05%, .95%, .94%, 1.05% and 1.05%, respectively.
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 years 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.
</TABLE>

See Notes to Financial Statements.
20

<PAGE>
Supplemental Proxy Information

The Annual Meeting of Shareholders of The First Australia Prime Income Fund,
Inc. (the 'Fund') was held on March 26, 1999 at the offices of Prudential
Securities Incorporated, One Seaport Plaza, New York, New York. The meeting was
held for the following purposes:

(1) To elect the following five Directors to serve as Class
II Directors for a three-year term expiring in 2002:
- Rt. Hon. Malcolm Fraser
- Harry A. Jacobs, Jr.
- Howard A. Knight
- Peter D. Sacks
- Brian M. Sherman
(1b) To elect the following director to serve as Class I
director for a two-year term expiring in 2001:
- Dr. Anton E. Schrafl

Directors whose term of office continued beyond this meeting
are as follows: Anthony E. Aaronson, Sir Roden Cutler,
David Lindsay Elsum, Laurence S. Freedman, Michael R.
Horsburgh, David Manor, Neville J. Miles, William
J. Potter, John T. Sheehy and Marvin Yontef.

(3) To ratify the selection of PricewaterhouseCoopers LLP as
independent public accountants of the Fund for
the fiscal year ending October 31, 1998.

The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Director/Auditor Votes for Votes against Votes withheld Abstentions
--------------------------- ----------- ------------- -------------- ------------
<C> <S> <C> <C> <C> <C>
(1) Rt. Hon. Malcolm Fraser 199,079,015 -- 14,065,729 --
Harry A. Jacobs, Jr. 199,378,110 -- 13,766,634 --
Howard A. Knight 199,087,330 -- 14,057,414 --
Peter D. Sacks 199,084,972 -- 14,059,772 --
Brian M. Sherman 199,471,337 -- 13,673,407 --
(1b) Dr. Anton E. Schrafl 199,033,743 -- 14,111,000 --
(3) PricewaterhouseCoopers LLP 208,110,340 3,065,544 -- 1,968,859
</TABLE>
21
<PAGE>
Directors
Anthony E. Aaronson
Sir Roden Cutler
David Lindsay Elsum
Rt. Hon. Malcolm Fraser
Laurence S. Freedman, Chairman
Michael R. Horsburgh
Harry A. Jacobs, Jr.
Howard A. Knight
David Manor
Neville J. Miles
William J. Potter
Peter D. Sacks
Dr. Anton E. Schrafl
John T. Sheehy
Brian M. Sherman
Marvin Yontef

Officers
Brian M. Sherman, President
Laurence S. Freedman, Vice President
Ouma Sananikone-Fletcher, Assistant Vice President
and Chief Investment Officer
David Manor, Treasurer
Roy M. Randall, Secretary
Barry G. Sechos, 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, 1999 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 general
information only. It does not have regard to the specific investment objectives,
financial situation and the particular needs of any specific person.

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.
22
<PAGE>
- -------------------------------------------------------------------
Investment Manager
EquitiLink International Management Limited
P.O. Box 578, 17 Bond Street
St. Helier, Jersey, JE4 5XB Channel Islands

Investment Adviser
EquitiLink Australia Limited
190 George Street
Sydney, NSW 2000, Australia

Administrator
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171

Auction Agent
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001

Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036

Legal Counsel
Dechert Price & Rhoads
1775 Eye Street N.W.
Washington, D.C. 20006-2401

Stikeman, Elliot
Level 40, Chifley Tower
2 Chifley Square
Sydney, NSW 2000, Australia

Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
for information call toll-free (800) 362-3277
collect (973) 367-7403
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