FIRST AUSTRALIA PRIME INCOME FUND INC, N-30D, 2000-07-07

FIRST AUSTRALIA PRIME INCOME FUND INC
N-30D, 2000-07-07

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<PAGE>

(LOGO)
The First
Australia
Prime Income Fund, Inc.

(LOGO)
Managed by EquitiLink
International
Management
Limited

Semi-Annual Report April 30, 2000

Highlights

- 16.6% cash distribution rate for the previous 12
months, based on a share price of $4.25 on April
30, 2000
- 27.3% of assets invested in Asian debt securities
- 16.3% of assets are denominated in US dollars
- 75.8% of assets rated A or better
- Brokerage on DRP purchases reduced from 5 cents
to 2 cents per share

(GRAPHIC)
www.equitilink.com
AMEX - FAX

Managed by EquitiLink International Management
Limited.
Advised by EquitiLink Australia Limited.
ALL AMOUNTS ARE U.S. DOLLARS UNLESS
OTHERWISE STATED

<PAGE>

letter to Shareholders

June 23, 2000

Dear Shareholder,
We 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, 2000. Included in this report is a
review of 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.

Net Asset Value Performance: Negatively affected by
strong US dollar
The Fund's Net Asset Value (NAV) return in US
dollar terms was -3.9% for the six months to April
30, 2000, assuming reinvestment of dividends. This
negative return was due to the 9.6% appreciation of
the US dollar against the Australian dollar during
the reporting period. As the Fund's investment
parameters do not permit hedging of the Australian
currency and at least 65% of total assets must be
invested in Australian dollar denominated debt
securities, the Fund remains exposed to movements
in the US dollar against the Australian dollar.

The Fund's strategy of diversifying into higher
yielding Asian bonds and reducing its exposure to
the Australian market has made a positive
contribution to the Fund's performance. The Fund's
NAV per share was $5.57 on April 30, 2000, and its
share price was $4.25, representing a discount to
NAV of 23.7%.

Asia: 27.3% of total assets invested in Asian debt
securities
On April 30, 2000, the Fund held 27.3% of its total
assets in Asian debt securities. Of the Fund's
total assets, 13.5% is held in Asian Yankee bonds,
bringing the Fund's total US dollar exposure to
16.3%. In this way, the currency risk of the
Fund's total investments has been reduced.

The Fund's total investments have maintained a high
credit quality. On April 30, 2000, 75.8% of the
portfolio was invested in securities where either
the issue or the issuer was rated A or better, or
judged by the Investment Manager to be of
equivalent quality.

Distributions: 16.6% annual cash distribution rate
Distributions for the year to April 30, 2000
totaled 70.5 cents per share. Based on the share
price of $4.25 as of April 30, 2000, the cash
distribution rate for the year was 16.6%. Since
all distributions are paid after deducting
applicable withholding taxes, the effective
distribution rate maybe
higher for those US investors who are able to claim
a tax credit.

On March 17, 2000, the Board of Directors announced
a 4.5 cent per share monthly distribution. It is
the Board's intention that the monthly disbribution
be maintained until March 2001, subject to regular
review at the Board's quarterly meetings, having
regard to market conditions, with the next review
to take place in September 2000. The Board's policy
is to provide investors with a stable monthly
distribution out of current income, supplemented by
realized capital gains and, to the extent
necessary, paid-in capital.

1
<PAGE>

The First Australia Prime Income Fund, Inc.

For information on the Fund, including weekly
updates of share price, NAV, and details of
distributions, please contact EquitiLink USA Inc.
Investor Relations, by:
- toll free on 1-800-522-5465 in the United States,
- e-mail at [email protected], or
- the website at www.equitilink.com.

Sincerely

Laurence S. Freedman
Chairman

Brian M. Sherman
President

(LOGO)
The First
Australia
Prime Income Fund, Inc.

Your Board's policy is to provide investors with a
stable monthly distribution out of current income,
supplemented by realized capital gains and, to the
extent necessary, paid-in capital.

The Fund is subject to U.S. corporate, tax and
securities laws. Under U.S. tax accounting rules,
the amount of distributable income for each fiscal
period depends on the actual exchange rates during
the entire year between the U.S. dollar and the
currencies in which Fund assets are denominated and
on the aggregated gains and losses realized by the
Fund during the entire year.

Therefore the exact amount of distributable income
for each fiscal year can only be determined at the
end of the Fund's fiscal year, October 31.

However, under the U.S. Investment Company Act of
1940, the Fund is required to indicate the source
of each distribution to shareholders.

The Fund estimates that distributions for the year
to date, including the distribution paid on June
16, 2000, are made up of 67% net investment income,
2% realized capital gains, and 31% return of paid-
in capital.

This estimated distribution composition will vary
from month to month because it may be materially
impacted by future realized gains and losses on
securities and on fluctuations in the value of the
currencies in which Fund assets are denominated.

In January 2001, a Form 1099 DIV will be sent to
shareholders, which will state the amount and
composition of distributions and provide
information with respect to their appropriate tax
treatment.

2
<PAGE>
Dividend Reinvestment and
Cash Purchase Plan The First Australia Prime Income Fund, Inc.

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. Distributions made
under the Plan are taxed to the same extent as are
cash distributions. 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;
Brokerage on share purchases was recently reduced
from 5 cents to 2 cents per share.

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 on the
Plan, together with an authorization form, please
telephone the Plan Agent, State Street Bank & Trust
Company, P.O. Box 8200, Boston, MA 02266, or toll-
free at 1-800-451-6788.

3
<PAGE>

Report of the Investment Manager The First Australia Prime Income Fund, Inc.

Distributions
Distributions for the year ended April 30, 2000
totaled 70.5 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 and, to the extent
necessary, paid-in capital. Based on the share
price of $4.25 as of April 30, 2000, the cash
distribution rate for the year was 16.6%. Since
all distributions are paid after deducting
applicable withholding taxes, the effective
distribution rate may be higher for those US
investors who are able to claim a tax credit.

On March 17, 2000, the Board of Directors announced
a 4.5 cent per share monthly distribution. It is
the Board's intention that the monthly distribution
be maintained until March 2001, subject to regular
review at the Board's quarterly meetings, having
regard to market conditions, with the next review
to take place in September 2000.

Net Asset Value Performance
The Fund's Net Asset Value (NAV) return in US
dollar terms was -3.9% for the six months to April
30, 2000, assuming reinvestment of dividends. This
negative return was due to the 9.6% appreciation of
the US dollar against the Australian dollar during
the reporting period. As the Fund's investment
parameters do not permit hedging of the Australian
currency and at least 65% of total assets must be
invested in Australian dollar denominated debt
securities, the Fund remains exposed to movements
in the US dollar against the Australian dollar.

The Fund's strategy of diversifying into Asian high
yielding bonds and reducing its exposure to the
Australian market has made a positive contribution
to the Fund's performance. The Fund's NAV per share
was $5.57 on April 30, 2000, and its share price
was $4.25, representing a discount to NAV of 23.7%.
As of the date of this report, the NAV per share
was $5.69.

Share Price
The Fund's share price return in US dollar terms
was -24.2% for the six months to April 30, 2000,
assuming reinvestment of dividends. On April 30,
2000, the share price was $4.25, representing a
discount to NAV of 23.7%. As of the date of this
report, the share price was $4.56, representing a
19.8% discount to NAV.

Auction Market Preferred Stock (AMPS)
The Fund's AMPS continue to be well bid with a
5.74% average interest rate over the quarter
compared with an average 5.94% for 30 day US
Commercial Paper. These rates have increased since
the last quarter as the US Federal Reserve has
increased official cash interest rates.

The Fund is a leveraged Fund. However, in recent
times the US dollar has strengthened against
virtually all other currencies in the world. This
has resulted in a negative impact for common
shareholders. The Manager expects that in the
medium to longer term this situation will rectify
itself and the AMP's will contribute positively.

4
<PAGE>

Report of the Investment Manager
(continued) The First Australia Prime Income Fund, Inc.

Quality of Investments
As of April 30, 2000, 75.8% 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, was judged to be of equivalent
quality by the Investment Manager. The following
table shows the ratings of securities held by the
Fund:

AAA/Aaa AA/Aa A BBB/Baa BB/Ba* B*
% % % % % %

April 30, 2000 52.1 19.0 4.7 14.6 6.4 3.2
January 31, 2000 54.6 18.6 4.0 12.5 8.0 2.3
October 31, 1999 54.9 19.7 4.4 12.3 7.2 1.5
July 31, 1999 54.2 19.9 5.9 12.5 6.6 0.9
April 30, 1999 59.2 19.5 2.1 12.6 5.6 1.0

* Below investment grade.

Geographic Composition
The following table displays the geographic
composition of the Fund's portfolio:
Asia
Australia (incl. New Zealand) United States
Date % % %
April 30, 2000 69.6 27.6 2.8
January 31, 2000 73.7 26.0 0.3*
October 31, 1999 75.9 22.6 1.5
July 31, 1999 76.8 22.0 1.2
April 30, 1999 77.5 19.6 2.9
* Includes US$ short-dated paper from Japanese
issuers with a credit rating of A or better.

Currency Composition
The following table displays the currency
composition of the Fund's portfolio:
Australian Asia Currencies
Dollar (incl. New Zealand) U.S. Dollar*
Date % % %
April 30, 2000 69.6 14.1 16.3
January 31, 2000 73.7 11.4 14.9
October 31, 1999 76.0 8.6 15.4
July 31, 1999 76.9 8.2 14.9
April 30, 1999 77.5 6.1 16.4

* Includes 13.5% Asian Yankee Bonds in April,
2000 (14.5% in January, 14.0% in October,
13.8% in July, 13.7% in April, 1999).

5
<PAGE>

Report of the Investment Manager
(continued) The First Australia Prime Income Fund, Inc.

Interest Rate Exposure
The following table displays the movements in
country composition of the Fund's portfolio
according to interest rate risk:

Ex-Australia
Australia (incl. Asia & New Zealand) United States
Date % % %
April 30, 2000 69.6 14.1 16.3
January 31, 2000 73.7 11.4 14.9
October 31, 1999 76.0 8.6 15.4
July 31, 1999 76.9 8.2 14.9
April 30, 1999 77.5 5.9 16.6

Maturity Composition
On April 30, 2000 the average maturity of the
portfolio was 6.1* years, compared with 6.6 years
as of October 31, 1999. The following table shows
the maturity composition of the Fund's portfolio as
of April 30, 2000, compared with the previous six
months and twelve months:

Under 3 Years 3 to 5 Years 5 to 10 Years 10 Years & Over
Date % % % %
April 30, 2000 37.6 13.5 40.0 8.9
October 31, 1999 32.6 12.5 46.9 8.0
April 31, 1999 36.2 25.6 36.4 1.8

* The portfolio's duration is 3.7 years (October
31, 1999: 4.0 years).

Sectoral Composition
The following shows the sectoral composition of the
portfolio as of April 30, 2000:

Domestic Bonds US Bonds
Ex-Australia United States
Australia (incl. Asia & New Zealand) Yankees (Cash/Bonds)
% % % %
Government* 17.2 7.0 3.1 0.0
Semi
Government** 26.7 1.0 1.8 0.0
Government Bank 0.0 4.1 0.8 0.0
Government
Corporation 0.7 0.0 0.0 0.0
Utility 0.0 0.0 0.3 0.0
Supernational 3.6 0.0 0.0 0.0
Bank/Finance
Company*** 17.6 0.9 3.3 2.5
Corporate 3.8 1.4 4.2 0.0

* Includes government guaranteed debt
** Includes State Government Guaranteed Banks.
*** Includes cash held by the Fund's custodian and
repurchase agreements.

6
<PAGE>

Market Review and Outlook The First Australia Prime Income Fund, Inc.

Australia
Economy
The growth in the Australian economy has been
uninterrupted since 1992, one of its longest
periods of expansion. After strong growth at the
end of 1999, the economy has moderated slightly in
early 2000. However, the economy is forecast by the
Federal Government to remain strong at 3.75% for
the year to June 2001.

Inflation has risen to 2.8% due to higher oil
prices, but remains well within expectations and
the Reserve Bank of Australia's target range.

Fixed Income
The Reserve Bank of Australia increased interest
rates by 1.00% during the six months to April 30
and by a further 0.25% in early May, taking
official interest rates to 6.00%. The Reserve Bank
of Australia is expected to maintain its pre-
emptive approach and further tightenings of
monetary policy are forecast to occur during the
year.

Movements in US treasury yields remained the key
influence on Australian yields during the six
months. Ten-year government bond yields fell from
6.63% to 6.39%.

Currency
The US dollar rose 9.6% against the Australian
dollar over the six months; the Australian dollar
closed the six months at 58.5 cents. The recent
appreciation by the US dollar against the
Australian dollar reflects the following:
- the continuing strength of the US economy has
seen the US dollar appreciate against most major
currencies,
- the interest rate differential between Australia
and the USA,
- expectations that the US Federal Reserve will
tighten more aggressively than the Reserve Bank of
Australia, and
- a sluggish commodity price recovery.

Over the year many of the above concerns are likely
to fade and we anticipate:
- growth in the Australian economy to remain
strong, at or above the world average,
- a broadening of the commodity price recovery,
particularly in the bulk and soft commodities,
- strong tourism income from the Olympics to
support the Australian dollar during the year.

Asia
Economies
The Asian recovery has matured, with the sharp
acceleration of growth observed at the end of 1999
replaced by an expansionary phase with solid growth
expected for 2000. Excess capacity remains within
certain countries and sectors and is likely to
moderate any rising inflation. This has already
been shown by the lower than expected inflation
from many countries.

Monetary policy is expected to be tightened during
2000, providing additional support to local
currencies and mitigating inflation derived from
strong growth in the region. Trade surpluses are
expected to be maintained, assisted by lower oil
prices.

7
<PAGE>

Market Review and Outlook
(continued) The First Australia Prime Income Fund, Inc.

Domestic Bond and Currency Markets
Asian domestic bond markets benefited from
improving economic conditions during the six
months. Better than expected inflation data from
most countries saw domestic bond yields fall in the
Philippines, Thailand, Malaysia and Singapore.

The continuing strength of the US economy has seen
the US dollar perform strongly against most Asian
currencies. The exception was the South Korean Won
which appreciated 8.3% against the US dollar during
the six months.

US-dollar denominated Asian Bond (Yankee) Market
and US dollar
US-dollar denominated Asian bonds (Yankees)
generally rose in line with rising official US
interest rates. The Fund has 13.5% of its total
assets in Yankees as at April 30, 2000 compared
with 14.0% at October 31, 1999.

8
<PAGE>
Summary of Key Market Rates The First Australia Prime Income Fund, Inc.

The following table summarizes the movements of key
interest rates and currencies over the last six and
twelve month periods:

April 30, 2000 October 31, 1999 April 30, 1999
Australia
90 day bank bills 6.24% 5.35% 4.81%
10 year bonds 6.39% 6.63 % 5.67%
Australian Dollar $ 0.58 $ 0.64 $ 0.66

New Zealand
90 day bank bills 6.66% 5.29% 4.64%
10 year bonds 7.03% 7.08% 5.77%
NZ Dollar $ 0.49 $ 0.51 $ 0.56

South Korea
90 day bank bills 7.37% 7.26% 6.02%
5 year bond 9.28% 9.03% 7.12%
South Korean Won* W 1108 W 1200 W 1175

Thailand
90 day bank bills 3.50% 4.00% 3.63%
10 year bond 6.95% 7.81% 7.55%
Thai Baht* B 38 B 39 B 37

Philippines
90 day bank bills 8.80% 9.75% 10.88%
10 year bond 14.40% 15.31% 14.94%
Philippines Peso* P 41 P 40 P 38

Malaysia
90 day bank bills 2.85% 3.35% 4.00%
10 year bond 5.86% 6.50% N/A
Malaysian Ringgit* R 3.8 R 3.8 R 3.8

Singapore
90 day bank bills 2.17% 0.63% 0.82%
10 year bonds 4.14% 4.65% 3.98%
Singaporean Dollar S$ 1.71 S$ 1.66 S$ 1.70

US$ Yankee Bonds**
South Korea 8.32% 8.37% 7.43%
Thailand 8.10% 8.02% 7.09%
Philippines 10.43% 9.42% 8.57%

* 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.

EquitiLink International Management Limited
June 2000

9
<PAGE>
Portfolio of Investments
April 30, 2000 (Unaudited) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--114.2%
AUSTRALIA--84.4%
Government and Semi-Government--47.7%
Commonwealth of Australia--26.4%
Australia Postal
Corp.,
A$ 5,000 5.50%, 3/25/04........ $ 2,772,140
22,000 6.00%, 3/25/09........ 11,999,885
Australian Capital Territory,
10,000 12.00%, 11/15/01...... 6,317,347
Commonwealth Bank of Australia,
10,000 5.50%, 3/1/02......... 5,724,205
5,000 6.00%, 8/1/03......... 2,852,793
2,800 7.625%, 8/5/03........ 1,666,756
12,000 5.25%, 12/1/04........ 6,579,343
8,000 6.00%, 9/1/05......... 4,498,883
10,000 6.75%, 12/1/07........ 5,807,562
4,000 6.25%, 2/10/09........ 2,237,727
20,000 6.25%, 9/1/09......... 11,204,126
Commonwealth of Australia,
48,000 12.00%, 11/15/01...... 30,353,150
45,000 9.50%, 8/15/03........ 28,653,758
40,000 9.00%, 9/15/04........ 25,636,955
25,000 7.50%, 7/15/05........ 15,278,672
41,000 10.00%, 2/15/06....... 27,997,718
21,000 10.00%, 10/15/07...... 14,841,137
72,000 8.75%, 8/15/08........ 48,329,181
117,000 7.50%, 9/15/09........ 73,698,555
75,000 5.75%, 6/15/11........ 41,727,216
Northern Territory Authority,
40,000 12.50%, 7/15/01....... 25,008,681
--------------
393,185,790
--------------
New South Wales--5.7%
New South Wales Treasury Corporation,
57,000 12.00%, 12/1/01....... 35,902,792
25,000 7.00%, 4/1/04......... 14,762,223
20,000 12.60%, 5/1/06........ 14,987,789
20,000 8.00%, 3/1/08......... 12,498,378
10,000 7.00%, 12/1/10........ 5,912,488
--------------
84,063,670
--------------
Queensland--3.2%
Queensland Treasury Corporation,
20,000 6.50%, 6/14/05........ 11,575,140
15,200 6.00%, 7/14/09........ 8,412,023
15,000 6.00%, 6/14/11........ 8,229,790
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
A$ 10,000 6.00%, 10/14/15....... $ 5,366,782
27,000 6.00%, 6/14/21........ 14,233,760
--------------
47,817,495
--------------
South Australia--3.1%
South Australian Financing Authority,
35,000 10.00%, 1/15/03....... 22,074,401
40,000 7.50%, 10/15/07....... 24,207,964
--------------
46,282,365
--------------
Tasmania--0.4%
Tasmanian Public Finance Corporation,
10,000 9.00%, 11/15/04....... 6,312,671
--------------
Victoria--4.8%
Treasury Corporation of Victoria,
36,000 12.50%, 10/15/03...... 24,701,418
30,500 10.25%, 11/15/06...... 20,993,378
25,000 7.50%, 8/15/08........ 15,209,257
20,000 5.50%, 9/15/10........ 10,536,161
--------------
71,440,214
--------------
Western Australia--4.1%
Western Australia Treasury
Corporation,
40,000 10.00%, 7/15/05....... 26,592,811
36,000 8.00%, 10/15/07....... 22,430,371
10,000 7.50%, 10/15/09....... 6,091,916
10,000 7.00%, 4/15/11........ 5,986,901
--------------
61,101,999
--------------
Total long-term
Australian
government and
semi-government
(cost
US$848,432,215)..... 710,204,204
--------------
Eurobonds--31.8%
Banking and Finance--15.2%
Bank Austria AG,
11,278 10.875%, 11/17/04..... 7,427,909
Banque National de Paris,
14,000 9.00%, 8/13/02........ 8,487,436
BHP Finance Limited,
14,000 7.50%, 7/15/05........ 8,152,846
Cable & Wireless Optus Finance,
5,000 7.75%, 7/15/05........ 2,938,912
Commonwealth Bank of Australia,
10,000 9.00%, 8/15/05........ 6,362,323
</TABLE>
10

<PAGE>
Portfolio of Investments
April 30, 2000 (Unaudited)
(continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
Eurobonds (cont'd.)
Banking and Finance (cont'd.)
Credit Locale de
France,
A$ 5,000 10.25%, 4/12/05....... $ 3,296,560
Dresdner Bank AG,
8,000 5.30%, 2/18/10........ 4,829,729
DSL Bank,
15,000 6.25%, 11/15/06....... 8,339,832
Federal National Mortgage Association
Global,
35,000 6.50%, 7/10/02........ 20,327,406
62,065 6.375%, 8/15/07....... 34,972,191
GE Capital Australia Limited,
10,000 6.50%, 12/3/01........ 5,812,238
5,000 6.25%, 8/15/03........ 2,851,522
15,000 6.75%, 9/15/07........ 8,559,301
GMAC Australia Finance Limited,
6,500 9.00%, 5/22/01........ 3,881,140
Interstar,
5,000 7.15%, 12/20/33....... 2,911,175
Jem Bonds Limited,
10,000 9.00%, 7/15/06........ 6,451,782
KFW International Finance,
15,755 9.125%, 7/26/05....... 10,033,408
9,000 7.25%, 2/20/07........ 5,312,748
Landesbank Baden Wurttemberg,
15,000 6.25%, 12/15/04....... 8,471,364
National Australia Bank Limited,
10,000 6.00%, 8/9/02......... 5,739,643
Northern Territory Authority,
5,000 10.03%, 8/9/05........ 3,312,451
Principal Financial Global Fund,
10,000 6.75%, 10/15/02....... 5,786,401
Priority Trust,
2,000 6.00%, 10/15/30....... 1,168,889
Puma,
5,000 7.47%, 2/21/33........ 2,939,526
State Bank of New South Wales,
20,000 11.75%, 8/16/01....... 12,362,610
28,000 10.75%, 3/12/02....... 17,432,325
6,400 9.00%, 9/17/02........ 3,897,838
10,000 9.25%, 2/18/03........ 6,169,562
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
State Bank of South Australia,
A$ 10,000 11.00%, 4/10/02....... $ 6,249,534
Westfield Trust,
5,000 7.50%, 10/15/04....... 2,907,376
--------------
227,385,977
--------------
Semi-Government and Local
Government--10.8%
New South Wales Treasury
Corporation,
25,000 8.00%, 12/1/01........ 14,916,836
50,000 12.00%, 12/1/01....... 31,529,539
7,000 10.50%, 12/7/04....... 4,636,286
10,000 10.00%, 6/6/05........ 6,579,384
34,000 12.60%, 5/1/06........ 25,397,437
7,000 9.25%, 6/20/06........ 4,499,860
40,000 8.00%, 3/1/08......... 24,996,756
Queensland Treasury Corporation,
20,000 8.00%, 5/14/03........ 12,114,153
20,000 12.00%, 6/15/05....... 14,330,825
30,000 8.00%, 9/14/07........ 18,737,746
South Australia Financing Authority,
5,000 11.25%, 10/23/01...... 3,093,596
--------------
160,832,418
--------------
Services--0.2%
Compass Master,
5,000 7.09%, 9/15/04........ 2,892,820
--------------
Supranational Global--5.6%
Asian Development Bank,
10,000 5.25%, 9/15/04........ 5,455,335
EFIC,
19,000 11.00%, 12/29/04...... 12,829,835
Eurofima,
46,170 9.875%, 1/17/07....... 31,258,275
European Bank of Reconstruction &
Development,
39,000 9.00%, 10/15/02....... 23,832,905
European Investment Bank,
3,000 10.25%, 10/1/01....... 1,837,071
Kingdom of Sweden,
8,287 7.875%, 4/23/07....... 5,075,605
</TABLE>
11

<PAGE>
Portfolio of Investments
April 30, 2000 (Unaudited)
(continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
Supranational Global (cont'd.)
Sigma Finance Corporation,
A$ 5,000 7.50%, 8/15/03........ $ 2,956,297
--------------
83,245,323
--------------
Total long-term
Australian eurobonds
(cost
US$573,342,850)..... 474,356,538
--------------
Corporate Bonds--4.9%
Asset Backed--0.1%
FANMAC 22,
1,209 11.40%, 12/15/01...... 748,884
FANMAC 25,
338 10.33%, 6/15/02....... 208,826
--------------
957,710
--------------
Banking and Finance--0.5%
Coles Myer Finance,
2,100 6.75%, 7/15/05........ 1,187,561
Lend Lease,
10,000 7.50%, 7/15/05........ 5,811,127
--------------
6,998,688
--------------
Floating Rate Notes*--0.2%
Crusade Trust,
1,982 5.25%, 7/10/29........ 1,155,364
Initial Corporate Obligation,
3,000 5.0483%, 9/19/03...... 1,753,352
--------------
2,908,716
--------------
Services--4.1%
ANZ Banking Group,
5,000 5.50%, 9/15/03........ 2,782,092
Austran Holdings Incorporated,
5,000 6.25%, 11/15/02....... 2,844,654
Merrill Lynch & Co. Australia,
10,000 7.625%, 3/15/02....... 5,904,129
Sydney Airports Corporation,
2,000 6.35%, 3/15/04........ 1,130,601
Telstra Corporation,
8,000 11.50%, 10/15/02...... 5,130,618
2,000 7.80%, 7/17/03........ 1,202,723
7,000 8.00%, 9/15/04........ 4,202,902
30,000 12.00%, 5/15/06....... 21,500,183
10,000 7.25%, 3/30/10........ 5,734,434
2,000 8.75%, 1/15/20........ 1,386,716
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
Westpac Banking Corporation,
A$ 16,600 3.54%, 3/15/02........ $ 9,729,793
--------------
61,548,845
--------------
Total Australian
corporate bonds
(cost US$81,763,587).. 72,413,959
--------------
Total Australian
long-term
investments
(cost US$1,503,538,652) 1,256,974,701
--------------
JAPAN--1.4%
Government Bonds--1.4%
Inchon Metropolitan City,
JPY 500,000 3.70%, 4/26/06........ 4,836,465
PTT Exploration &
Production,
1,700,000 3.35%, 9/19/07........ 16,387,195
--------------
Total Japan long-term
investments
(cost US$19,183,475).. 21,223,660
--------------
KOREA--5.4%
Government Bonds--5.4%
Korea Credit Insurance Fund,
KRW 20,000,000 8.72%, 3/12/04........ 17,641,811
2,000,000 15.00%, 7/3/04........ 2,144,087
Korea Deposit Insurance
Fund Bond,
10,000,000 9.90%, 10/23/03....... 9,168,732
Korea Development Bank,
3,930,000 8.40%, 11/3/01........ 3,520,409
10,000,000 8.40%, 11/20/01....... 9,107,240
5,000,000 6.40%, 1/5/02......... 4,355,544
5,000,000 6.82%, 2/26/02........ 4,405,465
Korea Monetary Stabilization
Bond,
18,040,000 8.97%, 2/8/02......... 16,292,294
10,000,000 8.99%, 2/14/02........ 9,034,080
Korea Treasury Bond,
5,000,000 7.10%, 12/9/01........ 4,398,432
--------------
Total Korea long-term
investments
(cost US$77,639,777).. 80,068,094
--------------
</TABLE>
12

<PAGE>
Portfolio of Investments
April 30, 2000 (Unaudited)
(continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
MALAYSIA--1.1%
Government Bond--1.1%
Danamodal Nasional Berhad,
MYR 79,830 Zero Coupon, 10/21/03
(cost
US$17,541,514)...... $ 17,468,065
--------------
PHILIPPINES--0.9%
Government Bonds--0.9%
Philippine Government Bonds,
PHP 162,000 11.875%, 6/10/01...... 3,961,593
339,500 18.00%, 11/26/08...... 9,811,106
--------------
Total Philippines
long-term
investments
(cost US$12,876,339).. 13,772,699
--------------
SINGAPORE--0.8%
Government Bonds--0.8%
Singapore Government Bonds,
SGD 10,250 4.00%, 2/1/05......... 6,081,649
9,365 4.375%, 1/15/09....... 5,575,306
--------------
Total Singapore
long-term
investments
(cost US$11,598,138).. 11,656,955
--------------
THAILAND--1.8%
Corporate Bonds--0.1%
Services--0.1%
Advance Information Services PLC,
THB 80,000 6.25%, 3/31/03........ 2,117,224
--------------
Government Bonds--1.8%
Eastern Water Resources,
95,000 9.00%, 7/22/04........ 2,747,721
Export-Import Bank of Thailand,
80,000 7.25%, 5/6/04......... 2,140,919
Thailand Government Bonds,
50,000 5.25%, 3/5/03......... 1,340,877
70,000 8.25%, 10/14/03....... 2,033,301
503,100 8.50%, 10/14/05....... 14,896,529
60,000 8.50%, 12/8/08........ 1,737,046
--------------
Total Thailand
long-term
investments
(cost US$26,192,546).. 27,013,617
--------------
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
UNITED STATES--18.4%
ASAT Finance LLC,
US$ 6,000 12.50%, 11/1/06....... $ 6,330,000
Bangkok Bank Public Company,
5,000 8.75%, 3/15/07........ $ 4,250,000
3,500 9.025%, 3/15/29....... 2,725,000
Bangkok Sentral Ng Philipinas,
4,000 8.60%, 6/15/27........ 3,040,000
Cho Hung Bank,
3,750 11.875%, 4/1/05....... 3,684,375
Chonhung Bank,
7,500 11.0725%, 1/7/05...... 7,612,500
Commerce Asset Holding Company,
2,000 Zero Coupon,
6/17/02............. 1,630,000
Dao Heng Bank Limited,
12,500 7.75%, 1/24/07........ 11,808,110
Export-Import Bank Korea,
10,000 7.10%, 3/15/07........ 9,802,600
Globe Telecom Incorporated,
8,500 13.00%, 8/1/09........ 9,057,500
Hanvit Bank,
4,000 11.75%, 3/1/10........ 3,954,800
6,000 12.75%, 3/1/10........ 6,097,800
Industrial Bank of Korea,
15,000 8.375%, 9/30/02....... 14,922,000
International Bank of
Reconstruction &
Development,
10,000 5.50%, 5/14/03........ 5,637,984
Korea Development Bank,
8,000 7.125%, 4/22/04....... 7,690,400
Korea Electric Power Corporation,
5,000 7.75%, 4/1/13......... 4,650,150
4,000 7.00%, 2/1/27......... 3,696,720
LG Caltex Oil Corporation,
3,500 7.875%, 7/1/06........ 3,353,000
6,500 7.50%, 7/15/07........ 6,077,500
Malaysia,
7,500 8.75%, 6/1/09......... 7,706,250
National Power Corporation,
7,000 8.40%, 12/15/16....... 5,556,530
</TABLE>
13

<PAGE>
Portfolio of Investments
April 30, 2000 (Unaudited)
(continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
UNITED STATES (cont'd.)
Petroliam Nasional Berhad,
US$ 5,000 8.875%, 8/1/04........ $ 5,107,500
2,000 7.125%, 8/15/05....... 1,848,660
6,000 7.125%, 10/18/06...... 5,587,200
5,000 7.75%, 8/15/15........ 4,572,045
3,000 7.625%, 10/15/26...... 2,610,882
Philippine Long Distance Telcom,
1,000 8.35%, 3/6/17......... 737,900
PTT Exploration & Production,
15,500 7.625%, 10/1/06....... 14,560,000
Reliance Industries Limited,
17,500 10.25%, 1/15/97....... 16,120,225
Republic of
Philippines,
5,000 9.875%, 3/16/10....... 4,750,000
29,000 9.875%, 1/15/19....... 25,557,700
12,500 9.50%, 10/21/24....... 12,000,000
7,636 10.625%, 3/16/25...... 7,082,390
Republic of South Korea,
3,000 8.875%, 4/15/08....... 3,098,250
Shinhan Bank,
8,500 7.25%, 6/26/02........ 8,194,000
Sterlite Industries Limited,
8,000 7.3775%, 6/5/07....... 7,040,000
Telekom Malaysia,
3,000 7.875%, 8/1/25........ 2,670,000
Tenaga Nasional Berhad,
6,000 7.20%, 4/29/07........ 5,874,832
1,000 7.625%, 4/29/07....... 933,820
7,000 7.50%, 1/15/96........ 5,262,390
Total Access Communication Public,
5,500 7.625%, 11/4/01....... 5,090,387
2,500 8.375%, 11/4/06....... 2,143,750
Windsor Petroleum Transport
Corporation,
4,000 7.84%, 1/15/21........ 3,420,000
--------------
Total United States
long-term
investments
(cost
US$270,363,838)..... 273,545,250
--------------
Total long-term
investments
(cost
US$1,938,934,279)... 1,701,723,041
--------------
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
SHORT-TERM INVESTMENTS--23.4%
Australia--12.1%
Demand Deposits--2.8%
Banque National de Paris,
A$ 71,287 5.60%, 5/1/00......... $ 41,670,522
State Street Call Deposit,
28 5.65%, 5/1/00......... 16,527
--------------
Total Australian
demand deposits
(cost US$42,892,106).. 41,687,049
--------------
Government and Semi-Government--5.3%
Commonwealth of Australia--3.0%
Commonwealth of Australia,
39,900 13.00%, 7/15/00....... $ 23,623,341
5,000 13.00%, 12/15/00...... 3,038,216
30,000 8.75%, 1/15/01........ 17,840,228
--------------
44,501,785
--------------
South Australia--1.2%
South Australian Financing Authority,
30,000 12.50%, 10/15/00...... 18,009,298
--------------
Tasmania--1.1%
Tasmanian Public Finance Corporation,
28,000 12.50%, 1/15/01....... 17,026,102
--------------
Total Australian
government and
semi-government
(cost
US$108,706,384)..... 79,537,185
--------------
Eurobonds--2.8%
Banking and Finance--2.8%
CitiGroup,
5,000 14.00%, 1/15/01....... 3,084,290
Federal National Mortgage
Association, Global
60,000 5.75%, 9/5/00......... 34,984,468
State Bank of New South Wales,
5,000 12.25%, 2/26/01....... 3,038,274
--------------
Total Australian
eurobonds
(cost US$45,995,003).. 41,107,032
--------------
</TABLE>
14

<PAGE>
Portfolio of Investments
April 30, 2000 (Unaudited)
(continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
SHORT-TERM INVESTMENTS (cont'd.)
Australia (cont'd.)
Corporate Bonds--1.2%
Services--1.2%
Macquarie Bank Limited,
A$ 1,000 9.75%, 8/1/00......... $ 589,314
Telstra Corporation,
30,000 12.50%, 11/15/00...... 18,070,483
--------------
Total Australian
corporate bonds
(cost US$25,038,459).. 18,659,797
--------------
Total Australian
short-term
investments
(cost
US$222,631,952)..... 180,991,063
--------------
Korea--4.8%
Government Bonds--4.8%
Korea Development Bank,
KRW 10,000,000 Zero Coupon,
11/26/00............ 8,604,884
10,000,000 Zero Coupon, 1/6/01... 8,522,072
Korea Monetary Stabilization Bond,
15,000,000 7.40%, 12/14/00....... 13,603,321
10,000,000 6.95%, 1/6/01......... 8,989,439
10,000,000 6.58%, 1/11/01........ 8,954,134
10,000,000 7.49%, 3/2/01......... 9,069,511
4,880,000 7.45%, 3/22/01........ 4,403,275
5,000,000 6.70%, 4/19/01........ 4,449,484
Korea Treasury Bond,
5,000,000 8.09%, 11/10/00....... 4,680,338
--------------
Total Korea short-term
investments
(cost US$68,990,397).. $ 71,276,458
--------------
--------------------------------------------------------
Principal
Amount
Local
Currency Value
(000) Description (US$) Note 1
--------------------------------------------------------
New Zealand--0.4%
Demand Deposit--0.0%
New Zealand Call Deposit,
NZ$ 595 Zero Coupon,
1/31/00............. $ 289,480
Eurobond--0.4%
International Bank of
Reconstruction & Development,
10,000 7.00%, 9/18/00........ 4,919,732
--------------
Total New Zealand
short-term
investments
(cost US$5,707,227)... 5,209,212
--------------
Philippines--0.6%
Government Bond--0.6%
Philippine Government Bond,
PHP 351,000 14.00%, 1/14/01
(cost
US$9,268,062)....... 8,708,100
--------------
Singapore--0.4%
Government Bonds--0.4%
Singapore Government Bonds,
SGD 4,000 Zero Coupon,
6/29/00............. 2,335,918
2,000 Zero Coupon, 7/1/00... 1,167,826
Singapore Treasury
Bills,
5,000 Zero Coupon,
6/22/00............. 2,920,355
--------------
Total Singapore
short-term
investments
(cost US$6,415,682)... 6,424,099
--------------
United States--5.1%
Korea Electric Power Corporation,
US$ 12,000 10.00%, 4/1/01........ 12,191,520
</TABLE>
15

<PAGE>
Statement of Assets and Liabilities
April 30, 2000
(Unaudited) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (cost $2,327,603,249).............................................. $2,050,696,493
Cash..................................................................................... 36,236
Interest receivable...................................................................... 43,336,325
Receivable for investments sold.......................................................... 17,045,115
Unrealized appreciation on interest rate and currency swaps.............................. 469,788
Forward currency contracts-amount receivable from counterparties......................... 293,495
Cash deposits with broker for futures contracts.......................................... 245,720
Other assets............................................................................. 43,235
--------------
Total assets......................................................................... 2,112,166,407
--------------
Liabilities
Foreign currency overdraft............................................................... 4,569,317
Dividends payable-common stock........................................................... 12,031,978
Withholding taxes payable................................................................ 2,751,678
Dividends payable-preferred stock........................................................ 1,361,303
Investment management fee payable........................................................ 884,805
Accrued expenses and other liabilities................................................... 541,936
Administration fee payable............................................................... 169,483
Forward currency contracts-amount payable to counterparties.............................. 40,590
Due to broker-variation margin........................................................... 752
--------------
Total liabilities.................................................................... 22,351,842
--------------
Total Net Assets......................................................................... $2,089,814,565
--------------
--------------
Total net assets were composed of:
Common stock:
Par value ($.01 per share, applicable to 267,377,298 shares)......................... $ 2,673,773
Paid-in capital in excess of par..................................................... 2,041,268,207
Preferred stock ($.01 par value per share and $25,000 liquidation value per share
applicable to 24,000 shares; Note 4)................................................. 600,000,000
--------------
2,643,941,980
Distributions in excess of net investment income....................................... (43,582,499)
Accumulated net realized gains on investments.......................................... 7,715,063
Net unrealized depreciation on investments............................................. (46,720,270)
Accumulated net realized and unrealized foreign exchange losses........................ (471,539,709)
--------------
Total net assets....................................................................... $2,089,814,565
--------------
--------------
Net assets applicable to common shareholders........................................... $1,489,814,565
--------------
--------------
Net asset value per common share:
($1,489,814,565 / 267,377,298 shares of
common stock issued and outstanding)................................................... $5.57
--------------
--------------
</TABLE>

<PAGE>
Statement of Operations
(Unaudited) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
April 30,
Net Investment Income 2000
----------------
<S> <C>
Income
Interest (net of foreign withholding taxes of $5,302,295)........................... $ 91,431,634
----------------
Expenses
Investment management fee........................................................... 5,833,258
Custodian's fees and expenses....................................................... 1,200,000
Administration fee.................................................................. 1,264,621
Auction agent's fees and broker commissions......................................... 835,000
Shareholder relations and communications............................................ 460,000
Transfer agent's fees and expenses.................................................. 325,000
Directors' fees and expenses........................................................ 302,500
Insurance expense................................................................... 171,000
Legal fees and expenses............................................................. 150,000
Independent accountant's fees and expenses.......................................... 115,000
Miscellaneous....................................................................... 38,462
----------------
Total operating expenses............................................................ 10,694,841
----------------
Net investment income................................................................. 80,736,793
----------------
Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currencies
Net realized gain on:
Investment transactions............................................................. 5,945,265
Financial futures contracts......................................................... 578,623
----------------
6,523,888
----------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................................... (79,791,907)
Interest rate and currency swaps.................................................... 1,316,767
Financial futures contracts......................................................... (155,286)
----------------
(78,630,426)
----------------
Net loss on investments............................................................... (72,106,538)
----------------
Net increase in total net assets from operations before net foreign exchange losses... 8,630,255
Net realized and unrealized foreign exchange losses................................... (70,966,821)
----------------
Net Decrease In Total Net Assets
Resulting From Operations............................................................. $(62,336,566)
----------------
----------------
</TABLE>

<PAGE>
Statement of Cash Flows
(Unaudited) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
Increase (Decrease) in Cash April 30,
(Including Foreign Currency) 2000
----------------
<S> <C>
Cash flows used for operating activities
Interest received (net of foreign withholding taxes)................................ $ 99,067,695
Expenses paid....................................................................... (12,293,313 )
Proceeds from sales of short-term portfolio investments, net........................ (17,223,080 )
Purchases of long-term portfolio investments........................................ (724,010,616 )
Proceeds from sales of long-term portfolio investments.............................. 768,305,694
Other............................................................................... 221,462
----------------
Net cash used for operating activities............................................ 114,067,842
----------------
Cash flows provided from financing activities
Dividends and distributions paid to preferred shareholders.......................... (21,520,744 )
Dividends and distributions paid to common shareholders............................. (92,242,924 )
----------------
Net cash provided from financing activities....................................... (113,763,668 )
----------------
Effect of changes in exchange rate.................................................... 4,038,108
----------------
Net increase in cash.................................................................. 4,342,282
Cash at beginning of year........................................................... (4,306,046 )
----------------
Cash at end of year................................................................. $ 36,236
----------------
----------------
Reconciliation of Net Increase in Total
Net Assets from Operations to Net Cash
(Including Foreign Currency) Used For
Operating Activities
Net decrease in total net assets resulting from operations............................ $ (62,336,566 )
----------------
Decrease in investments............................................................. 58,248,805
Net realized gain on investment transactions........................................ (6,523,888 )
Net change in unrealized depreciation on investments................................ 78,630,426
Net realized and unrealized foreign exchange losses................................. 70,966,821
Decrease in interest receivable..................................................... 7,673,094
Net decrease in other assets........................................................ 221,462
Decrease in payable for investments purchased....................................... (32,411,527 )
Increase in receivable for securities sold.......................................... 1,234,720
Decrease in accrued expenses and other liabilities.................................. (1,635,505 )
----------------
Total adjustments................................................................. 176,404,408
----------------
Net cash used for operating activities................................................ $ 114,067,842
----------------
----------------
</TABLE>

19
<PAGE>
Statement of Changes in
Net Assets (Unaudited) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) April 30, October 31,
in Total Net Assets 2000 1999
-------------- --------------
<S> <C> <C>
Operations
Net investment income.............................................. $ 80,736,793 $ 173,851,260
Net realized gain on investment transactions....................... 6,523,888 39,399,827
Net change in unrealized depreciation on investments............... (78,630,426) (83,793,302)
-------------- --------------
Net increase in total net assets resulting from operations before
net foreign exchange losses...................................... 8,630,255 129,457,785
Net realized and unrealized foreign exchange losses................ (70,966,821) (47,603,693)
-------------- --------------
Net increase/decrease in total net assets resulting from
operations......................................................... (62,336,566) 81,854,092
-------------- --------------
Dividends from net investment income
Common shares...................................................... (64,986,791) (163,686,312)
Preferred shares................................................... (15,750,002) (25,677,478)
-------------- --------------
(80,736,793) (189,363,790)
-------------- --------------
Distributions in excess of net investment income
Common shares...................................................... (23,245,473) --
Preferred shares................................................... -- --
-------------- --------------
(23,245,473) --
-------------- --------------
Distributions from net realized capital gains
Common shares...................................................... -- (28,475,021)
Preferred shares................................................... (1,231,344) (4,395,043)
-------------- --------------
(1,231,344) (32,870,064)
-------------- --------------
Fund share transactions:
Net proceeds from rights offering of Fund shares................... -- 365,420,287
Dividend reinvestment.............................................. -- 4,182,612
-------------- --------------
-- 369,602,899
-------------- --------------
Total increase (decrease)............................................ (167,550,176) 229,223,137
Total Net Assets
Beginning of period.................................................. 2,257,364,741 2,028,141,604
-------------- --------------
End of period........................................................ $2,089,814,565 $2,257,364,741
-------------- --------------
-------------- --------------
</TABLE>

20
<PAGE>
Notes to Financial Statements
(Unaudited) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
The First Australia Prime Income Fund, Inc. (the 'Fund') was incorporated in
Maryland on March 14, 1986 as a closed-end, non-diversified 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. On September 9, 1999, the
Board of Directors of the Fund voted to expand the investment policies of the
Fund to allow investments in U.S. dollar-denominated securities issued by
companies which are not domiciled in an Asian country, if the issuing company is
wholly-owned by an Asian country company and the Asian country company
guarantees the security issued by its subsidiary. The ability of issuers of debt
securities held by the Fund, including foreign currency balances on deposit with
the Fund's sub-custodian banks, to meet their obligations, may be affected by
economic or political developments in a specific industry or region.
Note 1. Accounting Policies
The following is a summary of 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
21

<PAGE>
Notes to Financial Statements
(Unaudited) (continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
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 takes 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, 2000.
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 reporting periods.
Net realized and unrealized foreign exchange losses of $70,966,821 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, 2000 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, 2000 was US$0.5845 to A$1.00 for the
Australian dollar.
22

<PAGE>
Notes to Financial Statements
(Unaudited) (continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
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.
Interest Rate and Currency Swap: An interest rate and 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. Interest rate and 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
23

<PAGE>
Notes to Financial Statements
(Unaudited) (continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
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.
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 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 Australian dollars into United States dollars
or transactions in New Zealand dollars 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. 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.
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
24

<PAGE>
Notes to Financial Statements
(Unaudited) (continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
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 $5,819,691 to
the Investment Adviser during the six months ended April 30, 2000.
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, the Administrator remitted $120,000 to Professional
Consulting Services Limited for administrative services provided.
EquitiLink USA, Inc. ('EUSA'), a wholly owned subsidiary of EquitiLink
International Management Limited, entered into an agreement on March 1, 2000 to
serve as the Fund's investor relations agent. This agreement provides EUSA with
a monthly retainer of $10,000 plus out of pocket expenses up to $3,000 per year.
During the period ended April 30, 2000, the Fund incurred fees of approximately
$20,000 for the services of EUSA. As of April 30, 2000 this amount was due to
EUSA. Shareholder relations and communications expenses in the Statement of
Operations include certain out-of-pocket and shareholder reporting expenses paid
to nonaffiliates.
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term
investments, for the six months ended April 30, 2000 aggregated $679,264,488 and
$760,547,086, respectively.
The Fund entered into two interest rate and foreign 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, 2000 the unrealized
appreciation on currency swaps was $469,788. The swaps are scheduled to
terminate on April 26, 2006.
25

<PAGE>
Notes to Financial Statements
(Unaudited) (continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
At April 30, 2000 the Fund had outstanding forward currency contracts to buy
and sell foreign currency as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Current
Sale Contract Date Receivable Value Appreciation
----------------------------------------- --------------- ----------- ------------
<S> <C> <C> <C>
Philippine Peso
expiring 05/02/00 $ 7,680,328 $ 7,662,853 $ 17,475
expiring 05/09/00 6,205,000 6,194,738 10,262
Singapore Dollar
expiring 05/02/00 406,475 406,369 106
Taiwan Dollar
expiring 06/12/00 5,770,010 5,727,576 42,434
Thailand Baht
expiring 05/10/00 23,360,000 23,280,843 79,157
--------------- ----------- ------------
$43,421,813 $43,272,379 $149,434
--------------- ----------- ------------
--------------- ----------- ------------
</TABLE>

<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Current
Purchase Contract Date Payable Value Appreciation
----------------------------------------- --------------- ----------- ------------
<S> <C> <C> <C>
South Korean Won
expiring 05/02/00 $ 2,000,000 $ 1,999,009 $ (991)
Philippine Peso
expiring 05/02/00 7,680,328 7,679,596 (732)
expiring 05/09/00 6,205,000 6,208,257 3,257
expiring 06/30/00 5,000,000 5,013,228 13,228
Singapore Dollar
expiring 05/24/00 1,000,000 994,943 (5,057)
expiring 05/24/00 1,183,432 1,175,639 (7,793)
Taiwan Dollar
expiring 06/12/00 5,600,000 5,727,576 127,576
Thailand Baht
expiring 05/10/00 23,360,000 23,333,983 (26,017)
--------------- ----------- ------------
$52,028,760 $52,132,231 $103,471
--------------- ----------- ------------
--------------- ----------- ------------
</TABLE>

The United States federal income tax basis of the Fund's investments at April
30, 2000 was $2,014,878,849 and accordingly, net unrealized depreciation for
United States federal income tax purposes was $51,906,411 (gross unrealized
appreciation--$20,479,003; gross unrealized depreciation--$72,385,414).
26

<PAGE>
Notes to Financial Statements
(Unaudited) (continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
Note 4. Capital
There are 400 million shares of common stock authorized. Of the 267,377,298
common shares outstanding at April 30, 2000, the Investment Manager owned 90,979
shares.
In connection with a rights offering, shareholders of record on September 25,
1998 were issued one-third 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
(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, 2000 and the fiscal year ended October
31, 1999 the Fund issued 0 and 641,049 shares, respectively 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 5.0% to 6.1% during the six
months ended April 30, 2000. 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 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.
27

<PAGE>
Notes to Financial Statements
(Unaudited) (continued) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
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 And Distributions
On May 15, 2000 and June 19, 2000 the Board of Directors of the Fund declared
distributions of $.045 per common share payable on June 16, 2000 and July 14,
2000 to shareholders of record on May 31, 2000 and June 30, 2000, respectively.
Subsequent to April 30, 2000, dividends and distributions declared and paid
on Preferred Stock totaled approximately $4,199,310 for the nine outstanding
preferred share series in the aggregate through June 9, 2000.
28
<PAGE>
Financial Highlights (Unaudited) The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Years Ended October 31,
April 30, --------------------------------------------------
2000 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
---------- ------ ------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE*:
Net asset value per common share,
beginning of period................... $ 6.20 $ 7.33 $ 8.85 $ 9.93 $ 9.36 $ 8.82
---------- ------ ------ ------ ------ ------
Net investment income................... .30 .67 .82 .87 .87 .93
Net realized and unrealized gain (loss)
on investments and foreign
currencies............................ (.53) (.35) (1.45) (.96) 1.13 1.16
---------- ------ ------ ------ ------ ------
Total from investment operations...... (.23) .32 (.63) (.09) 2.00 2.09
---------- ------ ------ ------ ------ ------
Dividends from net investment income to
preferred shareholders................ (.06) (.10) (.17) (.17) (.14) (.17)
Dividends from net investment income to
common shareholders................... (.24) (.63) (.51) (.82) (.83) (.83)
Distributions in excess of net
investment income to common
shareholders.......................... (.09) -- -- -- -- --
Distributions from net capital and
currency gains to preferred
shareholders.......................... (.01) (.02) -- -- (.02) (.01)
Distributions from net capital and
currency gains to common
shareholders.......................... -- (.09) (.21) -- (.03) (.15)
---------- ------ ------ ------ ------ ------
Total dividends and distributions..... (.40) (.84) (.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................................ $ 5.57 $ 6.20 $ 7.33 $ 8.85 $ 9.93 $ 9.36
---------- ------ ------ ------ ------ ------
---------- ------ ------ ------ ------ ------
Market price per common share, end of
period................................ $ 4.25 $ 6.00 $5.625 $8.125 $ 8.94 $ 9.31
---------- ------ ------ ------ ------ ------
---------- ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN BASED OND:
Market value............................ (24.22)% 20.96% (23.19)% (0.42)% 5.59% 8.78%
Net asset value......................... (3.89)% (5.15)% (8.10)% (2.37)% 16.73% 18.54%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS/SUPPLEMENTAL DATAPound:
ExpensesDD.............................. 1.33%** 1.26% 1.47% 1.25% 1.29% 1.47%
Net investment income available to
common shareholders................... 10.06%** 8.34% 8.51% 7.39% 7.71% 8.96%
Portfolio turnover rate................. 33% 89% 61% 85% 63% 50%
Net assets of common shareholders, end
of year (000,000 omitted)............. $1,490 $1,657 $1,428 $1,723 $1,932 $1,452
Average net assets of common
shareholders (000,000 omitted)........ $1,614 $1,776 $1,486 $1,848 $1,628 $1,201
Senior securities (preferred stock)
outstanding (000,000 omitted)......... $ 600 $ 600 $ 600 $ 600 $ 600 $ 475
Asset coverage of preferred stock at
period-end............................ 348% 376% 338% 387% 422% 406%
</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 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.
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 .97%, .95%, .95%, .94%, 1.05% and 1.05%,
respectively. Ratios to average net assets of net investment income before preferred stock dividends are 8.10%,
9.79%, 10.72%, 9.17%, 9.16% and 10.83%, respectively. Ratios to average net assets of preferred stock dividends
are 1.96%, 1.45%, 2.21%, 1.78%, 1.45% and 1.87%, 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 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.
</TABLE>

<PAGE>
Other Information The First Australia Prime Income Fund, Inc.
--------------------------------------------------------------------------------
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'). Generally, 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. Dividends and capital gains
distributions payable to Plan participants will be promptly invested. If the
Fund declares an income dividend or capital gains distribution payable in stock
to shareholders who are not Plan participants, then Plan participants will
receive that dividend or distribution in newly issued shares on identical terms
and conditions.
In every other case Plan participants will receive shares on the following
basis: If the market price of the Fund's common stock plus any brokerage
commission is equal to or exceeds net asset value, Plan participants will
receive newly issued shares valued at the greater of net asset value or 95% of
current market price. If, on the other hand, the net asset value plus any
brokerage commission exceeds the market price, the Plan Agent will buy shares in
the open market. If the market price plus any applicable brokerage commission
exceeds net asset value before the Plan Agent has completed its purchases, the
Fund will issue new shares to complete the program. 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 of at
least $100 in Fund shares as frequently as monthly through the Plan Agent on the
open market. Participants must pay a service fee of $0.75 for each investment
and a pro rata share of the brokerage commissions.
The Fund reserves the right to amend or terminate the Plan either in full or
partially upon 90 days' written or telephone notice to shareholders of the Fund.
Participants in the Plan may withdraw some or all of their shares from the
Plan upon written notice to the Plan Agent and will receive certificates for
whole Shares and cash for fractional Shares. In the alternative, by giving
proper notice to the Plan Agent, participants may receive cash in lieu of shares
in an amount which is reduced by brokerage commissions in connection with the
sale of shares and a $2.50 service fee.
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.
30

<PAGE>
Supplemental Proxy Information (Unaudited) The First Australia Prime Income
Fund, Inc.
--------------------------------------------------------------------------------
The Annual Meeting of Shareholders of The First Australia Prime Income
Fund, Inc. (the 'Fund') was held on March 22, 2000 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>
To elect the following five Directors to serve as Class III Directors for a three-year
(1) term expiring in 2003:
- David L. Elsum
- Laurence S. Freedman
- Michael R. Horsburgh
- William J. Potter
- Peter J. O'Connell
To elect the following two directors to represent the interests of the holders of
(2) preferred stock for the ensuing year:
- David Manor
- Marvin Yontef
Directors whose term of office continued beyond this meeting are as follows: Anthony E.
Aaronson, Rt. Hon. Malcolm Fraser, Harry A. Jacobs, Howard A. Knight, David Manor, Neville
J. Miles, Peter D. Sacks, Anton E. Schrafl, John T. Sheehy, Brian M. Sherman and Marvin
Yontef.
To ratify the selection of PricewaterhouseCoopers LLP as independent public accountants of
(3) the Fund for the fiscal year ending October 31, 2000;
</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> <C>
(1) David L. Elsum 234,084,022 -- 5,484,302 --
Laurence S. Freedman 229,217,234 -- 10,351,090 --
Michael R. Horsburgh 233,175,900 -- 6,392,425 --
William J. Potter 233,853,843 -- 5,714,482 --
Peter J. O'Connell 233,299,577 -- 6,268,748 --
(2) David Manor 16,777 -- 1,517 --
Marvin Yontef 16,777 -- 1,517 --
(3) PricewaterhouseCoopers LLP 235,129,120 2,426,400 -- 2,012,805
</TABLE>

31
<PAGE>
Directors Officers

Laurence S. Freedman, Chairman Brian M. Sherman, President
Anthony E. Aaronson Laurence S. Freedman, Vice President
David Lindsay Elsum David Manor, Treasurer
Michael R. Horsburgh Roy M. Randall, Secretary
Harry A. Jacobs, Jr Ouma Sananikone,
Howard A. Knight Assistant Vice President and
David Manor Chief Investment Officer
Neville J. Miles Barry G. Sechos, Assistant Treasurer
Peter J. O'Connell Peter W. Fortner, Assistant Treasurer
William J. Potter Allan S. Mostoff, Assistant Secretary
Peter D. Sacks Margaret A. Bancroft, Assistant Secretary
Anton E. Schrafl Sander Bieber, Assistant Secretary
John T. Sheehy
Brian M. Sherman
Marvin Yontef

The accompanying financial statements as of April
30, 2000 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.

<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
Level 3, 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
BankersTrust Company
Four Albany Street
New York, New York 10006

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 Elliott
Level 40, Chifley Tower
2 Chifley Square
Sydney, NSW 2000, Australia

Investor Relations
EquitiLink USA, Inc.
45 Broadway, 31st Floor
New York, NY 10006
(800) 522-5465
or e-mail at [email protected]

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.

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