<PAGE>
INVESTMENT MANAGER
EquitiLink International Management Limited
Union House, Union Street
St. Helier, Jersey, Channel Islands
INVESTMENT ADVISER
EquitiLink Australia Limited
190 George Street
Sydney, NSW 2000, Australia
CONSULTANT
Wood Gundy, Inc.
BCE Place, P.O. Box 500
Toronto, Ontario, MSJ 258
Canada
ADMINISTRATOR
Princeton Administrators, L.P.
Box 9011
Princeton, New Jersey 08543
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266
AUCTION AGENT
Chemical Bank
55 Water Street
New York, New York 10041
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
Dechert Price & Rhoads
477 Madison Avenue
New York, New York 10022
Freehill, Hollingdale and Page
19-29 Martin Place
Sydney, NSW 2000, Australia
Box 9011
Princeton, NJ 08543
(609) 282-4600
The shares of The First Commonwealth Fund, Inc. are traded on the New York
Stock Exchange under the symbol "FCO". 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:
1-800-543-6217
This report, including the financial information herein, is transmitted to the
shareholders of The First Commonwealth Fund, Inc. for their information. It is
not a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report. Past performance
results should not be considered a representation of future performance.
THE FIRST
COMMONWEALTH
FUND, INC.
ANNUAL REPORT
OCTOBER 31, 1995
HIGHLIGHTS OF THIS REPORT
- - SHARE PRICE RETURN OF 20.7% OVER THE PAST TWELVE MONTHS (WITH DIVIDENDS
REINVESTED).
- - NET ASSET VALUE UP BY 19.7% OVER THE PAST TWELVE MONTHS (ASSUMING REINVESTMENT
OF DIVIDENDS).
- - CASH DISTRIBUTION RATE OF 9.3% OVER PAST TWELVE MONTHS.
- - 90% RATED AAA OR AA.
<PAGE>
- -------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- -------------------------------------------------------------------
December 15, 1995
Dear Shareholder:
We are pleased to present our Annual Report to shareholders for the year ended
October 31, 1995. The report includes a summary of developments in fixed-income
and currency markets in Australia, Canada, New Zealand and the United Kingdom.
Moderating economic growth in the Commonwealth countries has provided an
environment for strengthening bond markets over the past twelve months. The
Australian bond market participated in the global bond market rally. Over the
twelve months ended October 31, 1995, Australian government ten-year bond yields
had moved to 8.8% from 10.5% at October 31, 1994. Evidence that the Reserve Bank
of Australia's anti-inflation stance was slowing economic growth and signs of an
improving current account deficit underpinned the bond market's buoyancy.
The New Zealand and Canadian fixed-income markets also participated in the
global bond market rally. In New Zealand, softer price data and an easing by the
central bank provided favorable conditions for the bond market. Canadian bond
market conditions were sensitive to the Quebec referendum. The market made good
gains after the narrow defeat of the referendum as the focus shifted back to
generally positive economic fundamentals. Economic growth moderated in the UK
over the past year. Concerns over the inflation outlook and the budgetary
policies placed pressure on bond yields in the three months ended October 31,
1995. However, stronger European markets and expectations that the Bank of
England may ease official interest rates saw Gilts stronger towards the end of
the quarter.
Assuming reinvestment of dividends, the Fund's Net Asset Value rose by 7.5%
over the quarter, by 11.2% over the six months and by 19.7% over the twelve
months ended October 31, 1995. The Fund's share price was $11.125 at the
beginning of the quarter and had risen to $11.375 at October 31, 1995. The
Fund's share price return, assuming reinvestment of dividends, was 4.6% over the
quarter, 14.8% over the past six months and 20.7% over the past year.
The Fund continues to pay a monthly cash distribution of US$0.0875 per share.
The level of the distribution is reviewed on a regular basis, with the next
review scheduled for the Board of Directors' meeting to be held in March 1996.
The Board's policy is to facilitate payment of a stable monthly distribution out
of current income and to supplement with realized capital gains if required.
Distributions to common shareholders over the past twelve months totalled
US$1.0625, consisting of twelve payments of US$0.0875 per share and one special
dividend of US$0.0125 per
share paid in January 1995. Based on the October 31,1995 share price of
US$11.375, this represents a cash distribution rate of 9.3% over the past year.
Since all distributions are paid after the deduction of applicable Australian,
Canadian, New Zealand and United Kingdom withholding taxes, the distribution
rate is higher for those US investors who are able to claim a tax credit.
The Fund continues to maintain a high quality portfolio, with over 90% of the
Fund's assets invested in securities where either the issue or the issuer is
rated at least AA. There are no securities in the portfolio where either the
issue or the issuer are rated less than A.
<PAGE>
- -------------------------------------------------------------------
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
- -------------------------------------------------------------------
We again invite you to consider joining the shareholders who currently
participate in the Fund's Automatic Dividend Reinvestment and Cash Purchase Plan
(the "Plan"), which allows you to automatically reinvest your dividends in
shares of the Fund's common stock. If the market price, plus any applicable
brokerage commissions, equals or exceeds the net asset value on the payment
date, participants will receive new shares issued by the Fund at a discount of
up to 5% from the market price. If the market price is less than the net asset
value, plus any applicable brokerage commissions, on the payment date,
participants receive shares purchased at market price. Distributions pursuant to
the Plan are taxable to the same extent as are cash dividends.
The Plan also enables you to make optional cash investments in Fund shares
through the Plan Agent at favorable commission rates. You may invest in any
amount of at least $100 monthly. The Plan Agent will purchase shares for you on
the New York Stock Exchange or otherwise on the open market on or about the
fifteenth of each month.
Other advantages of participation in the Plan include:
- - LOWER COSTS - You will build holdings in the Fund automatically, at reduced or
no brokerage cost.
- - CONVENIENCE - You will receive a detailed account statement from State Street
Bank and Trust Company, your Plan Agent, showing total dividends and
distributions, date of investment, shares acquired and price per share, as
well
as the total shares of record held by you and by the Plan Agent for you.
- - SAFETY - As long as you participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will hold the shares it has acquired for you in
safekeeping, in non-certificated form. This convenience provides added
protection against loss, theft, or inadvertent destruction of certificates.
Further information can be obtained by contacting State Street Bank and Trust
Company, P.O. Box 8200, Boston, MA 02266, Tel: 1-800-426-5523.
IF YOUR SHARES ARE NOT REGISTERED IN YOUR OWN NAME:
If you wish to participate and your shares are held in the name of a brokerage
firm, bank or other nominee, you should instruct your nominee to participate on
your behalf. If your nominee is unable to participate, you should request it to
re-register your shares in your own name which will enable you to participate in
the Plan.
TOLL FREE INFORMATION
Information on The First Commonwealth Fund, Inc. is available by telephoning
toll-free, 1-800-543-6217 in the United States. Available information includes
weekly updates of share price, NAV, and details of recent distributions.
Yours sincerely,
Sir Roden Cutler Laurence S. Freedman
Chairman President
<PAGE>
- -------------------------------------------------------------------
REPORT OF THE INVESTMENT MANAGER
- -------------------------------------------------------------------
PERFORMANCE
DISTRIBUTIONS
The Fund continues to pay a monthly cash distribution of US$0.0875 per share.
The level of the distribution is reviewed on a regular basis, with the next
review scheduled for the Board of Directors' meeting to be held in March 1996.
The Board's policy is to facilitate payment of a stable monthly distribution out
of current income and to supplement with realized capital gains if required.
Based on the October 31, 1995 share price of US$11.375 and total distributions
of US$1.0625 paid over the twelve months to that date, the shares offered an
annual cash distribution rate of 9.3%. Since all distributions are paid after
the deduction of applicable Australian, Canadian, New Zealand and United Kingdom
withholding taxes, the distribution rate is higher for those US investors who
are able to claim a tax credit.
For Federal income tax purposes, the Board has determined that US$0.018760 of
the US$0.0875 per common share monthly distribution paid in October 1995 will be
characterized as long-term capital gains. Shareholders are advised to rely only
on Form 1099-DIV, which will be sent January 1996, for definitive information
with respect to the tax treatment of the Fund's distributions.
NET ASSET VALUE (NAV) PERFORMANCE
The NAV per share at October 31, 1995 was US$13.13. Assuming reinvestment of
distributions, the Fund achieved a 7.5% NAV return over the past three months, a
11.2% NAV return over the past six months and 19.7% over the past twelve months.
At the date of this report, the NAV was US$13.07.
SHARE PRICE PERFORMANCE
As of October 31, 1995, the share price as quoted on the New York Stock
Exchange was US$11.375, which represents a discount of 13.4% to the then current
NAV of US$13.13. Total investment return, based on the Fund's share price and
assuming reinvestment of dividends, was 4.6% over the quarter, 14.8% over the
past six months and 20.7% over the year to October 31, 1995. At the date of this
report, the share price was US$11.375, representing a 13.0% discount to NAV.
AUCTION MARKET PREFERRED STOCK (AMPS)
The Fund's US$30 million in AMPS continues to be well bid at the weekly
auctions, maintaining a lower interest rate on average compared to the 30-day
commercial paper rate. Weighted average auction results were 5.6% for the
quarter ended October 31, 1995, compared with 5.9% for 30-day commercial paper
over the same period.
<PAGE>
PORTFOLIO COMPOSITION
The geographical composition of the portfolio, expressed as a percentage of the
Fund's total investments, is summarized in the following table and chart.
TABLE 1: THE FIRST COMMONWEALTH FUND, INC. - GEOGRAPHIC ASSET ALLOCATION
<TABLE>
<CAPTION>
COMMENCEMENT OF OPERATIONS
(FEBRUARY 28, 1992) OCTOBER 31, 1992 OCTOBER 31, 1993 OCTOBER 31, 1994 OCTOBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australia 44.7% 48.7% 48.0% 44.7% 41.4%
- ---------------------------------------------------------------------------------------------------------------------
Canada 17.9% 27.3% 26.7% 27.5% 30.7%
- ---------------------------------------------------------------------------------------------------------------------
New Zealand - 1.4% 3.4% 4.2% 4.7%
- ---------------------------------------------------------------------------------------------------------------------
United Kingdom 36.4% 22.1% 21.3% 22.7% 22.6%
- ---------------------------------------------------------------------------------------------------------------------
United States* 1.0% 0.5% 0.6% 0.9% 0.6%
- ---------------------------------------------------------------------------------------------------------------------
TOTAL FUND 100.0% 100.0% 100.0% 100.0% 100.0%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
*It is the policy of the Manager to maintain a portion of the Fund's investments
in US short-term securities to cover dividend payments and expenses.
Asset Allocation as of October 31, 1995
A pie chart illustrating the following percentages:
Australia 41.4%
United States 0.6%
United Kingdom 22.6%
New Zealand 4.7%
Canada 30.7%
<PAGE>
MATURITY COMPOSITION
The maturity composition of the portfolio as of October 31, 1995 is summarized
in the table below. At October 31, 1995, the average maturity of the Fund's
assets was 7.3 years, compared with 7.5 years at July 31, 1995 and 7.3 years at
October 31, 1994. Overall, the Fund remains well positioned in medium- to
long-term maturities in each market.
TABLE 2: THE FIRST COMMONWEALTH FUND, INC. - MATURITY ANALYSIS - OCTOBER 31,
1995
<TABLE>
<CAPTION>
LESS THAN 1 YEAR 1 - 5 YEARS 5 - 10 YEARS OVER 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australia 8.0% 19.0% 54.6% 18.4%
- --------------------------------------------------------------------------------
Canada 4.8% 22.2% 47.9% 25.1%
- --------------------------------------------------------------------------------
New Zealand 10.9% 38.9% 50.2% -
- --------------------------------------------------------------------------------
United Kingdom 4.0% 12.5% 38.1% 45.4%
- --------------------------------------------------------------------------------
United States 100.0% - - -
- --------------------------------------------------------------------------------
TOTAL FUND 6.8% 19.4% 48.2% 25.6%
- --------------------------------------------------------------------------------
</TABLE>
The Fund's sectoral exposure is spread between the various securities offered
in the Commonwealth fixed- income markets and is summarized in the table
following.
TABLE 3: THE FIRST COMMONWEALTH FUND, INC. - SECTORAL COMPOSITION - OCTOBER 31,
1995
<TABLE>
<CAPTION>
SOVEREIGN STATE/ CASH OR
GOVT. PROVINCE EUROBOND CORPORATE EQUIVALENT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australia 15.5% 11.2% 5.6% 7.4% 1.7%
- --------------------------------------------------------------------------
Canada 11.0% 5.9% 10.1% 2.5% 1.2%
- --------------------------------------------------------------------------
New Zealand 2.4% - 0.5% 1.3% 0.5%
- --------------------------------------------------------------------------
United Kingdom 7.4% - 14.6% - 0.6%
- --------------------------------------------------------------------------
United States - - - - 0.6%
- --------------------------------------------------------------------------
TOTAL FUND 36.3% 17.1% 30.8% 11.2% 4.6%
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
QUALITY OF INVESTMENTS
At October 31, 1995, 90% of the Fund's assets are invested in securities where
either the issue or the issuer is rated at least "AA" by Moody's Investors
Service, Inc. or Standard & Poor's Corporation. The remainder of the Fund was
invested in "A" rated securities (see Table 4).
TABLE 4: THE FIRST COMMONWEALTH FUND, INC. - ASSET QUALITY - OCTOBER 31, 1995
<TABLE>
<CAPTION>
AAA AA A
- ---------------------------------------------
<S> <C> <C> <C>
Australia 72.4% 24.8% 2.8%
- ---------------------------------------------
Canada 42.2% 41.0% 16.8%
- ---------------------------------------------
New Zealand 56.9% 43.1% -
- ---------------------------------------------
United Kingdom 33.7% 51.0% 15.3%
- ---------------------------------------------
TOTAL FUND 53.4% 36.7% 9.9%
- ---------------------------------------------
</TABLE>
Quality Of Assets as of October 31, 1995
A pie chart illustrating the following percentages:
AAA 53.4%
AA 36.7%
A 9.9%
<PAGE>
- -------------------------------------------------------------------
ECONOMIC, FIXED-INCOME AND CURRENCY MARKET REVIEW
- -------------------------------------------------------------------
AUSTRALIA
Economic growth has moderated after peaking in the second half of 1994.
Australia's September quarter National Accounts showed annual growth of 3.3%.
While forward indicators suggest further moderation over the next three months
or so, there are some tentative signs amongst leading activity indicators of a
stronger growth outlook for 1996. The underlying inflation rate breached the
Reserve Bank's 2% to 3% target range in the September quarter, posting an annual
gain of 3.1%. Headline inflation is running at over 5% reflecting, in part,
higher mortgage interest charges as a result of previous monetary policy moves.
Taxation changes have also boosted both the headline and underlying inflation
rates. The Reserve Bank has indicated that monetary policy will remain firm.
The Australian bond market rallied strongly over the past quarter, with
Government ten-year bonds falling from 9.4% to a low of 8.3%. The strength
reflected the positive global bond market environment and favorable domestic
economic fundamentals. Higher inflation data released in October pushed up
yields, with ten-year Government bonds finishing the quarter trading around
8.8%. Australian bonds continue to provide substantially higher yields than
comparable United States fixed-income securities.
Over the twelve months to the end of October, the Australian dollar appreciated
by 2.4% against the US dollar. In the quarter ended October 31, 1995, the
Australian dollar rose by 3.0% against the US dollar. The stronger Australian
dollar trend reflects the sharp improvement in monthly current account deficit,
a firmer outlook for commodity prices and supportive short-term interest rates.
At the end of October, the currency was trading at US$0.7605 and at the date of
this report it was at US$0.7400.
CANADA
Economic growth in Canada has slowed during the second quarter of 1995. Leading
indicators point to a tentative recovery, although growth remains soft.
Inflation is subdued. After moving towards the top half of the Bank of Canada's
2% to 3% target band in the first half of the year, inflation has responded to
slowing growth and now appears to be drifting lower. Currently, headline
inflation is 2.3% per annum.
Positive bond market fundamentals were largely overshadowed by Quebec
referendum concerns in the most recent quarter. The fixed-income market weakened
towards the end of October as the separatist case gained support. In the event,
the referendum was defeated by a very slender margin, and markets settled with
ten-year bonds retracing their losses and the Bank of Canada moved to ease
monetary policy. Continued fiscal policy reforms and positive economic growth
and inflation fundamentals should encourage a stronger outlook for Canadian
bonds.
Following the Quebec referendum, the currency market recovered somewhat.
Continued positive Dollar Bloc sentiment also supported the currency. Over the
three months to October 31, the Canadian dollar appreciated by 2.1% against the
US dollar and over the twelve months to October 31, the currency appreciated by
0.6%. At the end of October, the currency was trading at US$0.7443 and at the
date of this report it was at US$0.7273.
NEW ZEALAND
Tight monetary conditions in New Zealand are proving effective in slowing
growth from the rapid pace of 1994. September quarter inflation was at the top
end of the Reserve Bank of New Zealand's 0% to 2% target range and could
represent the peak in the current inflation cycle. The Bank has allowed monetary
conditions to ease as it expects inflation to trend lower.
After weakening in the early part of the quarter, the New Zealand bond market
rallied strongly in line with global markets. Government ten-year bond yields
fell to 7.2% by the end of October. Economic fundamentals remain positive for
the New Zealand bond market. New Zealand Government ten-year bonds yields remain
significantly below those available in Australia.
After its strong performance during 1994 and the first half of 1995, the New
Zealand dollar has lost some momentum over recent months. Expectations of slower
growth and the Reserve Bank's decision to ease monetary policy have removed some
of the currency's appeal to foreign investors. Over the past twelve months, the
New Zealand
<PAGE>
dollar appreciated by 7.2% against the US dollar. Over the three months to
October, the currency depreciated by 2.1% against the US dollar. At the end of
October, the currency was trading at US$0.6592 and at the date of this report it
was at US$0.6508.
UNITED KINGDOM
Growth in the UK economy has slowed since the second half of 1994. Third
quarter 1995 GDP grew at an annual rate of 2.3%, with almost all of the growth
recorded in the services sector. Retail price inflation, excluding mortgages,
has risen to 3.1%, above the Bank of England's target of 2.5%.
The UK Gilt market had a volatile quarter over the three months to the end of
October, with concerns over the inflation outlook and the Government's borrowing
requirement. However, weaker growth and signs that inflation may be peaking
encouraged the market towards the end of the quarter. Stronger European markets
and speculation that the Bank of England may ease official interest rates could
promote a further Gilt market rally.
The Pound weakened sharply against the US dollar in August, reflecting Dollar
Bloc strength against the Yen and the Deutschemark. The Pound retraced some of
its losses in the latter part of the October quarter. Over the three months to
October 31, the Pound depreciated by 1.5% and over the past twelve months it has
depreciated by 3.1% against the US dollar. At the end of October, the currency
was trading at US$1.5760 and at the date of this report it was at US$1.5404.
Movements of interest rates in the Commonwealth countries since the Fund
commenced operations are summarized in the table following.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEBRUARY 28, 1992
(COMMENCEMENT OF OPERATIONS) OCTOBER 31, 1994 OCTOBER 31, 1995
- ---------------------------------------------------------------------------------------------
AUSTRALIA:
90-day Bank Bills 7.49% 6.78% 7.48%
10-yr Government Bonds 10.14% 10.51% 8.78%
CANADA:
90-day Bank Bills 7.15% 5.50% 5.92%
10-yr Government Bonds 8.33% 9.09% 7.58%
NEW ZEALAND:
90-day Bank Bills 7.48% 8.20% 8.10%
10-yr Government Bonds 9.23% 9.03% 7.23%
UNITED KINGDOM:
90-day Bank Bills 10.85% 5.88% 6.57%
10-yr Government Bonds 9.26% 8.73% 7.92%
- ---------------------------------------------------------------------------------------------
</TABLE>
Yield comparisons are direct and do not take into account fluctuations in
currency exchange rates.
EQUITILINK INTERNATIONAL MANAGEMENT LIMITED
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
LOCAL CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------------------------
<S> <C> <C>
LONG-TERM INVESTMENTS - 93.2%
AUSTRALIA - 38.7%
GOVERNMENT AND SEMI-GOVERNMENT
BONDS - 26.0%
COMMONWEALTH OF AUSTRALIA - 15.1%
Australian Wool Corporation,
A$ 1,000 11.50%, 11/15/95. . . . . . . . . . 761,373
Commonwealth of Australia,
5,000 12.50%, 3/15/97. . . . . . . . . . . 4,032,199
5,000 13.00%, 7/15/00. . . . . . . . . . 4,489,750
5,000 10.00%, 10/15/02 4,077,660
5,000 7.50%, 7/15/05. . . . . . . . . . . 3,487,320
5,000 10.00%, 2/15/06. . . . . . . . . . 4,094,563
3,000 6.75%, 11/15/06 1,943,366
----------------
22,886,231
----------------
NEW SOUTH WALES - 8.0%
New South Wales Treasury Corporation,
10,000 12.00%, 12/01/01. . . . . . . . . . 8,800,582
5,000 7.00%, 4/01/04. . . . . . . . . . . 3,366,543
----------------
12,167,125
----------------
SOUTH AUSTRALIA - 1.2%
South Australia Finance Authority,
2,000 12.50%, 5/15/06. . . . . . . . . . 1,839,254
----------------
VICTORIA - 0.6%
Treasury Corporation of Victoria,
1,000 12.50%, 10/15/03. . . . . . . . . . 913,163
----------------
WESTERN AUSTRALIA - 1.1%
Western Australia Treasury
Corporation,
2,000 10.00%, 7/15/05. . . . . . . . . . 1,610,206
----------------
Total Australian government and
semi-government bonds
(cost US$38,840,602). . . . . . . . 39,415,979
----------------
CORPORATE BONDS - 7.2%
SERVICES - 7.2%
Australian and Overseas
Telecommunications Corporation,
A$ 5,000 11.50%, 10/15/02. . . . . . . . . . 4,373,521
2,000 12.00%, 5/15/06. . . . . . . . . . 1,795,084
First Australian National Mortgage
Acceptance Corporation,
Series 22,
4,424 11.40%, 12/15/01. . . . . . . . . . 3,611,033
General Property Trust,
1,500 8.25%, 5/31/96. . . . . . . . . . . 1,142,244
----------------
Total Australian corporate bonds
(cost US$10,490,609). . . . . . . . 10,921,882
----------------
EUROBONDS - 5.5%
DIVERSIFIED INDUSTRIALS - 1.4%
Shell Australia Limited,
635 12.25%, 3/07/96. . . . . . . . . . . 488,954
State Electricity Commission of
Victoria,
972 9.25%, 7/27/99. . . . . . . . . . . 756,799
500 11.00%, 4/09/02 . . . . . . . . . . 416,868
535 10.50%, 5/27/03. . . . . . . . . . 434,844
----------------
2,097,465
----------------
FINANCIAL SERVICES - 2.6%
Commonwealth Bank of Australia,
975 12.75%, 1/07/98. . . . . . . . . . . 805,478
Export Finance & Insurance Corp.,
750 11.00%, 12/29/04. . . . . . . . . . 627,949
South Australia Finance Authority,
500 12.50%, 5/08/01. . . . . . . . . . . 440,139
State Bank of New South Wales,
1,000 10.50%, 4/30/99. . . . . . . . . . . 806,130
Treasury Corporation of Victoria,
1,000 10.50%, 12/12/01. . . . . . . . . . 816,625
500 9.00%, 9/04/02 . . . . . . . . . . 380,820
----------------
3,877,141
----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
PRINCIPAL AMOUNT
LOCAL CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------------------------
<S> <C> <C>
FLOATING RATE NOTES - 0.5%
A$ 1,000 Repackaged Sovereign
Investments S.A.,
7.7558%, 7/28/98 (a). . . . . . . . 758,599
----------------
SUPRANATIONAL - 1.0%
Eurofima,
2,000 9.875%, 1/17/07. . . . . . . . . . . 1,588,715
----------------
Total Australian eurobonds
(cost US$8,141,910). . . . . . . . . 8,321,920
----------------
Total Australian long-term
investments
(cost US$57,473,121). . . . . . . . 58,659,781
----------------
CANADA - 28.8%
GOVERNMENT AND PROVINCIAL BONDS - 16.5%
CANADA - 10.8%
Canadian Government,
C$ 5,000 9.75%, 12/01/01. . . . . . . . . . . 4,164,930
5,000 8.50%, 4/01/02 3,950,208
5,000 7.25%, 6/01/03. . . . . . . . . . . 3,671,108
5,000 10.25%, 3/15/14 4,545,624
----------------
16,331,870
----------------
ALBERTA - 1.6%
City of Edmonton,
1,000 9.625%, 2/13/12. . . . . . . . . . . 816,091
Province of Alberta,
2,000 10.25%, 8/22/01. . . . . . . . . . . 1,682,793
----------------
2,498,884
----------------
BRITISH COLUMBIA - 1.6%
Province of British Columbia,
1,000 8.50%, 2/26/97. . . . . . . . . . . 762,950
1,000 10.15%, 8/29/01 838,047
1,000 9.50%, 1/09/12. . . . . . . . . . . 830,976
----------------
2,431,973
----------------
ONTARIO - 2.0%
Municipality of Halton,
1,000 10.125%, 12/21/99. . . . . . . . . . 817,208
Province of Ontario,
1,000 8.75%, 4/16/97. . . . . . . . . . . 766,597
1,000 8.75%, 4/22/03 773,072
1,000 7.50%, 2/07/24. . . . . . . . . . . 671,703
----------------
3,028,580
----------------
QUEBEC - 0.5%
Province of Quebec,
C$ 1,000 9.375%, 1/16/23. . . . . . . . . . . 775,901
----------------
Total Canadian government and
provincial bonds
(cost US$26,650,833). . . . . . . . 25,067,208
----------------
CORPORATE BONDS - 2.4%
DIVERSIFIED INDUSTRIALS - 1.3%
Bell Telephone Company of Canada,
500 10.50%, 7/15/09. . . . . . . . . . . 417,535
Imperial Oil Ltd.,
1,000 9.875%, 12/15/99. . . . . . . . . . 812,184
Scotts Hospitality Incorporated,
1,000 10.95%, 4/16/01. . . . . . . . . . . 835,070
----------------
2,064,789
----------------
FINANCIAL SERVICES - 1.1%
Bank of Nova Scotia,
1,000 10.35%, 7/19/01. . . . . . . . . . . 835,814
National Bank of Canada,
500 10.875%, 6/01/98. . . . . . . . . . 402,650
Toronto Dominion Centre,
500 10.70%, 5/12/98. . . . . . . . . . . 401,905
----------------
1,640,369
----------------
Total Canadian corporate bonds
(cost US$3,995,799). . . . . . . . . 3,705,158
----------------
EUROBONDS - 9.9%
DIVERSIFIED INDUSTRIALS - 0.3%
Procter & Gamble Company,
500 10.875%, 8/15/01. . . . . . . . . . 415,414
----------------
FINANCIAL SERVICES - 3.0%
Credit Local de France,
500 6.75%, 3/21/06. . . . . . . . . . . 330,753
Ford Credit Canada Ltd.,
2,500 9.625%, 11/20/96. . . . . . . . . . 1,911,655
General Electric Capital Corporation,
500 8.25%, 1/09/97. . . . . . . . . . . 376,355
1,000 10.125%, 4/29/98 793,391
Guinness Finance B.V.,
500 9.625%, 10/29/98. . . . . . . . . . 390,741
Prudential Funding Corporation,
1,000 9.125%, 5/12/97. . . . . . . . . . . 761,350
----------------
4,564,245
----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
PRINCIPAL AMOUNT
LOCAL CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------------------------
<S> <C> <C>
NATURAL RESOURCES - 2.4%
Mobil Oil Canada Limited,
C$ 300 8.125%, 1/20/98. . . . . . . . . . . 225,882
Ontario Hydro,
1,000 9.00%, 6/24/02. . . . . . . . . . . 783,343
500 8.50%, 5/26/25 375,670
Quebec Hydro,
500 10.625%, 3/08/01. . . . . . . . . . 404,696
1,500 7.00%, 6/01/04 1,021,509
Tokyo Electric Power Company,
500 10.625%, 12/20/96. . . . . . . . . . 387,392
500 10.50%, 6/14/01 411,209
----------------
3,609,701
----------------
SERVICES - 2.2%
Canadian National Railway
Company,
1,250 8.25%, 7/21/97. . . . . . . . . . . 938,523
City of Montreal,
500 11.25%, 3/07/96. . . . . . . . . . . 375,856
1,000 6.375%, 2/15/01 678,252
Metropolitan Municipality of Toronto,
750 9.625%, 5/14/02. . . . . . . . . . . 598,002
Province of Ontario,
1,000 7.75%, 12/08/03. . . . . . . . . . . 729,384
----------------
3,320,017
----------------
SUPRANATIONAL - 2.0%
Bayerische Vereinsbank AG,
500 7.25%, 7/29/99. . . . . . . . . . . 367,263
Canada (Cayman),
750 7.25%, 6/01/08. . . . . . . . . . . 506,568
Kingdom of Sweden,
3,250 7.00%, 12/01/08. . . . . . . . . . . 2,168,763
----------------
3,042,594
----------------
Total Canadian eurobonds
(cost US$15,371,722). . . . . . . . 14,951,971
----------------
Total Canadian long-term
investments
(cost US$46,018,354). . . . . . . . 43,724,337
----------------
NEW ZEALAND - 4.1%
GOVERNMENT BONDS - 2.4%
Government of New Zealand,
NZ$ 3,000 10.00%, 7/15/97. . . . . . . . . . . 2,056,123
2,000 10.00%, 3/15/02 1,499,586
----------------
Total New Zealand government
bonds (cost US$3,490,025). . . . . . 3,555,709
----------------
CORPORATE BONDS - 1.3%
DIVERSIFIED INDUSTRIALS - 1.3%
Electricity Corporation of
New Zealand Ltd.,
NZ$ 2,750 10.00%, 10/15/01. . . . . . . . . . 2,019,410
----------------
Total New Zealand corporate bonds
(cost US$1,818,266). . . . . . . . . 2,019,410
----------------
EUROBONDS - 0.4%
FINANCIAL SERVICES - 0.4%
Primary Industry Bank of Australia
Limited,
1,000 8.25%, 3/27/00. . . . . . . . . . . 674,032
----------------
Total New Zealand eurobonds
(cost US$589,733). . . . . . . . . . 674,032
----------------
Total New Zealand long-term
investments
(cost US$5,898,024). . . . . . . . . 6,249,151
----------------
UNITED KINGDOM - 21.6%
GOVERNMENT BONDS - 7.3%
United Kingdom Treasury,
(pound sterling)2,000 8.00%, 6/10/03. . . . . . . . . . . 3,187,460
2,000 6.75%, 11/26/04 2,912,645
3,000 8.50%, 7/16/07. . . . . . . . . . . 4,890,525
----------------
Total United Kingdom government
bonds (cost US$11,066,677). . . . . 10,990,630
----------------
EUROBONDS - 14.3%
DIVERSIFIED INDUSTRIALS - 2.2%
Allied Domecq PLC,
1,000 10.625%, 2/25/99. . . . . . . . . . 1,698,140
British Airways PLC,
500 10.00%, 3/02/98. . . . . . . . . . . 827,400
Rolls-Royce PLC,
500 11.625%, 7/30/98. . . . . . . . . . 862,860
----------------
3,388,400
----------------
NATURAL RESOURCES - 1.2%
Thames Water Utilities Finance PLC,
1,000 10.50%, 11/21/01. . . . . . . . . . 1,745,420
----------------
SERVICES - 9.9%
Abbey National Treasury Services
PLC,
1,250 8.00%, 4/02/03. . . . . . . . . . . 1,925,675
Barclays Bank PLC,
1,000 9.875%, 5/12/49. . . . . . . . . . . 1,619,340
Bayerische Hypotheken--und
Wechsel--Bank AG,
500 10.25%, 2/06/97. . . . . . . . . . . 817,077
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
PRINCIPAL AMOUNT
LOCAL CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------------------------
<S> <C> <C>
(pound sterling)1,400 British Gas PLC,
8.875%, 7/08/08. . . . . . . . . . . 2,195,368
Halifax Building Society,
1,500 11.00%, 1/17/14. . . . . . . . . . . 2,700,870
Lloyds Bank PLC,
1,000 7.375%, 3/11/04. . . . . . . . . . . 1,448,029
Prudential Finance B.V.,
1,000 9.375%, 6/04/07. . . . . . . . . . . 1,639,040
Republic of Finland,
1,250 10.125%, 6/22/08. . . . . . . . . . 2,159,711
Swedish Export Credit Corp.,
300 10.375%, 3/08/96. . . . . . . . . . 477,528
----------------
14,982,638
----------------
SUPRANATIONAL - 1.0%
Republic of Finland,
1,000 8.00%, 4/07/03. . . . . . . . . . . 1,546,529
----------------
Total United Kingdom eurobonds
(cost US$21,763,117). . . . . . . . 21,662,987
----------------
Total United Kingdom long-term
investments
(cost US$32,829,794). . . . . . . . 32,653,617
----------------
Total long-term investments
(cost US$142,219,293). . . . . . . . 141,286,886
----------------
SHORT-TERM INVESTMENTS - 4.5%
AUSTRALIA - 1.6%
Banque National de Paris Fixed
Deposit,
A$ 3,264 7.10%, 11/01/95
(cost US$2,482,106). . . . . . . . . 2,482,107
----------------
CANADA - 1.2%
State Street Bank Time Deposit,
C$ 2,451 6.50%, 11/06/95
(cost US$1,788,943). . . . . . . . . 1,824,093
----------------
NEW ZEALAND- 0.5%
National Bank of New Zealand Call
Deposit,
NZ$ 1,161 8.70%, 11/01/95
(cost US$768,376). . . . . . . . . . 765,431
----------------
UNITED KINGDOM- 0.6%
State Street Bank Fixed Deposit,
(pound sterling) 539 6.50%, 11/02/95
(cost US$848,070). . . . . . . . . . 849,795
----------------
US$ 922 UNITED STATES- 0.6%
Repurchase Agreement, State
Street Bank and Trust Company,
5.78% dated 10/31/95, due
11/01/95 in the amount of $922,148
(cost $922,000;
collateralized by $725,000 U.S.
Treasury Bond, 8.875% due
2/15/19; value $945,603). . . . . . 922,000
----------------
Total short-term investments
(cost US$6,809,495). . . . . . . . . 6,843,426
----------------
TOTAL INVESTMENTS - 97.7%
(cost US$149,028,788). . . . . . . . 148,130,312
Other assets in excess of
liabilities - 2.3%. . . . . . . . . 3,524,086
----------------
TOTAL NET ASSETS - 100.0%. . . . . . $151,654,398
----------------
----------------
</TABLE>
- -------------------------------------------------------------------
(a) Stated interest rate in effect at 10/31/95; interest rate resets
quarterly.
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost $149,028,788). . . . . $ 148,130,312
Foreign currency, at value (cost $18,135). . . . . 18,198
Cash. . . . . . . . . . . . . . . . . . . . . . . 835
Interest receivable. . . . . . . . . . . . . . . . 4,533,499
Withholding tax reclaim receivable. . . . . . . . 57,622
Deferred organization expenses. . . . . . . . . . 36,811
Prepaid expenses. . . . . . . . . . . . . . . . . 32,917
-------------
Total assets. . . . . . . . . . . . . . . . . . . 152,810,194
-------------
LIABILITIES
Payable for investments purchased. . . . . . . . . 5,153
Dividends payable - common stock. . . . . . . . . 810,793
Investment management fee payable. . . . . . . . . 86,546
Administration fee payable. . . . . . . . . . . . 26,629
Accrued expenses and other liabilities. . . . . . 226,675
-------------
Total liabilities. . . . . . . . . . . . . . . . 1,155,796
-------------
TOTAL NET ASSETS. . . . . . . . . . . . . . . . . $ 151,654,398
-------------
-------------
Total net assets were composed of:
Common stock:
Par value ($.001 per share, 300,000,000 authorized,
applicable to
9,266,209) shares issued. . . . . . . . . . . . . $ 9,266
Paid-in capital in excess of par. . . . . . . . . 127,608,668
Preferred stock ($.001 par value per share and
$50,000 liquidation value per share applicable to
600 shares; Note 4). . . . . . . . . . . . . . . 30,000,000
-------------
157,617,934
Undistributed net investment income. . . . . . . . 606,190
Net unrealized depreciation on investments. . . . (2,271,607)
Accumulated net realized foreign exchange losses. (5,718,645)
Net unrealized foreign exchange gains. . . . . . . 1,420,526
-------------
TOTAL NET ASSETS. . . . . . . . . . . . . . . . . $ 151,654,398
-------------
-------------
Net assets applicable to common shareholders. . . $ 121,654,398
-------------
-------------
Net asset value per common share:
($121,654,398/9,266,209 shares of
common stock issued and outstanding). . . . . . . $ 13.13
-------------
-------------
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME
Income
Interest and discount earned (net of foreign
withholding taxes of $553,607). . . . . . . . . $ 12,998,360
------------
Expenses
Investment management fee. . . . . . . . . . . . 947,389
Administration fee 291,504
Independent accountant's fees and expenses. . . 130,150
Reports to shareholders 127,617
Custodian's fees and expenses. . . . . . . . . . 121,489
Auction agent's fees and expenses 94,524
Directors' fees and expenses. . . . . . . . . . 87,497
Insurance expense 49,065
Amortization of deferred organization expenses. 27,755
Legal fees and expenses 25,954
Transfer agent's fees and expenses. . . . . . . 24,335
Registration fees 16,229
Excise tax. . . . . . . . . . . . . . . . . . . 6,837
Miscellaneous. . . . . . . . . . . . . . . . . . 22,478
------------
Total operating expenses. . . . . . . . . . . . 1,972,823
------------
Net investment income. . . . . . . . . . . . . . 11,025,537
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCIES
Net realized gain on investment transactions. . 217,129
Net change in unrealized appreciation/
depreciation of investments. . . . . . . . . . 8,676,748
------------
Net gain on investments. . . . . . . . . . . . 8,893,877
------------
Net increase in total net assets resulting from
operations before net foreign exchange gains/
losses. . . . . . . . . . . . . . . . . . . . . 19,919,414
Net realized foreign exchange gains. . . . . . 465,362
Net change in unrealized foreign exchange gains 892,942
------------
NET INCREASE IN TOTAL NET ASSETS
RESULTING FROM OPERATIONS. . . . . . . . . . . . $ 21,277,718
------------
------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1995
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN CASH
(INCLUDING FOREIGN CURRENCY)
Cash flows provided by operating activities
Interest received. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,520,141
Operating expenses paid (1,860,292)
Purchases of short-term portfolio investments, net. . . . . . . . . . . . (4,075,150)
Purchases of long-term portfolio investments (35,319,759)
Proceeds from sales of long-term portfolio investments. . . . . . . . . . 40,163,511
Other 28,340
------------
Net cash provided by operating activities. . . . . . . . . . . . . . . . 11,456,791
------------
Cash flows used for financing activities
Dividends paid to common shareholders. . . . . . . . . . . . . . . . . . (9,555,205)
Dividends paid to preferred shareholders (1,673,395)
Distributions paid to common shareholders. . . . . . . . . . . . . . . . (289,661)
Distributions paid to preferred shareholders (29,939)
------------
Net cash used for financing activities. . . . . . . . . . . . . . . . . (11,548,200)
------------
Effect of exchange rate on cash. . . . . . . . . . . . . . . . . . . . . 74,226
------------
Net decrease in cash. . . . . . . . . . . . . . . . . . . . . . . . . . . (17,183)
Cash at beginning of year 36,216
------------
Cash at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,033
------------
------------
RECONCILIATION OF NET INCREASE IN TOTAL NET ASSETS FROM OPERATIONS TO NET
CASH (INCLUDING FOREIGN CURRENCY) PROVIDED BY OPERATING ACTIVITIES
Net increase in total net assets resulting from operations. . . . . . . . $ 21,277,718
------------
Decrease in investments. . . . . . . . . . . . . . . . . . . . . . . . . 661,585
Net realized gain on investment transactions. . . . . . . . . . . . . . (217,129)
Net realized foreign exchange gains. . . . . . . . . . . . . . . . . . . (465,362)
Net change in unrealized depreciation on investments. . . . . . . . . . (8,676,748)
Net change in unrealized foreign exchange gains. . . . . . . . . . . . . (892,942)
Increase in interest receivable. . . . . . . . . . . . . . . . . . . . . (329,188)
Decrease in receivable for investments sold. . . . . . . . . . . . . . . 3,295,906
Net decrease in other assets. . . . . . . . . . . . . . . . . . . . . . 27,755
Decrease in payable for investments purchased. . . . . . . . . . . . . . (3,337,335)
Increase in accrued expenses and other liabilities. . . . . . . . . . . 112,531
------------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,820,927)
------------
Net cash provided by operating activities. . . . . . . . . . . . . . . $ 11,456,791
------------
------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
FOR THE YEAR
ENDED
OCTOBER 31,1995
-----------------
INCREASE (DECREASE) IN TOTAL NET ASSETS
Operations
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,025,537
Net realized gain on investment transactions 217,129
Net change in unrealized appreciation/depreciation of investments. . . . . . . . . . . . . 8,676,748
--------------
Net increase (decrease) in total net assets resulting from
operations before net foreign exchange gains/losses. . . . . . . . . . . . . . . . . . . . 19,919,414
Net realized foreign exchange gains/losses 465,362
Net change in unrealized foreign exchange gains/losses. . . . . . . . . . . . . . . . . . . 892,942
--------------
Net increase (decrease) in total net assets resulting from operations. . . . . . . . . . . 21,277,718
--------------
Dividends and distributions to shareholders
Dividends to common shareholders from net investment income. . . . . . . . . . . . . . . . (9,555,205)
Dividends to preferred shareholders from net investment income (1,673,395)
Distributions to common shareholders from net realized gains on investment transactions. . (289,661)
Distributions to preferred shareholders from net realized gains on investment transactions (29,939)
--------------
Net decrease in total net assets resulting from dividends and distributions to shareholders (11,548,200)
--------------
Capital stock transactions
Net asset value of 16,779 shares issued to common shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
--------------
Net increase in total net assets resulting from capital stock transactions. . . . . . . . . -
--------------
Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,729,518
TOTAL NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,924,880
--------------
End of year (including undistributed net investment income of $606,190 and $457,843,
respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 151,654,398
-----------------
<CAPTION> -----------------
<S> <C>
FOR THE YEAR
ENDED
OCTOBER 31, 1994
------------------
INCREASE (DECREASE) IN TOTAL NET ASSETS
Operations
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,723,039
Net realized gain on investment transactions 1,746,079
Net change in unrealized appreciation/depreciation of investments. . . . . . . . . . . . . (24,120,233)
--------------
Net increase (decrease) in total net assets resulting from
operations before net foreign exchange gains/losses. . . . . . . . . . . . . . . . . . . . (11,651,115)
Net realized foreign exchange gains/losses (1,296,076)
Net change in unrealized foreign exchange gains/losses. . . . . . . . . . . . . . . . . . . 11,387,163
--------------
Net increase (decrease) in total net assets resulting from operations. . . . . . . . . . . (1,560,028)
--------------
Dividends and distributions to shareholders
Dividends to common shareholders from net investment income. . . . . . . . . . . . . . . . (9,147,592)
Dividends to preferred shareholders from net investment income (1,039,036)
Distributions to common shareholders from net realized gains on investment transactions. . (621,909)
Distributions to preferred shareholders from net realized gains on investment transactions (73,976)
--------------
Net decrease in total net assets resulting from dividends and distributions to shareholders (10,882,513)
--------------
Capital stock transactions
Net asset value of 16,779 shares issued to common shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,979
--------------
Net increase in total net assets resulting from capital stock transactions. . . . . . . . . 220,979
--------------
Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,221,562)
TOTAL NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,146,442
--------------
End of year (including undistributed net investment income of $606,190 and $457,843,
respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,924,880
------------------
------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
PER SHARE OPERATING PERFORMANCE:
------------------ --------------------
Net asset value per common share, beginning of period. . . . . . . $ 12.08 $ 13.42
------------ -------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . 1.19 1.16
Net realized and unrealized gain (loss) on investments and foreign
currencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.10 (1.33)
------------ -------------
Total from investment operations 2.29 (0.17)
------------ -------------
Dividends from net investment income to common shareholders. . . . (1.03) (0.98)
Dividends from net investment income to preferred shareholders. . (0.18) (0.11)
Distributions in excess of net investment income. . . . . . . . . -- --
Distributions from net realized gains on investment transactions to
common shareholders. . . . . . . . . . . . . . . . . . . . . . . . (0.03) (0.07)
Distributions from net realized gains on investment transactions to
preferred shareholders. . . . . . . . . . . . . . . . . . . . . . -- (0.01)
------------ -------------
Total dividends and distributions. . . . . . . . . . . . . . . . (1.24) (1.17)
------------ -------------
Capital charge in respect to issuance of preferred shares. . . . . -- --
------------ -------------
Net asset value per common share, end of period. . . . . . . . . . $ 13.13 $ 12.08
------------ -------------
------------ -------------
Market value, end of period. . . . . . . . . . . . . . . . . . . . $ 11.38 $ 10.38
------------ -------------
------------ -------------
Number of shares of common stock outstanding (000 omitted). . . . 9,266 9,266
TOTAL INVESTMENT RETURN BASED ON:(1)
Market value. . . . . . . . . . . . . . . . . . . . . . . . . . . 20.72% (10.19%)
Net asset value. . . . . . . . . . . . . . . . . . . . . . . . . . 19.67% (1.63%)
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS(3)/SUPPLEMENTARY
DATA:
Net assets of common shareholders, end of period
(000 omitted). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,654 $ 111,925
Average net assets of common shareholders (000 omitted). . . . . . 115,277 118,336
Operating expenses. . . . . . . . . . . . . . . . . . . . . . . . 1.71% 1.75%
Net investment income before preferred stock dividends. . . . . . 9.56% 9.06%
Net investment income available to common shareholders. . . . . . 8.09% 8.12%
Preferred stock dividends and distributions. . . . . . . . . . . . 1.48% 0.94%
Portfolio turnover. . . . . . . . . . . . . . . . . . . . . . . . 23% 34%
Senior securities (preferred stock) outstanding (000 omitted). . . $ 30,000 $ 30,000
Asset coverage on preferred stock at period end. . . . . . . . . . 505% 473%
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
FOR THE PERIOD
FOR THE YEAR FEBRUARY 28,
ENDED 1992* THROUGH
OCTOBER 31, 1993 OCTOBER 31, 1992
PER SHARE OPERATING PERFORMANCE:
-------------------- -------------------
Net asset value per common share, beginning of period. . . . . . . $ 13.00 $ 13.89+
------------- ----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . 1.19 0.83
Net realized and unrealized gain (loss) on investments and foreign
currencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55 (0.76)
------------- ----------------
Total from investment operations 1.74 0.07
------------- ----------------
Dividends from net investment income to common shareholders. . . . (0.96) (0.80)
Dividends from net investment income to preferred shareholders. . (0.08) (0.03)
Distributions in excess of net investment income. . . . . . . . . -- (0.04)
Distributions from net realized gains on investment transactions to
common shareholders. . . . . . . . . . . . . . . . . . . . . . . . (0.26) --
Distributions from net realized gains on investment transactions to
preferred shareholders. . . . . . . . . . . . . . . . . . . . . . (0.02) --
------------- ----------------
Total dividends and distributions. . . . . . . . . . . . . . . . (1.32) (0.87)
------------- ----------------
Capital charge in respect to issuance of preferred shares. . . . . -- (0.09)
------------- ----------------
Net asset value per common share, end of period. . . . . . . . . . $ 13.42 $ 13.00
------------- ----------------
------------- ----------------
Market value, end of period. . . . . . . . . . . . . . . . . . . . $ 12.63 $ 13.50
------------- ----------------
------------- ----------------
Number of shares of common stock outstanding (000 omitted). . . . 9,249 9,176
TOTAL INVESTMENT RETURN BASED ON:(1)
Market value. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.65% (4.50%)(2)
Net asset value. . . . . . . . . . . . . . . . . . . . . . . . . . 13.31% (0.69%)(2)
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS(3)/SUPPLEMENTARY
DATA:
Net assets of common shareholders, end of period
(000 omitted). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 124,146 $ 119,302
Average net assets of common shareholders (000 omitted). . . . . . 121,323 125,794
Operating expenses. . . . . . . . . . . . . . . . . . . . . . . . 1.73% 1.59%(4)
Net investment income before preferred stock dividends. . . . . . 9.03% 8.72%(4)
Net investment income available to common shareholders. . . . . . 8.25% 8.43%(4)
Preferred stock dividends and distributions. . . . . . . . . . . . 0.78% 0.29%(4)
Portfolio turnover. . . . . . . . . . . . . . . . . . . . . . . . 41% 18%
Senior securities (preferred stock) outstanding (000 omitted). . . $ 30,000 $ 30,000
Asset coverage on preferred stock at period end. . . . . . . . . . 514% 498%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------
(1)Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of each
period reported. Dividends and distributions, if any, are assumed for the
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. Generally, total investment return based on net asset
value will be higher than total investment return based on market value in
periods where there is an increase in the discount or a decrease in the premium
of the market value to the net asset value from the beginning to the end of
such periods. Conversely, total investment return based on net asset value will
be lower than total investment return based on market value in periods where
there is a decrease in the discount or an increase in the premium of the market
value to the net asset value from the beginning to the end of such periods.
(2)Total investment returns for periods of less than one full year are not
annualized.
(3)Ratios are 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.
(4)Annualized.
*Commencement of investment operations.
+Net of offering costs of $0.16 charged to paid-in capital in respect to
issuance of common shares.
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------
The First Commonwealth Fund, Inc. (the "Fund") was incorporated in Maryland on
June 28, 1991, as a closed- end, nondiversified investment company. The Fund had
no operations prior to February 28, 1992 other than the sale to EquitiLink
International Management Limited (the "Investment Manager") of 7,120 shares of
Common Stock for $100,036 on February 18, 1992.
The Fund's investment objective is to provide high current income by investing
in high-grade fixed-income securities denominated in the currencies of
Australia, Canada, New Zealand and the United Kingdom (the "Commonwealth
Currencies"). The Fund may also achieve incidental capital appreciation. It is
expected that normally all of the Fund's assets will be invested in a portfolio
of securities issued or guaranteed by the governments, provinces and states of
Australia, Canada, New Zealand and the United Kingdom as well as securities
issued by corporations domiciled in those countries. The Fund will, under normal
circumstances, invest in debt securities in at least three of these currencies
and will not hold more than 50% of its assets in securities denominated in any
one Commonwealth Currency. At least 75% of the Fund's investments will be rated,
at the time of investment, not less than Aa by Moody's or AA by S&P, or
comparably rated by another appropriate nationally or internationally recognized
rating agency, or, if unrated, judged by the Investment Manager to be of
equivalent quality. The remainder of the Fund's investments will be rated no
less than A2 or A by those rating agencies or, if unrated, judged by the
Investment Manager to be of equivalent quality. The ability of issuers of debt
securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry, country 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. However, the
Commonwealth Currencies (excluding New Zealand) are the functional currencies
for Federal tax purposes (see Taxes below).
Foreign Currency Translation: Australian dollar ("A$"), Canadian dollar ("C$"),
New Zealand dollar ("NZ$") and United Kingdom pound ("(pound sterling)") amounts
are translated into United States dollars on the following basis:
(i) market value of investment securities, other assets and liabilities - at
the closing rates of exchange as reported by a major bank;
(ii) purchases and sales of investment securities, income and expenses - at
the rates of exchange prevailing on the respective dates of such
transactions.
The Fund isolates that portion of the results of operations arising as a result
of changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at fiscal period end.
Similarly, the Fund isolates the effect of changes in foreign exchange rates
from the fluctuations arising from changes in the market prices of portfolio
securities sold during the fiscal period.
Net realized foreign exchange gain of $465,362 for the year ended October 31,
1995 includes 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, and the difference between the amounts of interest, discount and
foreign withholding taxes recorded on the Fund's books and the US dollar
equivalent amounts actually received or paid. Net unrealized foreign exchange
gain of $892,942 for the year ended October 31, 1995 includes changes in the
value of portfolio securities and other assets and liabilities arising as a
result of changes in exchange rates.
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 US
dollar.
The exchange rates used by the Fund of the Commonwealth Currencies on October
31, 1995 were US$0.7605 to A$1.00, US$0.7443 to C$1.00, US$0.6592 to NZ$1.00,
and US$1.5760 to (pound sterling)1.00.
<PAGE>
Security Valuation: Investments are stated at value. Investments for which
market quotations are readily available are valued at the last trade price on
the date of determination as obtained from a pricing source. If no such trade
price is available, such investments are valued at the quoted bid price or the
mean between the quoted bid and asked price on the date of determination as
obtained from a pricing source. Securities for which market quotations are not
readily available are valued at fair value in good faith using methods
determined 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, if their term to maturity from date of purchase was 60
days or less, or by amortizing their value on the 61st day prior to maturity, if
their original term to maturity exceeded 60 days.
In connection with transactions in repurchase agreements with US financial
institutions, it is the Fund's policy that its custodian/counterparty segregates
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.
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 securities
purchased are accreted on an effective yield basis over the estimated lives of
the respective securities.
Dividends: Dividends and distributions are recorded on the ex-dividend date and
are determined based upon tax basis net investment income and capital and
currency gains of the Fund. Dividends and distributions to preferred
shareholders are accrued on a daily basis and are determined as described in
Note 4.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with AICPA Statement of Position
93-2 Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. For
the year ended October 31, 1995, the Fund increased undistributed net investment
income by $351,411, decreased accumulated net realized gain on investments by
$12,605, and increased accumulated net realized foreign exchange loss by
$25,564, resulting in a decrease to paid-in capital in excess of par of
$313,242. Net investment income, net realized and unrealized losses on
investments and net assets were not affected by this change. Accumulated
realized and unrealized foreign exchange losses shown in the composition of net
assets at October 31, 1995 represent foreign exchange losses for book purposes
that have not yet been recognized for tax purposes.
Taxes: For Federal income and excise tax purposes, substantially all of the
Fund's transactions are accounted for using the functional currencies.
Accordingly, only realized currency gains and losses resulting from the
repatriation of any of the Commonwealth Currencies into US dollars or another
Commonwealth Currency are recognized for tax purposes.
No provision has been made for United States Federal income taxes because it is
the Fund's policy 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. Under the applicable foreign tax law, a
withholding tax may be imposed on interest and discounts earned at various
rates.
Deferred Organization Expenses: A total of $138,857 was incurred in connection
with the organization of the Fund. These costs were deferred and are being
amortized ratably over a period of sixty months from the date the Fund commenced
investment operations.
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.
<PAGE>
NOTE 2. AGREEMENTS
The Fund has agreements with EquitiLink International Management Limited (the
"Investment Manager"), EquitiLink Australia Limited (the "Investment Adviser"),
and Princeton Administrators, L.P. (the "Administrator"). The Investment Manager
and the Investment Adviser are affiliated companies. The Investment Manager has
entered into an agreement with Wood Gundy, Inc. (the "Consultant").
The Investment Manager makes investment decisions on behalf of the Fund on the
basis of recommendations and information furnished to it by the Investment
Adviser and the Consultant, including the selection of and placement of orders
with brokers and dealers to execute portfolio transactions on behalf of the
Fund.
The management agreement provides the Investment Manager with a fee, computed
weekly and payable monthly, at the following annual rates: 0.65% of the Fund's
average weekly net assets up to $200 million, 0.60% of such assets between $200
million and $500 million and 0.55% of such assets in excess of $500 million. The
administration agreement provides the Administrator with a fee computed and
payable monthly at the annual rate of 0.20% of the Fund's average weekly net
assets, subject to a minimum annual payment of $150,000. The Investment Manager
pays fees to the Investment Adviser and the Consultant for their services
rendered.
The Investment Manager informed the Fund that it paid $350,926 to the Investment
Adviser and $12,266 to the Consultant during the year ended October 31, 1995.
NOTE 3. PORTFOLIO
SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the year ended October 31, 1995 aggregated $31,981,330 and $36,871,702,
respectively.
The United States Federal income tax basis of the Fund's investments at October
31, 1995 was $150,421,887 and accordingly, net unrealized depreciation for
United
States Federal income tax purposes was $2,291,575 (gross unrealized
appreciation
$2,304,128; gross unrealized depreciation $4,595,703).
NOTE 4. CAPITAL
There are 300 million shares of $.001 par value Common Stock authorized. Of
the
9,266,209 shares outstanding at October 31, 1995, the Investment Manager owned
7,120 shares.
There are 100 million shares of $.001 par value of Preferred Stock authorized.
The preferred shares have rights as determined by the Board of Directors. The
600 shares of Auction Market Preferred Stock ("Preferred Stock") outstanding
consists of one series, W-7. The Preferred Stock has a liquidation value of
$50,000 per share plus any accumulated but unpaid dividends whether or not
declared.
Dividends on the preferred stock are cumulative at a rate typically reset every
seven days based on the results of an auction. Dividend rates ranged from 4.70%
to 6.05% during the year ended October 31, 1995. Under the Investment Company
Act of 1940, the Fund may not declare dividends or make other distributions on
shares of Common Stock or purchase any such shares if, at the time of the
declaration, distribution or purchase, asset coverage with respect to the
outstanding Preferred Stock would be less than 200%.
The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at $50,000 per share plus any accumulated but
unpaid dividends. The Preferred Stock is also subject to mandatory redemption at
$50,000 per share plus any accumulated but unpaid dividends, whether or not
declared, 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. SUBSEQUENT EVENTS/DIVIDENDS
(UNAUDITED)
On November 28, 1995 and December 27, 1995, the Board of Directors of the Fund
declared dividends from undistributed net investment income of $0.0875 and
$0.0875
per common share payable on December 15, 1995 and January 12, 1996 to common
shareholders of record on November 30, 1995 and December 29, 1995,
respectively.
Subsequent to October 31, 1995, dividends and distributions declared and paid
on
preferred shares totaled approximately $191,124 for the outstanding preferred
share series through December 15, 1995.
<PAGE>
NOTE 6.
QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET INVESTMENT
INCOME
-----------------
PER
QUARTERLY TOTAL COMMON
PERIOD INCOME AMOUNT SHARE
- ---------- ---------- ---------- ------
<S> <C> <C> <C>
11/1/93 to
1/31/94 $3,169,106 $2,625,833 $0.28
2/1/94 to
4/30/94 3,075,055 2,520,439 0.27
5/1/94 to
7/31/94 3,262,146 2,744,983 0.30
8/1/94 to
10/31/94 3,282,415 2,831,784 0.31
11/1/94 to
1/31/95 3,330,516 2,823,173 0.30
2/1/95 to
4/30/95 3,149,832 2,670,883 0.29
5/1/95 to
7/31/95 3,250,344 2,735,857 0.30
8/1/95 to
10/31/95 3,267,668 2,795,624 0.30
<CAPTION>
NET REALIZED AND NET INCREASE
UNREALIZED (DECREASE)
GAINS (LOSSES) ON IN NET ASSETS
INVESTMENTS AND RESULTING FROM
FOREIGN CURRENCIES OPERATIONS
------------------- -------------------
PER PER
QUARTERLY COMMON COMMON
PERIOD AMOUNT SHARE AMOUNT SHARE
- ---------- ----------- ------ ----------- ------
<S> <C> <C> <C> <C>
11/1/93 to
1/31/94 $7,439,520 $0.81 $10,065,353 $1.09
2/1/94 to
4/30/94 (16,190,047) (1.75) (13,669,608) (1.48)
5/1/94 to
7/31/94 (3,843,880) (0.42) (1,098,897) (0.12)
8/1/94 to
10/31/94 311,340 0.03 3,143,124 0.34
11/1/94 to
1/31/95 (1,432,880) (0.15) 1,390,293 0.15
2/1/95 to
4/30/95 4,354,870 0.47 7,025,753 0.76
5/1/95 to
7/31/95 1,353,900 0.14 4,089,757 0.44
8/1/95 to
10/31/95 5,976,291 0.64 8,771,915 0.94
<CAPTION>
-------------------------------------
DIVIDENDS AND DISTRIBUTIONS
-------------------------------------
COMMON SHARES PREFERRED SHARES
-------------------------------------
PER PER
QUARTERLY COMMON COMMON
PERIOD AMOUNT SHARE AMOUNT SHARE
- ---------- ----------- ------- --------- -------
<S> <C> <C> <C> <C>
11/1/93 to
1/31/94 $2,474,122 $0.27 $230,430 $0.02
2/1/94 to
4/30/94 2,430,809 0.26 248,898 0.03
5/1/94 to
7/31/94 2,432,293 0.26 299,082 0.03
8/1/94 to
10/31/94 2,432,277 0.26 334,602 0.04
11/1/94 to
1/31/95 2,548,087 0.27 419,502 0.05
2/1/95 to
4/30/95 2,432,273 0.27 403,410 0.04
5/1/95 to
7/31/95 2,432,251 0.26 433,788 0.04
8/1/95 to
10/31/95 2,432,255 0.26 446,634 0.05
<CAPTION>
COMMON
SHARE PRICE ON
THE NEW YORK
STOCK
EXCHANGE
----------------
QUARTERLY
PERIOD HIGH LOW
- ---------- ------- -------
<S> <C> <C>
11/1/93 to
1/31/94 $13 3/8 $12 1/4
2/1/94 to
4/30/94 13 1/2 10 3/4
5/1/94 to
7/31/94 12 11
8/1/94 to
10/31/94 12 10 3/8
11/1/94 to
1/31/95 10 3/4 9 5/8
2/1/95 to
4/30/95 10 3/4 10 1/8
5/1/95 to
7/31/95 11 1/2 10 3/8
8/1/95 to
10/31/95 11 3/4 11
</TABLE>
<PAGE>
- -------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------
To the Shareholders and the Board of Directors of
The First Commonwealth Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of cash
flows and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of The First Commonwealth Fund,
Inc. (the "Fund") at October 31, 1995, the results of its operations and its
cash flows for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the three years in the period then ended and for the period February 28, 1992
(commencement of operations) through October 31, 1992, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
December 11, 1995
<PAGE>
- -------------------------------------------------------------------
FEDERAL TAX INFORMATION: DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------------------------
During the year ended October 31, 1995, 96.39% of the ordinary income
distributions paid monthly by the Fund qualifies as foreign source income.
Additionally, 4.90% of the ordinary income distributions was attributable to
foreign withholding taxes.
The foreign taxes paid or withheld represent taxes incurred by the Fund on
income received by the Fund from foreign sources. Foreign taxes paid or withheld
should be included in taxable income with an offsetting deduction from gross
income or as a credit for taxes paid to foreign governments. You should consult
your tax counsel or other tax advisors regarding the appropriate treatment of
foreign taxes paid.
The following table summarizes the long-term capital gain distributions paid by
the Fund during the year.
<TABLE>
<CAPTION>
<S> <C> <C>
COMMON SHAREHOLDERS
RECORD DATE PAYABLE DATE PER SHARE AMOUNT
12/30/94 1/13/95 $0.01250
9/29/95 10/13/95 $0.01876
PREFERRED SHAREHOLDERS
MONTH PAID PER SHARE AMOUNT
10/95 $49.90
</TABLE>
ADDITIONAL INFORMATION
During the period, there have been no material changes in the Fund's investment
objectives or fundamental policies that have not been approved by the
shareholders. There have been no changes in the Fund's charter or By-Laws that
would delay or prevent a change in control of the Fund which have not been
approved by shareholders. There have been no changes in the principal risk
factors associated with investment in the Fund. Fund manager, James Blair,
joined EquitiLink from SBC Funds management. James has significant experience in
international fixed-income management. He has three years investment experience.
<PAGE>
DIRECTORS
Sir Roden Cutler
David Lindsay Elsum
Rt. Hon. Malcolm Fraser
Laurence S. Freedman
Michael Gleeson-White
Michael R. Horsburgh
Roger C. Maddock
David Manor
William J. Potter
Peter D. Sacks
Anton E. Schrafl
E. Duff Scott
John T. Sheehy
Brian M. Sherman
Warren C. Smith
OFFICERS
Laurence S. Freedman, President
Brian M. Sherman, Vice President
David Manor, Treasurer
Roy M. Randall, Secretary
David R. Andrews, Chief Economic Analyst
Ouma Sananikone-Fletcher, Deputy Treasurer
Allan S. Mostoff, Assistant Secretary
Margaret A. Bancroft, Assistant Secretary
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>
