<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 9095
Princeton, New Jersey 08540-9095
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 9095
Princeton, NJ 08540-9095
(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.
SEMI-ANNUAL REPORT
APRIL 30, 1996
HIGHLIGHTS OF THIS REPORT
- - SHARE PRICE RETURN OF 16.1% OVER THE PAST
TWELVE MONTHS (ASSUMING REINVESTMENT OF DISTRIBUTIONS).
- - NET ASSET VALUE RETURN OF 15.2% OVER THE PAST
TWELVE MONTHS (ASSUMING REINVESTMENT OF DISTRIBUTIONS).
- - 89% OF SECURITIES HELD RATED AAA OR AA OR JUDGED TO BE OF EQUIVALENT QUALITY.
<PAGE>
- -------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- -------------------------------------------------------------------
June 14, 1996
Dear Shareholder:
We are pleased to present our Semi-Annual Report to shareholders for the six
months to April 30, 1996. The report includes a summary of developments in
fixed-income and currency markets in Australia, Canada, New Zealand and the
United Kingdom.
INVESTMENT MARKETS
Commonwealth fixed-income markets weakened over the quarter, reflecting global
bond market developments, especially concerns flowing from signs of stronger US
growth. In the three months to the end of April, 1996 Australian bond yields
rose from 8.0% to 8.7%. However, as the US bond market stabilized in the latter
half of April, there was more focus on positive Australian fundamentals.
Yields in the Canadian, New Zealand and UK fixed-income markets also rose over
the quarter ended April 30, 1996, reflecting the weaker global backdrop.
Continued benign inflation enabled the Bank of Canada and the Bank of England to
lower official interest rates over the quarter. In contrast, the Reserve Bank of
New Zealand encouraged market rates to move higher in response to a heightened
inflation risk.
INVESTMENT PERFORMANCE
Assuming reinvestment of the Fund's distributions, Net Asset Value return was
3.6% over the six months and 15.2% over the twelve months ended April 30, 1996.
The Fund's share price return, assuming reinvestment of distributions, was 1.1%
over the six months and 16.1% over the past year.
Distributions to common shareholders over the past twelve months totalled
US$1.045. Based on the April 30, 1996 share price of US$11.00, this represents a
cash distribution rate of 9.5% over the year ended April 30, 1996. Since all
distributions are paid after the deduction of applicable Australian, Canadian,
New Zealand and United Kingdom withholding taxes, the effective yield 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 89% of the
Fund's assets invested in securities where either the issue or the issuer were
rated AA or AAA or judged to be of equivalent quality by the Fund's Investment
Manager.
<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 valuation
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 valuation 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 shortly after
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.
SHARES 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,
Brian M. Sherman Laurence S. Freedman
Chairman and Vice President President
<PAGE>
- -------------------------------------------------------------------
REPORT OF THE INVESTMENT MANAGER
- -------------------------------------------------------------------
PERFORMANCE
DISTRIBUTIONS
Based on the April 30, 1996 share price of US$11.00 and total distributions of
US$1.045 paid over the twelve months to that date, the shares provided a cash
distribution rate of 9.5% for the period. Since all distributions are paid after
the deduction of applicable Australian, Canadian, New Zealand and United Kingdom
withholding taxes, the cash distribution rate is higher for those US investors
who are able to claim a tax credit. The Board's policy is to facilitate payment
of a stable monthly distribution out of current income and supplemented by
realized capital gains if required. As reported in the last quarterly report,
the Board, at its meeting in March, reduced the monthly distribution from
US$0.0875 per share to US$0.0825 per share. It is the Board's intention that the
monthly dividend be maintained at the current level of US$0.0825 per share,
subject to the regular review at the Board's quarterly meetings, the next of
which will be held in September, 1996.
NET ASSET VALUE (NAV) PERFORMANCE
The NAV per share at April 30, 1996 was US$13.01. Total investment return,
based on the Fund's NAV, and assuming reinvestment of distributions, was 1.4%
over the past three months, 3.6% over the past six months and 15.2% over the
past twelve months. At the date of this report, the NAV was US$13.01.
SHARE PRICE PERFORMANCE
As of April 30, 1996, the share price as quoted on the New York Stock Exchange
was US$11.00, which represented a discount of 15.4% to the then current NAV of
US$13.01. Total investment return, based on the Fund's share price and assuming
reinvestment of distributions, was (5.3%) over the past three months, 1.1% over
the six months and 16.1% over the year to April 30, 1996. At the date of this
report, the share price was US$10.875, representing a 16.4% 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 5.02% for the
quarter ended April 30, 1996 compared with 5.39% for 30-day commercial paper
over the same period.
<PAGE>
PORTFOLIO COMPOSITION
The following table displays the composition of the Fund's portfolio by
currency denomination.
TABLE 1: THE FIRST COMMONWEALTH FUND, INC. - ASSET ALLOCATION
<TABLE>
<CAPTION>
COMMENCEMENT OF OPERATIONS
(FEBRUARY 28, 1992) OCTOBER 31, 1995 JANUARY 31, 1996 APRIL 30, 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australia 44.7% 41.4% 39.4% 35.8%
- --------------------------------------------------------------------------------------------------
Canada 17.9% 30.7% 31.6% 31.3%
- --------------------------------------------------------------------------------------------------
New Zealand - 4.7% 4.9% 7.5%
- --------------------------------------------------------------------------------------------------
United Kingdom 36.4% 22.6% 23.3% 24.2%
- --------------------------------------------------------------------------------------------------
United States* 1.0% 0.6% 0.8% 1.2%
- --------------------------------------------------------------------------------------------------
TOTAL FUND 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.
The First Commonwealth Fund, Inc.
Asset Allocation -- April 30, 1996
A pie chart illustrating the following percentages:
Australia 35.8%
United States 1.2%
United Kingdom 24.2%
New Zealand 7.5%
Canada 31.3%
<PAGE>
MATURITY COMPOSITION
The maturity composition of the portfolio as of April 30, 1996 is summarized in
the table below. At April 30, 1996, the average maturity of the Fund's assets
was 6.8 years, compared with 7.6 years at January 31, 1996. Overall, the Fund
remains positioned in medium- to long-term maturities in each market.
TABLE 2: THE FIRST COMMONWEALTH FUND, INC. - MATURITY ANALYSIS - APRIL 30, 1996
<TABLE>
<CAPTION>
LESS THAN 1 YEAR 1 - 5 YEARS 5 - 10 YEARS OVER 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australia 16.4% 23.5% 44.8% 15.3%
- --------------------------------------------------------------------------------
Canada 14.7% 14.7% 42.7% 27.9%
- --------------------------------------------------------------------------------
New Zealand 39.5% 30.3% 30.2% -
- --------------------------------------------------------------------------------
United Kingdom 16.5% 8.9% 33.8% 40.8%
- --------------------------------------------------------------------------------
United States 100.0% - - -
- --------------------------------------------------------------------------------
TOTAL FUND 18.7% 17.5% 39.8% 24.0%
- --------------------------------------------------------------------------------
</TABLE>
The Fund's sectoral exposure is spread among 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 - APRIL 30,
1996
<TABLE>
<CAPTION>
SOVEREIGN STATE/ CASH OR
GOVT. PROVINCE EUROBOND CORPORATE EQUIVALENT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australia 18.9% 1.8% 5.4% 7.2% 2.4%
- --------------------------------------------------------------------------
Canada 12.3% 5.7% 9.1% 2.5% 1.8%
- --------------------------------------------------------------------------
New Zealand 2.3% - 0.5% 1.7% 3.0%
- --------------------------------------------------------------------------
United Kingdom 7.2% - 13.5% - 3.5%
- --------------------------------------------------------------------------
United States - - - - 1.2%
- --------------------------------------------------------------------------
TOTAL FUND 40.7% 7.5% 28.5% 11.4% 11.9%
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
QUALITY OF INVESTMENTS
At April 30, 1996, 89% of the Fund's assets were invested in securities where
either the issue or the issuer was rated at least "Aa" by Moody's Investors
Service Inc. or "AA" by Standard & Poor's Corporation or, if unrated judged by
the Fund's Investment Manager to be of equivalent quality. The remainder of the
Fund was invested in securities where the issue or the issuer was rated, or
judged by the Investment Manager to be of "A" quality (see Table 4).
TABLE 4: THE FIRST COMMONWEALTH FUND, INC. - ASSET QUALITY - APRIL 30, 1996
<TABLE>
<CAPTION>
AAA AA A
- --------------------------------------------
<S> <C> <C> <C>
Australia 71.3% 28.7% -
- --------------------------------------------
Canada 5.2% 80.3% 14.5%
- --------------------------------------------
New Zealand 51.9% 48.1% -
- --------------------------------------------
United Kingdom 34.7% 40.7% 24.6%
- --------------------------------------------
TOTAL FUND 39.6% 49.8% 10.6%
- --------------------------------------------
</TABLE>
The First Commonwealth Fund, Inc.
Quality of Assets -- April 30, 1996
A pie chart illustrating the following percentages:
AAA 39.6%
A 10.6%
AA 49.8%
<PAGE>
- -------------------------------------------------------------------
ECONOMIC, FIXED-INCOME AND CURRENCY MARKET REVIEW
- -------------------------------------------------------------------
AUSTRALIA
Australian economic activity appears to have bottomed. In the March quarter,
Australia GDP growth increased by 1.8% bringing the annual growth rate to 4.8%.
A strong rise in consumption, business investment and government spending led to
the pick-up in growth. In the opinion of the Investment Manager, the Australian
economy should continue to strengthen over the remainder of 1996.
The Liberal/National Coalition government came to power following the March 2
Federal Election. The major economic implications are:
(1) endorsement of the Reserve Bank of Austalia's (RBA) 2% to 3% underlying
inflation target,
(2) a commitment to wind back the projected $7.6 billion underlying deficit in
1996-97 to a surplus within two years,
(3) acceleration of the move to more enterprise-based wage outcomes, with less
role for centralized wage setting, and
(4) industrial relations reform, which is expected to see a much reduced role
for unions. These wage determination and labor market measures are expected to
improve Australia's longer term economic performance.
March quarter price data confirmed the peak in underlying inflation this cycle,
a little above the RBA's longer term 2% to 3% inflation target. After rising
above 5% in 1995, headline inflation fell to 3.7% in the March quarter.
Underlying inflation is expected to remain subdued for the remainder of 1996.
The Australian bond market weakened over the quarter ended April 30, with
Australian ten-year Government bond yields rising from 8.0% to 8.7% in line with
global markets. However, as the US market stabilized in the latter half of
April, there was an increased focus on the lower-than-expected March quarter
Consumer Price Index (CPI) and wage data.
The Australian dollar strengthened against the US dollar over the quarter ended
April 30. Stronger world growth and the associated improvement in commodity
price sentiment, along with continued Japanese buying of Australian dollar
assets, have been the principal factors supporting the Australian dollar. Over
the past three months to April 30, the Australian dollar appreciated by 6.0%
against the US dollar. Supportive interest rate differentials and a stronger
global economy should assist the Australian dollar to strengthen over the medium
term. At the end of April, the currency was trading at US$0.7865. On the date of
this report the Australian dollar was trading at US$0.7865.
CANADA
Canadian economic activity is showing tentative signs of bottoming after very
weak conditions through most of 1995. The 300 basis point easing in interest
rates since May 1995 is beginning to impact on the interest rate sensitive
sectors of the economy, and employment growth also appears to be stabilizing.
Activity is expected to gather momentum through 1996, driven principally by a
recovery in the export sector.
In line with other Commonwealth markets, Canadian bond yields also rose in the
three months ended April 30, 1996. The weakness came despite a 25 basis point
easing by the Bank of Canada in March, moderate inflation and soft economic
data. Yields on Canadian ten-year Government bonds rose from 7.0% at the end of
January to 7.8% at the end of April.
<PAGE>
After trading with a weaker tack for some time, the Canadian dollar stabilized
during the quarter ended April 30. Continued low inflation, an improved fiscal
outlook and a more constructive political outlook in Quebec, were positive
influences. At the end of April, the Canadian dollar was trading at US$0.7350
and at the date of this report, it was trading at US$0.7315.
NEW ZEALAND
Economic activity has regained momentum after weakness in 1995. Consumption is
steady and consumer confidence is at historically high levels. Despite this
strength in the household sector, recent surveys suggest that business
confidence has weakened, reflecting the strength in the currency and continued
high interest rates. March quarter inflation was above the top end of the
Reserve Bank of New Zealand's 0% to 2% target band boosted by a rise in
government charges.
The global bond sell off fed through to the New Zealand bond market, with New
Zealand ten-year Government bond yields rising from 7.0% to 8.5% over the three
months ended April 30. In addition, the New Zealand bond market was affected by
political uncertainty because of the upcoming election in November.
The New Zealand dollar continued to appreciate over the quarter ended April 30
rising 3.7% against the US dollar. Positive commodity price sentiment and the
Reserve Bank's call for firmer monetary conditions appear to have added to the
currency's appeal. At the end of April, the currency was trading at US$0.6862.
At the date of this report the currency was trading at US$0.6712.
UNITED KINGDOM
Economic growth in the UK appears to have stabilized. Inflation pressures have
declined, although annual inflation remains above the Bank of England's 2.5%
target. Subdued price pressures enabled the Bank of England to lower interest
rates by 25 basis points in March.
Over the quarter, UK-ten year Gilt yields rose from 7.5% to approximately 8.0%
reflecting rising yields in other global markets. There were also domestic
political concerns, including the possibility that the Conservative Government
might lose its Parliamentary majority.
The Pound depreciated by 2.6% against the US dollar over the quarter ended
April 30 reflecting continued political concerns and less positive interest rate
differentials. At the end of April, the currency was trading at US$1.5029 and at
the date of this report it was trading at US$1.5368.
<PAGE>
Movements of interest rates in the Commonwealth countries compared with
interest rates when the Fund commenced operations are summarized in the table
following.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FEBRUARY 28, 1992
(COMMENCEMENT
OF OPERATIONS) APRIL 30, 1995 OCTOBER 31, 1995 JANUARY 31, 1996 APRIL 30, 1996
- ---------------------------------------------------------------------------------------------------------------------
AUSTRALIA:
90-day Bank Bills 7.49% 7.88% 7.48% 7.35% 7.55%
10-yr Government Bonds 10.14% 9.67% 8.78% 8.03% 8.71%
CANADA:
90-day Bank Bills 7.15% 7.88% 5.92% 5.13% 5.44%
10-yr Government Bonds 8.33% 8.32% 7.58% 7.06% 7.79%
NEW ZEALAND:
90-day Bank Bills 7.48% 9.15% 8.10% 8.54% 9.62%
10-yr Government Bonds 9.23% 7.85% 7.23% 6.96% 8.52%
UNITED KINGDOM:
90-day Bank Bills 10.85% 6.50% 6.57% 6.09% 5.90%
10-yr Government Bonds 9.26% 8.39% 7.92% 7.49% 8.03%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Yield comparisons are direct and do not take into account fluctuations in
currency exchange rates.
EQUITILINK INTERNATIONAL MANAGEMENT LIMITED
<PAGE>
THE FIRST COMMONWEALTH FUND, INC.
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
LOCAL CURRENCY VALUE
(000) DESCRIPTION (US$)
- -------------------------------------------------------------------
<S> <C> <C>
LONG-TERM INVESTMENTS - 87.5%
AUSTRALIA - 33.2%
GOVERNMENT AND SEMI-GOVERNMENT
BONDS - 20.6%
COMMONWEALTH OF AUSTRALIA - 18.8%
Commonwealth of Australia,
A$ 5,000 12.50%, 3/15/97. . . . . . . . . 4,089,133
4,000 7.00%, 8/15/98. . . . . . . . . . 3,076,942
2,000 12.00%, 7/15/99 1,736,817
5,000 13.00%, 7/15/00. . . . . . . . . 4,572,083
5,000 10.00%, 10/15/02. . . . . . . . 4,212,742
5,000 7.50%, 7/15/05. . . . . . . . . 3,646,293
5,000 10.00%, 2/15/06. . . . . . . . . 4,258,462
4,000 6.75%, 11/15/06 2,724,123
--------------
28,316,595
--------------
SOUTH AUSTRALIA - 1.3%
South Australia Finance Authority,
2,000 12.50%, 5/15/06. . . . . . . . . 1,920,318
--------------
WESTERN AUSTRALIA - 0.5%
Western Australia Treasury
Corporation,
1,000 10.00%, 7/15/05. . . . . . . . . 832,558
--------------
Total Australian government and
semi-government bonds
(cost US$30,425,047). . . . . . . 31,069,471
--------------
CORPORATE BONDS - 7.2%
SERVICES - 7.2%
Australian and Overseas
Telecommunications Corporation,
5,000 11.50%, 10/15/02. . . . . . . . 4,422,018
2,000 12.00%, 5/15/06. . . . . . . . . 1,867,009
First Australian National Mortgage
Acceptance Corporation,
Series 22,
3,969 11.40%, 12/15/01. . . . . . . . 3,345,220
General Property Trust,
1,500 8.25%, 5/31/96. . . . . . . . . . 1,180,143
--------------
Total Australian corporate bonds
(cost US$10,154,302). . . . . . . 10,814,390
--------------
EUROBONDS - 5.4%
FINANCIAL SERVICES - 1.3%
Commonwealth Bank of Australia,
A$ 975 12.75%, 1/07/98. . . . . . . . . 815,762
Export Finance & Insurance Corp.,
750 11.00%, 12/29/04. . . . . . . . 656,088
State Bank of New South Wales,
1,000 10.50%, 4/30/99. . . . . . . . . 824,881
--------------
2,296,731
--------------
FLOATING RATE NOTES - 0.5%
Repackaged Sovereign
Investments S.A.,
1,000 7.796%, 7/28/98 (a). . . . . . . 786,846
--------------
SEMI-GOVERNMENT - 1.4%
South Australia Finance Authority,
500 12.50%, 5/08/01. . . . . . . . . 449,288
Treasury Corporation of Victoria,
1,000 10.50%, 12/12/01. . . . . . . . . 838,645
500 9.00%, 9/04/02 397,183
--------------
1,685,116
--------------
SERVICES - 1.1%
State Electricity Commission of
Victoria,
972 9.25%, 7/27/99. . . . . . . . . 776,939
500 11.00%, 4/09/02 428,643
535 10.50%, 5/27/03. . . . . . . . . 452,654
--------------
1,658,236
--------------
SUPRANATIONAL - 1.1%
Eurofima,
2,000 9.875%, 1/17/07. . . . . . . . . 1,656,495
--------------
Total Australian eurobonds
(cost US$7,610,158). . . . . . . 8,083,424
--------------
Total Australian long-term
investments
(cost US$48,189,507). . . . . . . 49,967,285
--------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
LOCAL CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------------------
<S> <C> <C>
CANADA - 29.2%
GOVERNMENT, PROVINCIAL AND MUNICIPAL
BONDS - 17.8%
CANADA - 12.2%
Canadian Government,
C$ 5,000 9.75%, 12/01/01. . . . . . . . . . . 4,097,089
5,000 8.50%, 4/01/02. . . . . . . . . . . 3,886,153
5,000 7.25%, 6/01/03 3,617,889
5,000 10.25%, 3/15/14. . . . . . . . . . . 4,378,583
3,000 9.00%, 6/01/25 2,376,011
--------------
18,355,725
--------------
ALBERTA - 1.6%
City of Edmonton,
1,000 9.625%, 2/13/12. . . . . . . . . . . 790,828
Province of Alberta,
2,000 10.25%, 8/22/01. . . . . . . . . . 1,662,502
--------------
2,453,330
--------------
BRITISH COLUMBIA - 1.6%
Province of British Columbia,
1,000 8.50%, 2/26/97. . . . . . . . . . . 753,124
1,000 10.15%, 8/29/01 827,576
1,000 9.50%, 1/09/12. . . . . . . . . . . 807,732
--------------
2,388,432
--------------
ONTARIO - 2.4%
Municipality of Halton,
1,000 10.125%, 12/21/99. . . . . . . . . . 809,569
Province of Ontario,
1,000 8.75%, 4/16/97. . . . . . . . . . . 757,386
1,000 8.75%, 4/22/03. . . . . . . . . . . 778,186
2,000 7.50%, 2/07/24. . . . . . . . . . . 1,295,017
--------------
3,640,158
--------------
Total Canadian government,
provincial and municipal bonds
(cost US$29,075,149). . . . . . . . 26,837,645
--------------
CORPORATE BONDS - 2.4%
DIVERSIFIED INDUSTRIALS - 1.3%
Bell Telephone Company of Canada,
500 10.50%, 7/15/09. . . . . . . . . . . 412,686
Imperial Oil Ltd.,
1,000 9.875%, 12/15/99. . . . . . . . . . 804,792
Scotts Hospitality Incorporated,
1,000 10.95%, 4/16/01. . . . . . . . . . . 816,552
--------------
2,034,030
--------------
FINANCIAL SERVICES - 1.1%
Bank of Nova Scotia,
1,000 10.35%, 7/19/01. . . . . . . . . . . 822,431
National Bank of Canada,
500 10.875%, 6/01/98. . . . . . . . . . 398,721
Toronto Dominion Centre,
C$ 500 10.70%, 5/12/98. . . . . . . . . . . 396,884
--------------
1,618,036
--------------
Total Canadian corporate bonds
(cost US$3,995,798). . . . . . . . . 3,652,066
--------------
EUROBONDS - 9.0%
DIVERSIFIED INDUSTRIALS - 0.3%
Procter & Gamble Company,
500 10.875%, 8/15/01. . . . . . . . . . 417,095
--------------
FINANCIAL SERVICES - 3.0%
Credit Local de France,
500 6.75%, 3/21/06. . . . . . . . . . . 330,295
Ford Credit Canada Ltd.,
2,500 9.625%, 11/20/96. . . . . . . . . . 1,876,562
General Electric Capital Corporation,
500 8.25%, 1/09/97. . . . . . . . . . . 374,199
1,000 10.125%, 4/29/98 785,536
Guinness Finance B.V.,
500 9.625%, 10/29/98. . . . . . . . . . 391,371
Prudential Funding Corporation,
1,000 9.125%, 5/12/97. . . . . . . . . . . 759,760
--------------
4,517,723
--------------
NATURAL RESOURCES - 2.4%
Mobil Oil Canada Limited,
300 8.125%, 1/20/98. . . . . . . . . . . 226,581
Ontario Hydro,
1,000 9.00%, 6/24/02. . . . . . . . . . . 790,093
500 8.50%, 5/26/25 361,973
Quebec Hydro,
500 10.625%, 3/08/01. . . . . . . . . . 409,746
1,500 7.00%, 6/01/04 1,030,244
Tokyo Electric Power Company,
500 10.625%, 12/20/96. . . . . . . . . . 378,509
500 10.50%, 6/14/01 412,061
--------------
3,609,207
--------------
PROVINCIAL AND MUNICIPAL - 1.3%
City of Montreal,
1,000 6.375%, 2/15/01. . . . . . . . . . . 696,384
Metropolitan Municipality of Toronto,
750 9.625%, 5/14/02. . . . . . . . . . . 600,176
Province of Ontario,
1,000 7.75%, 12/08/03. . . . . . . . . . . 734,970
--------------
2,031,530
--------------
SUPRANATIONAL - 2.0%
Bayerische Vereinsbank AG,
500 7.125%, 7/29/99. . . . . . . . . . . 371,641
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
LOCAL CURRENCY VALUE
(000) DESCRIPTION (US$)
- -------------------------------------------------------------------------
<S> <C> <C>
Canada (Cayman),
C$ 750 7.25%, 6/01/08. . . . . . . . . . 505,090
Kingdom of Sweden,
3,250 7.00%, 12/01/08. . . . . . . . . . 2,110,374
---------------
2,987,105
---------------
Total Canadian eurobonds
(cost US$14,035,220). . . . . . . 13,562,660
---------------
Total Canadian long-term
investments
(cost US$47,106,167). . . . . . . 44,052,371
---------------
NEW ZEALAND - 4.5%
GOVERNMENT BONDS - 2.4%
Government of New Zealand,
NZ$ 3,000 10.00%, 7/15/97. . . . . . . . . . 2,077,403
2,000 10.00%, 3/15/02 1,445,153
---------------
Total New Zealand government bonds
(cost US$3,490,025). . . . . . . 3,522,556
---------------
CORPORATE BONDS - 1.7%
DIVERSIFIED INDUSTRIALS - 1.3%
Electricity Corporation of
New Zealand Ltd.,
2,750 10.00%, 10/15/01. . . . . . . . . 1,944,062
---------------
FINANCIAL SERVICES - 0.4%
Bank of New Zealand,
1,000 7.50%, 7/15/99. . . . . . . . . . 651,911
---------------
Total New Zealand corporate bonds
(cost US$2,487,345). . . . . . . . 2,595,973
---------------
EUROBONDS - 0.4%
FINANCIAL SERVICES - 0.4%
Primary Industry Bank of Australia
Limited,
1,000 8.25%, 3/27/00. . . . . . . . . . 667,329
---------------
Total New Zealand eurobonds
(cost US$589,732). . . . . . . . . 667,329
---------------
Total New Zealand long-term
investments
(cost US$6,567,102). . . . . . . . 6,785,858
---------------
UNITED KINGDOM - 20.6%
GOVERNMENT BONDS - 7.1%
United Kingdom Treasury,
(pound sterling)2,000 8.00%, 6/10/03. . . . . . . . . . 3,039,615
2,000 6.75%, 11/26/04 2,780,365
3,000 8.50%, 7/16/07. . . . . . . . . . 4,634,098
200 8.00%, 12/07/15 292,878
---------------
Total United Kingdom
government bonds
(cost US$11,383,751). . . . . . . 10,746,956
---------------
EUROBONDS - 13.5%
DIVERSIFIED INDUSTRIALS - 3.5%
Allied Domecq PLC,
(pound sterling)1,000 10.625%, 2/25/99. . . . . . . . . 1,613,814
British Airways PLC,
500 10.00%, 3/02/98. . . . . . . . . . 787,144
British Gas PLC,
1,400 8.875%, 7/08/08. . . . . . . . . . 2,085,755
Rolls-Royce PLC,
500 11.625%, 7/30/98. . . . . . . . . 816,300
---------------
5,303,013
---------------
FINANCIAL SERVICES - 6.5%
Abbey National Treasury
Services PLC,
1,250 8.00%, 4/02/03. . . . . . . . . . 1,859,839
Barclays Bank PLC,
1,000 9.875%, 5/12/49. . . . . . . . . . 1,559,259
Bayerische Hypotheken--und
Wechsel--Bank AG,
500 10.25%, 2/06/97. . . . . . . . . . 771,213
Halifax Building Society,
1,500 11.00%, 1/17/14. . . . . . . . . . 2,561,618
Lloyds Bank PLC,
1,000 7.375%, 3/11/04. . . . . . . . . . 1,392,136
Prudential Finance B.V.,
1,000 9.375%, 6/04/07. . . . . . . . . . 1,574,288
---------------
9,718,353
---------------
NATURAL RESOURCES - 1.1%
Thames Water Utilities
Finance PLC,
1,000 10.50%, 11/21/01. . . . . . . . . 1,662,658
---------------
SUPRANATIONAL - 2.4%
Republic of Finland,
1,000 8.00%, 4/07/03. . . . . . . . . . 1,491,628
1,250 10.125%, 6/22/08 2,071,184
---------------
3,562,812
---------------
Total United Kingdom eurobonds
(cost US$21,270,092). . . . . . . 20,246,836
---------------
Total United Kingdom long-term
investments
(cost US$32,653,843). . . . . . . 30,993,792
---------------
Total long-term investments
(cost US$134,516,619). . . . . . . 131,799,306
---------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
LOCAL CURRENCY VALUE
(000) DESCRIPTION (US$)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -11.8%
AUSTRALIA - 2.3%
Banque National de Paris
Fixed Deposit,
A$ 4,473 7.10%, 5/01/96
(cost US$3,517,733). . . . . . . 3,517,733
----------------
CANADA - 1.8%
State Street Bank Time Deposit,
C$ 3,743 4.50%, 5/06/96
(cost US$2,751,098). . . . . . . 2,751,098
----------------
NEW ZEALAND - 3.0%
National Bank of New Zealand Call
Deposit,
NZ$ 6,456 9.00%, 5/01/96
(cost US$4,419,460). . . . . . . 4,430,344
----------------
UNITED KINGDOM - 3.5%
State Street Bank Fixed Deposit,
(pound sterling) 1,736 5.75%, 5/01/96. . . . . . . . . 2,608,597
1,738 5.75%, 5/08/96. . . . . . . . . 2,611,474
----------------
(cost US$5,241,767). . . . . . 5,220,071
----------------
UNITED STATES- 1.2%
US$ 1,830 Repurchase Agreement, State
Street Bank and Trust
Company, 5.15% dated
4/30/96, due 5/01/96 in the
amount of $1,830,262
(cost $1,830,000;
collateralized by $1,845,000
U.S. Treasury Bond, 4.375%
due 11/15/96; value
$1,871,365). . . . . . . . . . . 1,830,000
----------------
Total short-term investments
(cost US$17,760,058). . . . . . 17,749,246
----------------
TOTAL INVESTMENTS - 99.3%
(cost US$152,276,677). . . . . . 149,548,552
Other assets in excess of
liabilities - 0.7%. . . . . . . 1,040,589
----------------
TOTAL NET ASSETS - 100.0%. . . . $150,589,141
----------------
----------------
(a) Stated interest rate in effect at 4/30/96; interest rate resets quarterly.
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost $152,276,677). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $149,548,552
Foreign currency, at value (cost $74). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Cash. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928
Receivable for investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 860,470
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,791,282
Prepaid expenses. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,917
Deferred organization expenses. . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,972
--------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,257,196
--------------
LIABILITIES
Payable for investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,611,474
Dividends payable - common stock. . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 764,462
Investment management fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,213
Administration fee payable. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,527
Accrued expenses and other liabilities. . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,379
--------------
Total liabilities. . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,668,055
--------------
TOTAL NET ASSETS. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,589,141
--------------
--------------
Total net assets were composed of:
Common stock:
Par value ($.001 per share, 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 30,000,000
4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --------------
157,617,934
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,110
Accumulated net realized gains on investment transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 401,280
Net unrealized depreciation of investments. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,590,590)
Accumulated net realized foreign exchange losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,047,136)
Net unrealized foreign exchange gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870,543
--------------
TOTAL NET ASSETS. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,589,141
--------------
--------------
Net assets applicable to common shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,589,141
--------------
--------------
Net asset value per common share: ($120,589,141 / 9,266,209 shares of common stock issued and outstanding). . . . $ 13.01
--------------
--------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME
Income
Interest and discount earned (net of foreign withholding taxes of $252,790). . . . . . . . . . . . $ 6,342,023
-----------
Expenses
Investment management fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,212
Administration fee. . . . . . . . . . . 151,450
Reports to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,254
Independent accountant's fees and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,037
Custodian's fees and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,271
Directors' fees and expenses. . . . . . 49,663
Auction agent's fees and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,107
Insurance expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,401
Legal fees and expenses. . . . . . . . 19,372
Amortization of deferred organization expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 13,839
Transfer agent's fees and expenses. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,689
Excise tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,680
Registration fees. . . . . . . . . . . 8,041
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,446
-----------
Total operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055,462
-----------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,286,561
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain on investment transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . 401,280
Net change in unrealized appreciation/depreciation of investments. . . . . . . . . . . . . . . . . (1,318,983)
-----------
Net loss on investments. . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (917,703)
-----------
Net increase in total net assets resulting from operations before net foreign exchange gains/losses 4,368,858
Net realized foreign exchange gains. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671,509
Net change in unrealized foreign exchange gains/losses. . . . . . . . . . . . . . . . . . . . . . (549,983)
-----------
NET INCREASE IN TOTAL NET ASSETS RESULTING FROM OPERATIONS. . . . . . . . . . . . . . . . . . . . . $ 4,490,384
-----------
-----------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN CASH
(INCLUDING FOREIGN CURRENCY)
Cash flows provided by operating activities
Interest received. . . . . . . . . . . . . . . . . . . . . . . . . $ 7,050,004
Operating expenses paid. . - (1,103,193)
Purchases of short-term portfolio investments, net. . . . . . . . (9,270,150)
Purchases of long-term portfolio investments. . . . . . . . . . . (11,190,616)
Proceeds from sales of long-term portfolio investments. . . . . . 19,955,485
Other. . . . . . . . . . . 13,716
-----------
Net cash provided by operating activities. . . . . . . . . . . . 5,455,246
------------
Cash flows used for financing activities
Dividends paid to common shareholders. . . . . . . . . . . . . . . (4,818,162)
Dividends paid to preferred shareholders. . . . . . . . . . . . . (783,810)
------------
Net cash used for financing activities. . . . . . . . . . . . . . (5,601,972)
------------
Effect of exchange rate on cash. . . . . . . . . . . . . . . . . . 128,696
------------
Net decrease in cash. . . .. . . . . . . . . . . . . . . . . . . . (18,030)
Cash at beginning of period 19,033
------------
Cash at end of period. . .. . . . . . . . . . . . . . . . . . . . $ 1,003
------------
------------
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. . . . $ 4,490,384
------------
Increase in investments. .. . . . . . . . . . . . . . . . . . . . (2,303,734)
Net realized gain on investment transactions. . . . . . . . . . . (401,280)
Net realized foreign exchange gains. . . . . . . . . . . . . . . (671,509)
Net change in unrealized appreciation/depreciation of investments 1,318,983
Net change in unrealized foreign exchange gains. . . . . . . . . 549,983
Decrease in interest receivable. . . . . . . . . . . . . . . . . 764,941
Increase in receivable for investments sold. . . . . . . . . . . (865,105)
Net decrease in other assets. . . . . . . . . . . . . . . . . . . 13,975
Increase in payable for investments purchased. . . . . . . . . . 2,606,339
Decrease in accrued expenses and other liabilities. . . . . . . . (47,731)
------------
Total adjustments. . . . .. . . . . . . . . . . . . . . . . . . . 964,862
------------
Net cash provided by operating activities. . . . . . . . . . . . . $ 5,455,246
------------
------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C>
FOR THE SIX
MONTHS ENDED
APRIL 30,1996
(UNAUDITED)
----------------
INCREASE (DECREASE) IN TOTAL NET ASSETS
Operations
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,286,561
Net realized gain on investment transactions 401,280
Net change in unrealized appreciation/depreciation of investments. . . . . . . . . . . . . (1,318,983)
------------
Net increase in total net assets resulting from operations before net foreign
exchange gains/losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,368,858
Net realized foreign exchange gains 671,509
Net change in unrealized foreign exchange gains/losses. . . . . . . . . . . . . . . . . . (549,983)
------------
Net increase in total net assets resulting from operations. . . . . . . . . . . . . . . . 4,490,384
------------
Dividends and distributions to shareholders
Dividends to common shareholders from net investment income. . . . . . . . . . . . . . . . (4,771,831)
Dividends to preferred shareholders from net investment income (783,810)
Distributions to common shareholders from net realized gains on investment transactions. . _
Distributions to preferred shareholders from net realized gains on investment transactions -
------------
Net decrease in total net assets resulting from dividends and distributions to shareholders (5,555,641)
------------
Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,065,257)
TOTAL NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,654,398
------------
End of period (including undistributed net investment income of $337,110 and $606,190,
respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,589,141
----------------
----------------
<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 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/losses. . . . . . . . . . . . . . . . . . 892,942
-------------
Net increase 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)
-------------
Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,729,518
TOTAL NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,924,880
-------------
End of period (including undistributed net investment income of $337,110 and $606,190,
respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 151,654,398
------------------
------------------
</TABLE>
17
<PAGE>
- -------------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEAR FOR THE YEAR FOR THE YEAR FEBRUARY 28, 1992*
APRIL 30, 1996 ENDED ENDED ENDED THROUGH
PER SHARE OPERATING (UNAUDITED) OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1993 OCTOBER 31, 1992
PERFORMANCE:
-------------- ------------------ ------------------ ------------------- -------------------
Net asset value per
common share, beginning
of period. . . . . . . $ 13.13 $ 12.08 $ 13.42 $ 13.00 $ 13.89 +
---------- ------------ ------------ ------------ -------------------
Net investment income. 0.57 1.19 1.16 1.19 0.83
Net realized and
unrealized gain (loss)
on investments
and foreign currencies (0.09) 1.10 (1.33) 0.55 (0.76)
---------- ------------ ------------ ------------ -------------------
Total from investment
operations. . . . . . 0.48 2.29 (0.17) 1.74 0.07
---------- ------------ ------------ ------------ -------------------
Dividends from net
investment income to
common
shareholders. . . . . (0.52) (1.03) (0.98) (0.96) (0.80)
Dividends from net
investment income to
preferred
shareholders. . . . . (0.08) (0.18) (0.11) (0.08) (0.03)
Distributions in excess
of net investment
income. . . . . . . . -- -- -- -- (0.04)
Distributions from net
realized gains on
investment
transactions to common
shareholders. . . . . -- (0.03) (0.07) (0.26) --
Distributions from net
realized gains on
investment
transactions to
preferred shareholders -- -- (0.01) (0.02) --
---------- ------------ ------------ ------------ -------------------
Total dividends and
distributions. . . . (0.60) (1.24) (1.17) (1.32) (0.87)
---------- ------------ ------------ ------------ -------------------
Capital charge in
respect to issuance of
preferred shares. . . -- -- -- -- (0.09)
---------- ------------ ------------ ------------ -------------------
Net asset value per
common share, end of
period. . . . . . . . $ 13.01 $ 13.13 $ 12.08 $ 13.42 $ 13.00
---------- ------------ ------------ ------------ -------------------
---------- ------------ ------------ ------------ -------------------
Market value, end of
period. . . . . . . . $ 11.00 $ 11.38 $ 10.38 $ 12.63 $ 13.50
---------- ------------ ------------ ------------ -------------------
---------- ------------ ------------ ------------ -------------------
Number of shares of
common stock
outstanding (000
omitted). . . . . . . 9,266 9,266 9,266 9,249 9,176
TOTAL INVESTMENT RETURN BASED ON:(1)
Market value. . . . . 3.61%(2) 20.72% (10.19)% 2.65% (4.50%)(2)
Net asset value. . . . 1.11%(2) 19.67% (1.63)% 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). . . . $ 120,589 $ 121,654 $ 111,925 124,146 $ 119,302
Average net assets of
common shareholders
(000 omitted). . . . 121,419 115,277 118,336 121,323 125,794
Operating expenses. . 1.75%(4) 1.71% 1.75% 1.73% 1.59%(4)
Net investment income
before preferred stock
dividends. . . . . . 8.76%(4) 9.56% 9.06% 9.03% 8.72%(4)
Net investment income
available to common
shareholders. . . . . 7.46%(4) 8.09% 8.12% 8.25% 8.43%(4)
Preferred stock
dividends and
distributions. . . . 1.30%(4) 1.48% 0.94% 0.78% 0.29%(4)
Portfolio turnover. . 8% 23% 34% 41% 18%
Senior securities
(preferred stock)
outstanding (000
omitted). . . . . . . $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000
Asset coverage on
preferred stock at
period end. . . . . . 502% 505% 473% 514% 498%
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</TABLE>
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(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.
18
<PAGE>
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THE FIRST COMMONWEALTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- -------------------------------------------------------------------
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 seek capital appreciation, only as a secondary
investment objective. 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, territories, 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 $671,509 for the six months ended April
30, 1996 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
loss of $549,983 for the six months ended April 30, 1996 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 of the Commonwealth Currencies on April 30, 1996 were
US$0.7865 to A$1.00, US$0.7350 to C$1.00, US$0.6862 to NZ$1.00, and US$1.5029 to
(pound sterling)1.00.
19
<PAGE>
Security Valuation: Investments are stated at value. Investments for which
market quotations are readily available are valued at the last trade price on or
within one local business day of 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 by $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
substantially 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.
Use of Estimates: The preparation of financial statements in accordance with
generally accepted accounting principles
20
<PAGE>
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
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 $177,464 to the Investment
Adviser and $6,958 to the Consultant during the six months ended April 30, 1996.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the six months ended April 30, 1996 aggregated $11,190,616 and $19,955,485,
respectively.
The United States Federal income tax basis of the Fund's investments at April
30, 1996 was $153,159,110 and accordingly, net unrealized depreciation for
United States Federal income tax purposes was $3,610,558 (gross unrealized
appreciation - $1,633,109; gross unrealized depreciation - $5,243,667).
NOTE 4. CAPITAL
There are 300 million shares of $.001 par value common stock authorized. Of the
9,266,209 shares outstanding at April 30, 1996, the Investment Manager owned
9,302 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
consist 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 6.00% during the six months ended April 30, 1996. 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
Subsequent to April 30, 1996, the Board of Directors of the Fund declared
dividends from undistributed net investment income of $0.0825 and $0.0825 per
common share payable on June 14, 1996 and July 12, 1996 to common shareholders
of record on May 31, 1996 and June 28, 1996, respectively.
Subsequent to April 30, 1996, dividends and distributions declared and paid on
preferred shares totaled approximately $178,800 for the outstanding preferred
share series through June 14, 1996.
21
<PAGE>
- -------------------------------------------------------------------
SUPPLEMENTAL PROXY INFORMATION
- -------------------------------------------------------------------
The Annual Meeting of Shareholders of The First Commonwealth Fund was held on
Thursday March 14, 1996 at the offices of Prudential Securities Incorporated,
One Seaport Plaza, New York, New York. The description of each proposal and
number of shares voted at the meeting are as follows:
<TABLE>
<CAPTION>
VOTES
VOTES FOR WITHHELD
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. To elect the following five Directors to serve as Class I David Lindsay Elsum 8,575,331 166,975
Directors for a three-year term expiring in 1999: Laurence S. Freedman 8,575,331 166,975
Michael R. Horsburgh 8,575,331 166,975
David Manor 8,575,331 166,975
E. Duff Scott 8,575,331 166,975
- --------------------------------------------------------------------------------------------------------------------------------
VOTES
VOTES FOR WITHHELD
- --------------------------------------------------------------------------------------------------------------------------------
2. To elect the following two Directors to represent the interests Roger C. Maddock 590 0
of the holders of preferred stock for the ensuing year: Dr. Anton E. Schrafl 590 0
Directors whose term of office continued beyond this meeting are
as follows: Sir Roden Cutler, Rt. Hon. Malcolm Fraser, William
J. Potter, Peter D. Sacks, John T. Sheehy, Brian M. Sherman,
Warren C. Smith, and Michael Gleeson-White.
- --------------------------------------------------------------------------------------------------------------------------------
VOTES
VOTES FOR AGAINST ABSTENTIONS
- --------------------------------------------------------------------------------------------------------------------------------
3. To ratify the selection of Price Waterhouse LLP as independent
public accountants of the Fund for the fiscal year ending
October 31, 1996: Common 8,545,587 54,536 142,183
Preferred 590 0 0
- --------------------------------------------------------------------------------------------------------------------------------
VOTES
VOTES FOR AGAINST ABSTENTIONS
- --------------------------------------------------------------------------------------------------------------------------------
4. To amend the Fund's charter documents to decrease the
liquidation value of the shares of preferred stock Series W-7,
in order to effect a stock split:
Common 5,683,888 164,736 376,214
Preferred 556 2 0
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
DIRECTORS
Brian M. Sherman, Chairman
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
Warren C. Smith
OFFICERS
Laurence S. Freedman, President
Brian M. Sherman, Vice President
David Manor, Treasurer
Roy M. Randall, Secretary
Ouma Sananikone-Fletcher, Assistant Vice President and Chief Investment Officer
Barry G. Sechos, Assistant 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.
.
23
