<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
March 14, 1997
Dear Shareholder:
We are pleased to present our Quarterly Report to shareholders for the three
months to January 31, 1997. The report includes a summary of developments in
fixed-income and currency markets in the Commonwealth countries of Australia,
Canada, New Zealand and the United Kingdom.
INVESTMENT MARKETS
Commonwealth fixed-income markets performed reasonably well over the quarter
ended January 31, 1997. However, returns were reduced for investors because all
Commonwealth currencies depreciated against the US dollar over the quarter.
Despite the quarter's disappointing performance for investors, the past year
has seen significant gains made through investment in Commonwealth fixed-income
markets. All Commonwealth markets offer long-term yields higher than the US and
capital gains have been made in most markets. Currency effects have been
positive over the past year except for Canada.
The UK market was the strongest performing Commonwealth fixed-income market
over the quarter ended January 31, 1997, both in terms of local currency and US
dollar terms. The UK market strengthened because of reduced fears of higher
official interest rates. Rallying European markets also supported this market.
The Fund's weighting to this market was increased during the quarter ended
January 31, 1997 and this benefited the Fund's performance.
The Australian bond market performed modestly over the past quarter ended
January 31, 1997. Another cut to official interest rates by the Reserve Bank
helped shorter term bonds strengthen. However, longer term bonds were affected
by rising US interest rates, with ten-year Australian Government bond yields
rising from 7.35% to 7.41%.
A similar pattern was seen in both New Zealand and Canada. Short-term bonds
rallied in New Zealand because of cuts to official cash rates. In Canada
short-term bond yields fell because of a moderate growth outlook. Long-term New
Zealand and Canadian bonds were also negatively impacted by US developments.
INVESTMENT PERFORMANCE
Assuming reinvestment of dividends and distributions, the Fund's Net Asset
Value rose by 15.2% and 9.6% respectively over the twelve month and six month
periods to January 31, 1997 but fell by 1.1% over the quarter ended January 31,
1997. The Fund's share price return was 9.1% over the past year, 7.8% over the
past six months, and 2.2% over the past three months.
Distributions to common shareholders over the past twelve months ended
January 31, 1997 totaled US$1.02. Based on the January 31, 1997 share price of
US$11.875, this represents a cash distribution rate of 8.6% over the year to
January 31, 1997. 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 91% of the
Fund's assets invested in securities where either the issue or the issuer was
rated at least 'AA' by Standard & Poor's Corporation or 'Aa' by Moody's
Investors Service, Inc., or, if unrated, was judged by the Investment Manager to
be of equivalent quality.
1
<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 applicable
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 about the
fifteenth of each month.
Other advantages of participation in the Plan include:
O LOWER COSTS--You will build holdings in the Fund automatically, at reduced or
no brokerage cost.
O 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.
O 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 uncertificated 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 President
2
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF THE INVESTMENT MANAGER
- --------------------------------------------------------------------------------
PERFORMANCE
DISTRIBUTIONS
The Fund continues to pay a monthly cash distribution of US$0.0825 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 June 1997.
The Board's policy is to provide investors with a stable monthly distribution
out of current income, supplemented with realized capital gains if required.
Based on the January 31, 1997 share price of US$11.875, distributions
consisting of two payments of US$0.0875 per share plus ten payments of US$0.0825
and a special payment of US$0.02 in January 1997, totaling US$1.02 paid over the
twelve months to that date, the annual cash distribution rate was 8.6%. 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.
NET ASSET VALUE (NAV) PERFORMANCE
The NAV per share at January 31, 1997 was US$13.86. Assuming reinvestment of
dividends and distributions, the Fund's NAV returned 15.2% over the year ended
January 31, 1997, 9.6% over the six month period, and -1.1% over the past
quarter. At the date of this report, the NAV was US$13.98.
SHARE PRICE PERFORMANCE
As of January 31, 1997, the share price as quoted on the New York Stock
Exchange was US$11.875 which represented a discount of 14.32% to the NAV of
US$13.86. The total investment return, based on the Fund's share price and
assuming reinvestment of distributions, was 9.1% over the past year ended
January 31, 1997, 7.8% over the six month period, and 2.2% over the quarter
ended January 31, 1997. At the date of this report, the share price was US$12.00
representing a 14.16% discount to NAV.
AUCTION MARKET PREFERRED STOCK (AMPS)
The Fund's US$30 million of AMPS continues to be well bid at the weekly
auctions, maintaining a lower interest rate on average than to the 30-day
Commercial Paper rate. Weighted average auction results were 5.29% for the
quarter ended January 31, 1997 compared with 5.55% for 30-day commercial paper
over the same period.
3
<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. It
is based upon the currencies in which the Fund is invested.
TABLE 1: THE FIRST COMMONWEALTH FUND, INC. -- GEOGRAPHIC ASSET ALLOCATION
<TABLE><CAPTION>
COMMENCEMENT OF OPERATIONS
(FEBRUARY 28, 1992) JANUARY 31, 1996 OCTOBER 31, 1996 JANUARY 31, 1997
<S> <C> <C> <C> <C>
Australia 44.7% 39.4% 30.5% 29.5%
Canada 17.9% 31.6% 34.5% 30.8%
New Zealand -- 4.9% 9.5% 9.9%
United Kingdom 36.4% 23.3% 24.1% 29.5%
United States** 1.0% 0.8% 1.4% 0.3%
TOTAL FUND 100.0% 100.0% 100.0% 100.0%
</TABLE>
**It is the policy of the Investment Manager to maintain a portion of the Fund's
investments in US dollar short-term securities to cover distribution payments
and expenses.
THE FIRST COMMONWEALTH FUND, INC.
ASSET ALLOCATION - JANUARY 31, 1997
A pie chart illustrates the following percentages:
Canada 30.8%
New Zealand 9.9%
United Kingdom 29.5%
United States 0.3%
Australia 29.5%
4
<PAGE>
MATURITY COMPOSITION
The maturity composition of the portfolio as of January 31, 1997 is
summarized in the table below. At January 31, 1997 the average maturity of the
Fund's assets was 7.0 years, compared with 7.1 years at October 31, 1996 and 7.6
years at January 31, 1996. Overall, the Investment Manager believes that the
Fund remains well positioned in medium-term to long-term maturities in each
market.
TABLE 2: THE FIRST COMMONWEALTH FUND, INC. -- MATURITY ANALYSIS -- JANUARY 31,
1997
<TABLE><CAPTION>
LESS THAN 1 YEAR 1 - 5 YEARS 5 - 10 YEARS OVER 10 YEARS
<S> <C> <C> <C> <C>
Australia 16.8% 30.8% 47.3% 5.1%
Canada 12.0% 34.1% 25.5% 28.4%
New Zealand 21.1% 36.1% 42.8% --
United Kingdom 6.1% 14.7% 32.2% 47.0%
United States 100.0% -- -- --
TOTAL FUND 12.8% 27.5% 35.6% 24.1%
</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 -- JANUARY
31, 1997
<TABLE><CAPTION>
CASH OR
SOVEREIGN GOVT. STATE/ PROVINCE EUROBOND CORPORATE EQUIVALENT
<S> <C> <C> <C> <C> <C>
Australia 14.0% 1.1% 5.6% 5.8% 3.0%
Canada 12.2% 5.3% 7.7% 2.4% 3.2%
New Zealand 5.1% -- 2.3% 1.3% 1.2%
United Kingdom 14.0% -- 14.2% -- 1.3%
United States -- -- -- -- 0.3%
TOTAL FUND 45.3% 6.4% 29.8% 9.5% 9.0%
</TABLE>
5
<PAGE>
QUALITY OF INVESTMENTS
At January 31, 1997, 91% 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 Investment Manager to be of equivalent quality at the time of
investment. 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 -- JANUARY 31, 1997
AAA/AAA AA/AA A/A
Australia 71.0% 29.0% --
Canada 9.6% 82.1% 8.3%
New Zealand 69.4% 30.6% --
United Kingdom 49.7% 31.6% 18.7%
TOTAL FUND 45.6% 46.1% 8.3%
THE FIRST COMMONWEALTH FUND, INC.
QUALITY OF ASSETS - JANUARY 31, 1997
A pie chart illustrates the following percentages:
A/A 8.3%
AAA/Aaa 45.6%
AA/Aa 46.1%
6
<PAGE>
- --------------------------------------------------------------------------------
ECONOMIC, FIXED-INCOME AND CURRENCY MARKET REVIEW
- --------------------------------------------------------------------------------
AUSTRALIA
The Australian economy continues to grow at a moderate pace. GDP grew by 0.5%
in the December quarter and by 3.1% in the year to December 1996. The
manufacturing and retail sectors face tough trading conditions and the labor
market remains weak. However, recently released data has shown that the
construction sector is strengthening, service industries are generally
performing well and the outlook for the housing sector is improving. Australia's
underlying inflation fell to 2.1% per annum in the quarter ended December 1996
and the headline inflation rate fell to 1.5% per annum. Because of this low
inflation and the slow growth in the economy, the Reserve Bank of Australia
(RBA) cut official interest rates by 50 basis points in December 1996 -- the
third cut since July 1996. Overall, economic growth is expected to pick up over
the next year, supported by lower interest rates and a firmer international
economy.
The Australian bond market performed modestly over the quarter ended January
31, 1997. There was a decline in short-term bonds following the cut in official
interest rates in December 1996. However, there were renewed concerns about
higher official interest rates in the United States as economic growth
strengthened in the December quarter. These concerns flowed onto the Australian
bond market. Ten year bond yields rose by 6 basis points over the quarter to be
7.41% on January 31, 1997. The differential against ten-year US Treasuries fell
a further 9 basis points over the quarter to be 92 basis points on January 31,
1997.
Over the three months to the end of January, the Australian dollar
depreciated by 3.9% against the US dollar. The Australian dollar rose strongly
early in the quarter but fell sharply from late November. The weakness reflected
expectations of less favorable interest rate differentials and continuing doubts
about the timing of the recovery in commodity prices. Looking ahead, the
Australian dollar should be supported by favorable domestic fundamentals (such
as low inflation and an improving budget outlook), as well as any improvement in
international growth and commodity price sentiment. At the end of January, the
currency was trading at $US0.7615. At the date of this report, the Australian
dollar was trading at US$0.7968.
CANADA
Canadian economic growth has been gradually improving. GDP has risen to an
annual rate of over 2% per annum. Leading economic indicators have strengthened,
especially for the housing sector. Retail spending has increased, although the
unemployment rate is around 10%. Core inflation remains below an annual rate of
2%. The Bank of Canada lowered official interest rates to 3% during 1996,
reflecting earlier weak activity, low inflation and a strong Canadian dollar.
Canadian bond yields rose during the quarter ended January 31, 1997 with 10
year bond yields closing above US Treasuries, despite trading below the
equivalent US rate for a brief time. Domestic factors were generally positive
due to continued low inflation, moderate growth and a gradually improving fiscal
position and this saw short term yields fall. However, weakness in the US bond
market due to renewed concerns about higher US official interest rates flowed
into the Canadian market and 10 year bond yields rose.
7
<PAGE>
Over the three months to the end of January, the Canadian dollar depreciated
by 0.6% against the US dollar. The Canadian dollar strengthened against other
major currencies, particularly the Yen and Deutschemark. The outlook for the
Canadian dollar is promising. Economic growth is accelerating, inflation remains
low, the public sector deficit is in decline and the external accounts are
positive. Furthermore, there is little chance of further cuts to official
interest rates. At the end of January, the currency was trading at US$0.7418. At
the date of this report, the Canadian dollar was trading at US$0.7336.
NEW ZEALAND
Economic activity has been weak in New Zealand with GDP rising by 2.3% for
the year to September 30, 1996. Price pressures are low and underlying inflation
was 2.4% per annum for the year ending December 31, 1996. Since the formation of
a Coalition government in November 1996 there have been a number of economic
policy changes, including widening the Reserve Bank of New Zealand's (RBNZ)
inflation target from 0-2% to 0-3%. This wider target band should allow for
lower official interest rates over time.
After a strong rally in the previous quarter ended October 31, 1996,
long-term New Zealand bonds were slightly weaker in the three months to January
31, 1997. Ten-year bond yields rose by 5 basis points to 7.34%. However, the
widening of the RBNZ's target range led to short-term bonds performing
substantially better. The yield for 90 day bills fell over the quarter from
8.84% to 7.30%.
Over the three months to the end of January, the New Zealand dollar
depreciated by 2.4% against the US dollar. At the end of January, the currency
was trading at US$0.6886. At the date of this report, the New Zealand dollar was
trading at US$0.6968.
UNITED KINGDOM
United Kingdom economic growth continues to be one of the strongest in Europe
at 2.6% per annum in the December quarter. Employment has been strong and this
has supported consumer spending. Despite strong domestic demand, manufacturing
production has been weak more recently. Notably, exports have slowed following
the appreciation of the Pound. Inflation has increased to around 3% per annum,
reflecting higher wages and strong consumer demand. Despite market speculation,
there have been no further increase in interest rates since October 1996. The
Chancellor has been resisting pressure from the Bank of England for a further
rate rise and a further cut is unlikely prior to the May General election.
Despite concerns about a further official interest rate increase in the UK
and a weaker US market, the Gilt market rallied again over the quarter ended
January 31, 1997. Continental European bond markets were generally supportive.
Ten-year bond yields fell by 22 basis points over the quarter to 7.40% on
January 31, 1997.
Over the three months to the end of January, the Pound depreciated by 1.5%
against the US dollar. At the end of January, the currency was trading at
US$1.5998. At the date of this report, the Pound was trading at US$1.5948.
8
<PAGE>
The table below compares interest rates in the four Commonwealth's countries
for various periods since the Fund commenced operations.
<TABLE><CAPTION>
FEBRUARY 28, 1992
(COMMENCEMENT
OF OPERATIONS) JANUARY 31, 1996 OCTOBER 31, 1996 JANUARY 31, 1997
<S> <C> <C> <C> <C>
AUSTRALIA:
90-day Bank Bills 7.49% 7.35% 6.53% 5.64%
10-yr Government Bonds 10.14% 8.03% 7.35% 7.41%
CANADA:
90-day Bank Bills 7.15% 5.13% 3.11% 2.86%
10-yr Government Bonds 8.33% 7.06% 6.42% 6.56%
NEW ZEALAND:
90-day Bank Bills 7.48% 8.54% 8.84% 7.30%
10-yr Government Bonds 9.23% 6.96% 7.29% 7.34%
UNITED KINGDOM:
90-day Bank Bills 10.85% 6.09% 5.87% 6.03%
10-yr Government Bonds 9.26% 7.49% 7.62% 7.40%
</TABLE>
Yield comparisons are direct and do not take into account fluctuations in
currency exchange rates.
EQUITILINK INTERNATIONAL MANAGEMENT LIMITED
9
<PAGE>
- ----------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1997
(UNAUDITED)
- ------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- ------------------------------------------------
LONG-TERM INVESTMENTS - 89.8%
AUSTRALIA - 26.2%
GOVERNMENT AND SEMI-GOVERNMENT
BONDS - 14.9%
COMMONWEALTH OF AUSTRALIA - 13.8%
Commonwealth of Australia,
A$ 3,000 12.50%, 3/15/97................. 2,301,464
2,000 6.25%, 3/15/99.................. 1,524,980
2,000 12.00%, 7/15/99................. 1,717,182
5,000 13.00%, 7/15/00................. 4,545,774
5,000 10.00%, 10/15/02................ 4,324,178
2,000 7.50%, 7/15/05.................. 1,538,078
4,000 10.00%, 2/15/06................. 3,560,774
1,000 8.75%, 8/15/08.................. 832,243
2,000 7.50%, 9/15/09.................. 1,511,882
------------
21,856,555
------------
VICTORIA - 1.1%
State Electricity Commission of
Victoria,
1,000 12.00%, 10/22/98................ 833,987
Treasury Corporation of Victoria,
1,000 10.25%, 11/15/06................ 896,735
------------
1,730,722
------------
Total Australian gover nment and
semi-gover nment bonds (cost
US$23,563,972).................. 23,587,277
------------
CORPORATE BONDS - 5.8%
SERVICES - 5.8%
Australian and Overseas
Telecommunications Corporation,
5,000 11.50%, 10/15/02................ 4,536,906
2,000 12.00%, 5/15/06................. 1,945,576
First Australian National
Mortgage
Acceptance Corporation,
Series 22,
3,206 11.40%, 12/15/01................ 2,666,536
------------
Total Australian corporate bonds
(cost US$8,477,985)............. 9,149,018
------------
EUROBONDS - 5.5%
FINANCIAL SERVICES - 2.0%
Commonwealth Bank of Australia,
A$ 975 12.75%, 1/07/98................. 786,082
Export Finance & Insurance
Corporation,
1,750 11.00%, 12/29/04................ 1,580,826
State Bank of New South Wales,
1,000 10.50%, 4/30/99................. 820,516
------------
3,187,424
------------
SEMI-GOVERNMENT - 1.3%
South Australia Finance
Authority,
500 12.50%, 5/08/01................. 452,617
Treasury Corporation of Victoria,
1,000 10.50%, 12/12/01................ 856,688
1,000 9.00%, 6/27/05.................. 816,709
------------
2,126,014
------------
SERVICES - 1.1%
State Electricity Commission of
Victoria,
972 9.25%, 7/27/99.................. 782,738
500 11.00%, 4/09/02................. 438,814
535 10.50%, 5/27/03................. 463,930
------------
1,685,482
------------
SUPRANATIONAL - 1.1%
Eurofima,
2,000 9.875%, 1/17/07................. 1,749,546
------------
Total Australian eurobonds
(cost US$8,173,178)............. 8,748,466
------------
Total Australian long-term
investments
(cost US$40,215,135)............ 41,484,761
------------
10
<PAGE>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- ------------------------------------------------------------
CANADA - 27.3%
GOVERNMENT, PROVINCIAL AND MUNICIPAL
BONDS - 17.3%
CANADA - 12.0%
Canadian Government,
C$ 5,000 9.75%, 12/01/01................. 4,337,537
5,000 8.50%, 4/01/02.................. 4,156,528
5,000 7.25%, 6/01/03.................. 3,936,202
5,000 10.25%, 3/15/14................. 4,857,567
2,000 9.00%, 6/01/25.................. 1,787,685
------------
19,075,519
------------
ALBERTA - 1.7%
City of Edmonton,
1,000 9.625%, 2/13/12................. 891,395
Province of Alberta,
2,000 10.25%, 8/22/01................. 1,754,896
------------
2,646,291
------------
BRITISH COLUMBIA - 1.6%
Province of British Columbia,
1,000 8.50%, 2/26/97.................. 744,637
1,000 10.15%, 8/29/01................. 873,516
1,000 9.50%, 1/09/12.................. 894,955
------------
2,513,108
------------
ONTARIO - 2.0%
Municipality of Halton,
1,000 10.125%, 12/21/99............... 841,098
Province of Ontario,
1,000 8.75%, 4/22/03.................. 839,392
2,000 7.50%, 2/07/24.................. 1,465,134
------------
3,145,624
------------
Total Canadian government,
provincial and municipal bonds
(cost US$27,422,387)............ 27,380,542
------------
CORPORATE BONDS - 2.4%
DIVERSIFIED INDUSTRIALS - 1.4%
Bell Telephone Company of Canada,
500 10.50%, 7/15/09................. 443,731
Imperial Oil Ltd.,
1,000 9.875%, 12/15/99................ 835,608
Scotts Hospitality Incorporated,
1,000 10.95%, 4/16/01................. 875,742
------------
2,155,081
------------
FINANCIAL SERVICES - 1.0%
Bank of Nova Scotia,
C$ 1,000 10.35%, 7/19/01................. 869,214
National Bank of Canada,
500 10.875%, 6/01/98................ 402,485
Toronto Dominion Centre,
500 10.70%, 5/12/98................. 400,371
------------
1,672,070
------------
Total Canadian corporate bonds
(cost US$3,995,799)............. 3,827,151
------------
EUROBONDS - 7.6%
DIVERSIFIED INDUSTRIALS - 0.3%
Procter & Gamble Company,
500 10.875%, 8/15/01................ 439,076
------------
FINANCIAL SERVICES - 2.0%
Credit Local de France,
1,000 6.75%, 3/21/06.................. 736,276
General Electric Capital
Corporation,
1,000 10.125%, 4/29/98................ 794,696
Inter national Bank for
Reconstruction
and Development,
2,000 10.125%, 7/20/99................ 1,669,080
------------
3,200,052
------------
NATURAL RESOURCES - 1.8%
Ontario Hydro,
1,000 9.00%, 6/24/02.................. 841,988
500 8.50%, 5/26/25.................. 412,537
Quebec Hydro,
1,500 7.00%, 6/01/04.................. 1,129,451
Tokyo Electric Power Company,
500 10.50%, 6/14/01................. 433,513
------------
2,817,489
------------
PROVINCIAL AND MUNICIPAL - 0.9%
City of Montreal,
1,000 6.375%, 2/15/01................. 751,113
Metropolitan Municipality of
Toronto,
750 9.625%, 5/14/02................. 639,837
------------
1,390,950
------------
11
<PAGE>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- ------------------------------------------------------------
SUPRANATIONAL - 2.6%
Bayerische Vereinsbank AG,
C$ 500 7.125%, 7/29/99................. 389,002
Canada (Cayman),
750 7.25%, 6/01/08.................. 559,162
Kingdom of Sweden,
3,250 7.00%, 12/01/08................. 2,408,809
Republic of Finland,
1,000 9.00%, 12/31/98................. 800,883
------------
4,157,856
------------
Total Canadian eurobonds
(cost US$11,534,269)............ 12,005,423
------------
Total Canadian long-term
investments
(cost US$42,952,455)............ 43,213,116
------------
NEW ZEALAND - 8.5%
GOVERNMENT BONDS - 5.0%
Government of New Zealand,
NZ$ 2,000 10.00%, 7/15/97................. 1,393,345
3,000 10.00%, 3/15/02................. 2,298,324
4,000 8.00%, 4/15/04.................. 2,849,576
2,000 8.00%, 11/15/06................. 1,435,733
------------
Total New Zealand government
bonds
(cost US$7,705,023)............. 7,976,978
------------
CORPORATE BONDS - 1.3%
DIVERSIFIED INDUSTRIALS - 1.3%
Electricity Corporation of
New Zealand Ltd.,
2,750 10.00%, 10/15/01................ 2,052,326
------------
Total New Zealand corporate bonds
(cost US$1,818,266)............. 2,052,326
------------
EUROBONDS - 2.2%
FINANCIAL SERVICES - 2.2%
International Bank for
Reconstruction
and Development,
2,000 9.00%, 7/08/99.................. 1,415,073
Primary Industry Bank of
Australia Limited,
1,000 8.25%, 3/27/00.................. 700,651
Societe Generale New Zealand
Euro,
NZ$ 2,000 9.00%, 5/29/98.................. 1,394,415
------------
Total New Zealand eurobonds
(cost US$3,465,863)............. 3,510,139
------------
Total New Zealand long-term
investments
(cost US$12,989,152)............ 13,539,443
------------
UNITED KINGDOM - 27.8%
GOVERNMENT BONDS - 13.8%
United Kingdom Treasury,
1,000 8.00%, 12/07/00................. 1,655,468
2,000 8.00%, 6/10/03.................. 3,330,584
2,000 6.75%, 11/26/04................. 3,101,612
2,000 7.50%, 12/07/06................. 3,221,597
5,000 8.50%, 7/16/07.................. 8,613,923
1,200 8.00%, 12/07/15................. 1,995,351
------------
Total United Kingdom government
bonds
(cost US$21,501,908)............ 21,918,535
------------
EUROBONDS - 14.0%
DIVERSIFIED INDUSTRIALS - 3.6%
Allied Domecq PLC,
1,000 10.625%, 2/25/99................ 1,699,787
British Airways PLC,
500 10.00%, 3/02/98................. 823,897
British Gas PLC,
1,400 8.875%, 7/08/08................. 2,337,708
Rolls-Royce PLC,
500 11.625%, 7/30/98................ 849,894
------------
5,711,286
------------
FINANCIAL SERVICES - 6.8%
Abbey National Treasury
Services PLC,
1,250 8.00%, 4/02/03.................. 2,027,247
Barclays Bank PLC,
1,000 9.875%, 5/29/49................. 1,749,781
Bayerische Hypotheken-und
Wechsel-Bank AG,
500 10.25%, 2/06/97................. 800,223
Halifax Building Society,
1,500 11.00%, 1/17/14................. 2,915,635
12
<PAGE>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- ------------------------------------------------------------
Lloyds Bank PLC,
L$ 1,000 7.375%, 3/11/04................. 1,547,807
Prudential Finance B.V.,
1,000 9.375%, 6/04/07................. 1,741,782
------------
10,782,475
------------
NATURAL RESOURCES - 1.1%
Thames Water Utilities
Finance PLC,
1,000 10.50%, 11/21/01................ 1,779,777
------------
SUPRANATIONAL - 2.5%
Republic of Finland,
1,000 8.00%, 4/07/03.................. 1,629,796
1,250 10.125%, 6/22/08................ 2,319,710
------------
3,949,506
------------
Total United Kingdom eurobonds
(cost US$21,287,264)............ 22,223,044
------------
Total United Kingdom
long-term investments
(cost US$42,789,172)............ 44,141,579
------------
Total long-term investments
(cost US$138,945,914)........... 142,378,899
------------
SHORT-TERM INVESTMENTS - 8.9%
AUSTRALIA - 2.9%
Banque National de Paris Fixed
Deposit,
5.60%, 2/03/97
A$ 6,102 (cost US$4,646,610)............. 4,646,610
------------
CANADA - 3.2%
State Street Bank Time Deposit,
C$ 3,383 2.65%, 2/03/97.................. 2,509,278
3,384 2.65%, 2/07/97.................. 2,510,570
------------
(cost US$5,020,592)............. 5,019,848
------------
NEW ZEALAND - 1.2%
Bankers Trust New Zealand
Limited Call Account,
NZ$ 2,700 7.75%, 2/03/97
(cost US$1,912,440)............. 1,859,486
------------
UNITED KINGDOM - 1.3%
State Street Bank Fixed Deposit,
5.80%, 2/06/97
L$ 1,259 (cost US$2,037,465)............. 2,014,297
------------
UNITED STATES - 0.3%
US$ 477 Repurchase Agreement, State
Street Bank and Trust
Company, 5.35% dated
1/31/97, due 2/03/97 in the
amount of $477,213
(cost $477,000;
collateralized by $405,000
U.S. Treasury Bond, 8.75%
due 5/15/17; value
$492,399)....................... 477,000
------------
Total short-term investments
(cost US$14,094,107)............ 14,017,241
------------
TOTAL INVESTMENTS - 98.7%
(cost US$153,040,021)........... 156,396,140
Unrealized appreciation on foreign
currency exchange contracts-0.0%+ 10,565
Other assets in excess of
liabilities - 1.3%.............. 2,049,655
------------
TOTAL NET ASSETS - 100.0%........ $158,456,360
------------
------------
- --------------------------------------------------------------------------------
+FOREIGN CURRENCY EXCHANGE CONTRACTS AS OF JANUARY 31, 1997:
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
CURRENCY CURRENCY EXPIRATION
PURCHASED SOLD DATE COST VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
United States Australian February
dollar dollar 1997 $761,500 $772,065
- ---------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<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.
<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 08543-9095
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266
AUCTION AGENT
Chase Manhattan Bank, N.A.
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
30 Rockefeller Plaza
New York, New York 10112
Stikeman Elliot
L32 Chifley Tower
Chifley Square
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.
- ---------------------------------------------
QUARTERLY REPORT
JANUARY 31, 1997
HIGHLIGHTS OF THIS
REPORT
O COMMONWEALTH BOND
MARKETS HAVE PERFORMED
WELL OVER THE PAST
YEAR, LIFTING THE
FUNDS'S NET ASSET
VALUE BY 15.2% OVER
THE PAST TWELVE MONTHS
(ASSUMING REINVESTMENT
OF DIVIDENDS AND
DISTRIBUTIONS).
O CASH DISTRIBUTION RATE
OF 8.6% OVER PAST
TWELVE MONTHS.
O OVER 91% OF SECURITIES
HELD RATED AAA AND AA
OR JUDGED TO BE OF
EQUIVALENT QUALITY.
