<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
September 12, 1997
Dear Shareholder:
We are pleased to present our Quarterly Report to shareholders for the three
months to July 31, 1997. The report includes a summary of developments in bond
and currency markets in Australia, Canada, New Zealand and the United Kingdom.
INVESTMENT MARKETS
Commonwealth bond markets were generally stronger over the quarter. These
markets took the positive lead from the US and European markets which were also
stronger. Currency movements had a mixed impact on the Fund's performance. The
UK pound and the Canadian dollar both strenghtened against the US dollar, while
the Australian and New Zealand dollar were both weaker against the US dollar.
The Australian market recorded the best performance in local currency terms
while the Canadian market recorded the best performance in US dollar terms.
Australian ten year bond yields fell by 1.49% to 6.34%, reflecting moderate
economic growth, low inflation and further cuts in interest rates.
The New Zealand and UK markets also performed strongly in local currency
terms. Ten year government bonds in New Zealand fell from 7.85% to 6.66% and
from 7.43% to 6.96% in the UK.
INVESTMENT PERFORMANCE
The Fund's Net Asset Value increased by 4.7% over the quarter and 16.0% for
the 12 months to July 31, 1997, assuming reinvestment of distributions, due to
strength in Commonwealth bond markets. The total return based on share price was
8.1% for the quarter and 16.4% for the year.
Distributions to common shareholders over the 12 months to July 31, 1997
totalled US$1.01. This represents a cash distribution rate of 8.2% for the year,
based on the share price on July 31, 1997 of US$12.31. As all distributions are
paid after deducting applicable Australian, Canadian, New Zealand and United
Kingdom withholding taxes, the distribution rate is higher for those US
investors who are able to claim a tax credit.
The Fund continues to maintain a high quality portfolio, with over 91% of
assets invested in securities where either the issue or the issuer are rated at
least 'AA' by Standard & Poor's Corporation or 'Aa' by Moody's or, if unrated,
are judged to be of equivalent quality by the Investment Manager.
1
<PAGE>
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
- --------------------------------------------------------------------------------
We invite you to participate in the Fund's Dividend Reinvestment and Cash
Purchase Plan ('the Plan'), which allows you to automatically re-invest your
distributions in shares of the Fund's common stock.
Where the market price of shares, plus any applicable brokerage commissions,
equals or exceeds the Net Asset Value of shares on the applicable valuation
date, the Fund will issue new shares at a discount of up to 5% from the market
price. Where the market price is less than the Net Asset Value, plus any
applicable brokerage commissions, on the valuation date, the Fund will purchase
shares on the market. Distributions made under the Plan are taxable to the same
extent as are cash distributions.
The Plan enables you to make optional cash investments in Fund shares through
the Plan Agent at favorable commission rates. You may invest 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 15th of each
month.
Other advantages of participating in the Plan include:
o LOWER COSTS -- You will build your holdings in the Fund automatically at a
reduced 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.
If you would like further information on the Plan, please contact 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 in the Plan 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., including weekly updates of
share price, NAV, and details of recent distributions, is available by
telephoning toll-free, 1-800-543-6217 or 1-800-323-9995 in the United States.
Yours sincerely,
/s/ Brian M. Sherman /s/ Laurence S. Freedman
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 8.25 cents per
share. This distribution rate was re-affirmed at the September meeting of the
Board of Directors ('the Board'). The Board reviews the level of the
distribution on a regular basis with the next review scheduled for the Board
meeting to be held in December 1997. The Board's policy is to provide investors
with a stable monthly distribution out of current income and to supplement this
with realized capital gains if required.
Distributions to common shareholders over the past 12 months totalled
US$1.01, consisting of 12 payments of US 8.25 cents per share and a special
payment of US 2 cents per share in January 1997. Based on the July 31, 1997
share price of US$12.31 and total distributions of US$1.01 paid over the 12
months to that date, this represents an annual cash distribution rate of 8.2%.
Since all distributions are paid after deducting applicable Australian,
Canadian, New Zealand and United Kingdom withholding taxes, the effective
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 July 31, 1997 was US$14.08. Assuming reinvestment of
distributions, the Fund's NAV increased 4.7% and 16.0% over the three and 12
months respectively. Since inception, the Fund has returned 9.7% per annum to
July 31, 1997. At the date of this report, the NAV per share was US$13.69.
SHARE PRICE PERFORMANCE
As of July 31, 1997, the share price as quoted on the New York Stock Exchange
was US$12.31. This represented a discount of 12.6% to the NAV of US$14.08. The
total investment return, based on the Fund's share price and assuming
reinvestment of distributions, was 8.1% over the three months to July 31, 1997
and 16.4% over the 12 months to July 31, 1997. At the date of this report, the
share price was US$12.06, representing a discount of 11.9% to NAV.
AUCTION MARKET PREFERRED STOCK (AMPS)
The Fund's US$30 million of AMPS continue 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 5.32% for the three
months ended July 31, 1997 compared with 5.62% for 30-day commercial paper over
the same period.
3
<PAGE>
PORTFOLIO COMPOSITION
The following table and chart show the geographical composition of the
portfolio, expressed as a percentage of the portfolio's total investments. The
figures are based on the currencies in which the portfolio is invested.
TABLE 1: THE FIRST COMMONWEALTH FUND, INC. -- GEOGRAPHIC ASSET ALLOCATION
<TABLE>
<CAPTION>
COMMENCEMENT OF OPERATIONS
(FEBRUARY 28, 1992) OCTOBER 31, 1996 APRIL 30, 1997 JULY 31, 1997
<S> <C> <C> <C> <C>
Australia 44.7% 30.5% 32.2% 31.4%
Canada 17.9% 34.5% 28.7% 29.0%
New Zealand -- 9.5% 7.6% 7.4%
United Kingdom 36.4% 24.1% 30.7% 31.7%
United States* 1.0% 1.4% 0.8% 0.5%
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 AT JULY 31, 1997
[A PIE CHART ILLUSTRATING THE FOLLOWING PERCENTAGES:]
Canada 29.0%
New Zealand 7.4%
United Kingdom 31.7%
United States 0.5%
Australia 31.4%
4
<PAGE>
MATURITY COMPOSITION
The following table shows the maturity composition of the portfolio as of
July 31, 1997. At July 31, 1997, the average maturity of the Fund's assets was
7.2 years, compared with 7.1 years at April 30, 1997 and 7.1 years at July 31,
1996. Overall, the Fund remains well positioned in medium to long term
maturities in each market.
TABLE 2: THE FIRST COMMONWEALTH FUND, INC. -- MATURITY ANALYSIS -- JULY 31, 1997
<TABLE>
<CAPTION>
LESS THAN 1 YEAR 1 - 5 YEARS 5 - 10 YEARS OVER 10 YEARS
<S> <C> <C> <C> <C>
Australia 7.9% 33.4% 49.2% 9.5%
Canada 6.9% 46.8% 14.5% 31.8%
New Zealand 18.8% 43.0% 38.2% --
United Kingdom 13.0% 10.3% 52.4% 24.3%
United States 100.0% -- -- --
TOTAL FUND 10.5% 30.5% 39.1% 19.9%
</TABLE>
The Portfolio's sectoral exposure is spread among the various securities
offered in the Commonwealth bond markets and is summarized in the following
table.
TABLE 3: THE FIRST COMMONWEALTH FUND, INC. -- SECTORAL COMPOSITION --
JULY 31, 1997
<TABLE>
<CAPTION>
SOVEREIGN GOVT. STATE/ PROVINCE CASH OR
BONDS BONDS EUROBONDS CORPORATE BONDS EQUIVALENT
<S> <C> <C> <C> <C> <C>
Australia 14.0% 1.8% 7.5% 7.1% 1.0%
Canada 13.7% 4.4% 8.1% 1.8% 1.0%
New Zealand 3.7% -- 2.1% 1.0% 0.6%
United Kingdom 14.5% -- 14.1% -- 3.1%
United States -- -- -- -- 0.5%
TOTAL FUND 45.9% 6.2% 31.8% 9.9% 6.2%
</TABLE>
5
<PAGE>
QUALITY OF INVESTMENTS
At July 31, 1997, over 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 or, if unrated, were judged
to be of equivalent quality by the Investment Manager. The remainder of the Fund
was invested in securities where the issue or the issuer was rated, or deemed at
least equivalent to 'A' quality.
TABLE 4: THE FIRST COMMONWEALTH FUND, INC. -- ASSET QUALITY -- JULY 31, 1997
AAA/AAA AA/AA A/A
Australia 66.3% 33.7% --
Canada 8.9% 85.0% 6.1%
New Zealand 73.4% 3.1% 23.5%
United Kingdom 50.6% 32.4% 17.0%
TOTAL FUND 44.9% 46.4% 8.7%
THE FIRST COMMONWEALTH FUND, INC.
QUALITY OF ASSETS AT JULY 31, 1997
[A PIE CHART ILLUSTRATING THE FOLLOWING PERCENTAGES:]
AAA/Aaa 44.9%
AA/Aa 46.4%
A/A 8.7%
6
<PAGE>
- --------------------------------------------------------------------------------
ECONOMIC, FIXED-INCOME AND CURRENCY MARKET REVIEW
- --------------------------------------------------------------------------------
AUSTRALIA
The Australian economy continues to grow at only a moderate rate. Employment
has been broadly flat and unemployment remains at over 8.5%. Forward indicators
have improved, especially for the housing industry. Business investment has been
strong, particularly in non-residential construction. However, other sectors
continue to face difficult trading conditions. Australia's inflation remains
low. Underlying (or core) annual inflation is likely to be below 2% until mid
1998. Economic growth is expected to gradually improve through the second half
of 1997 and into 1998, helped by the full effects of the earlier reductions in
interest rates.
The Australian bond market was one of the strongest performing bond markets
during the quarter. The market was supported by a combination of moderate
economic growth, low inflation, subdued wages and two further interest rate
cuts, together with a more positive US bond market. Ten year government bond
yields fell by 1.49% to a record low of 6.34% and 90 day bank bill rates fell
from 5.91% to 4.85%. The differential against ten year US Treasuries fell by
0.78% to 0.33%.
The Australian dollar was generally weaker over the quarter, depreciating by
4.8% against the US dollar. In trade weighted terms, the fall in the Australian
dollar was less pronounced. The depreciation reflected concerns about weaker
commodity prices (especially gold) and expectations of further cuts in official
interest rates. At the end of July, the currency was trading at US$0.74. On the
date of this report, the Australian dollar was trading at US$0.72.
CANADA
The Canadian economy continues to improve. Cuts in official interest rates
have stimulated the interest sensitive components of spending. Domestic demand
has grown strongly since mid 1996, led by residential construction, equipment
investment and consumer-durables spending. Inflation remains low, reflecting
excess capacity in the economy, limited wage pressures and the firm Canadian
dollar. Economic growth should continue to pick up through 1997, with stronger
domestic demand. Growth is expected to be over 3% again in 1998.
Canadian bond markets strengthened during the quarter with ten year bond
yields falling from 6.63% to 5.77%. The differential against ten year US
Treasuries fell by 0.15% to 0.24% below the US bond rate. The Canadian market
was supported by continued low inflation, an improving fiscal position, and the
more positive US bond market. These factors more than offset any market concerns
flowing from stronger economic growth and higher official interest rates.
The Canadian dollar appreciated over the quarter by 1.2% against the US
dollar. The Canadian dollar's strength was assisted by expectations that
Canadian interest rates could increase more than US interest rates. The Canadian
dollar strengthened against the Deutschemark, but was weaker against the Yen. At
the end of July, the currency was trading at US$0.72. On the date of this
report, the Canadian dollar was trading at US$0.71.
7
<PAGE>
NEW ZEALAND
Economic growth slowed sharply in the first half of 1997, reflecting high
real interest rates and a high real exchange rate. Business and consumer
confidence has fallen and the unemployment rate has edged up slightly. Housing
and retail spending have weakened. Underlying inflation slowed to 1.5% in the
three months to June 30, 1997. The Investment Manager believes that after a
period of softer growth through 1997, the economy will pick up again in 1998,
due to some easing in overall monetary conditions.
The New Zealand bond market rose strongly during the quarter reflecting
weaker New Zealand economic growth and supported by the positive US bond market.
Ten year government bond rates fell from 7.85% to 6.66%. However, shorter dated
bonds did not rally as strongly and the rate for 90 day bank bills rose from
6.80% to 7.94%. The higher rates for bank bills reflected the Reserve Bank's
concern about the weaker New Zealand dollar.
The New Zealand dollar depreciated over the quarter by 6.6% against the US
dollar. The depreciation was associated with signs of weaker economic growth and
expectations that overall monetary conditions would not be as restrictive as in
earlier periods. At the end of July, the currency was trading at US$0.64. On the
date of this report, the New Zealand dollar was trading at US$0.63.
UNITED KINGDOM
Economic growth in the United Kingdom remains the strongest amongst the major
European economies. Domestic demand has been supported by stronger consumer
spending as unemployment has continued to fall. However, the sharp rise in the
Pound is impacting on exports. Headline inflation has increased to over 3%,
reflecting higher mortgage costs and recent tax rises. However, underlying
inflation remains below the Bank of England's 2.5% inflation target, with
currency strength helping to contain cost pressures. The outlook is for GDP to
remain strong through 1997 but slow in 1998, reflecting tighter monetary policy
and the full impact of the Pound's appreciation.
The Gilt market was stronger during the quarter. As of July 31, 1997 ten year
bond yields were 6.96%, compared with 7.43% at April 30, 1997. The UK market was
assisted by the stronger US and European markets. Bond yields remained
attractive compared with other European markets and despite continued strong UK
economic growth and further increases in official interest rates.
The Pound appreciated over the quarter by 0.9% against the US dollar, helped
by strong UK economic growth and expectations of higher interest rates. At the
end of July, the currency was trading at US$1.63. On the date of this report the
Pound Sterling was trading at US$1.60.
8
<PAGE>
The following table compares interest rates in Commonwealth countries' for
various periods since the Fund commenced operations.
<TABLE>
<CAPTION>
FEBRUARY 28, 1992
(COMMENCEMENT
OF OPERATIONS) JULY 31, 1996 APRIL 30, 1997 JULY 31, 1997
<S> <C> <C> <C> <C>
AUSTRALIA:
90-day Bank Bills 7.49% 6.93% 5.91% 4.85%
10-yr Government Bonds 10.14% 8.31% 7.83% 6.34%
CANADA:
90-day Bank Bills 7.15% 4.46% 3.15% 3.24%
10-yr Government Bonds 8.33% 7.90% 6.63% 5.77%
NEW ZEALAND:
90-day Bank Bills 7.48% 9.72% 6.80% 7.94%
10-yr Government Bonds 9.23% 8.36% 7.85% 6.66%
UNITED KINGDOM:
90-day Bank Bills 10.85% 5.61% 6.29% 6.81%
10-yr Government Bonds 9.26% 7.90% 7.43% 6.96%
</TABLE>
Yield comparisons are direct and do not take into account fluctuations in
currency exchange rates.
EQUITILINK INTERNATIONAL MANAGEMENT LIMITED
9
<PAGE>
- -----------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------
LONG-TERM INVESTMENTS - 92.6%
AUSTRALIA - 29.9%
GOVERNMENT AND SEMI-GOVERNMENT
BONDS - 15.5%
COMMONWEALTH OF AUSTRALIA - 13.8%
Commonwealth of Australia,
A$ 2,000 6.25%, 3/15/99.................. 1,512,532
2,000 12.00%, 7/15/99................. 1,669,470
5,000 13.00%, 7/15/00................. 4,454,011
5,000 10.00%, 10/15/02................ 4,369,996
1,000 9.00%, 9/15/04.................. 859,798
2,000 7.50%, 7/15/05.................. 1,599,952
4,000 10.00%, 2/15/06................. 3,680,087
1,600 10.00%, 10/15/07................ 1,506,402
1,000 8.75%, 8/15/08.................. 877,256
2,000 7.50%, 9/15/09.................. 1,611,462
------------
22,140,966
------------
SOUTH AUSTRALIA - 0.6%
South Australia Finance
Authority,
1,000 12.50%, 10/15/00................ 889,058
------------
VICTORIA - 0.6%
Treasury Corporation of
Victoria,
1,000 10.25%, 11/15/06................ 935,881
------------
WESTERN AUSTRALIA - 0.5%
Western Australia Treasury
Corporation,
1,000 10.00%, 7/15/05................. 906,505
------------
Total Australian government and
semi-government bonds (cost
US$24,315,697).................. 24,872,410
------------
CORPORATE BONDS - 7.0%
FINANCIAL SERVICES - 0.5%
Deutsche Bank AG,
1,000 5.75%, 5/30/07 (a).............. 751,619
------------
SERVICES - 6.5%
Australian and Overseas
Telecommunications Corporation,
5,000 11.50%, 10/15/02................ 4,554,449
2,000 12.00%, 5/15/06................. 2,045,424
First Australian National
Mortgage
Acceptance Corporation,
Ser ies 22,
2,884 11.40%, 12/15/01................ 2,427,939
PUMA Masterfund P-6 Tranche 1F,
1,000 6.90%, 4/15/00.................. 762,608
Westpac Securitization Trust 97-2,
Series A,
A$ 958 5.505%, 6/23/28 (b)............. 712,968
------------
10,503,388
------------
Total Australian corporate bonds
(cost US$10,522,436)............ 11,255,007
------------
EUROBONDS - 7.4%
FINANCIAL SERVICES - 4.2%
Commonwealth Bank of Australia,
975 12.75%, 1/07/98................. 745,754
Credit Local de France,
2,000 10.50%, 1/06/99................. 1,585,514
Export Finance & Insurance
Corporation,
1,750 11.00%, 12/29/04................ 1,618,274
Ing Mercantile Mutual Bank Ltd.,
500 7.125%, 3/13/02................. 384,297
State Bank of New South Wales,
1,000 10.50%, 4/30/99................. 801,121
Toyota Motor Credit Corporation,
2,000 10.75%, 3/06/98................. 1,531,610
------------
6,666,570
------------
SEMI-GOVERNMENT - 1.3%
South Australia Finance
Authority,
500 12.50%, 5/08/01................. 447,959
Treasury Corporation of
Victoria,
1,000 10.50%, 12/12/01................ 860,601
1,000 9.00%, 6/27/05.................. 849,449
------------
2,158,009
------------
SERVICES - 0.8%
State Electricity Commission of
Victoria,
972 9.25%, 7/27/99.................. 769,656
535 10.50%, 5/27/03................. 472,355
------------
1,242,011
------------
SUPRANATIONAL - 1.1%
Eurofima,
2,000 9.875%, 1/17/07................. 1,815,999
------------
Total Australian eurobonds
(cost US$11,392,285)............ 11,882,589
------------
Total Australian long-term
investments
(cost US$46,230,418)............ 48,010,006
------------
10
<PAGE>
- -----------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------
CANADA - 27.6%
GOVERNMENT, PROVINCIAL AND MUNICIPAL
BONDS - 17.8%
CANADA - 13.5%
Canadian Government,
C$ 3,000 7.50%, 3/01/01.................. 2,342,990
5,000 9.75%, 12/01/01................. 4,248,624
5,000 8.50%, 4/01/02.................. 4,100,883
5,000 7.25%, 6/01/03.................. 3,945,901
5,000 10.25%, 3/15/14................. 5,149,913
2,000 9.00%, 6/01/25.................. 1,956,402
------------
21,744,713
------------
ALBERTA - 1.7%
City of Edmonton,
1,000 9.625%, 2/13/12................. 945,828
Province of Alberta,
2,000 10.25%, 8/22/01................. 1,713,355
------------
2,659,183
------------
BRITISH COLUMBIA - 1.1%
Province of British Columbia,
1,000 10.15%, 8/29/01................. 853,418
1,000 9.50%, 1/09/12.................. 950,319
------------
1,803,737
------------
ONTARIO - 1.5%
Province of Ontario,
1,000 8.75%, 4/22/03.................. 838,210
2,000 7.50%, 2/07/24.................. 1,618,627
------------
2,456,837
------------
Total Canadian government,
provincial and municipal bonds
(cost US$28,067,331)............ 28,664,470
------------
CORPORATE BONDS - 1.8%
DIVERSIFIED INDUSTRIALS - 0.8%
Bell Telephone Company of Canada,
500 10.50%, 7/15/09................. 438,623
Imperial Oil Ltd.,
1,000 9.875%, 12/15/99................ 802,216
------------
1,240,839
------------
FINANCIAL SERVICES - 1.0%
Bank of Nova Scotia,
C$ 1,000 10.35%, 7/19/01................. 848,638
National Bank of Canada,
500 10.875%, 6/01/98................ 381,120
Toronto Dominion Centre,
500 10.70%, 5/12/98................. 379,345
------------
1,609,103
------------
Total Canadian corporate bonds
(cost US$3,103,827)............. 2,849,942
------------
EUROBONDS - 8.0%
DIVERSIFIED INDUSTRIALS - 0.3%
Procter & Gamble Company,
500 10.875%, 8/15/01................ 429,099
------------
FINANCIAL SERVICES - 2.4%
Credit Local de France,
1,000 6.75%, 3/21/06.................. 760,429
General Electric Capital
Corporation,
1,000 10.125%, 4/29/98................ 754,092
International Bank for
Reconstruction
and Development,
2,000 10.125%, 7/20/99................ 1,589,093
Rabobank Nederland N.V.,
1,000 9.00%, 12/22/00................. 802,071
------------
3,905,685
------------
NATURAL RESOURCES - 1.8%
Ontario Hydro,
1,000 9.00%, 6/24/02.................. 832,851
500 8.50%, 5/26/25.................. 454,519
Quebec Hydro,
1,500 7.00%, 6/01/04.................. 1,152,864
Tokyo Electric Power Company,
500 10.50%, 6/14/01................. 423,215
------------
2,863,449
------------
PROVINCIAL AND MUNICIPAL - 0.9%
City of Montreal,
1,000 6.375%, 2/15/01................. 741,418
Metropolitan Municipality of
Toronto,
750 9.625%, 5/14/02................. 632,106
------------
1,373,524
------------
11
<PAGE>
- -----------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------
SUPRANATIONAL - 2.6%
Bayerische Vereinsbank AG,
C$ 500 7.125%, 7/29/99................. 375,688
Canada (Cayman),
750 7.25%, 6/01/08.................. 585,259
Kingdom of Sweden,
3,250 7.00%, 12/01/08................. 2,509,523
Republic of Finland,
1,000 9.00%, 12/31/98................. 764,919
------------
4,235,389
------------
Total Canadian eurobonds
(cost US$12,380,073)............ 12,807,146
------------
Total Canadian long-term
investments
(cost US$43,551,231)............ 44,321,558
------------
NEW ZEALAND - 6.8%
GOVERNMENT BONDS - 3.7%
Government of New Zealand,
NZ$ 2,500 10.00%, 3/15/02................. 1,818,934
5,000 8.00%, 4/15/04.................. 3,447,245
1,000 8.00%, 11/15/06................. 704,596
------------
Total New Zealand government
bonds
(cost US$5,967,648)............. 5,970,775
------------
CORPORATE BONDS - 1.0%
DIVERSIFIED INDUSTRIALS - 0.8%
Electricity Corporation of
New Zealand Ltd.,
1,750 10.00%, 10/15/01................ 1,238,884
------------
FINANCIAL SERVICES - 0.2%
Transpower Finance Ltd.,
500 8.00%, 6/15/05.................. 338,123
------------
Total New Zealand corporate bonds
(cost US$1,493,950)............. 1,577,007
------------
EUROBONDS - 2.1%
FINANCIAL SERVICES - 2.1%
International Bank for
Reconstruction
and Development,
2,000 9.00%, 7/08/99.................. 1,326,760
Primary Industry Bank of
Australia Limited,
1,000 8.25%, 3/27/00.................. 658,526
Societe Generale New Zealand,
NZ$ 2,000 9.00%, 5/29/98.................. 1,302,490
------------
Total New Zealand eurobonds
(cost US$3,465,863)............. 3,287,776
------------
Total New Zealand long-term
investments
(cost US$10,927,461)............ 10,835,558
------------
UNITED KINGDOM - 28.3%
GOVERNMENT BONDS - 14.3%
United Kingdom Treasury,
Pound 1,000 8.00%, 12/07/00................. 1,683,223
2,000 8.00%, 6/10/03.................. 3,423,002
2,000 6.75%, 11/26/04................. 3,228,769
2,000 7.50%, 12/07/06................. 3,383,592
5,000 8.50%, 7/16/07.................. 9,041,808
1,200 8.00%, 12/07/15................. 2,189,227
------------
Total United Kingdom government
bonds
(cost US$21,504,635)............ 22,949,621
------------
EUROBONDS - 14.0%
DIVERSIFIED INDUSTRIALS - 3.7%
Allied Domecq PLC,
1,000 10.625%, 2/25/99................ 1,709,454
British Airways PLC,
500 10.00%, 3/02/98................. 829,136
British Gas PLC,
1,400 8.875%, 7/08/08................. 2,484,952
Rolls-Royce PLC,
500 11.625%, 7/30/98................ 849,609
------------
5,873,151
------------
FINANCIAL SERVICES - 6.6%
Abbey National Treasury
Services PLC,
1,250 8.00%, 4/02/03.................. 2,090,754
Barclays Bank PLC,
1,000 9.875%, 5/29/49................. 1,860,950
Halifax Building Society,
1,500 11.00%, 1/17/14................. 3,190,639
12
<PAGE>
- -----------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- -----------------------------------------------------------
Lloyds Bank PLC,
Pound 1,000 7.375%, 3/11/04................. 1,619,375
Prudential Finance B.V.,
1,000 9.375%, 6/04/07................. 1,848,667
------------
10,610,385
------------
NATURAL RESOURCES - 1.1%
Thames Water Utilities
Finance PLC,
1,000 10.50%, 11/21/01................ 1,799,533
------------
SUPRANATIONAL - 2.6%
Republic of Finland,
1,000 8.00%, 4/07/03.................. 1,686,934
1,250 10.125%, 6/22/08................ 2,474,613
------------
4,161,547
------------
Total United Kingdom eurobonds
(cost US$20,456,687)............ 22,444,616
------------
Total United Kingdom long-term
investments
(cost US$41,961,322)............ 45,394,237
------------
Total long-term investments
(cost US$142,670,432)........... 148,561,359
------------
SHORT-TERM INVESTMENTS - 6.1%
AUSTRALIA - 1.0%
Banque National de Paris Fixed
Deposit,
5.10%, 8/01/97
A$ 2,218 (cost US$1,649,384)............. 1,649,384
------------
CANADA - 1.0%
State Street Bank Time Deposit,
3.00%, 8/07/97
C$ 2,274 (cost US$1,641,721)............. 1,647,190
------------
NEW ZEALAND - 0.6%
Bankers Trust New Zealand
Limited Call Account,
NZ$ 1,393 8.05%, 8/01/97
(cost US$929,975)............... 901,772
------------
UNITED KINGDOM - 3.0%
State Street Bank Fixed Deposit,
6.50%, 8/06/97
Pound 2,959 (cost US$4,818,476)............. 4,845,696
------------
UNITED STATES - 0.5%
US$ 813 Repurchase Agreement, State
Street Bank and Trust
Company, 5.50% dated
7/30/97, due 8/01/97 in the
amount of $813,124
(cost $813,000;
collateralized by $810,000
U.S. Treasury Bonds, 6.25%
due 3/31/99; value
$833,710)....................... 813,000
------------
Total short-term investments
(cost US$9,852,556)............. 9,857,042
------------
TOTAL INVESTMENTS - 98.7%
(cost US$152,522,988)........... 158,418,401
Other assets less liabilities -
1.3%............................. 2,078,056
------------
TOTAL NET ASSETS - 100.0%........ $160,496,457
------------
------------
- --------------------------------------------------------------------------------
(a) Stated interest rate in effect at 7/31/97; interest rate resets quarterly.
(b) Stated interest rate in effect at 7/31/97; interest rate resets monthly.
13
<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.
14
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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 08543-9095
(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
JULY 31, 1997
HIGHLIGHTS OF THIS REPORT
o NAV RETURN 4.7% FOR THE QUARTER, 16.0% FOR THE YEAR.*
o TOTAL RETURN BASED ON SHARE PRICE 8.1% FOR
THE QUARTER, 16.4% FOR THE YEAR.*
o CASH DISTRIBUTION RATE 8.2% FOR THE YEAR.
* ASSUMING REINVESTMENT OF DISTRIBUTIONS
