<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
September 18, 1998
Dear Shareholder:
We are pleased to present our Quarterly Report to shareholders for the three
months ended July 31, 1998. The report includes a summary of developments in
bond and currency markets in Australia, Canada, New Zealand and the United
Kingdom.
INVESTMENT MARKETS
The strength of the US dollar had a negative impact on the performance of the
Fund over the three months to July 31, 1998, appreciating against all
Commonwealth currencies.
The New Zealand bond market was the best performer of the Commonwealth
markets in local currency terms over the three months to July 31, 1998. The
market rallied strongly due to weakness in domestic conditions. Ten-year
Government bond yields fell 0.62% to 6.14% over the period. However, the weak
economic conditions caused the New Zealand dollar to depreciate against the US
dollar. Over the quarter, the currency fell 8.0% to US 51 cents, detracting from
the performance of the Fund.
The Australian bond market strengthened over the three months to July 31,
1998, with ten-year government bond yields falling from 5.77% to 5.57%. UK bond
rates also fell over the quarter. The Canadian bond market lagged the other
Commonwealth markets, with ten-year bond yields moving up from 5.38% to 5.46%.
INVESTMENT PERFORMANCE
The Fund's total return based on Net Asset Value ('NAV') was -4.2% over the
three months and -3.2% over the year to July 31, 1998. The Fund's total return
based on share price was -0.2% for the three months and -3.7% for the year. The
NAV and share price performance both assume reinvestment of distributions.
The Fund continues to maintain a high quality portfolio, with 95% of assets
invested in securities where either the issue or the issuer is rated at least
'AA' by Standard & Poor's Ratings Group or 'Aa' by Moody's Investors Service or,
if unrated, is judged to be of equivalent quality by the Investment Manager.
DISTRIBUTIONS
Distributions to common shareholders for the year to July 31, 1998, totalled
US 97 cents per share. Based on the share price of US$10.94 at July 31, 1998,
the cash distribution rate over the last 12 months was 8.9%. Since 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.
At its meeting held on September 10, 1998, the Board of Directors resolved to
continue paying a monthly distribution of US 7.75 cents per share through to
December when the Board will review the position at its next quarterly meeting.
The Board intends to maintain future distributions at as high a level as is
practicable in the current economic climate.
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 at favorable commission
rates. Distributions made under the Plan are taxable to the same extent as are
cash distributions. The Plan also enables you to make additional cash
investments in shares of at least $100 per month. As a participant in the Plan,
you will also have the convenience of:
AUTOMATIC REINVESTMENT -- the Plan Agent will automatically reinvest your
distributions, allowing you to gradually grow your holdings in the Fund;
LOWER COSTS -- shares purchased on your behalf under the Plan will be at
reduced brokerage rates;
CONVENIENCE -- the Plan Agent will hold your shares in uncertificated form
and will provide a detailed record of your holdings at the end of each
distribution period.
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.
For information on the Fund including weekly updates of share price, NAV, and
details of recent distributions, please telephone Investor Relations, toll free
on 1-800-543-6217 in the United States.
Yours sincerely,
Brian M. Sherman Laurence S. Freedman
Chairman President
2
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF THE INVESTMENT MANAGER
- --------------------------------------------------------------------------------
PERFORMANCE
DISTRIBUTIONS
During the 12 months to July 31, 1998, the Fund paid a total of US 97 cents
per share in distributions, consisting of 8 monthly payments of US 8.25 cents
per share and four monthly payments of US 7.75 cents per share. The Board's
policy is to provide investors with a stable monthly distribution out of current
income, supplemented by realized capital gains if required. The Board revised
the current monthly distribution of US 8.25 cents per share in March 1998 down
to US 7.75 cents per share with effect from the distribution payable on April 9,
1998. The current distribution rate of US 7.75 cents per share per month will be
reviewed at the next meeting of the Board to be held in December 1998.
Based upon the July 31, 1998 share price of US$10.94, and total distributions
of US 97 cents per share paid over the past 12 months, the Fund provided a cash
distribution rate of 8.9%. At the date of this report, with the share price at
US$10.56 and monthly distributions at US 7.75 cents per share, the annualized
cash distribution rate to shareholders is 8.8% per annum. Since 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.
NET ASSET VALUE (NAV) PERFORMANCE
The Fund's Net Asset Value per share at July 31, 1998 was US$12.57. The
Fund's total return based on NAV was -4.2% over the three months and -3.2% over
the year to July 31, 1998. Since inception, the Fund's average NAV return was
7.6% per annum. All figures assume reinvestment of distributions. At the date of
this report, the NAV per share was US$12.88.
SHARE PRICE PERFORMANCE
As of July 31, 1998, the Fund's share price as quoted on the New York Stock
Exchange was US$10.94, which represented a discount of 13.0% to the NAV of
US$12.57. The total investment return, based on the Fund's share price, assuming
reinvestment of distributions, was -0.2% over the three months and -3.7% over
the year to July 31, 1998. Since inception, the average share price return was
4.0% per annum. At the date of this report, the share price was US$10.56,
representing a discount of 18.0% 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. The average interest rate of auction results over the
quarter was 5.3% compared with 5.5% for 30-day commercial paper over the same
period.
Holders of Common Stock have generally benefited from the Fund's issuance of
the AMPS which commenced in 1992. Since the fiscal quarter beginning August 1,
1997, however, the shrinking yield differential between Australian, New Zealand
and Canadian interest rates versus those available in the US and depreciating
Australian, New Zealand and Canadian dollars have resulted in the AMPS having a
negative impact on the total return to holders of Common Stock. Because the
Investment Manager's and the Investment Adviser's fees are based on the average
net assets of the Fund, which include the AMPS, the Investment Manager and
Investment Adviser have benefited from the Fund's determination not to redeem
the AMPS.
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* JANUARY 31, 1998 APRIL 30, 1998 JULY 31, 1998
<S> <C> <C> <C> <C>
Australia 44.7% 24.9% 25.5% 25.5%
Canada 17.9% 29.8% 30.9% 30.9%
New Zealand -- 9.3% 9.2% 9.3%
United Kingdom 36.4% 35.6% 33.4% 34.1%
United States** 1.0% 0.4% 1.0% 0.2%
TOTAL FUND 100.0% 100.0% 100.0% 100.0%
</TABLE>
*February 28, 1992.
**It is the policy of the Investment Manager to maintain a portion of the Fund's
investments in US short-term securities to cover distributions and expenses.
THE FIRST COMMONWEALTH FUND, INC.
ASSET ALLOCATION AT JULY 31, 1998
[PIE CHART DEPICTING THE GEOGRAPHICAL ASSET ALLOCATION
OUTLINED IN THE TABLE ABOVE]
4
<PAGE>
MATURITY COMPOSITION
The following table shows the maturity composition of the portfolio. At July
31, 1998, the average maturity of the Fund's assets was 7.8 years, compared with
7.8 years on April 30, 1998 and 7.2 years at July 31, 1997.
TABLE 2: THE FIRST COMMONWEALTH FUND, INC. -- MATURITY ANALYSIS -- JULY 31, 1998
<TABLE><CAPTION>
LESS THAN 1 YEAR 1 - 5 YEARS 5 - 10 YEARS OVER 10 YEARS
<S> <C> <C> <C> <C>
Australia 10.8% 40.3% 41.0% 7.9%
Canada 13.0% 39.0% 16.4% 31.6%
New Zealand 14.6% 35.8% 49.6% --
United Kingdom 7.1% 17.4% 48.2% 27.3%
United States 100.0% -- -- --
TOTAL FUND 10.8% 31.5% 36.6% 21.1%
</TABLE>
The following table shows the sectoral exposure of the portfolio, spread
between the various securities offered in the Commonwealth bond markets.
TABLE 3: THE FIRST COMMONWEALTH FUND, INC. -- SECTORAL COMPOSITION -- JULY 31,
1998
<TABLE><CAPTION>
SOVEREIGN GOVT. STATE/ PROVINCE CASH OR
BONDS BONDS EUROBONDS CORPORATE BONDS EQUIVALENT
<S> <C> <C> <C> <C> <C>
Australia 11.2% 5.0% 4.9% 3.2% 1.2%
Canada 18.4% 3.4% 5.4% 1.3% 2.4%
New Zealand 4.8% -- 3.0% 1.2% 0.3%
United Kingdom 18.5% -- 14.3% -- 1.3%
United States -- -- -- -- 0.2%
TOTAL FUND 52.9% 8.4% 27.6% 5.7% 5.4%
</TABLE>
5
<PAGE>
QUALITY OF INVESTMENTS
At July 31, 1998, 95% of the Fund's assets were invested in securities where
either the issue or the issuer was rated at least 'AA' by Standard & Poor's
Ratings Group or 'Aa' by Moody's Investors Service or, if unrated, was 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 to
be at least equivalent to, 'A' quality.
TABLE 4: THE FIRST COMMONWEALTH FUND, INC. -- ASSET QUALITY -- JULY 31, 1998
AAA AA A
Australia 74.6% 25.4% --
Canada 6.8% 88.1% 5.1%
New Zealand 76.4% 17.4% 6.2%
United Kingdom 56.5% 34.5% 9.0%
TOTAL FUND 48.1% 46.6% 5.3%
THE FIRST COMMONWEALTH FUND, INC.
QUALITY OF ASSETS AT JULY 31, 1998
[PIE CHART DEPICTING THE QUALITY OF ASSETS OUTLINED IN THE TABLE ABOVE]
6
<PAGE>
- --------------------------------------------------------------------------------
ECONOMIC, FIXED-INCOME AND CURRENCY MARKET REVIEW
- --------------------------------------------------------------------------------
AUSTRALIA
Economy
The pace of growth in the Australian economy has eased from the 3.1% recorded
over 1997, primarily reflecting the impact of Asia. Domestic demand has been the
key driver of growth to date, as low inflation, low interest rates and solid
wages growth have underpinned real household disposable income, consumption and
the housing sector. Most indicators point to a slowing in the pace of growth,
with lower levels of confidence and a softening labor market likely to play key
roles.
The redirection of exports to alternate markets outside Asia has been
reasonably successful, whilst the decline in Asian demand should bottom out as
raw material stockpiles are run down. This suggests that net exports should
improve and the deterioration in the current account deficit may have a peaked
at around 5.5% of GDP.
Underlying inflation remains in check and below the Reserve Bank's 2 to 3%
target band. As the impact of the weaker currency flows through, underlying
inflation is expected to drift back towards 2.5%.
Fixed Income
The Australian bond market experienced volatile conditions in the three
months to July, with ten-year bond yields ending the period down 0.20% at 5.57%
after trading in a 5.30% to 5.80% range.
The Australian bond market continued to assess the impact of Asia on domestic
growth, and to search for reasons to justify another cut in official interest
rates. This led to a bond rally in the early part of the quarter. However, June
saw a change in sentiment, with ongoing weakness in the Australian dollar
triggering fears of an official interest rate hike by the Reserve Bank of
Australia, placing upward pressure on bond yields.
Currency
The Australian dollar depreciated 6.9% against the US dollar over the quarter
and on July 31, 1998 was trading at US 61 cents.
As the Yen weakened towards the key 150 level against the US dollar, the
Australian dollar traded to a low of US 57.99 cents. The Australian dollar then
found good support, recovering from its lows following joint intervention by the
US Federal Reserve and the Bank of Japan to support the weakening Yen.
On the day of this report, the Australian dollar was trading at US 59 cents.
CANADA
Economy
The Canadian economy remained comparatively robust and notwithstanding the
weaker Canadian dollar, inflation stayed very low. The Manager expects Canadian
growth to decelerate during the remainder of 1998, with relatively little impact
from weaker Asian demand. Any increase in official interest rates to counter
currency weakness is likely to be modest with inflation at the lower end of the
Bank of Canada's 1 to 3% target range.
Fixed Income
The Canadian bond market gave up a little ground over the three month period,
responding to concerns that Canadian dollar weakness would lead the Bank of
Canada to tighten monetary policy.
7
<PAGE>
Currency
The Canadian dollar depreciated by 4.7% against the US dollar over the period
and was mostly weaker against major European currencies, but firmer against the
Yen. At the end of July, the currency was trading at US 66 cents. On the day of
this report, the Canadian dollar was trading at US 65 cents.
NEW ZEALAND
Economy
The pace of growth in New Zealand has weakened substantially over the past
year, with data releases and expectations suggesting the economy is now in
technical recession. Whilst the external sector has reflected the impact of
Asia, the domestic economy, particularly the housing and retail sectors, has
been subdued by high short-term interest rates. Easing monetary conditions
should support a recovery in growth by late 1998/early 1999.
Fixed Income
The New Zealand bond market rallied strongly over the three months to July
31, 1998, with 10-year Government bond yields falling 0.62% over the period. The
main driver was the weakness in domestic economic conditions, and particularly
the release of GDP data for the March quarter showing a 0.9% contraction in the
economy.
Currency
The New Zealand dollar depreciated by 8.0% against the US Dollar over the
three months to July 31, 1998. The currency was weighted down by weak economic
fundamentals and briefly traded below US 49 cents before the combined
intervention by the Bank of Japan and US Federal Reserve to support the Yen
lifted the New Zealand dollar with it. The currency ended the period at US 51
cents. On the day of this report, the New Zealand dollar was trading at US 51
cents.
UNITED KINGDOM
Economy
UK economic growth slowed over the past three months, undermined by the
strong pound and high short-term interest rates. Annual headline inflation was
at 3.7% in June and core inflation was 2.8%, a little above the Bank of
England's inflation target. The Manager expects economic growth to moderate
further, but residual inflationary pressure may lead the Bank of England to
raise short-term interest rates a little higher.
Fixed Income
The UK bond market rally slowed over the three months to July 31, 1998, amid
concerns about tighter monetary policy. Ten-year yields fell from 5.83% to
5.77%. British yields remained attractive relative to bond yields available in
major European markets.
Currency
The Pound weakened against the US dollar over the period and was mixed
against other major currencies, depreciating against the Deutschemark, but
improving against the Yen. On July 31, 1998, the currency was trading at
US$1.63. On the day of this report, the pound was trading at US$1.68.
8
<PAGE>
SUMMARY OF KEY INTEREST RATES
The following table compares interest rates in Commonwealth countries for
various periods since the Fund commenced operations.
<TABLE><CAPTION>
FEBRUARY 28, 1992
(COMMENCEMENT
OF OPERATIONS) JULY 31, 1997 APRIL 30, 1998 JULY 31, 1998
<S> <C> <C> <C> <C>
AUSTRALIA:
90-day Bank Bills 7.49% 4.85% 4.97% 5.15%
10-yr Government Bonds 10.14% 6.34% 5.77% 5.57%
CANADA:
90-day Bank Bills 7.15% 3.24% 4.80% 4.97%
10-yr Government Bonds 8.33% 5.77% 5.38% 5.46%
NEW ZEALAND:
90-day Bank Bills 7.48% 7.94% 8.64% 7.12%
10-yr Government Bonds 9.23% 6.66% 6.76% 6.14%
UNITED KINGDOM:
90-day Bank Bills 10.85% 6.81% 7.19% 7.40%
10-yr Government Bonds 9.26% 6.96% 5.83% 5.77%
</TABLE>
Yield comparisons are direct and do not take into account currency exchange
rates.
EQUITILINK INTERNATIONAL MANAGEMENT LIMITED
9
<PAGE>
- ----------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
(UNAUDITED)
- ------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- ------------------------------------------------
LONG-TERM INVESTMENTS - 93.6%
AUSTRALIA - 24.1%
GOVERNMENT AND SEMI-GOVERNMENT
BONDS - 16.10%
COMMONWEALTH OF AUSTRALIA - 11.1%
Commonwealth of Australia,
A$ 5,000 13.00%, 7/15/00................. 3,467,391
1,500 12.00%, 11/15/01................ 1,092,592
1,000 9.75%, 3/15/02.................. 694,570
3,000 10.00%, 10/15/02................ 2,136,129
5,000 10.00%, 2/15/06................. 3,861,949
2,600 10.00%, 10/15/07................ 2,074,538
2,000 8.75%, 8/15/08.................. 1,505,709
2,000 7.50%, 9/15/09.................. 1,400,530
------------
16,233,408
------------
NEW SOUTH WALES - 1.6%
New South Wales Treasury
Corporation,
2,000 8.00%, 12/01/01................. 1,308,220
1,500 7.00%, 4/01/04.................. 970,339
------------
2,278,559
------------
QUEENSLAND - 1.9%
Queensland Treasury Corporation,
2,000 8.00%, 5/14/03 (Global)......... 1,337,939
1,000 8.00%, 9/14/07.................. 699,580
1,000 8.00%, 9/14/07 (Global)......... 700,871
------------
2,738,390
------------
SOUTH AUSTRALIA - 0.5%
South Australia Finance
Authority,
1,000 12.50%, 10/15/00................ 695,546
------------
VICTORIA - 0.5%
Treasury Cor poration of
Victoria,
1,000 10.25%, 11/15/06................ 783,180
------------
WESTERN AUSTRALIA - 0.5%
Wester n Australia Treasur y
Corporation,
1,000 10.00%, 7/15/05................. 754,231
------------
Total Australian gover nment and
semi-gover nment bonds (cost
US$26,719,494).................. 23,483,314
------------
CORPORATE BONDS - 3.2%
SERVICES - 3.2%
Australian and Overseas
Telecommunications Corporation,
A$ 2,000 11.50%, 10/15/02................ 1,467,366
2,000 12.00%, 5/15/06................. 1,652,106
First Australian National
Mortgage
Acceptance Cor poration,
Ser ies 22,
2,310 11.40%, 12/15/01................ 1,582,984
------------
Total Australian corporate bonds
(cost US$5,196,349)............. 4,702,456
------------
EUROBONDS - 4.8%
FINANCIAL SERVICES - 2.4%
Credit Local de France,
2,000 10.50%, 1/06/99................. 1,235,744
Export Finance & Insurance
Corporation,
1,750 11.00%, 12/29/04................ 1,336,006
Ing Mercantile Mutual Bank Ltd.,
500 7.125%, 3/13/02................. 314,622
State Bank of New South Wales,
1,000 10.50%, 4/30/99................. 627,728
------------
3,514,100
------------
SEMI-GOVERNMENT - 0.7%
South Australia Finance
Author ity,
500 12.50%, 5/08/01................. 353,665
Treasury Cor poration of
Victoria,
1,000 9.00%, 6/27/05.................. 712,638
------------
1,066,303
------------
SERVICES - 0.7%
State Electricity Commission of
Victoria,
972 9.25%, 7/27/99.................. 610,151
535 10.50%, 5/27/03................. 388,562
------------
998,713
------------
SUPRANATIONAL - 1.0%
Eurofima,
2,000 9.875%, 1/17/07................. 1,519,283
------------
Total Australian eurobonds
(cost US$8,197,034)............. 7,098,399
------------
Total Australian long-term
investments
(cost US$40,112,877)............ 35,284,169
------------
10
<PAGE>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- ------------------------------------------------------------
CANADA - 28.1%
GOVERNMENT, PROVINCIAL AND MUNICIPAL
BONDS - 21.5%
CANADA - 18.2%
Canadian Government,
C$ 5,500 7.50%, 3/01/01.................. 3,827,515
6,000 8.50%, 4/01/02.................. 4,377,754
5,000 7.25%, 6/01/03.................. 3,565,835
4,000 8.75%, 12/01/05................. 3,174,675
2,500 7.25%, 6/01/07.................. 1,863,220
8,000 10.25%, 3/15/14................. 7,902,310
2,000 9.00%, 6/01/25.................. 1,953,809
------------
26,665,118
------------
AL BERTA - 0.6%
City of Edmonton,
1,000 9.625%, 2/13/12................. 895,009
------------
BRITISH COLUMBIA - 1.1%
Province of British Columbia,
1,000 10.15%, 8/29/01................. 748,142
1,000 9.50%, 1/09/12.................. 891,890
------------
1,640,032
------------
ONTARIO - 1.6%
Province of Ontario,
1,000 8.75%, 4/22/03.................. 748,341
2,000 7.50%, 2/07/24.................. 1,604,393
------------
2,352,734
------------
Total Canadian gover nment,
provincial and municipal bonds
(cost US$32,628,876)............ 31,552,893
------------
CORPORATE BONDS - 1.2%
DIVERSIFIED INDUSTRIALS - 0.7%
Bell Telephone Company of Canada,
500 10.50%, 7/15/09................. 387,145
Imperial Oil Ltd.,
1,000 9.875%, 12/15/99................ 699,960
------------
1,087,105
------------
FINANCIAL SERVICES - 0.5%
Bank of Nova Scotia,
C$ 1,000 10.35%, 7/19/01................. 744,890
------------
Total Canadian cor porate bonds
(cost US$2,184,922)............. 1,831,995
------------
EUROBONDS - 5.4%
DIVERSIFIED INDUSTRIALS - 0.3%
Procter & Gamble Company,
500 10.875%, 8/15/01................ 376,626
------------
FINANCIAL SERVICES - 1.9%
Credit Local de France,
1,000 6.75%, 3/21/06.................. 694,518
Inter national Bank for
Reconst r uction
and Development,
2,000 10.125%, 7/20/99................ 1,382,758
Rabobank Neder l and N.V.,
1,000 9.00%, 12/22/00................. 709,284
------------
2,786,560
------------
NATURAL RESOURCES - 1.3%
Ontar io Hydro,
500 8.50%, 5/26/25.................. 446,576
Quebec Hydro,
1,500 7.00%, 6/01/04.................. 1,053,225
Tokyo Elect r ic Power Company,
500 10.50%, 6/14/01................. 371,234
------------
1,871,035
------------
PROVINCIAL AND MUNICIPAL - 0.8%
Metropolitan Municipality of
Toronto,
750 9.625%, 5/14/02................. 561,828
Ville de Montreal,
1,000 6.375%, 2/15/01................. 671,954
------------
1,233,782
------------
11
<PAGE>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- ------------------------------------------------------------
SUPRANATIONAL - 1.1%
Bayerische Vereinsbank AG,
C$ 500 7.125%, 7/29/99................. 336,806
Canada (Cayman),
750 7.25%, 6/01/08.................. 549,384
Republic of Finland,
1,000 9.00%, 12/31/98................. 672,345
------------
1,558,535
------------
Total Canadian eurobonds
(cost US$8,536,727)............. 7,826,538
------------
Total Canadian long-term
investments
(cost US$43,350,525)............ 41,211,426
------------
NEW ZEALAND - 8.9%
GOVER NMENT BONDS - 4.7%
Gover nment of New Zealand,
NZ$ 1,000 8.00%, 2/15/01.................. 526,626
5,000 8.00%, 4/15/04.................. 2,745,015
5,000 8.00%, 11/15/06................. 2,837,046
------------
6,108,687
------------
Housing New Zealand,
1,500 8.00%, 11/15/06................. 808,558
------------
Total New Zealand gover nment
bonds
(cost US$8,311,473)............. 6,917,245
------------
CORPORATE BONDS - 1.2%
DIVERSIFIED INDUSTRIALS - 1.0%
Electricity Cor poration of
New Zealand Ltd.,
1,750 10.00%, 10/15/01................ 956,749
1,000 8.00%, 2/15/03.................. 523,801
------------
1,480,550
------------
FINANCIAL SERVICES - 0.2%
Transpower Finance Ltd.,
500 8.00%, 6/15/05.................. 268,088
------------
Total New Zealand corporate bonds
(cost US$2,075,642)............. 1,748,638
------------
EUROBONDS - 3.0%
FINANCIAL SERVICES - 1.4%
Inter national Bank for
Reconst ruction
and Development,
2,000 9.00%, 7/08/99.................. 1,032,220
1,000 7.00%, 9/18/00.................. 507,679
Primary Industry Bank of
Australia Limited,
NZ$ 1,000 8.25%, 3/27/00.................. 514,194
------------
2,054,093
------------
GLOBAL - 1.2%
Federal National Mortgage
Association,
3,500 7.00%, 9/26/00.................. 1,777,322
------------
SUPRANATIONAL - 0.4%
European Investment Bank,
1,000 9.00%, 7/16/99.................. 516,008
------------
Total New Zealand eurobonds
(cost US$4,985,043)............. 4,347,423
------------
Total New Zealand long-term
investments
(cost US$15,372,158)............ 13,013,306
------------
UNITED KINGDOM - 32.5%
GOVERNMENT BONDS - 18.4%
United Kingdom Treasur y,
1,250 8.00%, 12/07/00................. 2,094,382
500 8.00%, 6/10/03.................. 876,586
1,500 6.75%, 11/26/04................. 2,545,588
2,000 7.50%, 12/07/06................. 3,612,195
4,000 8.50%, 7/16/07.................. 7,721,762
3,450 8.00%, 12/07/15................. 7,092,523
750 8.00%, 6/07/21.................. 1,606,798
750 6.00%, 12/07/28................. 1,331,426
------------
Total United Kingdom gover nment
bonds
(cost US$24,735,880)............ 26,881,260
------------
EUROBONDS - 14.1%
DIVERSIFIED INDUSTRIALS - 2.9%
Allied Domecq PLC,
1,000 10.625%, 2/25/99................ 1,652,805
British Gas PLC,
1,400 8.875%, 7/08/08................. 2,633,877
------------
4,286,682
------------
FINANCIAL SERVICES - 7.1%
Abbey National Treasury
Services PLC,
1,250 8.00%, 4/02/03.................. 2,124,671
Barclays Bank PLC,
1,000 9.875%, 5/29/49................. 1,948,678
Halifax Building Society,
1,500 11.00%, 1/17/14................. 3,483,134
12
<PAGE>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- ------------------------------------------------------------
Lloyds Bank PLC,
500 7.375%, 3/11/04................. 837,625
Prudential Finance B.V.,
1,000 9.375%, 6/04/07................. 1,936,435
------------
10,330,543
------------
NATURAL RESOURCES - 1.2%
Thames Water Utilities
Finance PLC,
1,000 10.50%, 11/21/01................ 1,779,316
------------
SUPRANATIONAL - 2.9%
Republic of Finland,
1,000 8.00%, 4/07/03.................. 1,711,979
1,250 10.125%, 6/22/08................ 2,593,986
------------
4,305,965
------------
Total United Kingdom eurobonds
(cost US$18,022,033)............ 20,702,506
------------
Total United Kingdom long-term
investments
(cost US$42,757,913)............ 47,583,766
------------
Total long-term investments
(cost US$141,593,473)........... 137,092,667
------------
SHOR T-TERM INVESTMENTS - 5.1%
AUSTRALIA - 1.0%
Banque Nat ionale de Par is Fixed
Deposit,
4.60%, 8/04/98
A$ 2,479 (cost US$1,503,526)............. 1,503,526
------------
CANADA - 2.3%
State Street Bank and Trust
Company Ti me Deposit,
4.50%, 8/07/98
C$ 5,162 (cost US$3,434,993)............. 3,425,875
------------
NEW ZEALAND - 0.3%
Bankers Trust New Zealand
Limited Call Account,
NZ$ 807 8.25%, 8/04/98
(cost US$426,635)............... 412,278
------------
UNITED KINGDOM - 1.3%
State Street Bank and Trust
Company Fixed Deposit,
7.375%, 8/06/98
1,142 (cost US$1,875,240)............. 1,864,503
------------
UNITED STATES - 0.2%
US$ 340 Repurchase Agreement, State
Street Bank and Trust
Company, 5.35% dated
7/31/98, due 8/03/98 in the
amount of $340,152
(cost $340,000;
collateralized by $225,000
U.S. Treasury Notes, 10.625%
due 8/15/15; value
$364,213)....................... 340,000
------------
Total shor t-term investments
(cost US$7,580,394)............. 7,546,182
------------
TOTAL INVESTMENTS - 98.7%
(cost US$149,173,867)........... 144,638,849
Other assets in excess of
liabilities - 1.3%.............. 1,843,002
------------
TOTAL NET ASSETS - 100.0%........ $146,481,851
------------
------------
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.
<PAGE>
INVESTMENT MANAGER
EquitiLink International Management Limited
Union House, Union Street
St. Helier, Jersey, Channel Islands
INVESTMENT ADVISER
EquitiLink Australia Limited
Level 3, 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
L40 Chifley Tower
Chifley Square
Sydney, NSW 2000, Australia
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.
Box 9095
Princeton, NJ 08543-9095
(609) 282-4600
THE FIRST
COMMONWEALTH
FUND, INC.
- ---------------------------------------------
QUARTERLY REPORT
JULY 31, 1998
HIGHLIGHTS OF THIS
REPORT
O AVERAGE NAV RETURN
7.6% PER ANNUM SINCE
INCEPTION*
O 8.9% CASH DISTRIBUTION
RATE FOR THE YEAR TO
JULY 31, 1998
O 95% OF THE FUND'S
ASSETS ARE INVESTED IN
SECURITIES RATED
'AA'/'AA' OR BETTER
O FUND HOLDS SPREAD OF
HIGH QUALITY BONDS
ACROSS AUSTRALIA, NEW
ZEALAND, CANADA AND
UNITED KINGDOM
* ASSUMING REINVESTMENT
OF DISTRIBUTIONS
