- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
March 13, 1998
Dear Shareholder:
We are pleased to present our Quarterly Report to shareholders for the
quarter ended January 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
Commonwealth bond markets recorded positive returns over the quarter, but
lagged behind the US market. The stronger US dollar detracted from performance
in US dollar terms.
These markets benefited from the more positive US bond market and concerns
about the impact of uncertainty in Asia. The United Kingdom bond market
performed strongly, despite higher short-term interest rates. Canadian bonds
were stronger, despite higher short-term interest rates and a pick up in
economic growth. Australian bonds also provided positive local currency returns,
even with stronger economic growth, current account deficit concerns and a
weaker Australian dollar. The New Zealand market lagged the other Commonwealth
markets with only modest local currency returns, reflecting higher short-term
interest rates and a weaker New Zealand dollar.
The Commonwealth currencies fell against the US dollar over the quarter. The
Pound was the strongest of the currencies, depreciating by 1.9% against the US
dollar, while the New Zealand dollar was the weakest of the currencies, falling
6.7%.
INVESTMENT PERFORMANCE
The Fund's total return based on its Net Asset Value ('NAV') decreased by
1.9% for the quarter and increased by 4.9% for the year to January 31, 1998. The
Fund's total return based on share price was 1.5% for the quarter and 13.0% for
the year. The NAV and share price performance both assume reinvestment of
distributions.
The Fund continues to maintain a high quality portfolio, with over 93% 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 Investors Service
or, if unrated, are judged to be of equivalent quality by the Investment
Manager.
DISTRIBUTIONS
Distributions to common shareholders for the year through January 31, 1998
totalled US 99 cents per share. Based on the share price of US$12.38 at January
31, 1998, the cash distribution rate over the last 12 months was 8%. 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.
On March 12, 1998, the Board of Directors announced a cut in the Fund's
monthly distributions by US 0.5 cents per share per month to US 7.75 cents per
share, with effect from the distribution payable on April 9, 1998. For many
years, the Fund has maintained its distributions well above its running yield by
distributing a combination of income and capital gains. While the capital gains
component of the portfolio still remains large, bond yields have continued to
fall, making it difficult for the Fund to continue to maintain its distribution
rate. However, even with the cut, shareholders will continue to receive a high
distribution rate relative to bond yields. At the date of this report, with the
share price at US$12.31 and monthly distribution at US 7.75 cents per share, the
annualized distribution rate to shareholders would be 7.6% per annum. The Board
intends to maintain future distributions at as high a level as is practicable in
the then 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 reinvest 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,
/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
During the 12 months to January 31, 1998, the Fund paid a total of US 99
cents per share in distributions, consisting of 12 monthly payments of US 8.25
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 down to US 7.75 cents per share with effect from the
distribution payable on April 9, 1998. The next distribution review is scheduled
for the meeting of the Board to be held in June 1998.
Based upon the January 31, 1998 share price of US$12.38 and total
distributions of US 99 cents per share paid over the past 12 months, the shares
provided a cash distribution rate of 8%. At the date of this report, with the
share price at US$12.31 and monthly distributions at US 7.75 cents per share,
the annualized cash distribution rate to shareholders would be 7.6% 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 January 31, 1998 was US$13.41. The
Fund's total return based on NAV decreased by 1.9% over the quarter and
increased by 4.9% over the year to January 31, 1998. Since inception, the Fund
has returned 8.7% per annum. All figures assume reinvestment of distributions.
At the date of this report, the NAV per share was US$13.69.
SHARE PRICE PERFORMANCE
As of January 31, 1998, the Fund's share price as quoted on the New York
Stock Exchange was US$12.38, which represented a discount of 7.7% to the NAV of
US$13.41. The total investment return, based on the Fund's share price, assuming
reinvestment of distributions, was 1.5% over the quarter and 13.0% over the year
to January 31, 1998. Since inception, the share price return was 5.8% per annum.
At the date of this report, the share price was US$12.31, representing a
discount of 10.06% 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 5.61% 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>
COMMENCEMENT OF OPERATIONS* JANUARY 31, 1997 OCTOBER 31, 1997 JANUARY 31, 1998
<S> <C> <C> <C>
Australia 44.7% 29.5% 25.7% 24.9%
Canada 17.9% 30.8% 29.8% 29.8%
New Zealand -- 9.9% 10.0% 9.3%
United Kingdom 36.4% 29.5% 33.7% 35.6%
United States** 1.0% 0.3% 0.8% 0.4%
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 JANUARY 31, 1998
[ PIE CHART ]
AUSTRALIA CANADA NEW ZEALAND UNITED KINGDOM UNITED STATES
24.9% 28.8% 9.3% 35.6% 0.4%
4
<PAGE>
MATURITY COMPOSITION
The following table shows the maturity composition of the portfolio. At
January 31, 1998, the average maturity of the Fund's assets was 7.6 years,
compared with 7.4 years at October 31, 1997 and 7.0 years at January 31, 1997.
TABLE 2: THE FIRST COMMONWEALTH FUND, INC. -- MATURITY ANALYSIS --
JANUARY 31, 1998
<TABLE>
<CAPTION>
LESS THAN 1 YEAR 1 - 5 YEARS 5 - 10 YEARS OVER 10 YEARS
<S> <C> <C> <C> <C>
Australia 10.1% 39.3% 41.6% 9.0%
Canada 11.0% 33.3% 17.9% 37.8%
New Zealand 15.6% 39.1% 45.3% --
United Kingdom 9.9% 9.5% 48.1% 32.5%
United States 100.0% -- -- --
TOTAL FUND 11.2% 26.7% 37.0% 25.1%
</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 -- JANUARY
31, 1998
<TABLE>
<CAPTION>
SOVEREIGN GOVT. STATE/ PROVINCE CASH OR
BONDS BONDS EUROBONDS CORPORATE BONDS EQUIVALENT
<S> <C> <C> <C> <C>
Australia 11.0% 3.7% 6.0% 3.5% 0.7%
Canada 14.1% 4.3% 7.8% 1.7% 1.9%
New Zealand 5.4% -- 2.3% 0.9% 0.7%
United Kingdom 18.1% -- 15.0% -- 2.5%
United States -- -- -- -- 0.4%
TOTAL FUND 48.6% 8.0% 31.1% 6.1% 6.2%
</TABLE>
5
<PAGE>
QUALITY OF INVESTMENTS
At January 31, 1998, over 93% 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 Corporation or 'Aa' by Moody's Investors Service 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 to be at least equivalent to, 'A' quality.
TABLE 4: THE FIRST COMMONWEALTH FUND, INC. -- ASSET QUALITY -- JANUARY 31, 1998
<TABLE>
<CAPTION>
AAA/AAA AA/AA A/A
<S> <C> <C> <C>
Australia 73.3% 25.8% 0.9%
Canada 8.5% 85.6% 5.9%
New Zealand 76.5% 15.4% 8.1%
United Kingdom 54.7% 33.6% 11.7%
TOTAL FUND 47.7% 45.4% 6.9%
</TABLE>
THE FIRST COMMONWEALTH FUND, INC.
QUALITY OF ASSETS AT JANUARY 31, 1998
[ PIE CHART ]
A/A AAA/Aaa AA/Aa
6.9% 47.7% 45.4%
6
<PAGE>
- --------------------------------------------------------------------------------
ECONOMIC, FIXED-INCOME AND CURRENCY MARKET REVIEW
- --------------------------------------------------------------------------------
AUSTRALIA
Economy
The Australian economy grew strongly through 1997. Inflation remained low,
with underlying (core) inflation at a 1.4% annual rate. The Manager expects that
the fall-out from the Asian crisis will dampen economic growth over the next
year or so and could lead to some temporary upward pressure on inflation because
of higher import prices. Australia's current account deficit is also likely to
rise.
Fixed Income
The Australian bond market was stronger over the quarter, although returns
generally lagged behind other major bond markets. While the US market was
supportive, signs of stronger Australian economic growth and concerns about the
impact of the Asian crisis on Australia created relative underperformance.
Australian ten-year bond yields finished the quarter at 5.89%, down 0.07%.
Ninety-day bank bill rates rose from 4.84% to 5.03%. The differential between
Australian ten-year Government bond rates and US ten-year Government bond rates
rose 0.26% to 0.39% over the period.
Currency
The Australian dollar depreciated against the US dollar during the quarter.
At January 31, 1998, the Australian dollar was trading at US 68 cents. The
performance of the Australian dollar was affected by continuing concerns over
commodity prices and a higher current account deficit, in the wake of the Asian
economic crisis. On the date of this report, the Australian dollar was trading
at US 67 cents.
CANADA
Economy
The Canadian economy grew strongly during the period with inflation at low
levels. The Manager expects economic growth to ease in 1998, reflecting the
impact of weaker Asian demand and the increase in interest rates, and inflation
to remain at the lower end of the Bank of Canada's target range of 1% to 3%.
Fixed Income
The Canadian bond market was stronger over the quarter, despite higher
short-term interest rates and a continued pick up in economic growth. The
differential against ten-year US treasuries fell by 0.23% to be 0.11% below the
US bond rate. The Canadian market was supported by continued low inflation,
fiscal improvement and a positive US bond market.
Currency
The Canadian dollar depreciated by 3.8% against the US dollar over the
quarter. The Canadian dollar strengthened against other major currencies,
including the Deutschemark and the Yen. At the end of January, the currency was
trading at US 68 cents. On the date of this report, the Canadian dollar was
trading at US 71 cents.
NEW ZEALAND
Economy
The New Zealand economy grew at 2.5% in the year to September 1997. Inflation
remained low. However, the Manager expects the Asian crisis to dampen economic
growth through 1998, as export volumes and prices are adversely affected. The
current account deficit is likely to rise further. Economic activity will be
supported by tax cuts, some increase in government spending and an easing in
monetary conditions. The CPI is expected to remain within the Reserve Bank of
New Zealand's 0% to 3% target range.
7
<PAGE>
Fixed Income
Over the three months to January 31, 1998, New Zealand ten-year Government
bond rates rose from 6.54% to 6.76%, producing small capital losses. However,
total returns, including income were marginally positive. Bond market weakness
was associated with a lower New Zealand dollar and an increase in the 90-day
bank bill rate. At the end of January, 90-day bank bills were 8.80%.
Currency
The New Zealand dollar depreciated by 6.7% against the US dollar over the
quarter. The weakness reflected concerns about the Asian economic crisis on New
Zealand exports and the current account deficit. At January 31, 1998, the
currency was trading at US 58 cents. On the date of this report, the New Zealand
dollar was trading at US 58 cents.
UNITED KINGDOM
Economy
UK economic growth remains strong, the unemployment rate has fallen and
underlying (core) inflation remains in line with the Bank of England's inflation
target. Despite currency weakness against the US dollar, the Pound was stronger
against other major currencies. The Manager expects economic growth to slow over
the next year, reflecting the impact of higher official interest rates and the
stronger trade-weighted currency.
Fixed Income
The UK bond market was one of the strongest global bond markets over the
quarter. Ten-year bond yields fell from 6.54% to 6.04%. Despite continued strong
economic growth, the Gilt market offered attractive yields compared with other
European countries.
Currency
The pound depreciated by 1.9% against the US dollar over the quarter, but
performed well against other major currencies. At January 31, 1998, the currency
was trading at US$1.64. On the date of this report, the Pound was trading at
$US1.66.
8
<PAGE>
The following table compares interest rates in Commonwealth countries' for
various periods since the Fund commenced operations.
<TABLE>
<CAPTION>
FEBRUARY 28, 1992
(COMMENCEMENT
OF OPERATIONS) JANUARY 31, 1997 OCTOBER 31, 1997 JANUARY 31, 1998
<S> <C> <C> <C> <C>
AUSTRALIA:
90-day Bank Bills 7.49% 5.64% 4.84% 5.03%
10-yr Government Bonds 10.14% 7.41% 5.96% 5.89%
CANADA:
90-day Bank Bills 7.15% 2.86% 3.97% 4.49%
10-yr Government Bonds 8.33% 6.56% 5.49% 5.39%
NEW ZEALAND:
90-day Bank Bills 7.48% 7.30% 7.84% 8.80%
10-yr Government Bonds 9.23% 7.34% 6.54% 6.76%
UNITED KINGDOM:
90-day Bank Bills 10.85% 6.03% 7.05% 7.08%
10-yr Government Bonds 9.26% 7.40% 6.54% 6.04%
</TABLE>
Yield comparisons are direct and do not take into account currency exchange
rates.
EQUITILINK INTERNATIONAL MANAGEMENT LIMITED
9
<PAGE>
- --------------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1998
(UNAUDITED)
- --------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- --------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.1%
AUSTRALIA - 24.4%
GOVERNMENT AND SEMI-GOVERNMENT
BONDS - 14.8%
COMMONWEALTH OF AUSTRALIA - 11.0%
Commonwealth of Australia,
A$ 5,000 13.00%, 7/15/00................. 3,981,634
1,000 9.75%, 3/15/02.................. 781,957
3,000 10.00%, 10/15/02................ 2,402,069
1,000 9.00%, 9/15/04.................. 798,454
4,000 10.00%, 2/15/06................. 3,429,180
1,000 6.75%, 11/15/06................. 720,474
1,600 10.00%, 10/15/07................ 1,409,688
1,000 8.75%, 8/15/08.................. 826,414
3,500 7.50%, 9/15/09.................. 2,675,956
------------
17,025,826
------------
NEW SOUTH WALES - 1.6%
New South Wales Treasury
Corporation,
2,000 8.00%, 12/01/01................. 1,462,180
1,500 7.00%, 4/01/04.................. 1,069,197
------------
2,531,377
------------
QUEENSLAND - 0.5%
Queensland Treasury Corporation,
1,000 8.00%, 9/14/07.................. 767,946
------------
SOUTH AUSTRALIA - 0.5%
South Australia Finance
Authority,
1,000 12.50%, 10/15/00................ 795,453
------------
VICTORIA - 0.6%
Treasury Corporation of
Victoria,
1,000 10.25%, 11/15/06................ 866,495
------------
WESTERN AUSTRALIA - 0.6%
Western Australia Treasury
Corporation,
1,000 10.00%, 7/15/05................. 836,645
------------
Total Australian government and
semi-government bonds (cost
US$23,856,206).................. 22,823,742
------------
CORPORATE BONDS - 3.5%
SERVICES - 3.5%
Australian and Overseas
Telecommunications Corporation,
2,000 11.50%, 10/15/02................ 1,650,661
2,000 12.00%, 5/15/06................. 1,835,890
First Australian National
Mortgage
Acceptance Corporation,
Series 22,
A$ 2,597 11.40%, 12/15/01................ 1,970,604
------------
Total Australian corporate bonds
(cost US$5,409,297)............. 5,457,155
------------
EUROBONDS - 6.1%
FINANCIAL SERVICES - 3.5%
Credit Local de France,
2,000 10.50%, 1/06/99................. 1,414,281
Export Finance & Insurance
Corporation,
1,750 11.00%, 12/29/04................ 1,484,995
Ing Mercantile Mutual Bank Ltd.,
500 7.125%, 3/13/02................. 351,030
State Bank of New South Wales,
1,000 10.50%, 4/30/99................. 717,303
Toyota Motor Credit Corporation,
2,000 10.75%, 3/06/98................. 1,360,573
------------
5,328,182
------------
SEMI-GOVERNMENT - 0.8%
South Australia Finance
Authority,
500 12.50%, 5/08/01................. 402,689
Treasury Corporation of
Victoria,
1,000 9.00%, 6/27/05.................. 784,206
------------
1,186,895
------------
SERVICES - 0.7%
State Electricity Commission of
Victoria,
972 9.25%, 7/27/99.................. 693,103
535 10.50%, 5/27/03................. 431,330
------------
1,124,433
------------
SUPRANATIONAL - 1.1%
Eurofima,
2,000 9.875%, 1/17/07................. 1,678,506
------------
Total Australian eurobonds
(cost US$9,800,826)............. 9,318,016
------------
Total Australian long-term
investments
(cost US$39,066,329)............ 37,598,913
------------
10
<PAGE>
- --------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- --------------------------------------------------------------
CANADA - 27.9%
GOVERNMENT, PROVINCIAL AND MUNICIPAL
BONDS - 18.4%
CANADA - 14.1%
Canadian Government,
C$ 3,000 7.50%, 3/01/01.................. 2,183,386
5,000 8.50%, 4/01/02.................. 3,831,258
5,000 7.25%, 6/01/03.................. 3,729,985
2,500 7.25%, 6/01/07.................. 1,938,723
8,000 10.25%, 3/15/14................. 8,130,833
2,000 9.00%, 6/01/25.................. 1,979,061
------------
21,793,246
------------
ALBERTA - 1.6%
City of Edmonton,
1,000 9.625%, 2/13/12................. 922,745
Province of Alberta,
2,000 10.25%, 8/22/01................. 1,585,466
------------
2,508,211
------------
BRITISH COLUMBIA - 1.1%
Province of British Columbia,
1,000 10.15%, 8/29/01................. 789,312
1,000 9.50%, 1/09/12.................. 921,514
------------
1,710,826
------------
ONTARIO - 1.6%
Province of Ontario,
1,000 8.75%, 4/22/03.................. 785,959
2,000 7.50%, 2/07/24.................. 1,608,047
------------
2,394,006
------------
Total Canadian government,
provincial and municipal bonds
(cost US$28,334,623)............ 28,406,289
------------
CORPORATE BONDS - 1.7%
DIVERSIFIED INDUSTRIALS - 0.7%
Bell Telephone Company of Canada,
500 10.50%, 7/15/09................. 406,083
Imperial Oil Ltd.,
1,000 9.875%, 12/15/99................ 737,375
------------
1,143,458
------------
FINANCIAL SERVICES - 1.0%
Bank of Nova Scotia,
C$ 1,000 10.35%, 7/19/01................. 785,753
National Bank of Canada,
500 10.875%, 6/01/98................ 346,449
Toronto Dominion Centre,
500 10.70%, 5/12/98................. 345,525
------------
1,477,727
------------
Total Canadian corporate bonds
(cost US$3,103,827)............. 2,621,185
------------
EUROBONDS - 7.8%
DIVERSIFIED INDUSTRIALS - 0.3%
Procter & Gamble Company,
500 10.875%, 8/15/01................ 399,018
------------
FINANCIAL SERVICES - 2.3%
Credit Local de France,
1,000 6.75%, 3/21/06.................. 724,476
General Electric Capital
Corporation,
1,000 10.125%, 4/29/98................ 692,829
Inter national Bank for
Reconstruction
and Development,
2,000 10.125%, 7/20/99................ 1,467,853
Rabobank Nederland N.V.,
1,000 9.00%, 12/22/00................. 748,426
------------
3,633,584
------------
NATURAL RESOURCES - 1.8%
Ontario Hydro,
1,000 9.00%, 6/24/02.................. 783,495
500 8.50%, 5/26/25.................. 450,595
Quebec Hydro,
1,500 7.00%, 6/01/04.................. 1,103,394
Tokyo Electric Power Company,
500 10.50%, 6/14/01................. 393,458
------------
2,730,942
------------
PROVINCIAL AND MUNICIPAL - 0.8%
City of Montreal,
1,000 6.375%, 2/15/01................. 700,527
Metropolitan Municipality of
Toronto,
750 9.625%, 5/14/02................. 591,471
------------
1,291,998
------------
11
<PAGE>
- --------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- --------------------------------------------------------------
SUPRANATIONAL - 2.6%
Bayerische Vereinsbank AG,
C$ 500 7.125%, 7/29/99................. 351,119
Canada (Cayman),
750 7.25%, 6/01/08.................. 565,810
Kingdom of Sweden,
3,250 7.00%, 12/01/08................. 2,432,385
Republic of Finland,
1,000 9.00%, 12/31/98................. 708,499
------------
4,057,813
------------
Total Canadian eurobonds
(cost US$12,394,912)............ 12,113,355
------------
Total Canadian long-term
investments
(cost US$43,833,362)............ 43,140,829
------------
NEW ZEALAND - 8.6%
GOVERNMENT BONDS - 5.4%
Government of New Zealand,
NZ$ 1,000 8.00%, 2/15/01.................. 593,358
2,500 10.00%, 3/15/02................. 1,601,079
5,000 8.00%, 4/15/04.................. 3,060,222
5,000 8.00%, 11/15/06................. 3,135,443
------------
Total New Zealand government
bonds
(cost US$9,336,071)............. 8,390,102
------------
CORPORATE BONDS - 0.9%
DIVERSIFIED INDUSTRIALS - 0.7%
Electricity Corporation of
New Zealand Ltd.,
1,750 10.00%, 10/15/01................ 1,077,343
------------
FINANCIAL SERVICES - 0.2%
Transpower Finance Ltd.,
500 8.00%, 6/15/05.................. 295,395
------------
Total New Zealand corporate bonds
(cost US$1,493,949)............. 1,372,738
------------
EUROBONDS - 2.3%
FINANCIAL SERVICES - 2.3%
International Bank for
Reconstruction
and Development,
2,000 9.00%, 7/08/99.................. 1,166,356
1,000 7.00%, 9/18/00.................. 571,755
Primary Industry Bank of
Australia Limited,
NZ$ 1,000 8.25%, 3/27/00.................. 581,927
Societe Generale New Zealand,
2,000 9.00%, 5/29/98.................. 1,160,947
------------
Total New Zealand eurobonds
(cost US$4,095,707)............. 3,480,985
------------
Total New Zealand long-term
investments
(cost US$14,925,727)............ 13,243,825
------------
UNITED KINGDOM - 33.2%
GOVERNMENT BONDS - 18.2%
United Kingdom Treasury,
1,000 8.00%, 12/07/00................. 1,706,224
1,000 8.00%, 6/10/03.................. 1,772,104
3,500 6.75%, 11/26/04................. 5,934,101
2,000 7.50%, 12/07/06................. 3,590,094
4,000 8.50%, 7/16/07.................. 7,668,267
3,700 8.00%, 12/07/15................. 7,339,750
------------
Total United Kingdom government
bonds
(cost US$25,614,560)............ 28,010,540
------------
EUROBONDS - 15.0%
DIVERSIFIED INDUSTRIALS - 3.8%
Allied Domecq PLC,
1,000 10.625%, 2/25/99................ 1,693,920
British Airways PLC,
500 10.00%, 3/02/98................. 821,325
British Gas PLC,
1,400 8.875%, 7/08/08................. 2,629,882
Rolls-Royce PLC,
500 11.625%, 7/30/98................ 833,630
------------
5,978,757
------------
FINANCIAL SERVICES - 7.2%
Abbey National Treasury
Services PLC,
1,250 8.00%, 4/02/03.................. 2,153,288
Barclays Bank PLC,
1,000 9.875%, 5/29/49................. 1,960,517
Halifax Building Society,
1,500 11.00%, 1/17/14................. 3,359,129
12
<PAGE>
- --------------------------------------------------------------
PRINCIPAL
AMOUNT
LOCAL
CURRENCY VALUE
(000) DESCRIPTION (US$)
- --------------------------------------------------------------
Lloyds Bank PLC,
1,000 7.375%, 3/11/04................. 1,685,716
Prudential Finance B.V.,
1,000 9.375%, 6/04/07................. 1,931,806
------------
11,090,456
------------
NATURAL RESOURCES - 1.2%
Thames Water Utilities
Finance PLC,
1,000 10.50%, 11/21/01................ 1,825,168
------------
SUPRANATIONAL - 2.8%
Republic of Finland,
1,000 8.00%, 4/07/03.................. 1,728,782
1,250 10.125%, 6/22/08................ 2,599,326
------------
4,328,108
------------
Total United Kingdom eurobonds
(cost US$20,469,695)............ 23,222,489
------------
Total United Kingdom long-term
investments
(cost US$46,084,255)............ 51,233,029
------------
Total long-term investments
(cost US$143,909,673)........... 145,216,596
------------
SHORT-TERM INVESTMENTS - 6.2%
AUSTRALIA - 0.7%
Banque National de Paris Fixed
Deposit,
A$ 1,649 4.60%, 2/02/09
(cost US$1,117,289)............. 1,117,289
------------
CANADA - 1.9%
State Street Bank Time Deposit,
C$ 2,173 4.00%, 2/02/98 1,487,107
2,175 4.25%, 2/09/98 1,488,263
------------
Total Canadian short-term
investments
(cost US$2,983,144)............. 2,975,370
------------
NEW ZEALAND - 0.7%
Bankers Trust New Zealand
Limited Call Account,
NZ$ 1,843 8.15%, 2/02/98
(cost US$1,169,519)............. 1,071,394
------------
UNITED KINGDOM - 2.5%
State Street Bank Fixed Deposit,
1,164 7.0625%, 2/02/98 1,909,664
1,166 7.125%, 2/09/98................. 1,912,250
------------
Total United Kingdom
short-term investments
(cost US$3,838,442)............. 3,821,914
------------
UNITED STATES - 0.4%
US$ 625 Repurchase Agreement, State
Street Bank and Trust
Company, 5.40% dated
1/30/98, due 2/02/98 in the
amount of $625,281
(cost $625,000;
collateralized by $635,000
U.S. Treasury Notes, 6.00%
due 5/31/98; value
$646,265)....................... 625,000
------------
Total short-term investments
(cost US$9,733,394)............. 9,610,967
------------
TOTAL INVESTMENTS - 100.3%
(cost US$153,643,067)........... 154,827,563
Liabilities in excess of other
assets - (0.3%)................. (540,410)
------------
TOTAL NET ASSETS - 100.0%........ $154,287,153
------------
------------
- --------------------------------------------------------------------------------
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>
INVESTMENT MANAGER
EquitiLink International Management Limited
Union House, Union Street
St. Helier, Jersey, Channel Islands
INVESTMENT ADVISER
EquitiLink Australia Limited THE FIRST
Level 3, 190 George Street COMMONWEALTH
Sydney, NSW 2000, Australia FUND, INC.
-----------------------------
CONSULTANT
Wood Gundy, Inc. QUARTERLY REPORT
BCE Place, P.O. Box 500 JANUARY 31, 1998
Toronto, Ontario, MSJ 258
Canada
HIGHLIGHTS OF THIS
ADMINISTRATOR REPORT
Princeton Administrators, L.P. O 8.0% CASH DISTRIBUTION
Box 9095 RATE FOR THE YEAR TO
Princeton, New Jersey 08543-9095 JANUARY 31, 1998.
O 13.0% TOTAL RETURN
CUSTODIAN AND TRANSFER AGENT BASED ON SHARE PRICE
State Street Bank and Trust Company FOR THE YEAR TO
P.O. Box 8200 JANUARY 31, 1998.*
Boston, Massachusetts 02266 O 8.7% NAV RETURN PER
ANNUM, SINCE
AUCTION AGENT INCEPTION.*
Chase Manhattan Bank, N.A. * ASSUMING REINVESTMENT
55 Water Street OF DISTRIBUTIONS
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
