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[LOGO](R)
THE FIRST
COMMONWEALTH
FUND, INC.
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Semi-Annual Report
April 30, 1999
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HIGHLIGHTS OF THIS REPORT
o New distribution policy: to maintain monthly distribution level for the next
12 months
o Shareholders approve changes permitting the Fund to invest up to 35% of its
assets in global debt securities and certain derivative instruments
o 8.6% per annum return since inception
o 8.9% cash distribution rate
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ALL AMOUNTS ARE IN US DOLLARS
UNLESS OTHERWISE STATED
Managed by EquitiLink International
Management Limited
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<PAGE>
The First Commonwealth Fund, Inc.
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LETTER TO SHAREHOLDERS
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June 11, 1999
Dear Shareholder,
We are pleased to present this Semi-Annual Report which covers the
activities of The First Commonwealth Fund, Inc. (the Fund) for the six months
ended April 30, 1999. Included in this report is a review of the Australian, New
Zealand, Canadian and United Kingdom investment markets, together with an
overview of the Fund's investments prepared by the Investment Manager,
EquitiLink International Management Limited.
Annual Shareholders' Meeting--New distribution policy + Expansion of the Fund's
Mandate
At the Fund's Annual Meeting of Shareholders, the Fund announced that the
Board intends to maintain its monthly distribution of 7.75 cents per share for
the next 12 months. It also announced that the Board intends to review the level
of monthly distribution on an annual basis, subject to market conditions, with
the next review expected to take place in March 2000.
In addition, shareholders voted to amend the Fund's mandate, allowing it
to invest up to 35% of its assets in global debt securities. These amendments
were unanimously supported by the Board of Directors.
The ability to selectively invest in global debt securities should allow
the Fund to capitalize on higher interest rates and higher potential for future
capital gains than are currently available in the Commonwealth countries. This
supports our goal of providing a very competitive yield for our shareholders.
The Investment Manager's initial target is to invest 10% of the Fund's assets in
Asian debt securities.
Investment Performance--8.6% per annum return since inception
The Fund's net asset value (NAV) in US dollar terms returned 1.7% over the
three months and 6.4% over the six months ended April 30, 1999. Performance was
supported by the appreciation of Australian, New Zealand and Canadian dollars
against the US dollar. Since inception, the Fund's NAV has returned 8.6% per
annum to April 30, 1999.
Distributions--8.9% cash distribution rate
Distributions to common shareholders for the year ended April 30, 1999
totaled 94.5 cents per share. Based on the share price of $10.56 on April 30,
1999, 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.
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
1
<PAGE>
The First Commonwealth Fund, Inc.
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DIVIDENDS REINVESTMENT AND CASH PURCHASE PLAN
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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 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 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--share purchases on your behalf under the Plan will be made 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.
2
<PAGE>
The First Commonwealth Fund, Inc.
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REPORT OF THE INVESTMENT MANAGER
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Distributions
During the year ended April 30, 1999, the Fund paid a total of 94.5 cents
per share in distributions, consisting of 12 monthly payments of 7.75 cents per
share and a special distribution of 1.5 cents. The Board's policy is to provide
investors with a stable monthly distribution out of current income, supplemented
by realized capital gains if required. At the Fund's Annual General Meeting, the
Fund announced the Board's intention to maintain a monthly distribution of 7.75
cents per share for at least the next 12 months, with annual reviews thereafter.
Based upon the April 30, 1999 share price of $10.56, and total
distributions of 94.5 cents per share paid the Fund provided a cash distribution
rate of 8.9%. At the date of this report, with the share price at $10.44 and
monthly distributions at 7.75 cents per share, the annualized cash distribution
rate to shareholders is 8.9% 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 NAV per share at April 30, 1999 was $13.30. The Fund's total
return based on NAV was 1.7% over three months ended April 30, 1999 and 6.4%
over six months ended April 30, 1999. Since inception, the Fund has returned
8.6% per annum. All figures assume reinvestment of distributions. At the date of
this report, the NAV was $12.79 per share.
Share Price Performance
As of April 30, 1999, the Fund's share price as quoted on the New York
Stock Exchange was $10.56, which represented a discount of 20.6% to the NAV of
$13.30. The total investment return, based on the Fund's share price and
assuming reinvestment of distributions, was 2.1% over the latest six months. At
the date of this report, the share price was $10.44, representing a discount of
18.4% to NAV.
Auction Market Preferred Stock (AMPS)
The Fund's $30 million of AMPS continue to be well bid at the weekly
auctions, with the average interest rate of 4.84% over the quarter, compared
with 4.82% for 30-day commercial paper over the same period.
3
<PAGE>
The First Commonwealth Fund, Inc.
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PORTFOLIO COMPOSITION
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GEOGRAPHIC COMPOSITION
The table below shows the geographical composition of the Fund's total
investments as of April 30, 1999, compared to the previous quarter and fiscal
year-end. The figures are based on the currencies in which the portfolio is
invested:
TABLE 1: THE FIRST COMMONWEALTH FUND, INC.--GEOGRAPHIC ASSET ALLOCATION
-------------------------------------------------------------
October 31, 1998 January 31, 1999 April 30, 1999
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Australia 25.4% 24.9% 25.8%
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Canada 30.1% 29.6% 29.6%
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New Zealand 9.9% 10.0% 11.0%
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United Kingdom 33.7% 35.0% 32.8%
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United States* 0.9% 0.5% 0.8%
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Total Fund 100.0% 100.0% 100.0%
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*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.
MATURITY COMPOSITION
On April 30, 1999, the average maturity of the Fund's assets was 8.5
years, compared with 8.8 years on October 31, 1998 and 6.7 years on April 30,
1998. The table below shows the maturity composition of the Fund's investments
as of April 30, 1999:
TABLE 2: THE FIRST COMMONWEALTH FUND, INC.--MATURITY ANALYSIS--APRIL 30, 1999
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Less than 1 year 1-5 years 5-10 years Over 10 years
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Australia 7.5% 43.0% 43.7% 5.8%
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Canada 6.2% 38.6% 13.0% 42.2%
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New Zealand 7.4% 52.6% 28.1% 11.9%
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United Kingdom 1.4% 24.9% 32.1% 41.6%
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United States 100.0% -- -- --
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Total Fund 5.9% 36.3% 28.7% 29.1%
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4
<PAGE>
The First Commonwealth Fund, Inc.
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PORTFOLIO COMPOSITION (concluded)
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SECTORAL COMPOSITION
The table below shows the sectoral composition of the Fund's total
investments as of April 30, 1999:
TABLE 3: THE FIRST COMMONWEALTH FUND, INC.--SECTORAL COMPOSITION--APRIL 30, 1999
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Sovereign State/ Corporate Cash or
Govt. Bonds Province Bonds Eurobonds Bonds Equivalent
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Australia 9.9% 7.4% 3.7% 3.3% 1.5%
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Canada 19.9% 3.4% 4.9% 1.2% 0.2%
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New Zealand 5.3% -- 3.2% 1.7% 0.8%
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United Kingdom 19.3% -- 13.0% -- 0.5%
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United States -- -- -- -- 0.8%
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Total Fund 54.4% 10.8% 24.8% 6.2% 3.8%
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QUALITY OF INVESTMENTS
At April 30, 1999, nearly 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, Inc. 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--APRIL 30, 1999
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AAA/Aaa AA/Aa A
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Australia 73.9% 26.1% --
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Canada 4.8% 88.5% 6.7%
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New Zealand 73.6% 20.5% 5.9%
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United Kingdom 59.7% 32.9% 7.4%
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United States 100.0% -- --
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Total Fund 48.5% 46.4% 5.1%
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5
<PAGE>
The First Commonwealth Fund, Inc.
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MARKET REVIEW AND OUTLOOK
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Australia
Economy
The growth performance of the Australian economy exceeded most
expectations in 1998. This appears to have continued through early 1999 to date,
with surprisingly strong data continuing to build a positive picture. Domestic
demand has been the key driver of the economy, more than offsetting the
Asian-induced drag from net exports. This has been buoyed by high consumer
confidence, falling interest rates and rising household wealth.
As with the US, inflation has remained lower than generally expected
despite strong growth, well below 2% over the last year. Recently, a further
moderation in wages growth suggests that the positive inflation outlook is
unlikely to be disrupted soon.
Fixed Income
The improving expectations for global economic prospects over the next
year has resulted in a significant correction to the US and Australian bond
markets in the past few months. Australian ten-year government bond yields have
risen from 4.97% on October 31, 1998, to 5.67% on April 30, 1999. This
correction largely reflects an unwinding of perceptions that the global economy
was on the verge of deflation.
Given the backdrop of improving global prospects and strong domestic
growth but low inflation, Australia's central bank has indicated that monetary
policy could well be on hold for the foreseeable future.
Currency
The Australian dollar strengthened against the US dollar during the
reporting period. Expectations of stronger global industrial production and
firmer commodity prices have induced positive sentiment towards the currency,
which closed the quarter at 66.15 cents. This represented a gain of 6.4% against
the US dollar over the six months.
The resilience of Australian economic growth is a key positive for the
currency in the near-term. Looking further out, improving global growth should
lead commodity prices higher, supporting the Australian dollar.
Canada
Economy
The Canadian economy, having decelerated through 1998 following monetary
tightening to support the Canadian dollar, appears set for a moderate cyclical
recovery in 1999. Monetary policy has been eased significantly, and there are
signs of a recovery in both consumer and business sentiment. Exports to the
booming US economy have been rising sharply although domestic demand remains
muted.
Fixed Income
Despite monetary policy easing over the period, Canadian bond yields rose
from 5.09% on October 31, 1998, to 5.16% on April 30, 1999.
Currency
Indications of economic recovery supported the Canadian dollar, which
strengthened 6.0% against the US dollar over the quarter to close at 68.55 cents
on April 30, 1999.
6
<PAGE>
The First Commonwealth Fund, Inc.
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MARKET REVIEW AND OUTLOOK (concluded)
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New Zealand
Economy
Signs of a positive shift in the economy are now emerging. Recent growth
reflected gains in private consumption, an improvement in business investment
and a turnaround in dwelling investment after four consecutive quarters of
decline.
Fixed Income
The New Zealand bond and currency markets responded positively to news
that the central bank was changing its monetary policy target to an official
cash rate. But when the target was set at 4.5%, the top end of expectations,
some weakness developed in the bond market. Ten-year government bond yields
increased from 5.38% on October 31, 1998, to 5.77% on April 30, 1999.
Currency
The New Zealand dollar appreciated 5.7% against the US dollar over the six
months, to close at 55.86 cents. Firmer commodity prices also contributed to
currency strength.
United Kingdom
Economy
The pressure of increasingly restrictive policy settings has produced a
sharp economic slump in the UK over the past year. Despite the fact that
interest rates have progressively been eased by more than 2% now, the economy
stalled through early 1999.
Fixed Income
Monetary policy easing led to lower bond yields over the six months. UK
bond yields eased from 5.06% on October 31, 1998, to 4.61% on April 30, 1999.
Currency
Monetary policy easing resulted in the British pound depreciating 4.0%
against the US dollar over the six months to close at $1.61 on April 30, 1999.
7
<PAGE>
The First Commonwealth Fund, Inc.
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SUMMARY OF KEY RATES
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The following table summarizes the movements of key interest rates and
currencies over the last six and twelve month periods.
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April 30, 1998 October 31, 1998 April 30, 1999
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Australia:
90 day Bank Bills 4.97% 4.82% 4.81%
10 yr. Government Bonds 5.77% 4.97% 5.67%
Australian Dollar $0.65 $0.62 $0.66
Canada:
90 day Bank Bills 4.80% 4.75% 4.52%
10 yr. Government Bonds 5.38% 5.09% 5.16%
Canadian dollar $0.70 $0.64 $0.69
New Zealand:
90 day Bank Bills 8.93% 4.62% 4.64%
10 yr. Government Bonds 6.76% 5.38% 5.77%
New Zealand Dollar $0.56 $0.53 $0.56
United Kingdom:
90 day Bank Bills 7.19% 6.70% 4.97%
10 yr. Government Bonds 5.83% 5.06% 4.61%
British pound $1.67 $1.68 $1.61
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Yield comparisons are direct and do not take into account fluctuations in
currency exchange rates.
EquitiLink International Management Limited
8
<PAGE>
The First Commonwealth Fund, Inc.
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PORTFOLIO OF INVESTMENTS (unaudited) April 30, 1999
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Principal Amount
Local Currency Value
(000) Description (US$)
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LONG-TERM INVESTMENTS--94.5%
AUSTRALIA--23.9%
Government and Semi-Government
Bonds--17.0%
Commonwealth of Australia--9.7%
Commonwealth of Australia,
A$ 1,000 13.00%, 7/15/00............... 723,813
1,500 12.00%, 11/15/01.............. 1,153,292
3,000 10.00%, 10/15/02.............. 2,279,436
2,000 9.50%, 8/15/03................ 1,535,606
3,000 10.00%, 2/15/06............... 2,482,808
2,600 10.00%, 10/15/07.............. 2,224,863
2,700 8.75%, 8/15/08................ 2,185,054
3,000 7.50%, 9/15/09................ 2,268,482
----------
14,853,354
----------
New South Wales--1.6%
New South Wales Treasury
Corporation,
2,000 8.00%, 12/01/01............... 1,408,995
1,500 7.00%, 4/01/04................ 1,052,480
----------
2,461,475
----------
Queensland--3.3%
Queensland Treasury Corporation,
3,000 8.00%, 8/14/01................ 2,102,975
2,000 8.00%, 5/14/03 (Global) ...... 1,447,494
1,000 8.00%, 9/14/07................ 753,905
1,000 8.00%, 9/14/07 (Global)....... 755,698
----------
5,060,072
----------
South Australia--0.5%
South Australia Finance Authority,
1,000 12.50%, 10/15/00.............. 729,291
----------
Victoria--1.4%
Treasury Corporation of Victoria,
2,500 10.25%, 11/15/06.............. 2,096,178
----------
Western Australia--0.5%
Western Australia Treasury
Corporation,
1,000 10.00%, 7/15/05............... 808,082
----------
Total Australian government and
semi-government bonds
(cost US$26,532,885).......... 26,008,452
----------
Corporate Bonds--3.2%
Services--3.2%
First Australian National Mortgage
Acceptance Corporation,
Series 22,
2,121 11.40%, 12/15/01.............. 1,555,706
Telstra Corp.,
2,000 11.50%, 10/15/02.............. 1,568,152
2,000 12.00%, 5/15/06............... 1,775,466
----------
Total Australian corporate bonds
(cost US$5,057,180)........... 4,899,324
----------
Eurobonds--3.7%
Financial Services--1.2%
Export Finance & Insurance
Corporation,
1,750 11.00%, 12/29/04.............. 1,440,317
ING Mercantile Mutual Bank Ltd.,
500 7.125%, 3/13/02............... 344,046
----------
1,784,363
----------
Semi-Government--0.7%
South Australia Finance Authority,
500 12.50%, 5/08/01............... 375,302
Treasury Corporation of Victoria,
1,000 9.00%, 6/27/05................ 769,589
----------
1,144,891
----------
Services--0.7%
State Electricity Commission
of Victoria,
972 9.25%, 7/27/99................ 648,572
535 10.50%, 5/27/03............... 416,720
----------
1,065,292
----------
Supranational--1.1%
Eurofima,
2,000 9.875%, 1/17/07............... 1,649,120
----------
Total Australian eurobonds
(cost US$5,743,302)........... 5,643,666
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Total Australian long-term
investments
(cost US$37,333,367).......... 36,551,442
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9
<PAGE>
The First Commonwealth Fund, Inc.
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PORTFOLIO OF INVESTMENTS (continued) (unaudited) April 30, 1999
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Principal Amount
Local Currency Value
(000) Description (US$)
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CANADA--28.8%
Government, Provincial and
Municipal Bonds--22.8%
Canada--19.5%
Canadian Government,
C$ 5,500 7.50%, 3/01/01................ 3,942,521
6,000 8.50%, 4/01/02................ 4,502,879
5,000 7.25%, 6/01/03................ 3,705,100
2,500 7.25%, 6/01/07................ 1,946,635
2,000 6.00%, 6/01/08................ 1,452,975
8,000 10.25%, 3/15/14............... 8,246,778
6,000 9.00%, 6/01/25................ 6,174,801
----------
29,971,689
----------
Alberta--0.6%
City of Edmonton,
1,000 9.625%, 2/13/12............... 924,253
----------
British Columbia--1.1%
Province of British Columbia,
1,000 10.15%, 8/29/01............... 761,653
1,000 9.50%, 1/09/12................ 923,567
----------
1,685,220
----------
Ontario--1.6%
Province of Ontario,
1,000 8.75%, 4/22/03................ 772,279
2,000 7.50%, 2/07/24................ 1,679,188
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2,451,467
----------
Total Canadian government,
provincial and municipal bonds
(cost US$34,444,268).......... 35,032,629
----------
Corporate Bonds--1.2%
Diversified Industrials--0.7%
Bell Telephone Company of Canada,
500 10.50%, 7/15/09............... 395,119
Imperial Oil Ltd.,
1,000 9.875%, 12/15/99.............. 705,374
----------
1,100,493
----------
Financial Services--0.5%
Bank of Nova Scotia,
1,000 10.35%, 7/19/01............... 756,581
----------
Total Canadian corporate bonds
(cost US$2,184,922)........... 1,857,074
----------
Eurobonds--4.8%
Diversified Industrials--0.2%
Procter & Gamble Company,
500 10.875%, 8/15/01.............. 381,204
----------
Financial Services--1.9%
Credit Local de France,
1,000 6.75%, 3/21/06................ 730,600
International Bank for
Reconstruction and Development,
2,000 10.125%, 7/20/99.............. 1,384,727
Rabobank Nederland N.V.,
1,000 9.00%, 12/22/00............... 725,665
----------
2,840,992
----------
Natural Resources--1.3%
Ontario Hydro,
500 8.50%, 5/26/25................ 465,999
Quebec Hydro,
1,500 7.00%, 6/01/04................ 1,103,098
Tokyo Electric Power Company,
500 10.50%, 6/14/01............... 376,782
----------
1,945,879
----------
Provincial and Municipal--0.8%
Metropolitan Municipality of Toronto,
750 9.625%, 5/14/02............... 574,016
Ville de Montreal,
1,000 6.375%, 2/15/01............... 696,326
----------
1,270,342
----------
Supranational--0.6%
Bayerische Vereinsbank AG,
500 7.125%, 7/29/99............... 344,187
Canada (Cayman),
750 7.25%, 6/01/08................ 573,091
----------
917,278
----------
Total Canadian eurobonds
(cost US$7,777,288)........... 7,355,695
----------
Total Canadian long-term
investments
(cost US$44,406,478).......... 44,245,398
----------
10
<PAGE>
The First Commonwealth Fund, Inc.
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PORTFOLIO OF INVESTMENTS (continued) (unaudited) April 30, 1999
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Principal Amount
Local Currency Value
(000) Description (US$)
- --------------------------------------------------------------------------------
NEW ZEALAND--10.1%
Government Bonds--5.2%
Government of New Zealand,
NZ$ 4,300 8.00%, 4/15/04................ 2,666,030
4,000 8.00%, 11/15/06............... 2,550,188
3,000 7.00%, 7/15/09................ 1,828,918
----------
Total New Zealand
government bonds
(cost US$7,490,832)........... 7,045,136
----------
Corporate Bonds--1.7%
Diversified Industrials--1.1%
Electricity Corporation of
New Zealand Ltd.,
1,750 10.00%, 10/15/01.............. 1,082,138
1,000 8.00%, 2/15/03................ 599,858
----------
1,681,996
----------
Financial Services--0.2%
Transpower Finance Ltd.,
500 8.00%, 6/15/05................ 301,770
----------
Services--0.4%
Housing New Zealand Ltd.,
1,500 8.00%, 11/15/06............... 909,783
TCNZ Finance Limited,
1,000 9.25%, 7/01/02................ 608,986
----------
1,518,769
----------
Total New Zealand corporate bonds
(cost US$3,490,139)........... 3,502,535
----------
Eurobonds--3.2%
Financial Services--0.4%
Primary Industry Bank of
Australia Limited,
1,000 8.25%, 3/27/00................ 573,291
----------
Global--2.1%
Federal National Mortgage
Association,
4,500 7.00%, 9/26/00................ 2,574,783
Canadian Government
1,000 6.625%, 10/03/07.............. 566,197
----------
3,140,980
----------
Supranational--0.7%
European Investment Bank,
1,000 9.00%, 7/16/99................ 562,901
International Bank for
Reconstruction and Development,
1,000 7.00%, 9/18/00................ 571,727
----------
1,134,628
----------
Total New Zealand eurobonds
(cost US$4,637,145)........... 4,848,899
----------
Total New Zealand
long-term investments
(cost US$15,618,170).......... 15,396,570
----------
UNITED KINGDOM--31.7%
Government Bonds--18.9%
United Kingdom Treasury,
(pound) 1,250 8.00%, 12/07/00............... 2,102,236
2,000 8.00%, 6/10/03................ 3,586,162
1,500 6.75%, 11/26/04............... 2,645,652
2,000 7.50%, 12/07/06............... 3,762,684
6,150 8.00%, 12/07/15............... 13,666,191
750 8.00%, 6/07/21................ 1,763,124
750 6.00%, 12/07/28............... 1,493,268
----------
Total United Kingdom
government bonds
(cost US$27,152,881).......... 29,019,317
----------
Eurobonds--12.8%
Diversified Industrials--1.8%
British Gas PLC,
1,400 8.875%, 7/08/08............... 2,752,032
----------
Financial Services--6.9%
Abbey National Treasury
Services PLC,
1,250 8.00%, 4/02/03................ 2,173,907
Barclays Bank PLC,
1,000 9.875%, 5/29/49............... 2,018,887
Halifax Building Society,
1,500 11.00%, 1/17/14............... 3,571,425
Lloyds Bank PLC,
500 7.375%, 3/11/04............... 860,946
Prudential Finance B.V.,
1,000 9.375%, 6/04/07............... 1,983,454
----------
10,608,619
----------
11
<PAGE>
The First Commonwealth Fund, Inc.
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PORTFOLIO OF INVESTMENTS (concluded) (unaudited) April 30, 1999
- --------------------------------------------------------------------------------
Principal Amount
Local Currency Value
(000) Description (US$)
- --------------------------------------------------------------------------------
Natural Resources--1.2%
Thames Water Utilities Finance PLC,
(pound) 1,000 10.50%, 11/21/01.............. 1,781,001
------------
Supranational--2.9%
Republic of Finland,
1,000 8.00%, 4/07/03................ 1,754,588
1,250 10.125%, 6/22/08.............. 2,688,695
------------
4,443,283
------------
Total United Kingdom eurobonds
(cost US$16,309,474).......... 19,584,935
------------
Total United Kingdom
long-term investments
(cost US$43,462,355).......... 48,604,252
------------
Total long-term investments
(cost US$140,820,370)......... 144,797,662
------------
SHORT-TERM INVESTMENTS--3.0%
Australia--1.5%
Banque Nationale de Paris
Fixed Deposit,
A$ 3,407 4.35%, 5/03/99
(cost US$2,253,790)........... 2,253,790
------------
Canada--0.2%
State Street Bank and Trust
Company Time Deposit,
C$ 508 4.75%, 5/06/99
(cost US$344,743)............. 348,572
------------
United Kingdom--0.5%
State Street Bank and Trust
Company Fixed Deposit,
(pound) 436 5.0625%, 5/05/99
(cost US$703,772)............. 701,941
------------
United States--0.8%
US$ 1,268 Repurchase Agreement, State
Street Bank and Trust Company,
4.70% dated 4/30/99, due
5/04/99 in the amount of
$1,268,662 (cost $1,268,000;
collateralized by $1,190,000
U.S. Treasury Notes,
7.50% due 11/15/01;
value $1,298,111)............ 1,268,000
------------
Total short-term investments
(cost US$4,570,305)........... 4,572,303
------------
Total Investments--97.5%
(cost US$145,390,675)......... 149,369,965
Other assets in excess of
liabilities--2.5% ............ 3,891,784
------------
Total Net Assets--100.0%......... $153,261,749
============
See Notes to Financial Statements.
12
<PAGE>
The First Commonwealth Fund, Inc.
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (unaudited) April 30, 1999
- -------------------------------------------------------------------------------
Assets
Investments, at value (cost $145,390,675) ....................... $149,369,965
Foreign currency, at value (cost $1,132,942)..................... 1,173,317
Cash ............................................................ 154
Interest receivable.............................................. 3,581,598
Receivable for investments sold.................................. 751,663
Prepaid expenses................................................. 42,622
------------
Total assets.................................................. 154,919,319
------------
Liabilities
Dividends payable--common stock.................................. 718,131
Payable for investments purchased................................ 654,039
Investment management fee payable................................ 95,081
Administration fee payable....................................... 29,256
Accrued expenses and other liabilities........................... 161,063
------------
Total liabilities............................................. 1,657,570
------------
Total Net Assets................................................. $153,261,749
============
Total net assets were composed of:
Common stock:
Par value ($.001 per share, applicable
to 9,266,209 shares issued) ................................... $ 9,266
Paid-in capital in excess of par............................... 127,346,596
Preferred stock ($.001 par value per share
and $25,000 liquidation value per share
applicable to 1,200 shares; Note 4 ............................ 30,000,000
------------
157,355,862
Distributions in excess of net investment income................. (529,174)
Undistributed net realized gains on investment transactions...... 961,673
Net unrealized appreciation on investments....................... 9,571,027
Accumulated net realized foreign exchange losses................. (8,598,648)
Net unrealized foreign exchange losses........................... (5,498,991)
------------
Total Net Assets................................................. $153,261,749
============
Net assets applicable to common shareholders..................... $123,261,749
============
Net asset value per common share ($123,261,749 / 9,266,209
shares of common stock issued and outstanding)................. $ 13.30
============
See Notes to Financial Statements.
13
<PAGE>
The First Commonwealth Fund, Inc.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (unaudited) For the Six Months Ended April 30, 1999
- -------------------------------------------------------------------------------
Net Investment Income
Income
Interest and discount earned (net of foreign
withholding taxes of $94,078)................................ $ 5,266,972
-----------
Expenses
Investment management fee...................................... 492,469
Administration fee............................................. 151,529
Reports to shareholders........................................ 70,117
Independent accountant's fees and expenses..................... 65,854
Directors' fees and expenses................................... 65,289
Custodian's fees and expenses.................................. 64,103
Legal fees and expenses........................................ 60,254
Auction agent's fees and expenses.............................. 39,331
Insurance expense.............................................. 17,656
Transfer agent's fees and expenses............................. 12,971
Registration fees.............................................. 8,019
Miscellaneous.................................................. 15,393
-----------
Total operating expenses..................................... 1,062,985
-----------
Net investment income............................................ 4,203,987
-----------
Realized and Unrealized Gains (Losses) on Investments
and Foreign Currencies
Net realized gains on investment transactions.................. 868,818
Net change in unrealized appreciation of investments........... (1,388,490)
-----------
Net losses on investments...................................... (519,672)
-----------
Net increase in total net assets resulting from
operations before net foreign exchange losses................ 3,684,315
Net realized foreign exchange losses........................... (1,130,862)
Net change in unrealized foreign exchange losses............... 4,795,948
-----------
Net Increase in Total Net Assets Resulting from Operations....... $ 7,349,401
===========
See Notes to Financial Statements.
14
<PAGE>
The First Commonwealth Fund, Inc.
- -------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS (unaudited) For the Six Months Ended April 30, 1999
- -------------------------------------------------------------------------------
Increase (Decrease) in Cash (Including Foreign Currency)
Cash flows provided from operating activities
Interest received.............................................. $ 5,425,100
Operating expenses paid........................................ (1,118,333)
Sales of short-term portfolio investments, net................. 484,210
Purchases of long-term portfolio investments................... (11,395,751)
Proceeds from sales of long-term portfolio investments......... 12,803,331
Other.......................................................... (18,870)
------------
Net cash provided from operating activities................. 6,179,687
------------
Cash flows used for financing activities
Dividends paid to common shareholders.......................... (4,447,408)
Dividends paid to preferred shareholders....................... (736,092)
------------
Net cash used for financing activities...................... (5,183,500)
------------
Effect of exchange rate on cash.................................. 176,370
------------
Net increase in cash............................................. 1,172,557
Cash at beginning of period.................................... 914
------------
Cash at end of period.......................................... $ 1,173,471
============
Reconciliation of Net Increase in Total Net Assets Resulting
from Operations to Net Cash (Including Foreign Currency)
Provided From Operating Activities
Net increase in total net assets resulting from operations....... $ 7,349,401
------------
Decrease in investments....................................... 2,020,929
Net realized gains on investment transactions................. (868,818)
Net realized foreign exchange losses.......................... 1,130,862
Net change in unrealized appreciation/depreciation
on investments.............................................. 1,388,490
Net change in unrealized foreign exchange losses.............. (4,795,948)
Decrease in interest receivable............................... 193,061
Increase in receivable for investments sold................... (747,686)
Net increase in other assets.................................. (18,870)
Increase in payable for investments purchased................. 583,614
Decrease in accrued expenses and other liabilities............ (55,348)
------------
Total adjustments............................................. (1,169,714)
------------
Net cash provided from operating activities...................... $ 6,179,687
============
See Notes to Financial Statements.
15
<PAGE>
The First Commonwealth Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
April 30, 1999 Ended
(unaudited) October 31, 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Total Net Assets
Operations
Net investment income.......................................... $ 4,203,987 $ 9,169,164
Net realized gains on investment transactions.................. 868,818 2,119,218
Net change in unrealized appreciation of investments........... (1,388,490) 1,723,023
------------ ------------
Net increase in total net assets resulting from
operations before net foreign exchange losses ............... 3,684,315 13,011,405
Net realized foreign exchange losses........................... (1,130,862) (4,751,505)
Net change in unrealized foreign exchange losses............... 4,795,948 (5,894,135)
------------ ------------
Net increase in total net assets resulting from operations....... 7,349,401 2,365,765
------------ ------------
Dividends and distributions to shareholders
Dividends to common shareholders from net
investment income ........................................... (3,590,350) (8,084,197)
Dividends to preferred shareholders from net
investment income ........................................... (736,092) (1,313,699)
Distributions to common shareholders from net
realized gains on investment transactions ................... (857,058) (718,017)
Distributions to preferred shareholders from
net realized gains on investment transactions ............... -- (311,809)
------------ ------------
Net decrease in total net assets resulting
from dividends and distributions to shareholders .............. (5,183,500) (10,427,722)
------------ ------------
Total increase (decrease)........................................ 2,165,901 (8,061,957)
Total Net Assets
Beginning of period.............................................. 151,095,848 159,157,805
------------ ------------
End of period (including distributions in excess
of net investment income of $(529,174)
and $(406,718), respectively).................................. $153,261,749 $151,095,848
============ ============
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
The First Commonwealth Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended October 31,
April 30, 1999 --------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value per common share, beginning of period $ 13.07 $ 13.94 $ 14.32 $ 13.13 $ 12.08 $ 13.42
-------- -------- -------- -------- -------- --------
Net investment income................................ 0.45 0.99 1.14 1.16 1.19 1.16
Net realized and unrealized gains (losses) on
investments and foreign currencies................. 0.34 (0.73) (0.34) 1.21 1.10 (1.33)
-------- -------- -------- -------- -------- --------
Total from investment operations................... 0.79 0.26 0.80 2.37 2.29 (0.17)
-------- -------- -------- -------- -------- --------
Dividends from net investment income to common
shareholders....................................... (0.39) (0.87) (0.99) (1.00) (1.03) (0.98)
Dividends from net investment income to preferred
shareholders....................................... (0.08) (0.14) (0.17) (0.16) (0.18) (0.11)
Distributions from net realized gains on investment
transactions to common shareholders................ (0.09) (0.08) (0.02) (0.01) (0.03) (0.07)
Distributions from net realized gains on investment
transactions to preferred shareholders............. -- (0.04) -- (0.01) -- (0.01)
-------- -------- -------- -------- -------- --------
Total dividends and distributions................. (0.56) (1.13) (1.18) (1.18) (1.24) (1.17)
-------- -------- -------- -------- -------- --------
Net asset value per common share, end of period...... $ 13.30 $ 13.07 $ 13.94 $ 14.32 $ 13.13 $ 12.08
======== ======== ======== ======== ======== ========
Market value, end of period.......................... $10.5625 $10.8125 $12.4375 $ 11.875 $ 11.375 $ 10.375
======== ======== ======== ======== ======== ========
Number of shares of common stock outstanding
(000 omitted)..................................... 9,266 9,266 9,266 9,266 9,266 9,266
Total investment return based on:(1)
Market value....................................... 2.09% (5.59)% 13.78% 13.89% 20.72% (10.19)%
Net asset value.................................... 6.35% 1.82 % 5.76% 18.99% 19.67% (1.63)%
Ratio to Average Net Assets of Common
Shareholders(2)/Supplementary Data:
Net assets of common shareholders, end of period
(000 omitted)...................................... $123,262 $121,096 $129,158 $132,660 $121,654 $111,925
Average net assets of common shareholders
(000 omitted)...................................... $122,359 $122,266 $130,125 $122,887 $115,277 $118,336
Operating expenses................................... 1.75% 1.70 % 1.63% 1.70% 1.71% 1.75 %
Net investment income before preferred
stock dividends.................................... 6.93% 7.50 % 8.10% 8.73% 9.56% 9.06 %
Net investment income available to
common shareholders................................ 5.72% 6.17 % 6.88% 7.47% 8.09% 8.12 %
Preferred stock dividends and distributions.......... 1.21% 1.33 % 1.22% 1.26% 1.48% 0.94 %
Portfolio turnover................................... 8% 36 % 24% 30% 23% 34 %
Senior securities (preferred stock) outstanding
(000 omitted)..................................... $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000
Asset coverage on preferred stock at period end...... 511% 504 % 530% 542% 505% 473 %
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for the purposes of this calculation to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Total investment return does
not reflect brokerage commissions. Generally, total investment return
based on net asset value will be higher than total investment return based
on market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from
the beginning to the end of such periods. Conversely, total investment
return based on net asset value will be lower than total investment return
based on market value in periods where there is a decrease in the discount
or an increase in the premium of the market value to the net asset value
from the beginning to the end of such periods.
(2) Ratios are calculated on the basis of income, expenses and preferred share
dividends applicable to both the common and preferred shares relative to
the average net assets of common shareholders.
See Notes to Financial Statements.
17
<PAGE>
The First Commonwealth Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
The First Commonwealth Fund, Inc. (the "Fund") was incorporated in
Maryland on June 28, 1991, as a closed-end, non-diversified investment company.
From the Fund's inception to April 7, 1999 the Fund's investment objective
was to provide high current income by investing in high-grade fixed-income
securities denominated in the currencies of Australia, Canada, New Zealand and
the United Kingdom (the "Commonwealth Currencies"). For further information
about the Fund's investment objective and policies in effect after April 17,
1999 see Note 6 below. The Fund may also seek capital appreciation only as a
secondary investment objective. The Fund's assets have generally been invested
in a portfolio of securities issued or guaranteed by the governments,
territories, provinces and states of Australia, Canada, New Zealand and the
United Kingdom as well as securities issued by corporations domiciled in those
countries. The Fund will, under normal circumstances, invest in debt securities
in at least three of these currencies and will not hold more than 50% of its
assets in securities denominated in any one Commonwealth Currency. The ability
of issuers of debt securities held by the Fund to meet their obligations may be
affected by economic developments in a specific industry, country or region.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
Basis of Presentation: The financial statements of the Fund are prepared in
accordance with United States generally accepted accounting principles using the
United States dollar as both the functional and reporting currency. However, the
Commonwealth Currencies (excluding New Zealand) are the functional currencies
for Federal tax purposes (see Taxes below).
Foreign Currency Translation: Australian dollar ("A$"), Canadian dollar ("C$"),
New Zealand dollar ("NZ$") and United Kingdom pound ("(pound)") amounts are
translated into United States dollars on the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing rates of exchange as reported by a major bank;
(ii) purchases and sales of investment securities, income and expenses--at the
rates of exchange prevailing on the respective dates of such transactions.
The Fund isolates that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of the securities held at fiscal period end.
Similarly, the Fund isolates the effect of changes in foreign exchange rates
from the fluctuations arising from changes in the market prices of portfolio
securities sold during the fiscal year.
Net realized foreign exchange losses of $1,130,862 for the six months
ended April 30, 1999 includes realized foreign exchange gains and losses from
sales and maturities of portfolio securities, sales of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
securities transactions and the difference between the amounts of interest,
discount and foreign withholding taxes recorded on the Fund's books and the US
dollar equivalent amounts actually received or paid. Net unrealized foreign
exchange gains of $4,795,948 for the six months ended April 30, 1999 include
changes in the value of portfolio securities and other assets and liabilities
arising as a result of changes in the exchange rate.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin,
including unanticipated movements in the value of the foreign currency relative
to the US dollar.
The exchange rates of the Commonwealth Currencies utilized by the Fund at
April 30, 1999 were US$0.6615 to A$1.00, US$0.6855 to C$1.00, US$0.5586 to
NZ$1.00, and US$1.6106 to(pound)1.00.
Security Valuation: Investments are stated at value. Investments for which
market quotations are readily available are valued at the last trade price on or
within one local business day of the date of determination as obtained from a
pricing source. If no such trade price is available, such investments are valued
at the quoted bid price or the mean between the quoted bid and asked price on
the date of determination as obtained from a pricing source. Securities for
which market quotations are not readily available are valued at fair value
18
<PAGE>
The First Commonwealth Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
in good faith using methods determined by or under the direction of the Fund's
Board of Directors. Short-term securities that mature in more than 60 days are
valued at current market quotations.
Short-term securities that mature in 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase was 60 days or
less, or by amortizing their value on the 61st day prior to maturity, if their
original term to maturity exceeded 60 days.
In connection with transactions in repurchase agreements with US financial
institutions, it is the Fund's policy that its custodian/counterparty segregates
the underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the collateral is
valued on a daily basis to determine its adequacy. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Fund may be delayed or limited.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses from
security and currency transactions are calculated on the identified cost basis.
Interest income is recorded on an accrual basis. Discounts on securities
purchased are accreted on an effective yield basis over the estimated lives of
the respective securities. Expenses are accrued on a daily basis.
Derivative Financial Instruments: The Fund is authorized to use derivatives to
manage both currency and interest rate risk for global debt securities. With
respect to investments denominated in Commonwealth currencies, derivatives can
only be used to manage interest rate risk. Losses may arise due to changes in
the value of the contract or if the counterparty does not perform under the
contract.
Forward Currency Contracts: A forward currency contract involves an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. The forward currency contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the forward currency contract is closed, the
Fund records a realized gain or loss equal to the difference between the value
at the time it was opened and the value at the time it was closed.
Financial Futures Contracts: A futures contract is an agreement between two
parties to buy or sell a security for a set price on a future date. Upon
entering into a contract, the Fund deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
Options: When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the current market
value of the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent the
cost of the closing transaction exceeds the premium paid or received). Written
and purchased options are non-income producing investments.
Dividends: Dividends and distributions to common shareholders are recorded on
the ex-dividend date and are based upon net investment income and capital and
cur rency gains determined in accordance with income tax regula tions which may
differ from generally accepted
19
<PAGE>
The First Commonwealth Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
accounting principles. These differences are primarily due to differing
treatments for foreign currencies and loss deferrals. Dividends and
distributions to preferred shareholders are accrued on a daily basis and are
determined as described in Note 4.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with AICPA Statement of Position
93-2 Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. For
the year ended October 31, 1998, the Fund decreased undistributed net investment
income by $675,848, decreased accumulated net realized gains on investments by
$104,717 and decreased accumulated net realized foreign exchange losses by
$743,884, resulting in an increase to paid-in capital in excess of par by
$36,681. Net investment income, net realized losses on investments and net
assets were not affected by this change. Accumulated realized and unrealized
foreign exchange losses shown in the composition of net assets represent foreign
exchange losses for book purposes that have not yet been recognized for tax
purposes.
Taxes: For Federal income and excise tax purposes, substantially all of the
Fund's transactions are accounted for using the functional currencies.
Accordingly, only realized currency gains and losses resulting from the
repatriation of any of the Commonwealth Currencies into US dollars or another
Commonwealth Currency and realized currency gains and losses on non-Commonwealth
currencies are recognized for tax purposes.
No provision has been made for United States Federal income taxes because
it is the Fund's policy to meet the requirements of the United States Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Under the applicable
foreign tax law, a withholding tax may be imposed on interest and discounts
earned at various rates.
Cash Flow Information: The Fund invests in securities and distributes dividends
from net investment income and net realized gains on investment and currency
transactions which are paid in cash or are reinvested at the discretion of
shareholders. These activities are reported in the Statements of Changes in Net
Assets and additional information on cash receipts and cash payments is
presented in the Statement of Cash Flows. Cash includes domestic and foreign
currency.
Use of Estimates: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has agreements with EquitiLink International Management Limited
(the "Investment Manager"), EquitiLink Australia Limited (the "Investment
Adviser"), and Princeton Administrators, L.P. (the "Administrator"). The
Investment Manager and the Investment Adviser are affiliated companies. The
Investment Manager has entered into an agreement with CIBC Wood Gundy Securities
Inc. (the "Consultant").
The Investment Manager makes investment decisions on behalf of the Fund on
the basis of recommendations and information furnished to it by the Investment
Adviser and the Consultant, including the selection of and the placement of
orders with brokers and dealers to execute portfolio transactions on behalf of
the Fund.
The management agreement provides the Investment Manager with a fee,
computed weekly and payable monthly, at the following annual rates: 0.65% of the
Fund's average weekly net assets up to $200 million, 0.60% of such assets
between $200 million and $500 million and 0.55% of such assets in excess of $500
million. The administration agreement provides the Administrator with a fee
computed and payable monthly at the annual rate of 0.20% of the Fund's average
weekly net assets, subject to a minimum annual payment of $150,000. The
Investment Manager pays fees to the Investment Adviser and the Consultant for
their services rendered.
The Investment Manager informed the Fund that it paid $176,713 to the
Investment Adviser and $2,090 to the Consultant during the six months ended
April 30, 1999.
20
<PAGE>
The First Commonwealth Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term
investments, for the six months ended April 30, 1999 aggregated $12,046,512 and
$13,550,763, respectively.
The United States Federal income tax basis of the Fund's investments at
April 30, 1999 was $139,946,708 and accordingly, net unrealized appreciation for
United States federal income tax purposes was $9,527,257 (gross unrealized
appreciation--$10,689,107, gross unrealized depreciation--$1,161,850).
Note 4. Capital
There are 300 million shares of $.001 par value com mon stock authorized.
Of the 9,266,209 shares outstand ing at April 30, 1999, the Investment Manager
owned 11,131 shares.
There are 100 million shares of $.001 par value of Auction Market
Preferred Stock ("Preferred Stock") author ized. The preferred shares have
rights as determined by the Board of Directors. The 1,200 shares of Preferred
Stock outstanding consist of one series, W-7. The Preferred Stock has a
liquidation value of $25,000 per share plus any accumulated but unpaid dividends
whether or not declared.
Dividends on the Preferred Stock are cumulative at a rate typically reset
every seven days based on the results of an auction. Dividend rates ranged from
4.356% to 5.55% during the six months ended April 30, 1999. Under the Investment
Company Act of 1940, the Fund may not declare dividends or make other
distributions on shares of common stock or purchase any such shares if, at the
time of the declaration, distribution or purchase, asset coverage with respect
to the outstanding Preferred Stock would be less than 200%.
The Preferred Stock is redeemable at the option of the Fund, in whole or
in part, on any dividend payment date at $25,000 per share plus any accumulated
but unpaid dividends. The Preferred Stock is also subject to mandatory
redemption at $25,000 per share plus any accumulated but unpaid dividends,
whether or not declared, if certain requirements relating to the composition of
the assets and liabilities of the Fund as set forth in the Articles of
Incorporation are not satisfied.
The holders of Preferred Stock have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Fund's directors.
Note 5. Subsequent Dividends
Subsequent to April 30, 1999, the Board of Directors of the Fund declared
dividends from undistributed net investment income of $0.0775 per common share
payable on June 11, 1999 to common shareholders of record on May 28, 1999.
Subsequent to April 30, 1999, dividends and distributions declared and
paid on preferred shares totaled approximately $162,434 for the outstanding
preferred share series through June 11, 1999.
Note 6. Amendment to Fund's Principal Investment Objective, Investment Policies
and Investment Restrictions
At the reconvened Annual Meeting of Shareholders held on April 7, 1999,
shareholders approved to expand the Fund's principal investment objective,
investment policies and investment restrictions to enable the Fund to invest up
to 35% of its total assets in Global Debt Securities (the "Proposal"). Global
Debt Securities include securities of issuers located in, or securities
denominated in the currency of, countries other than Australia, Canada, New
Zealand or the United Kingdom.
The Proposal included (a) modifying the Fund's investment objective to
provide that the market value weighted average credit quality of the Fund's
investments must be A or better at all times, (b) permitting the Fund to invest
up to 15% of its total assets in debt securities rated below investment grade at
the time of investment, but not less than B- or if not rated, judged by the
Investment Manager to be of comparable quality, (c) permitting the Fund to
invest a portion of its assets in equity securities of other investment
companies that are registered under the 1940 Act and that are themselves
invested primarily in fixed-income securities, and (d) permitting the Fund, with
respect to the portion of the portfolio not denominated in a Commonwealth
Currency, to use derivatives to manage both currency and interest rate risk and
to replicate, or substitute for, physical securities in order to achieve
transactional efficiencies.
21
<PAGE>
The First Commonwealth Fund, Inc.
- --------------------------------------------------------------------------------
SUPPLEMENTAL PROXY INFORMATION (unaudited)
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the First Commonwealth Fund, Inc. was held
on March 26, 1999 and adjourned to April 7, 1999 at the offices of Prudential
Securities Incorporated, One Seaport Plaza, New York, New York. The description
of each proposal and number of shares voted at the meeting are as follows:
<TABLE>
<CAPTION>
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Votes
Votes for Withheld
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the following four directors to serve as David L. Elsum 5,227,166 512,088
Class I directors for a three-year term expiring Laurence S. Freedman 5,227,641 511,613
in 2002: David Manor 5,228,456 510,799
E. Duff Scott 5,228,731 510,524
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Votes
Votes for Against Abstentions
- ------------------------------------------------------------------------------------------------------------------------------------
2. To elect the following two directors to represent Michael R. Horsburgh 841 -- 3
the interests of the holders of preferred stock Dr. Anton E. Schrafl 841 -- 3
for the ensuing year:
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Votes
Votes for Against Abstentions
- ------------------------------------------------------------------------------------------------------------------------------------
3. To ratify the selection of PricewaterhouseCoopers LLP Common 5,329,190 49,445 360,620
as independent public accountants for the fiscal year Preferred 842 2 --
ending October 31, 1999:
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Votes Broker
Votes for Against Abstentions Non-Votes
- ------------------------------------------------------------------------------------------------------------------------------------
4A. To amend the Fund's investment policies to allow
the Fund to invest up to 35% of its total assets in Common 4,361,789 642,999 221,093 513,374
Global Debt Securities: Preferred 630 51 1 --
4B. To amend the Fund's principal investment objective
and investment policies regarding investments Common 4,444,069 583,279 198,532 513,374
in high grade fixed-income securities: Preferred 660 21 1 --
4C. To amend the Fund's investment policies to allow
the Fund to invest upto 15% of its total assets
in debt securities rated, or judged by the
Investment Manager to be, below investment Common 4,041,512 946,023 238,344 513,376
grade at the time of investment: Preferred 620 62 -- --
4D. To amend the Fund's investment policies to allow
the Fund to invest in equity securities issued by Common 4,356,311 664,702 195,866 513,375
certain US registered investment companies: Preferred 643 36 3 --
4E. To amend the Fund's investment policies and
investment restrictions to allow the Fund to Common 3,939,896 1,038,834 247,150 513,375
use derivatives: Preferred 618 61 3 --
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</TABLE>
22
<PAGE>
The First Commonwealth Fund, Inc.
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DIRECTORS OFFICERS
- --------------------------------------------------------------------------------
Brian M. Sherman, Chairman Laurence S. Freedman, President
Sir Roden Cutler Brian M. Sherman, Vice President
David Lindsay Elsum David Manor, Treasurer
Rt. Hon. Malcolm Fraser Roy M. Randall, Secretary
Laurence S. Freedman Ouma Sananikone-Fletcher,
Michael Gleeson-White Assistant Vice President and
Michael R. Horsburgh Chief Investment Officer
David Manor Barry G. Sechos, Assistant Treasurer
William J. Potter Allan S. Mostoff, Assistant Secretary
Peter D. Sacks Margaret A. Bancroft, Assistant Secretary
Anton E. Schrafl
E. Duff Scott
John T. Sheehy
Warren C. Smith
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.
The accompanying financial statements as of April 30, 1999 were not audited and
accordingly, no opinion is expressed on them.
23
<PAGE>
Investment Manager
EquitiLink International Management Limited
P.O. Box 578, 17 Bond Street
St. Helier, Jersey JE45XB
Channel Islands
Investment Adviser
EquitiLink Australia Limited
Level 3, 190 George Street
Sydney, NSW 2000, Australia
Consultant
CIBC Wood Gundy Securities 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
1 Heritage Drive
Boston, Massachusetts 02171
Auction Agent
The Chase Manhattan Bank
450 West 33rd St.
New York, New York 10001
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006
Stikeman, Elliott
Level 40 Chifley Tower
2 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 general
information only. It does not have regard to the specific investment objectives,
financial situation and the particular needs of any specific person. Past
performance is no guarantee of future returns.
The First Commonwealth Fund, Inc.
Box 9095
Princeton, NJ 08543-9095
(609) 282-4600
