<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
Wood Gundy, Inc.
BCE Place, P.O. Box 500
Toronto, Ontario, MSJ 258
Canada
ADMINISTRATOR
Princeton Administrators, L.P.
Box 9095
Princeton, New Jersey 08543-9095
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
1 Heritage Drive
Boston, Massachusetts 02171
AUCTION AGENT
Chase Manhattan Bank, N.A.
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
30 Rockefeller Plaza
New York, New York 10112
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.
The First Commonwealth Fund, Inc.
Box 9095
Princeton, NJ 08543-9095
(609) 282-4600
THE FIRST
COMMONWEALTH
FUND, INC.
- --------------------------------------------------------
QUARTERLY REPORT
JANUARY 31, 1999
HIGHLIGHTS OF THIS REPORT
NAV return 8.6% per annum since inception assuming
reinvestment of distributions
8.8% cash distribution rate for the year to January 31,
1999
95% of the Fund's assets invested in securities rated
or deemed equivalent to 'AA'/'Aa' or better
ALL AMOUNTS ARE IN US DOLLARS
UNLESS OTHERWISE STATED
MANAGED BY EQUITILINK INTERNATIONAL
MANAGEMENT LIMITED
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
March 12, 1999
Dear Shareholder:
We are pleased to present our Quarterly Report to shareholders for the three
months to January 31, 1999. The report includes a summary of developments in
bond and currency markets in Australia, Canada, New Zealand and the United
Kingdom.
INVESTMENT MARKETS -- UK AND CANADIAN BOND MARKETS RALLY
Investment conditions for the Fund were positive over the latest quarter.
The UK and Canadian bond markets rallied, more than compensating for the
weakness of the New Zealand bond market and flat Australian market. With the
exception of the British pound, all Commonwealth currencies appreciated against
the US dollar.
These positive investment conditions have translated into strong performance
of the Fund over the quarter.
INVESTMENT PERFORMANCE -- 8.6% PER ANNUM RETURN SINCE INCEPTION
The Fund's total return based on NAV was 4.5% over the three months to
January 31, 1999. Since inception, the Fund has returned 8.6% per annum. The
Fund's total return based on share price was 2.9% over the latest three months.
The NAV and share price performance both assume reinvestment of distributions.
INVESTMENT PORTFOLIO -- 95% AA/AA OR BETTER
The Fund continues to maintain a high quality portfolio, with nearly 95% of
assets invested in securities where either the issue or the issuer are rated at
least 'AA' by Standard & Poor's Ratings Group or 'Aa' by Moody's Investors
Service or, if unrated, are judged to be of equivalent quality by the Investment
Manager.
DISTRIBUTIONS -- 8.8% CASH DISTRIBUTION RATE
Distributions to common shareholders for the year totalled 95.5 cents per
share. Based on the share price of $10.88 at January 31, 1999, the cash
distribution rate over the last 12 months was 8.8%. Since all distributions are
paid after deducting applicable Australian, Canadian, New Zealand and United
Kingdom withholding taxes, the effective distribution rate is higher for those
US investors who are able to claim a tax credit.
At its meeting held on March 11, 1999, the Board of Directors resolved to
continue paying a monthly distribution of 7.75 cents per share through to June
1999 when the Board will review the position at its next quarterly meeting.
For information on the Fund including weekly updates of share price, NAV,
and details of recent distributions, please telephone Investor Relations, toll
free on 1-800-543-6217 in the United States.
Yours sincerely,
Brian M. Sherman Laurence S. Freedman
Chairman President
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 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.
2
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF THE INVESTMENT MANAGER
- --------------------------------------------------------------------------------
DISTRIBUTIONS
During the latest 12 month period, the Fund paid a total of 95.5 cents per
share in distributions, consisting of two monthly payments of 8.25 cents per
share and ten monthly payments of 7.75 cents per share plus an additional
payment of 1.5 cents per share in January. 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 current distribution rate of 7.75
cents per share per month will be reviewed at the next meeting of the Board to
be held in June 1999.
Based upon the January 31, 1999 share price of $10.88, and total
distributions of 95.5 cents per share paid over the past 12 months, the Fund
provided a cash distribution rate of 8.8%. At the date of this report, with the
share price at $10.50, 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 effective 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 January 31, 1999 was $13.37. The Fund's total
return based on NAV was 4.5% over the latest three months. 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 $12.98 per share.
SHARE PRICE PERFORMANCE
As of January 31, 1999, the Fund's share price as quoted on the New York
Stock Exchange was $10.88, which represented a discount of 18.6% to the NAV of
$13.37. The total investment return, based on the Fund's share price and
assuming reinvestment of distributions, was 2.9% over the latest three months.
At the date of this report, the share price was $10.50, representing a discount
of 19.1% 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 5.0% compared with 5.1% for 30-day commercial paper over the same
period.
3
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
COUNTRY COMPOSITION
The table below shows the geographical composition of the Fund's total
investments as of January 31, 1999, compared to the previous quarter and one
year ago. The figures are based on the currencies in which the portfolio is
invested:
TABLE 1: THE FIRST COMMONWEALTH FUND, INC. -- GEOGRAPHIC ASSET ALLOCATION
<TABLE>
<CAPTION>
JANUARY 31,
JANUARY 31, 1998 OCTOBER 31, 1998 1999
<S> <C> <C> <C>
Australia 24.9% 25.4% 24.9%
Canada 29.8% 30.1% 29.6%
New Zealand 9.3% 9.9% 10.0%
United Kingdom 35.6% 33.7% 35.0%
United States* 0.4% 0.9% 0.5%
TOTAL FUND 100.0% 100.0% 100.0%
</TABLE>
*It is the policy of the Investment Manager to maintain a portion of the Fund's
investments in U.S. short-term securities to cover distributions and expenses.
MATURITY COMPOSITION
At January 31, 1999, the average maturity of the Fund's assets was 8.6
years, compared with 8.8 years on October 31, 1998 and 7.6 years on January 31,
1998. The table below shows the maturity composition of the Fund's investments
as of January 31, 1999, compared to the previous quarter and one year ago:
TABLE 2: THE FIRST COMMONWEALTH FUND, INC. -- MATURITY ANALYSIS -- JANUARY 31,
1999
<TABLE>
<CAPTION>
LESS THAN 1 YEAR 1 - 5 YEARS 5 - 10 YEARS OVER 10 YEARS
<S> <C> <C> <C> <C>
Australia 4.6% 38.1% 53.3% 4.0%
Canada 8.6% 37.3% 12.7% 41.4%
New Zealand 16.7% 34.7% 48.6% --
United Kingdom 6.1% 22.4% 33.1% 38.4%
United States 100.0% -- -- --
TOTAL FUND 8.1% 31.8% 33.4% 26.7%
</TABLE>
4
<PAGE>
SECTORAL COMPOSITION
The table below shows the sectoral composition of the Fund's total
investments as of January 31, 1999:
TABLE 3: THE FIRST COMMONWEALTH FUND, INC. -- SECTORAL COMPOSITION -- JANUARY
31, 1999
<TABLE>
<CAPTION>
SOVEREIGN GOVT. STATE/ PROVINCE
BONDS BONDS EUROBONDS CORPORATE BONDS CASH OR EQUIVALENT
<S> <C> <C> <C> <C> <C>
Australia 10.2% 7.2% 4.0% 3.1% 0.4%
Canada 19.4% 3.3% 4.7% 1.2% 1.0%
New Zealand 5.0% -- 3.1% 1.3% 0.6%
United Kingdom 19.4% -- 14.6% -- 1.0%
United States -- -- -- -- 0.5%
TOTAL FUND 54.0% 10.5% 26.4% 5.6% 3.5%
</TABLE>
QUALITY OF INVESTMENTS
At January 31, 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 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, 1999
<TABLE>
<CAPTION>
AAA/AAA AA/AA A
<S> <C> <C>
Australia 75.1% 24.9% --
Canada 6.3% 88.8% 4.9%
New Zealand 76.4% 17.4% 6.2%
United Kingdom 57.0% 34.2% 8.8%
United States 100.0% -- --
TOTAL FUND 48.5% 46.4% 5.1%
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
MARKET REVIEW AND OUTLOOK
- --------------------------------------------------------------------------------
AUSTRALIA
Economy
The Australian economy has grown strongly in the last quarter, due mainly to
the strength of the service sector and other domestically focused parts of the
economy. Economic growth has been underpinned by low interest rates, rising real
wages growth, productivity growth, employment growth and reasonably healthy
consumer sentiment.
The September quarter national accounts recorded GDP growth of 5%. Our
expectations remain in place that the Australian economy will moderate towards
an annual growth rate of 2.5-3.0% in 1999.
Inflation remains lower than forecast, well below 2% over the last year.
Inflation should remain low in 1999, as solid productivity gains have capped
growth in unit labour costs. We expect a moderate increase in inflation to
around 2% as some impact from the Australian dollar depreciation flows through
to final prices.
Fixed Income
Australian bond yields were essentially flat over the three months to the
end of January. Bond yields rose in November when an anticipated monetary policy
easing was not forthcoming, but fell in early December following a 0.25% cash
rate cut by the central bank. The anticipation of further monetary policy easing
led yields to dip below cash rates, but after strong US and Australian economic
data was released in January, bond yields rose again.
Ten-year government bond yields were flat over the three months, rising
slightly from 4.97% on October 31, 1998 to 5.01% on January 31, 1999.
Based on our expectations of moderating growth and Australia's excellent
inflation performance, we support the case for further monetary policy easing,
but not in the near-term, given the resilience of domestic activity.
Currency
Over the quarter, the Australian dollar strengthened against the US dollar.
The Australian dollar rose to a high of 64.40 cents in mid-November. The
currency declined again following a monetary policy easing in early December,
but recovered ground following stronger US and Australian economic data in
January. The Australian dollar appreciated 0.9% against the US dollar over the
three months, to close at 63.02 cents on January 31, 1999.
The resilience of domestic growth is a key positive for the currency in the
near-term. Looking further out, any improvement in global growth should lead
commodity prices higher, supporting the Australian dollar.
6
<PAGE>
NEW ZEALAND
Economy
The New Zealand economy remains recessed, although economic growth was
stronger than expected in the second half of 1998. Subdued inflation will allow
monetary conditions to ease, and coupled with expansionary fiscal policy should
lift the economy out of recession in 1999.
The recent decision to introduce a cash rate target in New Zealand, should
increase the transparency of monetary policy and hence its effectiveness. This
move supports expectations of recovering growth over 1999.
Fixed Income
Stronger than expected employment and economic growth data, led New Zealand
bond yields higher. Ten-year government bond yields increased from 5.38% on
October 31, 1998, to 5.46% on January 31, 1999. Further easing of monetary
conditions should see yields fall in 1999.
While subdued inflation will be supportive of bonds, the key risk remains
the political situation, as an election is expected in November and a change of
government is likely.
Currency
Stronger data supported the New Zealand dollar. The currency appreciated
1.6% against the US dollar, to close at 53.79 cents on January 31, 1999.
CANADA
Economy
Canada's economy slowed in the first half of 1998, led by weaker consumption
spending and business investment. The resolution of union disputes in the second
half of the year helped growth to recover, further supported by the resilience
of US growth. We expect growth to moderate in line with global growth in 1999.
Fixed Income
The Canadian bond market rallied as Canada's central bank eased monetary
policy, following the lead of the US Federal Reserve. Ten-year government bond
yields decreased from 5.09% on October 31, 1998, to 4.89% on January 31, 1999.
We expect further rallies, supported by weakening growth, very low inflation and
the prospect of further monetary easing.
7
<PAGE>
Currency
Despite cash rate cuts, the Canadian dollar rallied. The currency was buoyed
by news that the US economy, where approximately 80% of Canadian exports are
directed, is growing strongly. The Canadian dollar appreciated 1.6% against the
US dollar, to close at 81.25 cents on January 31, 1999.
UNITED KINGDOM
Economy
The UK economy has been slowing substantially over the past year reflecting
easing external demand and until recently, tight monetary conditions. Responding
to weaker demand and lower inflationary pressures, the Bank of England has
progressively reduced short-term interest rates since October, by 200 basis
points to 5.5%.
Fixed Income
The UK bond market rallied as the central bank eased monetary policy.
Ten-year government bond yields decreased from 5.06% on October 31, 1998, to
4.11% on January 31, 1999. Relatively weaker British growth prospects compared
with other Western European economies point to British bonds rallying further.
Currency
Easing monetary conditions have also led to a depreciation of the British
pound. The pound depreciated 1.8% over the period to close at $1.64. We expect
weaker British growth and accelerating monetary easing to further weaken
Sterling.
8
<PAGE>
<TABLE>
<CAPTION>
JANUARY 31,
JANUARY 31, 1998 OCTOBER 31, 1998 1999
AUSTRALIA
<S> <C> <C> <C>
90 day Bank Bills 5.03% 4.82% 4.76%
10 yr. Government
Bonds 5.89% 4.97% 5.01%
CANADA
90 day Bank Bills 4.49% 4.75% 4.70%
10 yr. Government
Bonds 5.39% 5.09% 4.89%
NEW ZEALAND
90 day Bank Bills 9.00% 4.62% 4.11%
10 yr. Government
Bonds 6.76% 5.38% 5.46%
UNITED KINGDOM
90 day Bank Bills 7.08% 6.70% 5.53%
10 yr. Government
Bonds 5.51% 5.06% 4.11%
</TABLE>
Yield comparisons are direct and do not take into account fluctuations in
currency exchange rates.
EQUITILINK INTERNATIONAL MANAGEMENT LIMITED
9
<PAGE>
- ----------------------------------------------------------
THE FIRST COMMONWEALTH FUND, INC.
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------- -------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
LOCAL LOCAL
CURRENCY VALUE CURRENCY VALUE
(000) DESCRIPTION (US$) (000) DESCRIPTION (US$)
- ------------------------------------------------------------- -------------------------------------------------------------
LONG-TERM INVESTMENTS - 95.0%
AUSTRALIA - 24.2%
GOVERNMENT AND SEMI-GOVERNMENT
BONDS - 17.1%
COMMONWEALTH OF AUSTRALIA - 10.1%
Commonwealth of Australia,
<S> <C> <C> <C> <C> <C>
A$ 1,000 13.00%, 7/15/00................ 700,593
1,500 12.00%, 11/15/01............... 1,119,170
1,000 9.75%, 3/15/02................. 718,230
3,000 10.00%, 10/15/02............... 2,214,810
3,000 10.00%, 2/15/06................ 2,441,212
2,600 10.00%, 10/15/07............... 2,199,940
5,700 8.75%, 8/15/08................. 4,575,918
2,000 7.50%, 9/15/09................. 1,504,065
------------
15,473,938
------------
NEW SOUTH WALES - 1.5%
New South Wales Treasury
Corporation,
2,000 8.00%, 12/01/01................ 1,357,130
1,500 7.00%, 4/01/04................. 1,019,735
------------
2,376,865
------------
QUEENSLAND - 3.2%
Queensland Treasury Corporation,
3,000 8.00%, 8/14/01................. 2,024,562
2,000 8.00%, 5/14/03 (Global)........ 1,399,022
1,000 8.00%, 9/14/07................. 743,893
1,000 8.00%, 9/14/07 (Global)........ 743,792
------------
4,911,269
------------
SOUTH AUSTRALIA - 0.5%
South Australia Finance
Authority,
1,000 12.50%, 10/15/00............... 705,518
------------
VICTORIA - 1.3%
Treasury Cor poration of
Victoria,
2,500 10.25%, 11/15/06............... 2,057,192
------------
WESTERN AUSTRALIA - 0.5%
Wester n Australia Treasur y
Corporation,
1,000 10.00%, 7/15/05................ 792,710
------------
Total Australian gover nment and
semi-gover nment bonds (cost
US$27,317,517)................. 26,317,492
------------
CORPORATE BONDS - 3.1%
SERVICES - 3.1%
First Australian National
Mortgage
Acceptance Cor poration,
Ser ies 22,
A$ 2,121 11.40%, 12/15/01............... 1,502,153
Telstra Corp.,
2,000 11.50%, 10/15/02............... 1,516,896
2,000 12.00%, 5/15/06................ 1,732,015
------------
Total Australian corporate bonds
(cost US$5,056,422)............ 4,751,064
------------
EUROBONDS - 4.0%
FINANCIAL SERVICES - 1.6%
Export Finance & Insurance
Corporation,
1,750 11.00%, 12/29/04............... 1,395,201
Ing Mercantile Mutual Bank Ltd.,
500 7.125%, 3/13/02................ 329,046
State Bank of New South Wales,
1,000 10.50%, 4/30/99................ 636,862
------------
2,361,109
------------
SEMI-GOVERNMENT - 0.7%
South Australia Finance
Author ity,
500 12.50%, 5/08/01................ 362,068
Treasury Cor poration of
Victoria,
1,000 9.00%, 6/27/05................. 746,938
------------
1,109,006
------------
SERVICES - 0.7%
State Electricity Commission of
Victoria,
972 9.25%, 7/27/99................. 622,852
535 10.50%, 5/27/03................ 402,135
------------
1,024,987
------------
SUPRANATIONAL - 1.0%
Eurofima,
2,000 9.875%, 1/17/07................ 1,599,232
------------
Total Australian eurobonds
(cost US$6,558,074)............ 6,094,334
------------
Total Australian long-term
investments
(cost US$38,932,013)........... 37,162,890
------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- -------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
LOCAL LOCAL
CURRENCY VALUE CURRENCY VALUE
(000) DESCRIPTION (US$) (000) DESCRIPTION (US$)
- ------------------------------------------------------------- -------------------------------------------------------------
CANADA - 28.2%
GOVERNMENT, PROVINCIAL AND MUNICIPAL
BONDS - 22.3%
CANADA - 19.1%
Canadian Government,
<S> <C> <C> <C> <C> <C> <C>
C$ 5,500 7.50%, 3/01/01................. 3,823,463
6,000 8.50%, 4/01/02................. 4,385,592
5,000 7.25%, 6/01/03................. 3,613,020
2,500 7.25%, 6/01/07................. 1,916,226
2,000 6.00%, 6/01/08................. 1,430,932
8,000 10.25%, 3/15/14................ 8,176,603
6,000 9.00%, 6/01/25................. 6,080,106
------------
29,425,942
------------
AL BERTA - 0.6%
City of Edmonton,
1,000 9.625%, 2/13/12................ 907,138
------------
BRITISH COLUMBIA - 1.1%
Province of British Columbia,
1,000 10.15%, 8/29/01................ 741,309
1,000 9.50%, 1/09/12................. 907,997
------------
1,649,306
------------
ONTARIO - 1.5%
Province of Ontario,
1,000 8.75%, 4/22/03................. 753,139
2,000 7.50%, 2/07/24................. 1,634,171
------------
2,387,310
------------
Total Canadian gover nment,
provincial and municipal bonds
(cost US$34,443,162)........... 34,369,696
------------
CORPORATE BONDS - 1.2%
DIVERSIFIED INDUSTRIALS - 0.7%
Bell Telephone Company of Canada,
500 10.50%, 7/15/09................ 383,377
Imperial Oil Ltd.,
1,000 9.875%, 12/15/99............... 686,781
------------
1,070,158
------------
FINANCIAL SERVICES - 0.5%
Bank of Nova Scotia,
C$ 1,000 10.35%, 7/19/01................ 737,409
------------
Total Canadian cor porate bonds
(cost US$2,184,922)............ 1,807,567
------------
EUROBONDS - 4.7%
DIVERSIFIED INDUSTRIALS - 0.3%
Procter & Gamble Company,
500 10.875%, 8/15/01............... 371,365
------------
FINANCIAL SERVICES - 1.8%
Credit Local de France,
1,000 6.75%, 3/21/06................. 712,987
Inter national Bank for
Reconst r uction
and Development,
2,000 10.125%, 7/20/99............... 1,351,474
Rabobank Neder l and N.V.,
1,000 9.00%, 12/22/00................ 704,726
------------
2,769,187
------------
NATURAL RESOURCES - 1.2%
Ontar io Hydro,
500 8.50%, 5/26/25................. 458,262
Quebec Hydro,
1,500 7.00%, 6/01/04................. 1,073,199
Tokyo Elect r ic Power Company,
500 10.50%, 6/14/01................ 365,995
------------
1,897,456
------------
PROVINCIAL AND MUNICIPAL - 0.8%
Metropolitan Municipality of
Toronto,
750 9.625%, 5/14/02................ 558,906
Ville de Montreal,
1,000 6.375%, 2/15/01................ 672,505
------------
1,231,411
------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- -------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
LOCAL LOCAL
CURRENCY VALUE CURRENCY VALUE
(000) DESCRIPTION (US$) (000) DESCRIPTION (US$)
- ------------------------------------------------------------- -------------------------------------------------------------
SUPRANATIONAL - 0.6%
Bayerische Vereinsbank AG,
<S> <C> <C> <C> <C> <C> <C>
C$ 500 7.125%, 7/29/99................ 333,361
Canada (Cayman),
750 7.25%, 6/01/08................. 561,385
------------
894,746
------------
Total Canadian eurobonds
(cost US$7,773,565)............ 7,164,165
------------
Total Canadian long-term
investments
(cost US$44,401,649)........... 43,341,428
------------
NEW ZEALAND - 9.2%
GOVER NMENT BONDS - 4.9%
Gover nment of New Zealand,
NZ$ 1,000 8.00%, 2/15/01................. 568,682
5,000 8.00%, 4/15/04................. 3,013,903
5,000 8.00%, 11/15/06................ 3,120,481
Housing New Zealand,
1,500 8.00%, 11/15/06................ 877,411
------------
Total New Zealand gover nment
bonds
(cost US$8,312,566)............ 7,580,477
------------
CORPORATE BONDS - 1.2%
DIVERSIFIED INDUSTRIALS - 1.0%
Electricity Cor poration of
New Zealand Ltd.,
1,750 10.00%, 10/15/01............... 1,046,882
1,000 8.00%, 2/15/03................. 574,536
------------
1,621,418
------------
FINANCIAL SERVICES - 0.2%
Transpower Finance Ltd.,
500 8.00%, 6/15/05................. 291,948
------------
Total New Zealand corporate bonds
(cost US$2,075,749)............ 1,913,366
------------
EUROBONDS - 3.0%
FINANCIAL SERVICES - 1.4%
Inter national Bank for
Reconst ruction
and Development,
2,000 9.00%, 7/08/99................. 1,094,830
1,000 7.00%, 9/18/00................. 548,760
Primary Industry Bank of
Australia Limited,
1,000 8.25%, 3/27/00................. 554,812
------------
2,198,402
------------
GLOBAL - 1.3%
Federal National Mortgage
Association,
NZ$ 3,500 7.00%, 9/26/00................. 1,923,014
------------
SUPRANATIONAL - 0.4%
European Investment Bank,
1,000 9.00%, 7/16/99................. 548,087
------------
Total New Zealand eurobonds
(cost US$4,993,721)............ 4,669,503
------------
Total New Zealand long-term
investments
(cost US$15,382,036)........... 14,163,346
------------
UNITED KINGDOM - 33.4%
GOVERNMENT BONDS - 19.1%
United Kingdom Treasur y,
1,250 8.00%, 12/07/00................ 2,167,000
2,000 8.00%, 6/10/03................. 3,763,906
1,500 6.75%, 11/26/04................ 2,789,559
2,000 7.50%, 12/07/06................ 3,989,698
5,550 8.00%, 12/07/15................ 13,128,625
750 8.00%, 6/07/21................. 1,887,487
750 6.00%, 12/07/28................ 1,615,896
------------
Total United Kingdom gover nment
bonds
(cost US$25,759,803)........... 29,342,171
------------
EUROBONDS - 14.3%
DIVERSIFIED INDUSTRIALS - 2.9%
Allied Domecq PLC,
1,000 10.625%, 2/25/99............... 1,647,124
British Gas PLC,
1,400 8.875%, 7/08/08................ 2,877,425
------------
4,524,549
------------
FINANCIAL SERVICES - 7.2%
Abbey National Treasury
Services PLC,
1,250 8.00%, 4/02/03................. 2,263,913
Barclays Bank PLC,
1,000 9.875%, 5/29/49................ 2,079,942
Halifax Building Society,
1,500 11.00%, 1/17/14................ 3,772,847
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- -------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
LOCAL LOCAL
CURRENCY VALUE CURRENCY VALUE
(000) DESCRIPTION (US$) (000) DESCRIPTION (US$)
- ------------------------------------------------------------- -------------------------------------------------------------
L loyds Bank PLC,
<S> <C> <C> <C> <C> <C> <C>
500 7.375%, 3/11/04................ 891,110
Prudential Finance B.V.,
1,000 9.375%, 6/04/07................ 2,081,996
------------
11,089,808
------------
NATURAL RESOURCES - 1.2%
Thames Water Utilities
Finance PLC,
1,000 10.50%, 11/21/01............... 1,845,872
------------
SUPRANATIONAL - 3.0%
Republic of Finland,
1,000 8.00%, 4/07/03................. 1,826,243
1,250 10.125%, 6/22/08............... 2,838,618
------------
4,664,861
------------
Total United Kingdom eurobonds
(cost US$18,032,442)........... 22,125,090
------------
Total United Kingdom long-term
investments
(cost US$43,792,245)........... 51,467,261
------------
Total long-term investments
(cost US$142,507,943).......... 146,134,925
------------
SHOR T-TERM INVESTMENTS - 3.4%
AUSTRALIA - 0.3%
Banque Nat ionale de Par is Fixed
Deposit,
4.40%, 2/01/99
A$ 754 (cost US$474,355).............. 474,355
------------
CANADA - 1.0%
State Street Bank and Trust
Company Ti me Deposit,
4.75%, 2/02/99
C$ 2,274 (cost US$1,498,990)............ 1,502,754
------------
NEW ZEALAND - 0.6%
Bankers Trust New Zealand
Limited Call Account,
3.65%, 2/01/99
NZ$ 1,627 (cost US$858,119).............. 875,147
------------
UNITED KINGDOM - 1.0%
State Street Bank and Trust
Company Fixed Deposit,
5.75%, 2/05/99
959 (cost US$1,580,339)............ 1,575,352
------------
UNITED STATES - 0.5%
US$ 825 Repurchase Agreement, State
Street Bank and Trust
Company, 4.60% dated
1/29/99, due 2/01/99 in the
amount of $825,316
(cost $825,000;
collateralized by $655,000
U.S. Treasury Notes, 10.375%
due 11/15/09; value
$859,855)...................... 825,000
------------
Total shor t-term investments
(cost US$5,236,803)............ 5,252,608
------------
TOTAL INVESTMENTS - 98.4%
(cost US$147,744,746).......... 151,387,533
Other assets in excess of
liabilities - 1.6%............. 2,531,321
------------
TOTAL NET ASSETS - 100.0%........ $153,918,854
------------
------------
</TABLE>
13
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<TABLE>
<CAPTION>
<S> <C>
DIRECTORS OFFICERS
Brian M. Sherman, Chairman Laurence S. Freeman, 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
</TABLE>
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.
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