[LOGO]
THE FIRST
COMMONWEALTH
FUND, INC.
--------------------------------------------------------------------------------
[LOGO]
EQUITILINK
MANAGED BY
EQUITILINK
INTERNATIONAL MANAGEMENT
LIMITED
--------------------------------------------------------------------------------
Semi-Annual Report April 30, 2000
Highlights
o 10.0% cash distribution rate for the previous 12 months, based on a share
price of $9.19 on April 30, 2000
o 89.3% invested in securities rated AA/Aa or better
o 5.9% of total assets invested in Asian debt securities
o Brokerage on DRIP purchases reduced from 5 cents to 2 cents per share
[GRAPHIC OMITTED]
www.equitilink.com
NYSE - FCO
Managed by EquitiLink International
Management Limited
Advised by EquitiLink Australia Limited
ALL AMOUNTS ARE IN US DOLLARS UNLESS
OTHERWISE STATED
<PAGE>
letter to Shareholders
================================================================================
June 21, 2000
Dear Shareholder,
We present this Semi-Annual Report which covers the activities of The
First Commonwealth Fund, Inc. (the "Fund") for the six months ended April 30,
2000. Included in this report is a review of the Australian, New Zealand,
Canadian, United Kingdom and selected Asian economies and investment markets,
together with an overview of the Fund's investments prepared by the Investment
Manager, EquitiLink International Management Limited.
High Credit Quality: 89.3% of securities rated or deemed equivalent to AA/Aa or
better
The Fund has maintained its high credit quality. Over 89% of assets are
rated AA/Aa or better, or are considered of equivalent quality by the Investment
Manager. An additional 6.7% is held in A rated securities.
Distributions: 10.0% annual cash distribution rate
Distributions to common shareholders for the year to April 30, 2000
totaled 92.25 cents per share. Based on the share price of $9.19 on April 30,
2000, the cash distribution rate over the last 12 months was 10.0%. Since all
distributions are paid after deducting applicable foreign withholding taxes, the
effective distribution rate may be higher for those US investors who are able to
claim a foreign tax credit.
On March 17, 2000, the Board of Directors announced a 7.0 cent per share
monthly distribution. It is the Board's intention that the monthly distribution
be maintained until March 2001, subject to regular review at the Board's
quarterly meetings, having regard to market conditions, with the next review
scheduled to take place in September 2000. The Board's policy is to provide
investors with a stable monthly distribution out of current income, supplemented
by realized capital gains and, to the extent necessary, paid in capital.
Investment Performance: 6.6% per annum return since inception
Since inception, the Fund's Net Asset Value (NAV) has returned 6.6% per
annum to April 30, 2000. However, over the six months to April 30, 2000 the
Fund's NAV returned -1.9%. This negative return was primarily due to the
strength of the US dollar against the Australian, New Zealand and British
currencies.
The performance was in an environment of falling interest rates.
Commonwealth bond markets generally strengthened during the period; Australian
bond yields fell from 6.63% to 6.39%, New Zealand bond yields fell from 7.08% to
7.03%, UK bond yields fell from 5.41% to 5.21%, but Canadian bond yields rose
from 6.05% to 6.17%. The Fund's modest move into Asian bond markets had a
positive contribution to the overall performance of the Fund.
Asian Investments: 5.9% of total assets invested in Asian debt securities
In line with the Fund's mandate, 5.9% of the Fund's total assets are held
in Asian debt securities, a region which presents attractive opportunities. The
Fund's ability to increase its investment in Asian markets remains constrained
by currency repatriation issues.
1
<PAGE>
The First Commonwealth Fund, Inc.
================================================================================
For information about the Fund, including weekly updates of share price,
NAV, and details of recent distributions, contact EquitiLink USA, Inc. Investor
Relations, by:
o calling toll free on 1-800-552-5465 in the United States,
o email to [email protected], or
o visiting the website at www.equitilink.com.
Yours sincerely,
[LOGO]
/s/ Brian M. Sherman /s/ Laurence S. Freedman THE FIRST
Brian M. Sherman Laurence S. Freedman COMMONWEALTH
Chairman President FUND, INC.
================================================================================
Your Board's policy is to provide investors with a stable monthly
distribution out of current income, supplemented by realized capital gains and,
to the extent necessary, paid-in capital.
The Fund is subject to US corporate, tax and securities laws. Under US tax
accounting rules, the amount of distributable income for each fiscal period
depends on the actual exchange rates during the entire year between the US
dollar and the currencies on which Fund assets are denominated and on the
aggregate gains and losses realized by the Fund during the entire year.
Therefore the exact amount of distributable income for each fiscal year
can only be determined at the end of the Fund's fiscal year, October 31.
However, under the US Investment Company Act of 1940, the Fund is required
to indicate the source of each distribution to shareholders.
The Fund estimates that distributions year to date, including the
distribution paid on June 16, 2000, are made up of 72% net investment income,
16% realized short and long-term capital gains, and 12% return of paid-in
capital.
This estimated distribution composition will vary from month to month
because it may be materially impacted by future realized gains and losses on
securities and fluctuations on the value of the currencies in which the Fund
assets are denominated.
In January 2001, a Form 1099 DIV will be sent to shareholders, which will
state the amount and composition of distributions and provide definitive
information with respect to their appropriate tax treatment.
================================================================================
2
<PAGE>
Dividend Reinvestment and Cash Purchase Plan The First Commonwealth Fund, Inc.
================================================================================
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. Under this arrangement, the
Plan Agent will purchase shares for you on the stock exchange or otherwise on
the open market on or about the 15th of each 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. Brokerage on share purchases was recently reduced from
5 cents to 2 cents per share;
Convenience--the Plan Agent will hold your shares in non-certificated form
and will provide a detailed record of your holdings at the end of each
distribution period.
To request a brochure containing information on the Plan, together with an
authorization form, please contact the Plan Agent, State Street Bank & Trust
Company, P.O. Box 8200, Boston, MA 02266, or toll-free on 1-800-426-5523.
3
<PAGE>
Report of the Investment Manager The First Commonwealth Fund, Inc.
================================================================================
Distributions
During the 12 month period ended April 30, 2000, the Fund paid a total of
92.25 cents per share. The Board's policy is to provide investors with a stable
monthly distribution out of current income, supplemented by realized capital
gains and, to the extent necessary, paid-in capital. On March 17, 2000, the
Board of Directors announced a 7.0 cent per share monthly distribution. It is
the Board's intention that the distribution be maintained until March 2001,
subject to regular review at the Board's quarterly meetings, having regard to
market conditions, with the next review scheduled to take place in September
2000.
Based upon the April 30, 2000 share price of $9.19, and total
distributions of 92.25 cents per share paid over the past 12 months, the Fund
provided a cash distribution rate of 10.0%. Since all distributions are paid
after deducting applicable withholding taxes, the effective distribution rate
may be 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, 2000 was $11.36. The Fund's NAV
returned -1.9% over the six months to April 30, 2000. The strength of the US
dollar against the Australian, New Zealand and British currencies detracted from
the Fund's performance. The performance was in an environment of falling
interest rates. Commonwealth bond markets generally strengthened during the six
months; Australian bond yields fell from 6.63% to 6.39%, New Zealand bond yields
fell from 7.08% to 7.03%, UK bond yields fell from 5.41% to 5.21%, but Canadian
bond yields rose from 6.05% to 6.17%. The Fund's modest move into Asian bond
markets provided a positive contribution to the overall performance.
Since inception, the Fund's NAV has returned 6.6% per annum on average.
All figures assume reinvestment of distributions. At the date of this report,
the NAV was $11.25 per share.
Share Price Performance
The market return of the Fund for the six months ended April 30, 2000 was
-7.1%. As of April 30, 2000, the Fund's share price as quoted on the New York
Stock Exchange was $9.19, which represented a discount of 19.1% to the NAV. At
the date of this report, the share price was $9.13, representing a discount of
18.8% to NAV.
Auction Market Preferred Stock (AMPS)
The Fund's US$30 million of AMPS continue to be well bid at the weekly
auctions. The average interest rate paid was 5.66% over the quarter, compared
with the 30-day commercial paper rate of 5.96% over the same period. These rates
have increased since last quarter, with the US Federal Reserve having raised
official cash interest rates.
The Fund is a leveraged Fund. However, in recent times the US dollar has
strengthened against virtually all other currencies in the world and official
cash interest rates in the United States have risen to levels that exceed many
of those found in the Commonwealth Countries. This has resulted in a negative
impact for common shareholders.
The Manager expects that in the medium to longer term this situation will
rectify itself and the AMPS will contribute positively.
4
<PAGE>
Portfolio Composition The First Commonwealth Fund, Inc.
================================================================================
GEOGRAPHIC COMPOSITION
The table below shows the geographic composition of the Fund's total
investments as of April 30, 2000, compared with the previous six months and
twelve months:
TABLE 1: THE FIRST COMMONWEALTH FUND, INC.--GEOGRAPHIC ASSET ALLOCATION
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
April 30, 2000 October 31, 1999 April 30, 1999
% % %
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Australia 24.2 24.2 25.8
-------------------------------------------------------------------------------------------------------
Canada 33.3 30.2 29.6
-------------------------------------------------------------------------------------------------------
New Zealand 3.6 7.9 11.0
-------------------------------------------------------------------------------------------------------
United Kingdom 31.5 33.2 32.8
-------------------------------------------------------------------------------------------------------
United States* 1.5 0.1 0.8
-------------------------------------------------------------------------------------------------------
Asia 5.9 4.4 --
-------------------------------------------------------------------------------------------------------
Total Portfolio 100.0 100.0 100.0
-------------------------------------------------------------------------------------------------------
</TABLE>
* It is the policy of the Manager to maintain a portion of the Fund's
investments in US short-term securities to cover distributions and expenses.
CURRENCY COMPOSITION
The table below shows the currency composition of the Fund's total
investments as of April 30, 2000, compared with the previous six months and
twelve months:
TABLE 2: THE FIRST COMMONWEALTH FUND, INC.--CURRENCY ASSET ALLOCATION
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
April 30, 2000 October 31, 1999 April 30, 1999
% % %
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Australian Dollar 24.2 24.2 25.8
-------------------------------------------------------------------------------------------------------
Canadian Dollar 33.3 30.2 29.6
-------------------------------------------------------------------------------------------------------
New Zealand Dollar 3.6 7.9 11.0
-------------------------------------------------------------------------------------------------------
British Pound 31.5 33.2 32.8
-------------------------------------------------------------------------------------------------------
United States Dollar* 4.3 2.3 0.8
-------------------------------------------------------------------------------------------------------
Asian Currencies 3.1 2.2 --
-------------------------------------------------------------------------------------------------------
Total Portfolio 100.0 100.0 100.0
-------------------------------------------------------------------------------------------------------
</TABLE>
* Includes Asian Yankee bond investments.
5
<PAGE>
Portfolio Composition (continued) The First Commonwealth Fund, Inc.
================================================================================
MATURITY ANALYSIS
As of April 30, 2000, the average maturity of the Fund's assets was 9.2
years, increased from 7.9 years six months ago. The Fund's duration was 5.3
years as of April 30, 2000. The table below shows the maturity composition of
the Fund's total investments as of April 30, 2000:
TABLE 3: THE FIRST COMMONWEALTH FUND, INC.--MATURITY ANALYSIS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Less than 1 year 1-5 years 5-10 years Over 10 years
% % % %
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australia 5.9 46.2 39.9 8.0
-------------------------------------------------------------------------------------------------------
Canada 21.9 27.8 12.3 38.0
-------------------------------------------------------------------------------------------------------
New Zealand 30.7 39.1 30.2 --
-------------------------------------------------------------------------------------------------------
United Kingdom 7.2 31.3 22.6 38.9
-------------------------------------------------------------------------------------------------------
United States 100.0 -- -- --
-------------------------------------------------------------------------------------------------------
Asia 3.8 36.3 39.1 20.8
-------------------------------------------------------------------------------------------------------
Total Portfolio 14.0 33.8 24.0 28.2
-------------------------------------------------------------------------------------------------------
</TABLE>
SECTORAL COMPOSITION
The table below shows the sectoral composition of the Fund's total
investments as of April 30, 2000:
TABLE 4: THE FIRST COMMONWEALTH FUND, INC.--SECTORAL COMPOSITION
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Provincial/ Utilities/
Sovereign State Supranational Corporate Cash or
Govt. Bonds Bonds Bonds Bonds Equivalent
% % % % %
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australia 11.2 9.1 1.0 2.2 0.7
-------------------------------------------------------------------------------------------------------
Canada 21.6 5.9 0.5 1.8 3.5
-------------------------------------------------------------------------------------------------------
New Zealand 0.3 -- 1.9 0.6 0.8
-------------------------------------------------------------------------------------------------------
United Kingdom 19.9 -- 3.1 6.5 2.0
-------------------------------------------------------------------------------------------------------
United States -- -- -- -- 1.5
-------------------------------------------------------------------------------------------------------
Asia 1.4 -- 0.2 3.1 1.2
-------------------------------------------------------------------------------------------------------
Total Portfolio 54.4 15.0 6.7 14.2 9.7
-------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Portfolio Composition (concluded) The First Commonwealth Fund, Inc.
================================================================================
QUALITY OF INVESTMENTS
As of April 30, 2000, 89.3% 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 table below shows the asset quality of the Fund's investments as of April
30, 2000.
TABLE 5: THE FIRST COMMONWEALTH FUND, INC.--ASSET QUALITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
AAA/Aaa AA/Aa A BBB/Baa BB/Ba* B/B*
% % % % % %
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Australia 78.8 19.0 2.2 -- -- --
----------------------------------------------------------------------------------------------------------
Canada 12.2 80.2 7.6 -- -- --
----------------------------------------------------------------------------------------------------------
New Zealand 30.7 53.6 15.7 -- -- --
----------------------------------------------------------------------------------------------------------
United Kingdom 59.7 32.5 7.8 -- -- --
----------------------------------------------------------------------------------------------------------
United States 100.0 -- -- -- -- --
----------------------------------------------------------------------------------------------------------
Asia 10.2 -- 9.9 38.5 23.7 17.7
----------------------------------------------------------------------------------------------------------
Total Portfolio 45.5 43.8 6.7 1.9 1.2 0.9
----------------------------------------------------------------------------------------------------------
</TABLE>
* Below Investment Grade.
7
<PAGE>
Market Review and Outlook The First Commonwealth Fund, Inc.
================================================================================
Australia
Growth in the Australian economy has been uninterrupted since 1992, one of
its longest periods of expansion. After strong growth through the end of 1999,
the economy has moderated slightly in early 2000. However, it is forecast by the
Australian Federal Government to remain strong at 3.75% for the year to June
2001.
Inflation has risen to 2.8% due to higher oil prices, but it remains
within expectations and the Reserve Bank of Australia target range.
The Reserve Bank of Australia increased interest rates by 1.00% during the
six months to April 30, 2000 and by a further 0.25% in early May, taking
official interest rates to 6.00%. The Reserve Bank of Australia is expected to
maintain its pre-emptive approach and further tightenings of monetary policy are
forecast to occur during the year.
Movements in US treasury yields remained the key influence on Australian
yields during the six months. Ten-year government bond yields fell from a peak
of 6.63% to 6.39%.
The US dollar rose 9.6% against the Australian dollar over the six months;
the Australian dollar closed the period at US58.4 cents. The recent appreciation
by the US dollar against the Australian dollar reflects the following:
o the continuing strength of the US economy has seen the US dollar
appreciate against most major currencies,
o the interest rate differential between Australia and the US,
o expectations that the US Federal Reserve will tighten more
aggressively than the Reserve Bank of Australia, and
o a sluggish commodity price recovery.
Over the year many of the above concerns are likely to fade and we anticipate:
o growth in the Australian economy to remain strong, at or above the
world average,
o a broadening of the commodity price recovery, particularly in the
bulk and soft commodities,
o strong tourism income from the Olympics to support the Australian
dollar during the year.
Canada
The Canadian economy has benefited from the booming US economy and a
relatively undervalued exchange rate (against the US dollar). With robust
consumer demand and a strengthening corporate sector, Canadian growth is likely
to continue through the year. The Bank of Canada raised official cash interest
rates by 0.75% to 5.50% during the six months ended April 30, and is expected to
continue to match future official interest rate rises by the US Federal Reserve.
Canadian bond yields increased over the six months, with ten-year government
bond yields peaking at 6.54% before closing the six months at 6.17%, 0.12%
higher.
8
<PAGE>
Market Review and Outlook (concluded) The First Commonwealth Fund, Inc.
================================================================================
The Canadian dollar, due to the strength of the Canadian economy,
outperformed the other Commonwealth currencies and closed the six months
virtually unchanged against the US dollar at US67.59 cents.
New Zealand
For the six months to April 30, The Reserve Bank of New Zealand increased
the cash rate by 1.50% to 6.00% in response to stronger than expected growth.
New orders, production, domestic sales and profitability are all at their
highest levels since 1994/95.
The US dollar was driven by the strong US economy, resulting in the
depreciation of most global currencies against the US dollar. The US dollar
appreciated 4.1% against the New Zealand dollar; the New Zealand dollar closed
the six months at US48.54 cents.
United Kingdom
The Bank of England raised official rates by 0.50% to 6.00% for the six
months to April 30. Growth appears to be moderating due to the combined effects
of higher interest rates and the strength of Sterling against other European
currencies. Inflation remains well under control with the most recent reading
among the lowest on record. Ten-year government bond yields fell from 5.41% to
5.21%.
The strength of the US dollar resulted in the US dollar appreciating 6.5%
against the British pound; the British pound closed the six months at US$1.567.
Asia
Domestic and Yankee (US$ denominated) bonds
Asian domestic bond markets benefited from improving economic conditions
during the six months. Better than expected inflation data from most countries
saw domestic bond yields fall in the Philippines, Thailand, Malaysia and
Singapore.
Yankee bonds generally rose in line with rising official US interest
rates. As of April 30, 2000, the Fund held 2.8% of its total assets in Yankees.
Currencies
The continuing strength of the US economy has seen the US dollar perform
strongly against most Asian currencies. The exception was the South Korean Won
which appreciated 8.3% against the US dollar during the six months.
9
<PAGE>
Summary of Key Rates The First Commonwealth Fund, Inc.
================================================================================
The following table summarizes the movements of key interest rates and
currencies over the last six month and twelve month periods.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
April 30, 2000 October 31, 1999 April 30, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Australia
90 day bank bills 6.24% 5.35% 4.81%
10 year bonds 6.39% 6.63% 5.67%
Australian Dollar $ 0.58 $ 0.64 $ 0.66
Canada
90 day bank bills 5.50% 4.78% 4.52%
10 year bonds 6.17% 6.05% 5.16%
Canadian Dollar $ 0.68 $ 0.68 $ 0.69
New Zealand
90 day bank bills 6.66% 5.29% 4.64%
10 year bonds 7.03% 7.08% 5.77%
NZ Dollar $ 0.49 $ 0.51 $ 0.56
United Kingdom
90 day bank bills 6.01% 5.29% 4.52%
10 year bonds 5.21% 5.41% 4.61%
British Pound $ 1.57 $ 1.64 $ 1.61
South Korea
90 day bank bills 7.37% 7.26% 6.02%
5 year bonds 9.28% 9.03% 7.12%
South Korean Won* W 1108 W 1200 W 1158
Thailand
90 day bank bills 3.50% 4.00% 3.63%
10 year bonds 6.95% 7.81% 7.55%
Thai Baht* B 38 B 39 B 37
Philippines
90 day bank bills 8.80% 9.75% 10.88%
10 year bonds 14.40% 15.31% 14.94%
Philippines Peso* P 41 P 40 P 38
Malaysia
90 day bank bills 2.85% 3.35% 4.00%
10 year bonds 5.86% 6.50% N/A
Malaysian Ringgit* R 3.8 R 3.8 R 3.8
US$ Yankee Bonds**
South Korea 8.32% 8.37% 7.43%
Thailand 8.10% 8.02% 7.21%
Philippines 10.43% 9.42% 8.57%
</TABLE>
* These currencies are quoted Asian currency per US dollar. The Australian,
New Zealand and Canadian dollars and the British pound are quoted US
dollars per currency.
** Ten-year sovereign issues.
EquitiLink International Management Limited
June 2000
10
<PAGE>
Portfolio of Investments April 30, 2000 The First Commonwealth Fund, Inc.
(unaudited)
================================================================================
------------------------------------------------------------------
Principal Amount
Local Currency(a) Value
(000) Description (US$)
------------------------------------------------------------------
LONG-TERM INVESTMENTS--90.1%
AUSTRALIA--23.5%
Government Bonds--11.2%
Commonwealth of Australia,
A$ 1,000 13.00%, 7/15/00................... 591,936
1,500 12.00%, 11/15/01.................. 947,245
3,000 10.00%, 10/15/02.................. 1,891,231
2,000 9.50%, 8/15/03.................... 1,270,691
1,000 10.00%, 2/15/06................... 681,160
2,600 10.00%, 10/15/07.................. 1,831,737
2,700 8.75%, 8/15/08.................... 1,807,060
3,000 7.50%, 9/15/09.................... 1,884,101
3,250 5.75%, 6/15/11.................... 1,789,966
------------
12,695,127
------------
Government Banks
Export Finance & Insurance
Corporation,
3,750 11.00%, 12/29/04.................. 2,512,806
------------
Total Australian
government bonds
(cost US$18,429,096).............. 15,207,933
------------
Semi-Government Bonds--9.1%
New South Wales--2.2%
New South Wales Treasury
Corporation,
2,000 8.00%, 12/01/01................... 1,190,776
1,500 7.00%, 4/01/04.................... 880,555
1,500 8.00%, 3/01/08.................... 935,130
------------
3,006,461
------------
Queensland--3.7%
Queensland Treasury
Corporation,
3,000 8.00%, 8/14/01.................... 1,782,310
2,000 8.00%, 5/14/03 (Global)........... 1,208,296
1,000 8.00%, 9/14/07.................... 621,569
1,000 8.00%, 9/14/07 (Global)........... 625,464
1,500 6.00%, 6/14/11.................... 820,579
------------
5,058,218
------------
South Australia--0.7%
South Australia Finance
Authority,
1,000 12.50%, 10/15/00.................. 599,873
500 12.50%, 5/08/01................... 307,593
------------
907,466
------------
Victoria--2.0%
State Electricity Commission
of Victoria,
535 10.50%, 5/27/03................... 343,309
Treasury Corporation of Victoria,
1,000 9.00%, 6/27/05.................... 634,691
2,500 10.25%, 11/15/06.................. 1,714,945
------------
2,692,945
------------
Western Australia--0.5%
Western Australia Treasury
Corporation,
1,000 10.00%, 7/15/05................... 662,694
------------
Total Australian
semi-government bonds
(cost US$14,739,487).............. 12,327,784
------------
Supranational--1.0%
Eurofima,
2,000 9.875%, 1/17/07................... 1,337,477
------------
Total Australian
supranational bonds
(cost US$1,510,331)............... 1,337,477
------------
Corporate Banks--1.2%
Commonwealth Bank of Australia,
500 6.25%, 9/01/09.................... 279,646
First Australian National
Mortgage Acceptance
Corporation, Series 22,
1,736 11.40%, 12/15/01.................. 1,074,603
ING Mercantile Mutual Bank Ltd.,
500 7.125%, 3/13/02................... 292,292
------------
Total Australian corporate
bank bonds
(cost US$1,981,263)............... 1,646,541
------------
Corporate Non-Banks--1.0%
Telstra Corp.,
2,000 11.50%, 10/15/02.................. 1,279,544
------------
Total Australian corporate
non-bank bonds
(cost US$1,745,314)............... 1,279,544
------------
Total Australian
long-term investments
(cost US$38,405,491).............. 31,799,279
------------
See Notes to Financial Statements.
11
<PAGE>
Portfolio of Investments April 30, 2000 The First Commonwealth Fund, Inc.
(unaudited) (continued)
================================================================================
------------------------------------------------------------------
Principal Amount
Local Currency(a) Value
(000) Description (US$)
------------------------------------------------------------------
CANADA--29.8%
Government Bonds--21.6%
Canadian Government,
C$ 5,500 7.50%, 3/01/01.................... 3,760,596
6,000 8.50%, 4/01/02.................... 4,218,741
5,000 5.25%, 9/01/03.................... 3,274,667
2,500 7.25%, 6/01/07.................... 1,783,862
2,000 5.50%, 6/01/09.................... 1,289,036
1,000 10.75%, 10/01/09.................. 889,949
3,000 10.25%, 3/15/14................... 2,773,514
4,000 8.00%, 6/01/23.................... 3,348,655
8,000 9.00%, 6/01/25.................... 7,403,196
Canada (Cayman),
750 7.25%, 6/01/08.................... 523,337
------------
Total Canadian
government bonds
(cost US$31,626,194).............. 29,265,553
------------
Semi-Government Bonds--5.9%
British Columbia--1.8%
Province of British Columbia,
1,000 10.15%, 8/29/01................... 708,432
2,000 9.50%, 1/09/12.................... 1,658,524
------------
2,366,956
------------
Montreal--0.5%
Ville de Montreal,
1,000 6.375%, 2/15/01................... 675,477
------------
Ontario--1.9%
Ontario Hydro,
500 8.50%, 5/26/25.................... 417,064
Province of Ontario,
1,000 8.75%, 4/22/03.................... 717,307
2,000 7.50%, 2/07/24.................... 1,499,992
------------
2,634,363
------------
Quebec--1.3%
Quebec Hydro,
1,500 7.00%, 6/01/04.................... 1,033,696
1,000 5.30167%, 1/28/05 (b)............. 673,922
------------
1,707,618
------------
Toronto--0.4%
Metropolitan Municipality
of Toronto,
750 9.625%, 5/14/02................... 534,896
------------
Total Canadian
semi-government bonds
(cost US$8,277,279)............... 7,919,310
------------
Utilities--0.5%
Bell Telephone Company
of Canada,
500 10.50%, 7/15/09................... 362,685
Tokyo Electric Power Company,
500 10.50%, 6/14/01................... 352,136
------------
Total Canadian utility bonds
(cost US$879,374)................. 714,821
------------
Corporate Banks--1.5%
Bank of Nova Scotia,
1,000 10.35%, 7/19/01................... 706,700
Credit Local de France,
1,000 6.75%, 3/21/06.................... 678,991
Rabobank Nederland N.V.,
1,000 9.00%, 12/22/00................... 687,846
------------
Total Canadian
corporate bank bonds
(cost US$2,411,128)............... 2,073,537
------------
Corporate Non-Banks--0.3%
Procter & Gamble Company,
500 10.875%, 8/15/01.................. 355,076
------------
Total Canadian
corporate non-bank bonds
(cost US$453,347)................. 355,076
------------
Total Canadian
long-term investments
(cost US$43,647,322).............. 40,328,297
------------
MALAYSIA--0.5%
Semi-Government Bonds--0.5%
Danamodal Nasional Berhad,
MYR 3,100 0.00%, 10/21/03................... 677,794
------------
Total Malaysia
long-term investments
(cost US$687,560)................. 677,794
------------
NEW ZEALAND--2.8%
Government Bonds--0.3%
Canadian Government,
NZ$ 1,000 6.625%, 10/03/07.................. 461,081
------------
Total government bonds
(cost US$557,544)................. 461,081
------------
See Notes to Financial Statements.
12
<PAGE>
Portfolio of Investments April 30, 2000 The First Commonwealth Fund, Inc.
(unaudited) (continued)
================================================================================
------------------------------------------------------------------
Principal Amount
Local Currency(a) Value
(000) Description (US$)
------------------------------------------------------------------
Supranational--0.3%
International Bank
for Reconstruction and
Development,
NZ$ 1,000 7.00%, 9/18/00.................... 485,497
------------
Total New Zealand
supranational bonds
(cost US$630,368).................. 485,497
------------
Utilities--1.6%
Electricity Corporation of
New Zealand Ltd.,
1,750 10.00%, 10/15/01.................. 883,264
1,000 8.00%, 2/15/03.................... 494,482
TCNZ Finance Limited,
1,000 9.25%, 7/01/02.................... 498,554
Transpower Finance Ltd.,
500 8.00%, 6/15/05.................... 244,379
------------
Total New Zealand utility bonds
(cost US$2,683,526)............... 2,120,679
------------
Corporate Non-Banks--0.6%
Housing New Zealand,
1,500 8.00%, 11/15/06................... 748,509
------------
Total New Zealand corporate
non-bank bonds
(cost US$806,898)................. 748,509
------------
Total New Zealand
long-term investments
(cost US$4,678,336)............... 3,815,766
------------
PHILIPPINES--0.4%
Government Bonds--0.4%
Philippine Government,
PHP 14,000 11.875%, 6/10/01.................. 342,775
7,000 16.50%, 2/25/09................... 189,861
------------
Total Philippine
long-term investments
(cost US$575,142)................. 532,636
------------
SINGAPORE--0.3%
Government Bonds--0.3%
Singapore Government,
SG$ 440 4.00%, 2/01/05.................... 261,140
220 4.375%, 1/15/09................... 130,983
------------
Total Singapore
long-term investments
(cost US$390,835)................. 392,123
------------
THAILAND--0.8%
Government Bonds--0.5%
Thailand Government,
THB 11,000 6.125%, 4/12/02 (c)............... 301,407
11,000 8.00%, 12/08/06 (c)............... 318,444
------------
Total Thailand
government bonds
(cost US$624,549)................. 619,851
------------
Utilities--0.2%
Eastern Water Resources
Development and Management
Company Limited,
10,000 9.00%, 7/22/04 (c)................ 289,258
------------
Total Thailand utility bonds
(cost US$257,158)................. 289,258
------------
Corporate Non-Banks--0.1%
Advanced Info Service Public
Company Limited,
8,000 6.50%, 3/20/03.................... 211,711
------------
Total Thailand
corporate non-banking bonds
(cost US$212,033)................. 211,711
------------
Total Thailand
long-term investments
(cost US$1,093,740)............... 1,120,820
------------
UNITED KINGDOM--29.3%
Government Bonds--19.8%
United Kingdom Treasury,
(POUND) 250 8.00%, 12/07/00................... 395,824
1,000 7.00%, 11/06/01................... 1,584,864
1,500 8.00%, 6/10/03.................... 2,478,132
500 5.00%, 6/07/04.................... 759,760
1,500 6.75%, 11/26/04................... 2,443,345
500 7.50%, 12/07/06................... 861,693
500 5.75%, 12/07/09................... 815,310
600 8.00%, 12/07/15................... 1,265,321
3,000 8.00%, 6/07/21.................... 6,824,912
2,700 6.00%, 12/07/28................... 5,304,279
Republic of Finland,
1,000 8.00%, 4/07/03.................... 1,618,084
1,250 10.125%, 6/22/08.................. 2,416,902
------------
Total government bonds
(cost US$27,501,967).............. 26,768,426
------------
See Notes to Financial Statements.
13
<PAGE>
Portfolio of Investments April 30, 2000 The First Commonwealth Fund, Inc.
(unaudited) (continued)
================================================================================
------------------------------------------------------------------
Principal Amount
Local Currency(a) Value
(000) Description (US$)
------------------------------------------------------------------
Utilities--3.0%
British Gas PLC,
(POUND) 1,400 8.875%, 7/08/08................... 2,446,965
Thames Water Utilities
Finance PLC,
1,000 10.50%, 11/21/01.................. 1,645,350
------------
Total United Kingdom
utility bonds
(cost US$4,037,471)............... 4,092,315
------------
Corporate Banks--6.5%
Abbey National Treasury
Services PLC,
1,250 8.00%, 4/02/03.................... 2,014,770
Barclays Bank PLC,
1,000 9.875%, 5/29/49................... 1,788,260
Halifax Building Society,
1,500 11.00%, 1/17/14................... 3,219,715
Lloyds Bank PLC,
500 7.375%, 3/11/04................... 798,543
Prudential Finance B.V.,
500 9.375%, 6/04/07................... 893,582
------------
Total United Kingdom
corporate bank bonds
(cost US$7,783,216)............... 8,714,870
------------
Total United Kingdom
long-term investments
(cost US$39,322,654).............. 39,575,611
------------
UNITED STATES--2.7%
Yankee Obligations--2.7%
Government Bonds--0.3%
Kingdom of Thailand,
US$ 500 7.07%, 9/30/13.................... 417,390
------------
Total US$ denominated
government bonds
(cost US$449,592)................. 417,390
------------
Corporate Banks--0.7%
Cho Hung Bank,
300 6.875%, 10/22/01 (b).............. 255,570
250 11.875%, 4/01/10.................. 245,222
Hanvit Bank,
500 12.75%, 3/01/10................... 505,527
------------
Total US$ denominated
corporate bank bonds
(cost US$1,043,371)............... 1,006,319
------------
Corporate Non-Banks--1.7%
Petroliam Nasional Berhad,
US$ 1,000 7.125%, 10/18/06.................. 929,500
Reliance Industries Ltd.,
1,000 10.25%, 1/15/97................... 904,881
Total Access Communication
Public Company Limited,
500 8.375%, 11/04/06 (d).............. 421,899
------------
Total US$ denominated
corporate non-bank bonds
(cost US$2,192,023)............... 2,256,280
------------
Total US$ denominated
long-term investments
(cost US$3,684,986)............... 3,679,989
------------
Total long-term investments
(cost US$132,486,066)............. 121,922,315
------------
SHORT-TERM INVESTMENTS--8.5%
Australia--0.6%
Banque Nationale de Paris
Fixed Deposit,
A$ 1,280 5.35%, 5/02/00
(cost US$747,779)................. 747,779
------------
Canada--3.6%
State Street Bank and Trust
Company Time Deposit,
C$ 7,257 5.00%, 5/03/00
(cost US$4,923,163)............... 4,905,193
------------
New Zealand--0.8%
State Street Bank and Trust
Company Time Deposit,
NZ$ 2,104 5.10%, 5/04/00
(cost US$1,022,559)............... 1,021,297
------------
United Kingdom--2.0%
State Street Bank and Trust
Company Fixed Deposit,
(POUND) 1,749 5.75%, 5/03/00
(cost US$2,759,080)............... 2,740,195
------------
See Notes to Financial Statements.
14
<PAGE>
Portfolio of Investments April 30, 2000 The First Commonwealth Fund, Inc.
(unaudited) (concluded)
================================================================================
------------------------------------------------------------------
Principal Amount
Local Currency(a) Value
(000) Description (US$)
------------------------------------------------------------------
United States--1.5%
US$ 2,037 Repurchase Agreement,
State Street Bank and
Trust Company,
5.65% dated 4/28/00,
due 5/02/00 in the
amount of $2,038,279
(cost $2,037,000
collateralized by $2,045,000
U.S. Treasury Notes,
5.875% due 10/31/01;
value $2,078,558).............. 2,037,000
-------------
Total short-term investments
(cost US$11,489,582)........... 11,451,464
-------------
Total Investments--98.6%
(cost US$143,975,648).......... 133,373,779
-------------
Unrealized appreciation
on forward foreign
currency exchange
contracts--0.0% (e)............ 6,281
Other assets in excess of
liabilities--1.4%.............. 1,913,002
-------------
Total Net Assets--100.0%.............$135,293,062
=============
(a) A$--Australian dollar MYR--Malaysian Ringgit THB--Thailand Baht
C$--Canadian dollar PHP--Philippine peso (pound)--British pound
NZ$--New Zealand dollar SGD--Singapore dollar US$--United States dollar
(b) Coupon changes periodically upon a predetermined schedule. Stated interest
rate in effect at April 30, 2000.
(c) Securities pledged as collateral for the forward currency exchange
contacts.
(d) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
2000, this security amounted to $421,899 or 0.3% of net assets.
(e) Forward foreign currency exchange contracts entered into as of April 30,
2000 were as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Purchases Net Unrealized
Contracts to Receive In exchange for Settlement Date Value Appreciation
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KRW 1,664,250,000 US$1,500,000 5/2/00 US$1,500,000 $ --
PHP 7,356,740 US$ 178,000 5/9/00 US$ 178,043 43
THB 21,903,322 US$ 576,000 5/10/00 US$ 577,467 1,467
PHP 7,753,785 US$ 187,041 6/2/00 US$ 187,195 154
TWD 4,380,880 US$ 140,000 6/12/00 US$ 143,989 3,989
------
$5,653
------
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Sales Net Unrealized
Appreciation
Contracts to Deliver In exchange for Settlement Date Value (Depreciation)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SGD 307,000 US$180,069 5/2/00 US$180,079 $ (11)
PHP 7,340,720 US$178,000 5/9/00 US$177,655 345
THB 21,853,440 US$576,000 5/10/00 US$576,152 (152)
PHP 7,739,757 US$187,041 6/2/00 US$186,856 185
TWD 4,380,880 US$144,250 6/12/00 US$143,989 261
------
$ 628
------
Total $6,281
======
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Statement of Assets and Liabilities The First Commonwealth Fund, Inc.
April 30, 2000 (unaudited)
================================================================================
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments, at value (cost $143,975,648) ........................................ $ 133,373,779
Foreign currency, at value (cost $431,823) ....................................... 431,463
Cash ............................................................................. 135,434
Interest receivable .............................................................. 3,010,837
Receivable for investments sold .................................................. 148,957
Net unrealized appreciation on forward foreign exchange contracts ................ 6,281
Prepaid expenses and other assets ................................................ 15,544
-------------
Total assets .................................................................. 137,122,295
-------------
Liabilities
Payable for investments purchased ................................................ 895,515
Dividends payable--common stock .................................................. 648,691
Investment management fee payable ................................................ 73,489
Administration fee payable ....................................................... 22,612
Accrued expenses and other liabilities ........................................... 188,926
-------------
Total liabilities ............................................................. 1,829,233
-------------
Total Net Assets ................................................................. $ 135,293,062
=============
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 .............................................. 127,652,659
Preferred stock ($.001 par value per share and $25,000 liquidation value per share
applicable to 1,200 shares; Note 5) ........................................... 30,000,000
-------------
157,661,925
Distributions in excess of investment income ..................................... (1,675,104)
Undistributed net realized gains on investment transactions ...................... 1,111,797
Net unrealized depreciation on investments ....................................... (1,742,943)
Accumulated net realized foreign exchange losses ................................. (11,125,251)
Net unrealized foreign exchange losses ........................................... (8,937,362)
-------------
Total Net Assets ................................................................. $ 135,293,062
=============
Net assets applicable to common shareholders ..................................... $ 105,293,062
=============
Net asset value per common share ($105,293,062/9,266,209 shares of common
stock issued and outstanding) ................................................. $ 11.36
=============
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Statement of Operations For the Six The First Commonwealth Fund, Inc.
Months Ended April 30, 2000 (unaudited)
================================================================================
<TABLE>
<CAPTION>
Net Investment Income
<S> <C>
Income
Interest and discount earned (net of foreign withholding taxes of $120,013) $ 4,963,107
-----------
Expenses
Investment management fee ................................................. 455,364
Administration fee ........................................................ 140,112
Reports to shareholders ................................................... 106,621
Directors' fees and expenses .............................................. 75,089
Legal fees and expenses ................................................... 63,612
Insurance expense ......................................................... 58,073
Independent accountant's fees and expenses ................................ 53,232
Custodian's fees and expenses ............................................. 52,564
Auction agent's fees and expenses ......................................... 39,532
Transfer agent's fees and expenses ........................................ 10,210
Registration fees ......................................................... 8,041
Miscellaneous ............................................................. 16,544
-----------
Total operating expenses ................................................ 1,078,994
-----------
Net investment income ........................................................ 3,884,113
-----------
Realized and Unrealized Gains (Losses) on Investments and Foreign Currencies
Net realized gains on investment transactions ............................. 1,103,419
Net realized gains on futures transactions ................................ 28,352
Net realized foreign exchange losses ...................................... (2,189,859)
-----------
(1,058,088)
-----------
Net change in unrealized depreciation on investments ...................... (1,495,526)
Net change in unrealized foreign exchange losses .......................... (3,546,108)
-----------
(5,041,634)
-----------
Net Loss on investments and foreign currencies ............................... (6,099,722)
-----------
Net Decrease in Net Assets Resulting from Operations ......................... $(2,215,609)
===========
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
Statement of Cash Flows For the Six Months The First Commonwealth Fund, Inc.
Ended April 30, 2000 (unaudited)
================================================================================
<TABLE>
<CAPTION>
Increase (Decrease) in Cash (Including Foreign Currency)
<S> <C>
Cash flows provided from operating activities
Interest received .......................................................... $ 5,061,966
Operating expenses paid .................................................... (1,306,747)
Sales of short-term portfolio investments, net ............................. 2,492,448
Purchases of long-term portfolio investments ............................... (15,982,433)
Proceeds from sales of long-term portfolio investments ..................... 13,695,106
Proceeds from futures transactions ......................................... 28,352
Proceeds from forward foreign exchange contracts ........................... 50,415
Other ...................................................................... 28,274
------------
Net cash provided from operating activities .............................. 4,067,381
------------
Cash flows used for financing activities
Dividends paid to common shareholders ...................................... (4,238,910)
Dividends paid to preferred shareholders ................................... (826,152)
------------
Net cash used for financing activities ................................... (5,065,062)
------------
Effect of exchange rates on cash .............................................. 60,194
------------
Net decrease in cash .......................................................... (937,487)
Cash at beginning of period ................................................ 1,504,384
------------
Cash at end of period ...................................................... $ 566,897
============
Reconciliation of Net Decrease in Total Net Assets Resulting from Operations to
Net Cash (Including Foreign Currency) Provided From Operating Activities
Net decrease in total net assets resulting from operations ................. $ (2,215,609)
------------
Decrease in investments .................................................... 2,842,062
Net realized gains on investment and futures transactions .................. (1,131,771)
Net realized foreign exchange losses ....................................... 2,189,859
Net change in unrealized depreciation on investments ....................... 1,495,526
Net change in unrealized foreign exchange losses ........................... 3,546,108
Proceeds from futures transactions ......................................... 28,352
Proceeds from forward foreign exchange contracts ........................... 43,652
Decrease in receivable on forward foreign currency exchange contracts closed 6,763
Decrease in interest receivable ............................................ 147,187
Increase in receivable for investments sold ................................ (149,015)
Net decrease in other assets ............................................... 28,274
Decrease in payable for investments purchased .............................. (2,536,254)
Decrease in accrued expenses and other liabilities ......................... (227,753)
------------
Total adjustments .......................................................... 6,282,990
------------
Net cash provided from operating activities ................................... $ 4,067,381
============
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Statements of Changes in Net Assets The First Commonwealth Fund, Inc.
================================================================================
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
April 30, 2000 Ended
(unaudited) October 31, 1999
--------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income ............................................ $ 3,884,113 $ 8,066,869
Net realized gains on investment transactions .................... 1,103,419 3,459,803
Net realized gains on futures transactions ....................... 28,352 --
Net realized foreign exchange losses ............................. (2,189,859) (3,585,472)
Net change in unrealized appreciation/depreciation of investments (1,495,526) (11,206,934)
Net change in unrealized foreign exchange losses ................. (3,546,108) 4,903,685
------------- -------------
Net increase (decrease) in net assets resulting from operations ..... (2,215,609) 1,637,951
------------- -------------
Dividends and distributions to shareholders
Dividends to common shareholders from net investment income ...... (2,473,976) (5,744,630)
Dividends to preferred shareholders from net investment income ... (826,152) (1,076,897)
Distributions to common shareholders in excess of net
investment income .............................................. (1,675,104) --
Distributions to common shareholders from net realized gains on
investment transactions ........................................ (20,391) (3,011,215)
Distributions to preferred shareholders from net realized gains on
investment transactions ........................................ -- (396,763)
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders .................................................. (4,995,623) (10,229,505)
------------- -------------
Total decrease in net assets ........................................ (7,211,232) (8,591,554)
Total Net Assets
Beginning of period ................................................. 142,504,294 151,095,848
------------- -------------
End of period (including distributions in excess of net
investment income of ($1,675,104) and ($583,985), respectively) .. $ 135,293,062 $ 142,504,294
============= =============
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
Financial Highlights The First Commonwealth Fund, Inc.
================================================================================
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended October 31,
April 30, 2000 --------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C>
Net asset value per common share,
beginning of period ........................ $ 12.14 $ 13.07 $ 13.94 $ 14.32 $ 13.13 $ 12.08
----------- ----------- ----------- ----------- ----------- ----------
Net investment income ......................... 0.42 0.87 0.99 1.14 1.16 1.19
Net realized and unrealized gains (losses) on
investments, futures and foreign currencies (0.66) (0.70) (0.73) (0.34) 1.21 1.10
----------- ----------- ----------- ----------- ----------- ----------
Total from investment operations ........... (0.24) 0.17 0.26 0.80 2.37 2.29
----------- ----------- ----------- ----------- ----------- ----------
Dividends from net investment income to
common shareholders ........................ (0.27) (0.62) (0.87) (0.99) (1.00) (1.03)
Dividends from net investment income to
preferred shareholders ..................... (0.09) (0.11) (0.14) (0.17) (0.16) (0.18)
Distributions in excess of net investment
income to common shareholders .............. (0.18) -- -- -- -- --
Distributions from net realized gains
on investment transactions to
common shareholders ...................... -- (0.33) (0.08) (0.02) (0.01) (0.03)
Distributions from net realized gains
on investment transactions to
preferred shareholders ................... -- (0.04) (0.04) -- (0.01) --
----------- ----------- ----------- ----------- ----------- ----------
Total dividends and distributions .......... (0.54) (1.10) (1.13) (1.18) (1.18) (1.24)
----------- ----------- ----------- ----------- ----------- ----------
Net asset value per common share,
end of period .............................. $ 11.36 $ 12.14 $ 13.07 $ 13.94 $ 14.32 $ 13.13
=========== =========== =========== =========== =========== ==========
Market value, end of period ................... $ 9.1875 $ 10.375 $ 10.8125 $ 12.4375 $ 11.875 $ 11.375
=========== =========== =========== =========== =========== ==========
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 ............................... (7.14)% 4.89% (5.59)% 13.78% 13.89% 20.72%
Net asset value ............................ (1.88)% 1.53% 1.82% 5.76% 18.99% 19.67%
Ratio to Average Net Assets of Common
Shareholders(2)/Supplementary Data:
Net assets of common shareholders, end of
period (000 omitted) ....................... $ 105,293 $ 112,504 $ 121,096 $ 129,158 $ 132,660 $ 121,654
Average net assets of common shareholders
(000 omitted) .............................. 110,191 119,257 122,266 130,125 122,887 115,277
Operating expenses ............................ 1.97% 1.95% 1.70% 1.63% 1.70% 1.71%
Net investment income available to
common shareholders(2) ..................... 5.58% 5.53% 6.17% 6.88% 7.47% 8.09%
Portfolio turnover ............................ 11% 40% 36% 24% 30% 23%
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 ................................. 451% 475% 504% 530% 542% 505%
------------------------------------------------------------------------------------------------------------------------------------
</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 and expenses applicable to
both the common and preferred shares relative to the average net assets of
common shareholders. Ratio of net investment income before preferred stock
dividends to average net assets of common shareholders is 7.09%, 6.76%,
7.50%, 8.10%, 8.73% and 9.56% respectively.
See Notes to Financial Statements.
20
<PAGE>
Notes to Financial Statements (unaudited) The First Commonwealth Fund, Inc.
================================================================================
Note 1. Investment Objectives
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"). On April 7, 1999,
shareholders approved an expansion of 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. 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.
As modified (a) the market value weighted average credit quality of the
Fund's investments must be A or better at all times, (b) the Fund may 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) the Fund may invest a
portion of its assets in equity securities of other investment companies that
are registered under the Investment Company Act of 1940 and that are themselves
invested primarily in fixed-income securities, and (d) the Fund, with respect to
the portion of the portfolio not denominated in a Commonwealth Currency, may use
derivatives to manage both currency and interest rate risk and to replicate, or
substitute for, physical securities in order to achieve transactional
efficiencies. 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 2. 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: Foreign currency 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
21
<PAGE>
Notes to Financial Statements The First Commonwealth Fund, Inc.
(unaudited) (continued)
================================================================================
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 $2,189,859 for the six months
ended April 30, 2000 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 losses of $3,546,108 for the six months ended April 30, 2000 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, 2000 were US$0.5840 to A$1.00, US$0.6759 to C$1.00, US$0.4854 to
NZ$1.00, US$1.5670 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 in
good faith using methods determined by or under the direction of the Fund's
Board of Directors.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which 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
22
<PAGE>
Notes to Financial Statements The First Commonwealth Fund, Inc.
(unaudited) (continued)
================================================================================
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 and 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 foreign 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 and 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).
Dividends: Dividends and distributions to common shareholders are recorded on
the ex-dividend date and are based upon net investment income and capital and
currency gains determined in accordance with income tax regulations which may
differ from generally accepted 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 5.
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.
23
<PAGE>
Notes to Financial Statements The First Commonwealth Fund, Inc.
(unaudited) (continued)
================================================================================
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 3. 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 World Markets, 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 ($12,500 per
month). The Investment Manager pays fees to the Investment Adviser and the
Consultant for their services rendered.
Effective March 1, 2000, the Fund entered into an agreement with
EquitiLink USA, Inc. (EUSA), an affiliate, to provide investor relation
services. This agreement provides EUSA with a monthly retainer of $4,000 plus
out of pocket expenses up to $3,000 per year.
The Investment Manager informed the Fund that it paid $177,239 to the
Investment Adviser and $6,000 to the Consultant during the six months ended
April 30, 2000.
24
<PAGE>
Notes to Financial Statements The First Commonwealth Fund, Inc.
(unaudited) (concluded)
================================================================================
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term
investments, for the six months ended April 30, 2000 aggregated $16,877,948 and
$13,844,121, respectively.
The United States federal income tax basis of the Fund's investments at
April 30, 2000 was $135,136,506 and accordingly, net unrealized depreciation for
United States federal income tax purposes was $1,762,727 (gross unrealized
appreciation--$2,247,886, gross unrealized depreciation--$4,010,613).
Note 5. Capital
There are 300 million shares of $.001 par value common stock authorized.
Of the 9,266,209 shares outstanding at April 30, 2000, the Investment Manager
and its affiliates owned 395,087 shares.
There are 100 million shares of $.001 par value of Auction Market
Preferred Stock ("Preferred Stock") authorized. 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
4.70% to 6.13% during the six months ended April 30, 2000. 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 6. Subsequent Dividends
Subsequent to April 30, 2000, the Board of Directors of the Fund declared
dividends from undistributed net investment income of $0.07 per common share
payable on June 16, 2000 to common shareholders of record on May 31, 2000.
Subsequent to April 30, 2000, dividends and distributions declared and
paid on preferred shares totaled approximately $254,760 for the outstanding
preferred share series through June 21, 2000.
25
<PAGE>
Supplemental Proxy Information (unaudited) The First Commonwealth Fund, Inc.
================================================================================
The Annual Meeting of Shareholders of the First Commonwealth Fund, Inc. was held
on March 22, 2000 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>
-----------------------------------------------------------------------------------------------------------------------
Votes For Votes Withheld
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1A. To elect the following four directors to serve as Class II directors
for a three-year term expiring in 2003:
Rt. Hon. Malcolm Fraser 7,193,799 117,031
William J. Potter 7,193,799 117,031
Peter D. Sacks 7,193,799 117,031
Brian M. Sherman 7,194,094 116,736
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Votes For Votes Withheld
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1B. To elect the following director to serve as a Class III director
for a term to expire in 2001:
Neville J. Miles 7,146,035 164,795
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Votes For Votes Against Abstentions
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To elect the following two directors to represent the interests
of the holders of preferred stock for the ensuing year:
Michael R. Horsburgh 904 -- --
Dr. Anton E. Schrafl 904 -- --
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Votes For Votes Against Abstentions
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3. To ratify the selection of PricewaterhouseCoopers LLP
as independent public accountants for the fiscal year ending October
31, 2000:
Common 7,196,532 60,882 52,512
Preferred 904 -- --
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
Directors Officers
================================================================================
Brian M. Sherman, Chairman Laurence S. Freedman, President
David Lindsay Elsum Brian M. Sherman, Vice President
Rt. Hon. Malcolm Fraser David Manor, Treasurer
Laurence S. Freedman Roy M. Randall, Secretary
Michael Gleeson-White Ouma Sananikone,
Michael R. Horsburgh Assistant Vice President and
David Manor Chief Investment Officer
Neville J. Miles Barry G. Sechos, Assistant Treasurer
William J. Potter Allan S. Mostoff, Assistant Secretary
Peter D. Sacks Margaret A. Bancroft, Assistant Secretary
Anton E. Schrafl Sander M. Bieber, Assistant Secretary
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, 2000 were not audited and
accordingly, no opinion is expressed on them.
[RECYCLED LOGO] Printed on post-consumer recycled paper
27
<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 World Markets, Inc.
BCE Place, Canada Trust Tower
P.O. Box 500
Toronto, Ontario, M5J 2S8
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
Bankers Trust Company
Four Albany Street
New York, New York 10006
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
INVESTOR RELATIONS
EquitiLink USA, Inc.
45 Broadway, 31st Fl
New York, NY 10006
1-800-522-5465
[email protected]
The common 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.
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.
