<DOCUMENT>
<TYPE>EX-99.J1
<SEQUENCE>14
<FILENAME>dex99j1.txt
<DESCRIPTION>EXHIBIT J1
<TEXT>
<PAGE>

                                                                  EXHIBIT (j)(1)





                               CUSTODIAN CONTRACT
                                     Between
                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.
                                       and
                       STATE STREET BANK AND TRUST COMPANY

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>                                                                                 <C>
1.    Employment of Custodian and Property to be Held by It ....................    1

2.    Duties of the Custodian with Respect to Property of the Fund Held By
      the Custodian in the United States .......................................    2

      2.1.    Holding Securities................................................    2
      2.2.    Delivery of Securities............................................    2
      2.3.    Registration of Securities........................................    5
      2.4.    Bank Accounts.....................................................    6
      2.5.    Investment and Availability of Federal Funds......................    7
      2.6.    Collection of Income..............................................    7
      2.7.    Payment of Fund Moneys............................................    8
      2.8.    Liability for Payment in Advance of Receipt of Securities
              Purchased.........................................................   10
      2.9.    Appointment of Agents.............................................   10
      2.10.   Deposit of Securities in Securities Systems.......................   10
      2.11.   Segregated Account................................................   13
      2.12.   Ownership Certificates for Tax Purposes...........................   14
      2.13.   Proxies...........................................................   14
      2.14.   Communications Relating to Fund Portfolio Securities..............   14
      2.15.   Reports to Fund by Independent Public Accountants.................   15

3.    Duties of the Custodian with Respect to Property of the Fund Held
      Outside of the United States..............................................   15

      3.1.    Appointment of Foreign Sub-Custodians.............................   15
      3.2.    Assets to be Held.................................................   16
      3.3.    Foreign Securities Depositories...................................   16
      3.4.    Segregation of Securities.........................................   16
      3.5.    Agreements with Foreign Banking Institutions......................   17
      3.6.    Access of Independent Accountants of the Fund.....................   17
      3.7.    Reports by Custodian..............................................   17
      3.8.    Transactions in Foreign Custody Account...........................   18
      3.9.    Liability of Foreign Sub-Custodians...............................   19
      3.10.   Liability of Custodian............................................   19
      3.11.   Monitoring Responsibilities.......................................   20
      3.12.   Branches of U.S Banks.............................................   20

4.    Proper Instructions ......................................................   20

5.    Actions Permitted without Express Authority ..............................   21

6.    Evidence of Authority ....................................................   21

7.    Duties of Custodian with Respect to the Books of Account and Calculations
      of Net Asset Value and Net Income ........................................   22
</TABLE>

<PAGE>

<TABLE>
<S>                                                                         <C>
8.      Records .........................................................   22

9.      Opinion of Fund's Independent Accountant ........................   23

10.     Compensation of Custodian .......................................   23

11.     Responsibility of Custodian .....................................   23

12.     Effective Period; Termination and Amendment .....................   25

13.     Successor Custodian .............................................   26

14.     Interpretive and Additional Provisions ..........................   27

15.     Massachusetts Law to Apply ......................................   28

16.     Prior Contracts .................................................   28
</TABLE>

<PAGE>



                               CUSTODIAN CONTRACT

         This Contract between The First Australia Prime Income Fund, Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at One Seaport Plaza, New York, New York 10292,
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts corporation, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",

         WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:

1.       Employment of Custodian and Property to be Held by It

         The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities")and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund agrees to deliver to the Custodian all securities and
cash owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such shares of
common stock, $.01 par value, ("Shares") of the Fund as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of
the Fund held or received by the Fund and not delivered to the Custodian.

         Upon receipt of "Proper Instructions" (within the meaning of Article
4), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by
the Board of Directors of the Fund, and provided that the Custodian shall have
no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such sub-

<PAGE>

custodian has to the Custodian. The Custodian may employ as sub-custodians for
the Fund's securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule "A" hereto but only in
accordance with the provisions of Article 3.

2.       Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States

2.1.     Holding Securities. The Custodian shall hold and physically segregate
         for the account of the Fund all non-cash property, to be held by it in
         the United States, including all domestic securities owned by the Fund,
         other than securities which are maintained pursuant to Section 2.10 in
         a clearing agency which acts as a securities depository or in a
         book-entry system authorized by the U.S. Department of the Treasury,
         collectively referred to herein as "Securities System".

2.2.     Delivery of Securities. The Custodian shall release and deliver
         domestic securities owned by the Fund held by the Custodian or in a
         Securities System account of the Custodian only upon receipt of Proper
         Instructions, which may be continuing instructions when deemed
         appropriate by the parties, and only in the following cases

              1)   Upon sale of such securities for the account of the Fund and
                   receipt of payment therefor;

              2)   Upon the receipt of payment in connection with any repurchase
                   agreement related to such securities entered into by the
                   Fund;

              3)   In the case of a sale effected through a Securities System,
                   in accordance with the provisions of Section 2.10 hereof;

              4)   To the depository agent in connection with tender or other
                   similar offers for portfolio securities of the Fund;

                                      -2-

<PAGE>

              5)   To the issuer thereof or its agent when such securities are
                   called, redeemed, retired or otherwise become payable;
                   provided that, in any such case, the cash or other
                   consideration is to be delivered to the Custodian;

              6)   To the issuer thereof, or its agent, for transfer into the
                   name of the Fund or into the name of any nominee or nominees
                   of the Custodian or into the name or nominee name of any
                   agent appointed pursuant to Section 2.9 or into the name or
                   nominee name of any sub-custodian appointed pursuant to
                   Article 1; or for exchange for a different number of bonds,
                   certificates or other evidence representing the same
                   aggregate face amount or number of units; provided that, in
                   any such case, the new securities are to be delivered to the
                   Custodian;

              7)   To the broker selling the same for examination in accordance
                   with the "street delivery" custom;

              8)   For exchange or conversion pursuant to any plan of merger,
                   consolidation, recapitalization, reorganization or
                   readjustment of the securities of the issuer of such
                   securities, or pursuant to provisions for conversion
                   contained in such securities, or pursuant to any deposit
                   agreement; provided that, in any such case, the new
                   securities and cash, if any, are to be delivered to the
                   Custodian;

              9)   In the case of warrants, rights or similar securities, the
                   surrender thereof in the exercise of such warrants, rights or
                   similar securities or the surrender of interim receipts or
                   temporary securities for definitive

                                      -3-

<PAGE>

                   securities; provided that, in any such case, the new
                   securities and cash, if any, are to be delivered to the
                   Custodian;

              10)  For delivery in connection with any loans of securities made
                   by the Fund, but only against receipt of adequate collateral
                   as agreed upon from time to time by the Custodian and the
                   Fund, which may be in the form of cash or obligations issued
                   by the United States government, its agencies or
                   instrumentalities, except that in connection with any loans
                   for which collateral is to be credited to the Custodian's
                   account in the book-entry system authorized by the U.S.
                   Department of the Treasury, the Custodian will not be held
                   liable or responsible for the delivery of securities owned by
                   the Fund prior to the receipt of such collateral;

              11)  For delivery as security in connection with any borrowings by
                   the Fund requiring a pledge of assets by the Fund, but only
                   against receipt of amounts borrowed;

              12)  For delivery in accordance with the provisions of any
                   agreement among the Fund, the Custodian and a broker-dealer
                   registered under the Securities Exchange Act of 1934 (the
                   "Exchange Act") and a member of The National Association of
                   Securities Dealers, Inc. ("NASD"), relating to compliance
                   with the rules of The Options Clearing Corporation and of any
                   registered national securities exchange, or of any similar
                   organization or organizations, regarding escrow or other
                   arrangements in connection with transactions by the Fund;

                                      -4-

<PAGE>

              13)  For delivery in accordance with the provisions of any
                   agreement among the Fund, the Custodian, and a Futures
                   Commission Merchant registered under the Commodity Exchange
                   Act, relating to compliance with the rules of the Commodity
                   Futures Trading Commission and/or any Contract Market, or any
                   similar organization or organizations, regarding account
                   deposits in connection with transactions by the Fund;

              14)  Upon receipt of instructions from the transfer agent
                   ("Transfer Agent") for the Fund, for delivery to such
                   Transfer Agent or to the holders of shares in connection with
                   distributions in kind, as may be described from time to time
                   in the Fund's currently effective prospectus and statement of
                   additional information ("prospectus"), in satisfaction of
                   requests by holders of Shares for repurchase or redemption;
                   and

              15)  For any other proper corporate purpose, but only upon receipt
                   of, in addition to Proper Instructions, a certified copy of a
                   resolution of the Board of Directors or of the Executive
                   Committee signed by an officer of the Fund and certified by
                   the Secretary or an Assistant Secretary, specifying the
                   securities to be delivered, setting forth the purpose for
                   which such delivery is to be made, declaring such purposes to
                   be proper corporate purposes, and naming the person or
                   persons to whom delivery of such securities shall be made.

2.3.     Registration of Securities. Domestic securities held by the Custodian
         (other than bearer securities) shall be registered in the name of the
         Fund or in the name of any

                                      -5-

<PAGE>

         nominee of the Fund or of any nominee of the Custodian which nominee
         shall be assigned exclusively to the Fund, unless the Fund has
         authorized in writing the appointment of a nominee to be used in common
         with other registered investment companies having the same investment
         adviser as the Fund, or in the name or nominee name of any agent
         appointed pursuant to Section 2.9 or in the name or nominee name of any
         sub-custodian appointed pursuant to Article 1. All securities accepted
         by the Custodian on behalf of the Fund under the terms of this Contract
         shall be in "street name" or other good delivery form.

2.4.     Bank Accounts. The Custodian shall open and maintain a separate bank
         account or accounts in the United States in the name of the Fund,
         subject only to draft or order by the Custodian acting pursuant to the
         terms of this Contract, and shall hold in such account or accounts,
         subject to the provisions hereof, all cash received by it from or for
         the account of the Fund, other than cash maintained by the Fund in a
         bank account established and used in accordance with Rule 17f-3 under
         the Investment Company Act of 1940. Funds held by the Custodian for the
         Fund may be deposited by it to its credit as Custodian in the Banking
         Department of the Custodian or in such other banks or trust companies
         as it may in its discretion deem necessary or desirable; provided,
         however, that every such bank or trust company shall be qualified to
         act as a custodian under the Investment Company Act of 1940 and that
         each such bank or trust company and the funds to be deposited with each
         such bank or trust company shall be approved by vote of a majority of
         the Board of Directors of the Fund. Such funds shall be deposited by
         the Custodian in its capacity as Custodian and shall be withdrawable by
         the Custodian only in that capacity.

                                      -6-

<PAGE>

2.5.          Investment and Availability of Federal Funds. Upon mutual
              agreement between the Fund and the Custodian, the Custodian
              shall, upon the receipt of Proper Instructions,

                     1)        invest in such instruments as may be set forth in
                               such instructions on the same day as received all
                               federal funds received after a time agreed upon
                               between the Custodian and the Fund; and

                     2)        make federal funds available to the Fund as of
                               specified times agreed upon from time to time by
                               the Fund and the Custodian in the amount of
                               checks received in payment for Shares of the Fund
                               which are deposited into the Fund's account.

2.6.          Collection of Income. The Custodian shall collect on a timely
              basis all income and other payments with respect to United States
              registered securities held hereunder to which the Fund shall be
              entitled either by law or pursuant to custom in the securities
              business, and shall collect on a timely basis all income and other
              payments with respect to United States bearer securities if, on
              the date of payment by the issuer, such securities are held by the
              Custodian or agent thereof and shall credit such income, as
              collected, to the Fund's custodian account. Without limiting the
              generality of the foregoing, the Custodian shall detach and
              present for payment all coupons and other income items requiring
              presentation as and when they become due and shall collect
              interest when due on securities held hereunder. Income due the
              Fund on United States securities loaned pursuant to the provisions
              of Section 2.2 (10) shall be the responsibility of the Fund. The
              Custodian will have no duty or responsibility in connection
              therewith, other than to provide the Fund with such information or
              data as

                                      -7-

<PAGE>

              may be necessary to assist the Fund in arranging for the timely
              delivery to the Custodian of the income to which the Fund is
              properly entitled.

2.7.          Payment of Fund Moneys. Upon receipt of Proper Instructions, which
              may be continuing instructions when deemed appropriate by the
              parties, the Custodian shall pay out moneys of the Fund in the
              following cases only:

                     1)        Upon the purchase of domestic securities, futures
                               contracts or options on futures contracts for the
                               account of the Fund but only (a) against the
                               delivery of such securities, or evidence of title
                               to futures contracts or options on futures
                               contracts, to the Custodian (or any bank, banking
                               firm or trust company doing business in the
                               United States or abroad which is qualified under
                               the Investment Company Act of 1940, as amended,
                               to act as a custodian and has been designated by
                               the Custodian as its agent for this purpose)
                               registered in the name of the Fund or in the name
                               of a nominee of the Custodian referred to in
                               Section 2.3 hereof or in proper form for
                               transfer; (b) in the case of a purchase effected
                               through a Securities System, in accordance with
                               the conditions set forth in Section 2.10 hereof
                               or (c) in the case of repurchase agreements
                               entered into between the Fund and the Custodian,
                               or another bank, or a broker-dealer which is a
                               member of NASD, (i) against delivery of the
                               securities either in certificate form or through
                               an entry crediting the Custodian's account at the
                               Federal Reserve Bank with such securities or (ii)
                               against delivery of the receipt evidencing
                               purchase by the Fund of securities owned by the
                               Custodian

                                      -8-

<PAGE>

                               along with written evidence of the agreement by
                               the Custodian to repurchase such securities from
                               the Fund;

                     2)        In connection with conversion, exchange or
                               surrender of securities owned by the Fund as set
                               forth in Section 2.2 hereof;

                     3)        For the redemption or repurchase of Shares issued
                               by the Fund as set forth in Article 4 hereof;

                     4)        For the payment of any expense or liability
                               incurred by the Fund, including but not limited
                               to the following payments for the account of the
                               Fund: interest, taxes, management, accounting,
                               transfer agent and legal fees, and operating
                               expenses of the Fund whether or not such expenses
                               are to be in whole or part capitalized or treated
                               as deferred expenses;

                     5)        For the payment of any dividends declared
                               pursuant to the governing documents of the Fund;

                     6)        For payment of the amount of dividends received
                               in respect of securities sold short;

                     7)        For any other proper purpose, but only upon
                               receipt of, in addition to Proper Instructions, a
                               certified copy of a resolution of the Board of
                               Directors or of the Executive Committee of the
                               Fund signed by an officer of the Fund and
                               certified by its Secretary or an Assistant
                               Secretary, specifying the amount of such payment,
                               setting forth the purpose for which such payment
                               is to be made, declaring such purpose

                                      -9-

<PAGE>

                     to be a proper purpose, and naming the person or persons to
                     whom such payment is to be made.

2.8.          Liability for Payment in Advance of Receipt of Securities
              Purchased. In any and every case where payment for purchase of
              domestic securities for the account of the Fund is made by the
              Custodian in advance of receipt of the securities purchased in the
              absence of specific written instructions from the Fund to so pay
              in advance, the Custodian shall be absolutely liable to the Fund
              for such securities to the same extent as if the securities had
              been received by the Custodian, except that in the case of
              repurchase agreements entered into by the Fund with a bank which
              is a member of the Federal Reserve System, the Custodian may
              transfer funds to the account of such bank prior to the receipt of
              written evidence that the securities subject to such repurchase
              agreement have been transferred by book-entry into a segregated
              non-proprietary account of the Custodian maintained with the
              Federal Reserve Bank of Boston or of the safe-keeping receipt,
              provided that such securities have in fact been so transferred by
              book-entry.

2.9.          Appointment of Agents. The Custodian may at any time or times in
              its discretion appoint (and may at any time remove) any other bank
              or trust company which is itself qualified under the Investment
              Company Act of 1940, as amended, to act as a custodian, as its
              agent to carry out such of the provisions of this Article 2 as the
              Custodian may from time to time direct; provided, however, that
              the appointment of any agent shall not relieve the Custodian of
              its responsibilities or liabilities hereunder.

2.10.         Deposit of Securities in Securities Systems. The Custodian may
              deposit and/or maintain domestic securities owned by the Fund in a
              clearing agency registered with

                                      -10-

<PAGE>

              the Securities and Exchange Commission under Section 17A of the
              Securities Exchange Act of 1934, which acts as a securities
              depository, or in the book-entry system authorized by the U.S.
              Department of the Treasury and certain federal agencies,
              collectively referred to herein as "Securities System" in
              accordance with applicable Federal Reserve Board and Securities
              and Exchange Commission rules and regulations, if any, and subject
              to the following provisions:

                     1)        The Custodian may keep domestic securities of the
                               Fund in a Securities System provided that such
                               securities are represented in an account
                               ("Account") of the Custodian in the Securities
                               System which shall not include any assets of the
                               Custodian other than assets held as a fiduciary,
                               custodian or otherwise for customers;

                     2)        The records of the Custodian with respect to
                               domestic securities of the Fund which are
                               maintained in a Securities System shall identify
                               by book-entry those securities belonging to the
                               Fund;

                     3)        The Custodian shall pay for domestic securities
                               purchased for the account of the Fund upon (i)
                               receipt of advice from the Securities System that
                               such securities have been transferred to the
                               Account, and (ii) the making of an entry on the
                               records of the Custodian to reflect such payment
                               and transfer for the account of the Fund. The
                               Custodian shall transfer domestic securities sold
                               for the account of the Fund upon (i) receipt of
                               advice from the Securities System that payment
                               for such securities has been transferred to the
                               Account, and (ii) the making of an entry on the
                               records of the Custodian to reflect such transfer
                               and

                                      -11-

<PAGE>

                               payment for the account of the Fund. Copies of
                               all advices from the Securities System of
                               transfers of domestic securities for the account
                               of the Fund shall identify the Fund, be
                               maintained for the Fund by the Custodian and be
                               provided to the Fund at its request. Upon
                               request, the Custodian shall furnish the Fund
                               confirmation of each transfer to or from the
                               account of the Fund in the form of a written
                               advice or notice and shall furnish to the Fund
                               copies of daily transaction sheets reflecting
                               each day's transactions in the Securities System
                               for the account of the Fund.

                     4)        The Custodian shall provide the Fund with any
                               report obtained by the Custodian on the
                               Securities System's accounting system, internal
                               accounting control and procedures for
                               safeguarding domestic securities deposited in the
                               Securities System;

                     5)        The Custodian shall have received the initial or
                               annual certificate, as the case may be, required
                               by Article 13 hereof;

                     6)        Anything to the contrary in this Contract
                               notwithstanding, the Custodian shall be liable to
                               the Fund for any loss or damage to the Fund
                               resulting from use of the Securities System by
                               reason of any negligence, misfeasance or
                               misconduct of the Custodian or any of its agents
                               or of any of its or their employees or from
                               failure of the Custodian or any such agent to
                               enforce effectively such rights as it may have
                               against the Securities System; at the election of
                               the Fund, it shall be entitled to be subrogated
                               to the rights of the Custodian with

                                      -12-

<PAGE>

                               respect to any claim against the Securities
                               System or any other person which the Custodian
                               may have as a consequence of any such loss or
                               damage if and to the extent that the Fund has not
                               been made whole for any such loss or damage.

2.11.         Segregated Account. The Custodian shall upon receipt of Proper
              Instructions establish and maintain a segregated account or
              accounts for and on behalf of the Fund, into which account or
              accounts may be transferred cash and/or securities, including
              securities maintained in an account by the Custodian pursuant to
              Section 2.10 hereof, (i) in accordance with the provisions of any
              agreement among the Fund, the Custodian and a broker-dealer
              registered under the Exchange Act and a member of the NASD (or any
              futures commission merchant registered under the Commodity
              Exchange Act), relating to compliance with the rules of The
              Options Clearing Corporation and of any registered national
              securities exchange (or the Commodity Futures Trading Commission
              or any registered contract market), or of any similar organization
              or organizations, regarding escrow or other arrangements in
              connection with transactions by the Fund, (ii) for purposes of
              segregating cash or government securities in connection with
              options purchased, sold or written by the Fund or commodity
              futures contracts or options thereon purchased or sold by the
              Fund, (iii) for the purposes of compliance by the Fund with the
              procedures required by Investment Company Act Release No. 10666,
              or any subsequent release or releases of the Securities and
              Exchange Commission relating to the maintenance of segregated
              accounts by registered investment companies and (iv) for other
              proper corporate purposes, but only, in the case of clause (iv),
              upon receipt of, in addition to Proper

                                      -13-

<PAGE>

              Instructions, a certified copy of a resolution of the Board of
              Directors or of the Executive Committee signed by an officer of
              the Fund and certified by the Secretary or an Assistant Secretary,
              setting forth the purpose or purposes of such segregated account
              and declaring such purposes to be proper corporate purposes.

2.12.         Ownership Certificates for Tax Purposes. The Custodian shall
              execute ownership and other certificates and affidavits for all
              federal and state tax purposes in connection with receipt of
              income or other payments with respect to domestic securities of
              the Fund held by it and in connection with transfers of such
              securities.

2.13.         Proxies. The Custodian shall, with respect to the domestic
              securities held hereunder, cause to be promptly executed by the
              registered holder of such securities, if the securities are
              registered otherwise than in the name of the Fund or a nominee of
              the Fund, all proxies, without indication of the manner in which
              such proxies are to be voted, and shall promptly deliver to the
              Fund such proxies, all proxy soliciting materials and all notices
              relating to such securities.

2.14.         Communications Relating to Fund Portfolio Securities. The
              Custodian shall transmit promptly to the Fund all written
              information (including, without limitation, pendency of calls and
              maturities of domestic securities and expirations of rights in
              connection therewith and notices of exercise of call and put
              options written by the Fund and the maturity of futures contracts
              purchased or sold by the Fund) received by the Custodian from
              issuers of the domestic securities being held for the Fund. With
              respect to tender or exchange offers, the Custodian shall transmit
              promptly to the Fund all written information received by the
              Custodian from issuers of the domestic securities whose tender or
              exchange is sought and from the party (or his agents)

                                      -14-

<PAGE>

              making the tender or exchange offer. If the Fund desires to take
              action with respect to any tender offer, exchange offer or any
              other similar transaction, the Fund shall notify the Custodian at
              least three business days prior to the date on which the Custodian
              is to take such action.

2.15.         Reports to Fund by Independent Public Accountants. The Custodian
              shall provide the Fund, at such times as the Fund may reasonably
              require, with reports by independent public accountants on the
              accounting system, internal accounting control and procedures for
              safeguarding securities, futures contracts and options on futures
              contracts, including domestic securities deposited and/or
              maintained in a Securities System, relating to the services
              provided by the Custodian under this Contract; such reports, which
              shall be of sufficient scope sad in sufficient detail, as may
              reasonably be required by the Fund, to provide reasonable
              assurance that any material inadequacies would be disclosed by
              such examination, and, if there are no such inadequacies, shall so
              state.

3.             Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States

3.1.          Appointment of Foreign Sub-Custodians.

              The Custodian is authorized and instructed to employ as
              sub-custodians for the Fund's securities and other assets
              maintained outside of the United States the foreign banking
              institutions and foreign securities depositories designated on
              Schedule A hereto ("foreign sub-custodians"). Upon receipt of
              "Proper Instructions", together with a certified resolution of the
              Fund's Board of Directors, the Custodian and the Fund may agree to
              amend Schedule A hereto from time to time to designate

                                      -15-

<PAGE>

              additional foreign banking institutions and foreign securities
              depositories to act as sub-custodians. Upon receipt of Proper
              Instructions from the Fund the Custodian shall cease the
              employment of any one or more of such sub-custodians for
              maintaining custody of the Fund's assets.

3.2.          Assets to be Held. The Custodian shall limit the securities and
              other assets maintained in the custody of the foreign
              sub-custodians to: (a) "foreign securities", as defined in
              paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
              1940, and (b) cash and cash equivalents in such amounts as the
              Custodian or the Fund may determine to reasonably necessary to
              effect the Fund's foreign securities transactions.

3.3.          Foreign Securities Depositories. Except as may otherwise be agreed
              upon in writing by the Custodian and the Fund, assets of the Fund
              shall be maintained in foreign securities depositories only
              through arrangements implemented by the foreign banking
              institutions serving as sub-custodians pursuant to the terms
              hereof.

3.4.          Segregation of Securities. The Custodian shall identify on its
              books as belonging to the Fund, the foreign securities of the Fund
              held by each foreign sub-custodian. Each agreement pursuant to
              which the Custodian employs a foreign banking institution shall
              require that such institution establish a custody account for the
              Custodian on behalf of the Fund and physically segregate in that
              account, securities and other assets of the Fund, and, in the
              event that such institution deposits the Fund's securities in a
              foreign securities depository, that it shall identify on its books
              as belonging to the Custodian, as agent for the Fund, the
              securities so deposited (all collectively referred to as the
              "Account").

                                      -16-

<PAGE>

3.5.          Agreements with Foreign Banking Institutions. Each agreement with
              a foreign banking institution shall be substantially in the form
              set forth in Exhibit 1 hereto and shall provide that: (a) the
              Fund's assets will not be subject to any right, charge, security
              interest, lien or claim of any kind in favor of the foreign
              banking institutions or its creditors, except a claim of payment
              for their safe custody or administration; (b) beneficial ownership
              for the Fund's assets will be freely transferable without the
              payment of money or value other than for custody or
              administration; (c) adequate records will be maintained
              identifying the assets as belonging to the Fund; (d) officers of
              or auditors employed by, or other representatives of the
              Custodian, including to the extent permitted under applicable law
              the independent public accountants for the Fund, will be given
              access to the books and records of the foreign banking institution
              relating to its actions under its agreement with the Custodian;
              and (e) assets of the Fund held by the foreign sub-custodian will
              be subject only to the instructions of the Custodian or its
              agents.

3.6.          Access of Independent Accountants of the Fund. Upon request of the
              Fund, the Custodian will use its best efforts to arrange for the
              independent accountants of the Fund to be afforded access to the
              books and records of any foreign banking institution employed as a
              foreign sub-custodian insofar as such books and records relate to
              the performance of such foreign banking institutions under its
              agreement with the Custodian.

3.7.          Reports by Custodian. The Custodian will supply to the Fund from
              time to time, as mutually agreed upon, statements in respect of
              the securities and other assets of the Fund held by foreign
              sub-custodians, including but not limited to an identification of

                                      -17-

<PAGE>

              entities having possession of the Fund's securities and other
              assets and advices or notifications of any transfers of securities
              to or from each custodial account maintained by a foreign banking
              institution for the Custodian on behalf of the Fund indicating, as
              to securities acquired for the Fund, the identity of the entity
              having physical possession of such securities.

3.8.          Transactions in Foreign Custody Account. (a) Upon receipt of
              Proper Instructions, which may be continuing instructions when
              deemed appropriate by the parties, the Custodian shall make or
              cause its foreign sub-custodian to transfer, exchange, or deliver
              foreign securities owned by the Fund, but except to the extent
              explicitly provided herein only in any of the cases specified in
              Section 2.2 (b) Upon receipt of Proper Instructions, which may be
              continuing instructions when deemed appropriate by the parties the
              Custodian shall pay out or cause its foreign sub-custodians to pay
              out monies of the Fund, but except to the extent explicitly
              provided herein only in any of the cases specified in Section 2.8.
              (c) Notwithstanding any provision of this Contract to the
              contrary, settlement and payment for securities received for the
              account of the Fund and delivery of securities maintained for the
              account of the Fund may be effected in accordance with the
              customary or established securities trading or securities
              processing practices and procedures in the jurisdiction or market
              in which the transaction occurs, including, without limitation,
              delivering securities to the purchaser thereof or to a dealer
              therefor (or an agent for such purchaser or dealer) against a
              receipt with the expectation of receiving later payment for such
              securities from such purchaser or dealer. (d) Securities
              maintained in the custody of a foreign sub-custodian may be
              maintained in the name of such entity's nominee to the same

                                      -18-

<PAGE>

              extent as set forth in Section 2.3 of this Contract and the Fund
              agrees to hold any such nominee harmless from any liability as a
              holder of record of such securities.

3.9.          Liability of Foreign Sub-Custodians. Each agreement pursuant to
              which the Custodian employs a foreign banking institution as a
              foreign sub-custodian shall require the institution to exercise
              reasonable care in the performance of its duties and to indemnify,
              and hold harmless, the Custodian and the Fund from and against any
              loss, damage, cost, expense, liability or claim arising out of or
              in connection with the institution's performance of such
              obligations. At the election of the Fund, it shall be entitled to
              be subrogated to the rights of the Custodian with respect to any
              claims against a foreign banking institution as a consequence of
              any such loss, damage, cost, expense, liability or claim if and to
              the extent that the Fund has not been made whole for any such
              loss, damage, cost, expense, liability or claim.

3.10.         Liability of Custodian. The Custodian shall be liable for the acts
              or omissions of a foreign banking institution to the same extent
              as set forth with respect to sub-custodians generally in Section 1
              of the Custodian Contract and, regardless of whether assets are
              maintained in the custody of a foreign banking institution, a
              foreign securities depository or a branch of a U.S. bank as
              contemplated by Section 3.12 hereof, the Custodian shall not be
              liable for any loss, damage, cost, expense, liability or claim
              resulting from, or caused by, the direction of or authorization by
              the Fund to maintain custody of any securities or cash of the Fund
              in a foreign country including, but not limited to, losses
              resulting from nationalization, expropriation, currency
              restrictions, or acts of war or terrorism.

                                      -19-

<PAGE>

3.11.         Monitoring Responsibilities. The Custodian shall furnish annually
              to the Fund, during the month of June, information concerning the
              foreign sub-custodians employed by the Custodian. Such information
              shall be similar in kind and scope to that furnished to the Fund
              in connection with the initial approval of this Contract. In
              addition, the Custodian will promptly inform the Fund in the event
              that the Custodian learns of a material adverse change in the
              financial condition of a foreign sub-custodian or is notified by a
              foreign banking institution employed as a foreign sub-custodian
              that there appears to be a substantial likelihood that its
              shareholders' equity will decline below $200 million (U.S. dollars
              or the equivalent thereof) or that its shareholders' equity has
              declined below $200 million (in each case computed in accordance
              with generally accepted U.S. accounting principles).

3.12.         Branches of U.S. Banks. Except as otherwise set forth in this
              Contract, the provisions hereof shall not apply where the custody
              of the Fund assets maintained in a foreign branch of a banking
              institution which is a "bank" as defined by Section 2(a) (5) of
              the Investment Company Act of 1940 which meets the qualification
              set forth in Section 26(a) of said Act. The appointment of any
              such branch as a sub-custodian shall be governed by Article 1 of
              this Contract.

4.            Proper Instructions

              Proper Instructions as used herein means a writing signed or
initialled by one or more person or persons as the Board of Directors shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person

                                      -20-

<PAGE>

authorized to give such instructions with respect to the transaction involved.
The Fund shall cause all oral instructions to be confirmed in writing. Upon
receipt of a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund accompanied by a detailed
description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate safeguards
for the Fund's assets.

5.            Actions Permitted without Express Authority

              The Custodian may in its discretion, without express authority
from the Fund:

                         1)   make payments to itself or others for minor
                              expenses of handling securities or other similar
                              items relating to its duties under this Contract,
                              provided that all such payments shall be accounted
                              for to the Fund;

                         2)   surrender securities in temporary form for
                              securities in definitive form;

                         3)   endorse for collection, in the name of the Fund,
                              checks, drafts and other negotiable instruments;
                              and

                         4)   in general, attend to all non-discretionary
                              details in connection with the sale, exchange,
                              substitution, purchase, transfer and other
                              dealings with the securities and property of the
                              Fund except as otherwise directed by the Board of
                              Directors of the Fund.

6.            Evidence of Authority

              The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been

                                      -21-

<PAGE>

properly executed by or on behalf of the Fund. The Custodian may receive and
accept a certified copy of a vote of the Board of Directors of the Fund as
conclusive evidence (a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by the Board of Directors
pursuant to the Articles of Incorporation as described in such vote, and such
vote may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.

7.            Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income

              The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of Directors of the
Fund to keep the books of account of the Fund and/or compute the net asset value
per share of the outstanding shares of the Fund or, if directed in writing to do
so by the Fund, shall itself keep such books of account and/or compute such net
asset value per share. If so directed, the Custodian shall also calculate daily
the net income of the Fund as described in the Fund's currently effective
prospectus and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of the Fund shall be made at the time or
times described from time to time in the Fund's currently effective prospectus.

8.            Records

              The Custodian shall create and maintain all records relating to
its activities and obligations under this Contract in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-

                                      -22-

<PAGE>

1 and 31a-2 thereunder, applicable federal and state tax laws and any other law
or administrative rules or procedures which may be applicable to the Fund. All
such records shall be the property of the Fund and shall at all times during the
regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by the Fund and
held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.

9.            Opinion of Fund's Independent Accountant

              The Custodian shall take all reasonable action, as the Fund may
from time to time request, to obtain from year to year favorable opinions from
the Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.

10.           Compensation of Custodian

              The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian

11.           Responsibility of Custodian

              So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title, validity
or genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the

                                      -23-

<PAGE>

exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to redemptions
effected by check shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.

              The Custodian shall be liable for the acts or omissions of a
foreign banking institution appointed pursuant to the provisions of Article 3 to
the same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities depository or
a branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization by the Fund to
maintain custody or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.

              If the Fund requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which action may,
in the opinion of the Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.

                                      -24-

<PAGE>

         If the Fund requires the Custodian to advance cash or securities for
any purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.

12.      Effective Period, Termination and Amendment

         This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at anytime by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors of the Fund have approved the initial use
of a particular Securities System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of Directors have
reviewed the use by the Fund of such Securities System, as required in each case
by Rule 17f-4 under the Investment Company Act of 1940, as amended; provided
further, however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Articles of Incorporation, and further provided, that the Fund may at any
time by action of its Board of Directors (i) substitute another bank or trust
company for the Custodian by

                                      -25-

<PAGE>

giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.

         Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.

13.      Successor Custodian

         If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.

         If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.

         In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than

                                      -26-

<PAGE>

$25,000,000, all securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract and to transfer to an account of such
successor custodian all of the Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.

         In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of vote referred to or of the
Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.

14.      Interpretive and Additional Provisions

         In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.

                                      -27-

<PAGE>

15.      Massachusetts Law to Apply

         This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.

16.      Prior Contracts

         This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.

         IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 11th day of April, 1986.


ATTEST                                THE FIRST AUSTRALIA PRIME INCOME
                                         FUND, INC.


/s/ Allan S. Mostoff                  By /s/ Robert F. Gunia
--------------------                     -------------------
Assistant Secretary                      Robert F. Gunia, Assistant Treasurer


ATTEST                                STATE STREET BANK AND TRUST COMPANY


Signature Illegible on Original       By Signature Illegible on Original
-------------------------------          -------------------------------
Assistant Secretary                      Vice President

                                      -28-

<PAGE>

                                   Schedule A

         The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of The First Australia
Prime Income Fund, Inc. for use as sub-custodians for the Fund's securities and
other assets:

              Australia and New Zealand Banking Group Limited Banque Bruxelles
Lambert S.A.

</TEXT>
</DOCUMENT>
