<PAGE> 1
May 10, 1995
Dear Shareholder:
The Philippine equity market and The First Philippine Fund demonstrated
impressive resiliency in the first quarter of 1995. A slide was inevitable,
given the uncertain and volatile global investment environment, particularly the
turmoil in emerging markets, but investors returned to the market during the
closing weeks of the quarter, and a more confident tone was established.
Shareholders of the Fund, their eyes on the longer-term benefits, cast their own
vote of confidence and helped produce an over-subscribed rights offering.
Meanwhile, both the Philippine market and The First Philippine Fund
retreated during the first quarter. The index was down 14.12%, but dollar based
investors lost another 5.9% to peso depreciation and experienced a total decline
of 19.19%. The Fund held up a little better, down 15.04% in dollar terms, but
the performance since inception encouraged investors to look beyond the turmoil
of the moment; a cumulative return of 131.1% for the Fund compared to a market
advance of 50.7%. As of March 31, 1995, the NAV of the Fund was $18.64, the
stock price $15.38, the discount of price to NAV 17.52%, and the total net
assets were $209.28 million.
THE PHILIPPINE RECOVERY CONTINUES DESPITE TURMOIL IN GLOBAL MARKETS
The Philippine economy is sustaining the momentum generated in 1994.
Improvements in infrastructure and power generation, along with a stable
macroeconomic environment and continued structural reforms, will boost
investment and exports and make possible real growth of more than 6%. Industry
is the key to the current recovery, particularly construction and manufacturing,
but agriculture is shaking off the effect of "El Nino", and the service sector
benefits from the expansion of the rest of the economy. Inflation is set to tick
up a bit, but monetary and fiscal policies remain prudent, and the 6.5% GNP
target is very likely to be achieved. One implication is relatively stable
interest rates for the rest of 1995. The sound economic fundamentals, and the
stabilized political scene, produced an upsurge in direct investments in the
first two months of 1995. Approved investments were twice as large as in the
comparable 1994 period, and equity investments more than four times greater. In
this supportive environment, corporate earnings continue to grow at rates
generally unmatched in Asia's Pacific Rim.
These positive developments were derailed, for much of the first quarter,
by global events: the fallout from the Mexico crisis, the fear of further
increases in US interest rates, and the near fall of Barings, the investment
house. The negative sentiment held sway, for a time, but the scenarios of doom
failed to materialize, US interest rates stabilized, Barings found a white
knight, and critical distinctions were drawn between the Philippines and the
world's most vulnerable emerging markets. What connects the Philippines to other
emerging markets -- deteriorating current account deficits and a weak reserve
base -- is more than offset by some very important strengths, including
political stability, a reliance on stable capital inflows rather than "hot"
money, a floating currency which can correct gradually, an emphasis on capital
not consumer good imports, a foreign debt that is largely long-term in maturity,
and manageable debt service requirements.
The Philippine stock and foreign exchange markets were certainly tested,
and they gave way in the face of so much negative news from abroad, but our
bullish view of the mid to long-term prospects remained intact. We cautiously
accumulated stocks whose prices had fallen to bargain levels, we participated in
two IPO's (Bankard and La Tondena Distillers), and we kept selling to a minimum
during this period of wild swings in sentiment. At the same time, your
participation in the rights issue made it possible for us to end the quarter
with a healthy cash position, 10.6% of the portfolio.
<PAGE> 2
THE COUNTRY'S STRONG FUNDAMENTALS WILL RE-ASSERT THEMSELVES
The strong underlying economic and corporate fundamentals revived the
market's upward momentum toward the end of the first quarter. This buoyant mood
should continue in the second quarter with the help of two additional
developments. Most clearly positive will be the gas drilling in Manila Bay where
the reserves, perhaps as large as those discovered at Malampaya, are in shallow
waters and more commercially viable. A bit uncertain is the impact of the
national and local elections of May 8. The Lakas NUCD-Laban coalition that backs
President Ramos, once assured of a landslide, is likely to win a more modest
victory in the aftermath of the Philippine quarrel with Singapore.
Contributing to the market's revival are valuations that have come back in
line with the rest of the region, after a period when Philippine P/E's were the
highest in the ASEAN markets. In addition, the upward movement of interest rates
may be over, and corporate earnings growth is expected to exceed 25%. The
overvalued peso has come down significantly, and further declines should be
modest and gradual.
The Fund is currently significantly underweighted in three sectors,
utilities, properties/construction, and conglomerates, while it is heavily
overweighted in banking. Utilities will remain underweighted, given the
restriction of stock selection to two companies in the sector, but holdings in
property/construction and conglomerates will be revised upward. Infrastructure
continues to boom, and construction material companies will be direct
beneficiaries. Real estate plays require caution. Real estate prices have
soared, especially for high-end structures, and the market may be approaching a
correction. Still promising, however, is the low cost end, particularly
government subsidized housing, and the Fund will pursue a number of IPO's
involved in this area. Our overweight position in banking will be maintained,
despite the likelihood of added foreign competition, because the well-managed
banks in our portfolio should be able to effectively weather the earliest
challenges of the new entrants. The consumer sector will be buoyed by
improvements in purchasing power; gold and other mining companies attracting
foreign partners deserve our attention as well.
Asia's newest tiger has been set free to take its long overdue place in the
dynamic Pacific Rim. Regional centers everywhere are coming alive -- Cebu,
Subic, Clark, General Santos, to name but a few -- and they are drawing in large
quantities of capital, both domestic and foreign, and in the process they are
dramatically transforming the economic and corporate landscape of the
Philippines. It is this metamorphosis which claims our attention, and which
guides our investment outlook, not the occasional market upheavals which,
although able to disrupt our investment course for a short time, cannot diminish
our excitement about the changes underway, nor weaken our determination to
participate in the Philippine revival that is clearly at hand.
We thank you for your continuing support, most recently demonstrated anew
by your enthusiastic response to our rights offering.
Sincerely yours,
/s/ LILIA C. CLEMENTE
---------------------
Lilia C. Clemente
President
2
<PAGE> 3
THE FIRST PHILIPPINE FUND INC.
- - ------------
SCHEDULE OF NET ASSETS (unaudited)
March 31, 1995
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
- - -----------------------------------------------------------------------------------------------
- - ------------
PHILIPPINE SECURITIES (93.8%)
- - -----------------------------------------------------------------------------------------------
- - ------------
COMMON STOCK (88.3%)
Banking (15.3%)
Bankard Inc. 4,470,000 $ 842,845
Citytrust Banking (b) 20,000 885,058
Far East Bank and Trust (b) 325,500 9,957,767
Metro Bank & Trust Co. 782,216 14,448,139
Philippine Commercial International Bank (b) 485,215 3,360,861
Philippine Savings Bank 109,550 2,487,186
- - -----------------------------------------------------------------------------------------------
31,981,856
- - -----------------------------------------------------------------------------------------------
Conglomerates (9.9%)
Aboitiz Equity Ventures 2,499,000 456,776
Ayala Corp. -- A 9,339,121 9,164,105
Benpres Holdings GDR (h) 352,168 2,817,344
First Philippine Holdings -- A 3,068,800 5,254,996
JG Summit 5,370,000 1,446,492
Metro Pacific -- A 17,238,333 1,592,027
- - -----------------------------------------------------------------------------------------------
20,731,740
- - -----------------------------------------------------------------------------------------------
Construction (3.0%)
Atlantic Gulf Pacific -- B (b) 380,500 527,110
Bacnotan Consolidated Industries 594,359 3,476,449
Davao Union Cement -- A 2,000,000 438,681
Seacem Holdings (b) 24,000,000 1,823,065
- - -----------------------------------------------------------------------------------------------
6,265,305
- - -----------------------------------------------------------------------------------------------
Drug and Personal Health Care (0.5%)
Interphil Laboratories, Inc. -- A 6,355,500 415,760
Interphil Laboratories, Inc. -- B 10,102,500 668,654
- - -----------------------------------------------------------------------------------------------
1,084,414
- - -----------------------------------------------------------------------------------------------
Electronics (0.9%)
Matsushita Electric Philippines (b) 4,413,996 1,783,467
- - -----------------------------------------------------------------------------------------------
Engineering (0.5%)
Engineering Equipment, Inc. 14,964,000 1,094,070
- - -----------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
- - -----------------------------------------------------------------------------------------------
- - ------------
COMMON STOCK (CONTINUED)
Food and Beverage (19.1%)
Alaska Milk Corp. 6,100,000 $ 1,337,977
La Tondena Distillers, Inc. (f) 763,800 984,619
RFM Corp. 2,002,850 3,005,778
San Miguel Corp. -- A 9,891,162 32,352,667
Swifts Food, Inc. 186,000 59,407
Universal Robina 3,764,000 2,136,414
- - -----------------------------------------------------------------------------------------------
39,876,862
- - -----------------------------------------------------------------------------------------------
Mining (2.0%)
Manila Mining Co. -- A (b) 514,500,000 1,781,852
Manila Mining Co. -- B 57,750,000 233,338
United Paragon Mining Co. (b) 6,960,000,000 2,142,610
- - -----------------------------------------------------------------------------------------------
4,157,800
- - -----------------------------------------------------------------------------------------------
Oil (0.3%)
Basic Petroleum and Mining -- A (b) 1,260,649,988 433,553
Basic Petroleum and Mining -- B 194,166,659 82,189
Philodrill Corp. -- A 44,334,545 18,766
Philodrill Corp. -- B 39,436,363 18,211
- - -----------------------------------------------------------------------------------------------
552,719
- - -----------------------------------------------------------------------------------------------
Packaging (0.7%)
Steniel Manufacturing 7,260,000 1,396,852
- - -----------------------------------------------------------------------------------------------
Real Estate Development (9.1%)
Ayala Land, Inc. -- B 7,298,249 8,565,690
Belle Resources -- A 11,733,333 2,483,293
Cebu Holding Inc. 6,960,000 616,000
Cebu Property Ventures -- A (c) 10,511,708 477,308
Cebu Property Ventures -- B (c) 3,180,000 145,619
Filinvest Land 10,800,000 2,742,910
Grand Plaza Hotel Corp. (b)(d) 5,681,500 2,732,857
Robinson Land -- B 10,200,000 1,295,263
- - -----------------------------------------------------------------------------------------------
19,058,940
- - -----------------------------------------------------------------------------------------------
Shipping/Ship Repair (2.4%)
ATI Holdings, Inc. (b) 52,500,000 2,020,241
Cebu Shipyard & Engineering Works -- A (b) 155,695 31,155
Keppel Philippines Holdings -- A (b) 5,325,860 2,151,904
Kepphil Shipyard, Inc. -- A 10,733,100 933,421
- - -----------------------------------------------------------------------------------------------
5,136,721
- - -----------------------------------------------------------------------------------------------
Telecommunications (12.6%)
Digital Telecommunications (b) 1,125,000 541,136
Globe Telecom 3,318,399 1,564,258
Philippine Long Distance Telephone ADR (g) 402,020 24,322,210
- - -----------------------------------------------------------------------------------------------
26,427,604
- - -----------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
- - -----------------------------------------------------------------------------------------------
- - ------------
COMMON STOCK (CONTINUED)
Tires and Auto (0.7%)
Sime Darby Pilipinas, Inc. (b) 879,327 $ 1,556,511
- - -----------------------------------------------------------------------------------------------
Utilities (11.3%)
Manila Electric Co. -- A 2,298,308 20,872,001
Petron Corp. 3,000,000 2,705,199
- - -----------------------------------------------------------------------------------------------
23,577,200
- - -----------------------------------------------------------------------------------------------
- - ------------
TOTAL COMMON STOCK
(Cost $108,507,534) 184,682,061
- - -----------------------------------------------------------------------------------------------
- - ------------
ENTITLEMENTS (0.0%) (a)
Banking (0.0%)
Philippine Commercial International Bank 121,303 93,357
- - -----------------------------------------------------------------------------------------------
- - ------------
TOTAL ENTITLEMENTS
(Cost $23,811) 93,357
- - -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Par
Maturity (000)
<S> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------
- - ------------
BONDS (2.7%)
Bacnotan Consolidated Ind. Convertible Bond 5.5% (f) 06/21/04 $1,750 1,400,000
International Container Terminal Services Inc. 6.0% 02/19/00 2,500 2,375,000
JG Summit Convertible Bond 3.5% (f) 12/23/03 3,000 1,822,500
- - -----------------------------------------------------------------------------------------------
- - ------------
TOTAL BONDS
(Cost $7,456,770) 5,597,500
- - -----------------------------------------------------------------------------------------------
- - ------------
CALL ACCOUNTS (2.8%)
Philippine Peso (e) (Cost $5,890,927) 5,844,284
- - -----------------------------------------------------------------------------------------------
- - ------------
TOTAL PHILIPPINE SECURITIES 196,217,202
- - -----------------------------------------------------------------------------------------------
- - ------------
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Par
Maturity (000) Value
<S> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------
- - ------------
UNITED STATES SECURITIES (7.9%)
- - -----------------------------------------------------------------------------------------------
- - ------------
COMMERCIAL PAPER (7.9%)
Chevron Corporation 6.004% 04/04/95 $15,010 $ 15,010,000
Ford Motor Corp. 5.96394% 04/03/95 1,617 1,617,000
- - -----------------------------------------------------------------------------------------------
- - ------------
TOTAL UNITED STATES SECURITIES
(Cost $16,627,000) 16,627,000
- - -----------------------------------------------------------------------------------------------
- - ------------
TOTAL INVESTMENTS**
(Cost $138,506,042) 101.7% 212,844,202
Liabilities in excess of other assets (1.7%) (3,567,590)
- - -----------------------------------------------------------------------------------------------
- - ------------
TOTAL NET ASSETS
(applicable to 11,225,000 common shares
outstanding) 100.0% $209,276,612
- - -----------------------------------------------------------------------------------------------
- - ------------
NET ASSET VALUE PER SHARE
($209,276,612 / 11,225,000) $ 18.64
- - -----------------------------------------------------------------------------------------------
- - ------------
** Cost of Total Investments:
Common Stock $108,507,534
Entitlements 23,811
Bond 7,456,770
Call Accounts 5,890,927
Commercial Paper 16,627,000
------------
$138,506,042
------------
------------
(a) Entitlements represent rights to subscribe to additional shares of the respective company's common
stock.
(b) At fair value as determined by the Board of Directors.
(c) Non-income producing security.
(d) Common stock has a warrant offering of 1 warrant for every 5 Common Shares owned, expiring on
12/9/97. The warrants are valued at zero as determined by the Board of Directors.
(e) Daily interest is being accrued at a rate of 4% of the outstanding balance.
(f) Pursuant to Rule 144A under the Securities Act of 1933, all or a portion of these securities can
only be sold to qualified institutional investors.
(g) ADR -- American Depository Receipts.
(h) GDR -- Global Depository Receipts.
</TABLE>
6
<PAGE> 7
DIRECTORS AND OFFICERS
- - ------------
Arsenio M. Bartolome III
Director and Chairman
Lilia C. Clemente
Director and President
Leopoldo M. Clemente, Jr.
Director, Executive Vice President and Managing Director
Stephen Bosworth
Director
M.A.T. Caparas
Director
Adrian C. Cassidy
Director
Edgardo B. Espiritu
Director
Joseph A. O'Hare, S.J.
Director
Robert B. Oxnam
Director
Stephen J. Solarz
Director
Valentin A. Araneta
Executive Vice President and Managing Director
Efren Cruz
Vice President
Roberto U. Ticzon
Vice President
Thomas J. Prapas
Treasurer
William H. Bohnett
Secretary
Angelito C. Imperio
Assistant Secretary
EXECUTIVE OFFICES
- - ------------
152 West 57th Street, New York, NY 10019
(For latest net asset value and market
data, please call 212-765-0700; regarding
shareholder inquiries, please call
1-800-432-8224)
- - ------------
INVESTMENT ADVISER
Clemente Capital, Inc.
- - ------------
ADMINISTRATOR
PFPC Inc.
- - ------------
TRANSFER AGENT AND REGISTRAR
The Bank of New York
- - ------------
CUSTODIAN
Brown Brothers Harriman & Co.
- - ------------
LEGAL COUNSEL
Fulbright & Jaworski L.L.P.
- - ------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
<PAGE> 8
SUMMARY OF GENERAL
INFORMATION
- - ------------
THE FUND
The First Philippine Fund Inc. is a closed-end investment company whose
shares trade on the New York Stock Exchange. The Fund seeks long-term capital
appreciation primarily through investment in equity securities of Philippine
companies. The Fund is managed by Clemente Capital, Inc.
- - ------------
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York
Stock Exchange Composite Transactions section of most newspapers under the
designation "FtPhil". The Fund's New York Stock Exchange trading symbol is FPF.
Net asset value (NAV) and market price information about The First Philippine
Fund Inc. shares are published each Monday in The Wall Street Journal and The
New York Times and in other newspapers.
- - ------------
DIVIDEND REINVESTMENT PLAN
Through its voluntary Dividend Reinvestment Plan, shareholders of The First
Philippine Fund Inc. may elect to receive dividends and capital gains
distributions in the form of additional shares of the Fund.
This report, including the financial information herein, is transmitted to the
shareholders of The First Philippine Fund Inc. for their information. This is
not a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
[LOGO]
The First Philippine Fund Inc.
QUARTERLY REPORT
MARCH 31, 1995
