May 7, 1999
Dear Shareholder:
We are heartened by the performance delivered by The First Philippine Fund
and the Philippine stock market at the start of 1999. In the first quarter of
the year, the Fund's net asset value (NAV) grew by 2.86%, reaching a total of
US$84.7 million or US$7.54 on a per share basis. The Philippine composite index
(Phisix), the Fund's benchmark, grew similarly, appreciating by 3.88% in US
dollar terms over the same period.
Despite the modest growth, the first quarter brought a healthy market
consolidation -- without a contraction -- after the record gains achieved in the
previous quarter. More significantly, the last two quarters represent the first
set of consecutive periods of appreciation for the Fund (since the first quarter
of 1997) and for the Phisix (since the second quarter of 1996.) It appears as if
the Fund and the market have shaken off the worst of the crisis and are on their
way to stable recoveries. The performance in the second quarter to date bolsters
this statement. We are pleased to report that the Fund's NAV has grown by
another 22.15% in April 1999 to US$103.4 million or US$9.21 per share, behind a
22.70% appreciation by the Phisix.
The Fund's share price delivered even more significant gains. Closing at
$6.3125 on March 31, 1999, the Fund's shares returned 7.45% to shareholders in
the first quarter of 1999. The discount of the Fund's share price to its NAV
narrowed to 16.28% on March 31, 1999 from 19.85% at the end of the previous
quarter. In April 1999, the shares appreciated by 28.71%, closing at US$8.125 at
the end of the month. The discount narrowed further to 11.78%.
Over the Fund's lifetime, the Fund's NAV (after adjusting for distributions
and the effects of the rights offering in 1995) continues to outperform its
benchmark. This cumulative outperformance stood at 20.65% by the end of the
first quarter and at 24.74% by the end of April 1999.
THE MARKET ANTICIPATES A RECOVERY
The bullishness in the stock market at the end of 1998 spilled over into
early 1999. The stability of the Philippine peso, declining interest rates and
inflation, and expectations of a steady economic recovery underpinned positive
sentiment. Confidence in the economy improved as Standard & Poor's upgraded the
country's outlook from negative to stable. The Philippine government was able to
tap the international capital market via global bond offerings worth more than
US$1 billion. Foreign investors began to return to the stock market.
The market's ascent was tempered by both external and local developments.
The peso and stock market tumbled in reaction to the Brazilian currency
devaluation and fears of a similar action for the Chinese currency. The 1998
economic figures showed a contraction in gross domestic product by 0.5%, due in
large part to a massive decline in agricultural production. Non-performing loans
in the banking sector continued to rise and bank lending remained weak.
Corporate earnings reports for 1998 turned in mixed results with some major
companies still taking large write-offs.
Despite these uncertainties, the stock market remained resilient, managing
a slight growth in the first quarter. Much of the bad news was already
anticipated. Investors expect the recovery to occur toward the second half of
the year and flourish in the year 2000. As we have seen, the bull market
<PAGE>
promptly returned in April with vigorous liquidity flows pushing the market up
to its highest level since August 1997.
FUND'S PORTFOLIO IS WELL-POSITIONED
The Fund's strategy of being fully invested in the market at this time has
allowed it to significantly capture the market's April gains. Much of the Fund's
portfolio is held in select quality blue chips which have benefited the most
from the return of liquidity to the stock market. Furthermore, the Fund's recent
emphasis on the interest rate-sensitive banking and property sectors have been
rewarding as both sectors have led the market's ascent.
Given the positive investor outlook on the Philippines, continued
macroeconomic and corporate earnings improvements, strong liquidity inflows and
robust market momentum, we remain optimistic about the Philippine stock market's
prospects over the coming quarters. In addition to the economic recovery theme,
market activity for the rest of the year will be driven by stories of corporate
restructuring, mergers and acquisitions, and privatization and deregulation.
Without any further adverse shocks to the recovery process, the market should be
able to sustain its uptrend.
While the Fund's strategy will continue to be guided by this belief, we
will remain sensitive to both external and domestic risks. For example,
developments in the United States and Japanese economies will have much impact
on the country's recovery. The manner by which economic restructuring and
political change takes place in Southeast Asia will affect sentiment towards the
region. Domestically, the ability of the government to meet or exceed its
economic targets will be keenly watched.
However, we believe the worst days of the crisis are behind us. We look
forward to sustaining the momentum achieved early this year. Thank you once
again for your continued confidence in the Philippines and in The First
Philippine Fund.
Very truly yours,
/s/ Lilia C. Clemente
-------------------------------
Lilia C. Clemente
Director, President and Chief
Executive Officer
2
<PAGE>
THE FIRST PHILIPPINE FUND INC.
SCHEDULE OF NET ASSETS
March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Number of
Shares Value
- --------------------------------------------------------------------------------------
PHILIPPINE SECURITIES -- (98.0%)
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (95.40%)
Banking (14.8%)
Bank of the Philippine Islands 1,854,900 $ 4,634,980
Bankard, Inc. (a)(b) 6,470,000 316,675
Equitable Banking Corp. 1,100,000 2,068,575
Far East Bank and Trust Company 300,156 413,672
Metropolitan Bank & Trust Company 527,746 4,180,476
Philippine Commercial International Bank, Inc. 160,000 902,651
- --------------------------------------------------------------------------------------
12,517,029
- --------------------------------------------------------------------------------------
Conglomerates (19.8%)
Aboitiz Equity Ventures, Inc. (b) 8,300,000 329,272
Alsons Consolidated Resources, Inc. (a) 15,980,000 222,293
Ayala Corporation 32,707,864 9,900,240
Benpres Holdings Corp. (b) 17,089,700 2,641,444
First Philippine Holdings Corp. -- A (a) 4,256,998 2,494,827
Guoco Holdings (Phils), Inc. (b) 4,360,000 86,483
Metro Pacific Corp. (b) 20,550,000 995,234
Uniwide Holdings, Inc. (b) (d) 8,687,000 107,415
- --------------------------------------------------------------------------------------
16,777,208
- --------------------------------------------------------------------------------------
Construction/Engineering (2.2%)
Davao Union Cement Corp. (a)(b) 10,066,622 280,068
DMCI Holdings Inc. (b) 25,604,000 1,094,893
HI Cement Corp. (b)(d) 5,430,000 176,249
Southeast Asia Cement Holdings Inc. (b) 23,105,670 309,512
- --------------------------------------------------------------------------------------
1,860,722
- --------------------------------------------------------------------------------------
Electronics (1.5%)
Ionics Circuits, Inc. 150,000 32,845
Matsushita Electric Philippines Corp. (a) 6,462,528 1,033,831
Music Corporation (b) 1,900,000 122,363
Solid Group, Inc. (b) 4,150,000 66,282
- --------------------------------------------------------------------------------------
1,255,321
- --------------------------------------------------------------------------------------
Food and Beverage (10.7%)
Cosmos Bottling Corp. 6,650,000 531,054
La Tondena Distillers, Inc. (b) 1,897,800 1,662,207
RFM Corporation 1,250,000 146,513
San Miguel Corp. -- A 4,203,584 5,630,912
Universal Robina Corp. 6,162,000 1,111,157
- --------------------------------------------------------------------------------------
9,081,843
- --------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Number of
COMMON STOCK (Continued) Shares Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Port Operations (2.7%)
Asian Terminals, Inc. (a)(b) 40,949,980 $ 1,033,797
International Container Terminal Services, Inc. (b) 18,865,500 1,263,564
- ------------------------------------------------------------------------------------------
2,297,361
- ------------------------------------------------------------------------------------------
Real Estate Development (21.9%)
Ayala Land, Inc. 29,871,321 8,656,904
Belle Corporation (b) 23,900,008 1,108,221
C & P Homes, Inc. (b) 35,916,750 601,404
Filinvest Land, Inc. (b) 16,487,499 1,359,128
Pryce Corporation (a)(b) 35,520,000 823,514
Robinson's Land Corp. (a)(b) 10,480,500 604,764
SM Prime Holdings, Inc. 25,950,000 5,347,897
Universal Rightfield Property Holdings, Inc. (b) 6,100,000 50,285
- ------------------------------------------------------------------------------------------
18,552,117
- ------------------------------------------------------------------------------------------
Telecommunications (12.6%)
Digital Telecommunications Phils., Inc. (b) 37,800,000 993,225
Philippine Long Distance Telephone Co. ADR (e) 371,020 9,600,143
Pilipino Telephone Corp. (b)(d) 1,217,500 48,927
- ------------------------------------------------------------------------------------------
10,642,295
- ------------------------------------------------------------------------------------------
Utilities (9.2%)
Manila Electric Co. -- A 1,940,000 4,897,602
Petron Corporation 26,070,002 2,921,366
- ------------------------------------------------------------------------------------------
7,818,968
- ------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $107,154,202) 80,802,864
- ------------------------------------------------------------------------------------------
WARRANTS (1.8%)
Real Estate (0.0%)
Belle Corporation (b) 2,993,333 5,494
Food and Beverage (1.8%)
Jollibee Foods Corp. (b)(d) 2,999,500 1,506,743
- ------------------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost $1,471,505) 1,512,237
- ------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Par
SCHEDULE OF NET ASSETS (Continued) Maturity (000) Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS (0.8%)
Bacnotan Consolidated Industries Inc.
Convertible Bond 5.50% (Cost $1,750,000) 06/21/04 $ 1,750 $ 656,250
- --------------------------------------------------------------------------------------------------
CALL ACCOUNTS (0.6%)
Philippine Pesos
(Cost $539,924) (c) 528,116
- --------------------------------------------------------------------------------------------------
TOTAL PHILIPPINE SECURITIES
(Cost $110,915,631) 83,499,467
- --------------------------------------------------------------------------------------------------
UNITED STATES SECURITIES (1.6%)
- --------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (1.6%)
American Express Credit Corp.
4.92336% (Cost $1,366,000) 04/01/99 1,366 1,366,000
- --------------------------------------------------------------------------------------------------
TOTAL UNITED STATES SECURITIES 1,366,000
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS** 100.20%
(Cost $112,281,631) 84,865,467
Liabilities in excess of other assets (0.20%) (191,640)
- --------------------------------------------------------------------------------------------------
TOTAL NET ASSETS
(applicable to 11,225,000 common shares
outstanding) 100.00% $ 84,673,827
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
($84,673,827/11,225,000) $ 7.54
- --------------------------------------------------------------------------------------------------
** Cost of Total Investments
Common Stock $107,154,202
Warrants 1,471,505
Bonds 1,750,000
Call Accounts 539,924
Commercial Paper 1,366,000
------------
$112,281,631
============
</TABLE>
(a) At fair value as determined by the Board of Directors.
(b) Non-income producing security.
(c) Daily interest is being accrued at a rate of 4% of the
outstanding balance.
(d) 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.
(e) ADR -- American Depository Receipt.
5
<PAGE>
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<PAGE>
Directors and Officers
- -------------
Benjamin P. Palma Gil
Director and Chairman
Lilia C. Clemente
Director, President and Chief Executive Officer
Leopoldo M. Clemente, Jr.
Director, Executive Vice President and Managing Director
M.A.T. Caparas
Director
Adrian C. Cassidy
Director
Roberto de Ocampo
Director
John Anthony B. Espiritu
Director
Joseph A. O'Hare, S.J.
Director
Robert B. Oxnam
Director
Stephen J. Solarz
Director
William H. Bohnett
Secretary
Joaquin G. Hofilena
Vice President and Treasurer
Imelda Singzon
Vice President
Angelito C. Imperio
Assistant Secretary
Maria Distefano
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 or access http://www.clementecapital.com. For
shareholder account inquiries, call 1-800-937-5449.)
- -------------
Investment Adviser
Clemente Capital, Inc.
- -------------
Administrator
PFPC Inc.
- -------------
Transfer Agent and Registrar
American Stock Transfer & Trust Company
- -------------
Custodian
Brown Brothers Harriman & Co.
- -------------
Legal Counsel
Fulbright & Jaworski L.L.P.
- -------------
Independent Accountants
PricewaterhouseCoopers LLP
<PAGE>
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, The New
York Times and in other newspapers. For general information visit us at our web
site http://www.clementecapital.com. For shareholder account inquiries call
1-800-937-5449.
- -------------
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.
[GRAPHIC]
The First Philippine Fund Inc.
Quarterly Report
March 31, 1999
