Edgar Filing: FIRST PHILIPPINE FUND INC

July 31, 2002

Dear Shareholder:

For the first six months of 2002, The First Philippine Fund Inc.'s ("Fund")
net asset value ("NAV") per share appreciated by 3.90%, from $3.08 at the end of
December 2001 to $3.20 at the end of June 2002. In this same period, the Fund's
share price rose even more significantly -- by 10.51% -- to close at $2.84 on
June 28, 2002. These performances well surpass that of the Fund's benchmark, the
Philippine composite index ("Phisix"), which rose by 1.25% in U.S. dollar terms
in the first half of the year.

The Fund's positive results in the first half of 2002 allowed it to narrow
its slump in its fiscal year ending June 2002. In the 2002 fiscal year, the
Fund's per share NAV and share price declined by 15.79% and 10.97%,
respectively. Performance improved from the first half of the fiscal year (the
last six months of 2001), a period which saw global markets plunge in response
to a slowing world economy and the war on terrorism. In that period, the Fund's
per share NAV and share price were down by 18.95% and 19.44%, respectively.
Comparatively, the Fund's benchmark declined 15.98% in the first half of the
fiscal year and 14.93% in the one-year period ending June 2002.

On June 28, 2002, the Fund traded at an 11.25% discount to NAV. This is
substantially lower than the 16.56% discount at the end of December 2001. The
Fund's discount to NAV has in fact narrowed significantly in 2002. In the first
six months of the year, the discount has averaged 10.83%, compared with an
average of 16.43% in the full year 2001 and 21.99% in 2000. We believe the
Fund's share repurchase program, which began in May 2001, has had an impact on
the narrowing of the Fund's discount. As of June 30, 2002, the Fund has
repurchased over one million of its shares, equivalent to 9.24% of the Fund's
common stock.

FIRST HALF 2002 MARKET REVIEW

The Philippine stock market performed strongly early in the year. In the
first quarter of 2002, the Phisix rose by 21.56% quarter-on-quarter in U.S.
dollar terms, with the bulk of the ascent occurring in January and early
February. Sentiment on the Philippines turned decisively positive as the
government unveiled a better-than-expected 2001 economic report card, credit
rating agencies upgraded the country's outlook, interest rates declined and U.S.
troops landed in the Philippines for military exercises in Mindanao. Trading
volumes increased and liquidity flowed back into the stock market, making the
Philippines one of the best performing among the emerging markets.

The rally, however, was not sustained in the second quarter of 2002. The
Phisix declined to its year-low at the end of June 2002, dropping 16.71%
quarter-on-quarter in U.S. dollar terms. This decline nearly erased the market's
early gains. But, with the help of the peso that strengthened by 2.3% in the
first six months of 2002, the market was able to eke out a 1.25% gain in U.S.
dollar terms in the first half of the year.

The market's drop was concentrated in June. Investors' confidence waned as
interim budget deficit numbers veered off targets, raising the specter of a
significant rise in interest rates. Domestic political developments that
threatened to move government's focus away from its reform agenda, weak first
quarter corporate results, concerns on the continued economic weakness of the
United States, the Philippines' largest trading partner, and overall bearishness
on global equity markets, all weighed down on the Philippine stock market.

FOUNDATIONS BEING BUILT

We believe, however, that value has emerged as a result of the market's
second quarter decline and that further significant downside at this point is
likely to be limited. The opportunity exists to pick up fundamentally sound
Philippine companies that have been oversold. We expect more positive news flow
to come out of the market and the economy in the second half of the year that
should restore investors' confidence in the Philippines.

This view is based on our observation that the foundations for sound
fundamentals are clearly and surely, albeit slowly, being built. For example,
the macroeconomy remains on track. The country's first quarter GDP growth rate
of 3.8%, driven by agriculture and services on the supply side and consumption
on the demand side, was generally in line with expectations and showed the
continuation of the Philippine economy's recovery that began in 2001. Interest
rates hit historic lows in April. While there may have been a slight uptick
since then, interest rates remain substantially lower now than last year and
should provide a substantial boost to economic growth and corporate profits.
Significant progress on peace and order was achieved with the victory against
the Abu Sayyaf. A close partnership has been formed between U.S. and Philippine
troops in the war against terrorism, and newly appointed police officials aim to
curb kidnapping in one year's time. Finally, reform momentum should pick up anew
as Congress reopens.

The road may be bumpy, but we believe the country is fundamentally moving in
the right direction. Given this, the Fund will remain substantially invested in
the stock market and focused on the largest, most liquid and best-managed
companies. The Fund will continue to remain more stock selective rather than
sector selective. In the near-term, particular attention will be given to
undervalued situations and stocks with the greatest potential of showing
corporate earnings growth in a recovering domestic and global economy.

ANNUAL MEETING SHAREHOLDER VOTE

The Fund's Board of Directors, in response to its commitment made a year
earlier to take action to allow shareholders to realize net asset value, has
authorized a vote for liquidation to be put forth to shareholders at the
upcoming annual meeting on October 31, 2002. This action was precipitated by the
Fund's exceeding a 12% average discount threshold in the twenty-day trading
period prior to July 19, 2002. In its July 26, 2002 press release announcing
this decision, the Board also stated its unanimous belief that such liquidation
would not be in shareholders' best long-term interests and recommended a vote
against it. The Board's belief in the favorable medium- to long-term prospects
of the Philippine market and the Fund's share price appreciation potential was a
major consideration in forming its position. A copy of the press release can be
found at the Fund's website -- http://www.clementecapital.com/fpf.html. We
encourage your participation in this vote that will determine the direction of
the Fund.

Once again, thank you for your continued support for the Philippines and The
First Philippine Fund.

Sincerely yours,

/S/LILIA C. CLEMENTE

Lilia C. Clemente
DIRECTOR, PRESIDENT & CEO

/S/JOAQUIN G. HOFILENA

Joaquin G. Hofilena
VICE PRESIDENT AND PORTFOLIO MANAGER

THE FIRST PHILIPPINE FUND INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2002

Number of Shares Value
-------------------------------------------------------------------------------------------------------------------
PHILIPPINE SECURITIES (98.0%)
-------------------------------------------------------------------------------------------------------------------
COMMON STOCK (96.1%)
CONGLOMERATES (13.1%)

Aboitiz Equity Ventures, Inc. 17,200,000 $ 775,924
Ayala Corp. - A 36,464,323 3,064,008
Benpres Holdings Corp. (c) 29,109,700 201,587
Metro Pacific Corp. (c) 15,550,000 86,148
Pryce Corp. (b)(c) 19,490,000 26,030
Uniwide Holdings, Inc. (c) 20,687,000 32,745
-------------------------------------------------------------------------------------------------------------------
4,186,442
-------------------------------------------------------------------------------------------------------------------
CONSTRUCTION/ENGINEERING (1.2%)
DMCI Holdings, Inc. (c) 25,604,000 75,990
Union Cement Corp. (c) 22,038,041 305,230
-------------------------------------------------------------------------------------------------------------------
381,220
-------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES (12.6%)
Bank of the Philippine Islands 2,014,881 1,913,581
Bankard, Inc. (c) 6,470,000 161,299
Equitable PCI Bank, Inc. (c) 836,000 521,042
Metropolitan Bank & Trust Co. (c) 2,197,000 1,456,233
-------------------------------------------------------------------------------------------------------------------
4,052,155
-------------------------------------------------------------------------------------------------------------------
FOOD AND BEVERAGE (23.8%)
Del Monte Pacific Ltd. (f) 2,400,000 631,472
Jollibee Foods Corp. 3,880,545 1,017,337
La Tondena Distillers, Inc. 1,567,800 1,023,672
San Miguel Corp. - A 4,545,086 4,361,541
Universal Robina Corp. 6,778,200 610,214
-------------------------------------------------------------------------------------------------------------------
7,644,236
-------------------------------------------------------------------------------------------------------------------
MEDIA (3.7%)
ABS-CBN Broadcasting Corp. PDR (c)(e) 2,649,900 1,179,691
-------------------------------------------------------------------------------------------------------------------
1,179,691
-------------------------------------------------------------------------------------------------------------------
PORT OPERATIONS (1.2%)
International Container Terminal Services, Inc. 7,643,750 369,022
-------------------------------------------------------------------------------------------------------------------
369,022
-------------------------------------------------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT (22.0%)
Ayala Land, Inc. 26,589,585 2,946,156
Belle Corp. (c) 5,900,008 37,356
Filinvest Land, Inc. (c) 32,287,499 1,456,550
SM Prime Holdings, Inc. 24,100,000 2,622,623
-------------------------------------------------------------------------------------------------------------------
7,062,685
-------------------------------------------------------------------------------------------------------------------
TECHNOLOGY (1.6%)
Ionics, Inc. 2,475,000 298,718
Music Corp. (c) 1,900,000 7,425
SPI Technologies, Inc. (c) 1,400,500 221,681
-------------------------------------------------------------------------------------------------------------------
527,824
-------------------------------------------------------------------------------------------------------------------

See Accompanying Notes to Financial Statements

THE FIRST PHILIPPINE FUND INC.
SCHEDULE OF INVESTMENTS (CONT'D)
JUNE 30, 2002

Number of Shares Value
-------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (14.0%)

Digital Telecommunications Philippines, Inc. (c) 20,200,000 $ 279,773
Globe Telecommunications, Inc. (c) 65,000 668,764
Philippine Long Distance Telephone Co. ADR (c)(d) 475,020 3,543,649
-------------------------------------------------------------------------------------------------------------------
4,492,186
-------------------------------------------------------------------------------------------------------------------
UTILITIES (2.9%)
Manila Electric Co. - A (c) 2,257,600 926,875
-------------------------------------------------------------------------------------------------------------------
926,875
-------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $62,731,958) 30,822,336
-------------------------------------------------------------------------------------------------------------------

Par
Maturity (000)
-------------------------------------------------------------------------------------------------------------------
BOND (1.9%)
Bacnotan Consolidated Industries, Inc., 5.50%
(Cost $1,750,000) 06/21/04 $1,750 621,250
-------------------------------------------------------------------------------------------------------------------
TOTAL PHILIPPINE SECURITIES
(Cost $64,481,958) 31,443,586
-------------------------------------------------------------------------------------------------------------------
UNITED STATES SECURITIES (2.0%)
-------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (2.0%)
American Express Credit Corp., 1.97%
(Cost $627,000) 07/01/02 627 627,000
-------------------------------------------------------------------------------------------------------------------
TOTAL UNITED STATES SECURITIES 627,000
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100%)
(Cost $65,108,958) (a) $ 32,070,586
============

(a) Aggregate cost for Federal Income tax purposes is $65,108,958.
Aggregate gross unrealized appreciation (depreciation) for all securities
is as follows:
Excess of market value over tax cost $ 2,056,002
Excess of tax cost over market value (35,094,374)
------------
$(33,038,372)
============
(b) At fair value as determined by the Board of Directors.
(c) Non-income producing security.
(d) ADR - American Depository Receipt.
(e) PDR - Philippine Depository Receipt.
(f) Singapore security - 2.0% of Total Investments.

See Accompanying Notes to Financial Statements

THE FIRST PHILIPPINE FUND INC.
STATEMENT OF ASSETS AND LIABILITIES June 30, 2002
-------------------------------------------------------------------------------------------------------------------
ASSETS

Investments at value (Cost $65,108,958) ......................................................... $ 32,070,586
Cash ............................................................................................ 644
Foreign currency value (Cost $748,552) .......................................................... 761,288
Dividends receivable ............................................................................ 18,025
Interest receivable ............................................................................. 2,144
Prepaid expenses ................................................................................ 17,956
-------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .................................................................................... 32,870,643
-------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for treasury stock repurchased .......................................................... 30,334
Advisory fee payable ............................................................................ 56,715
Accrued expenses payable ........................................................................ 160,807
-------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ............................................................................... 247,856
-------------------------------------------------------------------------------------------------------------------
NET ASSETS
(applicable to 10,188,300 common shares outstanding) ......................................... $32,622,787
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
($32,622,787/10,188,300) ..................................................................... $3.20
-------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Capital Stock Issued ......................................................................... $ 112,250
Paid-in capital .............................................................................. 119,167,739
Cost of 1,036,700 shares held in treasury .................................................... (3,220,835)
Accumulated net realized loss on investments ................................................. (50,410,749)
Net unrealized depreciation on investments, foreign currency holdings
and other assets and liabilities denominated in foreign currency ............................ (33,025,618)
-------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $32,622,787
-------------------------------------------------------------------------------------------------------------------

For the
Year Ended
STATEMENT OF OPERATIONS June 30, 2002
-------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of taxes withheld $139,210) ................................................... $ 450,716
Interest (net of taxes withheld $3,423) ...................................................... 133,032
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME ......................................................................... 583,748
-------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fee ...................................................................... 365,523
Trustee fee .................................................................................. 150,000
Administration fee ........................................................................... 124,800
Legal fee .................................................................................... 128,414
Custodian fee ................................................................................ 74,836
Audit fee .................................................................................... 54,602
Directors fee ................................................................................ 49,250
NYSE Listing fee ............................................................................. 34,688
Printing ..................................................................................... 27,998
Insurance .................................................................................... 10,924
Transfer agent fee ........................................................................... 8,229
Miscellaneous ................................................................................ 69,083
-------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .................................................................................. 1,098,347
-------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS ............................................................................. (514,599)
-------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS, FOREIGN CURRENCY HOLDINGS
AND OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES:
Net realized gain (loss) on:
Security transactions ....................................................................... (2,512,427)
Foreign currency transactions ............................................................... 3,745
Net change in unrealized appreciation (depreciation):
Investments ................................................................................. (3,795,603)
Foreign currency holding and other assets and liabilities denominated in foreign currency ... 45,367
-------------------------------------------------------------------------------------------------------------------
Net realized and unrealized losses on investments, foreign currency holdings
and other assets and liabilities denominated in foreign currency ............................ (6,258,918)
-------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................................ $(6,773,517)
-------------------------------------------------------------------------------------------------------------------

See Accompanying Notes to Financial Statements

For the For the
THE FIRST PHILIPPINE FUND INC. Year Ended Year Ended
STATEMENT OF CHANGES IN NET ASSETS June 30, 2002 June 30, 2001
-------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:

Net investment loss ................................................. $ (514,599) $ (346,430)
Net realized loss on security transactions .......................... (2,512,427) (15,229,320)
Net realized gain (loss) on foreign currency transactions ........... 3,745 (627,460)
Net change in unrealized appreciation (depreciation)
on investments, foreign currency holdings and other
assets and liabilities denominated in foreign currency ........... (3,750,236) 21,840
-------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations ................. (6,773,517) (16,181,370)
-------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Shares repurchased ................................................... (2,930,465) (290,370)
-------------------------------------------------------------------------------------------------------------------
Total decrease in net assets ......................................... (9,703,982) (16,471,740)
-------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of year ................................................... 42,326,769 58,798,509
-------------------------------------------------------------------------------------------------------------------
End of year (including accumulated net investment loss of
$0 and ($214,965), respectively) ................................. $32,622,787 $ 42,326,769
===================================================================================================================

See Accompanying Notes to Financial Statements

THE FIRST PHILIPPINE FUND INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)

For the Year Ended June 30,
-------------------------------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
-------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE

Net asset value, beginning of period ........................... $ 3.80 $ 5.24 $ 9.73 $ 6.51 $16.61
-------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss ......................................... (0.05) (0.03) (0.06) (0.07) (0.06)
Net realized and unrealized gains (losses) on investments,
foreign currency holdings and other assets and liabilities
denominated in foreign currencies .......................... (0.65) (1.56) (4.43) 3.29 (10.04)
-------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations ............. (0.70) (1.59) (4.49) 3.22 (10.10)
-------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS
Distributions from net realized long-term gains ............. -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS .............................. -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------
SHARES REPURCHASED
Effect of shares repurchased ................................ 0.10 0.15 -- -- --
-------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net asset value ...................... (0.60) (1.44) (4.49) 3.22 (10.10)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................................. $ 3.20 $ 3.80 $ 5.24 $ 9.73 $ 6.51
-------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD .......................... $ 2.84 $ 3.19 $ 4.06 $ 8.63 $ 5.75
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN
Based on market value* ...................................... (10.97)% (21.43)% (52.90)% 50.00% (58.18)%
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ........................... $32,623 $42,327 $58,799 $109,256 $73,068
Ratios to average net assets:
Operating expenses ......................................... 3.00% 2.38% 1.88% 2.07% 1.91%
Net investment loss ........................................ (1.41)% (0.71)% (0.86)% (1.02)% (0.68)%
Portfolio turnover ............................................. 3.04% 34.71% 14.37% 16.26% 23.10%
-------------------------------------------------------------------------------------------------------------------

* Total investment return is calculated assuming a purchase of common stock at the current market price on the
first day and a sale at the current market price on the last day of each period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices
obtained under the Fund's dividend reinvestment plan. Total investment return does not reflect sales charges
and brokerage commissions.

See Accompanying Notes to Financial Statements

NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2002
------------

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The First Philippine Fund Inc. (the "Fund") was incorporated in the State
of Maryland on September 11, 1989. The Fund is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, closed-end management
investment company. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.

1. PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities for which market quotations are
readily available are valued at the last sales price or lacking any recent
sales, at the mean between the current bid and asked prices. Securities
that are traded over-the-counter are valued at the mean between the current
bid and asked prices. Securities for which market values are not readily
available are carried at fair value as determined in good faith by or under
the supervision of the Board of Directors. Short-term investments having a
maturity of 60 days or less are valued on the basis of amortized cost.

2. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions
are accounted for on the trade date. The cost of investments sold is
determined by use of the specific identification method for both financial
reporting and income tax purposes. Interest income is accrued as earned;
dividend income is recorded on the ex-dividend date. Dividends and interest
income are subject to withholding tax at various rates not exceeding 25%
and such tax is recorded at the time when the related income is recorded.

3. TAX STATUS: No provision is made for U.S. Federal income or excise taxes
as it is the Fund's intention to continue to qualify as a regulated
investment company and to make the requisite distributions to its
shareholders which will be sufficient to relieve it from all or
substantially all U.S. Federal income and excise taxes. For the year ended
June 30, 2002, no U.S. Federal income or excise tax provision was required.

The Fund has a capital loss carry forward in the amount of $48,194,629, of
which $466,990, $7,894,664, $8,691,344, $26,411,868 and $4,729,763 are
available as a reduction of future net capital gains to be distributed and
expire in the years ended 2005, 2007, 2008, 2009 and 2010 respectively. It
is uncertain whether the Fund will realize these benefits before they
expire.

Capital and foreign currency losses incurred after October 31
("post-October losses") within the taxable year are deemed to arise on the
first business day of the Fund's next taxable year. The Fund after October
31, 2001 incurred and will elect to defer net capital losses of $2,216,120
during the year ended June 30, 2002.

The tax character of net assets at June 30, 2002 was substantially the same
as the book character.

4. FOREIGN CURRENCY: The books and records of the Fund are maintained in U.S.
dollars. Foreign currency amounts are translated into U.S. dollars on the
following basis:

(I) market value of investment securities and other assets and liabilities
at the Philippine peso exchange rate as stated on the Philippine
Dealing System at the valuation date; and

(II) purchases and sales of investment securities, income and expense at
the Philippine peso rate of exchange prevailing on the respective
dates of such transactions. Exchange gains or losses are realized upon
ultimate receipt or disbursement.

The Fund does not generally isolate the effect of fluctuation in foreign
exchange rates from the effect of fluctuations in the market prices of
securities held whether realized or unrealized.

NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2002 (CONT'D)
------------

Realized gains or losses on foreign currency transactions represent net
foreign exchange gains or losses from the disposition of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and between amounts of
interest, dividends and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts actually received or paid.

The change in unrealized appreciation/depreciation of foreign currency
holding and other assets and liabilities denominated in foreign currencies
represents the change in the value of the foreign currencies and other
assets and liabilities arising as a result of changes in foreign exchange
rates.

Foreign security and currency transactions may involve certain conditions
and risks not typically associated with those of domestic origin as a
result of, among other factors, the level of government supervision and
regulation of foreign securities markets and the possibilities of political
or economic instability.

5. DISTRIBUTION OF INCOME AND GAINS: The Fund intends to distribute to
shareholders, at least annually, substantially all of its net investment
income and expects to distribute annually any net capital gains in excess
of net capital losses. An additional distribution may be made to the extent
necessary to avoid the payment of a 4% Federal excise tax.

The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital accounts based on
their Federal tax-basis treatment; temporary differences do not require
reclassification. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions
of paid-in capital.

As of June 30, 2002, the Fund had temporary book/tax differences primarily
attributable to post-October losses and permanent book/tax differences
primarily attributable to foreign currency losses and net operating loss.
During the year ended June 30, 2002, the Fund decreased accumulated net
investment loss by $725,819 with an offsetting decrease to paid-in-capital
of $725,819. The Fund also decreased accumulated net investment loss by
$3,745 with an offsetting increase to accumulated net realized loss on
investments of $3,745. Net assets were not affected by these changes.

6. REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements with
respect to dollar-denominated debt securities of United States issuers. The
Fund's custodian takes possession of collateral pledged for investment in
the repurchase agreements. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market
on a daily basis to maintain the adequacy of the collateral. If the seller
defaults, the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of
the collateral by the Fund may be delayed or limited.

NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2002 (CONT'D)
------------

B. MANAGEMENT AND INVESTMENT ADVISORY SERVICES

The Fund has entered into an Investment Advisory Agreement for portfolio
management services with Clemente Capital, Inc. (the "Investment Adviser") and a
Trust Agreement with the Philippine National Bank (the "Trustee") for certain
services relating to the Philippine Trust. The Investment Advisory Agreement is
approved on an annual basis and provides for the Investment Adviser to receive a
fee computed weekly and payable monthly at the annual rate of 1% of the Fund's
average weekly net assets. For the year ended June 30, 2002, the Investment
Adviser earned $365,523 from the Fund, of which $56,715 was payable to the
Investment Adviser at June 30, 2002.

PNB Investments Limited (the "Philippine Adviser"), a wholly-owned
subsidiary of the Trustee, provides the Investment Adviser with investment
advice, research and assistance pursuant to a Research Agreement with the
Investment Adviser. For its services, the Philippine Adviser receives from the
Investment Adviser a fee at an annual rate of 0.35% of the Fund's average weekly
net assets. For the year ended June 30, 2002, the Investment Adviser paid
$127,933 to the Philippine Adviser.

Substantially all of the Fund's assets are invested through and held in the
Philippine Trust. Under the Trust Agreement, the Trustee receives a monthly fee
at the annual rate of 0.15% of the Fund's average weekly net assets held in the
Philippine Trust, subject to a minimum fee of $150,000 for administration of the
Philippine Trust. The Trust Agreement remains in effect for the life of the Fund
unless terminated in accordance with its terms. For the year ended June 30,
2002, the Trustee earned fees of $150,000, of which $37,396 was payable to the
Trustee at June 30, 2002.

PFPC Inc. (the "Administrator") provides administrative and accounting
assistance to the Fund. Under the Administration Agreement, the Administrator
receives a fee payable monthly at an annual rate of 0.10% of the Fund's average
weekly net assets, subject to a minimum annual fee of $124,800. For the year
ended June 30, 2002, the Administrator earned fees of $124,800, of which $20,515
was payable to the Administrator at June 30, 2002.

The Fund pays each of its Directors who is not a director, officer or
employee of the Investment Adviser, the Philippine Adviser or the Trustee an
annual fee of $8,000 plus $750 for each meeting of the Board or of a committee
of the Board attended in person plus certain out-of-pocket expenses. Directors'
fees payable at June 30, 2002 were $11,000, which were included in accrued
expenses.

C. CAPITAL STOCK

The authorized capital stock of the Fund is 25,000,000 shares of common
stock $.01 par value. Of the 10,188,300 shares outstanding at June 30, 2002,
Clemente Capital, Inc. owned 6,000 shares.

D. SHARE REPURCHASE PROGRAM

On May 4, 2001, the Fund commenced a share repurchase program for the
purpose of enhancing shareholder value and reducing the discount at which the
Fund's shares traded from their net asset value. From that date through June 30,
2002, the Fund repurchased 1,036,700 shares or 9.24% of its Common Stock issued
at a weighted average price per share of $3.07 and a weighted average discount
of 10.51% from net asset value per share. For the year ended June 30, 2002, the
Fund repurchased 950,400 shares or 8.47% of its Common Stock issued at a
weighted average price per share of $3.02 and a weighted average discount of
10.02% from net asset value per share. The Fund expects to continue to
repurchase its outstanding shares at such time and in such amounts as it
believes will further the accomplishment of the foregoing objectives subject to
review by the Board of Directors.

E. PORTFOLIO ACTIVITY

Purchases and sales of securities, other than short-term obligations,
aggregated $1,048,644 and $2,013,669, respectively, for the year ended June 30,
2002.

NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2002 (CONT'D)
------------

F. OTHER

The Fund has obtained the approval of the Central Bank for the registration
and conversion into pesos of all proceeds of the Fund to be invested in the
Philippine securities markets, which ensures repatriation of such investment and
the remittance of profits and dividends accruing thereon. Notwithstanding the
foregoing, the right of the Fund to repatriate its investments in Philippine
securities and to receive profits, capital gains and dividends in foreign
exchange is subject to the power of the Central Bank, with the approval of the
President of the Philippines, to restrict the availability of foreign exchange
in the imminence of or during an exchange crisis or in times of national
emergency.

There are nationality restrictions on the ownership of certain equity
securities of Philippine companies. Based on confirmations which the Fund
received from Philippine governmental authorities, the Fund believes that it is
permitted to make certain investments through the Philippine Trust that are
otherwise available only to Philippine nationals.

At June 30, 2002, 94.4% of the Fund was invested in Philippine securities.
Future economic and political developments in that country could adversely
affect the liquidity and/or value of the Philippine securities in which the Fund
is invested.

G. SUBSEQUENT EVENT

At the July 25, 2002 Board Meeting, the Board of Directors authorized a
shareholder vote on liquidation. Shareholders of record on August 21, 2002 shall
be entitled to vote at the Annual Meeting, which will be held on October 31,
2002. Under the Fund's Amended Articles of Incorporation, which have been in
effect since inception in 1989, the affirmative vote of 75% of the Fund's
outstanding shares of Common Stock will be required to approve the dissolution
of the Fund.

In the event that the requisite percentage is not achieved, the Board will
consider various alternatives to address the discount.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
The First Philippine Fund Inc.

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The First Philippine Fund Inc. (the
"Fund") at June 30, 2002, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 2002 by
correspondence with the custodian, provide a reasonable basis for our opinion.

As explained in Note G, the Board of Directors of the Fund has authorized a
shareholder vote on liquidation and dissolution of the Fund.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
August 5, 2002

TAX INFORMATION (UNAUDITED)
--------

The Fund is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise its shareholders within 60 days of the Fund's fiscal year
end (June 30, 2002) as to the U.S. Federal tax status of distributions received
by the Fund's shareholders during such fiscal year.

Because the Fund's fiscal year is not the calendar year, another
notification will be sent in respect of calendar year 2002. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their Federal income tax returns, will be made in conjunction with
Form 1099-DIV and will be mailed in January 2003. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in the Fund.

Foreign shareholders will generally be subject to U.S. withholding tax on
the amount of their dividend.

Dividends received by tax-exempt recipients (e.g. IRA's and Keoghs) need
not be reported as taxable income for U.S. Federal income tax purposes. However,
some retirement trusts (e.g. corporate, Keogh and 403(b)(7) plans) may need this
information for their annual information reporting.

This information is given to meet certain requirements of the Internal
Revenue Code. Shareholders should refer to their Form 1099-DIV to determine the
amounts includable on their respective tax returns for 2002.

SUMMARY OF THE FUND'S DIVIDEND REINVESTMENT PLAN (UNAUDITED)
------

The following is a summary of the Fund's Dividend Reinvestment Plan (the
"Plan"). Shareholders may participate in the Plan by completing an enrollment
card available from American Stock Transfer & Trust Company (the "Plan Agent"),
and forwarding it to the address below.

The Fund intends to distribute to shareholders, at lease annually, its net
investment income from dividends and interest and, to the extent necessary, its
net realized capital gains. Pursuant to the Plan, shareholders may elect to have
all cash distributions automatically reinvested by the Plan Agent in Fund shares
pursuant to the Plan.

If the directors of the Fund declare a dividend from net investment income
or a capital gains distribution payable either in the Fund's Common Stock or in
cash, participants in the Plan will receive shares of Common Stock, to be issued
by the Fund. If the market price per share on the valuation date equals or
exceeds net asset value per share on that date, the Fund will issue new shares
to participants at net asset value or, if the net asset value is less than 95%
of the market price on the valuation date, then the Fund will issue such new
shares at 95% of the market price. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the NYSE, the
next preceeding trading day. If the net asset value exceeds the market price of
the Fund shares at such time or if the Fund should declare a dividend or
distribution payable only in cash, participants in the Plan will be deemed to
have elected to receive shares of stock from the Fund valued at the market price
on the valuation date. The Fund may not issue shares below net asset value.
Accordingly, the Plan Agent, as agent for the participants, will use the amount
of the distribution to purchase Fund shares in the open market, on the New York
Stock Exchange or elsewhere, for the participants' accounts on, or in any event
within 30 days after, the payment date. If, before the Plan Agent has completed
its purchases, the market price exceeds the net asset value per share, the
average per share purchase price paid by the Plan Agent may exceed net asset
value per share, resulting in the acquisition of fewer shares than if the
dividend or distribution had been paid in shares issued by the Fund.

The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
for personal tax records. The Plan Agent will provide such confirmations to
banks, brokers or nominees which hold shares for others and who are certified by
the shareholder as representing the total amount of shares registered in the
shareholder's name and held for the account of beneficial owners who are
participating in the Plan.

There is no charge to participants for reinvesting dividends or
distributions. The Plan Agent's fees for the handling of the reinvestment of
dividends and distributions will be paid by the Fund. However, each
participant's account will be charged a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or distributions.

The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax which may be payable or required to be withheld
on such dividends or distributions.

Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid for such dividend or distribution.
The Plan also may be amended or terminated by the Plan Agent upon at least 30
days written notice to all shareholders. Participants may terminate
participation in the Plan at any time upon giving written notice 30 days prior
to the applicable dividend or distribution payment date. Additional information
about the Plan may be obtained by writing American Stock Transfer & Trust
Company (the Plan Agent) at 59 Maiden Lane, New York, NY 10007. Attention
Shareholder Services: The First Philippine Fund Inc.

REPORT OF THE FUND'S ANNUAL MEETING (UNAUDITED)
--------

The Fund held its annual meeting on October 25, 2001. At the meeting, the
shareholders voted to elect three Class II directors for a three year term:
Leopoldo M. Clemente, Jr., John Anthony B. Espiritu, and Benjamin P. Palma Gil.
The shareholders also voted to ratify the selection of PricewaterhouseCoopers
LLP as the Fund's independent accountants for the year ending June 30, 2002. The
results of the voting were as follows:

ABSTENTIONS
AND BROKER
FOR AGAINST WITHHELD NON-VOTES
----------------------------------------------------------------------------------------------------------------------------

Leopoldo M. Clemente, Jr. 8,743,389 587,565
John Anthony B. Espiritu 8,743,889 587,065
Benjamin P. Palma Gil 8,743,689 587,265
Selection of PricewaterhouseCoopers LLP 9,029,545 272,235 29,174

THE FIRST PHILIPPINE FUND INC.

FUND MANAGEMENT SUMMARY
---------
DIRECTORS AND OFFICERS

NUMBER OF
PORTFOLIOS
IN FUND
TERM OF OFFICE* PRINCIPAL OCCUPATION(S) COMPLEX
NAME, (AGE), ADDRESS AND AND LENGTH DURING PAST 5 YEARS OVERSEEN BY
POSITION(S) WITH COMPANY OF TIME SERVED AND OTHER DIRECTORSHIPS HELD DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------

DISINTERESTED DIRECTORS

Roberto de Ocampo1 (56) Class III President, Asian Institute of Management, since 1
Director 2002 September 1999; Chairman, Philand Group of Companies,
6760 SGV Building Since 1998 since June 1999; Chairman, Prime East Properties,
Ayala Avenue Inc., since June 1999; Secretary of Finance, Republic
Makati City, of the Philippines, 1993 to January 1998; Director of
Metro Manila, Philippines ABS-CBN Broadcasting Corp., Alaska Milk Corp. and PSi
Technologies (a semiconductor corporation).
------------------------------------------------------------------------------------------------------------------------------------
John Anthony B. Espiritu (39) Class II Managing Director of SynEx Financial Management 1
Director 2004 Advisors, Inc., Manila, Philippines, since March 2001;
Ritz Tower Since 1998 Chairman and President of EBECOM Holdings Co., Inc.,
Makati City Makati City, Metro Manila, Philippines since May 1995;
Metro Manilla, Philippines President and Chief Executive Officer of Westmont Bank,
Manila, Philippines from July 1998 to December 1999 and
other offices since 1994; President of Philippine Racing
Club, Inc., Manila, Philippines from June 1998 to
February 2001; Chairman/Executive Director, Western
State Bank, Duarte, California since May 1992.
------------------------------------------------------------------------------------------------------------------------------------
Joseph A. O'Hare, S.J. (71) Class III President of Fordham University since 1984; Chairman, 1
Director 2002 New York City Campaign Finance Board since 1988
Fordham University Since 1989 (re-appointed in 1994 and 1999).
Bronx, NY 10458
------------------------------------------------------------------------------------------------------------------------------------
Stephen J. Solarz (62) Class I Member, United States House of Representatives 1
Director 2003 from 1975 to 1992; President, Solarz Associates,
1120 Bellview Road Since 1994 (an international consulting firm) since 1992; Senior
McLean, VA 22102 Counselor, Apco Associates, (a public affairs company)
since 1995; Director of Santa Fe International
(an oil drilling company) and Samsonite Corp.
(a luggage manufacturer).
------------------------------------------------------------------------------------------------------------------------------------

THE FIRST PHILIPPINE FUND INC.

FUND MANAGEMENT SUMMARY (CONT'D)
--------
DIRECTORS AND OFFICERS

INTERESTED DIRECTORS

Lilia C. Clemente1,2 (61) Class III Chairman and Chief Executive Officer of Clemente 1
Director, President and Chief Executive 2002 Capital, Inc. since 1986; Director of Clemente
Officer Since 1989 Capital, Inc.
Clemente Capital, Inc.
152 West 57th Street
New York, NY 10019
------------------------------------------------------------------------------------------------------------------------------------
Leopoldo M. Clemente, Jr.1,2 (64) Class II President and Chief Investment Officer of Clemente 1
Director, Executive Vice President and 2004 Capital, Inc. since 1987; President of Clemente
Managing Director Since 1989 Strategic Value Fund, Inc. from 1987 to 2001
Clemente Capital, Inc. and Cornerstone Strategic Return Fund, Inc. from
152 West 57th Street April 2000 to April 2001; Director of Clemente
New York, NY 10019 Capital, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Benjamin P. Palma Gil2 (50) Class II President of Philippine National Bank and PNB 1
Director and Chairman 2004 Investments Limited from July 1998 to January 2000;
11 Helmcrest Street Since 1998 Executive Director of Capital Strategy Limited
Aliso Viejo, CA 92656 (a financial advisory firm) from 1994 to July 1998
and since January 2000.
------------------------------------------------------------------------------------------------------------------------------------

OFFICERS

Santiago S. Cua, Jr. (54) Since 1998 Executive Vice President of Philippine National N/A
Executive Vice President and Bank since July 1998; Senior Executive Vice President,
Managing Director Westmont Bank, Manila, Philippines from June 1994 to
Philippine National Bank July 1998.
Roxas Boulevard
Metro Manila, Philippines
------------------------------------------------------------------------------------------------------------------------------------
Joaquin G. Hofilena (35) Since 1996 Portfolio Manager and Investment Analyst of Clemente N/A
Vice President and Treasurer Capital, Inc. since April 1996.
Clemente Capital, Inc.
152 West 57th Street
New York, NY 10019
------------------------------------------------------------------------------------------------------------------------------------
Imelda Singzon (53) Since 1998 Senior Vice President of Philippine National Bank since N/A
Vice President August 1994.
PNB Investments Limited
Roxas Boulevard
Metro Manila, Philippines
------------------------------------------------------------------------------------------------------------------------------------

* Board members are elected at the annual shareholder meeting and serve three-year staggered terms: Class I
expiring in 2003, Class II in 2004 and Class III in 2002.
1 Lilia C. Clemente and Leopoldo M. Clemente, Jr. are wife and husband. Lilia C. Clemente and Roberto de Ocampo are
first cousins.
2 Mr. and Mrs. Clemente and Mr. Palma Gil are deemed to be interested persons because: (a) of their affiliation
with the Fund's investment adviser, Clemente Capital, Inc., the Fund's Philippine adviser, PNB Investments
Limited or Philippine National Bank; (b) they are officers of the Fund; or (c) both (a) and (b).

[This page intentionally left blank]

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
Roberto de Ocampo
DIRECTOR
John Anthony B. Espiritu
DIRECTOR
Joseph A. O'Hare, S.J.
DIRECTOR
Stephen J. Solarz
DIRECTOR
Santiago S. Cua, Jr.
EXECUTIVE VICE PRESIDENT AND MANAGING DIRECTOR
Joaquin G. Hofilena
VICE PRESIDENT AND TREASURER
Imelda Singzon
VICE PRESIDENT
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

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 news-papers 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.

[FIRST PHILIPPINE LOGO OMITTED]

ANNUAL REPORT

JUNE 30, 2002