[LOGO] THE FIRST PHILIPPINE FUND INC.


                                  ANNUAL REPORT

                                  JUNE 30, 2001


                                                                  August 1, 2001

Dear Shareholder:

     On June 30, 2001,  The First  Philippine  Fund Inc.'s  (Fund) per share net
asset value (NAV) stood at $3.80.  The Fund's NAV  declined by 6.40% in the June
quarter of 2001.  However,  the Fund outperformed its benchmark,  the Philippine
composite index (Phisix),  which slumped by 8.20% in US dollar terms in the same
period.  In the first half of the year,  the Fund's NAV declined by 12.64% while
the benchmark  dropped by 10.04% in US dollar  terms.  In the Fund's fiscal year
ending June 2001,  the Fund's NAV and the Phisix  weakened by 27.48% and 24.16%,
respectively.

     The Fund's share price  closed at $3.19 on June 30. The shares  declined by
0.31% in the June quarter, by 5.48% in the first half of the year, and by 21.47%
in the Fund's 2001 fiscal year.  The discount at which the Fund's  shares traded
to NAV  narrowed  to 16.05%  at the end of June from  21.18% at the end of March
2001 and from over 22% at the end of June and December 2000.

     We believe the share  repurchase  program,  which we began in May, may have
had an  impact  in the  narrowing  of the  discount.  As of the end of the  June
quarter,  the Fund has repurchased  86,300 shares. In April, the Fund's Board of
Directors  authorized a buyback  program over the next two years of up to 20% of
the Fund's outstanding shares.

     In  addition,  the  Board  recently  announced  that it has  authorized  an
unlimited  tender offer,  at NAV, in one year's time for up to all of the Fund's
outstanding  shares or to otherwise allow  shareholders to realize NAV for their
shares (such as through  liquidation of the Fund or conversion  into an open-end
investment company). Such action will be taken if, on July 19, 2002, the average
discount to NAV of the Fund's shares during the  preceding  twenty  trading days
equals or exceeds 12%.

PHILIPPINE MARKET REVIEW

     The Philippine stock market moved within a narrow 106 point trading band in
the June  quarter  of 2001.  Within  this  range,  the market  exhibited  marked
volatility  as key market  catalysts  were tamed by surprises  both positive and
negative.  The market was thus unable to breakout on a sustained  rally.  By the
end of the  quarter,  the Phisix was down by only  2.51% in local  terms.  In US
dollars,   however,  the  Phisix  declined  by  8.20%  as  the  Philippine  peso
depreciated by another 5.8% in the quarter to P52.428/US$.

     Again,  politics remained the dominant theme. The Philippine government did
in fact deliver what the market wanted in the quarter, such as:

o    A Supreme  Court  ruling in April  confirmed  the  legitimacy  of President
     Gloria Macapagal-Arroyo's administration.

o    Ex-President  Joseph Estrada was formally  charged for economic plunder and
     was arrested in late April.

o    The  national  elections  in May  resulted  in a  victory  for  the  ruling
     administration's coalition, ensuring a Senate majority.

o    Congress finally passed the Omnibus Power Bill.

     Nonetheless, sentiment was challenged by the following unforeseen events:

o    A state of rebellion  was declared on May 1 after  crowds,  protesting  Mr.
     Estrada's arrest,  attempted to storm the presidential  palace.  Government
     claimed this was a power grab attempt by oppositionists.

o    In  May,  the  renegade  Abu  Sayyaf  took  20  hostages,  including  three
     foreigners,  from a beach  resort in Palawan.  Peace and order has become a
     major concern.

     On the economic front,  the country reeled with the rest of the region from
the steep export  slowdown.  Due mainly to  industrial  weakness,  especially in
construction  and  manufacturing,  the country's  first  quarter gross  domestic
product (GDP) slowed to 2.5% year-on-year,  versus 3.3% a year ago. A week after
this  announcement,  the  government  lowered  its 2001 GDP  growth  targets  to
3.0-3.8%,  from  3.8-4.3%.  The  lower  first  quarter  earnings  of  Philippine
companies reflected this general economic downturn.


     To its credit,  however,  government has managed to rein in the huge budget
deficit,  keeping it within targets for the first 5 months of the year. Interest
rates  have been  lowered by the  country's  Central  Bank,  in line with the US
Federal  Reserve's  rate cuts.  Inflation has been contained at around 6.7%, the
2001 five-month average.

OUTLOOK AND STRATEGY

     While the new  government  made  progress,  the return of confidence to the
market  remains  tenuous.  Investors  will  require  more  concrete  signs of an
economic  recovery  and an  abatement of  political  risk.  Thus,  we expect the
Philippine  stock  market to continue to be  range-bound  in the third  quarter.
Without clearer signals of a pick up in external  demand,  the economy will lack
the robust  driver it needs to spark  growth.  Foreign  investor  activity  will
remain subdued until progress is seen in addressing peace and order concerns.

     Nonetheless,  we retain our positive long-term  outlook.  We agree that, as
far as the political leadership and economic policies are concerned, fundamental
improvements have been made. The country is pointing in the right direction. The
achievements made to date (e.g., election victory,  power bill passage,  efforts
to curb the  deficit  and  implement  tax  reforms,  renewed  peace  talks  with
insurgents)  are  important   milestones  in  re-establishing   credibility  and
confidence.

     We look forward to this government maintaining the path it has followed and
mustering the political will to implement  needed reforms.  We also look forward
to an economic and earnings recovery beginning as early as the fourth quarter of
the year.  With  renewed  external  demand  and the  sounder  structure  that is
currently  being built for the  economy,  we may just be at the  beginning  of a
long-term sustainable growth path.

     Given these, the Fund will maintain a defensive  strategy in the near term,
but will take advantage of  opportunities  to accumulate on dips in anticipation
of a  recovery.  The Fund  will not seek to  significantly  alter  its  sectoral
allocation.  Instead, the Fund will continue to employ a stock picking strategy.
That is, to be most heavily weighted in market leaders/blue chips, with emphasis
on  attractive  valuations,   ample  liquidity,  and  positive  earnings  growth
prospects.  These  companies will benefit first and strongest from the economy's
rebound and the return of foreign investor interest to the Philippines.

     Thank you for your continued support of 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


                                       2


THE FIRST PHILIPPINE FUND INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2001



                                                                                   Number of Shares         Value
--------------------------------------------------------------------------------------------------------------------
                                                                                                  
PHILIPPINE SECURITIES (94.3%)
--------------------------------------------------------------------------------------------------------------------
COMMON STOCK (92.7%)
CONGLOMERATES (16.0%)
    Aboitiz Equity Ventures, Inc.                                                      17,200,000       $    478,981
    Alsons Consolidated Resources, Inc. (b)(c)                                         15,000,000             54,074
    Ayala Corp.                                                                        36,464,323          4,868,586
    Benpres Holdings Corp. (c)                                                         29,109,700            910,580
    Metro Pacific Corp. (c)                                                            15,550,000            139,401
    Pryce Corp. (c)                                                                    19,490,000             92,937
    Uniwide Holdings,  Inc. (c)                                                        20,687,000            110,482
--------------------------------------------------------------------------------------------------------------------
                                                                                                           6,655,041
--------------------------------------------------------------------------------------------------------------------
CONSTRUCTION/ENGINEERING (1.5%)
    DMCI  Holdings, Inc. (c)                                                           25,604,000            136,742
    Union Cement Corp. (c)                                                             22,038,041            504,419
--------------------------------------------------------------------------------------------------------------------
                                                                                                             641,161
--------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES (10.8%)
    Bank of the Philippine Islands                                                      1,349,068          1,878,423
    Bankard Inc.                                                                        6,470,000            172,771
    Equitable PCI Bank, Inc.                                                              836,000            582,017
    Metropolitan Bank & Trust Co. (c)                                                     487,120          1,876,826
--------------------------------------------------------------------------------------------------------------------
                                                                                                           4,510,037
--------------------------------------------------------------------------------------------------------------------
FOOD AND BEVERAGE (18.9%)
    Cosmos Bottling Corp. (c)                                                           5,109,000            428,771
    Del Monte Pacific Ltd. (d)(g)                                                       2,400,000            599,358
    Jollibee Foods Corp.                                                                3,880,545            999,225
    La Tondena Distillers, Inc.                                                         2,347,800          1,209,098
    San Miguel Corp. -A                                                                 4,990,086          3,949,961
    Universal Robina Corp.                                                              6,778,200            672,287
--------------------------------------------------------------------------------------------------------------------
                                                                                                           7,858,700
--------------------------------------------------------------------------------------------------------------------
MEDIA (4.8%)
    ABS-CBN Broadcasting Corp. PDR (d)(f)                                               2,649,900          2,021,744
--------------------------------------------------------------------------------------------------------------------
                                                                                                           2,021,744
--------------------------------------------------------------------------------------------------------------------
PORT OPERATIONS (0.8%)
     International Container Terminal Services, Inc. (c)                                7,643,750            349,908
--------------------------------------------------------------------------------------------------------------------
                                                                                                             349,908
--------------------------------------------------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT (17.6%)
     Ayala Land, Inc.                                                                  26,589,585          2,687,968
     Belle Corp. (c)                                                                    5,900,008             49,516
     Filinvest Land, Inc. (c)                                                          40,487,499          1,745,284
     SM Prime Holdings, Inc.                                                           24,100,000          2,850,004
--------------------------------------------------------------------------------------------------------------------
                                                                                                           7,332,772
--------------------------------------------------------------------------------------------------------------------
TECHNOLOGY (2.4%)
     Ionics, Inc.                                                                       2,475,000            531,086
     Music Corp. (c)                                                                    1,900,000             66,682
     SPI Technologies, Inc. (c)                                                         1,400,500            400,692
--------------------------------------------------------------------------------------------------------------------
                                                                                                             998,460
--------------------------------------------------------------------------------------------------------------------


                 See Accompanying Notes to Financial Statements


                                       3


THE FIRST PHILIPPINE FUND INC.
SCHEDULE OF INVESTMENTS (CONT'D)
JUNE 30, 2001



                                                                                   Number of Shares         Value
--------------------------------------------------------------------------------------------------------------------
                                                                                                  
TELECOMMUNICATIONS (16.0%)
     Digital Telecommunications Philippines, Inc. (c)                                  20,200,000       $    192,645
     Global Telecommunications, Inc.                                                       32,000            424,201
     Philippine Long Distance Telephone Co. ADR (e)                                       430,020          6,041,781
--------------------------------------------------------------------------------------------------------------------
                                                                                                           6,658,627
--------------------------------------------------------------------------------------------------------------------
UTILITIES (3.9%)
     Manila Electric Co.-- A (c)                                                        2,257,600          1,636,316
--------------------------------------------------------------------------------------------------------------------
                                                                                                           1,636,316
--------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
     (Cost $66,811,785)                                                                                   38,662,766
--------------------------------------------------------------------------------------------------------------------


                                                                                         Par
                                                                      Maturity          (000)
--------------------------------------------------------------------------------------------------------------------
                                                                                               
BONDS (1.6%)
     Bacnotan Consolidated Industries, Inc., 5.50%
       (Cost $1,750,000)                                               06/21/04      $      1,750            656,250
--------------------------------------------------------------------------------------------------------------------
TOTAL PHILIPPINE SECURITIES
       (Cost $68,561,785)                                                                                 39,319,016
--------------------------------------------------------------------------------------------------------------------
UNITED STATES SECURITIES (5.7%)
--------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (5.7%)
     General Electric Corp., 4.07%
       (Cost $2,352,000)                                               07/02/01             2,352          2,352,000
--------------------------------------------------------------------------------------------------------------------
TOTAL UNITED STATES SECURITIES                                                                             2,352,000
--------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
       (Cost $70,913,785) (a)                                                                           $ 41,671,016
                                                                                                        ============


                                                                                                     
(a)  Aggregate cost for Federal Income tax purposes is $70,913,785 Aggregate
     gross unrealized appreciation (depreciation) for all securities is as
     follows:
               Excess of market value over tax cost                                                     $  2,667,978
               Excess of tax cost over market value                                                      (31,910,747)
                                                                                                        ------------
                                                                                                        $(29,242,769)
                                                                                                        ============

(b)  At fair value as determined by the Board of Directors.

(c)  Non-income producing security.

(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. At
     June 30, 2001, these securities amounted to value of $2,621,102 or 6.2% of
     net assets.

(e)  ADR-- American Depository Receipt.

(f)  PDR-- Philippine Depository Receipt.

(g)  Singapore Security- 1.4% of Total Investments.See Accompanying Notes to
     Financial Statements


                 See Accompanying Notes to Financial Statements


                                       4


THE FIRST PHILIPPINE FUND INC.


                                                                                   
STATEMENT OF ASSETS AND LIABILITIES                                                   June 30, 2001
---------------------------------------------------------------------------------------------------
ASSETS
Investments at value (Cost $70,913,785) ........................................      $  41,671,016
Cash ...........................................................................                257
Foreign currency value (Cost $900,359) .........................................            867,774
Dividends receivable ...........................................................              4,431
Interest receivable ............................................................              3,169
Prepaid expenses ...............................................................             17,717
---------------------------------------------------------------------------------------------------
TOTAL ASSETS ...................................................................         42,564,364
---------------------------------------------------------------------------------------------------
LIABILITIES
Payable for treasury stock repurchased .........................................             20,454
Advisory fee payable ...........................................................             65,454
Accrued expenses payable .......................................................            151,687
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ..............................................................            237,595
---------------------------------------------------------------------------------------------------
NET ASSETS
   (applicable to 11,138,700 common shares outstanding) ........................      $  42,326,769
---------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
   ($42,326,769/11,138,700) ....................................................      $        3.80
---------------------------------------------------------------------------------------------------
Net assets consist of:
   Capital Stock ...............................................................      $     112,250
   Paid-in capital .............................................................        119,893,558
   Cost of 86,300 shares held in treasury ......................................           (290,370)
   Accumulated net investment loss .............................................           (214,965)
   Accumulated net realized loss on investments ................................        (47,898,322)
   Net unrealized depreciation on investments, foreign currency holdings,
    and other assets and liabilities denominated in foreign currency ...........        (29,275,382)
---------------------------------------------------------------------------------------------------
NET ASSETS .....................................................................      $  42,326,769
---------------------------------------------------------------------------------------------------




                                                                                            For the
                                                                                         Year Ended
STATEMENT OF OPERATIONS                                                               June 30, 2001
---------------------------------------------------------------------------------------------------
                                                                                   
INVESTMENT INCOME
   Dividends (net of taxes withheld $169,871) ..................................      $     576,216
   Interest (net of taxes withheld $10,057) ....................................            249,032
---------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME ........................................................            825,248
---------------------------------------------------------------------------------------------------
EXPENSES
   Investment advisory fee .....................................................            491,289
   Trustee fee .................................................................            150,000
   Administration fee ..........................................................            124,800
   Legal fees ..................................................................            123,221
   Custodian fee ...............................................................             97,180
   Audit fee ...................................................................             54,998
   Directors fees ..............................................................             53,250
   Printing ....................................................................             25,000
   NYSE Listing fee ............................................................             17,356
   Transfer agent fee ..........................................................              6,658
   Insurance ...................................................................              3,017
   Miscellaneous ...............................................................             24,909
---------------------------------------------------------------------------------------------------
TOTAL EXPENSES .................................................................          1,171,678
---------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS ............................................................           (346,430)
---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS, FOREIGN CURRENCY HOLDINGS,
   AND OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES:
   Net realized loss on:
    Security transactions ......................................................        (15,229,320)
    Foreign currency transactions ..............................................           (627,460)
---------------------------------------------------------------------------------------------------
   Net change in unrealized appreciation on:
    Investments ................................................................             19,175
    Foreign currency holdings and other assets and liabilities
     denominated in foreign currency ...........................................              2,665
---------------------------------------------------------------------------------------------------
   Net realized and unrealized losses on investments, foreign currency
    holdings and other assets and liabilities denominated in foreign
    currency ...................................................................        (15,834,940)
---------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ...........................      $ (16,181,370)
---------------------------------------------------------------------------------------------------


                 See Accompanying Notes to Financial Statements


                                       5


THE FIRST PHILIPPINE FUND INC.



                                                                         For the          For the
                                                                      Year Ended       Year Ended
STATEMENT OF CHANGES IN NET ASSETS                                 June 30, 2001    June 30, 2000
-------------------------------------------------------------------------------------------------
                                                                              
INCREASE (DECREASE) IN NET ASSETS
   Operations:
    Net investment loss .........................................   $   (346,430)   $    (691,257)
    Net realized loss on security transactions ..................    (15,229,320)     (17,016,187)
    Net realized loss on foreign currency transactions ..........       (627,460)        (336,082)
    Net change in unrealized appreciation (depreciation)
       on investments, foreign currency holdings and other
       assets and liabilities denominated in foreign currency ...         21,840      (32,414,457)
-------------------------------------------------------------------------------------------------
   Net decrease in net assets resulting from operations .........    (16,181,370)     (50,457,983)
-------------------------------------------------------------------------------------------------
   Capital share transactions:
    Shares repurchased ..........................................        290,370               --
-------------------------------------------------------------------------------------------------
   Total decrease in net assets .................................    (16,471,740)     (50,457,983)
-------------------------------------------------------------------------------------------------
   Net assets:
    Beginning of year ...........................................     58,798,509      109,256,492
-------------------------------------------------------------------------------------------------
    End of year (including accumulated net investment loss of
       ($214,965) and ($96,576), respectively) ..................   $ 42,326,769    $  58,798,509
=================================================================================================


                 See Accompanying Notes to Financial Statements


                                       6


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



                                                                                    For the Year Ended June 30,
                                                                   -------------------------------------------------------------
                                                                      2001         2000         1999         1998         1997
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ............................  $    5.24    $    9.73    $    6.51    $   16.61    $   21.18
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
   Net investment loss ..........................................      (0.03)       (0.06)       (0.07)       (0.06)       (0.21)
   Net realized and unrealized gains (losses) on investments,
    foreign currency holdings and other assets and liabilities
    denominated in foreign currencies ...........................      (1.56)       (4.43)        3.29       (10.04)       (2.86)
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations ..............      (1.59)       (4.49)        3.22       (10.10)       (3.07)
--------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS
   Distributions from net realized long-term gains ..............         --           --           --           --        (1.50)
--------------------------------------------------------------------------------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ...............................         --           --           --           --        (1.50)
--------------------------------------------------------------------------------------------------------------------------------
SHARES REPURCHASED
   Effect of shares repurchased .................................       0.15           --           --           --           --
--------------------------------------------------------------------------------------------------------------------------------
   Increase (decrease) in net asset value .......................      (1.44)          --           --           --           --
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of  period .................................  $    3.80    $    5.24    $    9.73    $    6.51    $   16.61
--------------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD ...........................  $    3.19    $    4.06    $    8.63    $    5.75    $   13.75
--------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN
   Based on market value* .......................................     (21.43)%     (52.90)%      50.00%      (58.18)%     (10.88)%
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ............................  $  42,327    $  58,799    $ 109,256    $  73,068    $ 186,465
Ratios to average net assets:
    Operating expenses ..........................................       2.38%        1.88%        2.07%        1.91%        1.75%
    Net investment loss .........................................      (0.71)%      (0.86)%      (1.02)%      (0.68)%      (1.10)%
Portfolio turnover ..............................................      34.71%       14.37%       16.26%       23.10%       15.32%
--------------------------------------------------------------------------------------------------------------------------------


*    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


                                       7


NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2001

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  investment
management company.  The preparation of financial  statements in accordance with
accounting  principles  generally  accepted  within the United States of America
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 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
          totaling  $54,074  (0.13% of net assets) at June 30,  2001,  for which
          market values are not readily  available or average  trading volume is
          small  relative to the Fund's  holdings,  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
          recorded  on an accrual  basis;  dividend  income is  recorded  on the
          ex-dividend date. The collectibility of income receivable from foreign
          securities is evaluated periodically, and any resulting allowances for
          uncollectible  amounts are reflected currently in the determination of
          investment income. For the year ended June 30, 2001, investment income
          had no adjustment for uncollectible receivables.

     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 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, 2001,  no U.S.  Federal  income or excise tax provision
          was required. Dividends and interest income are subject to withholding
          tax at various  rates and such tax is recorded on the accrual basis at
          the time when the related income is recorded.

          The  Fund  has  a  capital  loss  carry   forward  in  the  amount  of
          $43,464,865, of which $466,990, $7,894,662, $8,691,345 and $26,411,868
          are  available  to reduce  future net capital  gains  distributed  and
          expire in the years ended 2005, 2007, 2008 and 2009, respectively.

          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, 2000  incurred and elected to defer net capital  losses of
          $4,433,457 and foreign currency loss of $214,965 during the year ended
          June 30, 2001.

     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 at the end of
               the period; 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  isolate  the  effect  of  fluctuation  in  foreign
          exchange rated from the effect of fluctuations in the market prices of
          securities held whether realized or unrealized.


                                       8


NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2001 (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  accounting
          principles  generally  accepted  within the United  States of America.
          These  "book/tax"  differences  are  either  considered  temporary  or
          permanent in nature.  To the extend 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,  2001,  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,  2001,  the Fund
          increased   accumulated  net  investment  loss  by  $855,501  with  an
          offsetting decrease to paid-in-capital of $855,501.

     6.   REPURCHASE  AGREEMENTS:  The Fund may enter into repurchase agreements
          with  respect  to  dollar-denominated  debt  securities  of the United
          States issuers.  The Fund's  custodian takes  possession of collateral
          pledge 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 check 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.


                                       9


NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2001 (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,  2001,  the  Investment
Adviser  earned  $491,289  from the Fund,  of which  $26,777  was payable to the
Investment Adviser at June 30, 2001.

     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 .35% of the Fund's average weekly
net  assets.  For the year ended June 30,  2001,  the  Investment  Adviser  paid
$171,951 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 .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,
2001, the Trustee  earned fees of $150,000,  of which $37,397 was payable to the
Trustee at June 30, 2001.

     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 .10% of the Fund's  average
weekly net assets,  subject to a minimum  annual fee of  $124,800,  for the year
ended June 30, 2001, the Administrator earned fees of $124,800, of which $10,257
was payable to the Administrator at June 30, 2001.

     The Fund pays  each of its  Directors  who is not a  director,  officer  or
employee of the Investment  Advisor,  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.  Director
fees  payable  at June 30,  2001 were  $13,750,  which are  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  11,138,700  shares  outstanding at June 30, 2001,
Clemente Capital, Inc. And PNB Investment Limited each owned 5,000 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,
2001,  the Fund  repurchased  86,300  shares or 0.77% of its Common  Stock at an
average  price per share of $3.36 and an  average  discount  of 15.14%  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  accomplishments 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  $18,532,841 and $15,580,224,  respectively,  for the year ended June
30, 2001.


                                       10


NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2001 (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 initial offering to be invested
in the Philippine securities markets, which by its terms 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, 2001, 92.9% 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 - Tender Offer

     At the July 26, 2001 Board  Meeting,  the Board of Directors  authorized an
unlimited  tender offer,  at NAV, in one year's time for up to all of the Fund's
outstanding  shares or to otherwise allow  shareholders to realize NAV for their
shares.  Such action will be taken if, on July 19, 2002, the average discount to
NAV of the Fund's  shares  during the  preceding  twenty  trading days equals or
exceeds 12%.


                                       11


                        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, 2001, 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,  2001  by
correspondence with the custodian, provide a reasonable basis for our opinion.


PricewaterhouseCoopers LLP

Philadelphia, PA
August 1, 2001


                                       12


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, 2001) 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  2000.  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 2002.  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 2001.

SUMMARY OF THE FUND'S DIVIDEND REINVESTMENT PLAN

     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 least 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 New York
Stock Exchange,  the next preceding  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.


                                       13


     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. In the case of shareholders, such as banks, brokers or
nominees,  which hold shares for others who are  certified  from time to time 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.


                                       14


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
Roberto de Ocampo
DIRECTOR
John Anthony B. Espiritu
DIRECTOR
Andres R. Narvasa
DIRECTOR
Joseph A. O'Hare, S.J.
DIRECTOR
Robert B. Oxnam
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.
--------------------------------------------------------------------------------