UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.230.14a-12
THE FIRST PHILIPPINE FUND INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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2
[THE FIRST PHILIPPINE FUND INC. LETTERHEAD]
September 30, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of The First Philippine Fund Inc. (the "Fund") to be held
on Thursday, October 31, 2002 at 9:30 A.M., New York time, at the offices of
Clemente Capital, Inc., 152 West 57th Street, New York, New York 10019.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. During the meeting, we
will also report on the operations of the Fund, and directors and officers will
be present to respond to any questions you may have.
You will be asked to vote on three proposals: (1) election of three
Class III Directors to serve for terms expiring on the date of the Annual
Meeting of Stockholders in 2005; (2) ratification of the selection of
PricewaterhouseCoopers LLP as the Fund's independent public accountants for the
fiscal year ending June 30, 2003; and (3) consideration of a proposal to
liquidate all the assets of the Fund and dissolve the Fund.
The Board of Directors of the Fund is recommending a vote AGAINST
liquidation, as more fully set forth in the Proxy Statement. This proposal and
the reasons the Fund believes the proposal is not in stockholders' best
interests are set forth in the attached Proxy Statement.
In order to be sure your shares are voted at the Annual Meeting if you
cannot attend, please complete, sign and return the enclosed proxy card as soon
as possible.
On behalf of your Board of Directors, thank you for your continued
interest and support. We look forward to seeing you at the Annual Meeting.
Sincerely,
Leopoldo M. Clemente, Jr.
EXECUTIVE VICE PRESIDENT AND
MANAGING DIRECTOR
THE FIRST PHILIPPINE FUND INC.
152 WEST 57TH STREET
NEW YORK, NEW YORK 10019
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 31, 2002
--------------------------
The Annual Meeting of Stockholders of The First Philippine Fund Inc.
(the "Fund"), a Maryland corporation, will be held at the offices of Clemente
Capital, Inc., 152 West 57th Street, New York, New York, on Thursday, October
31, 2002 at 9:30 A.M., New York time, for the following purposes:
1. To elect three Class III Directors to serve for terms expiring on the
date of the Annual Meeting of Stockholders in 2005.
2. To ratify the selection of PricewaterhouseCoopers LLP as the Fund's
independent public accountants for the fiscal year ending June 30, 2003.
3. To consider and act upon a proposal to liquidate all the assets of the
Fund and dissolve the Fund, as set forth in the Plan of Liquidation (the
"Plan") attached as Exhibit A.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed August 21, 2002 as the record date for
the Annual Meeting of Stockholders of the Fund (the "Annual Meeting"). Only
holders of the Fund's common stock at the close of business on such date will be
entitled to notice of, and to vote at, the Annual Meeting or any adjournments
thereof. The stock transfer books will not be closed.
A copy of the Fund's Annual Report for the fiscal year ended June 30,
2002 has been previously sent to stockholders.
By order of the Board of Directors,
Leopoldo M. Clemente, Jr.
Executive Vice President and
Managing Director
Dated: October 1, 2002
IMPORTANT
UNLESS YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED FOR
THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOUR
PROMPT RESPONSE WILL ASSURE A QUORUM AT THE ANNUAL MEETING, THEREBY SAVING YOUR
FUND THE EXPENSE OF FURTHER SOLICITATION OF PROXIES.
THE FIRST PHILIPPINE FUND INC.
152 WEST 57TH STREET
NEW YORK, NEW YORK 10019
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 31, 2002
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GENERAL INFORMATION
GENERAL
The Board of Directors of The First Philippine Fund Inc. (the "Fund")
solicits the proxies of the holders of the Fund's common stock for use at the
Annual Meeting of Stockholders of the Fund (the "Annual Meeting") to be held at
the offices of Clemente Capital, Inc., 152 West 57th Street, New York, New York
10019, on Thursday, October 31, 2002 at 9:30 A.M., New York time, and at any
adjournments thereof. This Proxy Statement and the form of proxy enclosed
herewith were first mailed to stockholders on or about October 1, 2002.
The cost of soliciting the proxies will be borne by the Fund.
Directors, officers and regular employees of the Fund may solicit proxies by
telephone, telegram or personal interview. In addition, the Fund has retained
the services of Georgeson Shareholder Communications Corporation to solicit
proxies from stockholders. The cost of such services is estimated at $10,000
plus out-of-pocket expenses. The Fund will, upon request, bear the reasonable
expenses of brokers, banks and their nominees who are holders of record of the
Fund's shares of common stock on the record date incurred in mailing copies of
the Annual Report, this Notice of Annual Meeting of Stockholders and Proxy
Statement and the enclosed form of proxy to the beneficial owners of the Fund's
shares of common stock.
REVOCABILITY AND VOTING OF PROXY
Any stockholder who executes and delivers a proxy may revoke it by
written communication at any time prior to its use or by voting in person at the
Annual Meeting. If the enclosed proxy is properly executed and returned in time
to be voted at the Annual Meeting, the shares represented thereby will be voted
in accordance with the instructions marked on the proxy. If no instructions are
marked on the proxy, the proxy will be voted FOR the election of the nominees
for Director, FOR the ratification of the selection of PricewaterhouseCoopers
LLP as independent public accountants, and AGAINST approval of the liquidation
and dissolution of the Fund, and in accordance with the judgment of the persons
appointed as proxies upon any other matter which may properly come before the
Annual Meeting.
2
All proxies sent to the Fund to be voted at the Annual Meeting will be
voted if received prior to the Annual Meeting. Votes shall be tabulated by the
Fund's transfer agent, American Stock Transfer & Trust Company. A quorum is
constituted by the presence in person or represented by proxy of the holders of
more than 50% of the outstanding shares of the Fund entitled to vote at the
Annual Meeting. Stockholders should note that while votes to abstain or withhold
authority and broker "non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
count toward establishing a quorum, passage of any proposal being considered at
the Annual Meeting will occur only if a sufficient number of votes are cast for
the proposal. Accordingly, votes to abstain or withhold authority, broker
"non-votes" and votes against a proposal will have the same effect in
determining whether the proposal is approved.
In the event that a sufficient number of votes in favor of any proposal
set forth in the Notice of Annual Meeting of Stockholders are not received prior
to the Annual Meeting, the persons named in the enclosed form of proxy may
propose one or more adjournments of the Annual Meeting to permit further
solicitation of proxies. Any such adjournments will require the affirmative vote
of the holders of a majority of the shares present in person or represented by
proxy at the session of the Annual Meeting to be adjourned. The persons named in
the enclosed form of proxy will vote in favor of such adjournment those proxies
which are required to be voted in favor of the proposal for which further
solicitation of proxies is made. They will vote against any such adjournments
those proxies which are required to be voted against such proposal for which
further solicitation of proxies is made. The costs of any such additional
solicitation and of any adjourned session will be borne by the Fund.
RECORD DATE AND VOTING RIGHTS
Only holders of issued and outstanding shares of the Fund's common
stock of record at the close of business on August 21, 2002 are entitled to
notice of, and to vote at, the Annual Meeting. Each such holder is entitled to
one vote per share of common stock so held on all business of the Annual Meeting
and any adjournments thereof. There is one class of stock. As of the record
date, there were 10,093,400 shares of common stock outstanding.
COPIES OF THE FUND'S ANNUAL REPORT ARE AVAILABLE FREE OF CHARGE TO ANY
STOCKHOLDER. ANNUAL REPORTS MAY BE ORDERED BY WRITING CLEMENTE CAPITAL, INC.,
152 WEST 57TH STREET, NEW YORK, NEW YORK 10019 OR CALLING (800) 937-5449.
3
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The Board of Directors of the Fund (the "Board") is divided into three
classes in accordance with the Fund's Charter and By-Laws. The Board presently
consists of seven members and there is one existing vacancy in Class I. The
class of Directors (Class III) whose term will expire at the Annual Meeting
consists of three current Directors, Lilia C. Clemente, Roberto de Ocampo and
Joseph A. O'Hare, S.J., each of whom are nominated for election for a term of
three years to expire on the date of the Annual Meeting of Stockholders in 2005
and until their successors are duly elected and qualified.
Each of the nominees has consented to serve as a Director of the Fund
if elected. In the event that any of such nominees should become unavailable for
election for any presently unforeseen reason, the proxies which are required to
be voted for such nominee will instead be voted for such person, if any, as
shall be designated by the Board to replace any such nominee.
The information set forth below as to the ages and principal
occupations and other directorships held by these nominees and the other members
of the Board, and the number of shares of common stock of the Fund beneficially
owned by them, directly or indirectly, has been furnished to the Fund by such
Directors or nominees. The Fund is not part of a Fund Complex or Family of
Investment Companies as such terms are defined under the Securities Exchange Act
of 1934 and hence the number of portfolios overseen by each Director is one. No
Director of the Fund oversees any fund affiliated with the Fund, the Fund's
investment adviser, Clemente Capital, Inc. or the Fund's Philippine adviser, PNB
Investments Limited.
NOMINEES FOR THREE YEAR TERMS EXPIRING IN 2005
(CLASS III)
NUMBER AND
PERCENTAGE
(IF OVER 1%)
POSITIONS HELD WITH THE FUND, OF SHARES OF THE FUND
PRINCIPAL OCCUPATION BENEFICIALLY
DURING PAST FIVE YEARS AND DIRECTOR OWNED AS OF
NAME AND ADDRESS AGE OTHER DIRECTORSHIPS HELD SINCE AUGUST 21, 2002(1)
---------------- --- --------------------------- --------- ----------------
*Lilia C. Clemente(2,3) 61 President and Chief Executive October 1989 1,200
152 West 57th Street Officer of the Fund since October
New York, NY 10019 1989; Chairman and Chief Executive
Officer of Clemente Capital, Inc.
since 1986; Director of Clemente
Capital, Inc.
Roberto de Ocampo(3) 56 President, Asian Institute of October 1998 --
6760 SGV Building Management, since September 1999;
Ayala Avenue Chairman, Philand Group of
Makati City, Metro Manila Companies, since June 1999;
Philippines Chairman, Prime East Properties,
Inc., since June 1999; Secretary of
Finance, Republic of the
Philippines, 1993 to January 1998;
Director of ABS-CBN Broadcasting
Corp., Alaska Milk Corp., and PSi
Technologies (a semiconductor
corporation).
Joseph A. O'Hare, S.J. 71 President of Fordham University October 1989 --
Fordham University since July 1984; Chairman, New York
Bronx, NY 10458 City Campaign Finance Board since
1988 (re-appointed in 1994 and 1999).
4
MEMBERS OF THE BOARD CONTINUING IN OFFICE
DIRECTORS WHOSE TERMS EXPIRE IN 2004
(CLASS II)
NUMBER AND
PERCENTAGE
(IF OVER 1%)
POSITIONS HELD WITH THE FUND, OF SHARES OF THE FUND
PRINCIPAL OCCUPATION BENEFICIALLY
DURING PAST FIVE YEARS AND DIRECTOR OWNED AS OF
NAME AND ADDRESS AGE OTHER DIRECTORSHIPS HELD SINCE AUGUST 21, 2002(1)
---------------- --- ------------------ --------- ----------------
*Leopoldo M. Clemente, Jr.(2) 64 Executive Vice President and Managing October 1989 1,200
152 West 57th Street Director of the Fund since October 1989;
New York, NY 10019 President and Chief Investment Officer
of Clemente Capital, Inc. since 1987;
President of Clemente Strategic Value
Fund, Inc. from 1987 to 2001 and
Cornerstone Strategic Return Fund, Inc.
from April 2000 to April 2001; Director
of Clemente Capital, Inc.
John Anthony B. Espiritu 39 Managing Director of SynEx Management July 1998 500
Ritz Tower Advisors, Inc., Manila, Philippines
Makati City, Metro Manila since March 2001; Chairman and President
Philippines of EBECOM Holdings Co., Inc., Makati
City, Metro Manila, Philippines since May
1995; 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.
5
MEMBER OF THE BOARD CONTINUING IN OFFICE
DIRECTOR WHOSE TERM EXPIRES IN 2003
(CLASS I)
NUMBER AND
PERCENTAGE
(IF OVER 1%)
POSITIONS HELD WITH THE FUND, OF SHARES OF THE
PRINCIPAl OCCUPATION FUND BENEFICIALLY
DURING PAST FIVE YEARS AND DIRECTOR OWNED AS OF
NAME AND ADDRESS AGE OTHER DIRECTORSHIPS HELD SINCE AUGUST 21, 2002(1)
---------------- --- ------------------ --------- ----------------
Stephen J. Solarz 62 Member, United States House October 1994 7,000
1120 Bellview Road of Representatives from 1975 to
McLean, VA 22102 1992; President, Solarz Associates
(an international consulting firm)
since 1992; Senior Counselor, Apco
Associates (a public affairs
company) since 1995; Director of
Global Santa Fe (an oil drilling
company) and Samsonite Corp. (a
luggage manufacturer).
All Directors and Officers as a Group (9 persons)................................................. 9,900
-------------------
* Directors considered to be persons who are "interested persons" (as defined in the Investment Company
Act of 1940) of the Fund or of the Fund's investment advisers. Mr. and Mrs. Clemente are deemed to be
interested persons because: (a) of their affiliation with the Fund's investment adviser, Clemente
Capital, Inc., (b) they are officers of the Fund; or (c) both (a) and (b).
(1) Unless otherwise noted, beneficial ownership is determined based on sole voting and investment power.
(2) Lilia C. Clemente and Leopoldo M. Clemente, Jr. are wife and husband. Each disclaims beneficial
ownership of the other's shares.
(3) Lilia C. Clemente and Roberto de Ocampo are first cousins.
EXECUTIVE OFFICERS OF THE FUND
In addition to Mr. and Mrs. Clemente, Santiago S. Cua, Jr., Joaquin G.
Hofilena and Imelda S. Singzon serve as executive officers of the Fund, in the
capacities set forth below, at the pleasure of the Board. The address for Mr.
Hofilena is 152 West 57th Street, New York, NY 10019. The address for Mr. Cua
and Ms. Singzon is PNB Financial Center, President Diosdado Macapagal
Boulevard, Pasay City, Metro Manila, Philippines.
6
PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE POSITIONS HELD WITH THE FUND(1) DURING PAST FIVE YEARS
---------------- --- ----------------------------- ----------------------
Santiago S. Cua, Jr.(2) 49 Executive Vice President and Managing Senior Executive Vice President of Philippine
Director of the Fund since October 1998. National Bank since July 1998; Senior
Executive Vice President, Westmont Bank,
Manila, Philippines from June 1994 to
July 1998.
Joaquin G. Hofilena(2) 35 Vice President and Treasurer of the Fund Portfolio Manager and Investment Analyst
since October 1998. of Clemente Capital, Inc. since April
1996.
Imelda S. Singzon(2) 52 Vice President of the Fund since October Senior Vice President of Philippine
1998. National Bank since August 1994.
-------------------
(1) None of the executive officers, including Mr. and Mrs. Clemente, receives compensation from the Fund for
serving in such capacity.
(2) Except for Mr. and Mrs. Clemente, who own stock as presented above, no officers own shares of the Fund.
The Board held four meetings during the fiscal year ended June 30,
2002. Each Director attended at least 75% of the total number of meetings of the
Board and of the meetings of committees of the Board on which they served.
STANDING COMMITTEES
The Board has appointed an audit committee (the "Audit Committee"),
presently consisting of Messrs. O'Hare, Solarz and Espiritu, which met once
during the fiscal year. All Audit Committee members are considered to be
independent, as that term is defined under the applicable rules of the New York
Stock Exchange. The purpose of the Audit Committee is to advise the full Board
with respect to accounting, auditing and financial matters affecting the Fund.
The Board has approved a written charter for the Audit Committee.
The Board has appointed a nominating committee (the "Nominating
Committee"), presently consisting of Mrs. Clemente*, Mr. Solarz and Father
O'Hare, which did not meet during the fiscal year. The purpose of the Nominating
Committee is to recommend to the Board (i) nominees for election as directors
and (ii) a successor to the Chair when a vacancy occurs. The Nominating
Committee normally will not consider nominees recommended by security holders.
Nomination of Directors who are not "interested persons" is committed to the
discretion of Mr. Solarz and Father O'Hare.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board reviews the Fund's financial reporting
process, its system of internal controls, its audit process and the process for
monitoring compliance with laws and regulations.
The Audit Committee reviewed the Fund's audited financial statements
with the Board and discussed with PricewaterhouseCoopers LLP, the Fund's
--------
* Interested person.
7
independent public accountants during the 2002 fiscal year, the matters required
to be discussed by Statement of Auditing Standards No. 61. The Audit Committee
received from PricewaterhouseCoopers LLP the written disclosures and the letter
required by Independence Standards Board Standard No. 1 and discussed with them
their independence.
After reviewing and discussing the audited financial statements, the
Audit Committee recommended that these audited financial statements be included
in the Fund's Annual Report.
The report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Fund specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under either of these Acts.
Audit Committee,
Joseph A. O'Hare, S.J.
Stephen J. Solarz
John Anthony B. Espiritu
COMPENSATION OF DIRECTORS
Directors who are not affiliated with the Fund's investment adviser,
Clemente Capital, Inc. (the "Adviser") or the Fund's Philippine adviser, PNB
Investments Limited (the "Philippine Adviser") receive an annual stipend of
$8,000 for serving on the Board and its committees, an additional $750 for each
Directors' meeting which they attend in person or an additional $250 per meeting
for attendance by conference call and reimbursement for out-of-pocket expenses
in connection with their attendance at Directors' meetings. The Fund does not
pay any pension or other benefits to its Directors. For the year ended June 30,
2002, Directors' fees totaled $52,000. For the fiscal year ended June 30, 2002,
the following table sets forth compensation received by the Fund's Directors
from the Fund.
AGGREGATE COMPENSATION PAID BY DOLLAR RANGE OF EQUITY SECURITIES OWNED
NAME OF DIRECTOR THE FUND TO DIRECTORS+ IN THE FUND (AS OF JUNE 30, 2002)
---------------- ------------------------------ ---------------------------------------
Benjamin Palma Gil* $ 0 N/A
Lilia C. Clemente 0 $1-$10,000
Leopoldo M. Clemente, Jr. 0 $1-$10,000
Roberto de Ocampo 11,000 None
John Anthony B. Espiritu 11,000 $1-$10,000
Joseph A. O'Hare, S.J. 10,500 None
Stephen J. Solarz 10,500 $10,001-$50,000
Robert B. Oxnam** 9,000 N/A
------------
* Resigned as a Director on August 28, 2002.
** Resigned as a Director on April 24, 2002.
+ Except as disclosed in this table, there is no other compensation paid by the
Fund to Directors.
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The Adviser, which pays the compensation and certain expenses of its
personnel who serve as Directors and as officers of the Fund, receives
an investment advisory fee from the Fund.
The Philippine Adviser, which pays the compensation and certain
expenses of its personnel who serve as Directors and as officers of the Fund,
receives an investment advisory fee from the Adviser.
Philippine National Bank ("PNB"), which acts as trustee of a trust fund
arrangement under which certain of the Fund's assets are held in the
Philippines, and which pays the compensation and certain expenses of its
personnel who serve as Directors and as officers of the Fund, receives a fee
monthly of .15% (on an annualized basis) of the Fund's average weekly net assets
held in the trust, subject to a $150,000 minimum fee per year, for
administration of the trust fund arrangement, including portfolio accounting and
valuation services.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Fund believes that the Directors and executive officers of the Fund
and all beneficial owners of more than ten percent of the Fund's common stock
are in compliance with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, except that Stephen J. Solarz failed to timely
file one report covering one transaction involving a share purchase.
As of August 21, 2002, the following person owned of record or, to the
knowledge of management, beneficially owned more than 5% of the outstanding
shares of the Fund:
Sarasin Fondsleitung AG, Elisabethenstrasse 62, Basel, 4002,
Switzerland owned 1,082,500 shares, or 10.7% of the Fund's outstanding shares.
Except as otherwise disclosed on the Directors' tables, no executive
officers own shares of the Fund.
VOTE REQUIRED
Directors shall be elected by a plurality of the votes cast at the
Annual Meeting. If you indicate "withhold authority" on your proxy card, your
vote will count toward establishing a quorum. Also, broker "non-votes" on this
proposal will count towards establishing a quorum. Accordingly, votes to
withhold authority, broker "non-votes" and votes against a nominee will have the
same effect in determining whether the nominee is elected.
THE BOARD DEEMS THE ELECTION OF THE NOMINEES LISTED ABOVE TO BE IN THE
FUND'S BEST INTEREST AND IN THE BEST INTERESTS OF ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE.
9
PROPOSAL NO. 2: RATIFICATION OF THE SELECTION OF
INDEPENDENT ACCOUNTANTS
At a meeting held on July 25, 2002, the Board, including a majority of
Directors who are not interested persons of the Fund, selected
PricewaterhouseCoopers LLP to act as the Fund's independent public accountants
for the fiscal year ending June 30, 2003. Such selection is being submitted to
the stockholders for ratification. The employment of PricewaterhouseCoopers LLP
is conditioned on the right of the Fund, by majority vote of its stockholders,
to terminate such employment. PricewaterhouseCoopers LLP has acted as the Fund's
independent public accountants from the Fund's inception.
The services to be provided by the Fund's independent public
accountants include auditing the Fund's annual financial statements and
assistance and consultation in connection with Securities and Exchange
Commission and New York Stock Exchange filings.
One or more representatives of PricewaterhouseCoopers LLP are expected
to be present at the Annual Meeting and will have an opportunity to make a
statement if they so desire. Such representatives are expected to be available
to respond to appropriate questions from stockholders.
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of the Fund's annual financial
statements for the year ended June 30, 2002 totaled $47,000.
VOTE REQUIRED
An affirmative vote of a plurality of the votes cast at the Annual
Meeting is required for the ratification of the appointment of
PricewaterhouseCoopers LLP. If you indicate "abstain" on your proxy card your
vote will count toward establishing a quorum. Also, broker "non-votes" on this
proposal will count toward establishing a quorum. Accordingly, votes to abstain,
broker "non-votes" and votes against this proposal will have the same effect in
determining whether this proposal is approved.
THE BOARD DEEMS PROPOSAL NO. 2 TO BE IN THE FUND'S BEST INTEREST AND IN
THE BEST INTERESTS OF ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL
THEREOF.
10
PROPOSAL NO. 3: PROPOSAL TO LIQUIDATE AND DISSOLVE THE FUND
BACKGROUND
The Fund is a non-diversified, closed-end management investment
company, which was incorporated under the laws of the State of Maryland on
September 11, 1989 and is registered under the 1940 Act. Common shares of the
Fund were first offered to the public in November 1989 and have been listed on
the New York Stock Exchange since that time under the symbol "FPF." The Fund
seeks long-term capital appreciation through investment primarily in equity
securities of Philippine incorporated companies which generate at least 50% of
their revenue from operations within the Republic of the Philippines.
The Board is proposing a vote on liquidation of the Fund because in
July 2001 the Board made a commitment to authorize certain actions in one year's
time in the event a discount threshold was met. The Board authorized under
specified circumstances an unlimited tender offer at net asset value ("NAV"), or
alternatively to allow shareholders to vote on liquidation or open-ending of the
Fund. Such actions were authorized if, as of July 19, 2002, the average discount
to NAV of the Fund's shares during the preceding twenty (20) trading days
equaled or exceeded 12%. For such 20-day period the Fund's average discount to
NAV was 12.3%.
In deciding to authorize a vote on liquidation, the Board at its
meeting on July 25, 2002 thoroughly considered the alternatives of an unlimited
tender offer or open-ending. Open-ending was rejected due to the small size of
the Fund, the size and liquidity constraints of the Philippine market, and the
lack of a distribution system to continuously offer shares. The alternative of
conducting an unlimited tender offer was very carefully considered by the Board.
The Board viewed the Fund's small size, the difficulties of liquidating
significant assets in a thinly-traded market on short notice, and the unfairness
to stockholders who do not tender, all as weighing heavily against an unlimited
tender offer. The Board unanimously concluded that conducting an unlimited
tender offer at NAV was not in the best interests of the Fund's shareholders.
Consequently, recognizing its prior commitment, the Board has
authorized a vote by stockholders on the attached Plan of Liquidation (the
"Plan"), which would be implemented promptly in the event of stockholder
approval. The Plan is attached as Exhibit A to this Proxy Statement. If the Plan
is approved by stockholders, the Fund's assets will be sold, creditors will be
paid or reserves for such payments will be established, the net proceeds of such
sales will be distributed to stockholders in cash, pro rata in accordance with
their shareholdings, and the Fund will file Articles of Dissolution with the
State of Maryland. In the event the Plan is not approved, the Fund will continue
to exist as a registered investment company and operate in accordance with its
stated objective and policies and continue considering various alternatives to
address the discount.
THE BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors of The First Philippine Fund Inc., after
thorough consideration, has decided to recommend against the liquidation of the
Fund. The Board has decided to recommend against liquidation because it believes
that it would not be in the stockholders' best long-term interests. In so
11
recommending the Board has cited the following factors: (a) the effectiveness of
the Fund's continuing 20% buyback program, which to date has resulted in the
repurchase of about 10% of the Fund's shares and the narrowing of the Fund's
average discount in the year-to-date to under 12%; (b) the closeness of the
20-day determination to the 12% threshold and the fact that the use of a
weighted average would have led to a different result; (c) the
unrepresentativeness of the trading during one day, and within five minutes of
closing on several other days, of the 20-day period; and (d) the perceived
favorable prospects for the Philippine market and the Fund's share price in the
medium to longer term.
The Fund's most recent Annual Report for its fiscal year ended June 30,
2002 contains audited financial statements and financial highlights detailing
the performance of the Fund. The market price and discount of the Fund's market
price from its NAV for the last two years is set forth in Exhibit B.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS OF THE
FUND VOTE AGAINST APPROVAL OF THE LIQUIDATION PLAN
REQUIRED VOTE
PURSUANT TO THE FUND'S ARTICLES OF INCORPORATION, THE AFFIRMATIVE VOTE
OF THE HOLDERS OF AT LEAST 75% OF THE OUTSTANDING SHARES OF THE FUND ENTITLED TO
VOTE THEREON IS NEEDED TO APPROVE THE LIQUIDATION OF THE FUND. The presence in
person or by proxy of the holders of a majority of the outstanding shares of the
Fund will constitute a quorum. For purposes of the vote on the Plan, abstentions
and broker non-votes will have the same effect as a vote against the Plan, but
will be counted toward the presence of a quorum. In the event that a quorum is
not present, the Annual Meeting may be adjourned. Unless a contrary
specification is made, the accompanying Proxy Card will be voted AGAINST
approval of the Plan.
SUMMARY OF PLAN OF LIQUIDATION
1. Effective Date of the Plan and Cessation of the Business of the
Fund. The Plan will become effective on the date of its adoption and approval by
75% of the shares of the Fund entitled to vote. Following this approval, the
Fund (i) will cease to invest its assets in accordance with its investment
objective and will sell the portfolio securities it owns in order to convert its
assets to cash; (ii) will not engage in any business activities except for the
purposes of winding up the business and affairs of the Fund, preserving the
value of assets of the Fund and distributing its assets to stockholders after
the payment to (or reservation of assets for payment to) all creditors of the
Fund; and (iii) the Fund will terminate in accordance with the laws of the State
of Maryland and the Articles of Incorporation of the Fund. (Plan, Section 2)
2. Closing of Books and Restriction of Transfer and Redemption of
Shares. The proportionate interests of stockholders in the assets of the Fund
shall be fixed on the basis of their respective holdings on the Effective Date
of the Plan. On such date the books of the Fund will be closed. Thereafter,
unless the books of the Fund are reopened because the Plan cannot be carried
into effect under the laws of the State of Maryland or otherwise, the
stockholders' respective interests in the Fund's assets will not be transferable
by the negotiation of share certificates and the Fund's shares will cease to be
traded on the New York Stock Exchange, Inc. ("NYSE") (Plan, Section 3)
12
3. Liquidating Distribution. The distribution of the Fund's assets will
be made in up to two cash payments in complete cancellation of all the
outstanding shares of capital stock of the Fund. The first distribution of the
Fund's assets (the "First Distribution") is expected to consist of cash
representing substantially all the assets of the Fund, less an estimated amount
necessary to discharge any (a) unpaid liabilities and obligations of the Fund on
the Fund's books on the First Distribution date, and (b) liabilities as the
Board of Directors reasonably deem to exist against the assets of the Fund on
the Fund's books. However, there can be no assurance that the Fund will be able
to declare and pay the First Distribution. The amount of the First Distribution,
if it will be declared and paid, currently is uncertain. A second distribution
(the "Second Distribution"), if necessary, is anticipated to be made within 90
days after the First Distribution and will consist of cash from any assets
remaining after the payment of expenses, the proceeds of any sale of assets of
the Fund under the Plan not sold prior to the First Distribution and any other
miscellaneous income of the Fund.
Each stockholder not holding stock certificates will receive
liquidating distributions equal to the stockholder's proportionate interest in
the net assets of the Fund. Each stockholder holding stock certificates of the
Fund will receive a confirmation showing such stockholder's proportionate
interest in the net assets of the Fund with an advice that such stockholder will
be paid in cash upon return of the stock certificate. All stockholders will
receive information concerning the sources of the liquidating distribution.
(Plan, Section 7)
4. Expenses. The Fund will bear all expenses incurred by it in carrying
out the Plan. It is expected that other liabilities of the Fund incurred or
expected to be incurred prior to the date of the liquidating distribution will
be paid by the Fund, or set aside for payment, prior to the mailing of the
liquidating distribution. The liabilities of the Fund relating to the Plan are
estimated at no more than $90,000, which includes legal and auditing expenses
and printing, mailing, soliciting and miscellaneous expenses arising from the
liquidation, which the Fund normally would not incur if it were to continue
doing business. The total liabilities of the Fund prior to the liquidating
distribution are estimated to be $300,000 (including proxy costs). This amount
includes the termination expenses referred to above and amounts accrued, or
anticipated to be accrued, for custodial and transfer agency services, legal,
audit and directors fees and printing costs.
(Plan, Section 8)
5. Continued Operation of the Fund. After the date of mailing of the
liquidating distribution, the outstanding shares of the Fund will be cancelled
and the termination of the Fund will be effected. The Plan provides that the
Board and shall have the authority to authorize such variations from or
amendments of the provisions of the Plan as may be necessary or appropriate to
marshal the assets of the Fund and to effect the complete liquidation and
termination of the existence of the Fund and the purposes to be accomplished by
the Plan. (Plan, Sections 7 and 10)
LIQUIDATION DISTRIBUTIONS
Prior to completion of the liquidation, the Fund will send to its
stockholders of record (stockholders with stock certificates) a letter of
transmittal for the purpose of exchanging each stockholder's Fund shares for
liquidation distributions. Stockholders whose shares are held in the name of
13
their broker or other financial institution will receive their distributions
through their nominee firms. No amount will be distributed by the Fund to a
stockholder of record unless and until such stockholder delivers to the Fund a
signed letter of transmittal and the certificates representing the stockholder's
Fund shares or, in the event a share certificate has been lost, a lost
certificate affidavit and such surety bonds and other documents and instruments
as are reasonably required by the Fund, together with appropriate forms of
assignment, endorsed in blank and with any and all signatures thereon guaranteed
by a financial institution reasonably acceptable to the Fund.
If the Plan is adopted, the Fund anticipates that its shares will stop
trading on the NYSE shortly before the Fund's final liquidation distribution.
Prior to that time, the right of a stockholder to sell his or her Fund shares on
the Exchange will not be impaired. The Fund expects that on or about the date of
its final liquidation distribution, the listing of the Fund's shares on the
Exchange will terminate.
GENERAL INCOME TAX CONSEQUENCES
The following is only a general summary of the United States federal
income tax consequences of the Plan and is limited in scope. This summary is
based on the federal tax laws and regulations in effect on the date of this
Proxy Statement, all of which are subject to change by legislative or
administrative action, possibly with retroactive effect. While this summary
discusses the effect of certain federal income tax provisions on the Fund
resulting from its liquidation and dissolution, the Fund has not sought a ruling
from the Internal Revenue Service (the "IRS") with respect to the liquidation
and dissolution of the Fund. The statements below are, therefore, not binding
upon the IRS, and there can be no assurance that the IRS will concur with this
summary or that the tax consequences to any stockholder upon receipt of a
liquidating distribution will be as set forth below.
The payment of liquidation distributions will be a taxable event to
stockholders. Each stockholder will be viewed as having sold his or her Fund
shares for an amount equal to the liquidation distribution he or she receives.
Each stockholder will recognize gain or loss in an amount equal to the
difference between (a) the stockholder's adjusted basis in the Fund shares, and
(b) such liquidation distribution. The gain or loss will be capital gain or loss
to the stockholder if the Fund shares were capital assets in the stockholder's
hands and generally will be long-term if the Fund shares were held for more than
one year before the liquidation distribution is received. The Fund anticipates
that it will retain its qualification as a regulated investment company under
the Internal Revenue Code of 1986, as amended, during the liquidation period
and, therefore, will not be taxed on any of its net income from the sale of its
assets.
The foregoing summary is generally limited to the material federal
income tax consequences to stockholders who are individual United States
citizens and who hold shares as capital assets. It does not address the federal
income tax consequences to stockholders who are corporations, trusts, estates,
tax-exempt organizations or non-resident aliens. This summary also does not
address state or local tax consequences. Because the income tax consequences for
a particular stockholder may vary depending on individual circumstances, each
stockholder is urged to consult his or her own tax adviser concerning the
federal, state and local tax consequences of receipt of a liquidation
distribution.
14
IMPACT OF THE PLAN ON THE FUND'S STATUS UNDER THE 1940 ACT
On the Effective Date, the Fund will cease doing business as a
registered investment company and, as soon as practicable, will apply for
deregistration under the 1940 Act. It is expected that the Securities and
Exchange Commission (the "Commission") will issue an order approving the
deregistration of the Fund if the Fund is no longer doing business as an
investment company. Accordingly, the Plan provides for the eventual cessation of
the Fund's activities as an investment company and its deregistration under the
1940 Act, and a vote in favor of the Plan will constitute a vote in favor of
such a course of action. (Plan, Section 11)
The Fund will prepare and file, in a timely manner, any and all
required income tax returns and other documents and instruments. The Fund will
file any and all other reports, documents and instruments necessary to terminate
the regulation of the Fund and its business and affairs by the Commission. Until
the Fund's withdrawal as an investment company becomes effective, the Fund, as a
registered investment company, will continue to be subject to and will comply
with the 1940 Act.
PROCEDURE FOR DISSOLUTION UNDER MARYLAND LAW
After the Effective Date, pursuant to the Fund's Articles of
Incorporation, if at least 75% of the Fund's aggregate outstanding shares of
capital stock are voted for the Plan, the Fund will file Articles of Dissolution
with the Maryland State Department of Assessments and Taxation, and will become
effective in accordance with such law. Upon the Effective Date of such Articles
of Dissolution, the Fund will be legally dissolved and will cease to exist, and
no stockholder will have any interest whatsoever in the Fund. The Fund will
cease to carry on its business and will proceed to sell its assets for cash for
the purpose of paying, satisfying, and discharging any existing debts or
obligations, collecting and distributing its assets, and doing all other acts
required to liquidate and wind up its business and affairs. The Fund will then
distribute in one or more payments the remaining assets among the stockholders,
with each stockholder receiving his or her proportionate share of each
liquidation distribution in cash.
APPRAISAL RIGHTS
Stockholders will not be entitled to appraisal rights under Maryland
law in connection with the Plan. (Plan, Section 14)
15
INVESTMENT ADVISER AND ADMINISTRATOR
THE INVESTMENT ADVISER
The Adviser, a New York corporation, has its principal office at 152
West 57th Street, New York, New York 10019. Lilia C. Clemente, President, Chief
Executive Officer and a Director of the Fund, is Chairman, Chief Executive
Officer and a Director of the Adviser. Leopoldo M. Clemente, Jr., an Executive
Vice President and Managing Director of the Fund, is President, Chief Investment
Officer and a Director of the Adviser. In addition to Mr. and Mrs. Clemente, the
Adviser's Directors are Salvador Diaz-Verson, Jr., President of Diaz-Verson
Capital Investments, Inc., an investment advisory firm located in Columbus,
Georgia and Robert J. Christian, Chief Investment Officer of Wilmington Trust
Company, a bank and trust company. Mrs. Clemente owns approximately 60% of the
outstanding common stock of the Adviser and Wilmington Trust Company, 1100 North
Market Street, Wilmington, Delaware 19890, owns 24% of the outstanding common
stock. The address for Mr. and Mrs. Clemente is 152 West 57th Street, New York,
New York 10019. The address for Mr. Diaz-Verson is 1200 Brookstone Centre
Parkway, Suite 105, Columbus, Georgia 31904. The address for Mr. Christian is
1100 North Market Street, Wilmington, Delaware 19890.
THE PHILIPPINE ADVISER
The Philippine Adviser was organized in November 1988 under the laws of
Hong Kong and has its principal offices at 110-116 Queen's Road, Central Hong
Kong. The Philippine Adviser is a wholly-owned subsidiary of PNB International
Finance Limited, which is a wholly-owned subsidiary of PNB. PNB, the fifth
largest bank in the Philippines, is 44.98% owned by the Philippine Government,
through shareholdings of the Republic of the Philippines and the Philippine
Deposit Insurance Corporation (PDIC); 44.98% by various companies and
individuals which are represented by Mr. Lucio C. Tan, and 10.04% held by the
public. Under the Articles of Incorporation of PNB, an eleven member,
stockholder elected board of directors directs the affairs and business of PNB,
manages and preserves its properties and assets and exercises its corporate
powers. PNB serves as trustee of certain of the Fund's Philippine securities
pursuant to a Trust Agreement between PNB and the Fund dated November 7, 1989.
The Philippine Adviser's Directors as of August 16, 2002 are Cielo M. Salgado
(Chairman), Feliciano L. Miranda, Jr., Alejandro R. Roces, Rosalinda U.
Casiguran, Domingo T. Chua and Florencia G. Tarriela. The address of all of the
Directors is: PNB Financial Center, President Diosdado Macapagal Boulevard,
Pasay City, Metro Manila, Philippines.
THE ADMINISTRATOR
PFPC Inc., the Fund's administrator, has its principal office at 103
Bellevue Parkway, Wilmington, Delaware 19809.
MISCELLANEOUS
As of the date of this Proxy Statement, management does not know of any
other matters that will come before the Annual Meeting. In the event that any
other matter properly comes before the Annual Meeting, the persons named in the
enclosed form of proxy intend to vote all proxies in accordance with their best
judgment on such matters.
16
2003 ANNUAL MEETING
Stockholder proposals meeting tests contained in the proxy rules
adopted by the Securities and Exchange Commission may, under certain conditions,
be included in the Fund's proxy material for an annual meeting of stockholders.
Pursuant to these rules, proposals of stockholders intended to be presented at
the Fund's Annual Meeting of Stockholders in 2003 must be received by the Fund
on or before May 1, 2003 to be considered for inclusion in the Fund's proxy
materials relating to that Annual Meeting. Receipt by the Fund of a stockholder
proposal in a timely manner does not insure the inclusion of such proposal in
the Fund's proxy material.
By Order of the Board of Directors,
Leopoldo M. Clemente, Jr.
Executive Vice President and
Managing Director
Dated: October 1, 2002
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD NOW
17
EXHIBIT A
THE FIRST PHILIPPINE FUND INC. PROPOSED PLAN OF LIQUIDATION
This Plan of Liquidation ("Plan") concerns The First Philippine Fund
Inc. (the "Fund"), which is a corporation organized and existing under the laws
of the State of Maryland. The Fund began operations on September 11, 1989. The
Fund is registered as a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Act"). The Plan is
intended to accomplish the complete liquidation and termination of the Fund in
conformity with all provisions of Maryland law and the Fund's Articles of
Incorporation.
WHEREAS, the Fund's Board of Directors, on behalf of the Fund, has
determined that the stockholders should vote on whether to liquidate and
terminate the Fund; and
WHEREAS, the Board of Directors proposed this Plan as the method of
liquidating and terminating the Fund and directed that this Plan be submitted to
stockholders of the Fund for their consideration;
NOW THEREFORE, the liquidation and termination of the Fund shall be
carried out in the manner hereinafter set forth:
1. Effective Date of Plan. The Plan shall be and become effective only
upon the adoption and approval of the Plan, at the Annual Meeting of
stockholders, by the affirmative vote of the holders of 75% of the outstanding
shares of the Fund entitled to vote. The date of such adoption and approval by
stockholders is hereinafter called the "Effective Date."
2. Cessation of Business. After the Effective Date of the Plan, the
Fund shall cease its business as an investment company and shall not engage in
any business activities except for the purpose of paying, satisfying and
discharging any existing debts and obligations, collecting and distributing its
assets, and doing all other acts required to liquidate and wind up its business
and affairs and will dissolve in accordance with the Plan.
3. Restriction of Transfer and Redemption of Shares. The proportionate
interests of stockholders in the assets of the Fund shall be fixed on the basis
of their respective shareholdings at the close of business on the Effective
Date. On the Effective Date, the books of the Fund shall be closed. Thereafter,
unless the books are reopened because the Plan cannot be carried into effect
under the laws of the State of Maryland or otherwise, the stockholders'
respective interests in the Fund's assets shall not be transferable by the
negotiation of stock certificates and the Fund's shares will cease to be traded
on the New York Stock Exchange, Inc.
4. Notice of Liquidation. As soon as practicable after the Effective
date, the Fund shall mail notice to the appropriate parties that this Plan has
been approved by the Board of Directors and the stockholders and that the Fund
will be liquidating its assets, to the extent such notice is required under the
Maryland General Corporation Law (the "MGCL"). Specifically, upon approval of
the Plan, the Fund shall mail notice to its known creditors at their addresses
as shown on the Fund's records.
18
5. Liquidation of Assets. As soon as is reasonable and practicable
after the Effective Date, all portfolio securities of the Fund not already
converted to U.S. cash or U.S. cash equivalents shall be converted to U.S. cash
or U.S. cash equivalents.
6. Payment of Debts. As soon as practicable after the Effective Date,
the Fund shall determine and pay, or set aside in U.S. cash or U.S. cash
equivalents, the amount of all known or reasonably ascertainable liabilities of
the Fund incurred or expected to be incurred prior to the date of liquidating
distribution provided for in Section 7, below.
7. Liquidating Distributions. In accordance with Section 331 of the
Internal Revenue Code of 1986, as amended, the Fund's assets are expected to be
distributed by up to two cash payments in complete cancellation of all the
outstanding shares of capital stock of the Fund. The first distribution of the
Fund's assets (the "First Distribution") is expected to consist of cash
representing substantially all the assets of the Fund, less an estimated amount
necessary to (a) discharge any unpaid liabilities and obligations of the Fund on
the Fund's books on the First Distribution date, and (b) liabilities as the
Board of Directors shall reasonably deem to exist against the assets of the Fund
on the Fund's books. A second distribution (the "Second Distribution"), if
necessary, is anticipated to be made within 90 days after the First Distribution
and will consist of cash from any assets remaining after payment of expenses,
the proceeds of any sale of assets of the Fund under the Plan not sold prior to
the First Distribution and any other miscellaneous income to the Fund.
Each stockholder not holding stock certificates of the Fund will
receive liquidating distributions equal to the stockholder's proportionate
interest in the net assets of the Fund. Each stockholder holding stock
certificates of the Fund will receive a confirmation showing such stockholder's
proportionate interest in the net assets of the Fund with an advice that such
stockholder will be paid in cash upon return of the stock certificate. All
stockholders will receive information concerning the sources of the liquidating
distribution.
8. Expenses of the Liquidation and Dissolution. The Fund shall bear all
of the expenses incurred by it in carrying out this Plan including, but not
limited to, all printing, legal, accounting, custodian and transfer agency fees,
and the expenses of any reports to or meeting of stockholders whether or not the
liquidation contemplated by this Plan is effected.
9. Power of Board of Directors. The Board of Directors and, subject to
the direction of the Board of Directors, the Fund's officers shall have
authority to do or authorize any or all acts and things as provided for in the
Plan and any and all such further acts and things as they may consider necessary
or desirable to carry out the purposes of the Plan, including, without
limitation, the execution and filing of all certificates, documents, information
returns, tax returns, forms and other papers which may be necessary or
appropriate to implement the Plan or which may be required by the provisions of
the 1940 Act or any other applicable laws.
The death, resignation or other disability of any director or any
officer of the Fund shall not impair the authority of the surviving or remaining
directors or officers to exercise any of the powers provided for in the Plan.
19
10. Amendment of Plan. The Board of Directors shall have the authority
to authorize such variations from or amendments of the provisions of the Plan as
may be necessary or appropriate to effect the marshalling of Fund assets and the
dissolution, complete liquidation and termination of the existence of the Fund,
and the distribution of its net assets to stockholders in accordance with the
laws of the State of Maryland and the purposes to be accomplished by the Plan.
11. De-Registration Under the 1940 Act. As soon as practicable after
the liquidation and distribution of the Fund's assets, the Fund shall prepare
and file a Form N-8F with the Securities and Exchange Commission in order to
de-register the Fund under the 1940 Act. The Fund shall also file, if required,
a final Form N-SAR (a semi-annual report) with the Securities and Exchange
Commission.
12. Articles of Dissolution. Consistent with the provisions of the
Plan, the Fund shall be liquidated and terminated in accordance with the laws of
the State of Maryland and the Fund's Articles of Incorporation. As soon as
practicable after the Effective Date and pursuant to the MGCL, the Fund shall
prepare and file Articles of Dissolution with and for acceptance by the Maryland
State Department of Assessments and Taxation.
The Fund's Board of Directors shall be the trustees of its assets for
purposes of liquidation after the acceptance of the Articles of Dissolution,
unless and until a court appoints a receiver. The Director-trustees will be
vested in their capacity as trustees with full title to all the assets of the
Fund. The Director-trustees shall collect and distribute any remaining assets,
applying them to the payment, satisfaction and discharge of existing debts and
obligations of the Fund, including necessary expenses of liquidation, and
distribute the remaining assets among the stockholders. The Director-trustees
may also (a) carry out the contracts of the Fund, (b) sell all or any part of
the assets of the Fund at public or private sale, (c) sue or be sued in their
own names as trustees or in the name of the Fund and (d) do all other acts
consistent with law and the Articles of Incorporation of the Fund necessary or
proper to liquidate the Fund and wind up its affairs.
13. Power of the Directors. Implementation of this Plan shall be under
the direction of the Board of Directors, who shall have full authority to carry
out the provisions of this Plan or such other actions as they deem appropriate
without further stockholder action.
14. Appraisal Rights. Stockholders will not be entitled to appraisal
rights under Maryland law and in connection with the Plan.
20
EXHIBIT B
The shares of the Fund currently trade on the New York Stock Exchange.
The following table shows the history of public trading of the Fund's shares, by
quarter, for the last two fiscal years, as reported on the New York Stock
Exchange.
PERCENTAGE DISCOUNT OF
NET ASSET VALUE (NAV) MARKET PRICE MARKET PRICE FROM NAV
--------------------- ------------ --------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
------------- ---- --- ---- --- ---- ---
09/30/00 $5.19 $4.56 $4.06 $3.38 -26.02% -19.40%
12/31/00 4.45 3.83 3.75 3.00 -26.20% -4.58%
03/31/01 4.87 4.06 3.94 3.20 -24.12% -4.66%
06/30/01 4.07 3.76 3.50 3.08 -21.45% -14.00%
09/30/01 3.72 3.07 3.15 2.60 -18.18% -12.01%
12/31/01 3.08 2.73 2.67 2.28 -16.56% -10.39%
03/31/02 3.77 3.13 3.44 2.74 -13.67% -8.75%
06/30/02 3.79 3.19 3.48 2.78 -13.13% -6.95%
--------------------------------------------------------------------------------------------------------------------
On September 27, 2002, the high, low and closing prices of the shares
of the Fund quoted on the New York Stock Exchange were $____, $____ and $____,
respectively. The closing price on such date was at a discount of ____% from the
net asset value of $____ per share.
21
THE FIRST PHILIPPINE FUND INC.
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 31, 2002
The undersigned hereby appoint Leopoldo M. Clemente, Jr. and John
Espiritu, and each of them, the proxies of the undersigned, with power of
substitution to each of them to vote all shares of The First Philippine Fund
Inc. which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of The First Philippine Fund Inc. to be held at the offices of
Clemente Capital, Inc., 152 West 57th Street, New York, New York 10019 on
Thursday, October 31, 2002 at 9:30 A.M., New York time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SPACES PROVIDED, THE UNDERSIGNED'S
VOTE WILL BE CAST FOR ITEMS (1) AND (2) AND AGAINST ITEM (3).
(CONTINUED, AND TO BE SIGNED AND DATED, ON THE REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
THE FIRST PHILIPPINE FUND INC.
OCTOBER 31, 2002
_Please Detach and Mail in the Envelope Provided_
[ ] Please mark your votes as in this example.
1. THE ELECTION FOR all nominees WITHHOLD AUTHORITY (to vote
OF DIRECTORS: listed at right (except for all nominees listed at right)
as marked to the
contrary below)
[ ] [ ] NOMINEES:
Lilia C. Clemente
Roberto de Ocampo
Joseph A. O'Hare, S.J.
(INSTRUCTION: To withhold authority to vote for
any individual nominee, write that nominee's name
on the space provided below).
--------------------------------
2. Ratification of selection of PricewaterhouseCoopers LLP as independent accountants:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Consideration of Plan of Liquidation:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion on any other business which may properly come before the meeting or
any adjournments thereof:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please sign exactly as your name or names appear
above. When signing as attorney, executor,
administrator, trustee or guardian, please give
your full title as such.
--------------------------------------
(Signature of Stockholder)
--------------------------------------
(Signature of Joint Owner, if any)
Date _________________, 2002
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.