-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WfL6Lu0I1f0040TiRmTWsKNYtvj6tt+gzUnzehSXKLF+Sk8XLvDhFA1JCEM/kwEH gKVOkA5lJenrQs0X97AYIg== 0000898733-99-001040.txt : 19991210 0000898733-99-001040.hdr.sgml : 19991210 ACCESSION NUMBER: 0000898733-99-001040 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL FUND INC CENTRAL INDEX KEY: 0000790202 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133341573 STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04605 FILM NUMBER: 99771184 BUSINESS ADDRESS: STREET 1: GATEWAY ENTER THREE 100 MULBERRY ST CITY: NEWARK STATE: NJ ZIP: 07102-4077 BUSINESS PHONE: 2013677530 MAIL ADDRESS: STREET 1: GATEWAY CENTER THREE 100 MULBERRY STREET CITY: NEWARK STATE: NJ ZIP: 07102-4077 FORMER COMPANY: FORMER CONFORMED NAME: FIRST SAVINGS & BANKING INSTITUTIONS FUND INC DATE OF NAME CHANGE: 19860402 N-30D 1 FIRST FINANCIAL FUND, INC. First Financial Fund, Inc. SEMI- ANNUAL REPORT September 30, 1999 Letter To Shareholders November 3, 1999 Dear Fellow Shareholder: For the six months ended September 30, 1999, the Fund returned +3.3% and managed to outperform the S&P 500 index and other relevant indexes (see chart below). Market concerns over higher interest rates and deteriorating credit, however, quickly drove financial stocks lower during the second half of this period. In spite of this, the actual financial results of companies in the Fund generally met or exceeded our expectations. Earnings grew smartly, credit quality continued strong and interest margins came in a smidge higher than we projected. Most of the Fund's companies confirmed their attractive valuations with net insider buying or corporate repurchases. Investment Objective The Fund seeks long-term capital appreciation and, as a secondary objective, current income by investing in a portfolio of securities issued by small to mid-sized savings, banking and mortgage institutions. Notwithstanding solid operating performances by the Fund's companies during the entire period, solid gains recorded by the Fund during the first three months of this period were partially offset during the second half. Investors continue to drain money out of the financial services sector and plough funds into large cap growth and technology Funds. The "tyranny" of negative fund flows makes positive stock performance in the financial services sector difficult to come by, but superior execution will bring back investors eventually. TOTAL RETURN For The Period Ended September 30, 1999
6 Mos. 1 Year 3 Years 5 Years First Financial Fund's NAV1 3.3% -8.9% 3.2% 14.1% S&P 500 Index 0.4 27.8 25.1 25.0 NASDAQ Composite2 11.6 62.1 30.8 29.1 NASDAQ Banks2 -3.8 -2.8 13.6 16.9 SNL All Daily Thrift2 -13.9 -6.5 12.4 16.8 SNL MBS REITS2 -17.4 -36.6 -8.8 9.3 SNL Mortgage Banks2 -19.5 -25.1 -18.2 6.9
1Source: Prudential Investments Fund Management. The Fund total return represents the change in net asset value from the beginning of the period noted through September 30, 1999 and assumes the reinvestment of dividends and distributions. Past performance is no guarantee of future results. 2Principal only. Note: Returns for periods greater than one year are annualized. We foresee several potential near-term catalysts to better stock performance. Those catalysts would include a plateauing of interest rates, a spurt of cross industry mergers or, more simply, investor rotation out of large cap growth stocks. Such a revival could gain momentum next year as it becomes clearer that the U.S. financial system will not only survive Y2K, but also continue to export its technological and operational prowess to the rest of the world. 1 More than ever, a disciplined credit culture, intelligent investment in technology, and a firm wide culture of accountability will differentiate winners and losers in financial services. The gap between the "haves" and "have nots" will grow wider and expand faster than most predict. With the repeal of Glass-Steagall now likely, boundaries between banks, insurers, brokers et. al., will become less and less distinct. All of which is positive for the well managed, attractively priced financial service firms which the First Financial Fund represents. Stay the course. Sincerely, Nicholas C. Adams Portfolio Manager Senior Vice President Wellington Management Company, LLP 2 Portfolio of Investments as of September 30, 1999 (Unaudited) FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------
Shares Description Value (Note 1) - ------------------------------------------------------------ LONG-TERM INVESTMENTS--114.6% COMMON STOCKS--114.6% - ------------------------------------------------------------ Banks & Thrifts--82.0% 11,700 Abington Bancorp, Inc. $ 141,131 34,600 Algiers Bancorp, Inc. 315,725 120,400 Bay State Bancorp, Inc. 2,347,800 125,000 Big Foot Financial Corp. 1,640,625 195,862 Bostonfed Bancorp, Inc. 2,937,930 89,640 Broadway Financial Corp., Delaware 616,275 100,000 Brookline Bancorp, Inc. 1,018,750 144,500 Cameron Financial Corp. 1,860,437 159,900 Capital Crossing Bank* 2,318,550 347,000 Capitol Federal Financial 3,459,156 234,000 Catskill Financial Corp. 3,524,625 91,000 CBES Bancorp, Inc. 1,387,750 142,538 CCF Holding Co. 2,512,232 51,450 Charter One Financial, Inc.* 1,189,781 118,000 Commercial Bank New York 1,386,500 60,000 Community Bank San Jose California 1,575,000 155,500 Community Financial Corp. 1,380,063 74,600 CSB Financial Group, Inc.* 764,650 196,000 Downey Financial Corp. 3,944,500 1,200,000 East West Bancorp, Inc. 14,250,000 50,000 Eldorado Bancshares, Inc. 428,125 202,900 Fidelity Federal Bancorp 557,975 109,200 First Commerce Bancshares, Inc. 2,270,175 24,000 First Financial Corp. 312,000 385,000 First Place Financial Corp., Delaware 4,379,375 258,700 FirstFed America Bancorp, Inc. 3,298,425 252,000 FirstFed Bancorp, Inc. 2,016,000 77,800 Hallmark Capital Corp.* 797,450 16,666 HFB Financial Corp. 229,158 85,200 Highland Bancorp, Inc.* 1,592,175 303,900 Hudson City Bancorp, Inc. 4,178,625 186,400 Hudson United Bancorp* 5,743,450 9,375 Independent Bankshares, Inc. 101,953 45,000 Innes Street Financial Corp. 551,250 327,400 ITLA Capital Corp.* 4,829,150 236,323 Jeffbanks, Inc. 6,823,827 56,100 Lincoln Bancorp Indiana 666,188 208,000 Metrocorp Bancshares, Inc. 1,872,000 147,200 Mystic Financial, Inc. 1,564,000 260,000 Niagara Bancorp, Inc. $ 2,713,750 301,000 Northeast Pennsylvania Financial Corp. 3,122,875 182,000 Pacific Century Financial Corp.* 3,719,625 221,200 PBOC Holdings, Inc. 1,797,250 286,000 People's Bank 6,756,750 34,600 Peoples Financial Corp. 326,538 169,230 Perpetual Federal Savings Bank 3,257,677 85,000 PrivateBankcorp, Inc.* 1,508,750 324,602 Progress Financial Corp. 4,260,401 357,000 Provident Financial Holdings, Inc.* 6,202,875 64,650 Redwood Financial, Inc.* 646,500 45,000 River Valley Bancorp 585,000 47,800 Rowan Bancorp, Inc.* 1,027,700 86,500 Seacoast Financial Services Corp. 865,000 98,700 Security Pennsylvania Financial Corp. 999,338 140,000 Southwest Bancorp, Inc., Oklahoma* 3,045,000 140,300 St Paul Bancorp, Inc. 3,209,362 32,500 ST Landry Financial Corp. 375,781 100,000 Team Financial, Inc. 1,012,500 110,600 Thistle Group Holdings Co.* 788,025 7,276 Tri-County Bancorp, Inc. 63,665 67,000 Triangle Bancorp, Inc.* 1,239,500 712,400 Troy Financial Corp.* 7,702,825 496,000 UCBH Holdings, Inc. 9,052,000 372,500 Unionbancal Corp. 13,503,125 700 Warwick Community Bancorp 7,525 140,000 Western Bancorp* 5,407,500 382,150 Woronoco Bancorp, Inc.* 3,869,269 344,000 WSFS Financial Corp. 4,859,000 160,800 Yardville National Bancorp 1,839,150 ------------ 184,547,037 ------------ - ------------------------------------------------------------ Other Financial Intermediaries--32.2% 300,000 American Cap Strategies Ltd.* 5,550,000 511,800 Anthracite Capital, Inc. 3,518,625 248,200 Central Financial Acceptance Corp.* 1,613,300 375,700 Dynex Capital Inc.* 2,535,975 227,875 First Mortgage Corp.* 897,258
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of September 30, 1999 (Unaudited) FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------
Shares Description Value (Note 1) - ------------------------------------------------------------ Other Financial Intermediaries (cont'd.) 300,000 Fortress Investment Corp. $ 5,062,500 312,500 Healthcare Financial Partners, Inc., 6,250,000 398,400 Imperial Credit Industries, Inc.* 1,743,000 128,016 Inco Homes Corp.* 8,001 448,300 LASER Mortgage Management, Inc.* 1,765,181 804,400 LNR Property Corp. 16,389,650 54,400 Miix Group Inc.* 921,400 974,600 Ocwen Asset Investment Corp. 4,202,962 825,100 Ocwen Financial Corp.* 5,517,856 330,000 Prime Capital Corp., Inc.* 536,250 336,300 RB Asset, Inc.* 1,471,313 910,000 Resource America, Inc. 6,768,125 545,300 Sundance Homes, Inc.* 141,778 807,600 Ugly Duckling Corp.* 5,754,150 185,800 Virginia Capital Bancshares, Inc. 2,763,775 ------------ 73,411,099 ------------ Total common stocks (cost $300,773,814) 257,958,136 ------------ - ------------------------------------------------------------ Warrants* Warrant 1 Golden State Bancorp, Inc., expiring January '01 1 125,000 Healthcare Financial Partners, Inc. expiring December '01 7,813 ------------ Total warrants* (cost $0) 7,814 ------------ Total long-term investments (cost $300,773,814) 257,965,950 ------------ Principal Amount (000) Description Value (Note 1) - ------------------------------------------------------------ SHORT-TERM INVESTMENTS--7.0% - ------------------------------------------------------------ Repurchase Agreement--7.0% $15,764 Paribas Corp., 5.29%, dated 9/30/99, due 10/1/99 in the amount of $15,764,000 (cost $15,764,000; collateralized by $16,323,000 U.S. Treasury Bonds, 6.25%, due 8/15/23, value of collateral including interest $16,159,770) $ 15,764,000 ------------ - ------------------------------------------------------------ Certificates Of Deposit 21 Nauatuck Valley Saving & Loan Assoc., 3.00%, 10/13/99 20,567 21 First Fed Monesson 4.00%, 10/25/99 20,662 1 Brookline Savings 4.35%, 11/26/99 1,391 ------------ 42,620 ------------ Total short-term investments (cost $15,806,620) 15,806,620 ------------ - ------------------------------------------------------------ Total Investments--121.6% (cost $316,580,434; Note 3) 273,772,570 Liabilities in excess of other assets--(21.6%) (48,543,399) ------------ Net Assets--100% $225,229,171 ------------ ------------
- --------------- * Non-income-producing security. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Statement of Assets and Liabilities (Unaudited) FIRST FINANCIAL FUND, INC. - --------------------------------------------------------------------------------
Assets September 30, 1999 Investments, at value (cost $316,580,434)............................................................... $273,772,570 Cash.................................................................................................... 2,898 Dividends and interest receivable....................................................................... 1,045,452 Receivable for investments sold......................................................................... 275,922 Other assets............................................................................................ 113,134 ------------------ Total assets......................................................................................... 275,209,976 ------------------ Liabilities Loan payable (Note 4)................................................................................... 45,000,000 Payable for investments purchased....................................................................... 4,031,852 Loan interest payable (Note 4).......................................................................... 432,051 Advisory fee payable.................................................................................... 392,856 Administration fee payable.............................................................................. 90,536 Deferred directors' fees................................................................................ 21,745 Accrued expenses........................................................................................ 11,765 ------------------ Total liabilities.................................................................................... 49,980,805 ------------------ Net Assets.............................................................................................. $225,229,171 ------------------ ------------------ Net assets were comprised of: Common stock, at par; 24,628,781 shares issued....................................................... $ 24,629 Paid-in capital in excess of par..................................................................... 270,841,378 Cost of 436,200 shares held in Treasury.............................................................. 3,617,561 ------------------ 274,483,568 Undistributed net investment income.................................................................. 2,253,662 Accumulated net realized losses...................................................................... (8,700,195) Net unrealized depreciation of investments........................................................... (42,807,864) ------------------ Net assets, September 30, 1999....................................................................... $225,229,171 ------------------ ------------------ Net asset value per share ($225,229,171 /24,628,781 shares of common stock outstanding)................. $9.14 ------------------ ------------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 FIRST FINANCIAL FUND, INC. Statement of Operations (Unaudited) - ------------------------------------------------------------
Six Months Ended Net Investment Income September 30, 1999 Income Dividends............................. $ 4,287,636 Interest.............................. 386,821 ------------------ Total income....................... 4,674,457 ------------------ Expenses Investment advisory fee............... 772,753 Administration fee.................... 177,960 Custodian's fees and expenses......... 41,000 Transfer agent's fees and expenses.... 34,000 Insurance expense..................... 33,000 Reports to shareholders............... 30,000 Legal fees and expenses............... 28,000 Listing fees.......................... 17,000 Audit fee and expenses................ 10,000 Directors fees........................ 8,000 Miscellaneous......................... 8,883 ------------------ Total operating expenses........... 1,160,596 Loan interest (Note 4)................ 1,260,199 ------------------ Total expenses..................... 2,420,795 ------------------ Net investment income.................... 2,253,662 ------------------ Realized and Unrealized Gain (Loss) on Investments Net realized loss on investment transactions.......................... (433,679) Net change in unrealized appreciation (depreciation) of investments......... 5,145,997 ------------------ Net gain on investments.................. 4,712,318 ------------------ Net Increase in Net Assets Resulting from Operations................ $ 6,965,980 ------------------ ------------------
FIRST FINANCIAL FUND, INC. Statement of Cash Flows (Unaudited) - ------------------------------------------------------------
Six Months Ended Increase (Decrease) in Cash September 30, 1999 Cash flows provided from operating activities Dividends and interest received........ $ 3,976,634 Operating expenses paid................ (530,505) Loan interest paid..................... (1,551,552) Purchases of short-term portfolio investments, net.................... (14,004,259) Purchases of long-term portfolio investments......................... (78,647,859) Proceeds from disposition of long-term portfolio investments............... 94,344,900 Other assets........................... 32,932 ------------------ Net cash provided from operating activities.......................... 3,620,291 ------------------ Cash used for financing activities Cash used to reacquire Fund shares..... (3,617,561) ------------------ Net increase in cash................... 2,730 Cash at beginning of period............ 168 ------------------ Cash at end of period.................. $ 2,898 ------------------ ------------------ Reconciliation of Net Increase in Net Assets to Net Cash Provided from Operating Activities Net increase in net assets resulting from operations............................. $ 6,965,980 ------------------ Increase in investments................... (2,579,509) Net realized loss on investment transactions........................... 433,679 Net increase in unrealized appreciation (depreciation) of investments.......... (5,145,997) Decrease in receivable for investments sold................................... 2,170,658 Increase in dividends and interest receivable............................. (697,823) Decrease in other assets.................. 32,932 Increase in payable for investments purchased.............................. 2,101,633 Increase in accrued expenses and other liabilities............................ 338,738 ------------------ Total adjustments................... (3,345,689) ------------------ Net cash provided from operating activities............................. $ 3,620,291 ------------------ ------------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 FIRST FINANCIAL FUND, INC. Statement of Changes in Net Assets (Unaudited) - ------------------------------------------------------------
Six Months Ended September Year Ended Increase (Decrease) 30, March 31, in Net Assets 1999 1999 ------------ ------------- Operations Net investment income...... $ 2,253,662 $ 2,686,510 Net realized gain (loss) on investment transactions............ (433,679) 31,773,999 Net change in unrealized appreciation (depreciation) of investments.......... 5,145,997 (181,559,749) ------------ ------------- Net increase (decrease) in net assets resulting from operations.............. 6,965,980 (147,099,240) ------------ ------------- Dividends and distributions (Note 1) Dividends from net investment income....... -- (1,023,852) Distributions from net realized gains on investments............. -- (51,039,444) Distributions in excess of net realized gains.......... -- (11,214,443) Value of Fund shares issued to shareholders in reinvestment of dividends and distributions................. -- 44,405,793 Cost of Fund shares reacquired.................... (3,617,561) -- ------------ ------------- Total increase (decrease)..... 3,348,419 (165,971,186) Net Assets Beginning of period........... 221,880,752 387,851,938 ------------ ------------- End of period(a).............. $225,229,171 $ 221,880,752 ------------ ------------- ------------ ------------- - --------------- (a) Includes undistributed net investment income of........ $ 2,253,662 $ -- ------------ -------------
FIRST FINANCIAL FUND, INC. Notes to Financial Statements (Unaudited) - ------------------------------------------------------------ First Financial Fund, Inc. (the 'Fund') was incorporated in Maryland on March 3, 1986, as a closed-end, diversified investment company. The Fund's primary investment objective is to achieve long-term capital appreciation with the secondary objective of current income by investing in securities issued by savings and banking institutions, mortgage banking institutions, and their holding companies. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry or region. - ------------------------------------------------------------ Note 1. Accounting Policies The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation: Securities for which market quotations are readily available--including securities listed on national securities exchanges and those traded over-the-counter--are valued at the last quoted sales price on the valuation date on which the security is traded. If such securities were not traded on the valuation date, but market quotations are readily available, they are valued at the most recently quoted bid price provided by an independent pricing service or by principal market makers. Securities for which market quotations are not readily available will be valued at fair value as determined in good faith according to pricing procedures developed by the Investment Adviser and approved by the Board of Directors. Short-term securities which mature in more than 60 days are valued at current market quotations. Short-term securities which mature in 60 days or less are valued at amortized cost. In connection with repurchase agreement transactions with financial institutions, it is the Fund's policy that its custodian take possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. If the seller defaults, and 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. Cash Flow Information: The Fund invests in securities and pays dividends from net investment income and distributions from net realized gains which are paid in cash or are reinvested at the discretion of shareholders. These activities are reported in the Statement of Changes in Net Assets and additional information on cash receipts and cash payments is presented in the Statement of Cash Flows. Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value and amortizing discounts on debt obligations. - -------------------------------------------------------------------------------- 7 Notes to Financial Statements (Unaudited) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses on sales of securities are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date; interest income is recorded on the accrual basis. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. Federal Income Taxes: It is the Fund's intention to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are provided in accordance with the Fund's understanding of the applicable country's tax rules and rates. Dividends and Distributions: The Fund expects to declare and pay, at least annually, dividends from net investment income and any net capital gains. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for wash sales. - ------------------------------------------------------------ Note 2. Agreements The Fund has agreements with Wellington Management Company, LLP (the 'Investment Adviser') and with Prudential Investments Fund Management LLC (the 'Administrator'). The Investment Adviser makes investment decisions on behalf of the Fund; the Administrator provides occupancy and certain clerical and accounting services to the Fund. The Fund bears all other costs and expenses. The investment advisory agreement provides for the Investment Adviser to receive a fee, computed monthly and payable quarterly, at the following annual rates: .75% of the Fund's average month-end net assets up to and including $50 million, and .625% of such assets in excess of $50 million. The administration agreement provides for the Administrator to receive a fee, computed monthly and payable quarterly, at the annual rate of .15% of the Fund's average month-end net assets. Note 3. Portfolio Securities Purchases and sales of investment securities, other than short-term investments, for the six months ended September 30, 1999 were $80,749,492 and $92,153,536, respectively. The cost basis of the Fund's investments including short-term investments, at September 30, 1999 was $317,150,348; and, accordingly, net unrealized depreciation for federal income tax purposes was $43,377,778 (gross unrealized appreciation--$26,326,678; gross unrealized depreciation--$69,704,456). The Fund elected to treat capital losses of approximately $8,003,900 incurred in the five month period ended March 31, 1999 as having occurred in the following fiscal year. - ------------------------------------------------------------ Note 4. Borrowings The Fund has a credit agreement (the 'Agreement') with an unaffiliated lender. The maximum commitment under the Agreement is $45,000,000. These borrowings may be set to any desired maturity at a rate of interest determined by the lender at the time of borrowing. While outstanding, the borrowings will bear interest, payable monthly. The average daily balance outstanding for the six months ended September 30, 1999 was $43,579,235 at a weighted average interest rate of 5.50%. The highest face amount of borrowing outstanding at any month-end during the period ended September 30, 1999 was $45,000,000 (as of September 30, 1999). The current borrowings are $45,000,000 (at an interest rate of 5.65%). - ------------------------------------------------------------ Note 5. Capital There are 50 million shares of $.001 par value common stock authorized. Of the 24,628,781 shares issued as of September 30, 1999, the Investment Adviser owned 10,994 shares. During the fiscal year ended March 31, 1999, the Fund issued 4,587,941 shares in connection with a cash distribution paid in stock. During the six months ended September 30, 1999, the Fund repurchased 436,200 of its own shares at a weighted average discount per share of 15.81%. - ------------------------------------------------------------ Note 6. Dividends On November 19, 1999 the Board of Directors of the Fund declared dividends of $.08 per share from ordinary income, payable on December 10, 1999 to shareholders of record on November 30, 1999. - -------------------------------------------------------------------------------- 8 Financial Highlights (Unaudited) FIRST FINANCIAL FUND, INC. - --------------------------------------------------------------------------------
Six months ended Year Ended March 31, September 30, ----------------------------------------------- 1999 1999 1998 1997 1996 ------------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period......................... $ 8.85 $ 18.94 $ 15.26 $ 13.71 $ 11.05 ------------- -------- -------- -------- -------- Income from investment operations Net investment income........................................ .09 .11 .14 .22 .13 Net realized and unrealized gain (loss) on investments....... .17 (7.20) 6.84 4.84 4.99 ------------- -------- -------- -------- -------- Total from investment operations.......................... .26 (7.09) 6.98 5.06 5.12 ------------- -------- -------- -------- -------- Less dividends and distributions Dividends from net investment income......................... -- (.05) (.14) (.21) (.15) Distributions from net realized gains........................ -- (2.59) (2.68) (3.36) (2.31) Distributions in excess of net realized gains................ -- (.45) (.63) -- -- ------------- -------- -------- -------- -------- Total dividends and distributions......................... -- (3.09) (3.45) (3.57) (2.46) ------------- -------- -------- -------- -------- Increase resulting from Fund share repurchase................ .03 -- -- .06 -- Net change resulting from the issuance of Fund shares........ -- .09 .15 -- -- ------------- -------- -------- -------- -------- Net asset value, end of period(a)............................ $ 9.14 $ 8.85 $ 18.94 $ 15.26 $ 13.71 ------------- -------- -------- -------- -------- ------------- -------- -------- -------- -------- Market price per share, end of period(a)..................... $ 8.0625 $ 7.3125 $ 20.813 $ 14.500 $ 12.625 ------------- -------- -------- -------- -------- ------------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN(b):.................................. 10.26% (53.65)% 72.59% 42.10% 35.46% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000).............................. $ 225,229 $221,881 $387,852 $270,496 $214,130 Average net assets (000)..................................... $ 237,231 $296,740 $320,484 $238,967 $195,421 Ratios to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses.................................. 1.06%(c) .94% .91% 1.03% 1.00% Total expenses............................................ 2.04%(c) 1.61% 1.25% 1.56% 1.23% Net investment income..................................... 1.89%(c) .91% .82% 1.43% .97% Portfolio turnover rate...................................... 30% 65% 43% 70% 82% Total debt outstanding at end of year (000 omitted).......... $ 45,000 $ 45,000 $ 20,000 $ 18,400 $ 9,700 Asset coverage per $1,000 of debt outstanding................ $ 6,005 $ 5,931 $ 20,393 $ 15,701 $ 23,075 1995 -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period......................... $ 12.74 -------- Income from investment operations Net investment income........................................ .05 Net realized and unrealized gain (loss) on investments....... 2.76 -------- Total from investment operations.......................... 2.81 -------- Less dividends and distributions Dividends from net investment income......................... (.03) Distributions from net realized gains........................ (4.38) Distributions in excess of net realized gains................ -- -------- Total dividends and distributions......................... (4.41) -------- Increase resulting from Fund share repurchase................ -- Net change resulting from the issuance of Fund shares........ (.09) -------- Net asset value, end of period(a)............................ $ 11.05 -------- -------- Market price per share, end of period(a)..................... $ 11.125 -------- -------- TOTAL INVESTMENT RETURN(b):.................................. 34.83% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000).............................. $158,214 Average net assets (000)..................................... $164,322 Ratios to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses.................................. 1.03% Total expenses............................................ 1.58% Net investment income..................................... 0.46% Portfolio turnover rate...................................... 103% Total debt outstanding at end of year (000 omitted).......... $ 16,000 Asset coverage per $1,000 of debt outstanding................ $ 10,888
- --------------- (a) NAV and market value are published in The Wall Street Journal each Monday. (b) Total investment return is calculated assuming a purchase of common stock at the current market value on the first day and a sale at the current market value on the last day of each period reported. Dividends and distributions are assumed for purposes of this calculation to be reinvested at prices obtained under the dividend reinvestment plan. This calculation does not reflect brokerage commissions. Total returns for periods less than one year are not annualized. (c) Annualized. Contained above is selected data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for the periods indicated. This information has been determined based upon information provided in the financial statements and market price data for the Fund's shares. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Other Information (Unaudited) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- Dividend Reinvestment Plan. Capital gains dividends and any accompanying income dividend are usually declared in stock, with a shareholder election to pay cash, but the Fund reserves its authority to declare capital gains and, or income distributions in cash. If the Fund does not declare a capital gains dividend, any income dividend will usually be declared in cash, but the Fund reserves its authority to declare such dividend in stock. Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested in Fund shares (Shares) pursuant to the Fund's Dividend Reinvestment Plan (the Plan.) Shareholders who do not participate in the Plan will normally receive all distributions in cash paid by check in United States dollars mailed directly to the shareholders of record (or if the shares are held in streetname or other nominee name, then to the nominee) by the custodian, as dividend disbursing agent unless the Fund declares a distribution payable in shares, absent a shareholder's specific election to receive cash. Shareholders who wish to participate in the Plan should contact the Fund at (800) 451-6788. State Street Bank and Trust Co. (the Plan Agent) serves as agent for the shareholders in administering the Plan. After the Fund declares a dividend or a capital gains distribution, if (1) the market price is lower than net asset value, the participants in the Plan will receive the equivalent in Shares valued at the market price determined as of the time of purchase (generally, following the payment date of the dividend or distribution); or if (2) the market price of Shares on the payment date of the dividend or distribution is equal to or exceeds their net asset value, participants will be issued Shares at the higher of net asset value or 95% of the market price. If the Fund declares a dividend or other distribution payable only in cash and the net asset value exceeds the market price of Shares on the valuation date, the Plan Agent will, as agent for the participants, receive the cash payment and use it to buy Shares in the open market. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share, the Plan Agent will halt open-market purchases of the Fund's shares for this purpose, and will request that the Fund pay the remainder, if any, in the form of newly-issued shares. The Fund will not issue Shares under the Plan below net asset value. There is no charge to participants for reinvesting dividends or capital gain distributions, except for certain brokerage commissions, as described below. The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Fund. There will be no brokerage commissions charged with respect to shares issued directly by the Fund. However, each participant will pay 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 and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions. The Fund reserves the right to amend or terminate the Plan upon 90 days' written notice to shareholders of the Fund. Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent or by telephone in accordance with specific procedures and will receive certificates for whole Shares and cash for fractional Shares. All correspondence concerning the Plan should be directed to the Plan Agent, State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200. - -------------------------------------------------------------------------------- 10 Supplemental Proxy Information (Unaudited) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- The annual meeting of shareholders of First Financial Fund, Inc. was held on August 23, 1999 at the offices of Prudential Investments Fund Management LLC, 751 Broad Street, Newark, New Jersey. The meeting was held for the following purposes: (1) To elect the following director to serve as follows: Director Class Term Expiring ----------------------------- ------ -------- --------- Eugene C. Dorsey I 3 years 2002 Directors whose term of office continued beyond this meeting are Douglas H. McCorkindale and Thomas T. Mooney. (2) To approve the proposed changes to the Fund's fundamental investment restrictions, including: (A) Clarification of conditions under which 25% or more of the Fund's total assets may be invested in securities of issuers having their principal business activities in the same industry. (B) Clarification in wording of the Fund's fundamental restriction on portfolio diversification with respect to 75% of the Fund's total assets. (C) Minor wording changes in the Fund's fundamental restriction on underwriting securities. (D) Clarification of the Fund's fundamental restriction regarding real estate investments and the types of real estate related securities in which the Fund may invest. (E) Modification of the Fund's fundamental restriction on investing in commodities to broaden the exception to the prohibition on buying and selling physical commodities to cover all financial derivative instruments. (F) Minor wording changes to the Fund's fundamental restriction on making loans to more completely describe various debt instruments the Fund may purchase that do not constitute the making of a loan. (G) Elimination of the Fund's fundamental restriction on purchasing more than 20 percent of the Fund's total assets in restricted securities. (H) Elimination of the Fund's fundamental restriction on purchasing more than 5 percent of the Fund's total assets in marketable warrants. (I) Elimination of the Fund's fundamental restriction on investments in oil and gas programs. (J) Elimination of the Fund's fundamental restriction on selling short. (K) Elimination of the Fund's fundamental restriction on purchasing securities issued by other investment companies. (L) Elimination of the Fund's fundamental restriction on pledging assets and replacement with a similar non-fundamental restriction. (M) Elimination of the Fund's fundamental restriction on entering into repurchase agreements maturing in more than seven days. * Approval of the revisions above to the fundamental restrictions also resulted in the deletion of references to those fundamental restrictions in the Fund's By-Laws. (3) To ratify the selection of PricewaterhouseCoopers LLP as independent public accountants for the year ending March 31, 2000. - -------------------------------------------------------------------------------- 11 Supplemental Proxy Information (Unaudited) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- The results of the proxy solicitation on the above matters were as follows:
Director/Matter Votes for Votes against Votes withheld Abstentions ---------------------------------- ----------- -------------- --------------- ------------ (1) Eugene C. Dorsey 13,687,118 -- 819,402 -- (2) Amendment of investment restrictions: (A) 11,208,451 762,287 852,768 -- (B) 11,168,288 779,209 540,003 -- (C) 11,152,941 787,626 576,937 -- (D) 11,058,131 810,309 676,453 -- (E) 10,545,587 1,388,075 684,081 -- (F) 10,963,270 961,550 681,383 -- (G) 10,583,871 1,228,772 696,772 -- (H) 10,828,065 1,085,480 582,649 -- (I) 10,683,213 1,266,471 558,659 -- (J) 10,677,232 1,224,747 608,624 -- (K) 11,037,684 917,945 551,995 -- (L) 10,745,708 1,181,463 652,510 -- (M) 11,020,353 899,735 657,422 -- (3) PricewaterhouseCoopers LLP 14,132,441 268,778 -- 442,761
- -------------------------------------------------------------------------------- 12 Directors Eugene C. Dorsey Douglas H. McCorkindale Thomas T. Mooney Investment Adviser Wellington Management Company, LLP 75 State Street Boston, MA 02109 Administrator Prudential Investments Fund Management LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 Custodian and Transfer Agent State Street Bank and Trust Company One Heritage Drive North Quincy, MA 02171 Independent Accountants PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 Legal Counsel Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, N.W. Washington, D.C. 20036 Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock at market prices. The accompanying financial statements as of September 30, 1999 were not audited and, accordingly, no opinion is expressed on them. The views expressed in this report and the information about the Fund's portfolio holdings are for the period covered by this report and are subject to change thereafter. This report is for stockholder information. This is not a prospectus intended for use in the purchase or sale of Fund shares. First Financial Fund, Inc. Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 For information call toll-free (800) 451-6788 320228109 -----END PRIVACY-ENHANCED MESSAGE-----