-----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, JMs9tclIHwFR6Ab6vOWdION/uJysm6fGqdX4au0IKOL/0aFm2lChjRlQr9XAW+xu 1oKE+hFpzDQE1clMJctSAA== 0000355348-99-000162.txt : 19990604 0000355348-99-000162.hdr.sgml : 19990604 ACCESSION NUMBER: 0000355348-99-000162 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990603 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: 99639898 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 THE FIRST FINANCIAL FUND, INC. INC. First Financial Fund, Inc. ANNUAL REPORT March 31, 1999 Letter To Shareholders April 29, 1999 Dear Fellow Shareholder: It is over. That's the best thing we can say about the last six months. Strangely enough, it was the Russian bond default last October that started toppling the world dominoes which reached our shores in the form of a plain old fashioned Wall Street liquidity crisis. Those financial entities lacking insured deposits or long-term investment grade funding were particularly hard hit as wholesale lines were pulled and short-term loans not renewed, in turn, forcing sales of assets in a severely distressed market. While the fundamental performance of the Fund's small banks and thrifts continued to be strong, this flight to liquidity crushed the stocks, as investors rushed to take money out of small-cap funds, finance sector funds and financially oriented hedge funds. The Fund's -11.9% negative return for the past six months ranks as the second worst we've seen since the great financial crisis of 1990. TOTAL RETURN
For The Period Ended March 31, 1999 6 Mos. 1 Year 3 Years 5 Years First Financial Fund's NAV1 -11.9% -38.4% 8.2% 18.8% S&P 500 Index 27.3 18.5 28.1 26.2 NASDAQ Composite2 45.3 34.1 30.7 27.1 NASDAQ Banks2 1.1 -21.0 18.5 21.0 SNL All Daily Thrift2 8.6 -18.6 22.8 24.0
1. Source: Prudential Investment Fund Management. The Fund total return represents the change in net asset value from the beginning of the period noted through March 31, 1999 and assumes the reinvestment of dividends and distributions. Past performance is no guarantee of future results. 2. Principal only. Note: Returns for periods greater than one year are annualized. As you know, we have not been particularly sanguine about the opportunities in our area for significant stock price appreciation. Today, however, we are. The reasons are severalfold. First, the valuations are as compelling now as they were in the early 90's, with banks, mortgage REITs and asset resolutions firms at single digit forward P/E's and opportunities again to buy thrift conversions well below book value. Second, acquisition activity is heating up again, spurred in part by the huge valuation gap between large-cap financials and small. Resolution of Year 2000 concerns as well as the pending elimination of pooling accounting are also contributing to the renewed urge to merge. Third and finally, the torrential outflow of funds from small-cap financials seems to be abating. Whether it is investor disenchantment with the large-cap growth stocks or simply a belated recognition of outstanding value in small-cap financials, we're not sure. But, spring may be in the air. 1 April, so far, has logged in a very good month of performance. With a week to go, the Fund's stocks are up 4%. We've been particularly impressed with first quarter earnings results; thus far, those reported, have been, almost without exception, better than expected. A steeper yield curve, a recovery of the asset backed securities market, gains in efficiency, good loan growth and more aggressive buybacks have all helped. While the domestic economy should cool down some as the year progresses, we don't see a meltdown, thanks to some early signs of recovery in Asia, the aversion of a severe crisis in Latin America and the continued gains in productivity domestically. We look forward to some rewarding returns over the next several quarters. Sincerely, Nicholas C. Adams Portfolio Manager Senior Vice President Wellington Management Company, LLP 2 Portfolio of Investments as of March 31, 1999 FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - ------------------- - ------------------------------------------------------------ - -------------------
Shares Description Value (Note 1) - ------------------------------------------------------------ LONG-TERM INVESTMENTS--119.3% COMMON STOCKS--117.7% - ------------------------------------------------------------ Banks & Thrifts--80.6% 34,600 Algiers Bancorp, Inc. $ 354,650 289,180 Ambanc Holding Co., Inc. 4,843,765 140,400 Bay State Bancorp, Inc.* 2,878,200 125,000 Big Foot Financial Corp.* 1,609,375 214,762 Bostonfed Bancorp, Inc. 3,865,716 89,640 Broadway Financial Corp., Delaware 582,660 144,500 Cameron Financial Corp. 2,023,000 324,000 Catskill Financial Corp. 4,920,750 91,000 CBES Bancorp Inc. 1,342,250 142,538 CCF Holding Co. 1,924,263 375,800 Cohoes Bancorp, Inc. 3,922,412 118,000 Commercial Bank New York 1,534,000 146,500 Community Financial Corp. 1,410,063 74,600 CSB Financial Group, Inc.* 680,725 154,000 Downey Financial Corp. 2,820,125 736,000 East West Bancorp, Inc. 6,578,000 202,900 Fidelity Federal Bancorp 786,238 109,200 First Commerce Bancshares, Inc. 2,712,900 24,000 First Financial Corp. 294,000 390,300 First Place Financial Corp., Delaware 3,951,787 281,500 FirstFed America Bancorp, Inc. 3,378,000 252,000 FirstFed Bancorp, Inc. 2,299,500 154,000 Fort Bend Holding Corp. 2,695,000 166,800 GBC Bancorp 2,502,000 133,000 GreenPoint Financial Corp. 4,621,750 115,800 Hallmark Capital Corp.* 1,230,375 110,500 Hawthorne Financial Corp.* 1,657,500 16,666 HFB Financial Corp. 249,990 42,600 Highland Bancorp, Inc.* 1,565,550 790,000 Hudson River Bancorp, Inc. 8,640,625 9,375 Independent Bankshares, Inc. 98,438 120,000 Innes Street Financial Corp. 1,365,000 346,000 ITLA Capital Corp.* 5,017,000 91,923 Jeffbanks, Inc. 1,918,893 200,000 Lincoln Bancorp Indiana 2,087,500 104,000 Metrocorp Bancshares, Inc. 1,007,500 147,200 Mystic Financial, Inc. 1,711,200 120,000 Niagara Bancorp, Inc. 1,200,000 287,500 Northeast Pennsylvania Financial Corp. 3,144,531 221,200 PBOC Holdings, Inc. 1,990,800 358,000 People's Bank $ 10,650,500 34,600 Peoples Financial Corp. 302,750 183,330 Perpetual Federal Savings Bank 4,216,590 331,050 Progress Financial Corp. 4,800,225 397,000 Provident Financial Holdings, Inc.* 6,600,125 64,650 Redwood Financial, Inc.* 808,125 187,500 Republic Bancshares, Inc.* 4,007,812 77,000 River Valley Bancorp 1,020,250 47,800 Rowan Bancorp, Inc.* 1,075,500 197,200 Seacoast Financial Services Corp. 1,947,350 153,700 Security Pennsylvania Financial Corp. 1,440,937 100,600 SFS Bancorp, Inc.* 1,886,250 60,000 Southwest Bancorp of Texas 738,750 135,000 Southwest Bancorp Inc. Oklahoma 3,113,437 32,500 ST Landry Financial Corp. 426,725 40,100 TF Financial Corp. 636,588 18,150 Three Rivers Financial Corp. 240,488 7,276 Tri-County Bancorp, Inc. 76,398 125,400 Troy Financial Corp.* 1,244,595 396,000 UCBH Holdings Inc. 5,445,000 360,400 Unionbancal Corp. 12,276,125 355,600 Virginia Capital Bancshares, Inc. 4,489,450 1,000 Warwick Community Bancorp 13,250 181,900 Western Bancorp * 5,627,531 189,700 Woronoco Bancorp, Inc.* 1,802,150 344,000 WSFS Financial Corp. 5,031,000 103,400 Yonkers Financial Corp. 1,551,000 --------- - --- 178,884,932 --------- - --- - ------------------------------------------------------------ Other Financial Intermediaries--37.1% 511,800 Anthracite Capital, Inc. 3,838,500 2,800 Autobytel Inc.* 117,250 248,200 Central Financial Acceptance Corp.* 620,500 789,700 Dynex Capital, Inc. 2,615,881 227,875 First Mortgage Corp.* 911,500 300,000 Fortress Investment Corp.* 5,062,500 612,400 Franchise Mortgage Acceptance Co.* 4,439,900 312,500 Healthcare Financial Partners, Inc.* 6,250,000 829,900 Imperial Credit Industries, Inc.* 6,068,644 128,016 Inco Homes Corp.* 256,032
- ------------------------------------------------------------ - -------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of March 31, 1999 FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - ------------------- - ------------------------------------------------------------ - -------------------
Shares Description Value (Note 1) - ------------------------------------------------------------ Other Financial Intermediaries (cont'd.) 448,300 LASER Mortgage Management, Inc. $ 2,437,631 777,100 LNR Property Corp. 15,347,725 450,700 Novastar Financial, Inc.* 2,760,537 583,300 Ocwen Asset Investment Corp. 2,150,919 805,100 Ocwen Financial Corp.* 7,094,944 330,000 Prime Capital Corp., Inc.* 660,000 336,300 RB Asset, Inc.* 630,563 286,400 Redwood Trust, Inc. 4,582,400 570,000 Resource America, Inc. 4,916,250 515,450 Resource Bancshares Mortgage Group, Inc. 6,636,419 545,300 Sundance Homes, Inc.* 340,813 807,600 Ugly Duckling Corp.* 4,467,037 --------- - --- 82,205,945 --------- - --- Total common stocks (cost $310,132,243) 261,090,877 --------- - --- - ------------------------------------------------------------ Preferred Stocks--1.2% 100,000 Community Bank, Inc. 13.00%, Ser. B (cost $2,400,000) 2,712,500 --------- - --- - ------------------------------------------------------------ Warrants*--0.4% Warrants 50,000 Community Bank, Inc., expiring June '99 875,000 1 Golden State Bancorp, Inc., expiring January '01 5 125,000 Healthcare Financial Partners, expiring December '01 0 --------- - --- Total warrants (cost $100,000) 875,005 --------- - --- Total long-term investments (cost $312,632,243) 264,678,382 --------- - --- SHORT-TERM INVESTMENTS--0.8% - ------------------------------------------------------------ Repurchase Agreement--0.8% $1,761 PaineWebber, Inc., 4.90%, due 4/01/99 in the amount of $1,761,240 (cost $1,761,000; collateralized by $1,500,000 U.S. Treasury Notes, 6.875%, due 7/31/99, value of collateral including interest $1,796,911) $ 1,761,000 --------- - --- - ------------------------------------------------------------ Certificates Of Deposit Brookline Savings, 1 4.35%, 5/29/99 1,361 First Federal Bank, 20 4.50%, 4/14/99 20,000 Nauatuck Valley Saving & Loan Assoc., 20 4.10%, 4/27/99 20,000 --------- - --- Total certificates of deposit (cost $41,361) 41,361 --------- - --- Total short-term investments (cost $1,802,361) 1,802,361 --------- - --- - ------------------------------------------------------------ Total Investments--120.1% (cost $314,434,604; Note 3) 266,480,743 Liabilities in excess of other assets--(20.1%) (44,599,991) --------- - --- Net Assets--100% $221,880,752 --------- - --- --------- - ---
- --------------- * Non-income-producing security. - ------------------------------------------------------------ - -------------------- See Notes to Financial Statements. 4 Statement of Assets and Liabilities FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - -------------------
Assets March 31, 1999 Investments, at value (cost $314,434,604)............................................... ................... $266,480,743 Cash........................................................ ............................................... 168 Receivable for investments sold........................................................ .................... 2,446,580 Dividends and interest receivable.................................................. ........................ 347,629 Other assets...................................................... ......................................... 146,066 - -------------- Total assets...................................................... ...................................... 269,421,186 - -------------- Liabilities Loan payable (Note 4).......................................................... ............................ 45,000,000 Payable for investments purchased................................................... ....................... 1,930,219 Advisory fee payable..................................................... .................................. 356,747 Loan interest payable (Note 4).......................................................... ................... 140,698 Administration fee payable..................................................... ............................ 81,869 Deferred directors' fees........................................................ ........................... 18,806 Accrued expenses.................................................... ....................................... 12,095 - -------------- Total liabilities................................................. ...................................... 47,540,434 - -------------- Net Assets...................................................... ........................................... $221,880,752 - -------------- - -------------- Net assets were comprised of: Common stock, at par; 25,064,981 shares issued...................................................... .... $ 25,065 Paid-in capital in excess of par......................................................... ............... 278,076,064 - -------------- 278,101,129 Accumulated net realized losses...................................................... ................... (8,266,516) Net unrealized depreciation of investments................................................. ............. (47,953,861) - -------------- Net assets, March 31, 1999........................................................ ...................... $221,880,752 - -------------- - -------------- Net asset value per share ($221,880,752 /25,064,981 shares of common stock outstanding).................... $8.85 - -------------- - --------------
- ------------------------------------------------------------ - -------------------- See Notes to Financial Statements. 5 FIRST FINANCIAL FUND, INC. Statement of Operations - ------------------------------------------------------------
Year Ended Net Investment Income March 31, 1999 Income Dividends (net of foreign withholding taxes of $9,648)...................... $ 6,892,202 Interest................................. 565,622 ------------- - - Total income.......................... 7,457,824 ------------- - - Expenses Investment advisory fee.................. 1,917,124 Administration fee....................... 445,110 Legal fees and expenses.................. 93,000 Reports to shareholders.................. 90,000 Custodian's fees and expenses............ 69,000 Insurance expense........................ 57,000 Listing fees............................. 33,000 Transfer agent's fees and expenses....... 24,500 Audit fee and expenses................... 22,000 Directors fees........................... 16,000 Miscellaneous............................ 13,049 ------------- - - Total operating expenses.............. 2,779,783 Loan interest (Note 4)................... 1,991,531 ------------- - - Total expenses........................ 4,771,314 ------------- - - Net investment income....................... 2,686,510 ------------- - - Realized and Unrealized Gain (Loss) on Investments Net realized gain on investment transactions............................. 31,773,999 Net change in unrealized appreciation (depreciation) of investments............ (181,559,749) ------------- - - Net loss on investments..................... (149,785,750) ------------- - - Net Decrease in Net Assets Resulting from Operations................... $(147,099,240) ------------- - - ------------- - -
FIRST FINANCIAL FUND, INC. Statement of Cash Flows - ------------------------------------------------------------
Year Ended Increase (Decrease) in Cash March 31, 1999 Cash flows used for operating activities Dividends and interest received............ $ 8,034,181 Operating expenses paid.................... (2,848,475) Loan interest paid......................... (2,075,451) Purchases of short-term portfolio investments, net........................ 3,411,133 Purchases of long-term portfolio investments............................. (253,096,162) Proceeds from disposition of long-term portfolio investments................... 239,833,620 Deferred expenses and other assets......... (3,211) ------------ - -- Net cash used for operating activities..... (6,744,365) ------------ - -- Cash provided from financing activities Cash dividends paid........................ (18,871,946) Net increase in notes payable.............. 25,000,000 ------------ - -- Net cash provided from financing activities.............................. 6,128,054 ------------ - -- Net decrease in cash....................... (616,311) Cash at beginning of year.................. 616,479 ------------ - -- Cash at end of year........................ $ 168 ------------ - -- ------------ - -- Reconciliation of Net Decrease in Net Assets to Net Cash Used for Operating Activities Net decrease in net assets resulting from operations................................. $(147,099,240) ------------ - -- Decrease in investments....................... 540,801 Net realized gain on investment transactions............................... (31,773,999) Net decrease in unrealized appreciation (depreciation) of investments.............. 181,559,749 Increase in receivable for investments sold... (2,211,838) Decrease in dividends and interest receivable................................. 475,246 Increase in other assets...................... (3,211) Decrease in payable for investments purchased.................................. (8,079,261) Decrease in accrued expenses and other liabilities................................ (152,612) ------------ - -- Total adjustments....................... 140,354,875 ------------ - -- Net cash used for operating activities........ $ (6,744,365) ------------ - -- ------------ - --
- ------------------------------------------------------------ - -------------------- See Notes to Financial Statements. 6 FIRST FINANCIAL FUND, INC. Statement of Changes in Net Assets - ------------------------------------------------------------
Year Ended March 31, Increase (Decrease) --------------------------- - ---- in Net Assets 1999 1998 ------------- -------- - ---- Operations Net investment income...... $ 2,686,510 $ 2,632,906 Net realized gain on investment transactions............ 31,773,999 47,574,880 Net change in unrealized appreciation (depreciation) of investments.......... (181,559,749) 81,471,172 ------------- -------- - ---- Net increase (decrease) in net assets resulting from operations......... (147,099,240) 131,678,958 ------------- -------- - ---- Dividends and distributions (Note 1) Dividends from net investment income....... (1,023,852) (2,481,971) Distributions from net realized gains on investments............. (51,039,444) (47,574,880) Distributions in excess of net realized gains...... (11,214,443) (11,105,995) Value of Fund shares issued to shareholders in reinvestment of dividends and distributions................. 44,405,793 46,840,234 ------------- -------- - ---- Total increase (decrease)..... (165,971,186) 117,356,346 Net Assets Beginning of year............. 387,851,938 270,495,592 ------------- -------- - ---- End of year(a)................ $ 221,880,752 $387,851,938 ------------- -------- - ---- ------------- -------- - ---- - --------------- (a) Includes undistributed net investment income of........ $ -- $ 908,927 ------------- -------- - ----
Notes to Financial Statements FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - ------------------- First Financial Fund, Inc. (the 'Fund') was incorporated in Maryland on March 3, 1986, as a closed-end, diversified investment company. The Fund had no operations until April 24, 1986, when it sold 10,000 shares of common stock for $100,000 to Wellington Management Company, LLP (the 'Investment Adviser'). Investment operations commenced on May 1, 1986. 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 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 - ------------------------------------------------------------ - -------------------- 7 Notes to Financial Statements FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - -------------------- 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. 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. Reclassification of Capital Accounts: The Fund accounts for and reports distributions to shareholders in accordance with the American Institute of Certified Public Accountants Statement of Position 93-2: Determination, Disclosure and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. The effect of applying this statement was to decrease undistributed net investment income by $2,571,585, increase accumulated net realized gain on investments by $2,947,927 and decrease paid-in capital by $376,342 for the year ended March 31, 1999, due to distributions from paid-in capital. Net investment income, net realized gains and net assets were not affected by this change. - ------------------------------------------------------------ Note 2. Agreements The Fund has agreements with 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 year ended March 31, 1999 were $245,016,901 and $211,331,213, respectively. The cost basis of the Fund's investments for federal income tax purposes, including short-term investments, at March 31, 1999 was $314,697,235; and, accordingly, net unrealized depreciation for federal income tax purposes was $(48,216,492) (gross unrealized appreciation--$28,747,894; gross unrealized depreciation--$76,964,386). 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 from one week to one year at a rate of interest determined by the lender at the time of borrowing. While outstanding, each borrowing will bear interest, payable at maturity. The average daily balance outstanding for the year ended March 31, 1999 was $29,890,411 at a weighted average interest rate of 6.11%. The highest face amount of borrowing outstanding at any month-end during the year ended March 31, 1999 was $45,000,000 (as of March 31, 1999). The current borrowings of $45,000,000 (at a weighted average interest rate of 5.65%) mature between the period April 2, 1999 and April 14, 1999. - ------------------------------------------------------------ Note 5. Capital There are 50 million shares of $.001 par value common stock authorized. Of the 25,064,981 shares issued as of March 31, 1999, the Investment Adviser owned 10,994 shares. During the fiscal years ended March 31, - ------------------------------------------------------------ - -------------------- 8 Notes to Financial Statements FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - -------------------- 1998 and 1999, the Fund issued 2,748,679 and 4,587,941 shares in connection with a cash distribution paid in stock. - ------------------------------------------------------------ Note 6. Subsequent Event Effective April 14, 1999 the Fund's credit agreement expired and has not been renewed. Also effective April 14, 1999 the Fund entered into a credit agreement under the same terms except that the Fund now incurs a commitment fee at an annual rate of .09 of 1% on any unused portion of the credit facility. The maximum commitment under the agreement is $45,000,000. While outstanding, each borrowing will bear interest, payable on a monthly basis. - ------------------------------------------------------------ - -------------------- 9 Financial Highlights FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - --------------------
Year Ended March 31, - ------------------------------------------------------------ 1999 1998 1997 1996 1995 - -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year........................... $ 18.94 $ 15.26 $ 13.71 $ 11.05 $ 12.74 - -------- -------- -------- -------- -------- Income from investment operations Net investment income........................................ .11 .14 .22 .13 .05 Net realized and unrealized gain (loss) on investments....... (7.20) 6.84 4.84 4.99 2.76 - -------- -------- -------- -------- -------- Total from investment operations.......................... (7.09) 6.98 5.06 5.12 2.81 - -------- -------- -------- -------- -------- Less dividends and distributions Dividends from net investment income......................... (.05) (.14) (.21) (.15) (.03) Distributions from net realized gains........................ (2.59) (2.68) (3.36) (2.31) (4.38) Distributions in excess of net realized gains................ (.45) (.63) -- - -- -- - -------- -------- -------- -------- -------- Total dividends and distributions......................... (3.09) (3.45) (3.57) (2.46) (4.41) - -------- -------- -------- -------- -------- Increase resulting from Fund share repurchase................ -- -- .06 -- -- Net change resulting from the issuance of Fund shares........ .09 .15 -- - -- (.09) - -------- -------- -------- -------- -------- Net asset value, end of year(a).............................. $ 8.85 $ 18.94 $ 15.26 $ 13.71 $ 11.05 - -------- -------- -------- -------- -------- - -------- -------- -------- -------- -------- Market price per share, end of year(a)....................... $ 7.3125 $ 20.813 $ 14.500 $ 12.625 $ 11.125 - -------- -------- -------- -------- -------- - -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN(b):.................................. (53.65)% 72.59% 42.10% 35.46% 34.83% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000)................................ $221,881 $387,852 $270,496 $214,130 $158,214 Average net assets (000)..................................... $296,740 $320,484 $238,967 $195,421 $164,322 Ratios to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses.................................. .94% .91% 1.03% 1.00% 1.03% Total expenses............................................ 1.61% 1.25% 1.56% 1.23% 1.58% Net investment income..................................... .91% .82% 1.43% .97% 0.46% Portfolio turnover rate...................................... 65% 43% 70% 82% 103% Total debt outstanding at end of year (000 omitted).......... $ 45,000 $ 20,000 $ 18,400 $ 9,700 $ 16,000 Asset coverage per $1,000 of debt outstanding................ $ 5,931 $ 20,393 $ 15,701 $ 23,075 $ 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 year 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. 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 year 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. 10 Report of Independent Accountants FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - -------------------- To the Board of Directors and Shareholders of First Financial Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations, of cash flows and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of First Financial Fund, Inc. (the 'Fund') at March 31, 1999, the results of its operations and its cash flows for the year then ended and the changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as 'financial statements') are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. The accompanying financial highlights for each of the two years in the period ended March 31, 1996 were audited by other independent accountants, whose opinion dated May 9, 1996 was unqualified. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 May 20, 1999 - ------------------------------------------------------------ - -------------------- 11 Tax Information (Unaudited) FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - -------------------- We are required by the Internal Revenue Code to advise you within 60 days of the Fund's fiscal year end (March 31, 1999) as to the federal tax status of dividends and distributions paid by the Fund during such fiscal year. Accordingly, we are advising you that during the fiscal year ended March 31, 1999, the Fund paid dividends and distributions totalling $3.09 per share, comprised of $.05 ordinary income and $.435 short-term capital gains which are taxable as ordinary income and $2.605 long-term capital gains which is taxable as 20% rate gains. Further, we wish to advise you that 34.86% of the dividends taxable as ordinary income and paid in the fiscal year ended March 31, 1999 qualified for the corporate dividend received deduction available to corporate taxpayers. In January 2000, shareholders will receive a Form 1099-DIV or substitute Form 1099-DIV which reflects the amount of dividends to be used by calendar year taxpayers on their 1999 federal income tax returns. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund. Other Information FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - -------------------- Dividend Reinvestment Plan. 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. - ------------------------------------------------------------ - -------------------- 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 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-----