-----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, GjQK8w06FwBK0BFx1gMqlQgpgV7/+4hkhb6yGA1SXXzympbBDPHp4D5ElHNLd93o ukCo1N1yhKCiP+/WwlJC5g== 0000790202-96-000002.txt : 19960531 0000790202-96-000002.hdr.sgml : 19960531 ACCESSION NUMBER: 0000790202-96-000002 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960530 SROS: NONE 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: 1940 Act SEC FILE NUMBER: 811-04605 FILM NUMBER: 96574515 BUSINESS ADDRESS: STREET 1: 199 WATER ST CITY: NEW YORK STATE: NY ZIP: 10292 BUSINESS PHONE: 2122141250 MAIL ADDRESS: STREET 1: ONE SEAPORT PLAZA CITY: NEW YORK STATE: NY ZIP: 10292 FORMER COMPANY: FORMER CONFORMED NAME: FIRST SAVINGS & BANKING INSTITUTIONS FUND INC DATE OF NAME CHANGE: 19860402 N-30D 1 FIRST FINANCIAL FUND, INC. ANNUAL REPORT March 31, 1996 First Financial Fund, Inc. (LOGO) Letter To Shareholders April 10, 1996 Dear Shareholder: Taking still another curtain call, the U.S. equity bull market responded to investor enthusiasm by soaring ever higher during First Financial Fund's fiscal year ended March 31, 1996. The bank and thrift sector participated in the latest leg of the rally in early 1996, though not as spiritedly; most of the money made was in larger cap financials. Ironically, the rapid pace of consolidation was far more pronounced among the 50 largest banks than with their smaller and far more numerous brethren. For example, bank investors witnessed the successful completion of a rare event indeed: namely, Wells Fargo's unwelcome tender and acquisition of First Interstate. Additionally, hostile shareholders had a role in the largest bank merger to date, Chase and Chemical, which further fueled the rally in large bank stocks. An exception to the generally languid behavior of smaller cap financials was the consumer finance area, specifically home equity and auto finance issues. After stalling late in 1995 due to credit quality concerns, select finance company stocks have sprinted to new highs thus far in 1996. Investment Objective The Fund seeks long-term capital appreciation by investing in a portfolio of stocks issued by savings and loan companies and banking institutions. The performance of First Financial Fund and various benchmarks is shown as follows: TOTAL RETURN For The Period Ended 3/31/96
6 Mos. 12 Mos. First Financial Fund's NAV 8.5% 48.1% S&P 500 11.7 32.1 NASDAQ Composite* 5.5 34.8 NASDAQ Banks* 8.7 36.8 SNL Daily* 5.5 37.3
* Principal only. On March 31, 1996, First Financial Fund's shares closed at a market price of $12.625 per share, which represented a discount of 7.9% to the net asset value per share of $13.71. Outlook and Strategy Past readers of these letters may have concluded that we tend to be a cautious, at times overly pessimistic, lot. Against such a charge we have little to defend ourselves. To no one's surprise, we continue to be wary of a marketplace that has been so generous for so long. For financial stocks in particular, we worry that an overextended consumer may result in unexpectedly high delinquencies, especially if interest rates rise and the debt burden grows. Longer term, we worry that far too many banks and thrifts believe they can "go it alone" and believe that their individual franchises are worth far more than any sensible acquirer would pay. So-called "non-bank" competition continues to erode the bank's market share, eat into their best businesses, invest in the best technologies, and attract the brightest managers. In short, banks and thrifts need to address more honestly their own long-term viability if maximizing shareholder value is, as it should be, a priority. 1 Notwithstanding these concerns, the financial industry consolidation continues as it has for years; those who are leaders and visionaries will prosper, and those who are not will be bought, or they will atrophy and die. With this backdrop, we continue to search out the best opportunities we can find, with the goal of producing, over the long-term, value for shareholders. Thank you for your continued interest in First Financial Fund. Sincerely, Nicholas C. Adams Portfolio Manager Wellington Management Company Stock Listing The First Financial Fund, Inc.'s common stock is traded onthe New York Stock Exchange under the symbol "FF" and is frequently listed as "FrstFnl" or "FstFnlfd" in the financial sections of newspapers. It is also listed in a closed-end fund table every Monday in The Wall Street Journal. 2 Portfolio of Investments as of March 31, 1996 FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - ------------------------------------------------------------
Shares Description Value (Note 1) - ------------------------------------------------------------ LONG-TERM INVESTMENTS--106.6% COMMON STOCKS--103.1% - ------------------------------------------------------------ Banks And Thrifts--73.0% 224,000 Affiliated Community Bancorp, Inc. $ 3,948,000 91,000 Ahmanson (H.F.) & Co. 2,206,750 293,700 Ambanc Holding Co., Inc.* 2,900,287 60,000 American National Bancorp, Inc. 577,500 76,600 Banknorth Group, Inc. 2,700,150 518,000 Bostonfed Bancorp, Inc.* 6,345,500 117,800 CCF Holding Co. 1,384,150 161,000 Cenfed Financial Corp. 3,944,500 176,500 Community Financial Corp. Illinois 2,162,125 74,600 CSB Financial Group, Inc.* 671,400 161,000 Dime Bancorp, Inc.* 1,992,375 108,100 Dime Financial Corp. 1,378,275 271,950 Downey Financial Corp. 6,390,825 124,800 Eastern Bancorp, Inc. 2,995,200 34,800 FFE Financial Corp.* 948,300 187,000 Fidelity Federal Bancorp 2,431,000 350,000 Fidelity Federal Bank Glendale* 3,150,000 76,200 Financial Security Corp. 1,962,150 239,000 First Defiance Financial Corp. 2,479,625 2,000 First Federal Bankshares 42,500 62,398 First Midwest Bancorp, Inc. 1,762,743 145,000 First Mutual Bancorp, Inc. 1,812,500 407,000 First Republic Bancorp, Inc.* 4,985,750 41,000 First Savings Bancorp, Inc. 533,000 251,000 Flushing Financial Corp. 3,733,625 77,000 Fort Bend Holdings Corp. 1,405,250 1,805 Glendale Federal Bank California* 32,716 100,000 Great American Bancorp, Inc. 1,425,000 316,000 Greenpoint Financial Corp. 8,690,000 57,900 Hallmark Capital Corp. 868,500 350,000 HF Bancorp, Inc. 3,412,500 10,000 HFB Financial Corp. 180,000 62,400 Highland Federal Savings Bank California 998,400 269,200 Imperial Thrift & Loan Association* 3,701,500 67,000 Industrial Bancorp, Inc. 1,005,000 140,000 ISB Financial Corp. 2,170,000 271,000 Long Island Bancorp, Inc. $ 7,621,875 181,000 Mid Continent Bancshares, Inc. 3,235,375 42,100 North Central Bancshares, Inc. 447,312 84,700 NS & L Bancorp, Inc. 1,037,575 64,800 OSB Financial Corp. 1,522,800 175,000 Patriot Bank Corp. 2,209,375 364,000 People's Bank 7,735,000 174,600 Perpetual Federal Savings Bank* 2,226,150 380,000 PFF Bancorp, Inc 4,401,654 99,000 PMC Capital, Inc. 1,720,125 50,000 Poughkeepsie Savings Bank 262,500 330,000 Prime Bancorp, Inc. 1,155,000 75,000 Prime Residential, Inc. 1,396,875 87,000 Queens County Savings Bank 3,806,250 19,000 RCSB Financial, Inc. 448,875 93,800 Redwood Financial, Inc. 891,100 470,000 River Bank America New York 4,112,500 194,000 Roosevelt Financial Group, Inc. 3,589,007 47,800 Rowan Savings Bank, Inc. 717,000 125,600 SFS Bancorp, Inc. 1,538,600 257,000 SGV Bancorp, Inc. 2,313,000 217,000 Statewide Financial Corp.* 2,793,875 50,000D Sun Bancorp, Inc.*/DD (cost $650,000-purchased 1994) 735,000 35,000 TCF Financial Corp. 1,268,750 10,000 Telebanc Financial Corp. 75,000 16,500 Three Rivers Financial Corp. 218,625 57,100 Tri-County Bancorp, Inc. 999,250 73,800 United Companies Financial Corp. 2,343,150 24,000 Valley Federal Savings Bank 792,000 392,500 Westcorp, Inc. 7,261,250 9,500 Workingmens Capital Holdings, Inc. 152,000 ------------ 156,353,944 - ------------------------------------------------------------ Other Financial Intermediaries--30.1% 211,000 Cameron Financial Corp. 2,901,250 120,000 Cityscape Financial Corp. 4,260,000 294,000 CTL Credit, Inc.* 5,108,250 378,000 Express America Holdings Corp.* 1,559,250
- ------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of March 31, 1996 FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------ - ------------------------------------------------------------
Shares Description Value (Note 1) ------------------------------------------------------------ Other Financial Intermediaries (cont'd.) 417,000 First Financial Caribbean Corp. $ 7,923,000 279,700 First Merchants Acceptance Corp.* 6,083,475 112,000 First Mortgage Corp. 700,000 192,000 Georgia Financial, Inc. 2,184,000 378,000 Hamilton Financial Services 236,250 407,600 Imperial Credit Industries, Inc.* 9,680,500 768,100 Inco Homes Corp.* 672,088 142,700 Leasing Solutions, Inc.* 1,855,100 285,683 Redwood Trust, Inc. 5,820,791 147,000 Resource Bancshares Mortgage Group, Inc. 2,296,875 91,000 Security Capital Corp. (Wisconsin) 5,278,000 188,000 Standard Financial, Inc. 2,726,000 539,500 Sundance Homes, Inc.* 1,079,000 30,594D Tempest Reinsurance Co., Ltd.*/DD (cost $3,061,449-purchased 1993-1995) 4,038,408 ------------ 64,402,237 ------------ Total common stocks (cost $183,156,060) 220,756,181 ------------ - ------------------------------------------------------------ Preferred Stocks--3.0% 100,000 Community Bank Huntington Park, 13.0%, Series B 2,550,000 63,000 First Fed Bancorp, Inc.* 1,480,500 150,000 Prime Retail, Inc. 2,475,000 ------------ Total preferred stocks (cost $5,549,500) 6,505,500 ------------ - ------------------------------------------------------------ Warrants*--0.5% Warrants 50,000 Community Bank, expiring June '99 112,500 423 Glendale Federal Bank California expiring March '99 0 160,876 Redwood Trust, Inc. expiring December '97 925,037 300,000 Unionfed Financial Corp. expiring December '98 $ 0 ------------ Total warrants (cost $368,662) 1,037,537 ------------ Total long-term investments (cost $189,074,222) 228,299,218 ------------ Principal Amount (000) SHORT-TERM INVESTMENTS - ------------------------------------------------------------ Certificates Of Deposit Brookline Savings Bank, Certificates of Deposit, $3 5.50%, 4/14/96 2,744 1 4.00%, 4/25/96 1,085 1 5.00%, 6/3/96 1,178 ------------ Total short-term investments (cost $5,007) 5,007 ------------ OUTSTANDING OPTIONS-PURCHASED*--0.4% - ------------------------------------------------------------ Put Options Purchased Contracts 49 S&P 500 Index, expiring 6/22/96 @ $640.00 (cost $607,845) 784,000 ------------ - ------------------------------------------------------------ Total Investments--107.0% (cost $189,687,074; Note 3) 229,088,225 Liabilities in excess of other assets--(7.0%) (14,958,277) ------------ Net Assets--100% $214,129,948 ------------ ------------
- --------------- * Non-income producing security. D Indicates a restricted security; the cost of such securities is $3,711,449. The aggregate value ($4,773,408) is approximately 2.2% of net assets. DD Fair Valued security. P.P.--Represents a private placement. - ------------------------------------------------------------------------------- 4 See Notes to Financial Statements. Statement of Assets and Liabilities FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------
Assets March 31, 1996 Investments, at value (cost $189,687,074).................................................................. $ 229,088,225 Cash......................................................................... .............................. 25,054 Receivable for investments sold............................................................................ 369,431 Dividends and interest receivable................................................................... ....... 247,619 Deferred expenses and other assets......................................................................... 108,231 -------------- Total assets....................................................................... ..................... 229,838,560 -------------- Liabilities Loan payable (Note 4)........................................................................... ........... 9,700,000 Payable for investments purchased.................................................................... ...... 5,501,494 Advisory fee payable...................................................................... ................. 316,869 Administration fee payable...................................................................... ........... 75,020 Accrued expenses..................................................................... ...................... 68,633 Loan interest payable (Note 4)............................................................................. 29,644 Deferred director's fees......................................................................... .......... 16,952 -------------- Total liabilities.................................................................. ..................... 15,708,612 -------------- Net Assets....................................................................... .......................... $ 214,129,948 -------------- -------------- Net assets were comprised of: Common stock, at par; 17,124,177 shares issued....................................................................... ...... $ 17,124 Paid-in capital in excess of par........................................................................ 172,309,516 Cost of 1,501,100 shares held in treasury............................................................... (17,300,834) -------------- 155,025,806 Undistributed net investment income..................................................................... 529,985 Accumulated net realized gains.......................................................................... 19,173,006 Net unrealized appreciation of investments.............................................................. 39,401,151 -------------- Net assets, March 31, 1996......................................................................... ..... $ 214,129,948 -------------- -------------- Net asset value per share ($214,129,948 / 15,623,077 shares of common stock outstanding)................... $13.71 -------------- --------------
- ------------------------------------------------------------------------------- See Notes to Financial Statements. 5 FIRST FINANCIAL FUND, INC. Statement of Operations - ------------------------------------------------------------ - ------------------------------------------------------------
Year Ended Net Investment Income March 31, 1996 Income Dividends............................... $ 4,034,586 Interest................................ 268,492 ---------------- Total income......................... 4,303,078 ---------------- Expenses Investment advisory fee................. 1,254,978 Administration fee...................... 286,195 Custodian's fees and expenses........... 109,000 Reports to shareholders................. 62,000 Insurance expense....................... 59,000 Legal fees and expenses................. 48,000 Listing fees............................ 45,000 Director's fees and expenses............ 33,000 Audit fee and expenses.................. 25,000 Transfer agent's fees and expenses...... 21,000 Miscellaneous........................... 9,570 ---------------- Total operating expenses............. 1,952,743 Loan interest (Note 4).................. 456,624 ---------------- Total expenses....................... 2,409,367 ---------------- Net investment income...................... 1,893,711 ---------------- Realized and Unrealized Gain on Investments Net realized gain on investment transactions............................ 44,064,406 Net change in unrealized appreciation/depreciation of investments............................. 28,675,777 ---------------- Net gain on investments.................... 72,740,183 ---------------- Net Increase in Net Assets Resulting from Operations.................. $ 74,633,894 ---------------- ----------------
FIRST FINANCIAL FUND, INC. Statement of Cash Flows
Year Ended Increase (Decrease) in Cash March 31, 1996 Cash flows provided from operating activities Dividends and interest received.......... $ 4,169,387 Operating expenses paid.................. (1,867,695) Loan interest and commitment fees paid... (472,861) Proceeds from maturities of short-term portfolio investments, net............ 1,494,788 Purchases of long-term portfolio investments........................... (166,061,232) Proceeds from disposition of long-term portfolio investments................. 187,720,156 Deferred expenses and other assets....... 56,338 -------------- Net cash provided from operating activities............................ 25,038,881 -------------- Cash used for financing activities Cash dividends paid...................... (18,718,187) Net decrease in notes payable............ (6,300,000) -------------- Net cash used for financing activities... (25,018,187) -------------- Net increase in cash..................... 20,694 Cash at beginning of year................ 4,360 -------------- Cash at end of year...................... $ 25,054 -------------- -------------- Reconciliation of Net Increase in Net Assets to Net Cash from Operating Activities Net increase in net assets resulting from operations............................... $ 74,633,894 -------------- Increase in investments..................... 18,095,763 Net realized gain on investment transactions............................. (44,064,406) Net change in unrealized appreciation/depreciation of investments.............................. (28,675,777) Decrease in receivable for investments sold..................................... 3,431,899 Increase in dividends and interest receivable............................... (133,691) Decrease in deferred expenses and other assets................................... 56,338 Increase in payable for investments purchased................................ 1,626,050 Increase in accrued expenses and other liabilities.............................. 68,811 -------------- Total adjustments..................... (49,595,013) -------------- Net cash provided from operating activities............................... $ 25,038,881 -------------- --------------
- ------------------------------------------------------------------------------- 6 See Notes to Financial Statements. FIRST FINANCIAL FUND, INC. Statement of Changes in Net Assets - ------------------------------------------------------------ - ------------------------------------------------------------
Year Ended March 31, Increase (Decrease) ------------------------------ in Net Assets 1996 1995 ------------ ------------ Operations Net investment income....... $ 1,893,711 $ 753,685 Net realized gain on investment transactions............. 44,064,406 34,989,298 Net change in unrealized appreciation/depreciation of investments........... 28,675,777 (1,072,927) ------------ ------------ Net increase in net assets resulting from operations............... 74,633,894 34,670,056 ------------ ------------ Dividends and distributions (Note 1) Dividends from net investment income........ (2,148,396) (281,714) Distributions from net realized gains on investments.............. (33,085,304) (49,356,052) Value of Fund shares issued to shareholders in reinvestment of dividends and distributions............... 16,515,513 29,609,858 ------------ ------------ Total increase................. 55,915,707 14,642,148 Net Assets Beginning of year.............. 158,214,241 143,572,093 ------------ ------------ End of year.................... $214,129,948 $158,214,241 ------------ ------------ ------------ ------------
FIRST FINANCIAL FUND, INC. Notes to Financial Statements 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 (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: Each security traded on a national securities exchange will be valued on the basis of the last sales price on the valuation date on the principal exchange on which the security is traded. Securities traded in the over-the-counter market and on one or more exchanges will generally be valued using the quotations the Board of Directors or its delegate believe reflect most closely the value of such securities. Securities for which no trades have taken place that day and unlisted securities for which market quotations are readily available are valued at the latest bid price. Securities for which market quotations are not readily available, including restricted securities, 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. The Fund may invest up to 20% of its total assets in securities which are not readily marketable, including those which are restricted as to disposition under securities law (``restricted securities''). With regards to the restricted securities held by the Fund at March 31, 1996, the Fund may - ------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Notes to Financial Statements FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------------------------- not demand registration by the issuers. Restricted securities are valued pursuant to the valuation procedures noted above. 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. Cash, as used in the Statement of Cash Flows, is the amount reported as ``Cash'' in the Statement of Assets and Liabilities. 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. 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 the Investment Adviser and with Prudential Mutual Fund Management, Inc. (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, 1996 were $166,295,542 and $184,037,362, respectively. The cost basis of the Fund's investments, including short-term investments, at March 31, 1996 was $190,155,143; and, accordingly, net unrealized appreciation for federal income tax purposes was $38,933,082 (gross unrealized appreciation--$48,042,088; gross unrealized depreciation--$9,109,006). - ------------------------------------------------------------ Note 4. Borrowings The Fund has a credit agreement (the ``Agreement'') with an unaffiliated lender. The maximum commitment under the Agreement is $20,000,000. 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, 1996 was $8,000,334 at a weighted average interest rate of 6.84%. The highest face amount of borrowing outstanding at any month end during the year ended March 31, 1996 was $16,000,000. The Fund's borrowings on March 31, 1996 ($9,700,000 at 6.422%) matures on July 8, 1996. - ------------------------------------------------------------ Note 5. Capital There are 50 million shares of $.001 par value common stock authorized. Of the 17,124,177 shares issued as of March 31, 1996, the Investment Adviser owned 10,994 shares. During the fiscal years ended March 31, 1996 and March 31, 1995, the Fund issued 1,300,435 and 3,054,137 shares in connection with cash distributions paid in stock, respectively. - ------------------------------------------------------------------------------- 8 Financial Highlights FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------
Year Ended March 31, - ----------------------------------------------------------- 1996 1995 1994 1993 1992 -------- - -------- -------- -------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year.......................... $ 11.05 $ 12.74 $ 16.52 $ 10.50 $ 6.35 -------- - -------- -------- -------- ------- Income from investment operations Net investment income....................................... .13 .05 .04 .08 .11 Net realized and unrealized gain (loss) on investments...... 4.99 2.76 3.27 7.89 4.15 -------- - -------- -------- -------- ------- Total from investment operations......................... 5.12 2.81 3.31 7.97 4.26 -------- - -------- -------- -------- ------- Less dividends and distributions Dividends from net investment income........................ (.15) (.03) (.05) (.02) (.11) Distributions in excess of net investment income............ -- -- -- -- (.01) Distributions from net capital gains........................ (2.31) (4.38) (6.63) (2.02) -- -------- - -------- -------- -------- ------- Total dividends and distributions........................ (2.46) (4.41) (6.68) (2.04) (.12) -------- - -------- -------- -------- ------- Increase resulting from Fund share repurchase............... -- -- .08 .12 .01 Capital charge resulting from the issuance of Fund shares... -- (.09) (.49) (.03) -- -------- - -------- -------- -------- ------- Net asset value, end of year(a)............................. $ 13.71 $ 11.05 $ 12.74 $ 16.52 $ 10.50 -------- - -------- -------- -------- ------- -------- - -------- -------- -------- ------- Market price per share, end of year(a)...................... $ 12.625 $ 11.125 $ 12.00 $ 15.125 $ 10.00 -------- - -------- -------- -------- ------- -------- - -------- -------- -------- ------- TOTAL INVESTMENT RETURN(b):................................. 35.46% 34.83% 24.22% 72.89% 62.32% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000)............................... $214,130 $158,214 $143,572 $154,090 $99,067 Average net assets (000).................................... $195,421 $164,322 $158,100 $125,361 $80,947 Ratios to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses............................. 1.00% 1.03% 1.11% 1.13% 1.23% Total expenses........................................... 1.23% 1.58% 1.36% 1.21% 1.65% Net investment income.................................... .97% 0.46% 0.25% 0.62% 1.33% Portfolio turnover rate..................................... 82% 103% 139% 105% 89% Total debt outstanding at end of year (000 omitted)......... $ 9,700 $ 16,000 $ 15,000 -- $ 9,000 Asset coverage per $1,000 of debt outstanding............... $ 23,075 $ 10,888 $ 10,571 -- $12,007 Average commission rate paid per share...................... $ .0415 -- -- -- --
- --------------- (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 years 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 Independent Auditors' Report FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------------------------- The Shareholders and Board of Directors First Financial Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of First Financial Fund, Inc. as of March 31, 1996, the related statements of operations and of cash flows for the year then ended and of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of the securities owned as of March 31, 1996, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of First Financial Fund, Inc. as of March 31, 1996, the results of its operations, its cash flows, the changes in its net assets and its financial highlights for the respective stated periods in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP New York, New York May 9, 1996 Tax Information 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, 1996) 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, 1996, the Fund paid dividends and distributions totalling $2.46 per share, comprised of $.15 ordinary income and $1.77 short-term capital gains which are taxable as ordinary income and $.54 long-term capital gains which are taxed as such. Further, we wish to advise you that 13.88% of the dividends taxable as ordinary income and paid in the fiscal year ended March 31, 1996 qualified for the corporate dividend received deduction available to corporate taxpayers. In January 1997, 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 1996 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. - ------------------------------------------------------------------------------- 10 Supplemental Proxy Information FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------------------------- The Annual Meeting of Shareholders of First Financial Fund, Inc. (The ``Fund'') was held on July 31, 1995 at the offices of Prudential Securities Incorporated, One Seaport Plaza, New York, New York. The meeting was held for the following purposes: (1) To elect the following two directors to serve as follows: Director Class Term Expiring ---------------------- ------ -------- --------- Robin B. Smith III 3 years 1998 Nancy H. Teeters III 3 years 1998 Directors whose term of office continued beyond this meeting are Daniel S. Ahearn, Edward D. Beach and Thomas T. Mooney. (2) To ratify the selection of Deloitte & Touche LLP as independent public accountants for the fiscal year ending March 31, 1996. (3) To transact such other business as may properly come before the meeting or any adjournment thereof. The results of the proxy solicitation on the above matters were as follows:
Director/Auditor Votes for Votes against Votes withheld Abstentions ---------------------- ----------- -------------- - --------------- ------------ (1) Robin B. Smith 11,872,912 -- 75,559 -- Nancy H. Teeters 11,846,978 -- 101,493 -- (2) Deloitte & Touche LLP 11,828,820 55,368 - -- 64,284 (3) There was no other business voted upon at the Annual Meeting of Shareholders.
- ------------------------------------------------------------------------------- 11 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 street or other nominee name, then to the nominee) by the custodian, as dividend disbursing agent. 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 net asset value exceeds the market price of Shares on the valuation date or the Fund declares a dividend or other distribution payable only in cash, 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 average per share purchase price paid by the Plan Agent may exceed the net asset value per share, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. The 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 Edward D. Beach Eugene C. Dorsey Thomas T. Mooney Robin B. Smith Nancy H. Teeters Investment Adviser Wellington Management Company 75 State Street Boston, Massachusetts 02109 Administrator Prudential Mutual Fund Management, Inc. One Seaport Plaza New York, NY 10292 Custodian and Transfer Agent State Street Bank and Trust Company One Heritage Drive North Quincy, MA 02171 Independent Auditors Deloitte & Touche LLP Two World Financial Center New York, NY 10281 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 information about the Fund's portfolio holdings for the period covered by the report and are subject to change thereafter. This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of Fund shares. First Financial Fund, Inc. One Seaport Plaza New York, NY 10292 For information call toll-free (800) 451-6788 320228109 -----END PRIVACY-ENHANCED MESSAGE-----