-----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, IEJx+miEonjM+/pncRnQBi3xy/RIrHwtkPC45B7IkCa58613t0P+60JvV8EJ7W0m O7+P1DUK+tKRplsJhZYgTQ== 0000790202-98-000002.txt : 19980106 0000790202-98-000002.hdr.sgml : 19980106 ACCESSION NUMBER: 0000790202-98-000002 CONFORMED SUBMISSION TYPE: N-30D/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19980105 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/A SEC ACT: SEC FILE NUMBER: 811-04605 FILM NUMBER: 98500946 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/A 1 FIRST FINANCIAL FUND First Financial Fund, Inc. SEMI ANNUAL REPORT Sept. 30, 1997 Letter To Shareholders October 14, 1997 Dear Fellow Shareholder: We have long since run out of superlatives to describe the bull market in financial stocks. No matter. Like all genuine legends, it speaks for itself. In addition to the now well- known factors fueling the surge in financial stocks, namely, an ideal economy, benign interest rates and industry consolidation, the last six months witnessed a renaissance in investor interest in smaller cap stocks. The results are as follows:
TOTAL RETURN For The Periods Ended September 30, 1997 6 Mos. 12 Mos. First Financial Fund's (at NAV)* 38.14% 59.81% S&P 500 Index 26.3% 40.4% NASDAQ Composite** 38.0% 37.4% NASDAQ Banks** 37.5% 64.8% SNL Daily** 39.7% 71.8%
*The Fund's total return represents the change in net asset value from the beginning of the period noted through September 30, 1997 and assumes the reinvestment of dividends and distributions. Shares of the Fund are traded on the NYSE. Past performance is no guarantee of future results. ** Principal only. On September 30, 1997, First Financial Fund's shares closed at a (NYSE) market price of $22.94 per share, which represented a premium of 8.8% to the net asset value per share of $21.08. Outlook and Strategy We are witnessing a fascinating phenomenon in the area of bank consolidations. As the stock prices of the larger, acquiring banks have risen, their ability to pay commensurate higher prices has increased as well. Combine this ability with acquiring banks' talent to cut more costs out of the acquired entities (50% cost savings are the norm now rather than 30%) and the scene is set for record acquisition prices. Hence, two recent deals, Barnett Banks in Florida and New York Bancorp, a thrift, in which acquisition prices were both north of four times book value should come as no surprise. Then why are our eyes still wide open and mouths agape? Finding absolute value in bank and thrift stocks has gone from difficult to near impossible. It is not uncommon now for a thrift conversion to open at a mid to high single-digit deposit premium, i.e., close to the price at which it would be acquired. As a result, we have shifted some of the Fund's investment dollars to other areas in financial services such as consumer and commercial financials, mortgage REITs and asset workout companies. This latter type of company buys troubled loans from banks or other financial intermediaries. Through the wise use of technology, properly trained and motivated employees and a resolution focus, asset workout firms are able to squeeze more out of a bad loan than a bank can. It hasn't hurt either that banks have largely disbanded their workout departments in their search for greater efficiencies. 1 Once again, we must warn prospective investors that the stock market as well as financial service stocks are expensive by almost every measure. We will diligently search for relative value and, because we are paid to be fully invested, will remain that way. We hope every investor in equities understands that the risks at current valuations are substantial. Thank you for your confidence in us. Sincerely, Nicholas C. Adams Portfolio Manager Senior Vice President Wellington Management Company, LLP 2 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 Price Waterhouse 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, 1997, 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 Portfolio of Investments as of September 30, 1997 (Unaudited) FIRST FINANCIAL FUND, INC. - --------------------------------------------- - ---------------
Shares Description Value (Note 1) - --------------------------------------------- - --------------- LONG-TERM INVESTMENTS--105.3% COMMON STOCKS--98.2% - --------------------------------------------- - --------------- Banks & Thrifts--49.8% 242,700 Acadiana Bancshares, Inc. $ 5,400,075 210,000 Ambanc Holding Co., Inc. 3,386,250 117,900 Banknorth Group, Inc. 6,440,288 125,000 Big Foot Financial Corp.* 2,171,875 257,762 BostonFed Bancorp, Inc. 5,429,112 211,000 Cameron Financial Corp. 4,009,000 189,000 Catskill Financial Corp. 3,118,500 117,800 CCF Holding Co. 1,958,425 106,500 Community Financial Corp. 2,050,125 3,000 Covest Bancshares, Inc. 72,750 74,600 CSB Financial Group, Inc.* 913,850 210,000 Dime Bancorp, Inc. 4,396,875 324,345 Downey Financial Corp. 7,905,909 202,900 Fidelity Federal Bancorp 1,826,100 133,000 First Defiance Financial Corp. 2,078,125 24,000 First Financial Corp. 366,000 311,100 FirstFed America Bancorp, Inc.* 6,805,312 126,000 FirstFed Bancorp, Inc. 2,236,500 201,000 Flushing Financial Corp. 4,798,875 77,000 Fort Bend Holding Corp. 2,983,750 345,000 GA Financial, Inc. 6,425,625 42 Golden State Bancorp, Inc.* 1,255 105,000 GreenPoint Financial Corp. 6,654,375 85,000 GS Financial Corp. 1,375,938 57,900 Hallmark Capital Corp.* 1,476,450 75,400 Hamilton Bancorp, Inc.* 2,073,500 16,667 HFB Financial Corp. 235,417 62,400 Highland Federal Bank, FSB* 1,934,400 78,367 HUBCO, Inc. 2,468,561 9,375 Independent Bankshares, Inc. 168,750 294,000 ITLA Capital Corp.* 5,880,000 246,000 Long Island Bancorp, Inc. 11,562,000 154,000 Mechanics Savings Bank* 3,888,500 169,300 Mid Continent Bancshares, Inc. 6,475,725 50,000 Pamrapo Bancorp, Inc. 1,187,500 350,000 Peopleclquos Bank 11,200,000 65,000 Peoples Financial Corp. 1,186,250 174,600 Perpetual Federal Savings Bank 2,880,900 95,300 Prestige Bancorp, Inc. $ 1,733,269 294,000 Provident Financial Holdings, Inc.* 5,769,750 357,900 RedFed Bancorp, Inc.* 6,218,513 93,800 Redwood Financial, Inc.* 1,043,525 85,000 Regent Bancshares Corp.* 977,495 470,000 River Bank America* 2,702,500 47,800 Rowan Bancorp, Inc.* 860,400 125,600 SFS Bancorp, Inc. 2,794,600 40,500 Southern Community Bancshares, Inc. 658,125 50,000 Southwest Bancorp* 1,475,000 31,400 Sun Bancorp, Inc.* 643,700 10,000 Telebanc Financial Corp.* 170,000 16,500 Three Rivers Financial Corp. 273,281 41,600 Tri-County Bancorp, Inc. 946,400 117,411 Vermont Financial Services Corp. 6,340,194 631,700 Westcorp, Inc. 14,450,137 7,500 Westernbank of Puerto Rico 134,063 168,000 Yonkers Financial Corp. 3,339,000 - ------------ 185,952,794 - --------------------------------------------- - ------------------ Other Financial Intermediaries--48.4% 248,200 Central Financial Acceptance Corp.* 2,606,100 652,400 Doral Financial Corp. 15,983,800 539,000 Dynex Capital, Inc. 7,748,125 224,000 Emergent Group, Inc.* 4,088,000 286,050 Financial Federal Corp.* 5,077,388 73,000 Finova Group, Inc. 6,907,625 528,800 First Merchants Acceptance Corp.* 0 112,000 First Mortgage Corp.* 378,000 47,300 First Sierra Financial, Inc.* 910,525 252,000 FIRSTPLUS Financial Group, Inc.* 14,143,500 1,143,500 IMC Mortgage Co.* 17,581,312 566,400 Imperial Credit Industries, Inc.* 15,009,600 234,600 Imperial Credit Mortgage Holdings, Inc. 6,480,825 128,016 Inco Homes Corp.* 160,020 196,000 Legg Mason, Inc. 10,339,000 230,411 Life Financial Corp.* 4,147,398 1,012,700 Long Beach Financial Corp.* 13,608,156
- --------------------------------------------- - ----------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of September 30, 1997 (Unaudited) FIRST FINANCIAL FUND, INC. - --------------------------------------------- - ---------------
Shares Description Value (Note 1) - --------------------------------------------- - --------------- Other Financial Intermediaries (contclquod.) 209,600 Ocwen Asset Investment Corp. $ 4,794,600 216,500 Ocwen Financial Corp.* 9,120,062 99,000 PMC Commerical Trust, Inc. 1,942,875 330,000 Prime Capital Corp., Inc.* 1,897,500 1,539 Redwood Trust, Inc. 46,170 287,000 Resource Bancshares Mortgage Group, Inc. 3,731,000 372,200 Southern Pacific Funding Corp.* 5,234,063 545,300 Sundance Homes, Inc.* 852,031 904,400 Ugly Duckling Corp.* 13,792,100 378,000 WFS Financial Inc.* 8,221,500 251,500 Wilshire Financial Services Group, Inc.* 6,224,625 - ------------ 181,025,900 - ------------ Total common stocks (cost $238,527,927) 366,978,694 - ------------ - --------------------------------------------- - ------------------ Preferred Stocks--0.7% 100,000 Community Bank, Inc., 13.00%, Ser. B (cost $2,400,000) 2,750,000 - ------------ - --------------------------------------------- - ------------------ Corporate Bonds--1.6% Principal Amount (000) $1,450 Resource America, Inc 12.00%, 8/1/04 1,518,875 4,600 Wilshire Financial Services Group, Inc. 13.00%, 8/15/04 4,577,000 - ------------ Total corporate bonds (cost $6,050,000) 6,095,875 - ------------ - --------------------------------------------- - ------------------ Convertible Bonds--2.8% 3,000 RAC Financial Group, Inc., 7.25%, 8/15/03 (cost $3,415,094) 10,470,000 - ------------ - --------------------------------------------- - ------------------ Warrants*--0.1% Warrants 50,000 Community Bank, Inc., expiring June clquo99 187,500 3 Golden State Bancorp, Inc., expiring March clquo99 0 300,000 UnionFed Financial Corp.,D expiring December clquo98 (cost $0, purchased 3/24/97) $ 0 - ------------ Total warrants (cost $100,000) 187,500 - ------------ - --------------------------------------------- - ------------------ Units*--1.9% Units 466,700 Novastar Financial, Inc.D/DD (1 conv. preferred and 1 warrant) (cost $7,000,500; purchased 12/9/96) 7,000,500 - ------------ Total long-term investments (cost $257,493,521) 393,482,569 - ------------ SHORT-TERM INVESTMENTS--2.6% - --------------------------------------------- - ------------------ Repurchase Agreement--2.6% Principal Amount (000) $9,543 Swiss Bank Corp., 6.05%, dated 9/30/97, due 10/1/97 in the amount of $9,544,604 (cost $9,543,000; value of collateral including accrued interest-$9,980,063) 9,543,000 - ------------ - --------------------------------------------- - ------------------ Certificates Of Deposit First Federal Savings Bank, 3 5.00%, 10/14/97 2,980 Naugatuck Valley Savings & Loan Assoc., 1 4.10%, 10/25/97 1,164 - ------------ 4,144 - ------------ Total short-term investments (cost $9,547,144) 9,547,144 - ------------ - --------------------------------------------- - ------------------ Total Investments--107.9% (cost $267,040,665; Note 3) 403,029,713 Liabilities in excess of other assets--(7.9%) (29,358,523) - ------------ Net Assets--100% $373,671,190 - ------------ - ------------
- --------------- * Non-income-producing security. D Indicates a restricted security; the aggregate cost of such securities is $7,000,500. The aggregate value ($7,000,500) is approximately 1.9% of net assets. DD Fair Valued security. - --------------------------------------------- - ----------------------------------- See Notes to Financial Statements. 4 Statement of Assets and Liabilities (Unaudited) FIRST FINANCIAL FUND, INC. - --------------------------------------------- - ----------------------------------- Assets September 30, 1997 Investments, at value (cost $267,040,665)................................ ............................... $403,029,713 Cash......................................... ............................................. .............. 1,002,583 Receivable for investments sold......................................... ................................ 1,648,258 Dividends and interest receivable................................... .................................... 685,164 Deferred expenses and other assets....................................... ............................... 111,204 - ------------ Total assets....................................... ............................................. ..... 406,476,922 - ------------ Liabilities Loan payable (Note 4)........................................... ........................................ 32,000,000 Advisory fee payable...................................... ............................................. . 532,053 Administration fee payable...................................... ........................................ 123,943 Loan interest payable (Note 4)........................................... ............................... 73,904 Accrued expenses..................................... ............................................. ...... 51,436 Deferred directorclquos fees......................................... ................................... 24,396 - ------------ Total liabilities.................................. ............................................. ..... 32,805,732 - ------------ Net Assets....................................... ............................................. .......... $373,671,190 - ------------ - ------------ Net assets were comprised of: Common stock, at par; 19,629,461 shares issued....................................... ................ $ 19,629 Paid-in capital in excess of par.......................................... ........................... 210,011,537 Cost of 1,901,100 shares held in treasury..................................... ....................... (22,799,722) - ------------ 187,231,444 Undistributed net investment income....................................... ........................... 1,788,926 Accumulated net realized gains........................................ ............................... 48,661,772 Net unrealized appreciation of investments.................................. ......................... 135,989,048 - ------------ Net assets, September 30, 1997......................................... .............................. $373,671,190 - ------------ - ------------ Net asset value per share ($373,671,190 /17,728,361 shares of common stock outstanding)................. $21.08 - ------------ - ------------
- --------------------------------------------- - ----------------------------------- See Notes to Financial Statements. 5 FIRST FINANCIAL FUND, INC. Statement of Operations (Unaudited) - --------------------------------------------- - ---------------
Six Months Ended Net Investment Income September 30, 1997 Income Dividends (net of foreign withholding taxes of $17,148).................. $ 2,597,747 Interest.............................. 479,826 - ------------ Total income....................... 3,077,573 - ------------ Expenses Investment advisory fee............... 974,442 Administration fee.................... 226,366 Custodianclquos fees and expenses..... 48,000 Reports to shareholders............... 33,000 Insurance expense..................... 30,000 Legal fees and expenses............... 28,000 Transfer agentclquos fees and expenses........................... 18,000 Listing fees.......................... 18,000 Audit fee and expenses................ 11,000 Directors fees........................ 7,100 Miscellaneous......................... 6,243 - ------------ Total operating expenses........... 1,400,151 Loan interest (Note 4)................ 646,488 - ------------ Total expenses..................... 2,046,639 - ------------ Net investment income.................... 1,030,934 - ------------ Realized and Unrealized Gain on Investments Net realized gain on investment transactions.......................... 18,290,332 Net change in unrealized appreciation of investments........................... 83,854,332 - ------------ Net gain on investments.................. 102,144,664 - ------------ Net Increase in Net Assets Resulting from Operations................ $103,175,598 - ------------ - ------------
FIRST FINANCIAL FUND, INC. Statement of Cash Flows (Unaudited) - --------------------------------------------- - ---------------
Six Months Ended Increase (Decrease) in Cash September 30, 1997 Cash flows used for operating activities Dividends and interest received........ $ 2,922,657 Operating expenses paid................ (1,264,422) Loan interest paid..................... (839,740) Purchases of short-term portfolio investments, net.................... 32,616,153 Purchases of long-term portfolio investments......................... (103,437,472) Proceeds from disposition of long-term portfolio investments............... 57,375,492 Deferred expenses and other assets..... 29,665 - -------------- Net cash used for operating activities.......................... (12,597,667) - -------------- Cash provided from financing activities Net increase in notes payable.......... 13,600,000 - -------------- Net increase in cash................... 1,002,333 Cash at beginning of period............ 250 - -------------- Cash at end of period.................. $ 1,002,583 - -------------- - -------------- Reconciliation of Net Increase in Net Assets to Net Cash Used for Operating Activities Net increase in net assets resulting from operations............................. $ 103,175,598 - -------------- Increase in investments................... (15,625,336) Net realized gain on investment transactions........................... (18,290,332) Net increase in unrealized appreciation of investments............................ (83,854,332) Decrease in receivable for investments sold................................... 3,218,435 Increase in dividends and interest receivable............................. (154,916) Decrease in deferred expenses and other assets................................. 29,665 Decrease in payable for investments purchased.............................. (1,038,926) Decrease in accrued expenses and other liabilities............................ (57,523) - -------------- Total adjustments................... (115,773,265) - -------------- Net cash used for operating activities.... $ (12,597,667) - -------------- - --------------
- --------------------------------------------- - ----------------------------------- 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 1997 1997 ----------- - - ------------ Operations Net investment income....... $ 1,030,934 $ 3,424,853 Net realized gain on investment transactions............. 18,290,332 62,347,973 Net change in unrealized appreciation of investments.............. 83,854,332 12,733,565 ----------- - - ------------ Net increase in net assets resulting from operations............... 103,175,598 78,506,391 ----------- - - ------------ Dividends and distributions (Note 1) Dividends from net investment income........ - - - (3,196,846) Distributions from net realized gains on investments.............. - - - (51,149,539) Value of Fund shares issued to shareholders in reinvestment of dividends and distributions............ - - - 37,704,525 Cost of Fund shares reacquired............... - - - (5,498,887) ----------- - - ------------ Total increase................. 103,175,598 56,365,644 Net Assets Beginning of period............ 270,495,592 214,129,948 ----------- - - ------------ End of period.................. $373,671,190 $270,495,592 ----------- - - ------------ ----------- - - ------------
FIRST FINANCIAL FUND, INC. Notes to Financial Statements (Unaudited) - --------------------------------------------- - --------------- First Financial Fund, Inc. (the openqopenqFundclquoclquo) 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 openqopenqInvestment Adviserclquoclquo). Investment operations commenced on May 1, 1986. The Fundclquos 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 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 Fundclquos 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 (openqopenqrestricted securitiesclquoclquo). With regards to the restricted securities held by the Fund at September 30, 1997, the Fund - --------------------------------------------- - ----------------------------------- 7 Notes to Financial Statements (Unaudited) FIRST FINANCIAL FUND, INC. - --------------------------------------------- - ----------------------------------- may 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 openqopenqCashclquoclquo in the Statement of Assets and Liabilities. Options: The Fund may either purchase or write options in order to hedge against adverse market movements or fluctuations in value caused by changes in prevailing interest rates or foreign currency exchange rates with respect to securities or currencies which the Fund currently owns or intends to purchase. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an investment. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The investment or liability is adjusted daily to reflect the current market value of the option. If an option expires unexercised, the Fund realizes a gain or loss to the extent of the premium received or paid. If an option is exercised, the premium received or paid is an adjustment to the proceeds from the sale or the cost basis of the purchase in determining whether the Fund has realized a gain or loss. The difference between the premium and the amount received or paid on effecting a closing purchase or sale transaction is also treated as a realized gain or loss. Gain or loss on purchased options is included in net realized gain (loss) on investment transactions. The Fund, as writer of an option, has no control over whether the underlying securities or currencies may be sold (called) or purchased (put). As a result, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. The Fund, as purchaser of an option, bears the risk of the potential inability of the counterparties to meet the terms of their contracts. 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 Fundclquos 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 Fundclquos understanding of the applicable countryclquos 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 the Investment Adviser and with Prudential Investments Fund Management LLC (the openqopenqAdministratorclquoclquo). 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 Fundclquos 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 Fundclquos 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, 1997 were $102,398,546 and $54,157,057, respectively. The cost basis of the Fundclquos investments, including short-term investments, at September 30, 1997 was $268,570,289; and, accordingly, net unrealized appreciation for federal income tax purposes was $134,459,424 (gross unrealized appreciation--$152,525,172; gross unrealized depreciation--$18,065,748). - --------------------------------------------- - ----------------------------------- 8 Notes to Financial Statements (Unaudited) FIRST FINANCIAL FUND, INC. - --------------------------------------------- - ----------------------------------- Note 4. Borrowings The Fund has a credit agreement (the openqopenqAgreementclquoclquo) 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 six months ended September 30, 1997 was $18,886,339 at a weighted average interest rate of 6.37%. The highest face amount of borrowing outstanding at any month end during the six months ended September 30, 1997 was $32,000,000. The Fundclquos borrowings on September 30, 1997 ($32,000,000 at 6.44%) matured on October 24, 1997. - --------------------------------------------- - --------------- Note 5. Capital There are 50 million shares of $.001 par value common stock authorized. Of the 19,629,461 shares issued as of September 30, 1997, the Investment Adviser owned 13,601 shares. During the fiscal year ended March 31, 1997, the Fund issued 2,505,284 shares in connection with a cash distribution paid in stock. - --------------------------------------------- - --------------- Note 6. Dividends On November 12, 1997 the Board of Directors of the Fund declared dividends of $0.14, $1.89, and $1.42 per share from ordinary income, short-term capital gains, and long-term capital gains, respectively, payable on January 13, 1998 to shareholders of record on November 28, 1997. - --------------------------------------------- - ----------------------------------- 9 Financial Highlights (Unaudited) FIRST FINANCIAL FUND, INC. - --------------------------------------------- - -----------------------------------
Six Months Ended Year Ended March 31, September 30, --------------------------- - --------------------------------- 1997 1997 1996 1995 1994 1993 - --------- -------- -------- --- - ----- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period................ $ 15.26 $ 13.71 $ 11.05 $ 12.74 $ 16.52 $ 10.50 - --------- -------- -------- --- - ----- -------- -------- Income from investment operations Net investment income............................... 0.06 .22 .13 .05 .04 .08 Net realized and unrealized gain (loss) on investments.................................. .... 5.76 4.84 4.99 2.76 3.27 7.89 - --------- -------- -------- --- - ----- -------- -------- Total from investment operations................. 5.82 5.06 5.12 2.81 3.31 7.97 - --------- -------- -------- --- - ----- -------- -------- Less dividends and distributions Dividends from net investment income................ -- (.21) (.15) (.03) (.05) (.02) Distributions from net capital gains................ -- (3.36) (2.31) (4.38) (6.63) (2.02) - --------- -------- -------- --- - ----- -------- -------- Total dividends and distributions................ -- (3.57) (2.46) (4.41) (6.68) (2.04) - --------- -------- -------- --- - ----- -------- -------- Increase resulting from Fund share repurchase....... -- .06 - -- -- .08 .12 Capital charge resulting from the issuance of Fund shares....................................... .... -- -- -- (.09) (.49) (.03) - --------- -------- -------- --- - ----- -------- -------- Net asset value, end of period(b)................... $ 21.08 $ 15.26 $ 13.71 $ 11.05 $ 12.74 $ 16.52 - --------- -------- -------- --- - ----- -------- -------- - --------- -------- -------- --- - ----- -------- -------- Market price per share, end of period(b)............ $ 22.9375 $ 14.500 $ 12.625 $ 11.125 $ 12.00 $ 15.125 - --------- -------- -------- --- - ----- -------- -------- - --------- -------- -------- --- - ----- -------- -------- TOTAL INVESTMENT RETURN(c):......................... 58.19% 42.10% 35.46% 34.83% 24.22% 72.89% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000)..................... $ 373,671 $270,496 $214,130 $158,214 $143,572 $154,090 Average net assets (000)............................ $ 301,821 $238,967 $195,421 $164,322 $158,100 $125,361 Ratios to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses..................... 0.93%(a) 1.03% 1.00% 1.03% 1.11% 1.13% Total expenses................................... 1.35%(a) 1.56% 1.23% 1.58% 1.36% 1.21% Net investment income............................ 0.68%(a) 1.43% .97% 0.46% 0.25% 0.62% Portfolio turnover rate............................. 17% 70% 82% 103% 139% 105% Total debt outstanding at end of period (000 omitted)..................................... .... $ 32,000 $ 18,400 $ 9,700 $ 16,000 $ 15,000 -- Asset coverage per $1,000 of debt outstanding....... $ 12,677 $ 15,701 $ 23,075 $ 10,888 $ 10,571 - -- Average commission rate paid per share.............. $ .0423 $ .0530 $ .0415 -- -- - --
- --------------- (a) Annualized. (b) NAV and market value are published in The Wall Street Journal each Monday. (c) 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 less than one year are not 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 Fundclquos shares. - --------------------------------------------- - ----------------------------------- See Notes to Financial Statements. 10 -----END PRIVACY-ENHANCED MESSAGE-----