-----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, SfEN0M8N82BBNq1ZzhCghMIRUd02QeqFyWY9GHQF8zj17HnArOtZcFOKw3/Qe7E9 LfA9o+/me/mN4JYuXkN9FQ== /in/edgar/work/20000608/0000898733-00-000429/0000898733-00-000429.txt : 20000919 0000898733-00-000429.hdr.sgml : 20000919 ACCESSION NUMBER: 0000898733-00-000429 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000608 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL FUND INC CENTRAL INDEX KEY: 0000790202 STANDARD INDUSTRIAL CLASSIFICATION: [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: 651262 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 0001.txt FIRST FINANCIAL FUND, INC. First Financial Fund ANNUAL REPORT March 31, 2000 Letter To Shareholders May 1, 2000 Dear Fellow Shareholder: Waiting is the hardest part. In an investment world where stock prices soar 20, 50, 100% or more virtually overnight, "value" investing seems dull, old-fashioned, a waste of time. Lost in the madness of many of today's stock stories is the concept of investment return: What is the investor receiving for the capital provided? Too often the return is only a story, a concept, an unbridled sense of optimism that is, in itself, "justification enough." Value creation does not always mean profit today or positive cash flow or even a track record of earnings growth. But profits, at some future date, must be there. Morever, profits today are worth more than the same profits tomorrow. The frustration of waiting aside, we continue to be encouraged by the profitability of First Financial's holdings. With our banks, we have tried to focus on those not over-loaned, those with excess capital or those whose balance sheets are asset sensitive. This has resulted in generally at or better than expected earnings results. The asset resolution firms have benefited from a stronger economy and firmer real estate prices. For example, LNR Corporation should garner more and more research coverage as it continues to exceed earnings forecasts while Resource America is close to unlocking substantial value through outright sales of their leasing and real estate holdings. TOTAL RETURN For The Period Ended March 31, 2000 6 Mos. 1 Year 3 Years 5 Years First Financial Fund's NAV1 -3.6% -0.5% -2.9% 13.2% S&P 500 17.5 17.9 27.4 26.8 NASDAQ Composite2 66.5 85.8 55.3 41.1 NASDAQ Banks2 -9.1 -12.6 3.6 14.7 SNL All Daily Thrift2 -10.4 -22.9 1.1 14.4 SNL MBS REITS2 -10.7 -26.3 -17.2 8.4 SNL Mortgage Banks2 -25.1 -39.7 -23.5 -2.9 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, 2000 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. The worm has turned in the "e-finance" sector. Most of these internet-based financial intermediaries have plummeted from their highs, suffering from poor balance sheets, severe negative cash flow and a marked increase in competition from both old and new economy companies. While the internet will continue to revolutionize the delivery of financial services, it appears that investors want profits as much as promises. 1 Chief of all the waiting is the Fed. Most investors have shied away from financials believing that either the rising interest rates or the ensuing recession will play havoc on bank earnings. While we would quibble both with premise and conclusion, few investors will return to financials until the Fed is finished. We are betting this is sooner -- this year -- rather than later. Further, we don't believe a recession is necessary to slow economic growth to a more manageable or desirable rate. Waiting is still the hardest part. Stay the course. Sincerely, Nicholas C. Adams Portfolio Manager Senior Vice President Wellington Management Company, LLP 2 Portfolio of Investments as of March 31, 2000 FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------
Shares Description Value (Note 1) - ----------------------------------------------------------- LONG-TERM INVESTMENTS--111.2% COMMON STOCKS--111.2% - ------------------------------------------------------------ Banks & Thrifts--74.2% 12,800 Abington Bancorp, Inc. $ 124,800 34,600 Algiers Bancorp, Inc. 259,500 1,339,600 American Financial Holdings, Inc.* 16,158,925 139,300 Bostonfed Bancorp, Inc. 1,541,006 89,640 Broadway Financial Corp., Delaware 694,710 148,500 Cameron Financial Corp. 1,911,937 208,900 Capital Crossing Bank* 2,102,056 226,500 Catskill Financial Corp. 2,548,125 86,600 CBES Bancorp, Inc. 1,017,550 142,538 CCF Holding Co. 1,639,187 41,400 Centura Banks, Inc. 1,896,638 156,662 Charter One Financial, Inc.* 3,289,902 118,000 Commercial Bank New York 1,128,375 60,000 Community Bank San Jose California(a) 1,677,000 155,500 Community Financial Corp. 1,448,094 354,400 Connecticut Bancshares, Inc.* 3,831,950 74,600 CSB Financial Group, Inc.* 1,119,000 196,000 Downey Financial Corp. 4,165,000 1,184,200 East West Bancorp, Inc. 13,100,212 25,000 Eldorado Bancshares, Inc. 200,000 202,900 Fidelity Federal Bancorp 557,975 204,200 First Commerce Bancshares, Inc. 7,081,050 24,000 First Financial Corp. 246,000 342,700 FirstFed America Bancorp, Inc. 3,684,025 252,000 FirstFed Bancorp, Inc. 2,331,000 90,000 FleetBoston Financial Corp. 3,285,000 40,800 Hallmark Capital Corp.* 382,500 16,666 HFB Financial Corp. 202,075 134,200 Highland Bancorp, Inc.* 2,013,000 488,234 Hudson United Bancorp* 10,588,575 9,375 Independent Bankshares, Inc. 168,750 327,400 ITLA Capital Corp.* 4,174,350 41,600 Lincoln Bancorp Indiana 413,400 140,500 MetroCorp Bancshares, Inc. 957,156 31,200 Mystic Financial, Inc. 308,100 301,000 Northeast Pennsylvania Financial Corp. $ 2,709,000 49,600 Oregon Trail Financial Corp. 437,100 91,000 Pacific Century Financial Corp.* 1,848,438 45,000 Pacific Crest Capital, Inc. 478,125 286,000 People's Bank 5,988,125 34,600 Peoples Financial Corp. 216,250 165,930 Perpetual Federal Savings Bank 2,426,726 92,500 PrivateBankcorp, Inc.* 971,250 144,102 Progress Financial Corp. 1,576,116 317,300 Provident Financial Holdings, Inc.* 4,462,031 40,650 Redwood Financial, Inc.* 289,631 45,000 River Valley Bancorp 469,688 47,800 Rowan Bancorp, Inc.* 908,200 140,000 Southwest Bancorp, Inc., Oklahoma* 2,397,500 32,500 St. Landry Financial Corp.* 373,750 85,300 Sterling Financial Corp.* 853,000 35,100 Team Financial, Inc. 293,963 238,200 Thistle Group Holdings Co.* 1,488,750 7,276 Tri-County Bancorp, Inc. 75,489 670,600 Troy Financial Corp.* 6,873,650 497,100 UCBH Holdings, Inc. 10,687,650 299,000 Unionbancal Corp. 8,241,187 160,650 Woronoco Bancorp, Inc.* 1,546,256 482,850 WSFS Financial Corp. 6,005,447 160,800 Yardville National Bancorp 1,442,175 ------------ 159,306,420 - ------------------------------------------------------------ Other Financial Intermediaries--37.0% 321,000 American Cap. Strategies Ltd.* 8,145,375 511,800 Anthracite Capital, Inc. 3,646,575 245,600 BNC Mortgage, Inc.* 2,271,800 301,200 Central Financial Acceptance Corp.* 1,694,250 753,700 Dynex Capital, Inc.* 4,239,563 227,875 First Mortgage Corp.* 672,943 300,000 Fortress Investment Corp. 4,012,500 272,590 Healthcare Financial Partners, Inc.(a) 4,579,512 477,600 Imperial Credit Industries, Inc.* 2,149,200 128,016 Inco Homes Corp.* 32,004
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of March 31, 2000 FIRST FINANCIAL FUND, INC. - ------------------------------------------------------------
Shares Description Value (Note 1) - ------------------------------------------------------------ Other Financial Intermediaries (cont'd.) 39,500 John Hancock Financial Services, Inc.* $ 713,469 296,000 LASER Mortgage Management, Inc. 1,165,500 840,000 LNR Property Corp. 16,012,500 1,100,766 Ocwen Financial Corp.* 8,530,936 300,000 Prime Capital Corp., Inc.* 225,000 412,600 RB Asset, Inc.* 1,650,400 1,450,000 Resource America, Inc. 10,512,500 168,000 Resource Asset Investment Trust 1,806,000 102,200 Sun Life Financial Services of Canada* 1,098,650 545,300 Sundance Homes, Inc.* 174,496 780,900 Ugly Duckling Corp.* 6,003,169 ------------ 79,336,342 ------------ Total common stocks (cost $283,771,250) 238,642,762 ------------ - ------------------------------------------------------------ WARRANTS* 109,036 Healthcare Financial Partners, Inc. expiring December '01 (cost $0) 0 ------------ Total long-term investments (cost $283,771,250) 238,642,762 ------------ Principal Amount (000) Description Value (Note 1) - ------------------------------------------------------------ SHORT-TERM INVESTMENTS--9.2% - ------------------------------------------------------------ Repurchase Agreement--9.2% $19,736 Warburg Dillon Read LLC, 6.10%, dated 3/31/00, due 4/03/00 in the amount of $19,746,032 (cost $19,736,000; collateralized by $15,037,000 U.S. Treasury Notes, 12.75%, due 11/15/10, value of collateral including interest $20,102,873) $ 19,736,000 ------------ - ------------------------------------------------------------ Certificates Of Deposit 1 Brookline Savings 5.25%, 5/28/00 1,425 21 First Fed Monesson 4.55%, 4/14/00 20,880 21 Naugatuck Valley Saving & Loan Assoc., 3.85%, 4/27/00 20,861 ------------ Total certificates of deposit (cost $43,406) 43,166 ------------ - ------------------------------------------------------------ WARRANTS* 1 Golden State Bancorp, Inc. expiring January '01 (cost $0) 1 ------------ Total short-term investments (cost $19,779,406) 19,779,167 ------------ - ------------------------------------------------------------ Total Investments--120.4% (cost $303,550,656; Note 3) 258,421,929 Liabilities in excess of other assets--(20.4%) (43,760,208) ------------ Net Assets--100% $214,661,721 ------------ ------------
- --------------- * Non-income-producing security. (a) Indicates a fair valued security. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Statement of Assets and Liabilities FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- Assets March 31, 2000 Investments, at value (cost $303,550,656).................................................................. $258,421,929 Cash....................................................................................................... 128 Receivable for investments sold............................................................................ 2,317,597 Dividends and interest receivable.......................................................................... 282,520 Other assets............................................................................................... 115,370 -------------- Total assets............................................................................................ 261,137,544 -------------- Liabilities Loan payable (Note 4)...................................................................................... 45,000,000 Payable for investments purchased.......................................................................... 724,076 Advisory fee payable....................................................................................... 352,534 Loan interest payable (Note 4)............................................................................. 237,439 Administration fee payable................................................................................. 80,858 Accrued expenses........................................................................................... 57,765 Deferred directors' fees................................................................................... 23,151 -------------- Total liabilities....................................................................................... 46,475,823 -------------- Net Assets................................................................................................. $214,661,721 -------------- -------------- 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 Cost of 436,200 shares held in treasury................................................................. (3,617,561) -------------- 274,483,568 Undistributed net investment income..................................................................... 1,089,200 Accumulated net realized losses......................................................................... (15,782,320) Net unrealized depreciation on investments.............................................................. (45,128,727) -------------- Net assets, March 31, 2000.............................................................................. $214,661,721 -------------- -------------- Net asset value per share ($214,661,721 /24,628,781 shares of common stock outstanding).................... $8.72 -------------- --------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 FIRST FINANCIAL FUND, INC. Statement of Operations - ------------------------------------------------------------
Year Ended Net Investment Income March 31, 2000 Income Dividends................................ $ 7,243,356 Interest................................. 888,698 -------------- Total income.......................... 8,132,054 -------------- Expenses Investment advisory fee.................. 1,501,017 Administration fee....................... 345,244 Legal fees and expenses.................. 182,000 Reports to shareholders.................. 171,000 Custodian's fees and expenses............ 70,000 Insurance expense........................ 57,000 Listing fees............................. 34,000 Transfer agent's fees and expenses....... 25,000 Audit fee and expenses................... 22,000 Directors fees........................... 16,000 Miscellaneous............................ 10,341 -------------- Total operating expenses.............. 2,433,602 Loan interest (Note 4)................... 2,638,950 -------------- Total expenses........................ 5,072,552 -------------- Net investment income....................... 3,059,502 -------------- Realized and Unrealized Gain (Loss) on Investments Net realized loss on investment transactions............................. (7,515,804) Net change in unrealized appreciation (depreciation) of investments............ 2,825,134 -------------- Net loss on investments..................... (4,690,670) -------------- Net Decrease in Net Assets Resulting from Operations................... $ (1,631,168) -------------- --------------
FIRST FINANCIAL FUND, INC. Statement of Cash Flows - ------------------------------------------------------------
Year Ended Increase (Decrease) in Cash March 31, 2000 Cash flows provided from operating activities Dividends and interest received............ $ 8,197,163 Operating expenses paid.................... (2,195,329 ) Loan interest paid......................... (2,735,691 ) Purchases of short-term portfolio investments, net........................ (17,977,045 ) Purchases of long-term portfolio investments............................. (164,396,396 ) Proceeds from disposition of long-term portfolio investments................... 184,664,425 Other assets............................... 30,696 -------------- Net cash provided from operating activities.............................. 5,587,823 -------------- Cash used for financing activities Cash dividends paid........................ (1,970,302 ) Cash used to reacquire Fund shares......... (3,617,561 ) -------------- Net cash used for financing activities..... (5,587,863 ) -------------- Net decrease in cash....................... (40 ) Cash at beginning of year.................. 168 -------------- Cash at end of year........................ $ 128 -------------- -------------- Reconciliation of Net Decrease in Net Assets to Net Cash Provided from Operating Activities Net decrease in net assets resulting from operations................................. $ (1,631,168 ) -------------- Decrease in investments....................... 3,368,144 Net realized loss on investment transactions............................... 7,515,804 Net increase in unrealized appreciation (depreciation) of investments.............. (2,825,134 ) Decrease in receivable for investments sold... 128,983 Decrease in dividends and interest receivable................................. 65,109 Decrease in other assets...................... 30,696 Decrease in payable for investments purchased.................................. (1,206,143 ) Increase in accrued expenses and other liabilities................................ 141,532 -------------- Total adjustments....................... 7,218,991 -------------- Net cash provided from operating activities... $ 5,587,823 -------------- --------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 FIRST FINANCIAL FUND, INC. Statement of Changes in Net Assets Notes to Financial Statements - ------------------------------------------------------------
Year Ended March 31, Increase (Decrease) ------------------------------- in Net Assets 2000 1999 ------------ ------------- Operations Net investment income...... $ 3,059,502 $ 2,686,510 Net realized gain (loss) on investment transactions............ (7,515,804) 31,773,999 Net change in unrealized appreciation (depreciation) of investments............. 2,825,134 (181,559,749) ------------ ------------- Net decrease in net assets resulting from operations.............. (1,631,168) (147,099,240) ------------ ------------- Dividends and distributions (Note 1) Dividends from net investment income....... (1,970,302) (1,023,852) Distributions from net realized gains on investments............. -- (51,039,444) Distributions in excess of net realized gains.......... -- (11,214,443) Value of Fund shares issued to shareholders in reinvestment of dividends and distributions................. -- 44,405,793 Cost of Fund shares reacquired.................... (3,617,561) -- ------------ ------------- Total decrease................ (7,219,031) (165,971,186) Net Assets Beginning of year............. 221,880,752 387,851,938 ------------ ------------- End of year(a)................ $214,661,721 $ 221,880,752 ------------ ------------- ------------ ------------- - --------------- (a) Includes undistributed net investment income of.......... $ 1,089,200 -- ------------ -------------
First Financial Fund, Inc. (the 'Fund') was incorporated in Maryland on March 3, 1986, as a closed-end, diversified investment company. The Fund's primary investment objective is to achieve long-term capital appreciation with the secondary objective of current income by investing in securities issued by savings and banking institutions, mortgage banking institutions and their holding companies. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry or region. - ------------------------------------------------------------ Note 1. Accounting Policies The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation: Securities for which market quotations are readily available--including securities listed on national securities exchanges and those traded over-the-counter--are valued at the last quoted sales price on the valuation date on which the security is traded. If such securities were not traded on the valuation date, but market quotations are readily available, they are valued at the most recently quoted bid price provided by an independent pricing service or by principal market makers. Securities for which market quotations are not readily available will be valued at fair value as determined in good faith according to pricing procedures developed by the Investment Adviser and approved by the Board of Directors. Short-term securities which mature in more than 60 days are valued at current market quotations. Short-term securities which mature in 60 days or less are valued at amortized cost. In connection with repurchase agreement transactions with financial institutions, it is the Fund's policy that its custodian take possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. If the seller defaults, and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. Cash Flow Information: The Fund invests in securities and pays dividends from net investment income and distributions from net realized gains which are paid in cash or are reinvested at the discretion of shareholders. These activities are reported in the Statement of Changes in Net Assets and additional information on cash receipts and cash payments is - -------------------------------------------------------------------------------- 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. - ------------------------------------------------------------ Note 2. Agreements The Fund has agreements with Wellington Management Company, LLP (the 'Investment Adviser') and with Prudential Investments Fund Management LLC (the 'Administrator'). The Investment Adviser makes investment decisions on behalf of the Fund; the Administrator provides occupancy and certain clerical and accounting services to the Fund. The Fund bears all other costs and expenses. The investment advisory agreement provides for the Investment Adviser to receive a fee, computed monthly and payable quarterly, at the following annual rates: .75% of the Fund's average month-end net assets up to and including $50 million, and .625% of such assets in excess of $50 million. The administration agreement provides for the Administrator to receive a fee, computed monthly and payable quarterly, at the annual rate of .15% of the Fund's average month-end net assets. Note 3. Portfolio Securities Purchases and sales of investment securities, other than short-term investments, for the year ended March 31, 2000 were $162,548,253 and $184,514,738, respectively. The cost basis of the Fund's investments for federal income tax purposes, including short-term investments, at March 31, 2000 was $306,146,199; and, accordingly, net unrealized depreciation for federal income tax purposes was $47,724,270 (gross unrealized appreciation--$21,217,166; gross unrealized depreciation--$68,941,436). For federal income tax purposes, the Fund has a capital loss carryforward as of March 31, 2000 of approximately $6,483,800 which expires in 2008. Accordingly, no capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such carryforward. The Fund will elect to treat net capital losses of approximately $6,703,000 incurred in the five month period ended March 31, 2000 as having occurred in the following fiscal year. - ------------------------------------------------------------ Note 4. Borrowings The Fund has a credit agreement (the 'Agreement') with an unaffiliated lender. The maximum commitment under the Agreement is $45,000,000. These borrowings may be set to any desired maturity at a rate of interest determined by the lender at the time of borrowing. The current borrowings are due on April 3, 2000. However, the Fund intends to renew the loan on a daily basis through use of the credit agreement discussed above. The credit agreement expires on May 31, 2000. While outstanding, the borrowings will bear interest, payable monthly. The average daily balance outstanding for the year ended March 31, 2000 was $45,000,000 at a weighted average interest rate of 5.86%. The highest face amount of borrowing outstanding at any month-end during the year ended March 31, 2000 was $45,000,000 (as of March 31, 2000). The current borrowings are $45,000,000 (at an interest rate of 6.81%). - ------------------------------------------------------------ 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, 2000, the Investment Adviser owned 10,994 shares. During the year ended March 31, 2000, the Fund repurchased 436,200 of its own shares at a weighted average discount of 15.81%. During the fiscal year ended March 31, 1999, the Fund issued 4,587,941 shares in connection with a cash distribution paid in stock. - -------------------------------------------------------------------------------- 8 Financial Highlights FIRST FINANCIAL FUND, INC. - --------------------------------------------------------------------------------
Year Ended March 31, ------------------------------------------------------------ 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year........................... $ 8.85 $ 18.94 $ 15.26 $ 13.71 $ 11.05 -------- -------- -------- -------- -------- Income from investment operations Net investment income........................................ .12 .11 .14 .22 .13 Net realized and unrealized gain (loss) on investments....... (.20) (7.20) 6.84 4.84 4.99 -------- -------- -------- -------- -------- Total from investment operations.......................... (.08) (7.09) 6.98 5.06 5.12 -------- -------- -------- -------- -------- Less dividends and distributions Dividends from net investment income......................... (.08) (.05) (.14) (.21) (.15) Distributions from net realized gains........................ -- (2.59) (2.68) (3.36) (2.31) Distributions in excess of net realized gains................ -- (.45) (.63) -- -- -------- -------- -------- -------- -------- Total dividends and distributions......................... (.08) (3.09) (3.45) (3.57) (2.46) -------- -------- -------- -------- -------- Increase resulting from Fund share repurchase................ .03 -- -- .06 -- Net change resulting from the issuance of Fund shares........ -- .09 .15 -- -- -------- -------- -------- -------- -------- Net asset value, end of year(a).............................. $ 8.72 $ 8.85 $ 18.94 $ 15.26 $ 13.71 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Market price per share, end of year(a)....................... $ 7.8125 $ 7.3125 $ 20.813 $ 14.500 $ 12.625 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN(b):.................................. 7.93% (53.65)% 72.59% 42.10% 35.46% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000)................................ $214,662 $221,881 $387,852 $270,496 $214,130 Average net assets (000)..................................... $230,163 $296,740 $320,484 $238,967 $195,421 Ratios to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses.................................. 1.06% .94% .91% 1.03% 1.00% Total expenses............................................ 2.20% 1.61% 1.25% 1.56% 1.23% Net investment income..................................... 1.33% .91% .82% 1.43% .97% Portfolio turnover rate...................................... 63% 65% 43% 70% 82% Total debt outstanding at end of year (000 omitted).......... $ 45,000 $ 45,000 $ 20,000 $ 18,400 $ 9,700 Asset coverage per $1,000 of debt outstanding................ $ 5,768 $ 5,931 $ 20,393 $ 15,701 $ 23,075
- --------------- (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. 9 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, 2000, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. The accompanying financial highlights for the year 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 19, 2000 - -------------------------------------------------------------------------------- 10 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, 2000) 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, 2000, the Fund paid dividends of $.08 per share, which is taxable as ordinary income. Further, we wish to advise you that 100% of the dividends taxable as ordinary income and paid in the fiscal year ended March 31, 2000 qualified for the corporate dividend received deduction available to corporate taxpayers. In January 2001, 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 2000 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. - -------------------------------------------------------------------------------- 11 Supplemental Proxy Information (Unaudited) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- At the Special Meeting of Stockholders of the Fund reconvened on May 22, 2000 at the offices of Prudential Investments Fund Management LLC, 751 Broad Street, Newark, New Jersey, a majority of the Fund's outstanding shares voted in favor of a proposal to amend the Fund's Articles of Incorporation by adding supermajority voting requirements to approve any change to the Fund's investment objectives, its policies with respect to concentration, or certain business combinations with affiliated stockholders. No other matters were considered at the meeting. The Special Meeting of Stockholders was held initially on April 25, 2000, but was adjourned to permit additional solicitation. The results of the proxy solicitation were as follows: Matter Votes For Votes Against Abstentions - ----------------------------------------------------------------------------------------- Amendment of Articles of Incorporation 12,460,303 6,090,505 384,187
Corporate Governance (Unaudited) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- At its meetings in February and March 2000, the Fund's Board of Directors unanimously approved several changes to the Fund's By-Laws. These changes were as follows: - - Increasing the percentage of outstanding shares necessary to call a special meeting of stockholders from 25 percent to 50 percent. - - Clarifying that no business shall be transacted at any special stockholders' meeting except as provided in the notice of meeting. - - Specifying the individuals with authority to conduct the Fund's stockholder meetings and the powers vested in those persons. - - Modernizing the Fund's provisions to permit proxy voting through electronic means. - - Clarifying that the Fund will indemnify its directors and officers to the maximum extent permitted by applicable federal and Maryland state law. - -------------------------------------------------------------------------------- 12 [This page intentionally left blank] [This page intentionally left blank] [This page intentionally left blank] Directors Eugene C. Dorsey Robert E. LaBlane 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-----