ANNUAL REPORT March 31, 1996
First
Financial
Fund, Inc.
(LOGO)
<PAGE>
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
<TABLE>
<CAPTION>
6 Mos. 12 Mos.
<S> <C> <C>
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
</TABLE>
* 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
<PAGE>
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
<PAGE>
Portfolio of Investments as of March 31, 1996 FIRST FINANCIAL FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
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
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
Portfolio of Investments as of March 31, 1996 FIRST FINANCIAL FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
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
------------
------------
</TABLE>
- ---------------
* 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.
<PAGE>
<PAGE>
Statement of Assets and Liabilities FIRST FINANCIAL FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>
<C>
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
--------------
--------------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
FIRST FINANCIAL FUND, INC.
Statement of Operations
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- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income March 31, 1996
<S> <C>
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
----------------
----------------
</TABLE>
FIRST FINANCIAL FUND, INC.
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended
Increase (Decrease) in Cash March 31, 1996
<S> <C>
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
--------------
--------------
</TABLE>
- -------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
FIRST FINANCIAL FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
Increase (Decrease) ------------------------------
in Net Assets 1996 1995
------------ ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
Financial Highlights FIRST FINANCIAL FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
- -----------------------------------------------------------
1996
1995 1994 1993 1992
<S> <C> <C>
<C> <C> <C>
--------
- -------- -------- -------- -------
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
-- -- -- --
</TABLE>
- ---------------
(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
<PAGE>
<PAGE>
Independent Auditors' Report FIRST FINANCIAL FUND, INC.
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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.
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10
<PAGE>
<PAGE>
Supplemental Proxy Information FIRST FINANCIAL FUND, INC.
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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:
<TABLE>
<CAPTION>
Director/Auditor Votes for Votes against Votes
withheld Abstentions
---------------------- ----------- --------------
- --------------- ------------
<S> <C> <C> <C> <C>
<C>
(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.
</TABLE>
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11
<PAGE>
<PAGE>
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.
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12
<PAGE>
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
