First
Financial
Fund, Inc.
SEMI
ANNUAL
REPORT
Sept 30, 1996
<PAGE>
Letter To Shareholders October
11, 1996
Fueled by a seemingly bottomless reservoir of cash inflows,
the US equity
market swelled to record levels yet again during the six
months ended
September 30, 1996. The financial sector staged its own
rally of
price appreciation on the strength of consistently higher
earnings,
stabilizing interest rates and, of course, continued
consolidation.
Late in the period, the sector received good news in the
form of a
resolution to the Savings Association Insurance Fund (SAIF).
All
SAIF insured financials will be required to make a "one-
time"
contribution to recapitalize the fund, but shortly
thereafter
will enjoy close to premium parity with their Bank Insurance
Fund brethren. Another hurdle to bank acquisitions of
thrifts
crumbles.
The performance of First Financial Fund and various
benchmarks
is shown as follows:
<TABLE>
TOTAL RETURN
For The Period Ended 9/30/96
<CAPTION>
3 Mos. 6 Mos.
12 Mos.
<S> <C> <C>
<C>
First Financial Fund's NAV 13.3% 19.0%
29.2%
S&P 500 3.1 7.7
20.3
NASDAQ Composite* 3.5 11.4
17.6
NASDAQ Banks* 7.0 9.2
18.7
SNL Daily* 10.9 12.3
18.5
</TABLE>
* Principal only.
On September 30, 1996, First Financial Fund's shares closed
at a market
price of $14.13 per share, which represented a discount of
13.5% to
the net asset value per share of $16.32.
Outlook and Strategy
A number of our investments have approached or exceeded what
we
consider full valuation. Consequently, we have begun to
raise cash
and shift our focus to more stable, more overcapitalized and
higher
yielding financial intermediaries. Particularly in the area
of
consumer finance, we have become more cautious as many
equities
in this area have discounted robust and accelerating growth.
Such
a scenario is unlikely given the rickety state of many
consumer's
balance sheets.
Near-term price appreciation in the finance sector--if there
is
any--will occur chiefly as a result of takeover activity.
Apart
from a few special situations, we don't think there is a lot
of "gas"
left in
1
<PAGE>
the stock market or the financial sector. Because of the
large
discount to net asset value, the Fund's stock has again
become
attractive for repurchase. Indeed, over the last six weeks
we
have bought back 300,000 shares. While we find the larger
discount
of late puzzling, we think it may provide a great
opportunity to
put our growing cash balances to better use.
Thank you for your continued interest in First Financial
Fund.
Sincerely,
Nicholas C. Adams
Portfolio Manager
Wellington Management Company, LLP
2
<PAGE>
Portfolio of Investments as of
September 30, 1996 (Unaudited) FIRST FINANCIAL FUND,
INC.
- - ------------------------------------------------------------
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- - ------------------------------------------------------------
LONG-TERM INVESTMENTS--99.7%
COMMON STOCKS--94.9%
- - ------------------------------------------------------------
Banks & Thrifts--71.2%
43,200 Acadiana Bancshares, Inc. $
594,000
174,000 Affiliated Community Bancorp, Inc.
3,545,250
256,700 Ambanc Holding Co., Inc.*
2,695,350
76,600 Banknorth Group, Inc.
2,834,200
518,000 Bostonfed Bancorp, Inc.
6,863,500
211,000 Cameron Financial Corp.
3,112,250
224,000 Catskill Financial Corp.*
2,688,000
117,800 CCF Holding Co.
1,516,675
177,100 Cenfed Financial Corp.
4,250,400
106,500 Community Financial Corp.*
1,411,125
74,600 CSB Financial Group, Inc.*
699,375
308,000 Dime Bancorp, Inc.*
4,119,500
150,000 Dime Community Bancorp, Inc.*
2,025,000
271,950 Downey Financial Corp.
6,866,737
187,200 Eastern Bancorp, Inc.
3,884,400
202,900 Fidelity Federal Bancorp
2,155,812
76,200 Financial Security Corp.
2,038,350
266,500 First Defiance Financial Corp.
2,831,562
63,000 First Fed Bancorp, Inc.
1,527,750
3,000 FirstFed Bankshares, Inc.
49,500
10,000 First Financial Corp.
95,000
115,000 First Mutual Bancorp, Inc.
1,495,000
362,700 First Republic Bancorp, Inc.*
5,667,187
201,000 Flushing Financial Corp.
3,643,125
77,000 Fort Bend Holding Corp.
1,443,750
413,000 GA Financial, Inc.
5,420,625
42 Glendale Federal Bank, FSB*
746
60,000 Great American Bancorp, Inc.
825,000
316,000 GreenPoint Financial Corp.
12,047,500
57,900 Hallmark Capital Corp.*
969,825
237,000 HF Bancorp, Inc.*
2,281,125
10,000 HFB Financial Corp.
205,000
62,400 Highland Federal Bank, FSB*
889,200
175,000 Home Bancorp Elgin, Inc.*
2,078,125
49,000 HUBCO, Inc.
1,047,375
161,000 Imperial Bancorp
4,669,000
322,200 Imperial Thrift & Loan Association*
4,269,150
140,000 ISB Financial Corp.
2,170,000
271,000 Long Island Bancorp, Inc.
7,825,125
200,000 Mechanics Savings Bank*
2,975,000
181,000 Mid Continent Bancshares, Inc.
3,439,000
80,100 North Central Bancshares, Inc. $
991,238
93,700 Ocean Financial Corp.*
2,213,662
64,800 OSB Financial Corp.
1,490,400
249,800 Park Bancorp, Inc.*
2,779,025
339,800 People's Bank
8,367,575
65,000 Peoples Financial, Corp.*
747,500
174,600 Perpetual Federal Savings Bank
2,357,100
55,000 Pittsburgh Home Financial Corp.
639,375
95,300 Prestige Bancorp, Inc.*
1,131,688
308,000 Provident Financial Holdings, Inc.*
3,811,500
357,900 Redfed Bancorp, Inc.*
4,250,062
93,800 Redwood Financial, Inc.*
867,650
470,000 River Bank America*
4,112,500
47,800 Rowan Bancorp, Inc.*
752,850
125,600 SFS Bancorp, Inc.
1,695,600
257,000 SGV Bancorp, Inc.*
2,409,375
252,000 Statewide Financial Corp.
3,213,000
50,000D Sun Bancorp, Inc.*/DD
(cost $650,000-purchased 1994)
757,500
10,000 TCF Financial Corp.
376,250
10,000 Telebanc Financial Corp.*
92,500
16,500 Three Rivers Financial Corp.
212,438
41,600 Tri-County Bancorp, Inc.
748,800
24,000 Valley Federal Savings Bank
888,000
436,275 Westcorp, Inc.
9,434,447
139,800 Westernbank of Puerto Rico
2,201,850
9,500 Workingmens Capital Holdings, Inc.
203,063
168,000 Yonkers Financial Corp.
2,079,000
---------
- - ---
177,988,542
- - ------------------------------------------------------------
Other Financial Intermediaries--23.7%
73,000 Finova Group Inc.
4,380,000
112,000 First Alliance Corp.*
2,492,000
427,000 First Financial Caribbean Corp.
8,967,000
130,000 First Merchants Acceptance Corp.*
2,583,750
112,000 First Mortgage Corp.*
518,000
252,000 Imperial Credit Industries, Inc.
9,229,500
152,300 Imperial Credit Mortgage Holdings,
Inc.
3,141,187
768,100 Inco Homes Corp.*
480,063
162,700 Jayhawk Acceptance Corp.*
2,277,800
- - ------------------------------------------------------------
- - --------------------
See Notes to Financial Statements.
3
<PAGE>
Portfolio of Investments as of
September 30, 1996 (Unaudited) FIRST FINANCIAL FUND,
INC.
- - ------------------------------------------------------------
- - ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- - ------------------------------------------------------------
Other Financial Intermediaries (cont'd.)
99,000 PMC Commercial Trust, Inc. $
1,596,375
330,000 Prime Capital Corp., Inc.*
1,815,000
190,000 Prime Retail, Inc.
2,185,000
2,036 Redwood Trust, Inc.
63,625
187,571 Resource Bancshares Mortgage Group,
Inc.
2,344,638
545,300 Sundance Homes, Inc.*
2,044,875
84,000 The Money Store, Inc.
2,194,500
319,500 Thornburg Mortgage Asset Corp.
5,191,875
238,000 United Companies Financial Corp.
7,883,750
---------
- - ---
59,388,938
---------
- - ---
Total common stocks (cost
$186,847,278)
237,377,480
---------
- - ---
- - ------------------------------------------------------------
Preferred Stocks--1.8%
100,000 Community Bank,
13.00%, Ser. B
2,725,000
66,000 Walden Residential Properties, Inc.,
9.16%, Conv., Ser. A
1,683,000
---------
- - ---
Total preferred stocks (cost
$4,053,000)
4,408,000
---------
- - ---
- - ------------------------------------------------------------
Convertible Bond--2.9%
5,475 RAC Financial Group, Inc.,
7.25%, 8/15/03
(cost $5,875,500)
7,363,875
---------
- - ---
- - ------------------------------------------------------------
Warrants*--0.1%
Warrants
50,000 Community Banks, Inc.,
expiring June '99
187,500
3 Glendale Federal Bank,
expiring March '99
0
300,000D UnionFed Financial Corp.,
expiring September '98
(cost $0-purchased 1996)
0
---------
- - ---
Total warrants (cost $100,000)
187,500
---------
- - ---
Total long-term investments
(cost $196,875,778)
249,336,855
---------
- - ---
<CAPTION>
Principal
Amount
(000)
- - ------------------------------------------------------------
<SHORT-TERM INVESTMENTS--4.7%
Repurchase Agreement--4.7%
$11,585 Lehman Brothers Hldgs., Inc.,
5.70%, dated 9/30/96, due 10/1/96
in the amount of $11,586,834 (cost
$11,585,000; value of collateral
including interest--$11,816,700) $
11,585,000
---------
- - ---
- - ------------------------------------------------------------
Certificates of Deposit
3 First Federal Savings Bank,
4.75%, 10/14/96
2,821
1 Naugatuck Valley Savings & Loan
Assoc.,
4.00%, 10/25/96
1,107
1 Brookline Savings Bank,
5.00%, 11/29/96
1,208
---------
- - ---
Total certificates of deposit (cost
$5,136)
5,136
---------
- - ---
Total short-term investments
(cost $11,590,136)
11,590,136
---------
- - ---
OUTSTANDING OPTIONS PURCHASED*--0.2%
-----------------------------------------------------------
- - -
Put Options Purchased
Contracts
49 S&P 500 Index,
expiring 11/16/96 @$685.00
(cost $626,220)
569,625
---------
- - ---
- - ------------------------------------------------------------
Total Investments--104.6%
(cost $209,092,134; Note 3)
261,496,616
Liabilities in excess of other
assets--(4.6%)
(11,411,959)
---------
- - ---
Net Assets--100%
$250,084,657
---------
- - ---
---------
- - ---
</TABLE>
- - ---------------
* Non-income producing security.
D Indicates a restricted security; the cost of such
securities is $650,000. The
aggregate value ($757,500) is approximately 0.3% of net
assets.
DD Fair Valued security.
- - ------------------------------------------------------------
- - --------------------
4 See Notes to
Financial Statements.
<PAGE>
Statement of Assets and Liabilities (Unaudited) FIRST
FINANCIAL FUND, INC.
- - ------------------------------------------------------------
- - --------------------
<TABLE>
<CAPTION>
<S>
<C>
Assets
September 30, 1996
Investments, at value (cost
$209,092,134)...............................................
................ $ 261,496,616
Cash........................................................
............................................
1,804,317
Receivable for investments
sold........................................................
................. 10,265,113
Dividends and interest
receivable..................................................
..................... 418,620
Deferred expenses and other
assets......................................................
................ 111,425
- - ------------------
Total
assets......................................................
................................... 274,096,091
- - ------------------
Liabilities
Loan payable (Note
4)..........................................................
......................... 20,000,000
Payable for investments
purchased...................................................
.................... 3,174,968
Advisory fee
payable.....................................................
............................... 372,355
Loan interest payable (Note
4)..........................................................
................ 292,743
Administration fee
payable.....................................................
......................... 85,613
Accrued
expenses....................................................
.................................... 64,352
Deferred directors'
fees........................................................
........................ 21,403
- - ------------------
Total
liabilities.................................................
................................... 24,011,434
- - ------------------
Net
Assets......................................................
........................................ $
250,084,657
- - ------------------
- - ------------------
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 1,801,100 shares held in
treasury....................................................
........ (21,381,334)
- - ------------------
150,945,306
Undistributed net investment
income......................................................
............ 2,642,134
Accumulated net realized
gains.......................................................
................ 44,092,735
Net unrealized appreciation of
investments.................................................
.......... 52,404,482
- - ------------------
Net assets, September 30,
1996........................................................
............... $ 250,084,657
- - ------------------
- - ------------------
Net asset value per share ($250,084,657 / 15,323,077 shares
of common stock outstanding)................
$16.32
- - ------------------
- - ------------------
</TABLE>
- - ------------------------------------------------------------
- - --------------------
See Notes to Financial Statements.
5 -----
<PAGE>
FIRST FINANCIAL FUND, INC.
Statement of Operations (Unaudited)
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income September 30,
1996
<S> <C>
Income
Dividends............................. $ 3,648,064
Interest.............................. 211,761
----------------
- - --
Total income....................... 3,859,825
----------------
- - --
Expenses
Investment advisory fee............... 729,571
Administration fee.................... 167,597
Custodian's fees and expenses......... 50,000
Insurance expense..................... 31,000
Legal fees and expenses............... 27,000
Reports to shareholders............... 25,000
Listing fees.......................... 20,000
Director's fees and expenses.......... 17,000
Audit fee and expenses................ 15,000
Transfer agent's fees and expenses.... 12,000
Miscellaneous......................... 4,982
----------------
- - --
Total operating expenses........... 1,099,150
Loan interest (Note 4)................ 648,526
----------------
- - --
Total expenses..................... 1,747,676
----------------
- - --
Net investment income.................... 2,112,149
----------------
- - --
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions.......................... 24,919,729
Net change in unrealized appreciation of
investments........................... 13,003,331
----------------
- - --
Net gain on investments.................. 37,923,060
----------------
- - --
Net Increase in Net Assets
Resulting from Operations................ $ 40,035,209
----------------
- - --
----------------
- - --
</TABLE>
FIRST FINANCIAL FUND, INC.
Statement of Cash Flows (Unaudited)
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Increase (Decrease) in Cash September 30,
1996
<S> <C>
Cash used for operating activities
Dividends and interest received........ $ 3,688,824
Operating expenses paid................ (506,703)
Loan interest and commitment fees
paid................................ (911,625)
Purchases of short-term portfolio
investments, net.................... (11,585,129)
Purchases of long-term portfolio
investments......................... (98,194,677)
Proceeds from disposition of long-term
portfolio investments............... 103,072,267
Deferred expenses and other assets..... (3,194)
----------------
- - --
Net cash used for operating
activities.......................... (4,440,237)
----------------
- - --
Cash provided from financing activities
Cash used to reacquire Fund shares..... (4,080,500)
Net increase in notes payable.......... 10,300,000
----------------
- - --
Net cash provided from financing
activities.......................... 6,219,500
----------------
- - --
Net increase in cash................... 1,779,263
Cash at beginning of period............ 25,054
----------------
- - --
Cash at end of period.................. $ 1,804,317
----------------
- - --
----------------
- - --
Reconciliation of Net Increase in Net
Assets to Net Cash Used for Operating
Activities
Net increase in net assets resulting from
operations............................. $ 40,035,209
----------------
- - --
Decrease in investments................... 5,514,669
Net realized gain on investment
transactions........................... (24,919,729)
Net change in unrealized appreciation of
investments............................ (13,003,331)
Increase in receivable for investments
sold................................... (9,895,682)
Increase in dividends and interest
receivable............................. (171,001)
Increase in deferred expenses and other
assets................................. (3,194)
Decrease in payable for investments
purchased.............................. (2,326,526)
Increase in accrued expenses and other
liabilities............................ 329,348
----------------
- - --
Total adjustments................... (44,475,446)
----------------
- - --
Net cash used for operating activities.... $ (4,440,237)
----------------
- - --
----------------
- - --
</TABLE>
- - ------------------------------------------------------------
- - --------------------
6 See Notes to
Financial Statements.
<PAGE>
FIRST FINANCIAL FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year
Ended
Increase (Decrease) September 30, March
31,
in Net Assets 1996 1996
------------ --------
- - ----
<S> <C> <C>
Operations
Net investment income....... $ 2,112,149 $
1,893,711
Net realized gain on
investment
transactions............. 24,919,729
44,064,406
Net change in unrealized
appreciation of
investments.............. 13,003,331
28,675,777
------------ --------
- - ----
Net increase in net assets
resulting from
operations............... 40,035,209
74,633,894
------------ --------
- - ----
Dividends and distributions
(Note 1)
Dividends from net
investment income........ --
(2,148,396)
Distributions from net
realized gains on
investments.............. --
(33,085,304)
Value of Fund shares issued
to shareholders in
reinvestment of dividends
and distributions........ --
16,515,513
Cost of Fund shares
reacquired............... (4,080,500)
- - --
------------ --------
- - ----
Total increase................. 35,954,709
55,915,707
Net Assets
Beginning of period............ 214,129,948
158,214,241
------------ --------
- - ----
End of period.................. $250,084,657
$214,129,948
------------ --------
- - ----
------------ --------
- - ----
</TABLE>
FIRST FINANCIAL FUND, INC.
Notes to Financial Statements (Unaudited)
- - ------------------------------------------------------------
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 September 30, 1996, the Fund
- - ------------------------------------------------------------
- - --------------------
See Notes to Financial Statements.
7 -----
<PAGE>
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 ``Cash'' 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 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 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 six months ended September 30, 1996 were $90,149,361
and $109,309,466,
respectively.
The cost basis of the Fund's investments, including short-
term investments, at
September 30, 1996 was $209,217,842; and, accordingly, net
unrealized
appreciation for federal income tax purposes was $52,278,774
(gross unrealized
appreciation--$57,099,977; gross unrealized depreciation--
$4,821,203).
- - ------------------------------------------------------------
Note 4. Borrowings
The Fund has a credit agreement (the ``Agreement'') with an
unaffiliated lender.
The maximum commitment under the Agreement is $30,000,000.
These borrowings may
be set to any desired maturity from one week to
- - ------------------------------------------------------------
- - --------------------
8
<PAGE>
Notes to Financial Statements (Unaudited) FIRST
FINANCIAL FUND, INC.
- - ------------------------------------------------------------
- - --------------------
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, 1996
was $19,508,197 at a weighted average interest rate of
6.56%. The highest face
amount of borrowing outstanding at any month end during the
six months ended
September 30, 1996 was $20,000,000. The Fund's borrowings on
September 30, 1996
($20,000,000 at 6.60%) matures on October 31, 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 September 30, 1996, the
Investment Adviser owned
10,994 shares. During the fiscal year ended March 31, 1996,
the Fund issued
1,300,435 shares in connection with cash distributions paid
in stock. During the
six months ended September 30, 1996, the Fund repurchased
300,000 shares at a
weighted average discount per share of 13.88%.
- - ------------------------------------------------------------
- - --------------------
See Notes to Financial Statements.
9 -----
<PAGE>
Financial Highlights (Unaudited) FIRST
FINANCIAL FUND, INC.
- - ------------------------------------------------------------
- - --------------------
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended March 31,
September 30, ------------------------------------------
- - -----
1996 1996 1995 1994 1993
<S> <C>
<C> <C> <C> <C>
----
- - --------- -------- -------- -------- -------
- - -
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
13.71 $ 11.05 $ 12.74 $ 16.52 $ 10.50
----
- - --------- -------- -------- -------- -------
- - -
Income from investment operations
Net investment income...............................
.14 .13 .05 .04 .08
Net realized and unrealized gain (loss) on
investments......................................
2.43 4.99 2.76 3.27 7.89
----
- - --------- -------- -------- -------- -------
- - -
Total from investment operations.................
2.57 5.12 2.81 3.31 7.97
----
- - --------- -------- -------- -------- -------
- - -
Less dividends and distributions
Dividends from net investment income................
- - -- (.15) (.03) (.05)
(.02)
Distributions in excess of net investment income....
- - -- -- -- -- --
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)
----
- - --------- -------- -------- -------- -------
- - -
Increase resulting from Fund share repurchase.......
.04 -- -- .08 .12
Capital charge resulting from the issuance of Fund
shares...........................................
- - -- -- (.09) (.49)
(.03)
----
- - --------- -------- -------- -------- -------
- - -
Net asset value, end of period(b)................... $
16.32 $ 13.71 $ 11.05 $ 12.74 $ 16.52
----
- - --------- -------- -------- -------- -------
- - -
----
- - --------- -------- -------- -------- -------
- - -
Market price per share, end of period(b)............ $
14.125 $ 12.625 $ 11.125 $ 12.00 $ 15.125
----
- - --------- -------- -------- -------- -------
- - -
----
- - --------- -------- -------- -------- -------
- - -
TOTAL INVESTMENT RETURN(c):.........................
11.88% 35.46% 34.83% 24.22% 72.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
250,085 $214,130 $158,214 $143,572
$154,090
Average net assets (000)............................ $
223,463 $195,421 $164,322 $158,100
$125,361
Ratios to average net assets:
Expenses, before loan interest, commitment fees
and nonrecurring expenses.....................
.98%(a) 1.00% 1.03% 1.11% 1.13%
Total expenses...................................
1.56%(a) 1.23% 1.58% 1.36% 1.21%
Net investment income............................
1.89%(a) .97% 0.46% 0.25% 0.62%
Portfolio turnover rate.............................
38% 82% 103% 139% 105%
Total debt outstanding at end of period (000
omitted)......................................... $
20,000 $ 9,700 $ 16,000 $ 15,000 --
Asset coverage per $1,000 of debt outstanding....... $
13,504 $ 23,075 $ 10,888 $ 10,571 --
Average commission rate paid per share.............. $
.0512 $ .0415 -- -- --
<CAPTION>
1992
<S> <C>
------
- - -
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
6.35
------
- - -
Income from investment operations
Net investment income...............................
.11
Net realized and unrealized gain (loss) on
investments......................................
4.15
------
- - -
Total from investment operations.................
4.26
------
- - -
Less dividends and distributions
Dividends from net investment income................
(.11)
Distributions in excess of net investment income....
(.01)
Distributions from net capital gains................ --
------
- - -
Total dividends and distributions................
(.12)
------
- - -
Increase resulting from Fund share repurchase.......
.01
Capital charge resulting from the issuance of Fund
shares........................................... --
------
- - -
Net asset value, end of period(b)................... $
10.50
------
- - -
------
- - -
Market price per share, end of period(b)............ $
10.00
------
- - -
------
- - -
TOTAL INVESTMENT RETURN(c):.........................
62.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).....................
$99,067
Average net assets (000)............................
$80,947
Ratios to average net assets:
Expenses, before loan interest, commitment fees
and nonrecurring expenses.....................
1.23%
Total expenses...................................
1.65%
Net investment income............................
1.33%
Portfolio turnover rate.............................
89%
Total debt outstanding at end of period (000
omitted)......................................... $
9,000
Asset coverage per $1,000 of debt outstanding.......
$12,007
Average commission rate paid per share.............. --
</TABLE>
- - ---------------
(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 Fund's shares.
- - ------------------------------------------------------------
- - --------------------
10 See Notes to
Financial Statements.
<PAGE>
Directors
Eugene C. Dorsey
Douglas H. McCorkindale
Thomas T. Mooney
Investment Adviser
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Administrator
Prudential Mutual 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 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 accompanying financial statements as of September 30,
1996,
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
