First
Financial
Fund, Inc.
SEMI
ANNUAL
REPORT
Sept. 30, 1997
<PAGE>
Letter To Shareholders
October 14, 1997
Dear Fellow Shareholder:
We have long since run out of superlatives to
describe the bull market
in financial stocks. No matter. Like all
genuine legends, it speaks
for itself. In addition to the now well-
known factors fueling the
surge in financial stocks, namely, an ideal
economy, benign interest
rates and industry consolidation, the last
six months witnessed a
renaissance in investor interest in smaller
cap stocks. The
results are as follows:
<TABLE>
<CAPTION>
TOTAL RETURN
For The Periods Ended
September 30, 1997
<S> <C>
<C>
6 Mos.
12 Mos.
First Financial Fund's (at NAV)* 38.14%
59.81%
S&P 500 Index 26.3%
40.4%
NASDAQ Composite** 38.0%
37.4%
NASDAQ Banks** 37.5%
64.8%
SNL Daily** 39.7%
71.8%
</TABLE>
*The Fund's total return represents the
change in net asset
value from the beginning of the period noted
through September
30, 1997 and assumes the reinvestment of
dividends and distributions.
Shares of the Fund are traded on the NYSE.
Past performance is
no guarantee of future results.
** Principal only.
On September 30, 1997, First Financial Fund's
shares closed at
a (NYSE) market price of $22.94 per share,
which represented a
premium of 8.8% to the net asset value per
share of $21.08.
Outlook and Strategy
We are witnessing a fascinating phenomenon in
the area of
bank consolidations. As the stock prices of
the larger,
acquiring banks have risen, their ability to
pay commensurate
higher prices has increased as well. Combine
this ability with
acquiring banks' talent to cut more costs out
of the acquired
entities (50% cost savings are the norm now
rather than 30%)
and the scene is set for record acquisition
prices. Hence,
two recent deals, Barnett Banks in Florida
and New York
Bancorp, a thrift, in which acquisition
prices were both
north of four times book value should come as
no surprise.
Then why are our eyes still wide open and
mouths agape?
Finding absolute value in bank and thrift
stocks has gone
from difficult to near impossible. It is not
uncommon now
for a thrift conversion to open at a mid to
high single-digit
deposit premium, i.e., close to the price at
which it would
be acquired. As a result, we have shifted
some of the Fund's
investment dollars to other areas in
financial services such
as consumer and commercial financials,
mortgage REITs and
asset workout companies. This latter type of
company buys
troubled loans from banks or other financial
intermediaries.
Through the wise use of technology, properly
trained and
motivated employees and a resolution focus,
asset workout
firms are able to squeeze more out of a bad
loan than a
bank can. It hasn't hurt either that banks
have largely
disbanded their workout departments in their
search for
greater efficiencies.
1
<PAGE>
Once again, we must warn prospective
investors that the
stock market as well as financial service
stocks are
expensive by almost every measure. We will
diligently
search for relative value and, because we are
paid to be
fully invested, will remain that way. We
hope every
investor in equities understands that the
risks at current
valuations are substantial.
Thank you for your confidence in us.
Sincerely,
Nicholas C. Adams
Portfolio Manager
Senior Vice President
Wellington Management Company, LLP
2
<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 Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Notice is hereby given in accordance with
Section 23(c)
of the Investment Company Act of 1940 that
the Fund may
purchase, from time to time, shares of its
common stock
at market prices.
The accompanying financial statements as of
September 30,
1997, were not audited and, accordingly, no
opinion is
expressed on them.
The views expressed in this report and the
information
about the Fund's portfolio holdings are for
the period
covered by this report and are subject to
change thereafter.
This report is for stockholder information.
This is not
a prospectus intended for use in the purchase
or sale
of Fund shares.
First Financial Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
For information call toll-free (800) 451-6788
320228109
<PAGE>
Portfolio of Investments as of September 30,
1997
(Unaudited) FIRST
FINANCIAL FUND, INC.
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
LONG-TERM INVESTMENTS--105.3%
COMMON STOCKS--98.2%
- ---------------------------------------------
- ---------------
Banks & Thrifts--49.8%
242,700 Acadiana Bancshares, Inc.
$ 5,400,075
210,000 Ambanc Holding Co., Inc.
3,386,250
117,900 Banknorth Group, Inc.
6,440,288
125,000 Big Foot Financial Corp.*
2,171,875
257,762 BostonFed Bancorp, Inc.
5,429,112
211,000 Cameron Financial Corp.
4,009,000
189,000 Catskill Financial Corp.
3,118,500
117,800 CCF Holding Co.
1,958,425
106,500 Community Financial Corp.
2,050,125
3,000 Covest Bancshares, Inc.
72,750
74,600 CSB Financial Group, Inc.*
913,850
210,000 Dime Bancorp, Inc.
4,396,875
324,345 Downey Financial Corp.
7,905,909
202,900 Fidelity Federal Bancorp
1,826,100
133,000 First Defiance Financial Corp.
2,078,125
24,000 First Financial Corp.
366,000
311,100 FirstFed America Bancorp, Inc.*
6,805,312
126,000 FirstFed Bancorp, Inc.
2,236,500
201,000 Flushing Financial Corp.
4,798,875
77,000 Fort Bend Holding Corp.
2,983,750
345,000 GA Financial, Inc.
6,425,625
42 Golden State Bancorp, Inc.*
1,255
105,000 GreenPoint Financial Corp.
6,654,375
85,000 GS Financial Corp.
1,375,938
57,900 Hallmark Capital Corp.*
1,476,450
75,400 Hamilton Bancorp, Inc.*
2,073,500
16,667 HFB Financial Corp.
235,417
62,400 Highland Federal Bank, FSB*
1,934,400
78,367 HUBCO, Inc.
2,468,561
9,375 Independent Bankshares, Inc.
168,750
294,000 ITLA Capital Corp.*
5,880,000
246,000 Long Island Bancorp, Inc.
11,562,000
154,000 Mechanics Savings Bank*
3,888,500
169,300 Mid Continent Bancshares, Inc.
6,475,725
50,000 Pamrapo Bancorp, Inc.
1,187,500
350,000 Peopleclquos Bank
11,200,000
65,000 Peoples Financial Corp.
1,186,250
174,600 Perpetual Federal Savings Bank
2,880,900
95,300 Prestige Bancorp, Inc.
$ 1,733,269
294,000 Provident Financial Holdings,
Inc.* 5,769,750
357,900 RedFed Bancorp, Inc.*
6,218,513
93,800 Redwood Financial, Inc.*
1,043,525
85,000 Regent Bancshares Corp.*
977,495
470,000 River Bank America*
2,702,500
47,800 Rowan Bancorp, Inc.*
860,400
125,600 SFS Bancorp, Inc.
2,794,600
40,500 Southern Community Bancshares,
Inc. 658,125
50,000 Southwest Bancorp*
1,475,000
31,400 Sun Bancorp, Inc.*
643,700
10,000 Telebanc Financial Corp.*
170,000
16,500 Three Rivers Financial Corp.
273,281
41,600 Tri-County Bancorp, Inc.
946,400
117,411 Vermont Financial Services Corp.
6,340,194
631,700 Westcorp, Inc.
14,450,137
7,500 Westernbank of Puerto Rico
134,063
168,000 Yonkers Financial Corp.
3,339,000
- ------------
185,952,794
- ---------------------------------------------
- ------------------
Other Financial Intermediaries--48.4%
248,200 Central Financial Acceptance
Corp.* 2,606,100
652,400 Doral Financial Corp.
15,983,800
539,000 Dynex Capital, Inc.
7,748,125
224,000 Emergent Group, Inc.*
4,088,000
286,050 Financial Federal Corp.*
5,077,388
73,000 Finova Group, Inc.
6,907,625
528,800 First Merchants Acceptance Corp.*
0
112,000 First Mortgage Corp.*
378,000
47,300 First Sierra Financial, Inc.*
910,525
252,000 FIRSTPLUS Financial Group, Inc.*
14,143,500
1,143,500 IMC Mortgage Co.*
17,581,312
566,400 Imperial Credit Industries, Inc.*
15,009,600
234,600 Imperial Credit Mortgage
Holdings,
Inc.
6,480,825
128,016 Inco Homes Corp.*
160,020
196,000 Legg Mason, Inc.
10,339,000
230,411 Life Financial Corp.*
4,147,398
1,012,700 Long Beach Financial Corp.*
13,608,156
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of September 30,
1997
(Unaudited) FIRST
FINANCIAL FUND, INC.
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
Other Financial Intermediaries (contclquod.)
209,600 Ocwen Asset Investment Corp.
$ 4,794,600
216,500 Ocwen Financial Corp.*
9,120,062
99,000 PMC Commerical Trust, Inc.
1,942,875
330,000 Prime Capital Corp., Inc.*
1,897,500
1,539 Redwood Trust, Inc.
46,170
287,000 Resource Bancshares Mortgage
Group,
Inc.
3,731,000
372,200 Southern Pacific Funding Corp.*
5,234,063
545,300 Sundance Homes, Inc.*
852,031
904,400 Ugly Duckling Corp.*
13,792,100
378,000 WFS Financial Inc.*
8,221,500
251,500 Wilshire Financial Services
Group,
Inc.*
6,224,625
- ------------
181,025,900
- ------------
Total common stocks
(cost $238,527,927)
366,978,694
- ------------
- ---------------------------------------------
- ------------------
Preferred Stocks--0.7%
100,000 Community Bank, Inc.,
13.00%, Ser. B (cost
$2,400,000) 2,750,000
- ------------
- ---------------------------------------------
- ------------------
Corporate Bonds--1.6%
Principal Amount
(000)
$1,450 Resource America, Inc
12.00%, 8/1/04
1,518,875
4,600 Wilshire Financial Services
Group,
Inc.
13.00%, 8/15/04
4,577,000
- ------------
Total corporate bonds
(cost $6,050,000)
6,095,875
- ------------
- ---------------------------------------------
- ------------------
Convertible Bonds--2.8%
3,000 RAC Financial Group, Inc.,
7.25%, 8/15/03
(cost $3,415,094)
10,470,000
- ------------
- ---------------------------------------------
- ------------------
Warrants*--0.1%
Warrants
50,000 Community Bank, Inc.,
expiring June clquo99
187,500
3 Golden State Bancorp, Inc.,
expiring March clquo99
0
300,000 UnionFed Financial Corp.,D
expiring December clquo98
(cost $0, purchased 3/24/97)
$ 0
- ------------
Total warrants (cost $100,000)
187,500
- ------------
- ---------------------------------------------
- ------------------
Units*--1.9%
Units
466,700 Novastar Financial, Inc.D/DD
(1 conv. preferred and 1
warrant)
(cost $7,000,500; purchased
12/9/96)
7,000,500
- ------------
Total long-term investments
(cost $257,493,521)
393,482,569
- ------------
SHORT-TERM INVESTMENTS--2.6%
- ---------------------------------------------
- ------------------
Repurchase Agreement--2.6%
Principal Amount
(000)
$9,543 Swiss Bank Corp.,
6.05%, dated 9/30/97, due
10/1/97
in the amount of $9,544,604
(cost
$9,543,000; value of collateral
including accrued
interest-$9,980,063)
9,543,000
- ------------
- ---------------------------------------------
- ------------------
Certificates Of Deposit
First Federal Savings Bank,
3 5.00%, 10/14/97
2,980
Naugatuck Valley Savings & Loan
Assoc.,
1 4.10%, 10/25/97
1,164
- ------------
4,144
- ------------
Total short-term investments
(cost $9,547,144)
9,547,144
- ------------
- ---------------------------------------------
- ------------------
Total Investments--107.9%
(cost $267,040,665; Note 3)
403,029,713
Liabilities in excess of other
assets--(7.9%)
(29,358,523)
- ------------
Net Assets--100%
$373,671,190
- ------------
- ------------
</TABLE>
- ---------------
* Non-income-producing security.
D Indicates a restricted security; the
aggregate cost of such securities is
$7,000,500. The aggregate value
($7,000,500) is approximately 1.9% of net
assets.
DD Fair Valued security.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 4
<PAGE>
Statement of Assets and Liabilities
(Unaudited)
FIRST FINANCIAL FUND, INC.
- ---------------------------------------------
- -----------------------------------
<TABLE>
Assets
September 30, 1997
<S>
<C>
Investments, at value (cost
$267,040,665)................................
...............................
$403,029,713
Cash.........................................
.............................................
.............. 1,002,583
Receivable for investments
sold.........................................
................................
1,648,258
Dividends and interest
receivable...................................
....................................
685,164
Deferred expenses and other
assets.......................................
...............................
111,204
- ------------
Total
assets.......................................
.............................................
..... 406,476,922
- ------------
Liabilities
Loan payable (Note
4)...........................................
........................................
32,000,000
Advisory fee
payable......................................
.............................................
. 532,053
Administration fee
payable......................................
........................................
123,943
Loan interest payable (Note
4)...........................................
...............................
73,904
Accrued
expenses.....................................
.............................................
...... 51,436
Deferred directorclquos
fees.........................................
...................................
24,396
- ------------
Total
liabilities..................................
.............................................
..... 32,805,732
- ------------
Net
Assets.......................................
.............................................
.......... $373,671,190
- ------------
- ------------
Net assets were comprised of:
Common stock, at par; 19,629,461 shares
issued.......................................
................ $ 19,629
Paid-in capital in excess of
par..........................................
...........................
210,011,537
Cost of 1,901,100 shares held in
treasury.....................................
....................... (22,799,722)
- ------------
187,231,444
Undistributed net investment
income.......................................
...........................
1,788,926
Accumulated net realized
gains........................................
...............................
48,661,772
Net unrealized appreciation of
investments..................................
.........................
135,989,048
- ------------
Net assets, September 30,
1997.........................................
..............................
$373,671,190
- ------------
- ------------
Net asset value per share ($373,671,190
/17,728,361 shares of common stock
outstanding).................
$21.08
- ------------
- ------------
</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, 1997
<S>
<C>
Income
Dividends (net of foreign withholding
taxes of $17,148)..................
$ 2,597,747
Interest..............................
479,826
- ------------
Total income.......................
3,077,573
- ------------
Expenses
Investment advisory fee...............
974,442
Administration fee....................
226,366
Custodianclquos fees and expenses.....
48,000
Reports to shareholders...............
33,000
Insurance expense.....................
30,000
Legal fees and expenses...............
28,000
Transfer agentclquos fees and
expenses...........................
18,000
Listing fees..........................
18,000
Audit fee and expenses................
11,000
Directors fees........................
7,100
Miscellaneous.........................
6,243
- ------------
Total operating expenses...........
1,400,151
Loan interest (Note 4)................
646,488
- ------------
Total expenses.....................
2,046,639
- ------------
Net investment income....................
1,030,934
- ------------
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions..........................
18,290,332
Net change in unrealized appreciation of
investments...........................
83,854,332
- ------------
Net gain on investments..................
102,144,664
- ------------
Net Increase in Net Assets
Resulting from Operations................
$103,175,598
- ------------
- ------------
</TABLE>
FIRST FINANCIAL FUND, INC.
Statement of Cash Flows (Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six Months
Ended
Increase (Decrease) in Cash
September 30, 1997
<S>
<C>
Cash flows used for operating activities
Dividends and interest received........
$ 2,922,657
Operating expenses paid................
(1,264,422)
Loan interest paid.....................
(839,740)
Purchases of short-term portfolio
investments, net....................
32,616,153
Purchases of long-term portfolio
investments.........................
(103,437,472)
Proceeds from disposition of long-term
portfolio investments...............
57,375,492
Deferred expenses and other assets.....
29,665
- --------------
Net cash used for operating
activities..........................
(12,597,667)
- --------------
Cash provided from financing activities
Net increase in notes payable..........
13,600,000
- --------------
Net increase in cash...................
1,002,333
Cash at beginning of period............
250
- --------------
Cash at end of period..................
$ 1,002,583
- --------------
- --------------
Reconciliation of Net Increase in Net
Assets to Net Cash Used for Operating
Activities
Net increase in net assets resulting from
operations.............................
$ 103,175,598
- --------------
Increase in investments...................
(15,625,336)
Net realized gain on investment
transactions...........................
(18,290,332)
Net increase in unrealized appreciation of
investments............................
(83,854,332)
Decrease in receivable for investments
sold...................................
3,218,435
Increase in dividends and interest
receivable.............................
(154,916)
Decrease in deferred expenses and other
assets.................................
29,665
Decrease in payable for investments
purchased..............................
(1,038,926)
Decrease in accrued expenses and other
liabilities............................
(57,523)
- --------------
Total adjustments...................
(115,773,265)
- --------------
Net cash used for operating activities....
$ (12,597,667)
- --------------
- --------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 6
<PAGE>
FIRST FINANCIAL FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six Months
Ended
September
Year Ended
Increase (Decrease) 30,
March 31,
in Net Assets 1997
1997
-----------
- - ------------
<S> <C>
<C>
Operations
Net investment income....... $
1,030,934 $ 3,424,853
Net realized gain on
investment
transactions.............
18,290,332 62,347,973
Net change in unrealized
appreciation of
investments..............
83,854,332 12,733,565
-----------
- - ------------
Net increase in net assets
resulting from
operations...............
103,175,598 78,506,391
-----------
- - ------------
Dividends and distributions (Note 1)
Dividends from net
investment income........ -
- - (3,196,846)
Distributions from net
realized gains on
investments.............. -
- - (51,149,539)
Value of Fund shares issued
to
shareholders in
reinvestment
of dividends and
distributions............ -
- - 37,704,525
Cost of Fund shares
reacquired............... -
- - (5,498,887)
-----------
- - ------------
Total increase.................
103,175,598 56,365,644
Net Assets
Beginning of period............
270,495,592 214,129,948
-----------
- - ------------
End of period..................
$373,671,190 $270,495,592
-----------
- - ------------
-----------
- - ------------
</TABLE>
FIRST FINANCIAL FUND, INC.
Notes to Financial Statements (Unaudited)
- ---------------------------------------------
- ---------------
First Financial Fund, Inc. (the
openqopenqFundclquoclquo) was incorporated in
Maryland on March 3, 1986, as a closed-end,
diversified investment company. The
Fund had no operations until April 24, 1986,
when it sold 10,000 shares of
common stock for $100,000 to Wellington
Management Company, LLP (the
openqopenqInvestment Adviserclquoclquo).
Investment operations commenced on May
1, 1986. The Fundclquos primary investment
objective is to achieve long-term
capital appreciation with the secondary
objective of current income by investing
in securities issued by savings and banking
institutions and their holding
companies. The ability of issuers of debt
securities held by the Fund to meet
their obligations may be affected by economic
developments in a specific
industry or region.
- ---------------------------------------------
- ---------------
Note 1. Accounting Policies
The following is a summary of significant
accounting policies followed by the
Fund in the preparation of its financial
statements.
Securities Valuation: Each security traded on
a national securities exchange
will be valued on the basis of the last sales
price on the valuation date on the
principal exchange on which the security is
traded. Securities traded in the
over-the-counter market and on one or more
exchanges will generally be valued
using the quotations the Board of Directors
or its delegate believe reflect most
closely the value of such securities.
Securities for which no trades have taken
place that day and unlisted securities for
which market quotations are readily
available are valued at the latest bid price.
Securities for which market
quotations are not readily available will be
valued at fair value as determined
in good faith according to pricing procedures
developed by the Investment
Adviser and approved by the Board of
Directors.
Short-term securities which mature in more
than 60 days are valued at current
market quotations. Short-term securities
which mature in 60 days or less are
valued at amortized cost.
In connection with repurchase agreement
transactions with financial
institutions, it is the Fundclquos policy
that its custodian take possession of
the underlying collateral securities, the
value of which exceeds the principal
amount of the repurchase transaction,
including accrued interest. If the seller
defaults, and the value of the collateral
declines or if bankruptcy proceedings
are commenced with respect to the seller of
the security, realization of the
collateral by the Fund may be delayed or
limited.
The Fund may invest up to 20% of its total
assets in securities which are not
readily marketable, including those which are
restricted as to disposition under
securities law (openqopenqrestricted
securitiesclquoclquo). With regards to the
restricted securities held by the Fund at
September 30, 1997, the Fund
- ---------------------------------------------
- -----------------------------------
7
<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 openqopenqCashclquoclquo in the
Statement of Assets and Liabilities.
Options: The Fund may either purchase or
write options in order to hedge against
adverse market movements or fluctuations in
value caused by changes in
prevailing interest rates or foreign currency
exchange rates with respect to
securities or currencies which the Fund
currently owns or intends to purchase.
When the Fund purchases an option, it pays a
premium and an amount equal to that
premium is recorded as an investment. When
the Fund writes an option, it
receives a premium and an amount equal to
that premium is recorded as a
liability. The investment or liability is
adjusted daily to reflect the current
market value of the option. If an option
expires unexercised, the Fund realizes
a gain or loss to the extent of the premium
received or paid. If an option is
exercised, the premium received or paid is an
adjustment to the proceeds from
the sale or the cost basis of the purchase in
determining whether the Fund has
realized a gain or loss. The difference
between the premium and the amount
received or paid on effecting a closing
purchase or sale transaction is also
treated as a realized gain or loss. Gain or
loss on purchased options is
included in net realized gain (loss) on
investment transactions.
The Fund, as writer of an option, has no
control over whether the underlying
securities or currencies may be sold (called)
or purchased (put). As a result,
the Fund bears the market risk of an
unfavorable change in the price of the
security or currency underlying the written
option. The Fund, as purchaser of an
option, bears the risk of the potential
inability of the counterparties to meet
the terms of their contracts.
Securities Transactions and Net Investment
Income: Securities transactions are
recorded on the trade date. Realized gains or
losses on sales of securities are
calculated on the identified cost basis.
Dividend income is recorded on the
ex-dividend date; interest income is recorded
on the accrual basis. Expenses are
recorded on the accrual basis which may
require the use of certain estimates by
management.
Federal Income Taxes: It is the Fundclquos
intention to continue to meet the
requirements of the Internal Revenue Code
applicable to regulated investment
companies and to distribute all of its
taxable income to shareholders.
Therefore, no federal income tax provision is
required.
Withholding taxes on foreign dividends are
provided in accordance with the
Fundclquos understanding of the applicable
countryclquos tax rules and rates.
Dividends and Distributions: The Fund expects
to declare and pay, at least
annually, dividends from net investment
income and any net capital gains.
Dividends and distributions are recorded on
the ex-dividend date.
Income distributions and capital gain
distributions are determined in accordance
with income tax regulations which may differ
from generally accepted accounting
principles. These differences are primarily
due to differing treatments for wash
sales.
- ---------------------------------------------
- ---------------
Note 2. Agreements
The Fund has agreements with the Investment
Adviser and with Prudential
Investments Fund Management LLC (the
openqopenqAdministratorclquoclquo). The
Investment Adviser makes investment decisions
on behalf of the Fund; the
Administrator provides occupancy and certain
clerical and accounting services to
the Fund. The Fund bears all other costs and
expenses.
The investment advisory agreement provides
for the Investment Adviser to receive
a fee, computed monthly and payable
quarterly, at the following annual rates:
.75% of the Fundclquos average month-end net
assets up to and including $50
million, and .625% of such assets in excess
of $50 million. The administration
agreement provides for the Administrator to
receive a fee, computed monthly and
payable quarterly, at the annual rate of .15%
of the Fundclquos average
month-end net assets.
- ---------------------------------------------
- ---------------
Note 3. Portfolio Securities
Purchases and sales of investment securities,
other than short-term investments,
for the six months ended September 30, 1997
were $102,398,546 and $54,157,057,
respectively.
The cost basis of the Fundclquos investments,
including short-term investments,
at September 30, 1997 was $268,570,289; and,
accordingly, net unrealized
appreciation for federal income tax purposes
was $134,459,424 (gross unrealized
appreciation--$152,525,172; gross unrealized
depreciation--$18,065,748).
- ---------------------------------------------
- -----------------------------------
8
<PAGE>
Notes to Financial Statements (Unaudited)
FIRST FINANCIAL FUND, INC.
- ---------------------------------------------
- -----------------------------------
Note 4. Borrowings
The Fund has a credit agreement (the
openqopenqAgreementclquoclquo) with an
unaffiliated lender. The maximum commitment
under the Agreement is $45,000,000.
These borrowings may be set to any desired
maturity from one week to one year at
a rate of interest determined by the lender
at the time of borrowing.
While outstanding, each borrowing will bear
interest, payable at maturity. The
average daily balance outstanding for the six
months ended September 30, 1997
was $18,886,339 at a weighted average
interest rate of 6.37%. The highest face
amount of borrowing outstanding at any month
end during the six months ended
September 30, 1997 was $32,000,000. The
Fundclquos borrowings on September 30,
1997 ($32,000,000 at 6.44%) matured on
October 24, 1997.
- ---------------------------------------------
- ---------------
Note 5. Capital
There are 50 million shares of $.001 par
value common stock authorized. Of the
19,629,461 shares issued as of September 30,
1997, the Investment Adviser owned
13,601 shares. During the fiscal year ended
March 31, 1997, the Fund issued
2,505,284 shares in connection with a cash
distribution paid in stock.
- ---------------------------------------------
- ---------------
Note 6. Dividends
On November 12, 1997 the Board of Directors
of the Fund declared dividends of
$0.14, $1.89, and $1.42 per share from
ordinary income, short-term capital
gains, and long-term capital gains,
respectively, payable on January 13, 1998 to
shareholders of record on November 28, 1997.
- ---------------------------------------------
- -----------------------------------
9
<PAGE>
Financial Highlights (Unaudited)
FIRST FINANCIAL FUND, INC.
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
March 31,
September 30, ---------------------------
- ---------------------------------
1997 1997 1996
1995 1994 1993
<S>
<C> <C> <C>
<C> <C> <C>
- --------- -------- -------- ---
- ----- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 15.26 $
13.71 $ 11.05 $ 12.74 $ 16.52
$ 10.50
- --------- -------- -------- ---
- ----- -------- --------
Income from investment operations
Net investment
income...............................
0.06 .22 .13 .05
.04 .08
Net realized and unrealized gain (loss) on
investments..................................
.... 5.76 4.84 4.99
2.76 3.27 7.89
- --------- -------- -------- ---
- ----- -------- --------
Total from investment
operations................. 5.82
5.06 5.12 2.81 3.31
7.97
- --------- -------- -------- ---
- ----- -------- --------
Less dividends and distributions
Dividends from net investment
income................ --
(.21) (.15) (.03) (.05)
(.02)
Distributions from net capital
gains................ --
(3.36) (2.31) (4.38) (6.63)
(2.02)
- --------- -------- -------- ---
- ----- -------- --------
Total dividends and
distributions................ --
(3.57) (2.46) (4.41) (6.68)
(2.04)
- --------- -------- -------- ---
- ----- -------- --------
Increase resulting from Fund share
repurchase....... -- .06
- -- -- .08 .12
Capital charge resulting from the issuance of
Fund
shares.......................................
.... -- -- --
(.09) (.49) (.03)
- --------- -------- -------- ---
- ----- -------- --------
Net asset value, end of
period(b)................... $ 21.08
$ 15.26 $ 13.71 $ 11.05 $
12.74 $ 16.52
- --------- -------- -------- ---
- ----- -------- --------
- --------- -------- -------- ---
- ----- -------- --------
Market price per share, end of
period(b)............ $ 22.9375 $
14.500 $ 12.625 $ 11.125 $ 12.00
$ 15.125
- --------- -------- -------- ---
- ----- -------- --------
- --------- -------- -------- ---
- ----- -------- --------
TOTAL INVESTMENT
RETURN(c):.........................
58.19% 42.10% 35.46%
34.83% 24.22% 72.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 373,671
$270,496 $214,130 $158,214
$143,572 $154,090
Average net assets
(000)............................ $
301,821 $238,967 $195,421
$164,322 $158,100 $125,361
Ratios to average net assets:
Expenses, before loan interest, commitment
fees
and nonrecurring
expenses.....................
0.93%(a) 1.03% 1.00%
1.03% 1.11% 1.13%
Total
expenses...................................
1.35%(a) 1.56% 1.23%
1.58% 1.36% 1.21%
Net investment
income............................
0.68%(a) 1.43% .97%
0.46% 0.25% 0.62%
Portfolio turnover
rate.............................
17% 70% 82% 103%
139% 105%
Total debt outstanding at end of period (000
omitted).....................................
.... $ 32,000 $ 18,400 $ 9,700
$ 16,000 $ 15,000 --
Asset coverage per $1,000 of debt
outstanding....... $ 12,677 $
15,701 $ 23,075 $ 10,888 $ 10,571
- --
Average commission rate paid per
share.............. $ .0423 $
.0530 $ .0415 -- --
- --
</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 Fundclquos shares.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 10
