(ICON)
SEMI
ANNUAL
REPORT
September 30, 1998
<PAGE>
Letter To Shareholders
October 16, 1998
Dear Fellow Shareholder:
First Financial Fund had a horrible last six months. While bank and thrift
stocks labored, stocks in the specialty finance and mortgage REIT area
performed particularly poorly. In the bank and thrift sectors, a flat yield
curve and intense loan competition led to narrowing spreads. Specialty Finance
and Mortgage REITs came tumbling down as two notable names in the sector went
bankrupt and as Wall Street's own reliquification resulted in margin calls,
forced sales and the crippling of the securitization market.
<TABLE>
<CAPTION>
TOTAL RETURN
For The Period Ended September 30, 1998
6 Mos. 1 Year 3 Years 5 Years
<S> <C> <C> <C> <C>
First Financial Fund's NAV1 -30.1% -24.0% 16.5% 22.0%
S&P 500 Index -7.0 9.0% 22.6% 19.9%
NASDAQ Composite2 -7.7 0.5% 17.5% 17.3%
NASDAQ Banks2 -21.9 -8.6% 21.4% 19.9%
SNL All Daily Thrift2 -25.1 -11.7% 21.6% 20.3%
</TABLE>
1. Source: Prudential Investment Fund Management. The Fund total return
represents the change in net asset value from the beginning of the period
noted through September 30, 1998 and assumes the reinvestment of dividends and
distributions. Past performance is no guarantee of future results.
2. Principal only.
Note: Returns for periods greater than one year are annualized.
Putting additional pressure on all of the Fund's names was a flight to
liquidity. Investors' preference for larger cap, more liquid stocks, which
began in late 1993, intensified in late Spring of this year and by September
was manic. What has turned out to be the worst small-cap stock implosion since
the Great Depression saw the average unweighted OTC stock off 52% from its 52-
week high. Notwithstanding the recently minted junk injected into the OTC index
through the 1996 - 1997 IPO craze, this was still a remarkable collapse.
Still, bad markets do not excuse poor relative performance. In the Mortgage
REIT and Asset Resolution areas we grossly underestimated the fragility of
wholesale, Wall Street dependent funding, and we did not anticipate the
collapse of the securitization market. We are humbled by these mistakes.
Looking forward, we find the financial world fraught with peril. Wall Street
is over-leveraged, hedge funds are collapsing and the risk of recession or
serious credit contraction is growing by the day. The key to investment
success in difficult times is a focus on
- -------------------------------------------------------------------------------
1
<PAGE>
balance sheet strength and risk management. For the first time in a number of
years, we are buying excellent thrift franchises well below book value and
finding banks selling at single digit P/E multiples. The majority of what we
are buying is below liquidation value.
We thank you for your patience and commit ourselves to earning back your
confidence.
Sincerely,
Nicholas C. Adams
Portfolio Manager
Senior Vice President
Wellington Management Company, LLP
- -------------------------------------------------------------------------------
2
<PAGE>
Portfolio of Investments as of September 30, 1998
(Unaudited) FIRST FINANCIAL FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--109.7%
COMMON STOCKS--108.4%
- ------------------------------------------------------------
Banks & Thrifts--55.2%
242,700 Acadiana Bancshares, Inc. $ 4,125,900
210,000 Ambanc Holding Co., Inc. 2,730,000
70,300 Bay State Bancorp, Inc.* 1,564,175
125,000 Big Foot Financial Corp.* 1,843,750
214,762 Bostonfed Bancorp, Inc. 3,650,954
211,000 Cameron Financial Corp. 3,534,250
324,000 Catskill Financial Corp. 4,576,500
129,580 CCF Holding Co. 2,073,280
106,500 Community Financial Corp. 1,344,563
74,600 CSB Financial Group, Inc.* 680,725
316,050 Downey Financial Corp. 7,525,941
400,000 East West Bank Cupertino * 2,600,000
202,900 Fidelity Federal Bancorp 963,775
24,000 First Financial Corp. 324,000
409,300 First Source Bancorp, Inc. 3,606,956
281,500 FirstFed America Bancorp, Inc. 4,011,375
252,000 FirstFed Bancorp, Inc. 2,772,000
111,000 Flushing Financial Corp. 2,442,000
154,000 Fort Bend Holding Corp. 3,003,000
145,700 GA Financial, Inc. 2,231,031
166,800 GBC Bancorp 4,003,200
103,401 Golden State Bancorp, Inc.* 2,061,557
115,800 Hallmark Capital Corp.* 1,331,700
160,500 Hawthorne Financial Corp.* 2,427,562
16,666 HFB Financial Corp. 283,322
36,900 Highland Bancorp, Inc.* 1,328,400
200,750 HUBCO, Inc. 5,094,031
445,000 Hudson River Bancorp, Inc. 4,505,625
144,100 Independence Community Bank Corp.* 2,026,406
9,375 Independent Bankshares, Inc. 108,984
294,000 ITLA Capital Corp.* 3,969,000
42,923 Jeffbanks, Inc. 1,067,718
222,400 Long Island Bancorp, Inc. 10,703,000
120,000 Niagara Bancorp, Inc. 1,177,500
73,500 North Fork Bancorporation, Inc. 1,470,000
426,000 People's Bank 10,437,000
34,600 Peoples Financial Corp. 380,600
174,600 Perpetual Federal Savings Bank $ 4,365,000
68,595 Prestige Bancorp, Inc. 960,330
294,000 Provident Financial Holdings, Inc.* 4,777,500
85,850 Redwood Financial, Inc.* 1,030,200
150,400 Republic Bancshares, Inc.* 3,327,600
381,400 Richmond County Financial Corp. 5,721,000
47,800 Rowan Bancorp, Inc.* 1,266,700
125,600 SFS Bancorp, Inc. 3,312,700
50,000 Staten Islands Bancorp, Inc. 900,000
16,500 Three Rivers Financial Corp. 266,063
88,200 Tri-County Bancorp, Inc. 1,036,350
4,100 Warwick Community Bancorp 51,763
317,000 Western Bancorp * 10,738,375
182,000 WSFS Financial Corp. 2,923,375
66,800 Yonkers Financial Corp. 1,018,700
------------
149,675,436
------------
- ------------------------------------------------------------
Other Financial Intermediaries--53.2%
654,900 Anthracite Capital, Inc. 5,566,650
248,200 Central Financial Acceptance Corp.* 1,737,400
668,200 Doral Financial Corp. 10,691,200
1,338,700 Dynex Capital, Inc. 11,295,281
258,050 Financial Federal Corp.* 5,660,972
528,800 First Merchants Acceptance Corp.* 7,932
112,000 First Mortgage Corp.* 483,000
300,000 Fortress Investment Corp.* 5,400,000
518,400 Franchise Mortgage Acceptance Co.* 3,434,400
840,900 Headlands Mortgage Co.* 13,454,400
62,500 Healthcare Financial Partners, Inc.* 6,281,250
362,500 IMPAC Mortgage Holdings, Inc. 4,893,750
889,400 Imperial Credit Industries, Inc.* 5,558,750
128,016 Inco Homes Corp.* 264,033
448,300 LASER Mortgage Management, Inc. 3,362,250
140,000 Legg Mason, Inc. 3,683,750
700,400 LNR Property Corp. 13,526,475
350,000 Long Beach Financial Corp.* 3,237,500
315,500 Novastar Financial, Inc.* 4,101,500
701,700 Ocwen Asset Investment Corp. 5,482,031
692,600 Ocwen Financial Corp.* 6,060,250
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of September 30, 1998
(Unaudited) FIRST FINANCIAL FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Other Financial Intermediaries (cont'd.)
330,000 Prime Capital Corp., Inc.* $ 907,500
336,300 RB Asset, Inc.* 2,522,250
53,900 Redwood Trust, Inc. 781,550
570,000 Resource America, Inc. 5,735,625
421,350 Resource Bancshares Mortgage Group,
Inc. 7,478,963
545,300 Sundance Homes, Inc.* 749,788
807,600 Ugly Duckling Corp.* 4,189,425
581,700 Wilshire Financial Services Group,
Inc.* 3,635,625
405,900 Wilshire Real Estate Investment
Trust 4,160,475
------------
144,343,975
------------
Total common stocks
(cost $324,017,106) 294,019,411
------------
- ------------------------------------------------------------
Preferred Stock--1.0%
100,000 Community Bank, Inc.
13.00%, Ser. B (cost $2,400,000) 2,687,500
------------
- ------------------------------------------------------------
Warrants*--0.3%
Warrants
50,000 Community Bank, Inc.
expiring June '99 806,250
1 Golden State Bancorp, Inc.
expiring January '01 4
------------
Total warrants (cost $100,000) 806,254
------------
Total long-term investments
(cost $326,517,106) 297,513,165
------------
<CAPTION>
Principal
Amount
(000)
SHORT-TERM INVESTMENTS--5.4%
- ------------------------------------------------------------
Repurchase Agreement--5.4%
$14,634 PaineWebber Inc.,
5.45%, due 10/1/98 in the amount
of $14,636,215 (cost $14,634,000;
collateralized by $13,995,000 U.S.
Treasury Notes, 6.25%, 1/31/02,
value of collateral including
accrued interest-$15,089,690) $ 14,634,000
------------
- ------------------------------------------------------------
Certificates Of Deposit
Brookline Savings,
1 5.00%, 11/26/98 1,329
First Federal Savings Bank,
3 4.85%, 10/14/98 3,093
Nauatuck Valley Saving & Loan
Assoc.,
1 4.10%, 10/25/98 1,199
------------
Total certificates of deposit
(cost $5,621) 5,621
------------
Total short-term investments
(cost $14,639,621) 14,639,621
------------
- ------------------------------------------------------------
Total Investments--115.1%
(cost $341,156,727; Note 3) 312,152,786
Liabilities in excess of other
assets--(15.1%) (40,897,422)
------------
Net Assets--100% $271,255,364
------------
------------
</TABLE>
- ---------------
* Non-income-producing security.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Statement of Assets and Liabilities (Unaudited) FIRST FINANCIAL FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
Assets September 30, 1998
<S> <C>
Investments, at value (cost $341,156,727)............................................................... $312,152,786
Cash.................................................................................................... 418
Receivable for investments sold......................................................................... 4,801,005
Dividends and interest receivable....................................................................... 1,486,861
Other assets............................................................................................ 112,342
------------------
Total assets......................................................................................... 318,553,412
------------------
Liabilities
Loan payable (Note 4)................................................................................... 45,000,000
Advisory fee payable.................................................................................... 1,031,142
Payable for investments purchased....................................................................... 635,440
Administration fee payable.............................................................................. 320,371
Accrued expenses........................................................................................ 160,532
Loan interest payable (Note 4).......................................................................... 134,617
Deferred directors' fees................................................................................ 15,946
------------------
Total liabilities.................................................................................... 47,298,048
------------------
Net Assets.............................................................................................. $271,255,364
------------------
------------------
Net assets were comprised of:
Common stock, at par; 20,477,040 shares issued....................................................... $ 20,477
Paid-in capital in excess of par..................................................................... 234,051,201
------------------
234,071,678
Undistributed net investment income.................................................................. 2,807,694
Accumulated net realized gains....................................................................... 63,379,933
Net unrealized depreciation of investments........................................................... (29,003,941)
------------------
Net assets, September 30, 1998....................................................................... $271,255,364
------------------
------------------
Net asset value per share ($271,255,364 /20,477,040 shares of common stock outstanding)................. $13.25
------------------
------------------
</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, 1998
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $8,598)................... $ 4,447,434
Interest.............................. 277,413
------------------
Total income....................... 4,724,847
------------------
Expenses
Investment advisory fee............... 1,171,963
Administration fee.................... 273,771
Legal fees and expenses............... 59,000
Custodian's fees and expenses......... 39,000
Reports to shareholders............... 38,000
Insurance expense..................... 32,000
Listing fees.......................... 16,000
Transfer agent's fees and expenses.... 14,000
Audit fee and expenses................ 11,000
Directors fees........................ 9,000
Miscellaneous......................... 3,933
------------------
Total operating expenses........... 1,667,667
Loan interest (Note 4)................ 1,158,413
------------------
Total expenses..................... 2,826,080
------------------
Net investment income.................... 1,898,767
------------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain on investment
transactions.......................... 44,114,488
Net change in unrealized depreciation of
investments........................... (162,609,829)
------------------
Net loss on investments.................. (118,495,341)
------------------
Net Decrease in Net Assets
Resulting from Operations................ $ (116,596,574)
------------------
------------------
</TABLE>
FIRST FINANCIAL FUND, INC.
Statement of Cash Flows (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Increase (Decrease) in Cash September 30, 1998
<S> <C>
Cash flows used for operating activities
Dividends and interest received........ $ 4,060,861
Operating expenses paid................ (845,725)
Loan interest paid..................... (1,080,574)
Purchases of short-term portfolio
investments, net.................... (9,426,127)
Purchases of long-term portfolio
investments......................... (147,345,564)
Proceeds from disposition of long-term
portfolio investments............... 128,990,555
Deferred expenses and other assets..... 30,513
------------------
Net cash used for operating
activities.......................... (25,616,061)
------------------
Cash provided from financing activities
Net increase in notes payable.......... 25,000,000
------------------
Net decrease in cash................... (616,061)
Cash at beginning of period............ 616,479
------------------
Cash at end of period.................. $ 418
------------------
------------------
Reconciliation of Net Decrease in Net
Assets to Net Cash Used for Operating
Activities
Net decrease in net assets resulting from
operations............................. $ (116,596,574)
------------------
Increase in investments................... (13,840,833)
Net realized gain on investment
transactions........................... (44,114,488)
Net decrease in unrealized appreciation of
investments............................ 162,609,829
Increase in receivable for investments
sold................................... (4,566,263)
Increase in dividends and interest
receivable............................. (663,986)
Decrease in deferred expenses and other
assets................................. 30,513
Decrease in payable for investments
purchased.............................. (9,374,040)
Increase in accrued expenses and other
liabilities............................ 899,781
------------------
Total adjustments................... 90,980,513
------------------
Net cash used for operating activities.... $ (25,616,061)
------------------
------------------
</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 1998 1998
------------ ------------
<S> <C> <C>
Operations
Net investment income....... $ 1,898,767 $ 2,632,906
Net realized gain on
investment
transactions............. 44,114,488 47,574,880
Net change in unrealized
appreciation
(depreciation) of in-
vestments................ (162,609,829) 81,471,172
------------ ------------
Net increase (decrease) in
net assets resulting from
operations............... (116,596,574) 131,678,958
------------ ------------
Dividends and distributions (Note 1)
Dividends from net
investment income........ -- (2,481,971)
Distributions from net
realized gains on
investments.............. -- (47,574,880)
Distributions in excess of
net
realized gains........... -- (11,105,995)
Value of Fund shares issued
to
shareholders in
reinvestment
of dividends and
distributions............ -- 46,840,234
------------ ------------
Total increase (decrease)...... (116,596,574) 117,356,346
Net Assets
Beginning of period............ 387,851,938 270,495,592
------------ ------------
End of period(a)............... $271,255,364 $387,851,938
------------ ------------
------------ ------------
- ---------------
(a) Includes undistributed net
investment income of......... $ 2,807,694 $ 908,927
------------ ------------
</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, LLP (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: Securities for which market quotations are readily
available--including securities listed on national securities exchanges and
those traded over-the-counter--are valued at the last quoted sales price on the
valuation date on which the security is traded. If such securities were not
traded on the valuation date, but market quotations are readily available, they
are valued at the most recently quoted bid price provided by an independent
pricing service or by principal market makers. Securities for which market
quotations are not readily available will be valued at fair value as determined
in good faith according to pricing procedures developed by the Investment
Adviser and approved by the Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with repurchase agreement transactions with financial
institutions, it is the Fund's policy that its custodian take possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. If the seller
defaults, and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
Cash Flow Information: The Fund invests in securities and pays dividends from
net investment income and distributions from net realized gains which are paid
in cash or are reinvested at the discretion of shareholders. These activities
are reported in the Statement of Changes in Net Assets and additional
information on cash receipts and cash payments is
- --------------------------------------------------------------------------------
7
<PAGE>
Notes to Financial Statements (Unaudited) FIRST FINANCIAL FUND, INC.
- --------------------------------------------------------------------------------
presented in the Statement of Cash Flows. Accounting practices that do not
affect reporting activities on a cash basis include carrying investments at
value and amortizing discounts on debt obligations. 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.
Withholding taxes on foreign dividends are provided in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
Dividends and Distributions: The Fund expects to declare and pay, at least
annually, dividends from net investment income and any net capital gains.
Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for wash
sales.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has agreements with the Investment Adviser and with Prudential
Investments Fund Management LLC (the 'Administrator'). The Investment Adviser
makes investment decisions on behalf of the Fund; the Administrator provides
occupancy and certain clerical and accounting services to the Fund. The Fund
bears all other costs and expenses.
The investment advisory agreement provides for the Investment Adviser to receive
a fee, computed monthly and payable quarterly, at the following annual rates:
.75% of the Fund's average month-end net assets up to and including $50 million,
and .625% of such assets in excess of $50 million. The administration agreement
provides for the Administrator to receive a fee, computed monthly and payable
quarterly, at the annual rate of .15% of the Fund's average month-end net
assets.
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended September 30, 1998 were $137,971,525 and $133,644,611,
respectively.
The cost basis of the Fund's investments, including short-term investments, at
September 30, 1998 was $341,713,209; and, accordingly, net unrealized
depreciation for federal income tax purposes was $29,560,423 (gross unrealized
appreciation--$56,294,762; gross unrealized depreciation--$85,855,185).
- ------------------------------------------------------------
Note 4. Borrowings
The Fund has a credit agreement (the 'Agreement') with an unaffiliated lender.
The maximum commitment under the Agreement is $45,000,000. These borrowings may
be set to any desired maturity 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, 1998
was $43,224,044 at a weighted average interest rate of 6.32%. The highest face
amount of borrowing outstanding at any month-end during the six months ended
September 30, 1998 was $45,000,000. The current borrowings of $45,000,000 (at a
weighted average interest rate of 6.24%) mature between the period October 2,
1998 and October 28, 1998.
- ------------------------------------------------------------
Note 5. Capital
There are 50 million shares of $.001 par value common stock authorized. Of the
20,477,040 shares issued as of September 30, 1998, the Investment Adviser owned
10,060 shares. During the fiscal year ended March 31, 1998, the Fund issued
2,505,284 shares in connection with a cash distribution paid in stock.
- ------------------------------------------------------------
Note 6. Dividends
On November 17, 1998 the Board of Directors of the Fund declared dividends of
$0.05, $0.335, and $2.705 per share from ordinary income, short-term capital
gains and long-term capital gains, respectively, payable on January 19, 1999 to
shareholders of record on November 30, 1998.
- --------------------------------------------------------------------------------
8
<PAGE>
Financial Highlights (Unaudited) FIRST FINANCIAL FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended March 31,
September 30, -----------------------------------------------
1998 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
------------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 18.94 $ 15.26 $ 13.71 $ 11.05 $ 12.74
------------- -------- -------- -------- --------
Income from investment operations
Net investment income............................... .09 .14 .22 .13 .05
Net realized and unrealized gain (loss) on
investments...................................... (5.78) 6.84 4.84 4.99 2.76
------------- -------- -------- -------- --------
Total from investment operations................. (5.69) 6.98 5.06 5.12 2.81
------------- -------- -------- -------- --------
Less dividends and distributions
Dividends from net investment income................ -- (.14) (.21) (.15) (.03)
Distributions from net realized gains............... -- (2.68) (3.36) (2.31) (4.38)
Distributions in excess of net realized gains....... -- (.63) -- -- --
------------- -------- -------- -------- --------
Total dividends and distributions................ -- (3.45) (3.57) (2.46) (4.41)
------------- -------- -------- -------- --------
Increase resulting from Fund share repurchase....... -- -- .06 -- --
Net change resulting from the issuance of Fund
shares........................................... -- .15 -- -- (.09)
------------- -------- -------- -------- --------
Net asset value, end of period(a)................... $ 13.25 $ 18.94 $ 15.26 $ 13.71 $ 11.05
------------- -------- -------- -------- --------
------------- -------- -------- -------- --------
Market price per share, end of period(a)............ $ 12.688 $ 20.813 $ 14.500 $ 12.625 $ 11.125
------------- -------- -------- -------- --------
------------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN(b):......................... (39.04)% 72.59% 42.10% 35.46% 34.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 271,255 $387,852 $270,496 $214,130 $158,214
Average net assets (000)............................ $ 365,028 $320,484 $238,967 $195,421 $164,322
Ratios to average net assets:
Expenses, before loan interest, commitment fees
and nonrecurring expenses..................... .91%(c) .91% 1.03% 1.00% 1.03%
Total expenses................................... 1.54%(c) 1.25% 1.56% 1.23% 1.58%
Net investment income............................ 1.04%(c) .82% 1.43% .97% 0.46%
Portfolio turnover rate............................. 35% 43% 70% 82% 103%
Total debt outstanding at end of year (000
omitted)......................................... $ 45,000 $ 20,000 $ 18,400 $ 9,700 $ 16,000
Asset coverage per $1,000 of debt outstanding....... $ 7,028 $ 20,393 $ 15,701 $ 23,075 $ 10,888
<CAPTION>
1994
<S> <C>
--------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 16.52
--------
Income from investment operations
Net investment income............................... .04
Net realized and unrealized gain (loss) on
investments...................................... 3.27
--------
Total from investment operations................. 3.31
--------
Less dividends and distributions
Dividends from net investment income................ (.05)
Distributions from net realized gains............... (6.63)
Distributions in excess of net realized gains....... --
--------
Total dividends and distributions................ (6.68)
--------
Increase resulting from Fund share repurchase....... .08
Net change resulting from the issuance of Fund
shares........................................... (.49)
--------
Net asset value, end of period(a)................... $ 12.74
--------
--------
Market price per share, end of period(a)............ $ 12.00
--------
--------
TOTAL INVESTMENT RETURN(b):......................... 24.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $143,572
Average net assets (000)............................ $158,100
Ratios to average net assets:
Expenses, before loan interest, commitment fees
and nonrecurring expenses..................... 1.11%
Total expenses................................... 1.36%
Net investment income............................ 0.25%
Portfolio turnover rate............................. 139%
Total debt outstanding at end of year (000
omitted)......................................... $ 15,000
Asset coverage per $1,000 of debt outstanding....... $ 10,571
</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 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 for periods of less than one
year are not annualized.
(c) 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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Supplemental Proxy Information (Unaudited) FIRST FINANCIAL FUND, INC.
- --------------------------------------------------------------------------------
The annual meeting of shareholders of First Financial Fund, Inc. was held on
August 27, 1998 at the offices of Prudential Investments Fund Management LLC,
751 Broad Street, Newark, New Jersey. The meeting was held for the following
purposes:
<TABLE>
<CAPTION>
(1) To elect the following director to serve as follows:
Director Class Term Expiring
------------------------------- ------ -------- ---------
Douglas H. McCorkindale I 3 years 2001
<C> <S> <C> <C> <C>
Directors whose term of office continued beyond this meeting are Eugene C. Dorsey and Thomas T. Mooney.
(2) To ratify the selection of PricewaterhouseCoopers LLP as independent public accountants for the year ending March 31,
1999.
</TABLE>
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Director/Auditor Votes for Votes against Votes withheld Abstentions
---------------------------- ----------- -------------- --------------- ------------
<C> <S> <C> <C> <C> <C>
(1) Douglas H. McCorkindale 16,331,820 -- 432,216 --
(2) PricewaterhouseCoopers LLP 16,494,552 91,754 -- 177,754
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
Other Information (Unaudited) FIRST FINANCIAL FUND, INC.
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan. Shareholders may elect to have all distributions of
dividends and capital gains automatically reinvested in Fund shares (Shares)
pursuant to the Fund's Dividend Reinvestment Plan (the Plan.) Shareholders who
do not participate in the Plan will normally receive all distributions in cash
paid by check in United States dollars mailed directly to the shareholders of
record (or if the shares are held in streetname or other nominee name, then to
the nominee) by the custodian, as dividend disbursing agent unless the Fund
declares a distribution payable in shares, absent a shareholder's specific
election to receive cash.. Shareholders who wish to participate in the Plan
should contact the Fund at (800) 451-6788.
State Street Bank and Trust Co. (the Plan Agent) serves as agent for the
shareholders in administering the Plan. After the Fund declares a dividend or a
capital gains distribution, if (1) the market price is lower than net asset
value, the participants in the Plan will receive the equivalent in Shares valued
at the market price determined as of the time of purchase (generally, following
the payment date of the dividend or distribution); or if (2) the market price of
Shares on the payment date of the dividend or distribution is equal to or
exceeds their net asset value, participants will be issued Shares at the higher
of net asset value or 95% of the market price. If the Fund declares a dividend
or other distribution payable only in cash and the net asset value exceeds the
market price of Shares on the valuation date, the Plan Agent will, as agent for
the participants, receive the cash payment and use it to buy Shares in the open
market. If, before the Plan Agent has completed its purchases, the market price
exceeds the net asset value per share, the Plan Agent will halt open-market
purchases of the Fund's shares for this purpose, and will request that the Fund
pay the remainder, if any, in the form of newly-issued shares. The Fund will not
issue Shares under the Plan below net asset value.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage commissions
charged with respect to shares issued directly by the Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. The automatic reinvestment of
dividends and distributions will not relieve participants of any federal income
tax that may be payable on such dividends or distributions.
The Fund reserves the right to amend or terminate the Plan upon 90 days' written
notice to shareholders of the Fund.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent or by telephone in accordance with specific procedures and will
receive certificates for whole Shares and cash for fractional Shares.
All correspondence concerning the Plan should be directed to the Plan Agent,
State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200.
- --------------------------------------------------------------------------------
11
<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
PricewaterhouseCoopers LLC
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, 1998, 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
