<PAGE>
First
Financial
Fund
ANNUAL
REPORT
March 31, 2000
<PAGE>
Letter To Shareholders May 1, 2000
Dear Fellow Shareholder:
Waiting is the hardest part. In an investment world
where stock prices soar 20, 50, 100% or more virtually
overnight, "value" investing seems dull, old-fashioned,
a waste of time. Lost in the madness of many of
today's stock stories is the concept of investment
return: What is the investor receiving for the capital
provided? Too often the return is only a story, a
concept, an unbridled sense of optimism that is, in
itself, "justification enough." Value creation does
not always mean profit today or positive cash flow or
even a track record of earnings growth. But profits,
at some future date, must be there. Morever, profits
today are worth more than the same profits tomorrow.
The frustration of waiting aside, we continue to be
encouraged by the profitability of First Financial's
holdings. With our banks, we have tried to focus on
those not over-loaned, those with excess capital or
those whose balance sheets are asset sensitive. This
has resulted in generally at or better than expected
earnings results. The asset resolution firms have
benefited from a stronger economy and firmer real
estate prices. For example, LNR Corporation should
garner more and more research coverage as it continues
to exceed earnings forecasts while Resource America is
close to unlocking substantial value through outright
sales of their leasing and real estate holdings.
TOTAL RETURN
For The Period Ended March 31, 2000
6 Mos. 1 Year 3 Years 5 Years
First Financial Fund's NAV1 -3.6% -0.5% -2.9% 13.2%
S&P 500 17.5 17.9 27.4 26.8
NASDAQ Composite2 66.5 85.8 55.3 41.1
NASDAQ Banks2 -9.1 -12.6 3.6 14.7
SNL All Daily Thrift2 -10.4 -22.9 1.1 14.4
SNL MBS REITS2 -10.7 -26.3 -17.2 8.4
SNL Mortgage Banks2 -25.1 -39.7 -23.5 -2.9
1. Source: Prudential Investment Fund Management. The
Fund total return represents the change in net asset
value from the beginning of the period noted through
March 31, 2000 and assumes the reinvestment of
dividends and distributions. Past performance is no
guarantee of future results.
2. Principal only.
Note: Returns for periods greater than one year are
annualized.
The worm has turned in the "e-finance" sector. Most of
these internet-based financial intermediaries have
plummeted from their highs, suffering from poor balance
sheets, severe negative cash flow and a marked increase
in competition from both old and new economy companies.
While the internet will continue to revolutionize the
delivery of financial services, it appears that
investors want profits as much as promises.
1
<PAGE>
Chief of all the waiting is the Fed. Most investors
have shied away from financials believing that either
the rising interest rates or the ensuing recession will
play havoc on bank earnings. While we would quibble
both with premise and conclusion, few investors will
return to financials until the Fed is finished. We are
betting this is sooner -- this year -- rather than later.
Further, we don't believe a recession is necessary to
slow economic growth to a more manageable or desirable
rate.
Waiting is still the hardest part.
Stay the course.
Sincerely,
Nicholas C. Adams
Portfolio Manager
Senior Vice President
Wellington Management Company, LLP
2
<PAGE>
Portfolio of Investments as of March 31, 2000 FIRST FINANCIAL FUND, INC.
------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
-----------------------------------------------------------
LONG-TERM INVESTMENTS--111.2%
COMMON STOCKS--111.2%
------------------------------------------------------------
Banks & Thrifts--74.2%
12,800 Abington Bancorp, Inc. $ 124,800
34,600 Algiers Bancorp, Inc. 259,500
1,339,600 American Financial Holdings, Inc.* 16,158,925
139,300 Bostonfed Bancorp, Inc. 1,541,006
89,640 Broadway Financial Corp., Delaware 694,710
148,500 Cameron Financial Corp. 1,911,937
208,900 Capital Crossing Bank* 2,102,056
226,500 Catskill Financial Corp. 2,548,125
86,600 CBES Bancorp, Inc. 1,017,550
142,538 CCF Holding Co. 1,639,187
41,400 Centura Banks, Inc. 1,896,638
156,662 Charter One Financial, Inc.* 3,289,902
118,000 Commercial Bank New York 1,128,375
60,000 Community Bank San Jose
California(a) 1,677,000
155,500 Community Financial Corp. 1,448,094
354,400 Connecticut Bancshares, Inc.* 3,831,950
74,600 CSB Financial Group, Inc.* 1,119,000
196,000 Downey Financial Corp. 4,165,000
1,184,200 East West Bancorp, Inc. 13,100,212
25,000 Eldorado Bancshares, Inc. 200,000
202,900 Fidelity Federal Bancorp 557,975
204,200 First Commerce Bancshares, Inc. 7,081,050
24,000 First Financial Corp. 246,000
342,700 FirstFed America Bancorp, Inc. 3,684,025
252,000 FirstFed Bancorp, Inc. 2,331,000
90,000 FleetBoston Financial Corp. 3,285,000
40,800 Hallmark Capital Corp.* 382,500
16,666 HFB Financial Corp. 202,075
134,200 Highland Bancorp, Inc.* 2,013,000
488,234 Hudson United Bancorp* 10,588,575
9,375 Independent Bankshares, Inc. 168,750
327,400 ITLA Capital Corp.* 4,174,350
41,600 Lincoln Bancorp Indiana 413,400
140,500 MetroCorp Bancshares, Inc. 957,156
31,200 Mystic Financial, Inc. 308,100
301,000 Northeast Pennsylvania Financial
Corp. $ 2,709,000
49,600 Oregon Trail Financial Corp. 437,100
91,000 Pacific Century Financial Corp.* 1,848,438
45,000 Pacific Crest Capital, Inc. 478,125
286,000 People's Bank 5,988,125
34,600 Peoples Financial Corp. 216,250
165,930 Perpetual Federal Savings Bank 2,426,726
92,500 PrivateBankcorp, Inc.* 971,250
144,102 Progress Financial Corp. 1,576,116
317,300 Provident Financial Holdings, Inc.* 4,462,031
40,650 Redwood Financial, Inc.* 289,631
45,000 River Valley Bancorp 469,688
47,800 Rowan Bancorp, Inc.* 908,200
140,000 Southwest Bancorp, Inc., Oklahoma* 2,397,500
32,500 St. Landry Financial Corp.* 373,750
85,300 Sterling Financial Corp.* 853,000
35,100 Team Financial, Inc. 293,963
238,200 Thistle Group Holdings Co.* 1,488,750
7,276 Tri-County Bancorp, Inc. 75,489
670,600 Troy Financial Corp.* 6,873,650
497,100 UCBH Holdings, Inc. 10,687,650
299,000 Unionbancal Corp. 8,241,187
160,650 Woronoco Bancorp, Inc.* 1,546,256
482,850 WSFS Financial Corp. 6,005,447
160,800 Yardville National Bancorp 1,442,175
------------
159,306,420
------------------------------------------------------------
Other Financial Intermediaries--37.0%
321,000 American Cap. Strategies Ltd.* 8,145,375
511,800 Anthracite Capital, Inc. 3,646,575
245,600 BNC Mortgage, Inc.* 2,271,800
301,200 Central Financial Acceptance Corp.* 1,694,250
753,700 Dynex Capital, Inc.* 4,239,563
227,875 First Mortgage Corp.* 672,943
300,000 Fortress Investment Corp. 4,012,500
272,590 Healthcare Financial Partners,
Inc.(a) 4,579,512
477,600 Imperial Credit Industries, Inc.* 2,149,200
128,016 Inco Homes Corp.* 32,004
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of March 31, 2000 FIRST FINANCIAL FUND, INC.
------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Other Financial Intermediaries (cont'd.)
39,500 John Hancock Financial Services,
Inc.* $ 713,469
296,000 LASER Mortgage Management, Inc. 1,165,500
840,000 LNR Property Corp. 16,012,500
1,100,766 Ocwen Financial Corp.* 8,530,936
300,000 Prime Capital Corp., Inc.* 225,000
412,600 RB Asset, Inc.* 1,650,400
1,450,000 Resource America, Inc. 10,512,500
168,000 Resource Asset Investment Trust 1,806,000
102,200 Sun Life Financial Services of
Canada* 1,098,650
545,300 Sundance Homes, Inc.* 174,496
780,900 Ugly Duckling Corp.* 6,003,169
------------
79,336,342
------------
Total common stocks
(cost $283,771,250) 238,642,762
------------
------------------------------------------------------------
WARRANTS*
109,036 Healthcare Financial Partners, Inc.
expiring December '01
(cost $0) 0
------------
Total long-term investments
(cost $283,771,250) 238,642,762
------------
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
SHORT-TERM INVESTMENTS--9.2%
------------------------------------------------------------
Repurchase Agreement--9.2%
$19,736 Warburg Dillon Read LLC,
6.10%, dated 3/31/00, due 4/03/00
in the amount of $19,746,032 (cost
$19,736,000; collateralized by
$15,037,000 U.S. Treasury Notes,
12.75%, due 11/15/10, value of
collateral including interest
$20,102,873) $ 19,736,000
------------
------------------------------------------------------------
Certificates Of Deposit
1 Brookline Savings
5.25%, 5/28/00 1,425
21 First Fed Monesson
4.55%, 4/14/00 20,880
21 Naugatuck Valley Saving & Loan
Assoc.,
3.85%, 4/27/00 20,861
------------
Total certificates of deposit
(cost $43,406) 43,166
------------
------------------------------------------------------------
WARRANTS*
1 Golden State Bancorp, Inc.
expiring January '01
(cost $0) 1
------------
Total short-term investments
(cost $19,779,406) 19,779,167
------------
------------------------------------------------------------
Total Investments--120.4%
(cost $303,550,656; Note 3) 258,421,929
Liabilities in excess of other
assets--(20.4%) (43,760,208)
------------
Net Assets--100% $214,661,721
------------
------------
</TABLE>
---------------
* Non-income-producing security.
(a) Indicates a fair valued security.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Statement of Assets and Liabilities FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets March 31, 2000
Investments, at value (cost $303,550,656).................................................................. $258,421,929
Cash....................................................................................................... 128
Receivable for investments sold............................................................................ 2,317,597
Dividends and interest receivable.......................................................................... 282,520
Other assets............................................................................................... 115,370
--------------
Total assets............................................................................................ 261,137,544
--------------
Liabilities
Loan payable (Note 4)...................................................................................... 45,000,000
Payable for investments purchased.......................................................................... 724,076
Advisory fee payable....................................................................................... 352,534
Loan interest payable (Note 4)............................................................................. 237,439
Administration fee payable................................................................................. 80,858
Accrued expenses........................................................................................... 57,765
Deferred directors' fees................................................................................... 23,151
--------------
Total liabilities....................................................................................... 46,475,823
--------------
Net Assets................................................................................................. $214,661,721
--------------
--------------
Net assets were comprised of:
Common stock, at par; 25,064,981 shares issued.......................................................... $ 25,065
Paid-in capital in excess of par........................................................................ 278,076,064
Cost of 436,200 shares held in treasury................................................................. (3,617,561)
--------------
274,483,568
Undistributed net investment income..................................................................... 1,089,200
Accumulated net realized losses......................................................................... (15,782,320)
Net unrealized depreciation on investments.............................................................. (45,128,727)
--------------
Net assets, March 31, 2000.............................................................................. $214,661,721
--------------
--------------
Net asset value per share ($214,661,721 /24,628,781 shares of common stock outstanding).................... $8.72
--------------
--------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
FIRST FINANCIAL FUND, INC.
Statement of Operations
------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income March 31, 2000
<S> <C>
Income
Dividends................................ $ 7,243,356
Interest................................. 888,698
--------------
Total income.......................... 8,132,054
--------------
Expenses
Investment advisory fee.................. 1,501,017
Administration fee....................... 345,244
Legal fees and expenses.................. 182,000
Reports to shareholders.................. 171,000
Custodian's fees and expenses............ 70,000
Insurance expense........................ 57,000
Listing fees............................. 34,000
Transfer agent's fees and expenses....... 25,000
Audit fee and expenses................... 22,000
Directors fees........................... 16,000
Miscellaneous............................ 10,341
--------------
Total operating expenses.............. 2,433,602
Loan interest (Note 4)................... 2,638,950
--------------
Total expenses........................ 5,072,552
--------------
Net investment income....................... 3,059,502
--------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized loss on investment
transactions............................. (7,515,804)
Net change in unrealized appreciation
(depreciation) of investments............ 2,825,134
--------------
Net loss on investments..................... (4,690,670)
--------------
Net Decrease in Net Assets
Resulting from Operations................... $ (1,631,168)
--------------
--------------
</TABLE>
FIRST FINANCIAL FUND, INC.
Statement of Cash Flows
------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Increase (Decrease) in Cash March 31, 2000
<S> <C>
Cash flows provided from operating activities
Dividends and interest received............ $ 8,197,163
Operating expenses paid.................... (2,195,329 )
Loan interest paid......................... (2,735,691 )
Purchases of short-term portfolio
investments, net........................ (17,977,045 )
Purchases of long-term portfolio
investments............................. (164,396,396 )
Proceeds from disposition of long-term
portfolio investments................... 184,664,425
Other assets............................... 30,696
--------------
Net cash provided from operating
activities.............................. 5,587,823
--------------
Cash used for financing activities
Cash dividends paid........................ (1,970,302 )
Cash used to reacquire Fund shares......... (3,617,561 )
--------------
Net cash used for financing activities..... (5,587,863 )
--------------
Net decrease in cash....................... (40 )
Cash at beginning of year.................. 168
--------------
Cash at end of year........................ $ 128
--------------
--------------
Reconciliation of Net Decrease in Net Assets
to Net Cash Provided from Operating Activities
Net decrease in net assets resulting from
operations................................. $ (1,631,168 )
--------------
Decrease in investments....................... 3,368,144
Net realized loss on investment
transactions............................... 7,515,804
Net increase in unrealized appreciation
(depreciation) of investments.............. (2,825,134 )
Decrease in receivable for investments sold... 128,983
Decrease in dividends and interest
receivable................................. 65,109
Decrease in other assets...................... 30,696
Decrease in payable for investments
purchased.................................. (1,206,143 )
Increase in accrued expenses and other
liabilities................................ 141,532
--------------
Total adjustments....................... 7,218,991
--------------
Net cash provided from operating activities... $ 5,587,823
--------------
--------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
FIRST FINANCIAL FUND, INC.
Statement of Changes in Net Assets
Notes to Financial Statements
------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
Increase (Decrease) -------------------------------
in Net Assets 2000 1999
------------ -------------
<S> <C> <C>
Operations
Net investment income...... $ 3,059,502 $ 2,686,510
Net realized gain (loss) on
investment
transactions............ (7,515,804) 31,773,999
Net change in unrealized
appreciation
(depreciation) of
investments............. 2,825,134 (181,559,749)
------------ -------------
Net decrease in net assets
resulting from
operations.............. (1,631,168) (147,099,240)
------------ -------------
Dividends and distributions (Note 1)
Dividends from net
investment income....... (1,970,302) (1,023,852)
Distributions from net
realized gains on
investments............. -- (51,039,444)
Distributions in excess of
net
realized gains.......... -- (11,214,443)
Value of Fund shares issued to
shareholders in reinvestment
of dividends and
distributions................. -- 44,405,793
Cost of Fund shares
reacquired.................... (3,617,561) --
------------ -------------
Total decrease................ (7,219,031) (165,971,186)
Net Assets
Beginning of year............. 221,880,752 387,851,938
------------ -------------
End of year(a)................ $214,661,721 $ 221,880,752
------------ -------------
------------ -------------
---------------
(a) Includes undistributed net
investment income of.......... $ 1,089,200 --
------------ -------------
</TABLE>
First Financial Fund, Inc. (the 'Fund') was incorporated in Maryland on March 3,
1986, as a closed-end, diversified investment company. The Fund's primary
investment objective is to achieve long-term capital appreciation with the
secondary objective of current income by investing in securities issued by
savings and banking institutions, mortgage banking institutions and their
holding companies. The ability of issuers of debt securities held by the Fund to
meet their obligations may be affected by economic developments in a specific
industry or region.
------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation: Securities for which market quotations are readily
available--including securities listed on national securities exchanges and
those traded over-the-counter--are valued at the last quoted sales price on the
valuation date on which the security is traded. If such securities were not
traded on the valuation date, but market quotations are readily available, they
are valued at the most recently quoted bid price provided by an independent
pricing service or by principal market makers. Securities for which market
quotations are not readily available will be valued at fair value as determined
in good faith according to pricing procedures developed by the Investment
Adviser and approved by the Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with repurchase agreement transactions with financial
institutions, it is the Fund's policy that its custodian take possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. If the seller
defaults, and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
Cash Flow Information: The Fund invests in securities and pays dividends from
net investment income and distributions from net realized gains which are paid
in cash or are reinvested at the discretion of shareholders. These activities
are reported in the Statement of Changes in Net Assets and additional
information on cash receipts and cash payments is
--------------------------------------------------------------------------------
7
<PAGE>
Notes to Financial Statements FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
presented in the Statement of Cash Flows. Accounting practices that do not
affect reporting activities on a cash basis include carrying investments at
value and amortizing discounts on debt obligations.
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains or losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.
Federal Income Taxes: It is the Fund's intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends are provided in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
Dividends and Distributions: The Fund expects to declare and pay, at least
annually, dividends from net investment income and any net capital gains.
Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for wash
sales.
------------------------------------------------------------
Note 2. Agreements
The Fund has agreements with Wellington Management Company, LLP (the 'Investment
Adviser') and with Prudential Investments Fund Management LLC (the
'Administrator'). The Investment Adviser makes investment decisions on behalf of
the Fund; the Administrator provides occupancy and certain clerical and
accounting services to the Fund. The Fund bears all other costs and expenses.
The investment advisory agreement provides for the Investment Adviser to receive
a fee, computed monthly and payable quarterly, at the following annual rates:
.75% of the Fund's average month-end net assets up to and including $50 million,
and .625% of such assets in excess of $50 million. The administration agreement
provides for the Administrator to receive a fee, computed monthly and payable
quarterly, at the annual rate of .15% of the Fund's average month-end net
assets.
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended March 31, 2000 were $162,548,253 and $184,514,738,
respectively.
The cost basis of the Fund's investments for federal income tax purposes,
including short-term investments, at March 31, 2000 was $306,146,199; and,
accordingly, net unrealized depreciation for federal income tax purposes was
$47,724,270 (gross unrealized appreciation--$21,217,166; gross unrealized
depreciation--$68,941,436).
For federal income tax purposes, the Fund has a capital loss carryforward as of
March 31, 2000 of approximately $6,483,800 which expires in 2008. Accordingly,
no capital gains distributions are expected to be paid to shareholders until net
gains have been realized in excess of such carryforward. The Fund will elect to
treat net capital losses of approximately $6,703,000 incurred in the five month
period ended March 31, 2000 as having occurred in the following fiscal year.
------------------------------------------------------------
Note 4. Borrowings
The Fund has a credit agreement (the 'Agreement') with an unaffiliated lender.
The maximum commitment under the Agreement is $45,000,000. These borrowings may
be set to any desired maturity at a rate of interest determined by the lender at
the time of borrowing. The current borrowings are due on April 3, 2000. However,
the Fund intends to renew the loan on a daily basis through use of the credit
agreement discussed above. The credit agreement expires on May 31, 2000.
While outstanding, the borrowings will bear interest, payable monthly. The
average daily balance outstanding for the year ended March 31, 2000 was
$45,000,000 at a weighted average interest rate of 5.86%. The highest face
amount of borrowing outstanding at any month-end during the year ended March 31,
2000 was $45,000,000 (as of March 31, 2000). The current borrowings are
$45,000,000 (at an interest rate of 6.81%).
------------------------------------------------------------
Note 5. Capital
There are 50 million shares of $.001 par value common stock authorized. Of the
25,064,981 shares issued as of March 31, 2000, the Investment Adviser owned
10,994 shares. During the year ended March 31, 2000, the Fund repurchased
436,200 of its own shares at a weighted average discount of 15.81%. During the
fiscal year ended March 31, 1999, the Fund issued 4,587,941 shares in connection
with a cash distribution paid in stock.
--------------------------------------------------------------------------------
8
<PAGE>
Financial Highlights FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
-------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 8.85 $ 18.94 $ 15.26 $ 13.71 $ 11.05
-------- -------- -------- -------- --------
Income from investment operations
Net investment income........................................ .12 .11 .14 .22 .13
Net realized and unrealized gain (loss) on investments....... (.20) (7.20) 6.84 4.84 4.99
-------- -------- -------- -------- --------
Total from investment operations.......................... (.08) (7.09) 6.98 5.06 5.12
-------- -------- -------- -------- --------
Less dividends and distributions
Dividends from net investment income......................... (.08) (.05) (.14) (.21) (.15)
Distributions from net realized gains........................ -- (2.59) (2.68) (3.36) (2.31)
Distributions in excess of net realized gains................ -- (.45) (.63) -- --
-------- -------- -------- -------- --------
Total dividends and distributions......................... (.08) (3.09) (3.45) (3.57) (2.46)
-------- -------- -------- -------- --------
Increase resulting from Fund share repurchase................ .03 -- -- .06 --
Net change resulting from the issuance of Fund shares........ -- .09 .15 -- --
-------- -------- -------- -------- --------
Net asset value, end of year(a).............................. $ 8.72 $ 8.85 $ 18.94 $ 15.26 $ 13.71
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Market price per share, end of year(a)....................... $ 7.8125 $ 7.3125 $ 20.813 $ 14.500 $ 12.625
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN(b):.................................. 7.93% (53.65)% 72.59% 42.10% 35.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................ $214,662 $221,881 $387,852 $270,496 $214,130
Average net assets (000)..................................... $230,163 $296,740 $320,484 $238,967 $195,421
Ratios to average net assets:
Expenses, before loan interest, commitment fees and
nonrecurring expenses.................................. 1.06% .94% .91% 1.03% 1.00%
Total expenses............................................ 2.20% 1.61% 1.25% 1.56% 1.23%
Net investment income..................................... 1.33% .91% .82% 1.43% .97%
Portfolio turnover rate...................................... 63% 65% 43% 70% 82%
Total debt outstanding at end of year (000 omitted).......... $ 45,000 $ 45,000 $ 20,000 $ 18,400 $ 9,700
Asset coverage per $1,000 of debt outstanding................ $ 5,768 $ 5,931 $ 20,393 $ 15,701 $ 23,075
</TABLE>
---------------
(a) NAV and market value are published in The Wall Street Journal each Monday.
(b) Total investment return is calculated assuming a purchase of common stock at
the current market value on the first day and a sale at the current market
value on the last day of each year reported. Dividends and distributions are
assumed for purposes of this calculation to be reinvested at prices obtained
under the dividend reinvestment plan. This calculation does not reflect
brokerage commissions.
Contained above is selected data for a share of common stock outstanding, total
investment return, ratios to average net assets and other supplemental data for
the year indicated. This information has been determined based upon information
provided in the financial statements and market price data for the Fund's
shares.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Report of Independent Accountants FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
First Financial Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of cash
flows and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of First Financial Fund, Inc.
(the 'Fund') at March 31, 2000, the results of its operations and its cash flows
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the four years
in the period then ended, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at March 31,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above. The accompanying financial highlights for
the year ended March 31, 1996 were audited by other independent accountants,
whose opinion dated May 9, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
May 19, 2000
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Tax Information (Unaudited) FIRST FINANCIAL FUND, INC.
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We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (March 31, 2000) as to the federal tax status of
dividends and distributions paid by the Fund during such fiscal year.
Accordingly, we are advising you that during the fiscal year ended March 31,
2000, the Fund paid dividends of $.08 per share, which is taxable as ordinary
income. Further, we wish to advise you that 100% of the dividends taxable as
ordinary income and paid in the fiscal year ended March 31, 2000 qualified for
the corporate dividend received deduction available to corporate taxpayers.
In January 2001, shareholders will receive a Form 1099-DIV or substitute Form
1099-DIV which reflects the amount of dividends to be used by calendar year
taxpayers on their 2000 federal income tax returns. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in the Fund.
Other Information FIRST FINANCIAL FUND, INC.
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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.
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Supplemental Proxy Information (Unaudited) FIRST FINANCIAL FUND, INC.
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At the Special Meeting of Stockholders of the Fund reconvened on May 22, 2000 at
the offices of Prudential Investments Fund Management LLC, 751 Broad Street,
Newark, New Jersey, a majority of the Fund's outstanding shares voted in favor
of a proposal to amend the Fund's Articles of Incorporation by adding
supermajority voting requirements to approve any change to the Fund's investment
objectives, its policies with respect to concentration, or certain business
combinations with affiliated stockholders. No other matters were considered at
the meeting. The Special Meeting of Stockholders was held initially on April 25,
2000, but was adjourned to permit additional solicitation.
The results of the proxy solicitation were as follows:
<TABLE>
<S> <C> <C> <C>
Matter Votes For Votes Against Abstentions
-----------------------------------------------------------------------------------------
Amendment of Articles of
Incorporation 12,460,303 6,090,505 384,187
</TABLE>
Corporate Governance (Unaudited) FIRST FINANCIAL FUND, INC.
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At its meetings in February and March 2000, the Fund's Board of Directors
unanimously approved several changes to the Fund's By-Laws. These changes were
as follows:
- Increasing the percentage of outstanding shares necessary to call a special
meeting of stockholders from 25 percent to 50 percent.
- Clarifying that no business shall be transacted at any special stockholders'
meeting except as provided in the notice of meeting.
- Specifying the individuals with authority to conduct the Fund's stockholder
meetings and the powers vested in those persons.
- Modernizing the Fund's provisions to permit proxy voting through electronic
means.
- Clarifying that the Fund will indemnify its directors and officers to the
maximum extent permitted by applicable federal and Maryland state law.
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Directors
Eugene C. Dorsey
Robert E. LaBlane
Douglas H. McCorkindale
Thomas T. Mooney
Investment Adviser
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Administrator
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Notice is hereby given in accordance with Section 23(c)
of the Investment Company Act of 1940 that the Fund may
purchase, from time to time, shares of its common stock
at market prices.
The views expressed in this report and the information
about the Fund's portfolio holdings are for the period
covered by this report and are subject to change
thereafter.
This report is for stockholder information. This is not
a prospectus intended for use in the purchase or sale
of Fund shares.
First Financial Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
For information call toll-free (800) 451-6788
320228109
