-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IWy0uuFoWLTpKwpk63fh98M79EFS7Ol90bycQqNAE+0S+koiNRKA5XpU8Bjs81zm WyCz0qQdIWmAkKcR9BbwEw== 0000935069-03-001606.txt : 20031203 0000935069-03-001606.hdr.sgml : 20031203 20031203141042 ACCESSION NUMBER: 0000935069-03-001606 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031203 EFFECTIVENESS DATE: 20031203 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL FUND INC CENTRAL INDEX KEY: 0000790202 IRS NUMBER: 133341573 STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04605 FILM NUMBER: 031034927 BUSINESS ADDRESS: STREET 1: GATEWAY ENTER THREE 100 MULBERRY ST CITY: NEWARK STATE: NJ ZIP: 07102-4077 BUSINESS PHONE: 2013677530 MAIL ADDRESS: STREET 1: GATEWAY CENTER THREE 100 MULBERRY STREET CITY: NEWARK STATE: NJ ZIP: 07102-4077 FORMER COMPANY: FORMER CONFORMED NAME: FIRST SAVINGS & BANKING INSTITUTIONS FUND INC DATE OF NAME CHANGE: 19860402 N-CSRS 1 ncsr.txt FIRST FINANCIAL NCSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4605 --------------------- FIRST FINANCIAL FUND, INC. ------------------------------------------------------------- (Exact name of registrant as specified in charter) 1680 38th Street, Suite 800 BOULDER, CO 80301 ------------------------------------------------------------- (Address of principal executive offices) (Zip code) Stephen C. Miller, Esq. 1680 38th Street, Suite 800 BOULDER, CO 80301 ------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 303-444-5483 --------------- Date of fiscal year end: March 31, 2004 -------------- Date of reporting period: September 30, 2003 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. LETTER FROM THE CHAIRMAN NOVEMBER 11, 2003 FELLOW SHAREHOLDERS: As the new Chairman of the Board of First Financial Fund, Inc., I would like to take this opportunity to introduce myself and communicate with fellow shareholders. As you are aware, at the recent annual shareholder meeting held in August, shareholders replaced four of the Fund's five directors. Since then, we have received a few calls from our shareholders asking whether the Board is contemplating changing the adviser. Nothing could be further from the truth! Speaking for the entire Board, I want to emphasize that we are very pleased with the Fund's adviser, Wellington Management Company, LLP, and more specifically with Nick Adams, the Fund's portfolio manager. Wellington Management and Nick will continue in the same roles they have since the inception of the Fund. I also want to emphasize that the new Board intends to support Wellington Management and Mr. Adams in ways they feel will benefit the Fund. In this regard, after consultation with Wellington Management, the Board adopted a resolution permitting the Fund to invest in foreign securities without limitation. The resolution expands the universe of financial services companies available for investment, many of which in recent years have non-U.S. parent companies or which themselves are organized outside the U.S. One other change has occurred. The Fund's prior administrator, Prudential Investment LLC, was replaced with Fund Administrative Services, LLC, under substantially similar terms until the Board has had time to consider a formal proposal for enhanced administrative services. The Board is impressed with the outstanding performance of the Fund in the past few years and we look forward to a continued successful relationship with Wellington Management and Mr. Adams. Thank you for your support of the Fund. We remain committed to providing a quality investment fund to you, our shareholders. Sincerely, /S/ Joel Looney Joel Looney Chairman of the Board - -------------------------------------------------------------------------------- 1 LETTER FROM THE ADVISER NOVEMBER 11, 2003 DEAR SHAREHOLDERS: Few readers appreciate a preachy portfolio manager. Nor should they. Watch out when our urge to demonstrate understanding of the way the world works begets precise and concrete conclusions as to what stocks should and shouldn't populate your portfolio. The former is inscrutable enough without muddying the waters by turning it into a stock picking exercise. To wit, all (ourselves included) who have wrung their hands over consumer, corporate and public debt levels, trade deficits, a jobless recovery and terrorism have missed a small monster of a move in most stocks, made all the more annoying by the stingy returns of money sitting in cash. - -------------------------------------------------------------------------------- TOTAL RETURN FOR THE PERIODS ENDED 9/30/03 - -------------------------------------------------------------------------------- 6 MOS. 1 YEAR 3 YEARS 5 YEARS FIRST FINANCIAL FUND'S NAV 26.4% 39.0% 33.0% 20.4% S&P 500 18.4 24.4 -10.1 1.0 NASDAQ Composite* 33.4 52.7 -21.3 1.1 NASDAQ Banks* 19.0 17.8 13.4 8.4 SNL All Daily* 21.4 35.2 22.8 15.4 SNL MBS REITS* 26.5 40.2 36.3 10.8 - -------------------------------------------------------------------------------- * Principal Only And maybe that is the point worth noting. In response to 9/11, the Fed and the federal government created a sea of liquidity and easier credit. As it became clearer to investors that prognostication of crashes, deflation and changes in the world order were a bit premature, that sea made its way back to the stock pond. Given the rapid pickup in margin debt, bulletin board trading and, of late, IPOs and secondary offerings, the flow was not a trickle but a torrent. What good is a 1% yield in a money market account when the stock averages this year have produced from 17% to 40+% returns? Switching to the smaller world of financial services, we harbor a number of concerns. First, and perhaps most troubling, is the greater dependency of banks borrowing short and lending long. This mismatch is generally accompanied with more leverage as well, built on the thesis that the Fed will not raise short-term interest rates for the "foreseeable future." Indeed, both longer duration and greater leverage is required to match the high-teen ROE's many banks, thrifts and mortgage REIT's have promised their investors. There will be wailing and grinding of teeth if the "foreseeable future" is sooner rather than later. Second, we know that higher interest rates are a negative for certain financial institutions - -------------------------------------------------------------------------------- 2 dependent on the velocity of real estate transactions. Could a higher rate scenario also severely impact real estate values? The latter would have broad and potentially far more destructive impact on financial institutions. Finally, merger activity has heated up again. Driven by speculative frenzy, the stocks of many "target" institutions have soared. However, not all will be acquired and the integration process of those that do get bought rarely runs smoothly. For the Fund, all subsectors and, indeed, most of our holdings contributed positively to overall performance. Two positions deserve special mention. Countrywide Financial, a mortgage banker, benefited both from the Fed's easing and its own efforts to more fully and vertically integrate the mortgage process. Hudson City, a mutual holding company, received recognition for its tight control of expenses, successful capital management and the potential for full conversion from mutual to stock ownership. In both cases, a comprehensive understanding of what made each company special helped us identify an attractive investment. Increasingly, though still in small bites, we are finding compelling opportunities in financial institutions outside the U.S. The new property casualty insurers, based mostly in Bermuda, offer a way to participate in the hard market while avoiding the "legacy" issues still plaguing the older players. We have also found value in banks in both Canada and Asia. Most of these institutions have the liquidity and the balance sheet to grow earnings smartly should the world economy accelerate, while offering a margin of safety if the world proves more punk. Given our less sanguine view of the dollar, we can live with the currency risk. As always, we are grateful for your trust in us. Sincerely, /S/ Nicholas C. Adams Nicholas C. Adams - -------------------------------------------------------------------------------- 3 Portfolio of Investments as of September 30, 2003 (Unaudited) First Financial Fund, Inc. - -------------------------------------------------------------------------------- Shares Description Value (Note 1) - ------------------------------------------------------------------------ LONG-TERM INVESTMENTS--91.7% COMMON STOCKS-DOMESTIC--84.1% - ------------------------------------------------------------------------ BANKS & THRIFTS--43.4% 12,800 Abington Bancorp, Inc. $ 407,936 538,450 Bay View Capital Corporation 3,268,392 60,900 BostonFed Bancorp, Inc. 1,842,225 129,280 Broadway Financial Corporation 1,784,064 152,685 CB Bancshares, Inc. 9,352,109 213,807 CCF Holding Company 4,637,474 154,100 City National Corporation 7,852,936 96,500 Commerce Bancorp, Inc. 4,623,315 60,000 Community Bank San Jose California (a)(b) 2,571,000 195,000 Dime Bancorp, Inc.* 31,200 233,800 Downey Financial Corporation 10,925,474 413,565 Fidelity Federal Bancorp.* 636,890 20,199 First Citizens BancShares, Inc., Class A 2,135,034 111,000 First Community Bancorp, Inc. (a) 3,717,390 173,900 First Federal Bancshares, Inc. 5,479,589 239,550 First Republic Bank 7,385,327 378,700 FirstFed America Bancorp, Inc. 8,369,270 252,000 FirstFed Bancorp, Inc. 2,046,240 71,468 FNB Corporation 1,783,127 325,100 Franklin Bank Corporation 3,901,200 30,000 Hanmi Financial Corporation 598,200 286,400 Hawthorne Financial Corporation* 11,501,824 19,999 HFB Financial Corporation 399,980 204,600 Hibernia Corporation, Class A 4,145,196 79,300 IBERIABANK Corporation 4,172,766 219,600 MetroCorp Bancshares, Inc. 2,755,980 336,000 North Valley Bancorp 5,191,200 116,500 Northeast Pennsylvania Financial Corporation 2,038,750 136,200 Pacific Crest Capital, Inc. 2,891,390 380,059 Pacific Union Bank 7,050,094 165,930 Perpetual Federal Savings Bank 3,733,425 308,750 Provident Financial Holdings, Inc. 9,268,675 40,650 Redwood Financial, Inc.* 701,212 45,000 River Valley Bancorp 1,811,700 420,000 Southwest Bancorp, Inc. 7,077,000 32,500 St. Landry Financial Corporation(a)(d)* (12/01/98-cost $471,413) 422,500 100,000 Sterling Eagle (a) (b) 1,000,000 335,542 Taylor Capital Group, Inc. 7,744,309 21,100 Team Financial, Inc. 236,531 35,000 TriCo Bancshares 1,001,000 Shares Description Value (Note 1) - ------------------------------------------------------------------------ BANKS & THRIFTS--(CONTINUED) 43,000 UMB Financial Corporation $ 2,028,310 320,400 UnionBanCal Corporation 15,891,840 36,750 Westbank Corporation 658,928 172,000 Woronoco Bancorp, Inc. 4,816,000 ------------ 179,887,002 ------------ - ------------------------------------------------------------------------ MORTGAGE & REITS--15.4% 400,000 American Financial Realty Trust; REIT 5,640,000 77,000 Arbor Realty Trust, Inc.(a)(c); REIT 5,775,000 306,100 Countrywide Financial Corporation 23,961,508 228,300 Freddie Mac 11,951,505 219,738 iStar Financial, Inc.; REIT 8,558,795 45,500 INMC Mortgage Holdings, Inc. 1,054,235 272,590 Medical Office Properties, Inc., (a)(c); REIT 2,447,858 155,504 Newcastle Investment Corporation; REIT 3,575,037 155,504 Newcastle Investment Holdings; Corporation (a)(b); REIT 758,082 ------------ 63,722,020 ------------ - ------------------------------------------------------------------------ SAVINGS & LOANS--12.0% 24,400 Charter Financial Corporation 752,740 71,800 Chesterfield Financial Corporation 1,616,218 238,500 Citizens First Bancorp, Inc. 4,936,950 24,000 First PacTrust Bancorp, Inc. 493,200 221,600 FloridaFirst Bancorp, Inc. 5,830,296 97,500 Golden West Financial Corporation 8,727,225 90,000 HMN Financial, Inc. 1,935,000 533,900 Hudson City Bancorp, Inc. 16,465,476 33,100 Jefferson Bancshares, Inc. 473,330 439,200 Ocwen Financial Corporation* 1,998,360 295,600 Ohio Casualty Corporation* 4,286,200 94,800 Parkvale Financial Corporation 2,393,700 ------------ 49,908,695 ------------ - ------------------------------------------------------------------------ INSURANCE--10.5% 16,500 Axis Capital Holdings Ltd. 411,675 275,300 Ceres Group, Inc.* 1,029,200 1,037,100 Meadowbrook Insurance Group, Inc.* 4,283,223 220,100 Penn-America Group, Inc. 3,297,098 276,700 Platinum Underwriters Holdings, Ltd. 7,775,270 388,500 Safety Insurance Group, Inc. 6,029,520 131,400 Travelers Property Casualty Corporation, Class A 2,086,632 - -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of September 30, 2003 (Unaudited) First Financial Fund, Inc. - -------------------------------------------------------------------------------- Shares Description Value (Note 1) - ------------------------------------------------------------------------ INSURANCE--(CONTINUED) 55,300 XL Capital Ltd., Class A $ 4,282,432 36,300 White Mountains Insurance Group, Ltd. 14,412,189 ------------ 43,607,239 ------------ - ------------------------------------------------------------------------ OTHER--2.8% 1 Citigroup, Inc. 1 959,315 Resource America, Inc., Class A 11,396,662 ------------ 11,396,663 ------------ Total common stocks - domestic (cost $235,941,326) 348,521,619 ------------ - ------------------------------------------------------------------------ COMMON STOCKS-FOREIGN--4.7% - ------------------------------------------------------------------------ BERMUDA--3.4% 285,700 IPC Holdings Ltd., ADR 9,999,500 410,200 Quanta Capital Holdings Ltd. (a)(c) 4,102,000 ------------ 14,101,500 ------------ - ------------------------------------------------------------------------ SOUTH KOREA--0.8% 338,237 Koram Bank, GDR 3,234,899 ------------ - ------------------------------------------------------------------------ CANADA--0.5% 88,000 Canadian Western Bank 2,282,394 Total common stocks - foreign (cost $17,120,452) 19,618,793 ------------ - ------------------------------------------------------------------------ PREFERRED STOCKS--2.5% 62,350 Capital One Financial Corporation, 6.25% 2,831,937 270,365 Taylor Capital Trust, 9.75% 7,599,960 ------------ Total preferred stocks (cost $8,976,115) 10,431,897 ------------ CONVERTIBLE BONDS--0.4% 1,000 Online Resources Communications, 8.00%, 9/30/05 (cost $1,000,000) 1,745,000 ------------ Total long-term investments (cost $263,037,893) 380,317,309 ------------ Principal Amount (000) Description Value (Note 1) - ------------------------------------------------------------------------ SHORT TERM INVESTMENTS--8.3% - ------------------------------------------------------------------------ REPURCHASE AGREEMENTS--8.2% $ 4,100 Agreement with ABN Tri-Party, 1.08%, dated 9/30/03, to be repurchased at $4,100,123 on 10/01/03, collateralized by $4,182,000 market value of a U.S. Treasury Bond, 6.50%, due 5/1/17 $ 4,100,000 30,100 Agreement with Gold Tri-Party, 1.10%, dated 9/30/03, to be repurchased at $30,100,920 on 10/01/03, collateralized by $30,702,000 market value of a U.S. Treasury Bond, 5.00%, due 10/1/33 30,100,000 ------------ 34,200,000 ------------ - ------------------------------------------------------------------------ CERTIFICATE OF DEPOSITS--0.0%** (cost $23,629) 24 First Federal Savings Bank 1.50%, 10/14/03 23,629 ------------ Total short-term investments (cost $34,223,629) 34,223,629 ------------ - ------------------------------------------------------------------------ TOTAL INVESTMENTS--100% (cost $297,261,522) 414,540,938 Liabilities in excess of other assets-0.0% 156,614 ------------ Net Assets--100% $414,697,552 ============ - ------------ * Non-income producing security. ** Amount represents less than 0.1% of net assets. (a) Indicates a fair valued security. (b) Private Placement restricted as to resale and does not have a readily available market. Date represents acquisition date. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. (d) The security has been determined by the Manager to be an illiquid security because it is restricted or because there is exceptionally low trading volume in the primary trading market for the security at September 30, 2003. ADR--American Depository Receipt. GDR--Global Depository Receipt. REIT--Real Estate Investment Trust. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) FIRST FINANCIAL FUND, INC. - --------------------------------------------------------------------------------
SEPTEMBER 30, 2003 ASSETS -------------------- Investments, at value (Cost $297,261,522) (Note 1) See accompanying schedule .............................................................. $ 414,540,938 Cash ................................................................................... 76,270 Dividends and interest receivable ...................................................... 478,054 Prepaid expenses and other assets ...................................................... 244,139 ------------- Total Assets ........................................................................ 415,339,401 ------------- LIABILITIES Investment advisory fee payable (Note 2) ............................................... 315,009 Administration and Co-administration fees payable (Note 2) ............................. 213,185 Audit fees and expenses payable ........................................................ 16,225 Directors' fees and expenses payable (Note 2) .......................................... 8,250 Accrued expenses and other payables .................................................... 89,180 ------------- Total liabilities ................................................................... 641,849 ------------- NET ASSETS ............................................................................. $ 414,697,552 ============= Net assets consist of: Undistributed net investment income ................................................. $ 3,481,773 Accumulated net realized gain on investments sold ................................... 44,413,543 Unrealized appreciation of investments .............................................. 117,279,416 Par value of Common Stock ........................................................... 22,791 Paid-in capital in excess of par value of Common Stock .............................. 249,500,029 ------------- Total Net Assets .................................................................... $ 414,697,552 ============= Net Asset Value, ($414,697,552 (DIVIDE) 22,791,382 shares of common stock outstanding).. $18.20 =============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 FIRST FINANCIAL FUND, INC. STATEMENT OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- Six Months Ended NET INVESTMENT INCOME September 30, 2003 -------------------- Income Dividends ............................. $ 3,803,066 Interest .............................. 330,456 -------------- Total Investment Income ......... 4,133,522 -------------- Expenses Investment advisory fee (Note 2) ...... 1,268,903 Legal fees ............................ 450,978 Administration and co-administration fees (Note 2) .... 187,931 Custodian's fees ...................... 70,318 Insurance expenses .................... 49,646 Directors' fees and expenses (Note 2) . 43,426 Transfer agent's fees and expenses .... 26,066 Audit fee ............................. 16,222 Other ................................. 116,269 -------------- Total expenses .................. 2,229,759 -------------- Net Investment Income ................... 1,903,763 -------------- REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) on: Securities ............................ 26,913,819 Foreign currencies and net other assets (8,815) -------------- Net realized gain on investments during the period ..................... 26,905,004 Net change in unrealized appreciation of investments during the period ......... 58,483,193 -------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ........................... 85,388,197 -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $ 87,291,960 ============== FIRST FINANCIAL FUND, INC. STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) - -------------------------------------------------------------------------------- Six Months Ended Year Ended INCREASE IN September 30, March 31, NET ASSETS 2003 2003 ------------- ------------ Operations Net investment income ................... $ 1,903,763 $ 3,657,629 Net realized gain on investments sold during the period ............... 26,905,004 57,512,075 Net change in unrealized appreciation/(depreciation) of investments during the period ............................... 58,483,193 (16,492,824) ------------ ------------ Net increase in net assets resulting from operations ............ 87,291,960 44,676,880 ------------ ------------ Dividends and Distributions (Note 1) Dividends paid from net investment income .................... -- (3,937,223) Distributions paid from net realized capital gain to shareholders ......................... -- (65,919,006) Cost of Fund shares reacquired ............ (11,983,796) (638,426) ------------ ------------ Net increase/(decrease) in net assets for the period ................... 75,308,164 (25,817,775) NET ASSETS Beginning of period ....................... 339,389,388 365,207,163 ------------ ------------ End of period (including undistributed net investment income of $3,481,773 and $1,578,010 respectively) ................ $414,697,552 $339,389,388 ============ ============ - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 FINANCIAL HIGHLIGHTS (UNAUDITED) FIRST FINANCIAL FUND, INC. - --------------------------------------------------------------------------------
Six Months Ended Year Ended March 31, September 30, 2003 ------------------------------------------------------ (Unaudited) 2003 2002 2001 2000 1999 ----------- ------------------------------------------------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ....................... $ 14.40 $ 15.46 $ 12.86 $ 8.72 $ 8.85 $ 18.94 -------- -------- -------- -------- -------- -------- Net investment income ...................................... 0.08 0.16 0.19 0.14 0.12 0.11 Net realized and unrealized gain/(loss) on investments ..... 3.64 1.72 3.99 4.09 (0.20) (7.20) -------- -------- -------- -------- -------- -------- Total from investment operations ..................... 3.72 1.88 4.18 4.23 (0.08) (7.09) -------- -------- -------- -------- -------- -------- DISTRIBUTIONS Dividends paid from net investment income .................. -- (0.17) (0.20) (0.10) (0.08) (0.05) Distributions paid from net realized capital gains ......... -- (2.80) (1.46) -- -- (2.59) Distributions in excess of net realized gains .............. -- -- -- -- -- (0.45) -------- -------- -------- -------- -------- -------- Total dividends and distributions .................... -- (2.97) (1.66) (0.10) (0.08) (3.09) -------- -------- -------- -------- -------- -------- Net Increase resulting from Fund share repurchase .......... 0.08 0.03 0.08 0.01 0.03 -- Net change resulting from the issuance of Fund shares ...... -- -- -- -- -- 0.09 -------- -------- -------- -------- -------- -------- Net asset value, end of period(a) .......................... $ 18.20 $ 14.40 $ 15.46 $ 12.86 $ 8.72 $ 8.85 ======== ======== ======== ======== ======== ======== Market price per share, end of period(a) ................... $ 15.73 $ 13.97 $ 15.75 $ 11.29 $ 7.8125 $ 7.3125 ======== ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN BASED ON MARKET VALUE(B): ....................................... 12.60% 8.24% 35.20% 49.40% 7.93% (53.65)% RATIOS AND SUPPLEMENTAL DATA: Ratio of expenses to average net assets .................... 1.21%(c) 1.29% 1.00% 2.12% 2.20% 1.61% Ratio of net investment income to average net assets ....... 1.03%(c) 0.99% 1.32% 1.33% 1.33% 0.91% SUPPLEMENTAL DATA Portfolio Turnover Rate .................................... 30% 74% 114% 85% 63% 65% Net assets, end of period (in 000's) . ..................... $414,698 $339,389 $365,207 $315,392 $214,662 $221,881 Number of shares outstanding at the end of period (in 000's) 22,791 23,576 23,622 24,525 24,629 25,065 - --------------- (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. (c) Annualized for the six months ended September 30, 2003. 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. 8 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- First Financial Fund, Inc. (the "Fund") was incorporated in Maryland on March 3, 1986, as a closed-end, diversified management investment company. The Fund's primary investment objective is to achieve long-term capital appreciation with the secondary objective of current income by investing at least 80% of investable assets in finance and financial service-related companies, including savings and banking institutions and their holding companies. - -------------------------------------------------------------------------------- NOTE 1. SIGNIFICANT 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 traded via NASDAQ are valued at the NASDAQ Official Close Price ("NOCP"). Securities for which market quotations are not readily available or for which the pricing agent or market maker does not provide a valuation or methodology, or provides a valuation or methodology that, in the judgement of the adviser, does not represent fair value, are valued at fair value by a Valuation Committee appointed by the Board of Directors, in consultation with the adviser. 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, which approximates fair value. REPURCHASE AGREEMENTS: In connection with the repurchase agreement transactions with United States 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. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. 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. 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 including amortization of premium and accretion of discount on debt securities, as required 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 TAX: It is the Fund's policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net income and capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. DIVIDENDS AND DISTRIBUTIONS: The Fund expects to declare and pay dividends from net investment income and distributions of net realized capital gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. Permanent book/tax differences related to income and gains are reclassified to paid-in capital when they arise. - -------------------------------------------------------------------------------- 9 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- OTHER: The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- NOTE 2. AGREEMENTS Wellington Management Company, LLP serves as the Investment Adviser (the "Investment Adviser"). The Investment Adviser makes investment decisions on behalf of the Fund. The Fund pays a quarterly fee at the following rates: 0.75% of the Fund's average month-end net assets up to $50 million, and 0.625% of such assets in excess of $50 million. Fund Administrative Services, LLC ("FAS") serves as the Fund's Administrator. Under the Administration Agreement, FAS provides certain administrative and executive management services to the Fund including: providing the Fund's principal offices and executive officers, overseeing and administering all contracted service providers, making recommendations to the Board regarding policies of the Fund, conducting shareholder relations, authorizing expenses and other administrative tasks. Under the Administration Agreement, the Fund pays FAS a monthly fee, calculated at an annual rate of 0.15% of the value of the Fund's average monthly net assets. The Fund pays each Director who is not a director, officer or employee of the Adviser or FAS a fee of $8,000 per annum, plus $4,000 for each in-person meeting of the Board of Directors and $500 for each telephone meeting. In addition, the Fund will reimburse all Directors for travel and out-of-pocket expenses incurred in connection with such meetings. PFPC Inc. ("PFPC"), an indirect, majority-owned subsidiary of The PNC Financial Services Group Inc., serves as the Fund's Co-Administrator. As Co-Administrator, PFPC calculates the net asset value of the Fund's shares and generally assists in all aspects of the Fund's administration and operation. The Fund pays PFPC a fee on a monthly basis based on average net assets. PFPC Trust Company, an indirect subsidiary of The PNC Financial Services Group Inc., serves as the Fund's Custodian. As compensation to PFPC Trust Company, the Fund pays PFPC Trust Company a monthly fee based on the Fund's average monthly gross assets. - -------------------------------------------------------------------------------- NOTE 3. PURCHASES AND SALES OF SECURITIES Cost of purchases and proceeds from sales of securities for the period ended September 30, 2003, excluding short-term investments, aggregated $103,837,820 and $116,263,091, respectively. On September 30, 2003, aggregate gross unrealized appreciation for all securities in which there is an excess of tax cost over value was $123,822,294 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value was $6,542,878. - -------------------------------------------------------------------------------- NOTE 4. CAPITAL At September 30, 2003, 50,000,000 of $0.001 par value Common Stock were authorized. - -------------------------------------------------------------------------------- NOTE 5. SHARE REPURCHASE PROGRAM In accordance with Section 23(c) of the Investment Company Act of 1940, as amended, the Fund hereby gives notice that it may from time to time repurchase shares of the Fund in the open market at the option of the Board of Directors and upon such terms as the Directors shall determine. For the six months ended September 30, 2003, the Fund repurchased 784,800 of its own shares at an average discount of 15%. - -------------------------------------------------------------------------------- 10 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- NOTE 6. BORROWINGS The Fund has a credit agreement (the "Agreement") with an unaffiliated lender. The maximum under the Agreement is $75,000,000. Interest on any such borrowings is based on market rates and is payable quarterly and at maturity. The Fund may utilize these borrowings (leverage) in order to increase the potential for gain on amounts invested. There can be no guarantee that these gains will be realized. There are increased risks with the use of leverage. These borrowings may be set to any desired maturity at a rate of interest determined by the lender at the time of borrowing. - -------------------------------------------------------------------------------- 11 OTHER INFORMATION FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- DIVIDEND REINVESTMENT PLAN. Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested in Fund shares (Shares) pursuant to the Fund's Dividend Reinvestment Plan (the Plan). Shareholders who do not participate in the Plan will normally receive all distributions in cash paid by check in United States dollars mailed directly to the shareholders of record (or if the shares are held in 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. Equiserve Trust Company, N.A. (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, Equiserve Trust Company, N.A., P.O. Box 43011, Providence, RI 02940-3011. - -------------------------------------------------------------------------------- 12 MEETING OF SHAREHOLDERS - VOTING RESULTS (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- On August 19, 2003, the Fund held its Annual Meeting of Shareholders to (1) elect Susan L. Ciciora, Stephen C. Miller, Dr. Dean Jacobson and Joel W. Looney as Directors of the Fund, and (2) Adoption of Amendment to Article III, Section 3 of the Fund's by-laws. PROPOSAL 1: (VOTING BY SHAREHOLDERS):
ELECTION OF SUSAN L. CICIORA AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST ---------------------------------------------------- -------------------- -------------------- Affirmative .............................................. 14,077,457.9119 90.2 Withheld ................................................. 1,524,620.8176 9.8 ---------------- ------ TOTAL ........................................... 15,602,078.7295 100.0 ================ ====== ELECTION OF STEPHEN C. MILLER AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST ----------------------------------------------------- -------------------- -------------------- Affirmative .............................................. 14,081,363.9119 90.3 Withheld ................................................. 1,520,714.8176 9.7 ---------------- ------ TOTAL ........................................... 15,602,078.7295 100.0 ================ ====== ELECTION OF DR. DEAN JACOBSON AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST ----------------------------------------------------- -------------------- -------------------- Affirmative .............................................. 14,092,172.6145 90.3 Withheld ................................................. 1,509,906.1150 9.7 ---------------- ------ TOTAL ........................................... 15,602,078.7295 100.0 ================ ====== ELECTION OF JOEL W. LOONEY AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST -------------------------------------------------- -------------------- -------------------- Affirmative .............................................. 14,097,975.6145 90.4 Withheld ................................................. 1,504,103.1150 9.6 ---------------- ------ TOTAL ........................................... 15,602,078.7295 100.0 ================ ====== PROPOSAL2: (VOTING BY SHAREHOLDERS): ADOPTION OF AMENDMENT TO ARTICLE III, SECTION 3 OF THE FUND'S BY-LAWS # OF VOTES CAST % OF VOTES CAST -------------------------------------------------- -------------------- -------------------- For ...................................................... 13,452,382.3801 86.2 Against .................................................. 1,998,342.3352 12.8 Abstain .................................................. 151,354.0142 1.0 ---------------- ------ TOTAL ........................................... 15,602,078.7295 100.0 ================ ======
- -------------------------------------------------------------------------------- 13 This Page Left Blank Intentionally. This Page Left Blank Intentionally. [GRAPHIC OMITTED] logo FIRST FINANCIAL FUND, INC. SEMI- ANNUAL REPORT SEPTEMBER 30, 2003 DIRECTORS Richard I. Barr Susan L. Ciciora Dean Jacobson Joel W. Looney Stephen C. Miller INVESTMENT ADVISER Wellington Management Company, LLP 75 State Street Boston, MA 02109 ADMINISTRATOR Fund Administrative Services, LLC 1680 38th Street, Suite 800 Boulder, CO 80301 CUSTODIAN PFPC Trust Company 8800 Tinicum Boulevard Philadelphia, PA 19153 TRANSFER AGENT Equiserve Trust Company, N.A. P.O. Box 43011 Providence, RI 02940-3011 LEGAL COUNSEL Willkie Farr & Gallagher, LLP 787 Seventh Avenue New York, NY 10019-6099 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. 1680 38th Street, Suite 800 Boulder, CO 80301 For information call (303) 444-5483 The Fund's CUSIP number is: 320228109 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) First Financial Fund, Inc. By (Signature and Title)* /S/ Stephen C. Miller ------------------------------------------------------- Stephen C. Miller, President & Chief Executive Officer (principal executive officer) Date November 28, 2003 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /S/ Stephen C. Miller ------------------------------------------------------- Stephen C. Miller, President & Chief Executive Officer (principal executive officer) Date November 28, 2003 ---------------------------------------------------------------------------- By (Signature and Title)* /S/ Carl D. Johns ------------------------------------------------------- Carl D. Johns, Vice President and Treasurer (principal financial officer) Date November 28, 2003 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 3 certa.txt 302 CERTIFICATIONS EX-99.CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Stephen C. Miller, certify that: 1. I have reviewed this report on Form N-CSR of First Financial Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [Omitted] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 28, 2003 /S/ Stephen C. Miller ---------------------- ------------------------- Stephen C. Miller, President & Chief Executive Officer (principal executive officer) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Carl D. Johns, certify that: 1. I have reviewed this report on Form N-CSR of First Financial Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [Omitted] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: NOVEMBER 28, 2003 /S/ CARL D. JOHNS ---------------------- ------------------------------------------- Carl D. Johns, Vice President and Treasurer (principal financial officer) EX-99.906CERT 4 certb.txt 906 CERTIFICATIONS EX-99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT I, Stephen C. Miller, President & Chief Executive Officer of First Financial Fund, Inc. (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: NOVEMBER 28, 2003 /S/ STEPHEN C. MILLER ---------------------- ------------------------------ Stephen C. Miller, President & Chief Executive Officer (principal executive officer) I, Carl D. Johns, Vice President and Treasurer of First Financial Fund, Inc. (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: NOVEMBER 28, 2003 /S/ CARL D. JOHNS ---------------------- ------------------------------ Carl D. Johns, Vice President and Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----