-----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, WNuzJsgqWQGkn7AHIdlL2pOFU7yMs1AhGmRcUwBxU07QPq4MggOiUIUYCxkrnfvA yP+s7ThBHfT4eGtykwc2eQ== 0000935069-04-000832.txt : 20040607 0000935069-04-000832.hdr.sgml : 20040607 20040607140832 ACCESSION NUMBER: 0000935069-04-000832 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040607 EFFECTIVENESS DATE: 20040607 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-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04605 FILM NUMBER: 04851581 BUSINESS ADDRESS: STREET 1: 1680 38TH STREET STREET 2: SUITE 800 CITY: BOULDER STATE: CO ZIP: 80301 BUSINESS PHONE: 3034445483 MAIL ADDRESS: STREET 1: 1680 38TH STREET STREET 2: SUITE 800 CITY: BOULDER STATE: CO ZIP: 80301 FORMER COMPANY: FORMER CONFORMED NAME: FIRST SAVINGS & BANKING INSTITUTIONS FUND INC DATE OF NAME CHANGE: 19860402 N-CSR 1 ncsr.txt FIRST FINANCIAL NCSR 03/04 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 811-04605 --------------------- 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: March 31, 2004 -------------- 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. The Report to Shareholders is attached herewith. LETTER FROM THE CHAIRMAN MARCH 31, 2004 FELLOW SHAREHOLDERS: The Board of Directors is very pleased with the Fund's performance for fiscal year ending March 31, 2004. A 55.00% return is an outstanding performance. The Board is also proud of the Fund's recognition by Lipper as having achieved the highest 10 year return for any closed-end equity fund for the period ending December 31, 2003. Speaking for the entire Board, we wish to recognize and thank the Fund's adviser, Wellington Management Company, LLP, and more specifically Nick Adams, the Fund's portfolio manager. The Fund's fine performance is an illustration of their commitment to us as shareholders. We continue to support Wellington Management and Mr. Adams in ways they feel will benefit the Fund. To that end, you will receive shortly the Fund's Proxy Statement with regard to the upcoming annual meeting of stockholders. The Proxy Statement will contain a number of proposals, including a proposal to broaden the Fund's concentration policy. Currently, the Fund must invest at least 65% of its assets in securities issued by "savings and banking institutions, mortgage banking institutions" or their holding companies. The proposal would broaden the universe of financial companies in which the Fund might invest and is intended to give the Fund's portfolio manager needed investment flexibility and options. Please refer to Nick's letter for additional information on this issue. The Fund's investment objective and other fundamental policies would remain unchanged. The Proxy Statement will also recommend a comprehensive set of proposals to implement a number of what might be referred to as "shareholder-friendly" practices in the corporate governance area, including one which seeks to declassify the Board. Generally, these proposals seek to eliminate or modify a number of current charter or bylaw provisions that are often viewed as limiting accountability and insulating management from stockholders. Further details may be found in the upcoming Proxy Statement. When you receive your Proxy Statement, please respond promptly so that the Fund can save on proxy solicitation expenses. Thank you for your support of the Fund. We remain committed to providing a quality investment fund to you, our fellow shareholders. Sincerely, /S/ SIG Joel Looney Chairman of the Board - -------------------------------------------------------------------------------- 1 LETTER FROM THE ADVISER MARCH 31, 2004 DEAR FELLOW SHAREHOLDERS: Our Fund returned 55.00% for the fiscal year ending March 31, 2004, outperforming comparative benchmarks. These results came notwithstanding an outsized cash position for most of the year. Once again, our cautious outlook proved wrong or at least, premature. On a more positive note, the Fund had the highest returns of any closed-end equity fund, according to Lipper, for the 10 years ending December 31, 2003. The achievements could not have occurred without the support of our shareholders and Board of Directors. Thank you.
- -------------------------------------------------------------------------------- TOTAL RETURN FOR THE PERIODS ENDED 3/31/04 - ---------------------------------------------------------------------------------------------- 6 MOS. 1 YEAR 3 YEARS 5 YEARS FIRST FINANCIAL FUND'S NAV 22.6% 55.0% 33.1% 28.4% S&P 500 14.1 35.1 0.6 -1.2 NASDAQ Composite* 11.9 49.3 2.9 -4.0 NASDAQ Banks* 13.7 35.3 16.1 11.0 SNL All Daily* 19.1 44.6 21.4 17.5 SNL MBS REITS* 34.5 70.2 47.0 24.0 - ---------------------------------------------------------------------------------------------- Sources: Lipper Analytical Services, Inc. and Wellington Management Company, LLP * Principal Only
This past fiscal year was characterized by a grudging but determined rebound in the economy and a very steep yield curve made possible by an exceedingly accommodative Fed. Such an environment was ideal for mortgage bankers, mortgage REIT's and banks indulging in the "carry" trade - borrowing short and lending long. Low rates, lots of liquidity and a punk commercial lending environment all contributed to an acceleration in bank acquisition activity. Finally, an extended hard market in property and casualty insurance fueled a continued rebound in the stocks of this sector. 2003 was a propitious year for almost all of financial services. After the strong run of the past few years, the Fund reduced its allocation to mortgage REIT's (4%). Finding new names in the insurance area (13%) increased that sector's weighting, while the banks and thrifts (59%) grew mostly through appreciation. Our emphasis on mortgage bankers (11%) proved beneficial in the low rate, steep yield curve environment. This years top contributor was Countrywide Financial Corporation, a mortgage banker that continues to gain share, intelligently diversify and deliver mortgage related products at the lowest prices. Their strength in loan servicing and interest rate risk management should leave them well positioned even as interest rates rise. Hudson City - -------------------------------------------------------------------------------- 2 Bancorp, another top contributor, benefited from the steep yield curve and speculation over its converting from a mutual holding company to full stock. Fueling Resource America's outsized returns were successful liquidations of a number of discount real-estate loans and a well-run subsidiary in the natural gas exploration, production and syndication business. Looking ahead, we harbor a number of concerns. Interest rates, at long last, are on the rise. Higher rates will slow many areas of mortgage lending as well as challenge those dependent on the "carry trade." We wonder whether higher rates will also hurt real estate values, the primary source of collateral for most thrifts and community banks. Higher rates mean fewer refinancings. Refinancing to lower the debt burden has been an important stimulant to both the consumer and business. It has also kept some loans from going bad ("the rolling loan gathers no loss"). The economy will surely miss refinancings. Another of our worries concerns pricing. Core deposit pricing (including NSF charges), loan pricing and insurance pricing all have remained reasonably disciplined. However, as capital builds in the system with few areas of distress, the urge to offset margin pressures with volume may be the trigger that ignites irrational and ultimately destructive pricing. We will be on the look out for early signs. Finally, financial stocks have done well for a very long time now. As a percent of stock market capitalization, they have once again eclipsed technology and are approaching what energy represented back in the energy crisis of 1980. We are overdue for a correction. Consolidation and aggregation of financial services has increased markedly since the Fund's inception 18 years ago. Banks, for example, are now in the insurance and investment banking business. Mortgage REIT's do what used to be the mainstay of the thrift industry. Consumer and commercial finance companies make loans that banks used to make and even offer wholesale deposits. As a result, we need your support for increased flexibility in the Fund's concentration limit. A new, more up-to-date definition of financial services companies will be outlined in the Fund's upcoming annual proxy. Be assured that this request does not reflect a change in the Fund's investment philosophy but rather a recognition of the changing structure and nomenclature of financial services in the United States. We appreciate your continued interest in and support of the Fund. Sincerely, /S/ SIG Nicholas C. Adams - -------------------------------------------------------------------------------- 3 PORTFOLIO OF INVESTMENTS AS OF MARCH 31, 2004 FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE (NOTE 1) - ----------------------------------------------------------------- LONG TERM INVESTMENTS-99.3% COMMON STOCKS-DOMESTIC-94.2% - ----------------------------------------------------------------- BANKS & THRIFTS-32.6% 53,500 Bank of America Corporation $ 4,332,430 32,400 Bank of Oak Ridge* 437,400 538,450 Bay View Capital Corporation 1,200,743 164,000 Boston Private Financial Holdings, Inc. 4,592,000 50,400 Cardinal Financial Corporation* 483,840 112,485 CB Bancshares, Inc. 7,861,577 188,007 CCF Holding Company (e) 5,019,787 142,700 City National Corporation 8,547,730 62,000 Coast Financial Holdings, Inc.* 918,220 60,000 Community Bank San Jose California (a)(b) 2,707,800 195,000 Dime Bancorp, Inc.* 37,050 9,000 Fidelity Southern Corporation 132,840 20,199 First Citizens BancShares, Inc., Class A 2,484,477 16,600 First Indiana Corporation 334,490 50,000 First Regional Bancorp* (a) 1,361,250 230,250 First Republic Bank 8,878,440 242,200 FleetBoston Financial Corporation 10,874,780 71,468 F.N.B Corporation 1,522,983 325,100 Franklin Bank Corporation* (a)(c) 5,439,248 30,000 Hanmi Financial Corporation 797,700 198,316 Hanmi Financial Pipe (a) 4,745,900 280,000 Hibernia Corporation, Class A 6,577,200 71,500 IBERIABANK Corporation 4,207,775 219,600 MetroCorp Bancshares, Inc. 3,228,120 336,000 North Valley Bancorp (e) 5,967,360 292,459 Pacific Union Bank 8,583,672 37,500 Signature Bank* 783,750 271,100 Southwest Bancorp, Inc. 4,690,030 100,000 Sterling Eagle (a)(b) (e) 1,000,000 249,400 Sun Bancorp, Inc.* 6,307,326 335,542 Taylor Capital Group, Inc. 7,734,243 21,100 Team Financial, Inc. 255,521 23,700 Texas United Bancshares, Inc. 449,826 18,400 The Bank Holdings, Inc.* 278,760 218,900 The Bancorp Bank* 3,940,200 130,000 Transatlantic Bank* (a) 1,267,500 35,000 TriCo Bancshares 1,308,300 36,400 Trustmark Corporation 1,059,240 59,500 UMB Financial Corporation 3,016,650 150,400 UnionBanCal Corporation 7,879,456 36,750 Westbank Corporation 841,575 36,700 Yardville National Bancorp 906,490 ------------ 142,993,679 ------------ - ----------------------------------------------------------------- SAVINGS & LOANS-25.9% 12,800 Abington Bancorp, Inc. 578,418 98,600 Bank Mutual Corporation 1,103,334 60,900 BostonFed Bancorp, Inc. 2,088,870 129,280 Broadway Financial Corporation (e) 1,745,280 162,700 CFS Bancorp, Inc. 2,383,555 SHARES DESCRIPTION VALUE (NOTE 1) - ----------------------------------------------------------------- SAVINGS & LOANS - CONTINUED 24,400 Charter Financial Corporation $ 960,628 71,800 Chesterfield Financial Corporation 1,866,800 238,500 Citizens First Bancorp, Inc. 5,762,160 37,600 Commercial Federal Corporation 1,037,760 120,900 Downey Financial Corporation 6,395,610 413,565 Fidelity Federal Bancorp* 822,994 169,600 First Federal Bancshares, Inc. (e) 5,512,000 24,000 First PacTrust Bancorp, Inc. 543,360 163,100 FirstFed America Bancorp, Inc. 4,545,597 252,000 FirstFed Bancorp, Inc. (e) 2,018,520 151,600 FloridaFirst Bancorp, Inc. 4,090,168 114,400 Golden West Financial Corporation 12,807,080 99,300 Greenpoint Financial Corporation 4,340,403 103,100 Hawthorne Financial Corporation* 4,535,369 90,000 HMN Financial, Inc. 2,471,400 170,400 Hudson City Bancorp, Inc. 6,447,936 116,500 Northeast Pennsylvania Financial Corporation 2,143,600 200,400 Ocwen Financial Corporation* 1,937,868 163,300 Pacific Premier Bancorp, Inc.* 2,188,057 94,800 Parkvale Financial Corporation 2,716,968 25,300 People's Bank 1,176,197 165,930 Perpetual Federal Savings Bank (e) 3,982,320 450,000 Provident Bancorp, Inc. 5,332,500 456,525 Provident Financial Holdings, Inc.(e) 11,860,519 36,000 Rainier Pacific Financial Group, Inc. 580,320 40,650 Redwood Financial, Inc.*(e) 733,733 90,000 River Valley Bancorp (e) 2,088,090 32,500 St. Landry Financial Corporation* (d)(e) (12/01/98-cost $471,413) 858,000 172,000 Woronoco Bancorp, Inc. 6,140,400 ------------ 113,795,814 ------------ - ----------------------------------------------------------------- MORTGAGE & REITS-15.6% 68,000 Accredited Home Lenders Holding Company* 2,679,200 89,700 American Home Mortgage Investment Corporation 2,583,360 77,000 Arbor Realty Trust, Inc.*(a)(c)(e); REIT 5,775,000 424,000 Bimini Mortgage Management, Inc.(a) 6,360,000 242,633 Countrywide Financial Corporation 23,268,505 254,900 Freddie Mac 15,054,394 104,300 Luminent Mortgage Capital, Inc.; REIT 1,475,845 272,590 Medical Office Properties, Inc.*(a)(c); REIT 3,219,288 419,500 Medical Properties Trust, Inc. (a)(c); REIT 4,195,000 91,204 Newcastle Investment Corporation; REIT 3,073,575 155,504 Newcastle Investment Holdings Corporation (a)(b); REIT 777,520 ------------ 68,461,687 ------------ - -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 PORTFOLIO OF INVESTMENTS AS OF MARCH 31, 2004 FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE (NOTE 1) - ----------------------------------------------------------------- INSURANCE-13.7% 310,800 21St Century Insurance Group $ 4,475,520 124,900 Aspen Insurance Holdings, Ltd. 3,216,175 88,000 Assurant, Inc.* 2,213,200 204,200 Bristol West Holdings, Inc.* 4,165,680 279,100 Mercer Insurance Group, Inc.* 3,564,107 394,500 Ohio Casualty Corporation* 7,886,055 44,900 Old Republic International Corporation 1,102,744 220,100 Penn-America Group, Inc. 3,226,666 128,500 Platinum Underwriters Holdings, Ltd. 4,118,425 163,400 Safety Insurance Group, Inc. 3,104,600 36,600 The CHUBB Corporation 2,545,164 120,300 Travelers Property Casualty Corporation, Class A 2,063,145 263,900 United National Group, Ltd.* 4,475,744 26,100 White Mountains Insurance Group, Ltd. 13,689,450 ------------ 59,846,675 ------------ - ----------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES-3.3% 600,000 Centennial Bank Holdings, Inc. (a) 6,000,000 25,000 CMET Finance Holdings, Inc. (a) 2,500,000 250,000 Online Resources Corporation* 1,492,500 456,700 Spirit Finance Corporation 4,567,000 ------------ 14,559,500 ------------ - ----------------------------------------------------------------- OTHER-3.1% 729,186 Resource America, Inc., Class A 13,489,941 ------------ Total common stocks-domestic (cost $278,637,979) 413,147,296 ------------ COMMON STOCKS-FOREIGN-3.0% - ----------------------------------------------------------------- BERMUDA-1.9% 410,000 Alea Group Holdings AG* 1,808,457 103,100 IPC Holdings Ltd., ADR 4,061,109 58,400 Montpelier Re Holdings Ltd. 2,174,816 ------------ 8,044,382 ------------ - ----------------------------------------------------------------- CANADA-1.1% 152,300 Canadian Western Bank 4,930,846 ------------ Total common stocks-foreign (cost $10,591,713) 12,975,228 ------------ - ----------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS-1.3% 22,650 Capital One Financial Corporation, Conv. Pfd., 6.25%, 5/17/05 1,234,425 161,940 Taylor Capital Trust 1, Cum. Conv. Pfd., 9.75%, 10/21/32 (e) 4,675,208 ------------ Total Convertible Preferred Stocks (cost $4,791,690) 5,909,633 ------------ SHARES DESCRIPTION VALUE (NOTE 1) - ----------------------------------------------------------------- WARRANTS-0.0%** 1 Citigroup, Inc., Litigation Tracking Warrant, Expires 12/31/50* $ 1 3,680 The Bank Holdings, Inc., Warrant, Expires 5/21/06* 18,400 ------------ Total Warrants (cost $0.00) 18,401 ------------ PRINCIPAL AMOUNT (000) - ----------------------------------------------------------------- CONVERTIBLE BONDS-0.8% $3,200 First Regional Bancorp, 6.00%, 10/30/23 (a)(e) (cost $3,200,000) 3,664,960 ------------ Total long-term investments (cost $297,221,382) 435,715,518 ------------ SHORT TERM INVESTMENTS-4.5% - ----------------------------------------------------------------- REPURCHASE AGREEMENT-4.5% 19,600 Agreement with Gold Tri-Party, 1.08%, dated 3/31/04, to be repurchased at $19,600,588 on 4/1/04, collateralized by $19,992,000 market value of a U.S. Treasury Bond, 5.00%, 3/1/34 (cost $19,600,000) 19,600,000 ------------ - ----------------------------------------------------------------- TOTAL INVESTMENTS-103.8% (cost $316,821,382***) 455,315,518 Liabilities in excess of other assets-(3.8%) (16,742,605) ------------ Net Assets-100% $438,572,913 ============ - ----------------------------- * Non-income producing security. ** Amount represents less than 0.1% of the net assets. *** Aggregate cost for Federal tax purposes is $318,086,071. (a) Indicates a fair valued security. Total market value for fair valued securities is $49,013,466, representing 11.18% of the total net assets. (b) Private Placement restricted as to resale and does not have a readily available market. (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 March 31, 2004. Date represents acquisition date. (e) Affiliated Company. See Note 9 to Financial Statements. ADR-American Depository Receipt. REIT-Real Estate Investment Trust. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 STATEMENT OF ASSETS AND LIABILITIES FIRST FINANCIAL FUND, INC. - --------------------------------------------------------------------------------
ASSETS MARCH 31, 2004 -------------- Investments, at value (Cost $316,821,382) (Note 1) See accompanying schedule ..................................................... $ 455,315,518 Cash .............................................................................. 92,221 Receivable for investments sold . ................................................. 3,914,710 Dividends and interest receivable . ............................................... 598,324 Prepaid expenses and other assets ................................................. 216,275 -------------- Total Assets ................................................................... 460,137,048 -------------- LIABILITIES Payable for investments purchased ................................................. 20,685,632 Investment advisory fee payable (Note 2) .......................................... 685,535 Administration and Co-administration fees payable (Note 2) ........................ 76,202 Audit fees and expenses payable ................................................... 27,815 Directors' fees and expenses payable (Note 2) ..................................... 20,396 Accrued expenses and other payables ............................................... 68,555 -------------- Total liabilities .............................................................. 21,564,135 -------------- NET ASSETS ........................................................................ $ 438,572,913 ============== Net assets consist of: Undistributed net investment income ............................................ $ 1,402,664 Accumulated net realized gain on investments sold .............................. 49,153,160 Unrealized appreciation of investments ......................................... 138,494,269 Par value of Common Stock ...................................................... 22,791 Paid-in capital in excess of par value of Common Stock ......................... 249,500,029 -------------- Total Net Assets ............................................................... $ 438,572,913 ============== Net Asset Value, ($438,572,913 / 22,791,382 shares of common stock outstanding) ... $ 19.24 ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 FIRST FINANCIAL FUND, INC. STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- YEAR ENDED NET INVESTMENT INCOME MARCH 31, 2004 -------------------- Income Dividends .......................... $ 5,630,409 Dividends from affiliated companies 1,635,994 Interest ........................... 595,323 -------------- Total Investment Income ...... 7,861,726 -------------- Expenses Investment advisory fee (Note 2) ... 2,648,691 Legal fees ......................... 573,775 Administration and co-administration fees (Note 2) . 495,326 Insurance expense .................. 203,155 Custodian fees ..................... 114,931 Directors' fees and expenses (Note 2) 100,968 Transfer agent's fees and expenses . 36,734 Interest expense ................... 29,515 Audit fee .......................... 27,812 Other .............................. 185,634 -------------- Total expenses ............... 4,416,541 -------------- Net Investment Income ................. 3,445,185 -------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain/(loss) on: Securities ......................... 90,705,243 Foreign currencies and net other assets (7,007) -------------- Net realized gain on investments during the year .................... 90,698,236 -------------- Net change in unrealized appreciation of: Securities ......................... 79,697,913 Foreign currencies and net other assets 133 -------------- Net change in unrealized appreciation of investments during the year ........ 79,698,046 -------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ........................ 170,396,282 -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $ 173,841,467 ============== FIRST FINANCIAL FUND, INC. STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED INCREASE/(DECREASE) IN MARCH 31, MARCH 31, NET ASSETS 2004 2003 ------------ ------------ Operations Net investment income .................. $ 3,445,185 $ 3,657,629 Net realized gain on investments sold during the year ................ 90,698,236 57,512,075 Net change in unrealized appreciation/(depreciation) of investments during the year ................................ 79,698,046 (16,492,824) ------------ ------------ Net increase in net assets resulting from operations ........... 173,841,467 44,676,880 ------------ ------------ Dividends and Distributions (Note 1) Dividends paid from net investment income ................... (3,576,093) (3,937,223) Distributions paid from net realized capital gain to shareholders ........................ (59,098,053) (65,919,006) Cost of Fund shares reacquired ............ (11,983,796) (638,426) ------------ ------------ Net increase/(decrease) in net assets for the year .................... 99,183,525 (25,817,775) NET ASSETS Beginning of year ......................... 339,389,388 365,207,163 ------------ ------------ End of year (including undistributed net investment income of $1,402,664 and $1,578,010 respectively) ............... $438,572,913 $339,389,388 ============ ============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 FINANCIAL HIGHLIGHTS FIRST FINANCIAL FUND, INC. - --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, ----------------------------------------------------- 2004 2003 2002 2001 2000 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year ................................. $ 14.40 $ 15.46 $ 12.86 $ 8.72 $ 8.85 -------- -------- -------- -------- -------- Net investment income .............................................. 0.15 0.16 0.19 0.14 0.12 Net realized and unrealized gain/(loss) on investments ............. 7.36 1.72 3.99 4.09 (0.20) -------- -------- -------- -------- -------- Total from investment operations ............................. 7.51 1.88 4.18 4.23 (0.08) -------- -------- -------- -------- -------- DISTRIBUTIONS Dividends paid from net investment income .......................... (0.16) (0.17) (0.20) (0.10) (0.08) Distributions paid from net realized capital gains ................. (2.59) (2.80) (1.46) -- -- -------- -------- -------- -------- -------- Total dividends and distributions ............................ (2.75) (2.97) (1.66) (0.10) (0.08) -------- -------- -------- -------- -------- Net Increase resulting from Fund share repurchase .................. 0.08 0.03 0.08 0.01 0.03 -------- -------- -------- -------- -------- Net asset value, end of year (a) ................................... $ 19.24 $ 14.40 $ 15.46 $ 12.86 $ 8.72 ======== ======== ======== ======== ======== Market price per share, end of year (a) ............................ $ 18.30 $ 13.97 $ 15.75 $ 11.29 $ 7.8125 ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN BASED ON MARKET VALUE(B) ................................................ 51.96% 8.24% 35.20% 49.40% 7.93% RATIOS AND SUPPLEMENTAL DATA: Ratio of expenses to average net assets ............................ 1.10% 1.29% 1.00% 2.12% 2.20% Ratio of net investment income to average net assets ............... 0.86% 0.99% 1.32% 1.33% 1.33% SUPPLEMENTAL DATA: Portfolio Turnover Rate ............................................ 87% 74% 114% 85% 63% Net assets, end of year (in 000's) . ............................... $438,573 $339,389 $365,207 $315,392 $214,662 Number of shares outstanding at the end of year (in 000's) ......... 22,791 23,576 23,622 24,525 24,629 - ------------ (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. 8 NOTES TO FINANCIAL STATEMENTS 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 Pricing 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 busi ness 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. FOREIGN CURRENCY: The books and records of the Fund are maintained in US dollars. Foreign currencies, investments and other assets and liabilities are translated into US dollars at the exchange rate prevailing at the end of the period, and purchases and sales of investment securities, income and expenses are translated on the dates of such transactions. Unrealized gains and losses which result from changes in foreign currency exchange rates have been included in the unrealized appreciation (depreciation) of currencies and net other assets. Net realized foreign currency gains and losses between trade date and settlement date on investments, securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in the exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gains and losses on investment securities sold. 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, 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. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 NOTES TO FINANCIAL STATEMENTS FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- 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. 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 annualized rates: 0.75% of the Fund's average month-end net assets up to and including $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 equity owners of FAS are Evergreen Atlantic, LLC, a Colorado limited liability company ("EALLC") and the Lola Brown Trust No. 1B (the "Lola Trust"). The Lola Trust is a shareholder of the Fund and considered to be an "affiliated person" of the Fund as that term is defined in the 1940 Act. 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 Chairman of the Board and the Chairman of the Audit Committee receive $1,000 per meeting and each member of the Audit Committee receives $500 per meeting. 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. EquiServe Trust Company, N.A. ("EquiServe") serves as the Fund's Common Stock servicing agent ("Transfer Agent"), dividend paying agent and registrar, and as compensation for EquiServe's services as such, the Fund pays EquiServe a monthly fee plus certain out-of-pocket expenses. - -------------------------------------------------------------------------------- NOTE 3. PURCHASES AND SALES OF SECURITIES Cost of purchases and proceeds from sales of securities for the year ended March 31, 2004, excluding short-term investments, aggregated $323,187,416 and $365,255,021, respectively. On March 31, 2004, aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost was $143,330,073 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value was $6,100,626. - -------------------------------------------------------------------------------- NOTE 4. CAPITAL At March 31, 2004, 50,000,000 of $0.001 par value Common Stock were authorized and 22,791,382 shares were issued and outstanding. - -------------------------------------------------------------------------------- 10 NOTES TO FINANCIAL STATEMENTS FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- 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 years ended March 31, 2004 and March 31, 2003, the Fund repurchased 784,800 and 46,205, of its own shares at a weighted average discount of 15.0% and 15.5% with a value of $11,983,796 and $638,426, respectively. - -------------------------------------------------------------------------------- NOTE 6. SIGNIFICANT SHAREHOLDERS On March 31, 2004, the Lola Trust and other entities affiliated with Stewart R. Horejsi and the Horejsi family owned 9,343,500 shares of Common Stock of the Fund, representing approximately 41.00% of the total Fund shares. - -------------------------------------------------------------------------------- NOTE 7. BORROWINGS An agreement (the "Agreement") between the Fund and the Custodial Trust Company of Bear Stearns was reached, in which the Fund may borrow from the Custodial Trust Company an aggregate amount of up to the lesser of $50,000,000 or the maximum the Fund is permitted to borrow under the Investment Company Act of 1940. At March 31, 2004, there were no loans outstanding. - -------------------------------------------------------------------------------- NOTE 8. DISTRIBUTIONS AND TAX INFORMATION For the year ended March 31, 2004, the tax character of dividends paid was $24,498,582 of ordinary income (including short-term capital gain) and $38,175,564 of long-term capital gains. As of March 31, 2003, the tax character of dividends paid was $35,717,917 of ordinary income and $34,138,312 of long-term capital gains. As of March 31, 2004, the components of distributable earnings on a tax basis were $1,402,664 of ordinary income (including short-term capital gain), $50,417,848 of accumulated gains and $137,229,447 of unrealized appreciation. NOTE 9. TRANSACTIONS WITH AFFILIATED COMPANIES Transactions during the year with companies in which the Fund owned at least 5% of the voting securities were as follows: NAME OF PURCHASE SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE - --------- ---- ---- ------ ----- Arbor Realty Trust, Inc. $5,775,000 $ -- $338,800 $5,775,000 Broadway Financial Corporation -- -- 24,240 1,745,280 CCF Holding Company -- 161,694 60,456 5,019,787 First Federal Bancshares, Inc. 89,926 91,028 89,258 5,512,000 First Regional Bancorp 1,475,000 -- -- 3,664,960 FirstFed Bancorp, Inc. -- -- 105,868 2,018,520 North Valley Bancorp -- -- 168,000 5,967,360 Perpetual Federal Savings Bank -- -- 147,678 3,982,320 Provident Financial Holdings, Inc. -- 37,767 92,475 11,860,519 Redwood Financial, Inc. -- -- -- 733,733 River Valley Bancorp -- -- 68,850 2,088,090 St. Landry Financial Corporation -- -- 6,500 858,000 Sterling Eagle -- -- 7,000 1,000,000 Taylor Capital Trust 1, 9.75% -- 2,710,625 526,869 4,675,208 - -------------------------------------------------------------------------------- 11 INDEPENDENT AUDITORS' REPORT FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- Board of Directors and Shareholders First Financial Fund, Inc. We have audited the accompanying statement of assets and liabilities, including the portfolio of investments of First Financial Fund, Inc., as of March 31, 2004, and the related statement of operations, statement of changes in net assets and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended March 31, 2003 and financial highlights for each of the years in the four-year period ended March 31, 2003 were audited by other auditors whose report dated May 28, 2003 expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2004 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of First Financial Fund, Inc. as of March 31, 2004, and the results of its operations, changes in its net assets, and financial highlights for the year then ended in conformity with accounting principles generally accepted in the United States of America. [GRAPHIC OMITTED] KPMG LOGO Boston, Massachusetts May 21, 2004 - -------------------------------------------------------------------------------- 12 TAX INFORMATION (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- For the fiscal year ended March 31, 2004, the amount of long-term capital gain designated by the Fund was $67,114,745, which is taxable as a 20% rate gain for federal income tax purposes. Of the ordinary income (including short-term capital gain) distributions made by the Fund during the fiscal year ended March 31, 2004, 22.81% qualify for the dividend received deduction available to shareholders. For the fiscal year ended March 31, 2004, 14.65% of the taxable investment income qualifies for the 15% dividend tax rate as of January 1, 2003. OTHER INFORMATION (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- DIVIDEND REINVESTMENT PLAN. Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested in Fund shares (Shares) pursuant to the Fund's Dividend Reinvestment Plan (the Plan). Shareholders who do not participate in the Plan will normally receive all distributions in cash paid by check in United States dollars mailed directly to the shareholders of record (or if the shares are held in street name 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 on 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 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 purchase 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. - -------------------------------------------------------------------------------- 13 OTHER INFORMATION (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- CHANGE IN INDEPENDENT AUDITORS. PricewaterhouseCoopers LLP ("PWC") was the Fund's auditor for the fiscal year ending March 31, 2003, and for the 4 years preceding. PWC's audit reports on the Fund's financial statements for the fiscal years ended March 31, 2003 and March 31, 2002 contained no adverse opinion or disclaimer of opinion, nor were their reports qualified or modified as to uncertainty, audit scope, or accounting principles. During the Fund's fiscal years ended March 31, 2003 and March 31, 2002 and the interim period commencing April 1, 2003 and ending January 23, 2004, (i) there were no disagreements between the Fund and PWC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PWC, would have caused them to make reference to the subject matter of the disagreements in connection with their reports on the financial statements for such years, and (ii) there were no "reportable events" of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. On January 23, 2004, the Audit Committee and the Board of Directors voted to appoint KPMG LLP as the Fund's independent auditors for the fiscal year ended March 31, 2004. During the Fund's fiscal years ended March 31, 2003 and March 31, 2002 and the interim period commencing April 1, 2003 and ending January 23, 2004, neither the Fund nor anyone on its behalf had consulted KPMG LLP on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K or reportable events (as described in paragraph (a)(1)(v) of said Item 304). - -------------------------------------------------------------------------------- 14 MANAGEMENT OF THE FUND (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND OFFICERS Set forth in the following table is information about the Directors of the Fund, together with their address, age, position with the Fund, term of office, length of time served and principal occupation during the last five years.
NAME, ADDRESS, AGE* POSITION, LENGTH OF PRINCIPAL OCCUPATION(S) AND OTHER DIRECTORSHIPS TERM SERVED, AND HELD TERM OF OFFICE DURING THE PAST FIVE YEARS - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS - --------------------------------------------------------------------------------------------------------------------------- RICHARD I. BARR Director of the Fund Retired; from 1963-2001, Manager of Age: 65 since August 2001. Advantage Sales and Marketing, Inc.; Current term expires Director and Chairman of the Board, at Annual Meeting Boulder Total Return Fund, Inc., for 2004 since 1999; Director, Boulder Growth & Income Fund, Inc., since January 2002. - --------------------------------------------------------------------------------------------------------------------------- DR. DEAN JACOBSON Director of the Fund Founder and President of Forensic Age: 64 since August 2003. Engineering, Inc. (expert witness for Current term expires litigation) since 1977; Professor Emeritus at Annual Meeting for at Arizona State University since 1997. 2006 - --------------------------------------------------------------------------------------------------------------------------- JOEL W. LOONEY Director and Chairman Partner, Financial Management Group, Age: 42 of the Board since August LLC since July 1999; CFO, Bethany College 2003. Current term expires from 1995-1999; Director, Boulder Total at Annual Meeting Return Fund, Inc., since January 2001; for 2005 Director, Boulder Growth & Income Fund, Inc., since January 2002. - --------------------------------------------------------------------------------------------------------------------------- INTERESTED DIRECTORS** - --------------------------------------------------------------------------------------------------------------------------- SUSAN L. CICIORA Director of the Fund Owner, Superior Interiors (interior Age: 40 since August 2003. design for custom homes) since 1995; Current term expires at Corporate Secretary, Ciciora Custom Annual Meeting Builders, LLC since 1995; Trustee of the for 2005 Brown Trust and the EH Trust; Director, Boulder Total Return Fund, Inc., since November 2001; Director, Boulder Growth & Income Fund, Inc. since January 2002. - --------------------------------------------------------------------------------------------------------------------------- STEPHEN C. MILLER Director of the Fund President and General Counsel of Age: 51 since August 2003. Boulder Investment Advisers, LLC ("BIA"); President of the Fund. Manager, Fund Administrative Services, Current term expires at LLC ("FAS"); Vice President of Stewart Annual Meeting for Investment Advisers ("SIA"); Director 2005 and President of Boulder Total Return Fund, Inc., since 1999; Director and Chairman of the Board, Boulder Growth & Income Fund, Inc., since January 2002; President and General Counsel, Horejsi, Inc. (liquidated in 1999); General Counsel, Brown Welding Supply, LLC (sold in 1999); Of Counsel, Krassa & Miller, LLC since 1991. - --------------------------------------------------------------------------------------------------------------------------- * Unless otherwise specified, the Directors' respective addresses are c/o First Financial Fund, Inc., 1680 38th Street, Suite 800, Boulder, Colorado 80301. ** Mr. Miller is an "interested person" because he is an officer of FAS, the Fund's Administrator. Ms. Ciciora is an "interested person" as a result of the extent of her beneficial ownership of Fund shares and by virtue of her indirect beneficial ownership of FAS.
- -------------------------------------------------------------------------------- 15 MANAGEMENT OF THE FUND (UNAUDITED) FIRST FINANCIAL FUND, INC. - -------------------------------------------------------------------------------- The names of the executive officers of the Fund (other than Mr. Miller, who is described above) are listed in the table below. Each officer was elected to office by the Board at a meeting held on August 19, 2003. This table also shows certain additional information. Each officer will hold such office until a successor has been elected by the Board.
NAME, ADDRESS, AGE* POSITION, LENGTH OF PRINCIPAL OCCUPATION(S) AND OTHER DIRECTORSHIPS TERM SERVED, AND HELD TERM OF OFFICE DURING THE PAST FIVE YEARS - ---------------------------------------------------------------------------------------------------------------------------------- CARL D. JOHNS Chief Financial Officer, Vice President and Treasurer of BIA and Assistant 1680 38th Street, Chief Accounting Manager of FAS, since April, 1999; Vice President, Suite 800 Officer, Vice President Chief Financial Officer and Chief Accounting Officer, Boulder, CO 80301 and Treasurer since Boulder Total Return Fund, Inc., since 1999 and Age: 41 August 2003. Boulder Growth & Income Fund, Inc., since January Appointed annually. 2002. - ---------------------------------------------------------------------------------------------------------------------------------- STEPHANIE J. KELLEY Secretary since August Secretary, Boulder Total Return Fund, Inc., since 1680 38th Street, 2003. Appointed October 27, 2000 and Boulder Growth & Income Suite 800 annually. Fund Inc., since January 2002; Assistant Secretary and Boulder, CO 80301 Assistant Treasurer of various Horejsi Affiliates; Age: 47 employee of FAS since March 1999. - ---------------------------------------------------------------------------------------------------------------------------------- NICOLE L. MURPHEY Assistant Secretary Assistant Secretary, Boulder Total Return Fund, Inc., 1680 38th Street, since August 2003. since October 27, 2000 and Boulder Growth & Suite 800 Appointed annually. Income Fund, Inc., since January 2002; employee of Boulder, CO 80301 FAS since July 1999. Age: 27 - ----------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 16 This Page Left Blank Intentionally. This Page Left Blank Intentionally. This Page Left Blank Intentionally. 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 INDEPENDENT ACCOUNTANTS KPMG LLP 99 HighStreet Boston, MA 02110-2371 LEGAL COUNSEL Willkie Farr & Gallagher, LLP 787 Seventh Avenue New York, NY 10019-6099 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 If you have questions regarding shares held in a brokerage account contact your broker, or, if you have physical possession of your shares in certificate form, contact the Fund's Transfer Agent and Shareholder Servicing Agent - EquiServe Trust Company, N.A. at P.O. Box 43011 Providence, RI 02940-3011 (800) 451-6788 www.firstfinancialfund.com The Fund's CUSIP number is: 320228109 [GRAPHIC OMITTED] FIRST FINANCIAL FUND LOGO THE FUND NOW HAS A WEBSITE. YOU CAN VISIT IT AT WWW.FIRSTFINANCIALFUND.COM ANNUAL REPORT MARCH 31, 2004 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. (d) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. As of the end of the period covered by the report, the registrant's board of directors has determined that Joel Looney is qualified to serve as an audit committee financial expert serving on its audit committee and that he is "independent," as defined by Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES - ---------- (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $26,000 for year ending March 31, 2003 and $23,600 for year ending March 31, 2004. AUDIT-RELATED FEES - ------------------ (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $0 for fiscal year ending March 31, 2003 and $0 for fiscal year ending March 31, 2004. TAX FEES - -------- (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $5,600 for year ending March 31, 2004. ALL OTHER FEES - -------------- (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. Following is Sections 4(d) and (e) of the Fund's Audit Committee Charter covering pre-approval: [The Audit Committee shall have the following duties and powers] . . . (4)(d) to review and pre-approve all auditing services and permissible non-audit services (e.g., tax services) to be provided to the Fund by the auditor, including the fees therefore. The Committee may delegate to one or more of its members the authority to grant pre-approvals. In connection with such delegation, the Committee shall establish pre-approval policies and procedures, including the requirement that the decisions of any member to whom authority is delegated under this sub-section (d) shall be presented to the full Committee at each of its scheduled meetings. Pre-approval for a permitted non-audit service shall not be required if: (1) the aggregate amount of all such non-audit services is not more than 5% of the total revenues paid by the Fund to the auditor in the fiscal year in which the non-audit services are provided; (2) such services were not recognized by the Fund at the time of the engagement to be non-audit services; and (3) such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by one or more members of the Committee to whom authority to grant such approvals has been delegated by the Committee. Additionally, the Committee shall pre-approve the auditor's engagements for non-audit services with the Fund's investment advisers (each, an "Adviser") and any service providers controlling, controlled by or under common control with an Adviser ("affiliate") that provides ongoing services to the Fund in accordance with the foregoing paragraph, if the engagement relates directly to the operations and financial reporting of the Fund, unless the aggregate amount of all services provided constitutes no more than 5% of the total amount of revenues paid to the auditor by the Fund, an Adviser and any affiliate of the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be pre-approved by the Committee pursuant to this paragraph (without regard to this exception). Prohibited Services - The auditor may not perform contemporaneously any of the following non-audit services for the Fund: bookkeeping or other services related to the accounting records or financial statements of the Fund; financial information systems design and implementation; appraisal or valuation services, fairness opinions, or contribution-in-kind reports; actuarial services; internal audit outsourcing services; management functions or human resources; broker or dealer, investment adviser, or investment banking services; legal services and expert services unrelated to the audit; and any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible. (4)(e) to consider whether the provision by the Fund's auditor of non-audit services to its investment adviser or adviser affiliate that provides ongoing services to the Fund, which services were not pre-approved by the Audit Committee, is compatible with maintaining the auditor's independence . . . (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) N/A (c) 100% (d) N/A (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was zero percent. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $0. (h) The registrant's audit committee of the board of directors HAS considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. 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. The Proxy Voting Policies are attached herewith. First Financial Fund, Inc. PROXY VOTING PROCEDURES The Board of Directors of First Financial Fund, Inc. (the "FUND") hereby adopts the following policies and procedures with respect to voting proxies relating to portfolio securities held by the Fund (collectively, the "VOTING POLICIES"). 1. POLICY. It is the policy of the Board of Directors of the Fund (the "BOARD") to delegate certain responsibilities for voting proxies relating to portfolio securities held by the Funds to an authorized officer of the Fund, subject to the Board's continuing oversight.1 Proxy voting policies and procedures are required by Rule 206 (4)-6 of the Investment Advisers Act of 1940. 2. FIDUCIARY DUTY. The right to vote a proxy with respect to portfolio securities held by the Funds is a significant asset of the Fund. The Board and other authorized persons exercising this voting responsibility do so as a fiduciary, and must vote proxies in a manner consistent with the best interest of the Fund and its shareholders, and with the goal of maximizing the value of the Fund and the shareholders' investments. Although typically an investment company's adviser votes proxies, for reasons disclosed to and discussed by the Board (e.g., the possibility of aggregating securities of issuers regulated by the Office of Thrift Supervision with like securities of other clients of Wellington Management), the Board has instead delegated its proxy voting responsibility to a Proxy Committee (defined below) made up of Board members and has authorized officers of the Fund to vote proxies that are considered routine (e.g., approval of auditors and uncontested director elections). 3. PROCEDURES. The following are the procedures adopted by the Board for the administration of this policy: a. Review of Proxy Voting Procedures. Management, with advice and counsel from the Board, shall present to the Board its policies, procedures and other guideline for voting proxies at least annually (the "VOTING GUIDELINES"), and must notify the Board promptly of any material changes. In accordance with the foregoing, Management has developed the Voting Guidelines which are attached hereto as EXHIBIT A. b. Voting of Routine Proxies. An authorized Officer of the Fund will vote all routine proxy items for the Fund in accordance with the Voting Guidelines. c. Voting of Non-Routine Proxies. With respect to non-routine proxy issues ("NON-ROUTINE PROXIES"), Stephen C. Miller or his successor (i.e., President of the Fund and member of the Board) and at least one independent director (the "PROXY COMMITTEE"), after conducting such necessary due diligence as the Proxy Committee deems appropriate, will make a determination of how to vote, and direct an authorized Officer of the Fund to cause such vote to be cast. d. Seeking Advice from the Fund's Adviser. To the extent permitted by law, and to the extent assistance will not adversely affect the ability of Wellington Management ("Wellington") to invest in financial services company securities for other clients, the Proxy Committee may seek, and Wellington has agreed to provide the Proxy Committee with, notice of any special issues that might not be covered by the Voting Guidelines and use its best efforts to keep the Board and Management informed when Non- Routine matters arise or are anticipated. In addition, Wellington has agreed to assist in any discussions to review relevant issues related to the voting of a particular proxy, but shall not recommend how the Fund should vote. e. Voting Record Reporting. To the extent any Non-Routine Proxies are voted, the Proxy Committee will present a summary of such actions for the Board at the next regular quarterly meeting. - ------------------------------ 1 This policy is adopted for the purpose of the disclosure requirements adopted by the Securities and Exchange Commission, Releases No. 33-8188, 34-47304, IC-25922. Voting Policies and Procedures No less than annually, Management shall report to the Board a record of each proxy voted with respect to portfolio securities of the Funds during the respective year. With respect to those proxies the Proxy Committee has identified as involving a conflict of interest2, the Proxy Committee shall submit a separate report indicating the nature of the conflict of interest and how that conflict was resolved with respect to the voting of the proxy. 4. REVOCATION. The delegation by the Board of the authority to vote proxies relating to portfolio securities of the Funds is entirely voluntary and may be revoked by the Board, in whole or in part, at any time. This disclosure shall be included in any registration statement filed on behalf of the Funds after July 1, 2003. 5. ANNUAL FILING. The Fund shall file an annual report of each proxy voted with respect to portfolio securities of the Funds during the twelve-month period ended June 30 on Form N-PX not later than August 31 of each year. The Fund must file the complete proxy voting record on an annual basis on this form. Form N-PX must contain complete proxy voting records for the 12 month period stated above, and must be signed on behalf of the Fund by the principal executive officers. This form must provide the following information: 1. Name of the issuer of the portfolio security 2. Exchange ticker symbol 3. CUSIP # 4. Shareholder meeting date 5. Brief indication of the matter voted on 6. Whether matter was proposed by the issuer or by a security holder 7. Whether the Fund cast its vote on the matter 8. How the Fund cast its vote 9. Whether the Fund cast its vote for or against management 6. DISCLOSURES. a. The Fund shall include in any future registration statement: i. A description of the Voting Policies and the Voting Guidelines3; and ii. A statement disclosing that information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling the Funds' toll-free telephone number; or through a specified Internet address; or both; and on the SEC website.4 b. The Fund shall include in its Annual and Semi-Annual Reports to shareholders: i. A statement disclosing that the Voting Policies and Voting Guidelines are available without charge, upon request, by calling the Fund's telephone number; or through a specified Internet address; and on the SEC website.5 ii. A statement disclosing that information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without - ---------------------------- 2 As it is used in this document, the term "conflict of interest" refers to a situation in which the Adviser or affiliated persons of the adviser have a financial interest in a matter presented by a proxy other than the obligation it incurs as investment adviser to the Fund. 3 This disclosure shall be included in the registration statement next filed on behalf of the Funds after July 1, 2003. 4 This disclosure shall be included in the registration statement next filed on behalf of the Funds after August 31, 2004. 5 This disclosure shall be included in the report next filed on behalf of the Funds after July 1, 2003. Page 2 Voting Policies and Procedures charge, upon request, by calling the Fund's telephone number; or through a specified Internet address; or both; and on the SEC website.6 7. RECORDKEEPING REQUIREMENTS. SEC Rule 204-2, as amended, requires the Fund to retain: 1. Proxy voting policies and procedures 2. Proxy statements received regarding client securities 3. Records of votes cast on behalf of clients 4. Records of written client requests 5. Any documents prepared by Management material to making a decision how to vote, or that memorialized the basis for the decision. 8. REVIEW OF POLICY. At least annually, the Board shall review this Policy to determine its sufficiency and shall make and approve any changes that it deems necessary from time to time. - -------------------------- 6 This disclosure shall be included in the report next filed on behalf of the Funds after August 31, 2004. Page 3 EXHIBIT A - VOTING GUIDLINES The Fund's proxy voting principles are summarized below, with specific examples of voting decisions for the types of proposals that are most frequently presented:
CATEGORY GUIDELINE VOTING BOARD OF DIRECTOR ISSUES The board of directors' primary role is to protect the interests of all shareholders. Key functions of the board are to approve the direction of corporate strategy, ensure succession of management and evaluate performance of the corporation as well as senior management. The board is accountable to shareholders, and must operate independently from management. Routine Elections Generally we will vote with management's Generally FOR recommendation Board Classification Generally we are opposed to entrenchment Generally AGAINST mechanisms and will vote against proposals to classify a board. We prefer annual election of directors in order that shareholders have more power to replace directors deemed to not be acting in the shareholders' interest. Independence of Directors The majority of board members should be We will generally support boards independent from the corporation, management that have a majority of board or a majority shareholder. An independent members classified as member should not be a former employee of the independent. company or a representative of a key supplier to or a key client of the company. Director Indemnification Mandatory indemnification of directors and Generally FOR officers is necessary to attract quality candidates. Director Attendance Board membership requires a significant amount We look for attendance records of time in order for responsibilities to be to be in the 75% participation executed, and attendance at Board and range. Committee meetings is noted. Term Limits We are more concerned with the performance of Generally AGAINST but will look directors and not with the term limits at on a case-by-case basis. Separation of Chair and CEO In most cases it is advisable for there to be In most cases we would support a a separation between the CEO and the Chair to recommendation to separate the enhance separation of management interests and Chair from the CEO. Lead shareholders. directors are considered acceptable, and in this situation an independent Corporate Governance committee must also be in place. Committees of the Board Audit, Compensation, Governance We support the establishment of and Nominating committees are these committees, however the most significant committees independent director membership of the board. on these committees is the primary concern. Two-thirds independent membership is satisfactory, provided that the chair of each committee is independent. Audit Process The members of an audit committee should be We will generally support the independent directors, and the auditor must choice of auditors recommended also be independent. The auditor should report by the Audit Voting Policies and directly to the Audit committee and not to Procedures Committee. In the management. event that the auditor supplies other services for a fee other than the audit, each situation will be reviewed on a case-by-case basis.
Page A-2
CATEGORY GUIDELINE VOTING VOTING AND ENTRENCHMENT ISSUES Shareholder Right to Call Generally FOR Special Meeting Shareholder Right to Act by Generally FOR Written Consent Cumulative Voting Our experience has been that cumulative voting Generally AGAINST, although we is generally proposed by large shareholders may consider if the board has who may wish to exert undue influence on the been unresponsive to board. shareholders. Confidentiality of Shareholder Like any other electoral system, the voting at We will support any proposals to Voting annual and special meetings should be introduce or maintain confidential and free from any potential confidential voting. coercion and/or impropriety. Size of Board of Directors Generally boards should be comprised of a The independence of the board is minimum of seven to a maximum of fifteen. a greater concern than the However the complexity of the company has an number of members. However impact on required board size. should a change in board size be proposed as potentially an anti-takeover measure we would vote against. COMPENSATION ISSUES Director Compensation Directors should be compensated fairly for the We support recommendations where time and expertise they devote on behalf of a portion of the remuneration is shareholders. We favor directors personally to be in the form of common owning shares in the corporation, and that stock. We do not support options they receive a substantial portion of their for directors, and do not remuneration in the form of shares. support retirement bonuses or benefits for directors. MANAGEMENT COMPENSATION Compensation plans for executives should be Executive compensation will be designed to attract and retain the right considered on a case-by-case people with exceptional skills to manage the basis. company successfully long-term. These plans should be competitive within the company's respective industry without being excessive and should attempt to align the executive's interests with the long-term interest of shareholders. Stock Options and Incentive Compensation plans should be designed to We will not support plans with Compensation Plans reward good performance of executives. They options priced below current should also encourage management to own stock market value or the lowering of so as to align their financial interests with the exercise price on any those of the shareholders. It is important previously granted options. We that these plans are disclosed to the will not support any plan shareholders in detail for their approval. amendment that is not Voting Policies and Procedures capped or that results in anything but negligible dilution. We believe that shareholders should have a say in all aspects of option plans and therefore will not support omnibus stock option plans or plans where the Board is given discretion to set the terms. Plans will be considered on a case-by-case basis.
Page A-3
CATEGORY GUIDELINE VOTING Adopt/Amend Employee Considered on a case-by-case Stock Purchase Plans basis. Golden Parachutes Although we believe that "golden parachutes" Generally opposed but will may be a good way to attract, retain and consider on a case-by-case encourage objectivity of qualified executives basis. by providing financial security in the case of a change in the structure or control of a company, golden parachutes can be excessive. Require Shareholder Approval Generally FOR of Golden Parachutes TAKEOVER PROTECTIONS Some companies adopt shareholder rights plans We will review each situation on that incorporate anti-takeover measures, which a case-bycase basis. We will may include: poison pills, crown jewel generally support proposals that defense, payment of greenmail, going private protect the rights and share transactions, leveraged buyouts, lock-up value of shareholders. arrangements, Fair price amendments, Re-incorporation. Rights plans should be designed to ensure that all shareholders are treated equally in the event there is a change in control of a company. These plans should also provide the Board with sufficient time to ensure that the appropriate course of action is chosen to ensure shareholder interests have been protected. However, many shareholder rights plans can be used to prevent bids that might in fact be in the shareholders best interests. Depending on their contents, these plans may also adversely influence current share prices and long-term shareholder value. Dual Class Shares It is not unusual for certain classes of Generally AGAINST. shares to have more than one vote per share. This is referred to as a dual class share structure and can result in a minority of shareholders having the ability to make decisions that may not be in the best interests of the majority of shareholders. Super-Majority Voting Super-majority voting (e.g., 67% of votes cast Generally AGAINST. We will Provisions or a majority of outstanding shares), although generally oppose proposals for fairly common, can, from a practical point of voting requirements that are view, be difficult to obtain, and essentially greater than a majority of votes are a bar from effective challenges to cast. That said, we will review entrenched management, regardless of supermajority proposals on a performance or popularity. A very high case-by-case basis. requirement can be unwieldy and therefore not in the best interest of the majority of shareholders.
Page A-3 Voting Policies and Procedures
CATEGORY GUIDELINE VOTING Issuance of Authorized Shares Generally FOR Issuance of Unlimited or Corporations may increase their Generally AGAINST. We will Additional Shares authorized number of shares in generally oppose proposals to order to implement a stock increase the number of split, to support an acquisition authorized shares to or restructuring plan, to use in "unlimited", but will consider a stock option plan or to any proposals to increase the implement an anti-takeover plan. number of authorized shares on a Shareholders should approve of case-by case basis for a valid the specific business need for business purpose. the increase in the number of shares and should understand that the issuance of new shares can have a significant effect on the value of existing shares. Shareholder Proposals Shareholders should have the opportunity to Shareholder proposals will be raise their concerns or issues to company reviewed on a case-by-case management, the board and other shareholders. basis. As long as these proposals deal with appropriate issues and are not for the purposes of airing personal grievances or to obtain publicity, they should be included on the proxy ballot for consideration. OTHER MATTERS Stock Repurchase Plans Generally FOR Stock Splits Generally FOR Require Shareholder Approval to issue Preferred Stock Generally FOR Corporate Loans to Employees Corporate loans, or the guaranteeing of loans, Generally AGAINST. to enable employees to purchase company stock or options should be avoided. These types of loans can be risky if the company stock declines or the employee is terminated. Blank-cheque The authorization of blank-cheque preferred Generally AGAINST. Preferred Shares shares gives the board of directors' complete discretion to fix voting, dividend, conversion and other rights and privileges. Once these shares have been authorized, the shareholders have no authority to determine how or when they will be allocated. There may be valid business reasons for the issuance of these shares but the potential for abuse outweighs the benefits.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. ITEM 10. 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 Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) During the period covered by this report , the Fund implemented a protocol for insuring that communications of fair value pricing information for illiquid securities are provided to the Fund's administrator and that appropriate checks and tests are conducted to assure that such communications are timely and accurate. ITEM 11. EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not yet effective. (b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and 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 June 7, 2004 ---------------------------------------------------------------------------- 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 June 7, 2004 ---------------------------------------------------------------------------- By (Signature and Title)* /S/ Carl D. Johns ------------------------------------------------------- Carl D. Johns, Vice President and Treasurer (principal financial officer) Date June 1, 2004 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 codeofethics.txt CODE OF ETHICS FIRST FINANCIAL FUND, INC. 1680 38TH STREET - SUITE 800 - BOULDER, COLORADO 80301 TELEPHONE (303) 444-5483 FACSIMILE (303) 245-0420 EMAIL: SCMILLER@BOULDERFUNDS.NET CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS 1. INTRODUCTION. A. GENERAL PRINCIPLES. This Code of Ethics ("CODE") establishes rules of conduct for "Principal Executive" and "Senior Financial" officers ("COVERED OFFICERS") of the Boulder Total Return Fund, Inc. ("BTF"), Boulder Growth & Income Fund, Inc. ("BIF"),and First Financial Fund, Inc. ("FF"), (collectively, the "FUNDS"), and is designed to implement a high standard of business ethics and sensitivity to situations that may give rise to actual as well as apparent conflicts of interest. B. APPLICABILITY. For purposes of this Code, the term "Covered Officer" shall mean: i.The Principal Executive, Principal Financial and officers of the Funds, each of whom are set forth in EXHIBIT A (as amended from time to time) for the purpose of promoting: 1. honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; 2. full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; 3. compliance with applicable laws and governmental rules and regulations; 4. the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and 5. accountability for adherence to the Code. 2. ACTUAL AND APPARENT CONFLICTS OF INTEREST. A. OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper or undisclosed personal benefits as a result of his position with the Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions contained in the Investment Company Act of 1940 ("INVESTMENT COMPANY ACT") and the Investment Advisers Act of 1940 ("INVESTMENT ADVISERS ACT"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Funds because of their status as "affiliated persons" of the Funds. The Funds' and the Funds' investment advisers' (collectively, the "ADVISERS") compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code, however, does not and is not intended to repeat or replace these other programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between a Fund and the Advisers of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Funds or for the Advisers, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Advisers and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and the Advisers and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors ("BOARDS") that the Covered Officers may also be officers of employees of one or more other registered investment companies ("RICS") covered by this or other codes. Other conflicts of interest are covered by this Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The fundamental principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds: Each Covered Officer: o Shall not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds. o Shall not cause the Funds to take actions, or fail to take actions, for the individual personal benefit of the Covered Officer rather than for the benefit of the Funds. o Shall not use material non-public knowledge of portfolio transactions made or contemplated for the Funds to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. o Shall not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith. There are some conflict of interest situations that should always be discussed with or approved by the General Counsel (defined below) or the Committee (defined below) if material. Examples of these include: o service as a director on the board of any public or private company (other than the Funds); o the receipt from any company with which a Fund has current or prospective business dealings of any non-nominal gifts in excess of $500.00; o the receipt of any entertainment from any company with which a Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Funds' service providers, other than its Advisers, administrator or any affiliated person thereof; o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. 3. DISCLOSURE AND COMPLIANCE. Each Covered Officer is subject to each of the following disclosure and compliance obligations: a. Each Covered Officer should familiarize himself with all disclosure requirements generally applicable to the Funds; b. Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including to the Funds' directors and auditors, and to governmental regulators and self-regulatory organizations; c. Each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the Advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and d. It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. 4. REPORTING AND ACCOUNTABILITY. Each Covered Officer must: a. upon adoption of the Code (or as soon thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he has received, read and understands the Code; b. annually thereafter affirm to the Boards that he has complied with the requirements of the Code; c. notify the General Counsel promptly of any violations of this Code; and d. report to the Boards at least annually the listed categories of affiliations or other relationships related to conflicts of interest contemplated in the Funds' Directors and Officers Questionnaire. The general counsel or other designated senior legal officer of the Funds' Advisers or administrator (the "General COUNSEL") is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by the Principal Executive Officer or the Senior Financial Officer must be considered by the Legal Compliance Committees of the Funds' Boards (the "COMMITTEE"). The Funds will follow these procedures in investigating and enforcing this Code: o The General Counsel will take all appropriate action to investigate any potential violations reported to him. o If, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; o Any matter that the General Counsel believes is a violation will be reported to the Committee; o If the General Counsel and the Principal Executive Officer are the same person, any violations concerning such person shall be reported directly to the Committee and the Committee shall take such action as required by this Code; o If the Committee concurs that a violation has occurred, it will inform and make a recommendation to the relevant Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Advisers or their boards/members; or a recommendation to dismiss the Covered Officer; o The Committee will be responsible for granting waivers, as appropriate; and o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. 5. OTHER POLICIES AND PROCEDURES. This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Advisers or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and the Advisers' codes of ethics under Rule 17j-1 of the Investment Company Act and the Advisers' more detailed policies and procedures set forth in the Funds' compliance manuals are separate requirements applying to the Covered Officers and others and are not part of this Code. 6. AMENDMENTS. Any amendments to this Code, other than amendments to EXHIBIT A, must be approved or ratified by a majority vote of the Board, including a majority of independent directors. 7. CONFIDENTIALITY. All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board of Directors and its counsel, the appropriate Fund and its Advisers. 8. INTERNAL USE. The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. Date: August 19, 2003 EXHIBIT A COVERED OFFICERS - -------------------------------------------------------------------------------- Principal Executive Officer Stephen C. Miller (all Funds) Senior Financial Officer Carl D. Johns (all Funds) General Counsel Stephen C. Miller LEGAL COMPLIANCE COMMITTEE - ------------------------------------------------------------------------------- Joel Looney, Richard Barr and any one other Independent Director (all Funds) EX-99.CERT 3 exa.txt 302 CERTIFICATION CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND 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: June 7, 2004 /S/ STEPHEN C. MILLER ------------------------------- ---------------------------------- Stephen C. Miller, President & Chief Executive Officer (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND 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: June 4, 2004 /S/ CARL D. JOHNS ----------------------- -------------------------------------------- Carl D. Johns, Vice President and Treasurer (principal financial officer) EX-99.906 4 exb.txt 906 CERTIFICATION 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: June 7, 2004 /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: June 4, 2004 /S/ CARL D. JOHNS --------------------- -------------------------------------------- Carl D. Johns, Vice President and Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----