Edgar Filing: FIRST FINANCIAL FUND INC

FIRST FINANCIAL FUND (LOGO)

ANNUAL
REPORT

March 31, 2003

Letter To Shareholders May 13, 2003

Dear Shareholders:

Consider the European beech (fagus sylvatica).
In late winter, as bleak as any tombstone,
trunk and branch a smooth, lifeless, battleship
gray, it stands against howling winds and icy
blasts unyielding, a naked steel sculpture
against the cold. With spring comes a miracle.
Tiny buds appear that, as they unfurl in early
May's unabashed sunshine, glow like rubies
against the gray.

TOTAL RETURNS
For the Periods Ended 3/31/03

6 Mos. 1 Year 3 Years 5 Years
First Financial Fund's NAV 10.0% 9.67% 31.6% 6.9%
S&P 500 5.0 -24.8 -16.1 -3.8
NASDAQ Composite* 14.4 -27.3 -33.6 -6.1
NASDAQ Banks* -0.9 -6.8 12.5 -0.3
SNL All Daily* 11.4 8.9 26.2 4.7
SNL MBS REITS* 10.8 21.9 32.7 2.3
SNL Mortgage Banks* 19.9 21.1 33.5 -3.4
Source: Lipper

*Principal only.

Inspired, perhaps, by the resilient beech, the
stock market has experienced its own
resurrection of late. Past readers understand
that we approach market analysis in the same
way we studied irregular Latin verbs in high
school: reluctantly and with the sneaking
suspicion that the task at hand was another
person's practical joke. Our big picture
concerns remain. Overcapacity lingers, the
consumer gets less credit-worthy by the day,
and the fastest growing sector of the economy
is the federal government. One might add to the
worry list a foreign political equation with a
few too many unknown variables and a Federal
Reserve that can't afford to move rates up or
down. The beech's prospects seem a bit more
rosy to us.

Among the Financial Services Sector, banks may
have the hardest row to hoe. Loan volume and
fee growth, outside of consumer refinancings,
is slack, with the best years of cost cutting
behind most banks. A decade of strong
profitability and mostly trouble free lending
has created a huge pile of excess capital (i.e.
read capacity). Low levels of problem credits
have nowhere to go but up. Interest margins,
the most immediate problem, have been squeezed
as short-term interest rates close to within
100 basis points of zero. A

slowing top line and shrinking operating
margins is a phenomenon most banks have not
faced for some time. The banks' problems may
remain relatively benign but for the responses
of some to either bet heavily on a steep yield
curve or lend even greater amounts on real
estate collateral. Meanwhile, many regional and
community bank stock prices are hitting record
highs, commanding valuations not seen since the
peaks reached in 1998.

Not all is bleak in bankville, however. The
silver lining to a slow-down in organic growth
is a pickup in merger activity, some of which
has benefited the portfolio already this year.
Our hope is for low premium, in-market deals
where modest cost savings will bolster sagging
operating margins and moderate overly
aggressive competition.

The Fund's bet on well-positioned property
casualty insurers has begun to work. While
most areas of commercial line pricing remains
hard, the industry has an uncanny ability to
snatch defeat out of the jaws of victory.
Capital raising and the ease of entry into the
reinsurance arena is the primary culprit. We
are currently seeing more evidence of both.

We note that volatility of financial services
stocks continues to grow. Volatility is often
good for us because of its propensity to beget
irrational investor behavior and ample
liquidity. We strive to know our companies
under coverage well enough to take advantage of
such opportunities.

Over the course of the year, the Fund took
profits in the bank and thrift sectors as price
targets were met. We used most of the cash to
increase weighting in select property/casualty
insurers. Particularly large contributors to
performance this year included two takeover
targets, namely, Provident Financial Holdings
and Port Financial, the latter of which agreed
to be acquired in April. Another large
contributor was Novastar Financial, a subprime
mortgage REIT, which we were able to acquire at
a very friendly price. Laggards in the Fund
included Koram Bank, Resource America, and
Capital One, though the last of these, a credit
card lender, has begun to rebound with the
improving consumer sentiment of late.

Post fiscal year end, we have increased our cash
position, again due to stocks reaching our target
prices. As of this letter date, cash stands at
approximately 15% of the Fund. We will endeavor
to put this to work opportunistically in the
months ahead.

We appreciate your continued interest and support of the Fund.

Nicholas C. Adams
2

Portfolio of Investments as of March 31, 2003 FIRST FINANCIAL FUND, INC.
------------------------------------------------------------
------------------------------------------------------------

Shares Description Value (Note 1)

------------------------------------------------------------
LONG-TERM INVESTMENTS--90.5%
COMMON STOCKS--87.6%
------------------------------------------------------------
Banks & Thrifts--41.5%
12,800 Abington Bancorp, Inc. $ 263,680
34,600 Algiers Bancorp, Inc. 500,835
538,450 Bay View Capital Corp. 2,934,552
60,900 Bostonfed Bancorp, Inc. 1,392,174
129,280 Broadway Financial Corp. 1,556,531
83,050 CB Bancshares, Inc. 4,051,179
213,807 CCF Holding Co. 3,895,563
60,000 Community Bank San Jose
California(a) 2,449,800
57,900 Compass Bancshares, Inc. 1,810,533
195,000 Dime Bancorp, Inc.* 29,250
303,000 Downey Financial Corp. 11,941,230
413,565 Fidelity Federal Bancorp.* 620,347
20,199 First Citizens BancShares, Inc. 1,900,524
111,000 First Community Bancorp, Inc.(a) 3,209,121
239,550 First Republic Bank* 5,174,280
217,900 FirstFed America Bancorp, Inc. 6,101,200
252,000 FirstFed Bancorp, Inc. 1,634,220
71,468 FNB Corp. 1,818,146
325,100 Franklin Bank Corp. 3,251,000
314,800 Friedman Billings Ramsey Group
(Class A) 2,848,940
30,000 Hanmi Financial Corp. 510,000
286,400 Hawthorne Financial Corp.* 8,465,984
19,999 HFB Financial Corp. 334,983
50,000 Hibernia Corp. (Class A) 848,000
46,300 Iberiabank Corp. 1,884,410
613,283 Koram Bank, GDR (South Korea) 3,079,969
219,600 MetroCorp Bancshares, Inc. 2,817,468
224,000 North Valley Bancorp 4,565,120
90,000 Northeast Pennsylvania Financial
Corp. 1,480,500
205,800 Pacific Crest Capital, Inc. 3,457,440
380,059 Pacific Union Bank* 4,397,283
165,930 Perpetual Federal Savings Bank* 3,239,783
195,400 Port Financial Corp. 9,338,166
308,750 Provident Financial Holdings, Inc. 8,731,450
40,650 Redwood Financial, Inc.* 726,619
45,000 River Valley Bancorp 1,406,250
210,000 Southwest Bancorp, Inc. 4,788,000
32,500 St. Landry Financial Corp.(a)* 341,250
100,000 Sterling Eagle(a)(b) 1,000,000
335,542 Taylor Capital Group, Inc. 6,798,081
21,100 Team Financial, Inc. $ 210,789
35,000 Trico Bancshares 885,500
207,900 Unionbancal Corp. 8,195,418
80,070 United National Bancorp 1,882,446
36,750 Westbank Corp. 496,125
172,000 Woronoco Bancorp, Inc. 3,629,200
------------
140,893,339
------------
------------------------------------------------------------
Mortgage & REITS--12.9%
246,200 Accredited Home Lenders Holding Co.* 2,188,718
400,000 American Financial Realty Trust;
REIT 4,650,000
85,800 American Home Mortgage Holdings,
Inc.; REIT 858,858
227,900 Countrywide Financial Corp. 13,104,250
227,875 First Mortgage Corp.(a)* 911,500
78,800 Freddie Mac 4,184,280
231,450 iStar Financial, Inc. 6,751,397
272,590 Medical Office Properties, Inc.;
REIT(a) 3,129,333
132,100 MFA Mortgage Investments, Inc. 1,142,665
155,504 Newcastle Investment Holdings Corp.;
REIT(a) 3,001,694
109,400 Novastar Financial, Inc.; REIT 3,736,010
------------
43,658,705
------------
------------------------------------------------------------
Other Financial Intermediaries--16.6%
27,500 American International Group, Inc. 1,359,875
636,400 Ceres Group, Inc.* 1,050,060
103,873 Citigroup, Inc. 3,578,425
358,900 IPC Holdings Ltd., ADR (Bermuda) 10,799,301
1,370,500 Meadowbrook Insurance Group, Inc. 3,412,545
11,800 Penn-America Group, Inc. 120,124
344,400 Platinum Underwriters Holdings, Ltd. 8,730,540
298,800 PMA Capital Corp. (Class A) 2,022,876
959,315 Resource America, Inc. 7,636,147
152,300 RLI Corp 4,092,301
388,500 Safety Insurance Group, Inc. 5,062,155
24,800 White Mountains Insurance Group Ltd. 8,432,000
------------
56,296,349
------------

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See Notes to Financial Statements. 3

Portfolio of Investments as of March 31, 2003 FIRST FINANCIAL FUND, INC.
------------------------------------------------------------
------------------------------------------------------------

Shares Description Value (Note 1)

------------------------------------------------------------
Savings & Loan--16.6%
24,400 Charter Financial Corp. $ 739,564
71,800 Chesterfield Financial Corp. 1,449,642
238,500 Citizens First Bancorp, Inc. 4,626,900
35,500 First Bell Bancorp, Inc. 931,165
170,000 First Federal Bancshares, Inc. 3,568,300
1,247,574 First Niagara Financial Group, Inc. 14,660,242
24,000 First PacTrust Bancorp, Inc. 388,800
221,600 FloridaFirst Bancorp, Inc. 4,797,640
90,000 Golden West Financial Corp. 6,473,700
90,000 HMN Financial, Inc. 1,444,500
707,400 Hudson City Bancorp, Inc. 14,317,776
339,200 Ocwen Financial Corp.* 1,024,384
94,800 Parkvale Financial Corp. 2,085,601
------------
56,508,214
------------
Total common stocks
(cost $238,607,629) 297,356,607
------------
------------------------------------------------------------
Preferred Stocks--2.7%
62,350 Capital One Financial Corp., 6.25% 1,811,268
270,365 Taylor Capital Trust, 9.75% 7,335,002
------------
Total preferred stocks
(cost $8,976,115) 9,146,270
------------
Principal
Amount
(000)
----------------------------------------------------------------
Convertible Bonds--0.2%
$1,000 Online Resources Communications,
8.00%, 9/30/05
(cost $1,000,000) 877,090
------------
Total long-term investments
(cost $248,583,744) 307,379,967
------------
SHORT-TERM INVESTMENTS--9.7%
Repurchase Agreement--9.7%
$32,800 SBC Warburg, 1.36%, dated 3/31/03,
due 4/1/03 in the amount of
$32,801,239 (cost $32,800,000;
collateralized by $27,355,000 U.S.
Treasury Bonds, 7.25%, due
1/15/10, value of collateral
including interest $33,461,571) $ 32,800,000
------------
------------------------------------------------------------
Certificates of Deposit
2 Brookline Savings,
1.30%, 5/30/03 1,588
23 First Federal Savings Bank
1.75%, 4/14/03 23,422
23 Naugatuck Valley Savings & Loan
Assoc.,
1.20%, 4/29/03 23,008
------------
48,018
------------
Total short-term investments
(cost $32,848,018) 32,848,018
------------
------------------------------------------------------------
Total Investments--100.2%
(cost $281,431,762; Note 4) 340,227,985
Liabilities in excess of other
assets--(0.2%) (838,597)
------------
Net Assets--100% $339,389,388
------------
------------

---------------
* Non-income-producing security.
(a) Indicates a fair valued security (Note 1).
(b) Private Placement restricted as to resale and does not have a readily
available market; the cost of such security is $1,000,000; purchased
12/31/2002. The value of $1,000,000 is approximately 0.3% of net assets.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
REIT--Real Estate Investment Trust.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 4

Statement of Assets and Liabilities FIRST FINANCIAL FUND, INC.
-------------------------------------------------------------------------------

Assets March 31, 2003
Investments, at value (cost $281,431,762).................................................................. $340,227,985
Cash....................................................................................................... 21,557
Dividends and interest receivable.......................................................................... 370,096
Other assets............................................................................................... 174,424
--------------
Total assets............................................................................................ 340,794,062
--------------
Liabilities
Advisory fee payable....................................................................................... 543,475
Payable for investments purchased.......................................................................... 477,427
Accrued expenses........................................................................................... 257,088
Administration fee payable................................................................................. 126,684
--------------
Total liabilities....................................................................................... 1,404,674
--------------
Net Assets................................................................................................. $339,389,388
--------------
--------------
Net assets were comprised of:
Common stock, at par; 23,576,182 shares issued.......................................................... $ 23,576
Paid-in capital in excess of par........................................................................ 261,483,040
--------------
261,506,616
Undistributed net investment income..................................................................... 1,578,010
Accumulated net realized gains.......................................................................... 17,508,539
Net unrealized appreciation on investments.............................................................. 58,796,223
--------------
Net assets, March 31, 2003.............................................................................. $339,389,388
--------------
--------------
Net asset value per share ($339,389,388 / 23,576,182 shares of common stock outstanding)................... $14.40
--------------
--------------

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See Notes to Financial Statements. 5

FIRST FINANCIAL FUND, INC.
Statement of Operations
------------------------------------------------------------
Year Ended
Net Investment Income March 31, 2003
Income
Dividends................................ $ 7,494,591
Interest................................. 965,056
--------------
Total income.......................... 8,459,647
--------------
Expenses
Investment advisory fee.................. 2,382,036
Administration fee....................... 556,689
Legal fees and expenses.................. 1,093,000
Reports to shareholders.................. 298,000
Insurance expense........................ 85,000
Custodian's fees and expenses............ 80,000
Directors fees........................... 48,000
Transfer agent's fees and expenses....... 46,000
Listing fees............................. 27,000
Audit fee................................ 26,000
Miscellaneous............................ 79,822
--------------
Total operating expenses.............. 4,721,547
Loan interest (Note 5)................... 80,471
--------------
Total expenses........................ 4,802,018
--------------
Net investment income....................... 3,657,629
--------------
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions............................. 57,512,075
Net change in unrealized appreciation of
investments.............................. (16,492,824)
--------------
Net gain on investments..................... 41,019,251
--------------
Net Increase in Net Assets
Resulting from Operations................... $ 44,676,880
--------------
--------------

FIRST FINANCIAL FUND, INC.
Statement of Changes in Net Assets
------------------------------------------------------------
Year Ended March 31,
Increase in --------------------------------
Net Assets 2003 2002
Operations
Net investment income....... $ 3,657,629 $ 4,521,485
Net realized gain on
investment
transactions............. 57,512,075 60,925,158
Net change in unrealized
appreciation of
investments.............. (16,492,824) 34,818,254
------------- -------------
Net increase in net assets
resulting from
operations............... 44,676,880 100,264,897
------------- -------------
Dividends and distributions (Note 1)
Dividends from net
investment income........ (3,937,223) (4,724,478)
Distributions from net
realized gains on
investment
transactions............. (65,919,006) (34,535,923)
Cost of Fund shares reacquired
(Note 6)................. (638,426) (11,189,671)
------------- -------------
Total increase (decrease)...... (25,817,775) 49,814,825
Net Assets
Beginning of year.............. 365,207,163 315,392,338
------------- -------------
End of year(a)................. $ 339,389,388 $ 365,207,163
------------- -------------
------------- -------------
---------------
(a) Includes undistributed net
investment income of........ $ 1,578,010 $ 1,857,604
------------- -------------
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See Notes to Financial Statements. 6

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, mortgage banking institutions and their
holding companies.

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Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.

Securities Valuation: Securities for which market quotations are readily
available--including securities listed on national securities exchanges and
those traded over-the-counter--are valued at the last quoted sales price on the
valuation date on which the security is traded. If such securities were not
traded on the valuation date, but market quotations are readily available, they
are valued at the most recently quoted bid price provided by an independent
pricing service or by principal market makers. Securities traded via NASDAQ are
valued at the official closing price provided by NASDAQ. 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 judgment of the adviser, does not
represent fair value, are valued at fair value by a Valuation Committee
appointed by the Board of Directors, in consultation with the advisor.
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 market value.

Repurchase Agreement: In connection with repurchase agreement transactions with
United States financial institutions, it is the Fund's policy that its custodian
take possession of the underlying collateral securities, the value of which
exceeds the principal amount of the repurchase transaction, including accrued
interest. To the extent that any repurchase transaction exceeds one business
day, the value of the collateral is marked-to-market on a daily basis to
maintain the adequacy of the collateral. If the seller defaults, and the value
of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the Fund
may be delayed or limited.

Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains or losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income including amortization of premium and
accretion of discount on debt securities, as required is recorded on the accrual
basis. Expenses are recorded on the accrual basis, which may require the use of
certain estimates by management.

Federal Income Taxes: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income and capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
Dividends and Distributions: The Fund expects to declare and pay dividends from
net investment income and distributions of net realized capital gains, if any,
annually. Dividends and distributions to shareholders, which are determined in
accordance with federal income tax regulations and which may differ from
generally accepted accounting principles, are recorded on the ex-dividend date.
Permanent book/tax differences relating to income and gains are reclassified to
paid-in capital when they arise.

------------------------------------------------------------
Note 2. Agreements
The Fund has agreements with, among others, Wellington Management Company, LLP
(the 'Investment Adviser') and with Prudential Investments LLC (the
'Administrator'). The Investment Adviser makes investment decisions on behalf of
the Fund; the Administrator provides occupancy and certain clerical and
accounting services to the Fund. The Fund bears all other costs and expenses.
The investment advisory agreement provides for the Investment Adviser to receive
a fee, computed monthly and payable quarterly, at the following annual rates:
..75% of the Fund's average month-end net assets up to and including $50 million,
and .625% of such assets in excess of $50 million. The administration agreement
provides for the Administrator to receive a fee, computed monthly and payable
quarterly, at the annual rate of .15% of the Fund's average month-end net
assets.

------------------------------------------------------------
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended March 31, 2003 were $238,030,779 and $293,905,163,
respectively.

------------------------------------------------------------
Note 4. Distributions and Tax Information
For the year ended 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. For
the year ended March 31, 2002, the tax character of dividends paid was
$19,063,267 of ordinary income and $20,197,134 of long-term capital gains.
--------------------------------------------------------------------------------
7

Notes to Financial Statements FIRST FINANCIAL FUND, INC.
-------------------------------------------------------------------------------
As of March 31, 2003, the accumulated undistributed earnings on a tax basis were
$9,737,720 of ordinary income and $10,551,565 of long-term capital gains. As of
March 31, 2002, the accumulated undistributed earnings on a tax basis were
$12,121,422 of ordinary income and $15,738,060 of long-term capital gains.
The United States federal income tax basis of the Fund's investments and the net
unrealized appreciation as of March 31, 2003 was as follows:

Total Net
Unrealized
Tax Basis Appreciation Depreciation Appreciation
------------ ------------ ------------ ------------
$282,634,047 $ 73,583,206 $ 15,989,268 $ 57,593,938

The differences between book and tax basis are primarily attributable to
deferred losses on wash sales.

------------------------------------------------------------
Note 5. Borrowings
The Fund has a credit agreement (the 'Agreement') with an unaffiliated lender.
The maximum commitment under the Agreement is $45,000,000. Interest on any such
borrowings is based on market rates and is payable quarterly and at maturity.
The Fund may utilize these borrowings (leverage) in order to increase the
potential for gain on amounts invested. There can be no guarantee that these
gains will be realized. There are increased risks with the use of leverage.
These borrowings may be set to any desired maturity at a rate of interest
determined by the lender at the time of borrowing. The Agreement expired on
April 29, 2002. On May 6, 2002, the Agreement was amended. The maximum
commitment was increased to $75,000,000. The expiration date of the amended
Agreement is April 28, 2003. All other terms and conditions are unchanged.
During the period while the loan was outstanding, the average daily balance for
the year ended March 31, 2003 was approximately $4,110,000 at a weighted average
interest rate of 1.93%. The highest face amount of borrowing at any month-end
during the year ended March 31, 2003 was $50,000,000. The Fund did not have a
loan outstanding at March 31, 2003.

Note 6. Capital
There are 50 million shares of $.001 par value common stock authorized. Of the
23,576,182 shares issued as of March 31, 2003, the Investment Adviser owned
10,994 shares. During the years ended March 31, 2003 and 2002, the Fund
repurchased 46,205 and 902,300, respectively, of its own shares at a weighted
average discount of 15.5% and 14.8%, respectively.

------------------------------------------------------------
Note 7. Litigation
Badlands Trust Company ('Badlands'), as trustee of one of the members of an
affiliated group of Fund stockholders advised by Stewart R. Horejsi (the
'Horejsi Group'), filed suit in United States District Court for the District of
Maryland, Northern Division, on August 23, 2002 to invalidate the Fund's
election By-law and to seat Messrs. Looney and Jacobson as Class I Directors of
the Fund. The District Court ruled for Badlands on these matters, but on appeal,
the United States Court of Appeals for the Fourth Circuit overturned this
ruling. A final order dismissing this suit was issued by the District Court on
May 2, 2003.

In addition, on March 25, 2003, Badlands, in its capacity as trustee to a member
of the Horejsi Group, filed suit against the Fund in United States District
Court for the District of Maryland, Northern Division to invalidate the Fund's
By-law requiring the affirmative vote of 80% of the Fund's outstanding shares to
amend certain other By-laws, including the By-law that required that all
Directors be elected by a majority of the Fund's outstanding shares. The Fund
did not contest Badlands' assertions and agreed to a consent order issued by the
District Court on April 30, 2003 invalidating the 80% By-law and setting the
resulting voting standard to amend the Director voting By-law as the affirmative
vote of a majority of the shares voted at a stockholder meeting.
Although the Fund was not ordered to pay any damages or costs by the District
Court, it did incur legal fees defending itself in the three suits noted above.
The Fund has made a claim to its insurer, ICI Mutual Insurance Company ('ICI
Mutual'), for reimbursement of the portion of such fees in excess of the
deductible applicable to its policy. That claim is currently pending with ICI
Mutual.
--------------------------------------------------------------------------------
8

Financial Highlights FIRST FINANCIAL FUND, INC.
-------------------------------------------------------------------------------

Year Ended March 31,
-----------------------------------------------
2003 2002 2001 2000

-------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year....................................... $ 15.46 $ 12.86 $ 8.72 $ 8.85
-------- -------- -------- --------
Income from investment operations
Net investment income.................................................... .16 .19 .14 .12
Net realized and unrealized gain (loss) on investments................... 1.72 3.99 4.09 (.20)
-------- -------- -------- --------
Total from investment operations...................................... 1.88 4.18 4.23 (.08)
-------- -------- -------- --------
Less dividends and distributions
Dividends from net investment income..................................... (.17) (.20) (.10) (.08)
Distributions from net realized gains.................................... (2.80) (1.46) -- --
Distributions in excess of net realized gains............................ -- -- -- --
-------- -------- -------- --------
Total dividends and distributions..................................... (2.97) (1.66) (.10) (.08)
-------- -------- -------- --------
Increase resulting from Fund share repurchase............................ .03 .08 .01 .03
Net change resulting from the issuance of Fund shares.................... -- -- -- --
-------- -------- -------- --------
Net asset value, end of year(a).......................................... $ 14.40 $ 15.46 $ 12.86 $ 8.72
-------- -------- -------- --------
-------- -------- -------- --------
Market price per share, end of year(a)................................... $ 13.97 $ 15.75 $ 11.29 $ 7.8125
-------- -------- -------- --------
-------- -------- -------- --------
TOTAL INVESTMENT RETURN(b):.............................................. 8.24% 35.20% 49.40% 7.93%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)............................................ $339,389 $365,207 $315,392 $214,662
Average net assets (000)................................................. $371,126 $341,601 $258,156 $230,163
Ratios to average net assets:
Expenses, before loan interest and commitment fees.................... 1.27% .97% 1.09% 1.06%
Total expenses........................................................ 1.29% 1.00% 2.12% 2.20%
Net investment income................................................. .99% 1.32% 1.33% 1.33%
Portfolio turnover rate.................................................. 74% 114% 85% 63%
Total debt outstanding at end of year (000 omitted)...................... $ -- $ -- $ -- $ 45,000
Asset coverage per $1,000 of debt outstanding............................ $ -- $ -- $ -- $ 5,768

1999

--------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year....................................... $ 18.94
--------
Income from investment operations
Net investment income.................................................... .11
Net realized and unrealized gain (loss) on investments................... (7.20)
--------
Total from investment operations...................................... (7.09)
--------
Less dividends and distributions
Dividends from net investment income..................................... (.05)
Distributions from net realized gains.................................... (2.59)
Distributions in excess of net realized gains............................ (.45)
--------
Total dividends and distributions..................................... (3.09)
--------
Increase resulting from Fund share repurchase............................ --
Net change resulting from the issuance of Fund shares.................... .09
--------
Net asset value, end of year(a).......................................... $ 8.85
--------
--------
Market price per share, end of year(a)................................... $ 7.3125
--------
--------
TOTAL INVESTMENT RETURN(b):.............................................. (53.65)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)............................................ $221,881
Average net assets (000)................................................. $296,740
Ratios to average net assets:
Expenses, before loan interest and commitment fees.................... .94%
Total expenses........................................................ 1.61%
Net investment income................................................. .91%
Portfolio turnover rate.................................................. 65%
Total debt outstanding at end of year (000 omitted)...................... $ 45,000
Asset coverage per $1,000 of debt outstanding............................ $ 5,931

---------------
(a) NAV and market value are published in The Wall Street Journal each Monday.
(b) Total investment return is calculated assuming a purchase of common stock at
the current market value on the first day and a sale at the current market
value on the last day of each year reported. Dividends and distributions are
assumed for purposes of this calculation to be reinvested at prices obtained
under the dividend reinvestment plan. This calculation does not reflect
brokerage commissions.
Contained above is selected data for a share of common stock outstanding, total
investment return, ratios to average net assets and other supplemental data for
the year indicated. This information has been determined based upon information
provided in the financial statements and market price data for the Fund's
shares.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 9

Report of Independent Accountants FIRST FINANCIAL FUND, INC.
-------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
First Financial Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of First Financial Fund, Inc. (the
'Fund') at March 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as 'financial statements') are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP
New York, New York 10036
May 28, 2003
--------------------------------------------------------------------------------
10

Tax Information (Unaudited) FIRST FINANCIAL FUND, INC.
-------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (March 31, 2003) as to the federal tax status of
dividends and distributions paid by the Fund during such fiscal year.
Accordingly, we are advising you that during the fiscal year ended March 31,
2003, the Fund paid dividends of ordinary income of $0.167 and distributions of
short-term capital gains of $1.348, taxable as ordinary income, and long-term
capital gains of $1.448, taxable as such. Further, we wish to advise you that
22.3% of the dividends taxable as ordinary income and paid in the fiscal year
ended March 31, 2003 qualified for the corporate dividend received deduction
available to corporate taxpayers.

In January 2004, shareholders will receive a Form 1099-DIV or substitute Form
1099-DIV which reflects the amount of dividends to be used by calendar year
taxpayers on their 2003 federal income tax returns. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in the Fund.

Other Information (Unaudited) FIRST FINANCIAL FUND, INC.
-------------------------------------------------------------------------------
Dividend Reinvestment Plan. Shareholders may elect to have all distributions of
dividends and capital gains automatically reinvested in Fund shares (Shares)
pursuant to the Fund's Dividend Reinvestment Plan (the Plan.) Shareholders who
do not participate in the Plan will normally receive all distributions in cash
paid by check in United States dollars mailed directly to the shareholders of
record (or if the shares are held in streetname or other nominee name, then to
the nominee) by the custodian, as dividend disbursing agent, unless the Fund
declares a distribution payable in shares, absent a shareholder's specific
election to receive cash. Shareholders who wish to participate in the Plan
should contact the Fund at (800) 451-6788.

Equiserve Trust Company, N.A. (the Plan Agent) serves as agent for the
shareholders in administering the Plan. After the Fund declares a dividend or a
capital gains distribution, if (1) the market price is lower than net asset
value, the participants in the Plan will receive the equivalent in Shares valued
at the market price determined as of the time of purchase (generally, following
the payment date of the dividend or distribution); or if (2) the market price of
Shares on the payment date of the dividend or distribution is equal to or
exceeds their net asset value, participants will be issued Shares at the higher
of net asset value or 95% of the market price. If the Fund declares a dividend
or other distribution payable only in cash and the net asset value exceeds the
market price of Shares on the valuation date, the Plan Agent will, as agent for
the participants, receive the cash payment and use it to buy Shares in the open
market. If, before the Plan Agent has completed its purchases, the market price
exceeds the net asset value per share, the Plan Agent will halt open-market
purchases of the Fund's shares for this purpose, and will request that the Fund
pay the remainder, if any, in the form of newly-issued shares. The Fund will not
issue Shares under the Plan below net asset value.

There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage commissions
charged with respect to shares issued directly by the Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. The automatic reinvestment of
dividends and distributions will not relieve participants of any federal income
tax that may be payable on such dividends or distributions.

The Fund reserves the right to amend or terminate the Plan upon 90 days' written
notice to shareholders of the Fund.

Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent or by telephone in accordance with specific procedures and will
receive certificates for whole Shares and cash for fractional Shares.
All correspondence concerning the Plan should be directed to the Plan Agent,
Equiserve Trust Company, N.A., P.O. Box 43011, Providence, RI 02940-3011.
--------------------------------------------------------------------------------
11

Management of the Fund (Unaudited) FIRST FINANCIAL FUND, INC.
-------------------------------------------------------------------------------
Information pertaining to the Directors of the Fund is set forth below.

Directors

Term of Office
Position and Length
Name, Address and Age With Fund of Time Served*

----------------------------------------------------------------------
Richard I. Barr (67) Director Since 2001
6831 East Solano Drive (Class III)
Phoenix, AZ 85061
Eugene C. Dorsey (76) Director Since 1996
2010 Harbourside Drive, Pound2003 (Class I)
Longboat Key, FL 34228

Principal Occupations
and Other
Name, Address and Age Directorships Held**

------------------------------------
Richard I. Barr (67) Director of Boulder Total Return Fund,
6831 East Solano Drive Inc. (since 1999) and USLIFE Income
Phoenix, AZ 85061 Fund, Inc. (since 2002); formerly
President and Director of Advantage
Sales and Marketing (1997-1999);
formerly President and Chief Executive
Officer of CBS Marketing (1976-1997);
former President, Arizona Food Brokers
Association (1996); former Director,
Association of Sales and Marketing
Companies (formerly National Food
Brokers Association) (1992-1998); former
Director, St. Mary's Food Bank
(1990-1996), and currently advisory
board member of Kansas University
Business School and Arizona State
University.
Eugene C. Dorsey (76) Retired. Director of The High Yield Plus
2010 Harbourside Drive, Pound2003 Fund, Inc.; formerly President, Chief
Longboat Key, FL 34228 Executive Officer and Trustee, Gannett
Foundation (now Freedom Forum)
(1981-1989); former publisher of four
Gannett newspapers and Vice President of
Gannett Co., Inc. (publishing)
(1978-1981); past Chairman, Independent
Sector, Washington, D.C. (national
coalition of philanthropic
organizations) (1989-1992); and former
Chairman of the American Council for the
Arts; and former Director, Advisory
Board of Chase Manhattan Bank of
Rochester.

--------------------------------------------------------------------------------
12

Management of the Fund (Unaudited) FIRST FINANCIAL FUND, INC.
-------------------------------------------------------------------------------

Term of Office
Position and Length
Name, Address and Age With Fund of Time Served*
----------------------------------------------------------------------

Robert E. La Blanc (69) Director Since 1999
323 Highland Avenue (Class I)
Ridgewood, NJ 07450
Thomas T. Mooney (61)*** Director and Since 1986
930 East Avenue President (as Director)
Rochester, NY 14607 (Class II)
Clay T. Whitehead (64) Director Since 2000
P.O. Box 8090 (Class II)
McLean, VA 22106

Principal Occupations
During Past 5 Years
and Other
Name, Address and Age Directorships Held**
------------------------------------

Robert E. La Blanc (69) President of Robert E. La Blanc
323 Highland Avenue Associates, Inc. (information
Ridgewood, NJ 07450 technologies consulting) (since 1981);
Director or Trustee of 77 portfolios
within the Prudential Fund Complex;
Director of The High Yield Plus Fund,
Inc.; formerly Vice-Chairman of
Continental Telecom, Inc. (1979-1981);
formerly General Partner at Salomon
Brothers (1969-1979); Director of
Salient 3 Communications, Inc.
(telecommunications). Storage Technology
Corp. (computer equipment), Titan Corp.
(electronics), Computer Associates
International, Inc. (software company)
and Chartered Semiconductor
Manufacturing, Ltd. (semiconductors);
and Trustee of Manhattan College.
Thomas T. Mooney (61)*** Chief Executive Officer, the Rochester
930 East Avenue Business Alliance, formerly President of
Rochester, NY 14607 the Greater Rochester Metro Chamber of
Commerce. Director or Trustee of 97
portfolios within the Prudential Fund
Complex; President, Director and
Treasurer of The High Yield Plus Fund,
Inc.; Rochester City Manager; Trustee of
Center for Governmental Research, Inc.
(volunteer consulting); and Director of
Blue Cross of Rochester, Executive
Service Corps of Rochester, and
Rochester Individual Practice
Association.
Clay T. Whitehead (64) President of National Exchange Inc. (new
P.O. Box 8090 business development firm) (since May
McLean, VA 22106 1983); Director or Trustee of 94
portfolios within the Prudential Fund
Complex; Director of The High Yield Plus
Fund, Inc.

--------------------------------------------------------------------------------
13

Officers

Term of Office
Position and Length
Name, Address and Age With Fund of Time Served*

----------------------------------------------------------------------
Arthur J. Brown (54) Secretary Since 1986
1800 Massachusetts Avenue, NW
Washington, D.C. 20036
R. Charles Miller (45) Assistant Since 1999
1800 Massachusetts Avenue, NW Secretary
Washington, D.C. 20036
Grace C. Torres (43) Treasurer and Since 2000
Principal
Financial and
Accounting
Officer

Principal Occupations
Name, Address and Age During Past 5 Years

------------------------------------
Arthur J. Brown (54) Partner, Kirkpatrick & Lockhart LLP (law
1800 Massachusetts Avenue, NW firm and counsel to the Fund)
Washington, D.C. 20036
R. Charles Miller (45) Partner, Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, D.C. 20036
Grace C. Torres (43) Senior Vice President (since January
2000) of PI; formerly First Vice
President (December 1996-January 2000)
of PI and First Vice President (March
1993-1999) of Prudential Securities.

------------------

* The Board of Directors is divided into three classes, each of which has three terms. Class II's term expires this year. The
term of the Class I Directors expired last year, but they continue to serve as 'hold over' Directors of the Fund. Officers
are generally elected by the Board to one year terms.
** This column includes only directorships of companies required to report to the Securities and Exchange Commission under the
Securities Exchange Act of 1934 (that is, 'public companies') or other investment companies registered under the Investment
Company Act of 1940 ('1940 Act'). Each Director of the Fund, except Mr. Barr, oversees three other portfolios within the
Fund's 'Fund Complex'. The Fund's Fund Complex consists of a group of investment companies and series of investment companies
that are advised by the Investment Adviser.
*** Indicates an 'interested person' of the Fund, as defined in the 1940 Act. Mr. Mooney is deemed to be an 'interested person'
solely by reason of his service as an officer of the Fund.

--------------------------------------------------------------------------------
14

Directors
Richard I. Barr
Eugene C. Dorsey
Robert E. La Blanc
Thomas T. Mooney
Clay T. Whitehead

Investment Adviser
Wellington Management Company, LLP
75 State Street
Boston, MA 02109

Administrator
Prudential Investments LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171

Transfer Agent
Equiserve Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011

Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036

Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036

Notice is hereby given in accordance with
Section 23(c) of the Investment Company Act of
1940 that the Fund may purchase, from time to
time, shares of its common stock at market
prices.

The views expressed in this report and the
information about the Fund's portfolio holdings
are for the period covered by this report and
are subject to change thereafter.

This report is for stockholder information.
This is not a prospectus intended for use in
the purchase or sale of Fund shares.

First Financial Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

For information call toll-free (800) 451-6788

The Fund's CUSIP number is:

320228109