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
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FIRST FINANCIAL FUND, INC.
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(Exact name of registrant as specified in charter)
1680 38th Street, Suite 800
BOULDER, CO 80301
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(Address of principal executive offices) (Zip code)
Stephen C. Miller, Esq.
1680 38th Street, Suite 800
BOULDER, CO 80301
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(Name and address of agent for service)
Registrant's telephone number, including area code: 303-444-5483
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Date of fiscal year end: MARCH 31
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Date of reporting period: SEPTEMBER 30, 2004
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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 ADVISER NOVEMBER 8, 2004
DEAR SHAREHOLDERS:
The Fund returned 6.7% on NAV for the six months ending September 30, 2004.
While we do not manage for short-term results, our returns exceeded those of our
benchmarks. Given our new flexibility to invest more in financial service firms
not classified as either bank or thrift and given the recent addition of
non-U.S. financials, we may find the current benchmarks less relevant. The
Fund's aim was, is, and always will be to find ways of making a satisfactory
long-term return on our investment in financial stocks. Wellington Management
and the Fund's Board of Directors feel strongly that the increased scope of the
Fund will help us meet this goal.
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TOTAL RETURN
PERIODS ENDED 9/30/2004
6 MOS. 1 YEAR 3 YEARS 5 YEARS
FIRST FINANCIAL FUND'S NAV 6.7% 30.3% 31.5% 29.3%
S&P 500 -0.2 13.9 4.0 -1.3
NASDAQ Composite* -3.9 7.5 8.7 -6.9
NASDAQ Banks* 0.9 14.8 13.0 12.1
SNL All Daily* -5.7 12.3 16.2 19.7
SNL MBS REITS* -3.2 30.1 34.4 28.0
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Sources: Lipper Analytical Services, Inc. and Wellington Management Company, LLP
* Principal Only
Periods greater than one year are annualized
The grudging but determined rebound of the domestic economy continued this past
six months, with profit growth strong but job creation relatively tepid.
Treasury bond yields shot up in April only to fall back again in August and
September. As expected, the Fed raised rates, leaving the yield curve flatter
and economists, in general, a little more perplexed about the economy's stamina.
Emerging country economies appear less ambiguously robust. For our part, we see
a domestic economy with strong momentum and worry more over the possibility and
impact of significantly higher interest rates over the next 12 to 18 months.
We continue to benefit from an active merger market. Unsustainably low levels
of loan losses combined with good loan growth at the small community bank level
have also favored our investments. The Fund's weighting of banks and thrifts has
increased modestly, both due to appreciation and a number of capital raising
opportunities in the community bank arena. Bank stocks, however, are expensive.
After a torrid run, we have taken more profits off the table among our mortgage
bankers. Countrywide Financial was again
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1
among our top contributors. Other mortgage related winners included Freddie Mac,
First Republic, Provident Financial and Mortgage IT. Partially offsetting these
returns were generally negative to lackluster results in the property and
commercial insurance sector. They gave back some of the nice gains chalked up
over the previous six months. For the past 12 months, the Fund has been blessed
with a paucity of significant losses.
Looking forward, we find no shortage of possible stumbling blocks for financial
service stocks. Chief among these include a flattening yield curve, real estate
prices rolling over, questionable sub-prime lending and, not least, the
resurgence of regulatory risk. Valuations in most areas of financial services
leave little room for surprise or error, and earnings quality, in many cases,
has deteriorated. Offsetting positives include the continued torrid merger
activity, the elections and what may be a stronger world economy than most
expect. Overall, emerging economies appear more promising than the U.S.
As mentioned earlier, new and follow-on equity deals have picked up in our area.
Continued volatility, too, has provided entry points for the disciplined
investor. Both of these trends should provide opportunities that, with a little
patience, we can exploit.
We appreciate your trust in us.
Sincerely,
/S/NICHOLAS C. ADAMS
Nicholas C. Adams
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2
PORTFOLIO OF INVESTMENTS AS OF SEPTEMBER 30, 2004
(UNAUDITED) FIRST FINANCIAL FUND, INC.
------------------------------------------------- --------------------------
SHARES DESCRIPTION VALUE (NOTE 1)
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LONG TERM INVESTMENTS-93.7%
COMMON STOCKS-DOMESTIC-81.7%
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BANKS & THRIFTS-34.2%
57,600 Alliance Bankshares Corporation* $ 875,520
66,000 American Pacific Bank, Class B* 633,600
207,286 Bank of America Corporation 8,981,702
32,400 Bank of Oak Ridge* 421,200
68,100 Banknorth Group, Inc. 2,383,500
53,845 Bay View Capital Corporation 886,289
48,800 Boston Private Financial Holdings, Inc. 1,218,048
50,400 Cardinal Financial Corporation* 474,264
85,000 Cardinal State Bank* 896,750
282,010 CCF Holding Company (d) 4,535,003
252,250 Central Pacific Financial Corporation 6,941,920
72,700 Citigroup, Inc. 3,207,524
136,600 City National Corporation 8,872,170
62,000 Coast Financial Holdings, Inc.* 951,700
6,300 Coastal Banking Company, Inc.* 95,918
9,600 Columbia Bancorp 279,744
60,000 Community Bank San Jose
California (a)(b) 2,769,000
66,000 Community Capital Bancshares, Inc. 752,400
31,300 Cornerstone Bancorp, Inc. 909,265
9,100 Crescent Banking Company 229,320
91,600 Dearborn Bancorp, Inc.* 2,390,760
9,000 Fidelity Southern Corporation 137,160
36,599 First Citizens BancShares, Inc.,
Class A 4,318,682
34,300 First Indiana Corporation 689,430
50,000 First Regional Bancorp*(a) 1,637,500
230,250 First Republic Bank 10,591,500
71,468 F.N.B Corporation 1,263,554
64,800 Greenville First Bancshares, Inc.* 1,189,080
198,316 Hanmi Financial Pipe(a) 5,989,143
1,700 Heritage Oaks Bancorp* 28,900
172,500 Hibernia Corporation, Class A 4,555,725
72,500 IBERIABANK Corporation 4,184,700
60,000 Independence Financial
Group, Inc.(a)(b) 480,000
41,200 LSB Bancshares, Inc. 687,216
219,600 MetroCorp Bancshares, Inc. 4,172,400
83,700 North Fork Bancorporation, Inc. 3,720,465
336,000 North Valley Bancorp (d) 6,000,960
44,800 Parkway Bank* 544,320
2,000 Pointe Financial Corporation 64,000
216,500 Signature Bank* 5,791,375
246,100 SNB Bancshares, Inc.* 2,948,278
106,300 Southern Connecticut Bancorp, Inc.* 898,235
224,100 Southwest Bancorp, Inc. 4,941,405
100,000 Sterling Eagle (a)(b)(d) 807,000
29,500 SuffolkFirst Bank* 280,250
243,470 Sun Bancorp, Inc.* 5,339,297
335,542 Taylor Capital Group, Inc. 8,053,008
21,100 Team Financial, Inc. 232,100
61,200 Texas United Bancshares, Inc. 1,077,120
SHARES DESCRIPTION VALUE (NOTE 1)
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BANKS & THRIFTS - CONTINUED
218,900 The Bancorp Bank* $ 4,454,615
18,400 The Bank Holdings, Inc.* 293,480
5,500 The South Financial Group, Inc. 155,100
9,400 TIB Financial Corporation 209,150
130,000 Transatlantic Bank* (a) 1,267,500
70,000 TriCo Bancshares 1,464,400
36,400 Trustmark Corporation 1,131,312
56,500 UCBH Holdings, Inc. 2,207,455
59,500 UMB Financial Corporation 2,836,365
150,400 UnionBanCal Corporation 8,905,184
14,200 UnionBancorp, Inc. 286,130
33,000 Valley Bancorp* 770,550
153,560 Wainwright Bank & Trust Company 1,749,048
63,507 Webster Financial Corporation 3,136,611
38,587 Westbank Corporation 797,979
36,700 Yardville National Bancorp 1,067,970
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160,061,249
------------
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SAVINGS & LOANS-20.4%
9,100 BostonFed Bancorp, Inc. 390,117
129,280 Broadway Financial Corporation (d) 1,519,040
324,800 CFS Bancorp, Inc. 4,514,720
24,400 Charter Financial Corporation 827,892
71,800 Chesterfield Financial Corporation 2,244,468
54,900 Citizens Community Bancorp 691,740
238,500 Citizens First Bancorp, Inc. 5,983,965
37,600 Commerical Federal Corporation 1,014,448
86,900 Downey Financial Corporation 4,776,024
413,565 Fidelity Federal Bancorp* 591,398
79,638 First Federal Bancshares, Inc. (d) 1,911,312
1,300 First Defiance Financial Corporation 33,813
24,000 First PacTrust Bancorp, Inc. 602,400
63,600 First Place Financial Corporation 1,272,000
252,000 FirstFed Bancorp, Inc.(d) 1,927,800
24,200 FirstFed Financial Corporation* 1,182,896
114,400 Golden West Financial Corporation 12,692,680
90,000 HMN Financial, Inc. 2,496,600
46,900 Jefferson Bancshares, Inc. 617,204
100,000 K-Fed Bancorp* 1,475,000
54,612 LSB Corporation 1,086,779
79,500 Northewest Bancorp, Inc. 1,802,265
116,500 Northeast Pennsylvania
Financial Corporation 1,923,415
109,600 Ocwen Financial Corporation* 1,002,840
163,300 Pacific Premier Bancorp, Inc.* 1,931,839
94,800 Parkvale Financial Corporation 2,559,600
73,950 People's Bank 2,642,234
165,930 Perpetual Federal Savings Bank (d) 4,936,418
450,000 Provident Bancorp, Inc. 5,283,000
456,525 Provident Financial Holdings, Inc. (d) 13,239,225
36,000 Rainier Pacific Financial Group, Inc. 641,880
40,650 Redwood Financial, Inc.*(d) 774,383
90,000 River Valley Bancorp (d) 2,070,000
23,986 Sovereign Bancorp, Inc. 523,374
110,500 Third Century Bancorp 1,259,700
--------------------------------------------------------------------------------
See Notes to Financial Statements. 3
PORTFOLIO OF INVESTMENTS AS OF SEPTEMBER 30, 2004
(UNAUDITED) FIRST FINANCIAL FUND, INC.
------------------------------------------------- --------------------------
SHARES DESCRIPTION VALUE (NOTE 1)
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SAVINGS & LOANS- CONTINUED
172,000 Woronoco Bancorp, Inc. $ 6,665,000
------------
95,107,469
------------
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MORTGAGE & REITS-15.0%
68,000 Accredited Home Lenders Holding
Company* 2,619,360
483,400 Arbor Realty Trust, Inc.(c); REIT 10,731,480
113,600 Bimini Mortgage Management,
Inc., Class A*; REIT 1,790,336
424,000 Bimini Mortgage Management, Inc.(a);
REIT 6,014,016
459,998 Countrywide Financial Corporation 18,119,321
248,600 Freddie Mac 16,218,664
272,590 Medical Office Properties
Inc.(a)(c); REIT 0
419,500 Medical Properties Trust,
Inc. (a)(c); REIT 4,195,000
585,500 MortgageIT Holdings, Inc.* 8,460,475
155,504 Newcastle Investment Holdings
Corporation* (a)(b); REIT 1,166,280
41,100 Saxon Capital, Inc.*; REIT 883,650
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70,198,582
------------
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INSURANCE-5.3%
141,900 21St Century Insurance Group 1,894,365
19,700 Argonaut Group, Inc.* 367,799
320,100 Bristol West Holdings, Inc. 5,486,514
279,100 Mercer Insurance Group, Inc.* 3,237,560
226,100 Ohio Casualty Corporation* 4,732,273
44,900 Old Republic International
Corporation 1,123,847
170,200 Penn-America Group, Inc. 2,316,422
55,000 Safety Insurance Group, Inc. 1,222,650
304,000 United National Group,
Ltd., Class A* 4,414,080
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24,795,510
------------
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DIVERSIFIED FINANCIAL SERVICES-4.2%
40,800 Advanta Corporation, Class B 986,952
600,000 Centennial Bank Holdings, Inc. (a) 6,300,000
485,800 Centennial Bank Holdings, Inc.(a)(c) 5,100,900
25,000 CMET Finance Holdings, Inc. (a) 2,500,000
456,700 Spirit Finance Corporation 4,567,000
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19,454,852
------------
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OTHER-2.6%
329,600 DiamondRock Hospitality
Company*(a); REIT 3,296,000
385,386 Resource America, Inc., Class A 9,091,256
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12,387,256
------------
Total common stocks-domestic
(cost $272,587,353) 382,004,918
SHARES DESCRIPTION VALUE (NOTE 1)
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COMMON STOCKS-FOREIGN-9.9%
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BERMUDA-7.6%
124,900 Aspen Insurance Holdings, Ltd. $ 2,873,949
415,900 Assured Guaranty Ltd. 6,928,894
369,300 Axis Capital Holdings Ltd. 9,601,800
121,200 IPC Holdings Ltd. 4,606,812
73,100 Platinum Underwriters Holdings, Ltd. 2,140,368
17,900 White Mountains Insurance
Group, Ltd. 9,415,400
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35,567,223
------------
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CANADA-1.7%
217,042 Canadian Western Bank 7,674,631
------------
CAYMAN ISLANDS-0.3%
240,600 Kongzhong Corporation, ADR* 1,616,832
------------
TURKEY-0.3%
75,700 Denizbank A.S., Sponsored
GDR * (c) 1,454,197
------------
Total common stocks-foreign
(cost $41,179,706) 46,312,883
------------
--------------------------------------------------------------------------------
PREFERRED STOCKS-1.2%
22,650 Capital One Financial Corporation,
Conv. Pfd., 6.25%, 5/17/05 1,199,091
161,940 Taylor Capital Trust 1, Cum.
Conv. Pfd., 9.75%, 10/21/32 (e) 4,453,350
------------
Total Convertible Preferred Stocks
(cost $4,791,690) 5,652,441
------------
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WARRANTS-0.1%
77,000 Arbor Realty Trust, Inc. Warrants,
Expires 6/30/05 (a) 554,400
1 Citigroup, Inc., Litigation
Tracking Warrant,
Expires 12/31/50* 1
195,000 Dime Bancorp, Inc.,
Warrant, Expires 11/22/05* 27,300
3,680 The Bank Holdings, Inc. ,
Warrant, Expires 5/21/06* 18,032
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Total Warrants
(cost $248,903) 599,733
------------
PRINCIPAL
AMOUNT
(000)
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CONVERTIBLE BONDS-0.8%
$3,200 First Regional Bancorp
6.00%, 10/30/23 (a)(d)
(cost $3,200,000) 3,810,560
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Total long-term investments
(cost $322,007,652) 438,380,535
------------
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See Notes to Financial Statements. 4
PORTFOLIO OF INVESTMENTS AS OF SEPTEMBER 30, 2004
(UNAUDITED) FIRST FINANCIAL FUND, INC.
------------------------------------------------- --------------------------
PRINCIPAL
AMOUNT
(000) VALUE (NOTE 1)
--------------------------------------------------------------------------------
SHORT TERM INVESTMENTS-7.0%
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT-7.0%
$ 32,500 Agreement with Gold Tri-Party,
1.89%, dated 9/30/04, to be
repurchased at $32,501,706
on 10/1/04, collateralized by
$33,150,000 market value of a
FNMA Bond, 5.50%, 3/1/34
(cost $32,500,000) $ 32,500,000
------------
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TOTAL INVESTMENTS-100.7%
(cost $354,507,652**) 470,880,535
Liabilities in excess of
other assets-(0.7%) (3,207,055)
------------
Net Assets-100% $467,673,480
============
=========================
* Non-income producing security.
** Aggregate cost for Federal tax purposes.
(a) Indicates a fair valued security. Total market value for fair valued
securities is $38,505,987 representing 8.23% 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) Affilited Company. See Note 11 to Financial Statements.
ADR-American Depository Receipt.
GDR-Global Depository Receipt.
REIT-Real Estate Investment Trust.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF PRINTED GRAPHIC
Communications Equipment - 0.4%
Cash & Cash Equivalents - 6.3%
Convertible Bonds - 0.8%
Preferred Stocks - 1.2%
REITS - 0.7%
Diversified Financial Services - 6.1%
Insurance - 12.9%
Mortgage & REITS - 15.0%
Savings & Loans - 20.3%
Banks & Thrifts - 36.2%
Warrants - 0.1%
--------------------------------------------------------------------------------
See Notes to Financial Statements. 5
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) FIRST FINANCIAL FUND, INC.
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ASSETS SEPTEMBER 30, 2004
------------------
Investments:
Investments, at value of Unaffiliated Securities (Cost $335,159,439) (Note 1) ........................... $ 430,369,115
Investments, at value of Affiliated Securities (Cost $19,348,213) (Note 1 and Note 11) .................. 40,511,420
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Total Investments, at value. See accompanying schedule ...................................................... 470,880,535
Cash and foreign currency (Cost $10,682) .................................................................... 10,913
Receivable for investments sold ............................................................................. 3,098,700
Dividends and interest receivable ........................................................................... 711,554
Prepaid expenses and other assets ........................................................................... 125,794
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Total Assets ............................................................................................. 474,827,496
-------------
LIABILITIES
Payable for investments purchased ........................................................................... $ 6,274,701
Investment advisory fees payable (Note 2) ................................................................... 720,629
Administration and Co-administration fees payable (Note 2) .................................................. 77,823
Audit fees and expenses payable ............................................................................. 14,600
Directors' fees and expenses payable (Note 2) . ............................................................. 24,076
Accrued expenses and other payable .......................................................................... 42,187
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Total liabilities ........................................................................................ 7,154,016
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NET ASSETS .................................................................................................. $ 467,673,480
=============
Net assets consist of:
Undistributed net investment income ..................................................................... $ 7,815,842
Accumulated net realized gain on investments sold ....................................................... 93,961,715
Unrealized appreciation of investments .................................................................. 116,373,103
Par value of Common Stock ............................................................................... 22,791
Paid-in capital in excess of par value of Common Stock .................................................. 249,500,029
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Total Net Assets ......................................................................................... $ 467,673,480
=============
Net Asset Value, ( $467,673,480 / 22,791,382 shares of common stock outstanding) ............................ $ 20.52
=============
--------------------------------------------------------------------------------
See Notes to Financial Statements. 6
FIRST FINANCIAL FUND, INC.
Statement of Operations (Unaudited)
SIX MONTHS
ENDED
NET INVESTMENT INCOME SEPTEMBER 30, 2004
--------------------
Income
Dividends (net of foreign withholding
taxes of $6,910) ................................... $ 7,334,917
Dividends from affiliated companies. .................. 1,003,457
Interest .............................................. 308,520
--------------
Total Investment Income ......................... 8,646,894
--------------
Expenses
Investment advisory fee (Note 2) ...................... 1,412,706
Administration fee and
co-administration fee (Note 2) ..................... 456,353
Insurance expense ..................................... 114,221
Legal fees ............................................ 83,668
Directors fees and expenses (Note 2) .................. 65,846
Custodian fees ........................................ 51,713
Transfer agent's fees and expenses .................... 23,862
Audit fees. ........................................... 15,985
Other ................................................. 9,362
--------------
Total expenses .................................. 2,233,716
--------------
Net Investment Income ................................... 6,413,178
--------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on:
Securities ............................................ 44,807,257
Foreign currencies and net other assets ............... 1,298
--------------
Net realized gain on investments during
the period ............................................ 44,808,555
--------------
Net change in unrealized appreciation/
(depreciation) of:
Securities ............................................ (22,121,253)
Foreign currencies and net other assets ............... 87
--------------
Net change in unrealized depreciation of
investments during the period ......................... (22,121,166)
--------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ........................................ 22,687,389
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................. $ 29,100,567
==============
FIRST FINANCIAL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31,
INCREASE IN NET ASSETS 2004 2004
------------ ------------
Operations
Net investment income $ 6,413,178 $ 3,445,185
Net realized gain on investments
sold during the period 44,808,555 90,698,236
Net change in unrealized
appreciation/(depreciation)
of investments during the
period (22,121,166) 79,698,046
------------ ------------
Net increase in net assets
resulting from operations 29,100,567 173,841,467
------------ ------------
Dividends and Distributions (Note 1)
Dividends paid from net
investment income -- (3,576,093)
Distributions paid from net realized
capital gain to shareholders -- (59,098,053)
Cost of Fund shares reacquired -- (11,983,796)
------------ ------------
Net increase in net assets for
the period 29,100,567 99,183,525
NET ASSETS
Beginning of period 438,572,913 339,389,388
------------ ------------
End of period (including
undistributed net invesment
income of $7,815,842 and
$1,402,664 respectively) $467,673,480 $438,572,913
============ ============
--------------------------------------------------------------------------------
See Notes to Financial Statements. 7
FINANCIAL HIGHLIGHTS FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
SEPTEMBER 30, 2004 YEAR ENDED MARCH 31,
-------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
---------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ................... $ 19.24 $ 14.40 $ 15.46 $ 12.86 $ 8.72 $ 8.85
---------- -------- -------- -------- -------- --------
Net investment income .................................. 0.28 0.15 0.16 0.19 0.14 0.12
Net realized and unrealized gain/(loss) on investments . 1.00 7.36 1.72 3.99 4.09 (0.20)
---------- -------- -------- -------- -------- --------
Total from investment operations ................. 1.28 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 period (a) ..................... $ 20.52 $ 19.24 $ 14.40 $ 15.46 $ 12.86 $ 8.72
========== ======== ======== ======== ======== ========
Market price per share, end of period (a) .............. $ 20.38 $ 18.30 $ 13.97 $ 15.75 $ 11.29 $ 7.8125
========== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN BASED ON
MARKET VALUE(B) .................................... 11.37% 51.96% 8.24% 35.20% 49.40% 7.93%
RATIOS AND SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ................ 1.02%(c) 1.10% 1.29% 1.00% 2.12% 2.20%
Ratio of net investment income to average net assets ... 2.92%(c) 0.86% 0.99% 1.32% 1.33% 1.33%
SUPPLEMENTAL DATA:
Portfolio Turnover Rate ................................ 39% 87% 74% 114% 85% 63%
Net assets, end of period (in 000's) ................... $ 467,673 $438,573 $339,389 $365,207 $315,392 $214,662
Number of shares outstanding at the end of period (in 000's) 22,791 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 period reported. Dividends and distributions
are assumed for purposes of this calculation to be reinvested at prices
obtained under the dividend reinvestment plan. This calculation does not
reflect brokerage commissions.
(c) Annualized.
Contained above is selected data for a share of common stock outstanding, total
investment return, ratios to average net assets and other supplemental data for
the year indicated. This information has been determined based upon information
provided in the financial statements and market price data for the Fund's
shares.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 8
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
First Financial Fund, Inc. (the "Fund") was incorporated in Maryland on March 3,
1986, as a closed-end, diversified management investment company. The Fund's
primary investment objective is to achieve long-term capital appreciation with
the secondary objective of current income by investing, under normal conditions,
at least 65% of its assets in financial services companies, including savings
and banking institutions and their holding companies, except for temporary or
defensive purposes.
--------------------------------------------------------------------------------
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 ("Fair Value Securities"), are valued at fair value by a
Pricing Committee appointed by the Board of Directors, in consultation with the
adviser. In such circumstances, the adviser makes an initial written
recommendation to the Pricing Committee regarding valuation methodology for
each Fair Value Security. Thereafter, the adviser conducts periodic reviews
of each Fair Value Security to consider whether the respective methodology
and its application is appropriate and recommends methodology changes when
appropriate. Prior to implementation, the Pricing Committee reviews and makes
a determination regarding each initial methodology recommendation and any
subsequent methodology changes. All methodology recommendations and any changes
are reviewed by the entire Board of Directors on a quarterly basis.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost, which approximates fair value.
REPURCHASE AGREEMENTS: In connection with the repurchase agreement transactions
with United States financial institutions, it is the Fund's policy that its
custodian take possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to maintain the adequacy of the collateral. If the seller defaults, and the
value of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the Fund
may be delayed or limited.
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
dis-
--------------------------------------------------------------------------------
9
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
tribute all of its taxable net income and capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS: For 2004, the Fund expects to declare and pay
dividends from net investment income and distributions of net realized capital
gains in December. 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 EquisServe's services as such, the Fund pays EquisServe 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 six months ended
September 30, 2004, excluding short-term investments, aggregated $165,819,550
and $185,840,537, respectively.
On September 30, 2004, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $128,889,710
and aggregate gross unrealized depreciation for all securities in which there
is an excess of tax cost over value was $12,516,827.
--------------------------------------------------------------------------------
NOTE 4. CAPITAL
At September 30, 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 (UNAUDITED) 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 six months ended September 30, 2004, the Fund did not repurchase any of
its own shares. For the year ended March 31, 2004, the Fund repurchased 784,800
of its own shares at a weighted average discount of 15.0% with a value of
$11,983,796.
--------------------------------------------------------------------------------
NOTE 6. SIGNIFICANT SHAREHOLDERS
On September 30, 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. The Fund did not borrow any amounts pursuant to the Agreement during the
six months ended September 30, 2004.
--------------------------------------------------------------------------------
NOTE 8. SIGNIFICANT EVENT
Effective October 1, 2004, Investors Bank & Trust serves as the Fund's
Co-Administrator and Custodian.
At a regularly scheduled meeting of the Board of Directors held on October 15,
2004, the Board accepted the resignation of Stephen C. Miller as a director of
the Fund. The remaining directors of the Fund elected Dennis R. Causier as Mr.
Miller's replacement. Mr Miller, previously an interested director of the Fund,
resigned in order to bring the Fund into compliance with the recent SEC
regulations which require that 75% of the Board be non-interested directors.
NOTE 9. PORTFOLIO INFORMATION
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Form N-Q is available (1) on the Fund's website
located at http://www.firstfinancialfund.com; (2) on the SEC's website at
http://www.sec.gov; or (3) for review and copying at the SEC's Public Reference
Room ("PRR") in Washington, DC. Information regarding the operation of the PRR
may be obtained by calling 1-800-SEC-0330.
--------------------------------------------------------------------------------
NOTE 10. PROXY INFORMATION
The policies and procedures that the Company uses to determine how to vote
proxies relating to portfolio securities held by the Fund are included in the
Company's Statement of Additional Information which is available on the Fund's
website located at http://www.firstfinancialfund.com. Information regarding how
the Portfolio voted proxies relating to portfolio securities during the most
recent twelve-month period ended September 30 is available at
http://www.sec.gov.
--------------------------------------------------------------------------------
11
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
NOTE 11. 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 BEGINNING ENDING PURCHASE SALES DIVIDEND MARKET
AFFILIATE SHARE BALANCE SHARE BALANCE COST COST INCOME VALUE
------------------------------------------------------------------------------------------------------------------------------------
Arbor Realty Trust Inc. 77,000 77,000 -- -- 134,750 554,400
Bay View Capital Corporation(a) 538,450 53,845 -- -- 269,225 886,289
Broadway Financial Corporation 129,280 129,280 -- -- 6,464 1,519,040
CCF Holding Company(b) 188,007 282,010 -- -- 14,101 4,535,003
First Federal Bancshares, Inc. 169,600 79,638 853,046 1,549,710 14,055 1,911,312
First Regional Bancorp 3,200,000 3,200,000 -- -- -- 1,637,500
FirstFed Bancorp, Inc. 252,000 252,000 -- -- 35,280 1,927,800
Perpetual Federal Savings Bank 165,930 165,930 -- -- 204,094 4,936,418
Provident Financial Holdings, Inc. 456,525 456,525 -- -- 91,305 13,239,225
Redwood Financial, Inc. 40,650 40,650 -- -- -- 774,383
River Valley Bancorp 90,000 90,000 -- -- 32,400 2,070,000
St. Landry Financial Corp. 32,500 -- -- 471,413 -- --
Sterling Eagle 100,000 100,000 -- -- -- 807,000
Taylor Capital Trust 1, 9.75% 161,940 161,940 -- -- 197,363 4,453,350
Third Century Bancorp -- 110,500 1,261,446 -- 4,420 1,259,700
------------------------------------------------------------------------------------------------------------------------------------
(a) 1:10 stock split
(b) 3:2 stock split
--------------------------------------------------------------------------------
12
OTHER INFORMATION FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN. Shareholders may elect to have all distributions of
dividends and capital gains automatically reinvested in Fund shares (Shares)
pursuant to the Fund's Dividend Reinvestment Plan (the Plan). Shareholders who
do not participate in the Plan will normally receive all distributions in cash
paid by check in United States dollars mailed directly to the shareholders of
record (or if the shares are held in 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
MEETING OF SHAREHOLDERS - VOTING RESULTS (UNAUDITED) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
On August 18, 2004, the Fund held its Annual Meeting of Shareholders to
consider the election of Directors of the Fund and certain corporate governance
proposals. The following votes were recorded:
PROPOSAL 1: (VOTING BY SHAREHOLDERS):
ELECTION OF RICHARD I. BARR AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST
--------------------------------------------------- ------------------- -------------------
Affirmative ............................................................... 21,176,418.4718 97.9
Withheld .................................................................. 461,869.9532 2.1
----------------- -------
TOTAL ............................................................ 21,638,288.4250 100.0
================= =======
ELECTION OF SUSAN L. CICIORA AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST
---------------------------------------------------- ------------------- -------------------
Affirmative ............................................................... 21,161,539.0493 97.8
Withheld .................................................................. 476,749.3757 2.2
----------------- -------
TOTAL ............................................................ 21,638,288.4250 100.0
================= =======
ELECTION OF DR. DEAN JACOBSON AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST
----------------------------------------------------- ------------------- -------------------
Affirmative ............................................................... 21,179,728.8619 97.9
Withheld .................................................................. 458,559.5631 2.1
----------------- -------
TOTAL ............................................................ 21,638,288.4250 100.0
================= =======
ELECTION OF STEPHEN C. MILLER AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST
----------------------------------------------------- ------------------- -------------------
Affirmative ............................................................... 21,165,629.0493 97.8
Withheld .................................................................. 472,659.3757 2.2
----------------- -------
TOTAL ............................................................ 21,638,288.4250 100.0
================= =======
ELECTION OF JOEL W. LOONEY AS DIRECTOR OF THE FUND # OF VOTES CAST % OF VOTES CAST
-------------------------------------------------- ------------------- -------------------
Affirmative ............................................................... 21,169,396.8186 97.8
Withheld .................................................................. 468,891.6064 2.2
----------------- -------
TOTAL ............................................................ 21,638,288.4250 100.0
================= =======
PROPOSAL 2: (VOTING BY SHAREHOLDERS):
AN AMENDMENT TO THE BYLAWS TO DECLASSIFY THE BOARD AND AN AMENDMENT
TO THE FUND'S CHARTER TO PROVIDE FOR ANNUAL ELECTION OF DIRECTORS # OF VOTES CAST % OF VOTES CAST
----------------------------------------------------------------------- ------------------- -------------------
For ....................................................................... 20,741,511.8247 95.9
Against ................................................................... 788,770.8287 3.6
Abstain ................................................................... 108,003.7716 0.5
No vote ................................................................... 2.0000 0.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
--------------------------------------------------------------------------------
14
MEETING OF SHAREHOLDERS - VOTING RESULTS (UNAUDITED) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
PROPOSAL 3: (VOTING BY SHAREHOLDERS):
AN AMENDMENT TO THE CHARTER PROVIDING THAT DIRECTORS SHALL BE ELECTED
BY A PLURALITY OF VOTES CAST AT A MEETING AT WHICH A QUORUM IS PRESENT # OF VOTES CAST % OF VOTES CAST
---------------------------------------------------------------------- ------------------- -------------------
For ....................................................................... 20,810,026.3762 96.2
Against ................................................................... 684,106.9557 3.2
Abstain ................................................................... 144,152.0931 0.6
No vote ................................................................... 3.0000 0.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
PROPOSAL 4: (VOTING BY SHAREHOLDERS):
AN AMENDMENT TO THE CHARTER PROVIDING THAT THE SECRETARY OF THE FUND
SHALL CALL A SPECIAL STOCKHOLDERS MEETING UPON THE WRITTEN REQUEST OF
THE HOLDERS OF AT LEAST 25% OF OUTSTANDING SHARES ENTITLED TO VOTE AT
THE MEETING # OF VOTES CAST % OF VOTES CAST
--------------------------------------------------------------------- ------------------- -------------------
For ....................................................................... 16,612,529.5931 76.8
Against ................................................................... 744,048.3126 3.5
Abstain ................................................................... 159,992.5193 0.7
No vote ................................................................... 4,121,718.0000 19.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
PROPOSAL 5: (VOTING BY SHAREHOLDERS):
AN AMENDMENT TO THE CHARTER VESTING IN THE STOCKHOLDERS THE POWER TO
AMEND OR ADOPT BYLAWS BY THE AFFIRMATIVE VOTE OF A MAJORITY OF ALL VOTES
ENTITLED TO BE CAST ON THE MATTER # OF VOTES CAST % OF VOTES CAST
------------------------------------------------------------------------ ------------------- -------------------
For ....................................................................... 16,780,339.5317 77.6
Against ................................................................... 527,365.7759 2.4
Abstain ................................................................... 208,866.1174 1.0
No vote ................................................................... 4,121,717.0000 19.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
PROPOSAL 6: (VOTING BY SHAREHOLDERS):
AN AMENDMENT TO THE CHARTER PROHIBITING THE FUND FROM OPTING INTO ANY
PROVISION OF THE MARYLAND UNSOLICITED TAKEOVERS ACT # OF VOTES CAST % OF VOTES CAST
---------------------------------------------------------------------- ------------------- -------------------
For ....................................................................... 16,718,152.6880 77.3
Against ................................................................... 494,775.5488 2.3
Abstain ................................................................... 303,642.1882 1.4
No vote ................................................................... 4,121,718.0000 19.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
--------------------------------------------------------------------------------
15
MEETING OF SHAREHOLDERS - VOTING RESULTS (UNAUDITED) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
PROPOSAL 7: (VOTING BY SHAREHOLDERS):
AN AMENDMENT TO THE CHARTER REPEALING ARTICLE NINTH AND REPLACING IT
WITH A PROVISION PROVIDING THAT NO (A) BUSINESS COMBINATION (E.G.,
MERGERS, CONSOLIDATION, SHARE EXCHANGES), (B) VOLUNTARY LIQUIDATION OR
DISSOLUTION, (C) STOCKHOLDER PROPOSAL REGARDING SPECIFIC INVESTMENT
DECISIONS, (D) PROPOSAL TO OPEN-END THE FUND, OR (E) SELF TENDER FOR
MORE THAN 25% OF THE FUND'S SHARES IN ANY TWELVE-MONTH PERIOD, MAY BE
EFFECTED WITHOUT THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST
TWO-THIRDS OF OUTSTANDING SHARES ENTITLED TO BE CAST ON THE MATTER # OF VOTES CAST % OF VOTES CAST
------------------------------------------------------------------------ ------------------- -------------------
For ....................................................................... 16,518,447.9399 76.3
Against ................................................................... 730,697.8525 3.4
Abstain ................................................................... 267,426.6326 1.3
No vote ................................................................... 4,121,716.0000 19.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
PROPOSAL 8: (VOTING BY SHAREHOLDERS)
AN AMENDMENT TO THE CHARTER TO ESTABLISH THE MAXIMUM NUMBER OF DIRECTORS
AT FIVE # OF VOTES CAST % OF VOTES CAST
------------------------------------------------------------------------ ------------------- -------------------
For ....................................................................... 20,903,374.8608 96.6
Against ................................................................... 548,181.6962 2.5
Abstain ................................................................... 186,728.8680 0.9
No vote ................................................................... 3.0000 0.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
PROPOSAL 9: (VOTING BY SHAREHOLDERS):
A PROPOSAL TO AMEND AND RESTATE THE CHARTER, THE IMPLEMENTATION OF
WHICH IS CONTINGENT ON THE APPROVAL OF PROPOSALS 2 THROUGH 9 # OF VOTES CAST % OF VOTES CAST
------------------------------------------------------------------ ------------------- -------------------
For ....................................................................... 16,632,647.8768 76.9
Against ................................................................... 600,568.0679 2.8
Abstain ................................................................... 283,354.4803 1.3
No vote ................................................................... 4,121,718.0000 19.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
PROPOSAL 10A: (VOTING BY SHAREHOLDERS):
A PROPOSAL TO CHANGE THE FUND'S CURRENT INDUSTRY CONCENTRATION POLICIES
SO THAT THE FUND SHALL INVEST AT LEAST 65% OF ITS ASSETS IN THE FINANCIAL
SERVICES INDUSTRY # OF VOTES CAST % OF VOTES CAST
------------------------------------------------------------------------- ------------------- -------------------
For ....................................................................... 16,727,039.6062 77.3
Against ................................................................... 564,270.4279 2.6
Abstain ................................................................... 225,261.3909 1.1
No vote ................................................................... 4,121,717.0000 19.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
--------------------------------------------------------------------------------
16
MEETING OF SHAREHOLDERS - VOTING RESULTS (UNAUDITED) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
PROPOSAL 10B: (VOTING BY SHAREHOLDERS):
A PROPOSAL TO MAKE THE FUND'S POLICY OF INVESTING 80% OF ITS ASSETS IN
FINANCIAL SERVICES COMPANIES NON-FUNDAMENTAL # OF VOTES CAST % OF VOTES CAST
----------------------------------------------------------------------- ------------------- -------------------
For ....................................................................... 16,655,953.2650 77.0
Against ................................................................... 709,925.2500 3.3
Abstain ................................................................... 150,692.9100 0.7
No vote ................................................................... 4,121,717.0000 19.0
----------------- --------
TOTAL ............................................................ 21,638,288.4250 100.0
================= ========
--------------------------------------------------------------------------------
17
UPDATE REGARDING MANAGED DISTRIBUTION (UNAUDITED) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
Due to a lengthy delay in obtaining exemptive relief from the SEC, the planned
managed distribution has been postponed. The Fund still expects to receive
exemptive relief and will likely begin to pay distributions in early 2005.
--------------------------------------------------------------------------------
18
This Page Left Blank Intentionally.
DIRECTORS
Richard I. Barr
Dennis R. Causier
Susan L. Ciciora
Dean Jacobson
Joel W. Looney
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
TRANSFER AGENT
EquiServe Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
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]
[LOGO]
FIRST FINANCIAL FUND, INC.
THE FUND NOW HAS A WEBSITE. YOU CAN VISIT IT AT WWW.FIRSTFINANCIALFUND.COM
SEMI-
ANNUAL
REPORT
September 30, 2004
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not yet applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. 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 11. 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) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(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 applicable.
(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 NOVEMBER 8, 2004
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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
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Stephen C. Miller, President & Chief Executive Officer
(principal executive officer)
Date NOVEMBER 8, 2004
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By (Signature and Title)* /S/ CARL D. JOHNS
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Carl D. Johns, Vice President and Treasurer
(principal financial officer)
Date NOVEMBER 8, 2004
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* Print the name and title of each signing officer under his or her signature.