(LOGO)
SEMI
ANNUAL
REPORT
September 30, 2001
Letter To Shareholders November 1, 2001
Dear Fellow Shareholder:
We cannot begin this review to you
without acknowledging a debt.
Building over the last 18 years of
my professional career, this debt
consists of the stellar research,
true grit and integrity of a number
of brokerage firms. Chief among
them were Sandler O'Neill and
Keefe, Bruyette and Woods. The
professionals of these firms are
financial service industry
specialists who know their craft
like none before them. They are,
in short, world class. That so
many of them perished on September
11th is the kind of loss that
is beyond comprehension--beyond my
understanding, that is--a loss we
suffer for a long time and in bits
because the whole of it is too much
today. That so many are so missed
is consolation, even inspiration--a
charge to cherish our lives and one
another a little more.
TOTAL RETURN
For The Periods Ended 9/30/01
6 Mos. 1 Year 3 Years 5 Years
First Financial Fund's NAV1 11.0% 34.6% 13.1% 12.1%
S&P 500 -9.7 -26.6 2.0 10.2
NASDAQ Composite* -18.6 -59.2 -4.0 4.1
NASDAQ Banks* 9.4 15.8 6.0 12.4
SNL All Daily Thrift* 7.8 32.8 13.6 17.3
SNL MBS REITS 26.8 35.9 -3.5 1.4
SNL Mortgage Banks* 3.2 55.5 1.3 -5.3
1 Past performance is not indicative of future results. Returns
based on market performance of the Fund's shares would be different.
* Principal only.
Note: Returns for periods greater than one year are annualized.
Financially, we enjoyed a fine six-
month period. This was not so for
the stock market in general. Our
basic bet, namely, more interest
rate risk and limited credit risk
paid off. The yield curve has
steepened dramatically as the
Federal Reserve fought to revive a
slowing economy, which probably
entered the beginning of a
recession in the second
week of September. At this point,
all eyes are on consumers to see
whether they will save or spend the
tax cuts and the added cash from
mortgage refinancing. Though the
stock market of late suggests
otherwise, we feel the risk is for
a more protracted slowdown and
reliquefaction process. We would
still eschew credit risk and favor
the beneficiaries of a steep yield
curve. However, as we are nearer
to an inflection point, we prefer
to stay more liquid and keep our
concentration levels down. This
will allow greater flexibility as
events unfold. Flexibility may be
our and our companies' most
valuable asset over the next
several quarters.
1
We continue to owe you, our
shareholders, a debt of gratitude
as well. These are not easy days
to be an investor in equities. For
our part, we see a multitude of
opportunities in such volatile
markets. If ever there was a time
to run a small and flexible
portfolio within a large firm with
substantial resources, this is it.
We thank you for being there with
us.
Thank you for your trust in us.
Nicholas C. Adams
2
Portfolio of Investments as of September 30, 2001
(Unaudited) FIRST FINANCIAL FUND, INC.
------------------------------------------------------------
------------------------------------------------------------
Shares Description Value (Note 1)
------------------------------------------------------------
LONG-TERM INVESTMENTS--83.9%
COMMON STOCKS--82.6%
------------------------------------------------------------
Banks & Thrifts--44.6%
12,800 Abington Bancorp, Inc. $ 172,160
34,600 Algiers Bancorp, Inc. 301,020
129,200 Astoria Financial Corp. 7,656,392
703,250 Bay View Capital Corp. 4,922,750
125,300 Bostonfed Bancorp, Inc. 2,856,840
64,640 Broadway Financial Corp. 749,824
225,500 Capital Crossing Bank* 4,038,705
86,600 CBES Bancorp, Inc. 1,125,800
142,538 CCF Holding Co. 2,227,869
101,900 Commerce Bancorp, Inc. 6,929,200
118,000 Commercial Bank New York 3,858,600
60,000 Community Bank San Jose
California(a) 1,938,600
155,500 Community Financial Corp. 2,239,200
308,700 Connecticut Bancshares, Inc. 6,822,270
195,000 Dime Bancorp, Inc. 48,750
275,500 Downey Financial Corp. 12,157,815
370,486 Fidelity Federal Bancorp 1,352,274
64,380 Fifth Third Bancorp 3,958,082
29,000 First Financial Corp. 514,750
319,150 First Republic Bank 7,324,493
313,500 FirstFed America Bancorp, Inc. 5,454,900
252,000 FirstFed Bancorp, Inc. 1,638,000
39,600 Firstfed Financial Corp. 1,029,600
124,400 Golden State Bancorp, Inc. 3,781,761
291,400 Hawthorne Financial Corp.* 5,594,880
19,999 HFB Financial Corp. 241,588
50,000 Hibernia Corp. 817,500
19,500 Iberiabank Corp. 557,700
41,600 Lincoln Bancorp 640,640
42,000 M & T Bankcorp. 3,108,000
186,400 Macatawa Bank Corp. 3,112,880
33,300 Mercantile Bank Corp.* 547,785
219,600 MetroCorp Bancshares, Inc. 2,507,832
224,000 North Valley Bancorp 2,878,400
210,000 Northeast Pennsylvania Financial
Corp. 3,034,500
213,200 Pacific Century Financial Corp.* 4,982,484
102,900 Pacific Crest Capital, Inc. 1,924,230
341,660 Pacific Union Bank* 3,621,596
34,600 Peoples Financial Corp. 281,990
165,930 Perpetual Federal Savings Bank 2,522,136
345,000 Port Financial Corp. $ 8,238,600
94,900 PrivateBankcorp, Inc.* 1,508,910
317,300 Provident Financial Holdings, Inc.* 7,535,875
40,650 Redwood Financial, Inc.* 447,150
45,000 River Valley Bancorp 900,900
47,800 Rowan Bancorp, Inc.* 812,600
210,000 Southwest Bancorp, Inc. 3,213,000
32,500 St. Landry Financial Corp.(a)* 357,500
21,100 Team Financial, Inc. 173,864
345,800 Thistle Group Holdings Co.* 3,146,780
100,700 Unionbancal Corp. 3,407,688
172,000 Woronoco Bancorp, Inc.* 2,958,400
------------
152,175,063
------------
------------------------------------------------------------
Other Financial Intermediaries--21.3%
762,800 America First Mortgage Investments,
Inc. 6,750,780
125,600 American Home Mortgage Holdings,
Inc. 2,191,720
42,730 American International Group, Inc. 3,332,955
210,000 American Physicians Capital, Inc. 4,361,700
170,700 Annaly Mortgage Management, Inc. 2,466,615
167,500 Anthracite Capital, Inc. 1,742,000
574,200 Banner Central Finance Co. 717,750
157,500 E*Trade Group, Inc.* 952,875
42,000 Fannie Mae 3,362,520
227,875 First Mortgage Corp.* 820,350
155,504 Fortress Investment Corp.(a) 2,897,040
430,053 Hanmi Financial Corp.* 5,848,721
272,590 Healthcare Financial Partners,
Inc.(a) 4,034,332
574,200 Hispanic Express, Inc. 677,556
128,200 IndyMac Bancorp, Inc. 3,475,502
161,600 Landamerica Financial Group, Inc. 5,373,200
72,500 Legg Mason, Inc. 2,882,600
570,200 Ocwen Financial Corp.* 4,111,142
401,600 RAIT Investment Trust 6,405,520
959,315 Resource America, Inc. 8,576,276
77,595 Vista Bancorp, Inc. 1,454,906
13,500 Willis Group Holdings Ltd.* 315,765
------------
72,751,825
------------
--------------------------------------------------------------------------------
See Notes to Financial Statements. 3
Portfolio of Investments as of September 30, 2001
(Unaudited) FIRST FINANCIAL FUND, INC.
------------------------------------------------------------
------------------------------------------------------------
Shares Description Value (Note 1)
------------------------------------------------------------
Rental Services--1.6%
242,200 Rental-A-Center, Inc. $ 5,631,150
------------
------------------------------------------------------------
Savings & Loan--15.1%
87,500 Brookline Bancorp, Inc. 1,312,500
71,800 Chesterfield Financial Corp.* 1,076,282
238,500 Citizens First Bancorp, Inc. 3,541,725
259,700 Fidelity Bankshares, Inc. 3,466,995
35,500 First Bell Bancorp, Inc. 518,300
170,000 First Federal Bancshares, Inc. 2,638,400
184,400 Floridafirst Bancorp, Inc. 3,081,324
294,000 Golden West Financial Corp. 17,081,400
146,900 Hudson City Bancorp, Inc. 3,510,910
357,300 Independence Community Bank Corp. 7,764,129
51,300 Ledger Capital Corp. 912,114
33,000 Northwest Bancorp, Inc. 330,330
100,000 Parkvale Financial Corp. 2,195,000
139,700 Quaker City Bancorp, Inc. 4,189,603
------------
51,619,012
------------
Total common stocks
(cost $242,432,683) 282,177,050
------------
Principal
Amount
(000)
------------------------------------------------------------
Convertible Bonds--1.3%
$ 5,000 E*Trade Group, Inc.,
6.75%, 5/15/08 3,893,750
1,000 Online Resources & Communications,
8.00%, 9/30/05 520,000
------------
Total convertible bonds
(cost $5,991,591) 4,413,750
------------
Total long-term investments
(cost $248,424,274) 286,590,800
------------
Principal
Amount
(000) Description Value (Note 1)
------------------------------------------------------------
SHORT-TERM INVESTMENTS--14.7%
Repurchase Agreement--14.7%
$ 49,489 Paribas Corp., 3.00 %, dated
9/28/2001, due 10/1/2001 in the
amount of $49,501,372 (cost
$49,489,000; collateralized by
$24,762,000 U.S. Treasury Notes,
6.50%, due 2/28/02, value of
collateral including interest
$25,254,399 and by 21,270,000 U.S.
Treasury Bonds, 9.125%, due
5/15/09, value of collateral
including interest-$25,217,321) $ 49,489,000
636 Paribas Corp., 3.25%, dated
9/28/2001, due 10/1/2001 in the
amount of $636,172 (cost $636,000;
collateralized by 647,000 U.S.
Treasury Bonds, 5.50%, due
8/15/28, value of collateral
including interest-$648,130) 636,000
------------
Total repurchase agreements
(cost $50,125,000) 50,125,000
------------
------------------------------------------------------------
Certificates of Deposit
2 Brookline Savings,
4.00%, 11/25/01 1,530
22 First Federal Savings Bank,
3.75%, 10/12/01 22,465
22 Naugatuck Valley Savings & Loan
Assoc.,
3.00%, 10/26/01 21,916
------------
Total certificates of deposit
(cost $45,911) 45,911
------------
Total short-term investments
(cost $50,170,911) 50,170,911
------------
------------------------------------------------------------
Total Investments--98.6%
(cost $298,595,185; Note 3) 336,761,711
Other assets in excess of
liabilities--1.4% 4,731,028
------------
Net Assets--100% $341,492,739
------------
------------
--------------
* Non-income producing security.
(a) Indicates a fair valued security.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 4
Statement of Assets and Liabilities (Unaudited) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
Assets September 30, 2001
Investments, at value (cost $248,470,185).............................................................. $286,636,711
Repurchase agreement, at value (cost $50,125,000)...................................................... 50,125,000
Cash................................................................................................... 694
Receivable for investments sold........................................................................ 4,988,212
Dividends and interest receivable...................................................................... 834,317
Other assets........................................................................................... 156,205
------------------
Total assets........................................................................................ 342,741,139
------------------
Liabilities
Advisory fee payable................................................................................... 555,181
Payable for investments purchased...................................................................... 418,535
Administration fee payable............................................................................. 123,992
Accrued expenses....................................................................................... 118,704
Deferred directors' fees............................................................................... 31,988
------------------
Total liabilities................................................................................... 1,248,400
------------------
Net Assets............................................................................................. $341,492,739
------------------
------------------
Net assets were comprised of:
Common stock, at par; 25,064,981 shares issued...................................................... $ 25,065
Paid-in capital in excess of par.................................................................... 278,076,064
Cost of 1,154,194 shares held in treasury........................................................... (12,475,875)
------------------
265,625,254
Undistributed net investment income................................................................. 4,316,048
Accumulated net realized gains...................................................................... 33,384,911
Net unrealized appreciation on investments.......................................................... 38,166,526
------------------
Net assets, September 30, 2001...................................................................... $341,492,739
------------------
------------------
Net asset value per share ($341,492,739 / 23,910,787 shares of common stock outstanding)............... $14.28
------------------
------------------
--------------------------------------------------------------------------------
See Notes to Financial Statements. 5
FIRST FINANCIAL FUND, INC.
Statement of Operations (Unaudited)
------------------------------------------------------------
Six Months
Ended
Net Investment Income September 30, 2001
Income
Dividends............................. $ 2,654,592
Interest.............................. 1,355,348
------------------
Total income....................... 4,009,940
------------------
Expenses
Investment advisory fee............... 1,095,837
Administration fee.................... 255,501
Legal fees and expenses............... 100,000
Commitment fees....................... 98,000
Reports to shareholders............... 65,000
Custodian's fees and expenses......... 38,000
Transfer agent's fees and expenses.... 17,000
Listing fees.......................... 14,000
Directors fees........................ 12,000
Audit fee............................. 10,000
Miscellaneous......................... 49,151
------------------
Total expenses..................... 1,754,489
------------------
Net investment income.................... 2,255,451
------------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain on investment
transactions.......................... 33,858,676
Net change in unrealized appreciation of
investments........................... (2,304,267)
------------------
Net gain on investments.................. 31,554,409
------------------
Net Increase in Net Assets
Resulting from Operations................ $ 33,809,860
------------------
------------------
FIRST FINANCIAL FUND, INC.
Statement of Changes in Net Assets (Unaudited)
------------------------------------------------------------
Six Months
Ended
September Year Ended
Increase in 30, March 31,
Net Assets 2001 2000
Operations
Net investment income....... $ 2,255,451 $ 3,434,275
Net realized gain on
investment
transactions............. 33,858,676 15,308,555
Net change in unrealized
appreciation of
investments.............. (2,304,267) 85,599,520
------------ ------------
Net increase in net assets
resulting from
operations............... 33,809,860 104,342,350
------------ ------------
Dividends and distributions (Note 1)
Dividends from net
investment income........ -- (2,462,878)
Cost of Fund shares
reacquired.................. (7,709,459) (1,148,855)
------------ ------------
Total increase................. 26,100,401 100,730,617
Net Assets
Beginning of period............ 315,392,338 214,661,721
------------ ------------
End of period(a)............... $341,492,739 $315,392,338
------------ ------------
------------ ------------
---------------
(a) Includes undistributed net
investment income of........ $ 4,316,048 $ 2,060,597
------------ ------------
--------------------------------------------------------------------------------
See Notes to Financial Statements. 6
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 investment company. The Fund's primary
investment objective is to achieve long-term capital appreciation with the
secondary objective of current income by investing in securities issued by
savings and banking institutions, mortgage banking institutions and their
holding companies. The ability of issuers of debt securities held by the Fund to
meet their obligations may be affected by economic developments in a specific
industry or region.
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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 for which market
quotations are not readily available will be valued at fair value as determined
in good faith by or under the direction of the Board of Directors of the Fund.
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.
All securities are valued as of 4:15 p.m., New York time.
Repurchase Agreement: In connection with repurchase agreement transactions with
financial institutions, it is the Fund's policy that its custodian take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transactions, including accrued interest.
To the extent that any repurchase transaction exceed one business day, the value
of the collateral is marked-to-market on a daily basis to ensure the adequacy of
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 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 meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.
Dividends and Distributions: The Fund expects to declare and pay dividends from
net investment income and any net capital gains, if any, annually. Dividends and
distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
------------------------------------------------------------
Note 2. Agreements
The Fund has agreements with Wellington Management Company, LLP (the 'Investment
Adviser') and with Prudential Investments LLC (the 'Administrator'), formerly
Prudential Investments Fund Management LLC. 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.
The Fund has entered into a credit agreement with an unaffiliated lender. The
maximum commitment under the agreement is $45 million. Interest on any such
borrowings will be at market rates. The Fund also pays a variable commitment fee
on the unused portion of the credit facility. The commitment fee is accrued
daily and paid quarterly. The expiration date of the credit agreement is April
29, 2002. The Fund did not borrow any amounts pursuant to the credit agreement
during the period ended September 30, 2001.
------------------------------------------------------------
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended September 30, 2001 were $173,584,391 and $165,900,154,
respectively.
--------------------------------------------------------------------------------
7
Notes to Financial Statements (Unaudited) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
The cost basis of the Fund's investments for federal income tax purposes,
including short-term investments, at September 30, 2001 was $298,668,101; and,
accordingly, net unrealized appreciation for federal income tax purposes was
$38,093,610 (gross unrealized appreciation--$47,957,782; gross unrealized
depreciation--$9,864,172).
------------------------------------------------------------
Note 4. Capital
There are 50 million shares of $.001 par value common stock authorized. Of the
25,064,981 shares issued as of September 30, 2001, the Investment Adviser owned
10,994 shares. During the year ended March 31, 2001, the Fund repurchased
104,094 of its own shares at a weighted average discount of 15.2%. During the
six months ended September 30, 2001, the Fund repurchased 613,900 of its own
shares at a weighted average discount of 14.8%.
------------------------------------------------------------
Note 5. Dividends
On November 28, 2001, the Board of Directors of the Fund declared dividends of
$.20, $.60 and $.85 per share from ordinary income, short-term capital gains and
long-term capital gains, respectively, payable December , 2001 to shareholders
of record as of December , 2001.
--------------------------------------------------------------------------------
8
Financial Highlights (Unaudited) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, ------------------------------------------------------------
2001 2001 2000 1999 1998 1997
------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............. $ 12.86 $ 8.72 $ 8.85 $ 18.94 $ 15.26 $ 13.71
------------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income............................ .10 .14 .12 .11 .14 .22
Net realized and unrealized gain (loss) on
investments................................... 1.27 4.09 (.20) (7.20) 6.84 4.84
------------- -------- -------- -------- -------- --------
Total from investment operations.............. 1.37 4.23 (.08) (7.09) 6.98 5.06
------------- -------- -------- -------- -------- --------
Less dividends and distributions
Dividends from net investment income............. -- (.10) (.08) (.05) (.14) (.21)
Distributions from net realized gains............ -- -- -- (2.59) (2.68) (3.36)
Distributions in excess of net realized gains.... -- -- -- (.45) (.63) --
------------- -------- -------- -------- -------- --------
Total dividends and distributions............. -- (.10) (.08) (3.09) (3.45) (3.57)
------------- -------- -------- -------- -------- --------
Increase resulting from Fund share repurchase.... .05 .01 .03 -- -- .06
Net change resulting from the issuance of Fund
shares........................................ -- -- -- .09 .15 --
------------- -------- -------- -------- -------- --------
Net asset value, end of period(a)................ $ 14.28 $ 12.86 $ 8.72 $ 8.85 $ 18.94 $ 15.26
------------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- --------
Market price per share, end of period(a)......... $ 11.88 $ 11.29 $ 7.8125 $ 7.3125 $ 20.813 $ 14.50
------------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN(b):...................... 5.23% 49.40% 7.93% (53.65)% 72.59% 42.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................. $ 341,424 $315,392 $214,662 $221,881 $387,852 $270,496
Average net assets (000)......................... $ 340,668 $258,156 $230,163 $296,740 $320,484 $238,967
Ratios to average net assets:
Expenses, before loan interest, commitment
fees and nonrecurring expenses............. .97%(c) 1.09% 1.06% .94% .91% 1.03%
Total expenses................................ 1.03%(c) 2.12% 2.20% 1.61% 1.25% 1.56%
Net investment income......................... 1.32%(c) 1.33% 1.33% .91% .82% 1.43%
Portfolio turnover rate.......................... 59% 85% 63% 65% 43% 70%
Total debt outstanding at end of period (000
omitted)...................................... $ -- $ -- $ 45,000 $ 45,000 $ 20,000 $ 18,400
Asset coverage per $1,000 of debt outstanding.... $ -- $ -- $ 5,768 $ 5,931 $ 20,393 $ 15,701
---------------
(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 period 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
Supplemental Proxy Information (Unaudited) FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
The annual meeting of shareholders of First Financial Fund, Inc. was held on
August 30, 2001 at the offices of Prudential Investments LLC, 100 Mulberry
Street, Newark, New Jersey. The meeting was held for the following purposes:
(1) To elect the following director to serve as follows:
Director Class Term Expiring
------------------------------- ------ ------------------------- ---------
Richard I. Barr III 3 years 2004
Directors whose term of office continued beyond this meeting are Eugene C. Dorsey, Robert E. LaBlanc, Thomas T. Mooney
and Clay T. Whitehead.
The results of the proxy solicitation on the above matter were as follows:
Director/Auditor Votes For Votes Against Votes Withheld Abstentions
---------------------------------- ----------- -------------- --------------- ------------
(1) Richard I. Barr 22,776,174 -- 483,084 --
Other Information FIRST FINANCIAL FUND, INC.
--------------------------------------------------------------------------------
Dividend Reinvestment Plan. Shareholders may elect to have all distributions of
dividends and capital gains automatically reinvested in Fund shares (Shares)
pursuant to the Fund's Dividend Reinvestment Plan (the Plan.) Shareholders who
do not participate in the Plan will normally receive all distributions in cash
paid by check in United States dollars mailed directly to the shareholders of
record (or if the shares are held in streetname or other nominee name, then to
the nominee) by the custodian, as dividend disbursing agent, unless the Fund
declares a distribution payable in shares, absent a shareholder's specific
election to receive cash. Shareholders who wish to participate in the Plan
should contact the Fund at (800) 451-6788.
State Street Bank and Trust Co. (the Plan Agent) serves as agent for the
shareholders in administering the Plan. After the Fund declares a dividend or a
capital gains distribution, if (1) the market price is lower than net asset
value, the participants in the Plan will receive the equivalent in Shares valued
at the market price determined as of the time of purchase (generally, following
the payment date of the dividend or distribution); or if (2) the market price of
Shares on the payment date of the dividend or distribution is equal to or
exceeds their net asset value, participants will be issued Shares at the higher
of net asset value or 95% of the market price. If the Fund declares a dividend
or other distribution payable only in cash and the net asset value exceeds the
market price of Shares on the valuation date, the Plan Agent will, as agent for
the participants, receive the cash payment and use it to buy Shares in the open
market. If, before the Plan Agent has completed its purchases, the market price
exceeds the net asset value per share, the Plan Agent will halt open-market
purchases of the Fund's shares for this purpose, and will request that the Fund
pay the remainder, if any, in the form of newly-issued shares. The Fund will not
issue Shares under the Plan below net asset value.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage commissions
charged with respect to shares issued directly by the Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. The automatic reinvestment of
dividends and distributions will not relieve participants of any federal income
tax that may be payable on such dividends or distributions.
The Fund reserves the right to amend or terminate the Plan upon 90 days' written
notice to shareholders of the Fund.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent or by telephone in accordance with specific procedures and will
receive certificates for whole Shares and cash for fractional Shares.
All correspondence concerning the Plan should be directed to the Plan Agent,
State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200.
--------------------------------------------------------------------------------
10
Directors
Eugene C. Dorsey
Robert E. LaBlanc
Richard I. Barr
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 and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Notice is hereby given in
accordance with Section 23(c) of
the Investment Company Act of 1940
that the Fund may purchase, from
time to time, shares of its common
stock at market prices.
The accompanying Financial
Statements as of 9/30/01 were not
audited and, accordingly, no
opinion is expressed on them.
The views expressed in this report
and the information about the
Fund's portfolio holdings are for
the period covered by this report
and are subject to change
thereafter.
This report is for stockholder
information. This is not a
prospectus intended for use in the
purchase or sale of Fund shares.
First Financial Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
For information call toll-free (800) 451-6788
320228109