UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-04605

First Opportunity Fund, Inc.

(Exact name of registrant as specified in charter)

2344 Spruce Street, Suite A, Boulder, CO 80302

(Address of principal executive offices) (Zip code)

Fund Administrative Services

2344 Spruce Street, Suite A

Boulder, CO 80302

(Name and address of agent for service)

Registrant’s telephone number, including area code: (303) 444-5483

Date of fiscal year end: March 31

Date of reporting period: June 30, 2010

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Item 1 – Schedule of Investments.

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Portfolio of Investments as of June 30, 2010 (Unaudited)

FIRST OPPORTUNITY FUND, INC.

Shares		Description		Value     (Note 1)
LONG TERM INVESTMENTS (87.3%)
DOMESTIC COMMON STOCKS (39.8%)
Agriculture (0.5%)
26,000		Altria Group, Inc.		$521,040
11,000		Philip Morris International, Inc.		504,240
				1,025,280
Banks & Thrifts (19.5%)
63,325		1st United Bancorp, Inc.*		466,072
54,790		Alliance Bankshares Corp.*		147,385
27,800		American River Bankshares*		207,666
8,440		Ameris Bancorp*		81,530
406,400		AmeriServ Financial, Inc.*		654,304
42,594		Bancorp Rhode Island, Inc.		1,115,963
30,289		Bank of Commerce Holdings		143,570
62,500		Bank of Virginia*		215,625
42,700		BCB Bancorp, Inc.		336,903
28,000		Bridge Capital Holdings*		254,800
5,800		Cambridge Bancorp		196,620
35,498		Carolina Trust Bank*		163,291
340,815		CCF Holding Co.*(a)		34,081
14,044		Central Valley Community Bancorp*		90,162
29,600		Central Valley Community Bancorp*(b)(g)		190,032
38,860		Centrue Financial Corp.		77,720
21,500		Citizens & Northern Corp.		230,050
60,000		Community Bank*(b)(c)(g)		3,711,600
56,800		The Connecticut Bank & Trust Co.*		333,984
212,670		East West Bancorp, Inc. (b)(g)		3,243,217
65,566		Eastern Virginia Bankshares, Inc.		426,835
4,085		Evans Bancorp, Inc.		51,675
97,200		FC Holdings, Inc.*(b)(c)(g)		29,160
4,300		First Advantage Bancorp		45,709
39,700		First American International*(b)(c)(g)		455,359
61,678		First California Financial Group, Inc.*		165,914
17,400		First Capital Bancorp, Inc.*		124,584
28,900		First Community Bancshares, Inc.		424,541
36,300		First Interstate Bancsystem, Inc.		570,999
558,729		First Republic Bank*(b)(c)(g)		8,380,942
144,200		First Security Group, Inc.		276,864
66,726		First Southern Bancorp, Inc. - Class B*(c)(g)		800,712
28,200		First State Bank*(b)(c)(g)		28,200
2,880		First Trust Bank*		17,280
193,261		Florida Capital Group*(b)(c)(g)		193,261
7,448		FNB Bancorp		67,032
155,800		Great Florida Bank - Class A*		115,292
15,300		Great Florida Bank - Class B*		1,530
66,000		Greater Hudson Bank N.A.*		290,400
228,000		Hampshire First Bank*(b)(g)		1,995,000
14,900		Heritage Financial Corp.*		223,053
199,918		Heritage Oaks Bancorp*(b)(g)		727,702
36,900		ICB Financial*		81,180
14,200		Katahdin Bankshares Corp.		215,130
126,100		Metro Bancorp, Inc.*		1,556,074
905,600		National Bancshares, Inc.*(b)(c)(g)		624,864
17,300		New England Bancshares, Inc.		133,037
4,000		North Dallas Bank & Trust Co.(c)(g)		170,440
30,400		Oak Ridge Financial Services, Inc.*		156,560
1,900		Old Point Financial Corp.		24,738
44,800		OmniAmerican Bancorp, Inc.*		505,792
24,000		Pacific Continental Corp.		227,280
29,700		Parkway Bank*		23,760
12,500		Peoples Bancorp, Inc.		181,250
162,590		Pilot Bancshares, Inc.*(c)(g)		406,475

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1,058,661		Popular, Inc.*		2,837,212
190,540		Republic First Bancorp, Inc.*		371,553
370,345		Seacoast Banking Corp.* (b)(c)(g)		492,559
4,500		Shore Bancshares, Inc.		53,595
69,269		Southern First Bancshares, Inc.*		448,863
79,900		Southern National Bancorp of Virginia, Inc.*		584,069
302,900		Square 1 Financial, Inc.*(b)(c)(g)		1,559,935
73,100		State Bancorp, Inc.		694,450
63,158		Sterling Banks, Inc.*		152,842
9,960		Tower Bancorp, Inc.		218,024
39,164		Valley Commerce Bancorp*		234,984
19,087		Wainwright Bank & Trust Co.		355,973
97,400		Wells Fargo & Co.		2,493,440
238,000		Western Liberty Bancorp*		1,796,900
12,404		Xenith Bankshares, Inc.*		80,626
				43,988,224
Diversified Financial Services (2.5%)
16,241		Affinity Financial Corp.*(b)(c)(g)		0
100,033		Center Financial Corp.*(b)(g)		515,170
25,000		CMET Finance Holding*(c)(d)(g)		830,000
276,300		Highland Financial Partners LP*(c)(d)(g)		0
60,000		Independence Financial Group, Inc.*(b)(c)(g)		282,000
70,215		Mackinac Financial Corp.*		456,397
431,640		Muni Funding Co. of America, LLC*(c)(d)(g)		1,057,518
161,835		Ocwen Financial Corp.*		1,649,099
455,100		Ocwen Structured Investments, LLC*(b)(c)(g)		518,814
349,967		Terra Nova Financial Group*		318,470
				5,627,468
Insurance (3.3%)
241,100		Amtrust Financial Services, Inc.		2,902,844
13,119		Forethought Financial Group, Inc. - Class A*(b)(c)(g)		2,762,861
93,403		Penn Millers Holding Corp.*		1,232,920
179,400		The PMI Group, Inc.*		518,466
				7,417,091
Mining (0.4%)
13,100		Barrick Gold Corp.		594,871
5,800		Freeport-McMoRan Copper & Gold, Inc.		342,954
				937,825
Mortgages & REITS (1.3%)
55,000		Embarcadero Bank*(b)(c)(g)		537,900
155,504		Newcastle Investment Holdings Corp., REIT*(c)(g)		292,348
52,500		Two Harbors Investment Corp.		433,125
87,900		Verde Realty*(b)(c)(g)		1,720,203
				2,983,576
Registered Investment Companies (0.4%)
40,000		Cohen & Steers Infrastructure Fund, Inc.		506,000
42,000		THL Credit, Inc.*		483,000
				989,000
Retail (0.5%)
20,000		Walgreen Co.		534,000
10,000		Wal-Mart Stores, Inc.		480,700
				1,014,700
Savings & Loans (10.9%)
56,001		Abington Bancorp, Inc.		488,329
34,100		Appalachian Bancshares, Inc.*		682
10,000		Auburn Bancorp, Inc.*(c)(g)		75,000
113,600		Beacon Federal Bancorp, Inc.		995,136
14,400		BofI Holding, Inc.*		203,328
96,980		Broadway Financial Corp.(a)		169,715
45,100		Carver Bancorp, Inc.		362,153
61,300		Central Federal Corp.*		95,015
54,346		CFS Bancorp, Inc.		264,122
14,015		Charter Financial Corp.		138,748
14,300		Citizens Community Bank*		66,495
80,444		Citizens South Banking Corp.*(b)(g)		418,311
1,399		Colonial Bankshares, Inc.*		13,095
33,500		Eagle Bancorp		329,975
20,200		ECB Bancorp, Inc.		235,734
30,491		ESSA Bancorp, Inc.		375,344

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32,500		Fidelity Federal Bancorp*(c)(g)		387,075
19,238		First Community Bank Corp. of America*		35,783
18,128		Fox Chase Bancorp, Inc.*		173,488
43,400		Georgetown Bancorp, Inc.*		207,452
222,900		Hampden Bancorp, Inc.		2,117,550
22,030		HF Financial Corp.		215,894
47,216		Home Bancorp, Inc.*		609,558
88,948		Home Federal Bancorp, Inc.		1,123,413
58,100		Jefferson Bancshares, Inc.		230,657
35,500		Legacy Bancorp, Inc.		313,110
42,000		Liberty Bancorp, Inc.		386,400
98,012		LSB Corp.		1,190,846
22,600		Malvern Federal Bancorp, Inc.		188,936
59,299		Meridian Interstate Bancorp, Inc.*		646,359
310,300		MidCountry Financial Corp.*(b)(c)(g)		1,241,200
600		Naugatuck Valley Financial Corp.		3,750
113,200		Newport Bancorp, Inc.*		1,378,776
106,998		Ocean Shore Holding Co.		1,110,639
39,000		OceanFirst Financial Corp.		470,730
29,100		Old Line Bancshares, Inc.		217,377
3,450		Oritani Financial Corp.		34,500
82,800		Osage Bancshares, Inc.		579,600
191,410		Pacific Premier Bancorp, Inc.*		802,008
165,930		Perpetual Federal Savings Bank(a)		2,074,125
17,500		Privee, LLC*(b)(c)(g)		0
52,700		Provident Financial Holdings, Inc.		252,960
40,650		Redwood Financial, Inc.*(a)		518,287
89,993		River Valley Bancorp(a)		1,143,811
12,400		Rockville Financial, Inc.		147,684
16,800		Rome Bancorp, Inc.		156,072
6,300		Royal Financial, Inc.*		8,190
308,740		SI Financial Group, Inc.		1,852,440
13,200		Sound Financial, Inc.		66,000
100,000		Sterling Eagle*(c)(g)		0
110,500		Third Century Bancorp*(a)		442,000
				24,557,852
Trucking & Leasing (0.5%)
121,082		Willis Lease Finance Corp.*		1,116,376
TOTAL DOMESTIC COMMON STOCKS
(Cost $134,549,078)				89,657,392
FOREIGN COMMON STOCKS (12.0%)
Australia (0.4%)
321,916		CGA Mining, Ltd.*(b)(g)		604,793
143,826		CGA Mining, Ltd.*		270,210
				875,003
Bermuda (0.6%)
92,330		Assured Guaranty, Ltd.		1,225,219
112,000		Majestic Capital, Ltd.*		30,240
36,500		RAM Holdings, Ltd.*		21,900
				1,277,359
Brazil (0.3%)
117,000		Banco Panamericano S.A.		554,211
Canada (0.3%)
9,600		Genworth MI Canada, Inc.		209,396
37,300		Sino-Forest Corp.*		530,129
				739,525
Cayman Islands (0.4%)
1,414,100		Fantasia Holdings Group Co., Ltd.		237,896
70,457		Phoenix Group Holdings		676,344
				914,240
Denmark (0.4%)
5,490		Gronlandsbanken*		383,031
7,378		Spar Nord Bank A/S*		70,854
19,324		Sydbank A/S*		395,898
				849,783

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India (6.7%)
45,582		Axis Bank, Ltd.		1,219,315
16,714		Bajaj Auto, Ltd.		895,204
43,173		Educomp Solutions, Ltd.		495,032
14,934		Financial Technologies India, Ltd.		430,062
132,495		Jindal Saw, Ltd.*		574,539
221,163		Karnataka Bank, Ltd.		845,462
80,902		Kotak Mahindra Bank, Ltd.		1,342,909
186,456		Magma Fincorp, Ltd.		1,170,845
693,370		Manappuram General Finance & Leasing, Ltd.		1,078,609
20,659		Maruti Suzuki India, Ltd.		633,292
17,776		NSE India, Ltd.*(b)(c)(g)		1,454,382
53,608		Reliance Infrastructure, Ltd.		1,386,225
200,259		Shriram Transport Finance Co., Ltd.		2,485,290
66,094		Tata Motors, Ltd.		1,107,852
				15,119,018
Japan (0.5%)
257		Osaka Securities Exchange Co., Ltd.		1,097,297
Pakistan (0.3%)
299,213		Engro Corp., Ltd.		607,277
Puerto Rico (0.4%)
72,800		Oriental Financial Group, Inc.		921,648
Singapore (0.0%)(e)
111,400		ARA Asset Management, Ltd.		85,980
South Korea (0.2%)
51,660		Tong Yang Life Insurance		543,249
Switzerland (1.5%)
137,350		UBS AG*		1,842,632
8,447		Valiant Holding AG		1,576,000
				3,418,632
United Kingdom (0.0%)(e)
8,218		African Barrick Gold, Ltd.*		77,907
TOTAL FOREIGN COMMON STOCKS         (Cost $30,979,756)				27,081,129
LIMITED PARTNERSHIPS (34.0%)
1		Bay Pond*(b)(c)(g)		38,275,500
1		Wolf Creek*(b)(c)(g)		38,236,000
				76,511,500
TOTAL LIMITED PARTNERSHIPS         (Cost $79,000,000)				76,511,500
DOMESTIC PREFERRED STOCKS (1.0%)
925		Doral Financial, 15.00%*(b)(c)(g)		475,158
1,600		Maiden Holdings, Ltd., Series C, 14.00%*(c)(d)(g)		1,736,000
				2,211,158
TOTAL DOMESTIC PREFERRED STOCK         (Cost $2,184,000)				2,211,158
DOMESTIC WARRANTS (0.1%)
195,000		Dime Bancorp, Inc., Litigation Tracking Warrant, strike price $0.00, Expires 12/26/50*		78,000
52,459		Flagstar Bancorp, Warrant, strike price $0.62, Expires 1/30/19* (c)(g)		97,920
6,559		Forethought Financial Group, Warrant, strike price $220.00, Expires 8/13/10* (b)(c)(g)		0
6,560		Forethought Financial Group, Warrant, strike price $220.00, Expires 11/13/10* (b)(c)(g)		0
233,333		Terra Nova Financial Group, Inc., Warrant, strike price $3.00, Expires 3/17/11* (b)(c)(g)		0
181,429		Washington Mutual, Inc., Warrant, strike price $10.06, Expires 4/11/13* (b)(c)(g)		13
				175,933
TOTAL DOMESTIC WARRANTS         (Cost $–)				175,933

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Par Value
DOMESTIC CORPORATE BONDS & NOTES (0.4%)
Banks (0.4%)
1,010,000		Susquehanna Capital II, 11.00%, due 3/23/40			1,040,300
TOTAL DOMESTIC CORPORATE BONDS & NOTES         (Cost $1,010,000)					1,040,300
TOTAL LONG TERM INVESTMENTS         (Cost $247,722,834)					196,677,412
SHORT TERM INVESTMENTS (13.4%)
Money Market Fund (13.4%)
30,194,850		Dreyfus Treasury Cash Management Money Market Fund, Institutional Class (7 day Yield 0.000%)(f)			30,194,850
TOTAL SHORT TERM INVESTMENTS         (Cost $30,194,850)					30,194,850
TOTAL INVESTMENTS (100.7%)         (Cost $277,917,684)					226,872,262
TOTAL LIABILITIES LESS OTHER ASSETS (-0.7%)					(1,648,969	)
TOTAL NET ASSETS (100.0%)				$	225,223,293

 

*	Non-income producing security.

(a)	Affiliated Company. See accompanying Notes to Quarterly Portfolio of Investments.

(b)	Private Placement; these securities may only be resold in transactions exempt from registration under the Securities Act of 1933. As of June 30, 2010, these exemptions had a total value of $108,674,136 or 48.3% of total net assets.

(c)	Indicates a fair valued security. Total market value for fair value securities is $106,833,399 representing 47.4% of total net assets.

(d)	Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended.

(e)	Less than 0.05% of total net assets.

(f)	Less than 0.0005%.

(g)	Indicates a security which is considered illiquid. Also see Note 5.

Common Abbreviations:

AG - Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders.

A/S - Aktieselskab is a Danish term for joint stock company

LLC - Limited Liability Company

LP - Limited Partnership

Ltd. - Limited

N.A.- National Association

REIT- Real Estate Investment Trust

S.A.- Generally designates corporations in various countries, mostly those employing the civil law. This translates literally in all languages mentioned as anonymous company

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of total net assets. These industry classifications are unaudited.

See accompanying Notes to Quarterly Portfolio of Investments.

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Notes to Quarterly Portfolio of Investments

June 30, 2010 (unaudited)

Note 1. Valuation and Investment Practices

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 on NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). Where market quotations are not readily available or where the pricing agent or market maker does not provide a valuation or methodology, or provides a valuation or methodology that, in the judgment of the adviser or sub-adviser, does not represent fair value (“Fair Value Securities”), securities are valued at fair value by a Pricing Committee appointed by the Board of Directors, in consultation with the adviser or sub-adviser. The Fund uses various valuation techniques that utilize both observable and unobservable inputs including multi-dimensional relational pricing model, option adjusted spread pricing, book value, last available trade, discounted future cash flow models, cost, and comparable company approach. In such circumstances, the adviser or sub-adviser makes an initial written recommendation to the Pricing Committee regarding valuation methodology for each Fair Value Security. Thereafter, the adviser or sub-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. 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. Due to the inherent uncertainty of the valuation of these investments, these values may differ from the values that would have been used had a ready market for these investments existed and the differences could be material.

The Portfolio of Investments include investments valued at $106,833,399 (47.4% of total net assets), whose fair values have been estimated by management in the absence of readily determinable fair values.

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.

The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Codification™ (“ASC”) and the Fund follows the provisions of ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). In accordance with ASC 820, fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. ASC 820 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions

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about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.

•   Level 1 – unadjusted quoted prices in active markets for identical investments

•   Level 2 – significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

•   Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The valuation techniques used by the Fund to measure fair value during the three months ended June 30, 2010 maximized the use of observable inputs and minimized the use of unobservable inputs. The Fund uses the value of investment securities, as of the end of each reporting period, in determining transfers in/out of Levels 1, 2 or 3.

The following is a summary of the inputs used as of June 30, 2010 in valuing the Fund’s investments carried at value:

 

Investments in Securities at Value		Level 1		Level 2		Level 3			Total
Domestic Common Stocks^		$56,181,231		$16,373,030		$	17,103,131		$89,657,392
Foreign Common Stocks^		25,021,954		604,793			1,454,382		27,081,129
Limited Partnerships		-		-			76,511,500		76,511,500
Domestic Preferred Stocks		-		-			2,211,158		2,211,158
Domestic Warrants		78,000		97,933			-		175,933
Domestic Corporate Bonds & Notes		-		1,040,300			-		1,040,300
Short Term Investments		30,194,850		-			-		30,194,850
TOTAL		$111,476,035		$18,116,056			$97,280,171		$226,872,262
Other Financial Instruments*		Level 1		Level 2		Level 3
Credit Default Swaps		-		$1,510,812			-		$1,510,812
TOTAL		-		$1,510,812			-		$1,510,812

^ For detailed descriptions of industry and/or geography classifications, see the accompanying Portfolio of Investments.

* Other financial instruments include swap contracts.

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:

 

Investments in Securities		Balance as of March 31, 2010		Realized gain/(loss)		Change in unrealized appreciation/ (depreciation)				Net purchases/ (sales)		Transfers in and/or out of Level 3		Balance as of June 30, 2010
Domestic Common Stocks		$16,978,622		$-		$(412,491)				$537,000		$		$17,103,131
Foreign Common Stocks		-		-		(62,887)				1,517,269		-		1,454,382
Limited Partnerships		-		-		(2,488,500)				79,000,000		-		76,511,500
Domestic Preferred Stocks		2,737,160		-		(310,002)				(216,000)		-		2,211,158
Domestic Warrants		-		-		(15)				-		15		-
TOTAL		$19,715,782		$-		$(3,273,895)				$80,838,269		$15		$97,280,171

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New Accounting Pronouncement: In January 2010, the FASB issued Accounting Standards Update “Improving Disclosures about Fair Value Measurements” (“ASU”). The ASU requires enhanced disclosures about a) transfers into and out of Levels 1 and 2, and b) purchases, sales, issuances, and settlements on a gross basis relating to Level 3 measurements. The first disclosure is effective for the first reporting period beginning after December 15, 2009, and for interim periods within those fiscal years. There were no significant transfers in to and out of Levels 1 and 2 during the current period presented.

The second disclosure will become effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Management is currently evaluating the impact this disclosure may have on the Fund’s financial statements.

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, or for certain foreign securities, when the information becomes available to the Fund. Interest income including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis, using the effective interest method.

Dividend income from investments in real estate investment trusts (“REITs”) is recorded at management’s estimate of income included in distributions received. Distributions received in excess of this amount are recorded as a reduction of the cost of investments. The actual amount of income and return of capital are determined by each REIT only after its fiscal year-end, and may differ from the estimated amounts. Such differences, if any, are recorded in the Fund’s following year.

Foreign Currency Translation: The Fund may invest a portion of its assets in foreign securities. In the event that the Fund executes a foreign security transaction, the Fund will generally enter into a forward foreign currency contract to settle the foreign security transaction. Foreign securities may carry more risk than U.S. securities, such as political, market and currency risks.

The books and records of the Fund are maintained in US dollars. Foreign currencies, investments and other assets and liabilities denominated in foreign currencies 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 transacted in foreign currencies are translated at the exchange rate on the dates of such transactions. Foreign currency gains and losses result from fluctuations in exchange rates between trade date and settlement date on 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.

Repurchase Agreements: The Fund may enter into 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 exceed 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. The value of the collateral at the time of the execution must be at least equal to 102% of the total amount of the repurchase obligations, including interest. 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. The Fund had no outstanding repurchase agreements as of June 30, 2010.

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Note 2. Unrealized Appreciation/(Depreciation)

On June 30, 2010, based on cost of $277,449,619 for federal income tax purposes, aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost was $13,519,059 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value was $64,096,416, resulting in net unrealized depreciation of $50,577,357.

Note 3. Transactions With Affiliated Companies

Transactions during the period with companies in which the Fund owned at least 5% of the voting securities were as follows:

 

Name of Affiliate		Beginning Share Balance as of 4/1/10		Purchases		Sales			Ending Share Balance as of 6/30/10		Dividend Income			Realized Gains (Losses)				Market Value
Broadway Financial Corporation		129,280		-		(32,300	)		96,980		$	1,293			(11,386	)		$	169,715
CCF Holding Company		340,815		-		-			340,815			-			-				34,081
Perpetual Federal Savings Bank		165,930		-		-			165,930			24,890			-				2,074,125
Redwood Financial, Inc.		40,650		-		-			40,650			-			-				518,287
River Valley Bancorp		89,993		-		-			89,993			18,899			-				1,143,811
Third Century Bancorp		110,500		-		-			110,500			-			-				442,000
TOTAL											$	45,082		$	(11,386	)		$	4,382,019

Note 4. Credit Default Swaps

The Fund may enter into credit default swap contracts for hedging purposes, to gain market exposure or to add leverage to its portfolio. When used for hedging purposes, the Fund would be the buyer of a credit default swap contract. In that case, the Fund would be entitled to receive the par (or other agreed-upon) value of a referenced debt obligation, index or other investment from the counterparty to the contract in the event of a default by a third party, such as a U.S. or foreign issuer, on the referenced debt obligation. In return, the Fund would pay to the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the Fund would have spent the stream of payments and received no benefit from the contract. When the Fund is the seller of a credit default swap contract, it receives the stream of payments but is obligated to pay upon default of the referenced debt obligation. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total assets, the Fund would be subject to investment exposure on the notional amount of the swap.

In addition to the risks applicable to derivatives generally, credit default swaps involve special risks because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation, as opposed to a credit downgrade or other indication of financial difficulty. Credit default swaps are marked to market periodically using quotations from pricing services. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of the swap agreement.

Credit default swap contracts entered into by the Fund as of June 30, 2010, were as follows:

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Swap Counterparty		Referenced Obligation		Notional Amount				Rates paid by Fund			Termination Date		Upfront Payment Received/(Paid)			Unrealized Gain/(Loss)
Credit Suisse First Boston Intl		Bank of India London		1,000,000		USD		1.00	%		6/20/15		20,427			32,473
Morgan Stanley		Barclays Bank		4,500,000		EUR		1.42	%		9/20/13		-			(13,977	)
Goldman Sachs		BNP Paribas		4,500,000		EUR		0.67	%		9/20/13		-			82,696
Credit Suisse First Boston Intl		Capital One Bank		1,000,000		USD		1.00	%		12/20/14		(10,425	)		6,289
Goldman Sachs		Commerzbank		4,500,000		EUR		0.88	%		9/20/13		-			26,699
Morgan Stanley		Credit Agricole		4,500,000		EUR		1.09	%		9/20/13		-			51,501
Morgan Stanley		DBR		25,000,000		USD		0.12	%		9/20/18		-			655,875
Goldman Sachs		EURO DB		3,400,000		EUR		0.88	%		9/20/13		-			45,211
Goldman Sachs		Export-Import Bank of India		1,000,000		USD		1.00	%		6/20/15		17,484			34,333
Morgan Stanley		Federative Republic Brazil		1,500,000		USD		1.00	%		3/20/15		33,334			(18,514	)
Morgan Stanley		IDBI Bank Limited		1,000,000		USD		1.00	%		6/20/15		14,470			31,341
Goldman Sachs		Intesa Sanpaolo		4,500,000		EUR		0.57	%		9/20/13		-			112,857
Morgan Stanley		Lloyds Bank		4,500,000		EUR		0.89	%		9/20/13		-			206,101
Morgan Stanley		NAIGS13V1-5Y		25,000,000		USD		1.00	%		12/20/14		50,653			55,347
Morgan Stanley		NAIGS13V1-5Y		25,000,000		USD		1.00	%		12/20/14		68,565			37,435
Morgan Stanley		Republic of Korea		3,000,000		USD		1.22	%		9/20/13		-			(8,809	)
Morgan Stanley		Royal Bank Scotland		4,500,000		EUR		1.37	%		9/20/13		-			98,519
Morgan Stanley		Societe Generale		4,500,000		EUR		1.01	%		9/20/13		-			44,508
Morgan Stanley		State Bank of India London		1,000,000		USD		1.00	%		6/20/15		14,470			30,927
TOTAL													$          208,978			$      1,510,812

Note 5. Illiquid Securities

As of June 30, 2010, investments in securities included issues that are considered illiquid. Illiquid securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and may be revalued under methods approved by the Board of Directors as reflecting fair value.

The Fund may invest, without limit, in illiquid securities. The Fund may not be able to readily dispose of such securities at prices that approximate those at which the Fund could sell such securities if they were more widely traded and, as a result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. Limited liquidity can also affect the market price of securities, thereby adversely affecting the Fund’s net asset value and ability to make dividend distributions.

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Illiquid securities as of June 30, 2010 are as follows:

 

Description		Acquisition Date		Cost					Market Value					Market Value as % of Net Assets
Affinity Financial Corp.		3/24/2005		$	1,000,000				$	-				0.0	%
Auburn Bancorp, Inc.		8/4/2008			100,000					75,000				0.0	%
Bay Pond		6/1/2010			39,500,000					38,275,500				17.0	%
CGA Mining, Ltd.		2/1/2010			664,149					604,793				0.3	%
Center Financial Corp.		12/29/2009			375,125					515,170				0.2	%
Central Valley Community Bancorp		12/22/2009			155,400					190,032				0.1	%
Citizens South Banking Corp.		3/11/2010			362,000					418,311				0.2	%
CMET Finance Holding		12/8/2003			2,500,000					830,000				0.4	%
Community Bank		2/12/2008			912,100					3,711,600				1.7	%
Doral Financial		4/19/10-5/3/10			584,000					475,158				0.2	%
East West Bancorp		11/3/2009			1,920,416					3,243,217				1.4	%
Embarcadero Bank		7/7/2006			550,000					537,900				0.2	%
FC Holdings, Inc.		1/5/2006			972,000					29,160				0.0	%
Fidelity Federal Bancorp		10/17/95-11/27/01			2,242,322					387,075				0.2	%
First American International		11/29/2005			1,052,050					455,359				0.2	%
First Republic Bank		10/21/2009-6/7/2010			8,380,935					8,380,942				3.7	%
First Southern Bancorp, Inc. - Class B		3/17/2005			1,634,787					800,712				0.4	%
First State Bank		11/21/2007			190,350					28,200				0.0	%
Flagstar Bancorp, Warrant, strike price $0.62, Expires 1/30/19		1/30/2009			-					97,920				0.0	%
Florida Capital Group		8/23/2006			2,203,175					193,261				0.1	%
Forethought Financial Group, Inc. - Class A		11/13/2009			2,623,800					2,762,861				1.2	%
Forethought Financial Group, Inc., Warrant, strike price $220.00, Expires 8/13/10		11/13/2009-12/31/2009			-					-				0.0	%
Forethought Financial Group, Inc., Warrant, strike price $220.00, Expires 11/13/10		11/13/2009-12/31/2009			-					-				0.0	%
Hampshire First Bank		10/31/2006			2,280,000					1,995,000				0.9	%
Heritage Oaks Bancorp		6/28/2006-3/10/2010			840,735					727,702				0.3	%
Highland Financial Partners LP		10/18/2006			4,558,950					-				0.0	%
Independence Financial Group, Inc.		9/13/2004			480,000					282,000				0.1	%
Maiden Holdings, Ltd., Series C		1/15/2009			1,600,000					1,736,000				0.8	%
MidCountry Financial Corp.		10/22/2004			4,654,500					1,241,200				0.6	%
Muni Funding Co. of America, LLC		6/4/07-7/10/09			2,058,848					1,057,518				0.5	%
National Bancshares, Inc.		6/6/2006			2,128,160					624,864				0.3	%
Newcastle Investment Holdings Corp., REIT		6/5/1998			562,924					292,348				0.1	%
North Dallas Bank & Trust Co.		12/12/07-3/13/08			237,478					170,440				0.1	%
NSE India, Ltd.		4/30/2010			1,517,269					1,454,382				0.6	%
Ocwen Structured Investments, LLC		3/20/07 - 8/27/07			1,547,340					518,814				0.2	%
Pilot Bancshares, Inc.		6/13/2005			2,114,992					406,475				0.2	%

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Privee, LLC		11/17/2004			2,362,500					-				0.0	%
Seacoast Banking Corp.		4/9/10-6/16/10			537,000					492,559				0.2	%
Square 1 Financial, Inc.		5/3/2005			3,029,000					1,559,935				0.7	%
Sterling Eagle		12/31/2002			1,000,000					-				0.0	%
Terra Nova Financial Group, Inc., Warrant, strike price $3.00, Expires 3/17/11		3/16/2006			-					-				0.0	%
Verde Realty		2/16/2007			2,900,700					1,720,203				0.8	%
Washington Mutual, Inc., Warrant, strike price $10.06, Expires 4/11/13		4/14/2008			-					13				0.0	%
Wolf Creek		6/1/2010			39,500,000					38,236,000				17.0	%
TOTAL				$	141,833,005				$	114,527,624				50.9	%

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Item 2 - Controls and Procedures.

 

(a)		The Registrant’s Principal Executive Officer and Principal Financial Officer concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 17 CFR 270.30a-3(c)) were effective as of a date within 90 days of the filing date of this report (the “Evaluation Date”), based on their evaluation of the effectiveness of the Registrant’s disclosure controls and procedures as of the Evaluation Date.
(b)		There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 Act (17 CFR 270.30a-3(d)) that occurred during the Registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 3 – Exhibits.

 

(a)		Certification of Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is attached hereto as Exhibit 99CERT.

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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 Opportunity Fund, Inc.

 

By:		/s/Stephen C. Miller
		Stephen C. Miller, President
		(Principal Executive Officer)
Date:		August 27, 2010

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:		/s/Stephen C. Miller
		Stephen C. Miller, President
		(Principal Executive Officer)
Date:		August 27, 2010

 

By:		/s/ Carl D. Johns
		Carl D. Johns, Vice President and Treasurer
		(Principal Financial Officer)
Date:		August 27, 2010