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, LLC

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, 2013

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Item 1 – Schedule of Investments.

The Schedule of Investments is included herewith.

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Consolidated Portfolio of Investments as of June 30, 2013 (Unaudited)

FIRST OPPORTUNITY FUND, INC.

 

Shares		Description		Value (Note 1)
LONG TERM INVESTMENTS (96.5%)
DOMESTIC COMMON STOCKS (54.5%)
Banks & Thrifts (11.8%)
29,289		Bank of Commerce Holdings			$147,617
35,498		Carolina Trust Bank*			87,325
43,644		Central Valley Community Bancorp			427,711
12,300		Citizens & Northern Corp.			237,636
60,000		Community Bank*(a)(b)(c)			5,986,800
77,436		Eastern Virginia Bankshares, Inc.*			387,180
39,700		First American International*(a)(b)(c)			829,333
116,276		First Capital Bancorp, Inc.*			395,338
66,726		First Southern Bancorp, Inc. - Class B*			310,276
193,261		Florida Capital Group*(a)(b)(c)			8,117
126,100		Metro Bancorp, Inc.*			2,525,783
905,600		National Bancshares, Inc.*(a)(b)(c)			370,662
4,000		North Dallas Bank & Trust Co.*			184,640
30,400		Oak Ridge Financial Services, Inc.*			124,032
1,900		Old Point Financial Corp.			24,700
44,300		OmniAmerican Bancorp, Inc.*			975,929
190,540		Republic First Bancorp, Inc.*			543,039
55,000		San Diego Private Bank*			577,500
92,195		Southern First Bancshares, Inc.*			996,628
79,900		Southern National Bancorp of Virginia, Inc.			781,422
302,900		Square 1 Financial, Inc.*(a)(b)(c)			2,453,490
62,746		Square 1 Financial, Inc. - Class A*(a)(b)(c)			508,243
41,122		Valley Commerce Bancorp			528,829
419,789		Wells Fargo & Co.			17,324,692
12,404		Xenith Bankshares, Inc.*			65,245
					36,802,167
Construction Machinery (0.9%)
35,200		Caterpillar, Inc.			2,903,648
Diversified Financial Services (6.4%)
60,000		Independence Financial Group, Inc.*(a)(b)(c)			540,600
303,800		JPMorgan Chase & Co.			16,037,602
125,890		Mackinac Financial Corp.			1,088,949
455,100		Ocwen Structured Investments, LLC*(a)(b)(c)			297,681
25,000		South Street Securities Holdings, Inc.*(a)(c)(d)			1,085,250
47,960		Tiptree Financial*(a)(c)(d)			939,536
					19,989,618
Environmental Control (0.3%)
30,000		Republic Services, Inc.			1,018,200
Healthcare Products & Services (2.5%)
91,800		Johnson & Johnson			7,881,948
Insurance (2.0%)
19,678		Forethought Financial Group, Inc. - Class A*(a)(b)(c)			6,246,191
Mining (3.8%)
425,300		Freeport-McMoRan Copper & Gold, Inc.			11,742,533

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Shares		Description		Value (Note 1)
Mortgages & REITS (0.0%)
155,504		Newcastle Investment Holdings Corp., REIT*(c)			$72,838
Oil & Gas (4.0%)
97,300		Chevron Corp.			11,514,482
30,000		Linn Energy LLC			995,400
					12,509,882
Pharmaceuticals (0.3%)
20,447		Merck & Co., Inc.			949,763
Pipelines (0.7%)
33,250		Enterprise Products Partners LP			2,066,487
Registered Investment Companies (RICs) (0.4%)
40,000		Cohen & Steers Infrastructure Fund, Inc.			755,600
18,727		RMR Real Estate Income Fund			377,349
					1,132,949
Retail (4.4%)
253,700		Kohl’s Corp.			12,814,387
10,000		Wal-Mart Stores, Inc.			744,900
					13,559,287
Savings & Loans (7.3%)
10,000		Auburn Bancorp, Inc.*			60,000
40,846		CFS Bancorp, Inc.			437,869
33,500		Eagle Bancorp			357,445
31,254		Georgetown Bancorp, Inc.			442,244
84,989		Hampden Bancorp, Inc.			1,267,186
22,030		HF Financial Corp.			286,831
47,216		Home Bancorp, Inc.*			873,496
88,948		Home Federal Bancorp, Inc.			1,133,198
42,000		Liberty Bancorp, Inc.			441,000
16,122		Malvern Bancorp, Inc.*			192,819
310,300		MidCountry Financial Corp.*(a)(b)(c)			3,770,145
11,314		Newport Bancorp, Inc.*			193,130
106,998		Ocean Shore Holding Co.			1,478,712
29,100		Old Line Bancshares, Inc.			383,829
168,810		Pacific Premier Bancorp, Inc.*			2,062,858
165,930		Perpetual Federal Savings Bank(e)			3,152,670
40,650		Redwood Financial, Inc.*(e)			693,082
89,993		River Valley Bancorp(e)			1,864,655
6,300		Royal Financial, Inc.*			30,870
273,079		SI Financial Group, Inc.			3,017,523
110,500		Third Century Bancorp*(e)			569,075
					22,708,637
Software & Services (3.5%)
57,000		International Business Machines Corp.			10,893,270
Technology, Hardware & Equipment (5.4%)
638,825		Cisco Systems, Inc.			15,529,836
23,000		Harris Corp.			1,132,750
					16,662,586
Tobacco Products (0.8%)
42,000		Altria Group, Inc.			1,469,580

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Shares		Description		Value (Note 1)
Tobacco Products (continued)
11,000		Philip Morris International, Inc.			$952,820
					2,422,400
TOTAL DOMESTIC COMMON STOCKS (Cost $151,763,362)					169,562,404
FOREIGN COMMON STOCKS (7.8%)
Banks & Thrifts (0.2%)
5,490		Gronlandsbanken AB			541,326
Insurance (0.4%)
6,700		Muenchener Rueckversicherungs AG			1,233,150
Iron/Steel (1.5%)
72,000		POSCO, ADR			4,685,760
National Stock Exchange (0.5%)
17,776		NSE India, Ltd.*(a)(b)(c)			1,420,578
Oil & Gas (0.7%)
18,000		Total SA, Sponsored ADR			876,600
30,200		Transocean, Ltd.			1,448,090
					2,324,690
Pharmaceuticals (3.8%)
24,000		Sanofi			2,487,283
180,300		Sanofi, ADR			9,287,253
					11,774,536
Real Estate (0.7%)
98,000		Cheung Kong Holdings, Ltd.			1,329,234
2,490,000		Midland Holdings, Ltd.			931,015
					2,260,249
TOTAL FOREIGN COMMON STOCKS (Cost $22,862,615)					24,240,289
DOMESTIC LIMITED PARTNERSHIPS (16.9%)
		Bay Pond Partners, LP*(a)(b)(c)			52,454,209
TOTAL DOMESTIC LIMITED PARTNERSHIPS (Cost $39,387,185)					52,454,209
FOREIGN LIMITED PARTNERSHIPS (16.7%)
		Wolf Creek Investors (Bermuda), LP, a Wellington Management Investors (Bermuda), Ltd. share class*(a)(b)(c)			51,824,841
TOTAL FOREIGN LIMITED PARTNERSHIPS (Cost $40,043,650)					51,824,841
DOMESTIC PREFERRED STOCKS (0.5%)
1,600		Maiden Holdings, Ltd., Series C, 14.00%*(a)(c)(d)			1,734,704
TOTAL DOMESTIC PREFERRED STOCKS (Cost $1,600,000)					1,734,704

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Shares		Description		Value (Note 1)
DOMESTIC WARRANTS (0.1%)
116,276		First Capital Bancorp, Inc., Warrant, strike price $1.00, Expires 2/8/2022*(c)			$110,009
26,230		Flagstar Bancorp, Warrant, strike price $10.00, Expires 1/30/2019*(c)			174,791
					284,800
TOTAL DOMESTIC WARRANTS (Cost $0)					284,800
TOTAL LONG TERM INVESTMENTS (Cost $255,656,812)					300,101,247
SHORT TERM INVESTMENTS (3.4%)
Money Market Funds (3.4%)
3,791,523		Dreyfus Treasury & Agency Cash Management Money Market Fund, Institutional Class (7 day Yield 0.010%)			3,791,523
6,900,000		JPMorgan Prime Money Market Fund (7 day Yield 0.065%)			6,900,000
TOTAL SHORT TERM INVESTMENTS (Cost $10,691,523)					10,691,523
TOTAL INVESTMENTS (99.9%) (Cost $266,348,335)					310,792,770
TOTAL OTHER ASSETS LESS LIABILITIES (0.1%)					167,567
TOTAL NET ASSETS (100.0%)					$310,960,337

 

*	Non-income producing security.

(a)	Indicates a security which is considered restricted. Also see Notes to Quarterly Consolidated 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, 2013, these securities had a total value of $126,710,890 or 40.75% of total net assets.

(c)	Fair valued security under procedures established by the Fund’s Board of Directors. Total value of fair valued securities as of June 30, 2013 was $130,828,018 or 42.07% of total net assets.

(d)	Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of June 30, 2013 these securities had a total value of $3,759,490 or 1.21% of total net assets.

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

Common Abbreviations:

AB - Aktiebolag is the Swedish equivalent of the term corporation

ADR - American Depositary Receipt

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

LLC - Limited Liability Company

LP - Limited Partnership

Ltd. - Limited

REIT - Real Estate Investment Trust

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

See accompanying Notes to Quarterly Consolidated Portfolio of Investments.

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Regional Breakdown as a % of Total Net Assets
United States			75.5
Bermuda			16.7
France			4.1
South Korea			1.5
Hong Kong			0.7
Switzerland			0.4
India			0.4
Germany			0.4
Denmark			0.2
Other Assets and Liabilities			0.1

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Notes to Quarterly Consolidated Portfolio of Investments

June 30, 2013 (Unaudited)

Note 1. Valuation and Investment Practices

Basis for Consolidation: The First Opportunity Fund, Inc. (the “Fund”) invests a significant portion of its investments (the “Hedge Fund Portfolio”) in private investment partnerships and similar investment vehicles, typically referred to as hedge funds (“Hedge Funds”). In addition, a portion of the Fund’s assets are invested primarily in equity securities issued by financial services companies (the “Legacy Portfolio”). The accompanying Consolidated Portfolio of Investments includes the investment positions of FOFI 1, Ltd. and FOFI 2, Ltd. (the “Subsidiaries”), each a wholly-owned subsidiary of the Fund, organized under the laws of the Cayman Islands. FOFI 1, Ltd. invests in Bay Pond Partners, LP, and FOFI 2, Ltd. contains cash and accruals for expenses related to the subsidiary. The Fund may invest up to 25% of its total assets in the Subsidiaries. The aggregated net assets of the Subsidiaries at June 30, 2013 were $52,384,265 or 16.8% of the Fund’s consolidated total net assets. The Consolidated Portfolio of Investments includes positions of the Fund and of the Subsidiaries. The Subsidiaries price their portfolio investments pursuant to the same pricing and valuation methodologies used by the Fund.

Securities Valuation: Equity securities for which market quotations are readily available (including securities listed on national securities exchanges and those traded over-the-counter) are valued based on the last sales price at the close of the applicable exchange. If such equity securities were not traded on the valuation date, but market quotations are readily available, they are valued at the bid price provided by an independent pricing service or by principal market makers. Equity securities traded on NASDAQ are valued at the NASDAQ Official Closing Price. Debt securities are valued at the mean between the closing bid and asked prices, or based on a matrix system which utilizes information (such as credit ratings, yields and maturities) from independent pricing services, principal market maker or other independent sources. 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 Fund’s Board of Directors (the “Board”) has delegated to the advisers, through approval of the appointment of the members of the advisers’ Valuation Committee, the responsibility of determining fair value of any security or financial instrument owned by the Fund for which 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, does not represent fair value (“Fair Value Securities”). The advisers use a third party pricing consultant to assist the advisers in analyzing, developing, applying and documenting a methodology with respect to certain Fair Value Securities. The advisers and their valuation consultant, as appropriate, use valuation techniques that utilize both observable and unobservable inputs including discount for lack of marketability, price to tangible book value multiple, transaction price, book value multiple, discount, spread, and price to earnings multiple. In such circumstances, the advisers are responsible for (i) identifying Fair Value Securities, (ii) analyzing the Fair Value Security and developing, applying and documenting a methodology for valuing Fair Value Securities, and (iii) periodically reviewing the appropriateness and accuracy of the methods used in valuing Fair Value Securities. The appointment of any officer or employee of the advisers to the Valuation Committee shall be promptly reported to the Board and ratified by the Board at its next regularly scheduled meeting. The advisers are responsible for reporting to the Board, on a quarterly basis, valuations and certain findings with respect to the Fair Value Securities. Such valuations and findings are reviewed by the entire Board on a quarterly basis.

The Fund’s investments in Hedge Funds are valued, as a practical expedient, at the most recent estimated net asset value periodically determined by the respective Hedge Fund manager according to such manager’s policies and procedures based on valuation information reasonably available to the Hedge Fund manager at that time (adjusted for estimated expenses and fees accrued to the Fund since the last valuation date); provided, however,

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that the advisers may consider whether it is appropriate, in light of relevant circumstances, to adjust such valuation in accordance with the Fund’s valuation procedures. If a Hedge Fund does not report a value to the Fund on a timely basis, the fair value of such Hedge Fund shall be based on the most recent value reported by the Hedge Fund, as well as any other relevant information available at the time the Fund values its portfolio. As a practical matter, Hedge Fund valuations generally can be obtained from Hedge Fund managers on a weekly basis, as of close of business Thursday, but the frequency and timing of receiving valuations for Hedge Fund investments is subject to change at any time, without notice to investors, at the discretion of the Hedge Fund manager or the Fund.

The Consolidated Portfolio of Investments includes investments valued at $130,828,018 (42.07% of total net assets), whose fair values have been estimated by management in the absence of readily determinable fair values. 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.

For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the Fund determines that developments between the close of a foreign market and the close of the New York Stock Exchange (“NYSE”) will, in its judgment, materially affect the value of some or all of its portfolio securities, the Fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. The Fund may also fair value securities in other situations, such as when a particular foreign market is closed but the U.S. market is open. The Fund uses outside pricing services to provide it with closing prices. The advisers may consider whether it is appropriate, in light of relevant circumstances, to adjust such valuation in accordance with the Fund’s valuation procedures. The Fund cannot predict how often it will use closing prices and how often it will determine it necessary to adjust those prices to reflect fair value. If the Fund uses adjusted prices, the Fund will periodically compare closing prices, the next day’s opening prices in the same markets and those adjusted prices as a means of evaluating its security valuation process.

Various inputs are used to determine the value of the Fund’s investments. Observable inputs are inputs that reflect the assumptions market participants would use based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions based on the best information available in the circumstances.

These inputs are summarized in the three broad levels listed below.

 

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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 following is a summary of the inputs used as of June 30, 2013 in valuing the Fund’s investments carried at value:

 

		Valuation Inputs
Investments in Securities at Value		Level 1				Level 2				Level 3				Total
Banks & Thrifts		$	25,354,553			$	1,290,969			$	10,156,645			$	36,802,167

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Construction Machinery			2,903,648				–				–				2,903,648
Diversified Financial Services			17,126,551				–				2,863,067				19,989,618
Environmental Control			1,018,200				–				–				1,018,200
Healthcare Products & Services			7,881,948				–				–				7,881,948
Insurance			–				–				6,246,191				6,246,191
Mining			11,742,533				–				–				11,742,533
Mortgages & REITS			–				–				72,838				72,838
Oil & Gas			12,509,882				–				–				12,509,882
Pharmaceuticals			949,763				–				–				949,763
Pipelines			2,066,487				–				–				2,066,487
Registered Investment Companies (RICs)			1,132,949				–				–				1,132,949
Retail			13,559,287				–				–				13,559,287
Savings & Loans			12,158,010				6,780,482				3,770,145				22,708,637
Software & Services			10,893,270				–				–				10,893,270
Technology, Hardware & Equipment			16,662,586				–				–				16,662,586
Tobacco Products			2,422,400				–				–				2,422,400
Domestic Common Stocks			138,382,067				8,071,451				23,108,886				169,562,404
Banks & Thrifts			541,326				–				–				541,326
Insurance			1,233,150				–				–				1,233,150
Iron/Steel			4,685,760				–				–				4,685,760
National Stock Exchange			–				–				1,420,578				1,420,578
Oil & Gas			2,324,690				–				–				2,324,690
Pharmaceuticals			11,774,536				–				–				11,774,536
Real Estate			2,260,249				–				–				2,260,249
Foreign Common Stocks			22,819,711				–				1,420,578				24,240,289
Domestic Limited Partnerships			–				–				52,454,209				52,454,209
Foreign Limited Partnerships			–				–				51,824,841				51,824,841
Domestic Preferred Stocks			–				–				1,734,704				1,734,704
Domestic Warrants			–				284,800				–				284,800
Short Term Investments			10,691,523				–				–				10,691,523
TOTAL			$171,893,301				$8,356,251				$130,543,218				$310,792,770

The Fund evaluates transfers into or out of Level 1, 2 and 3 as of the end of the reporting period. Financial assets were transferred from Level 1 to Level 2 since certain equity prices used a bid price from a data provider at the end of the period and a last quoted sales price from a data provider at the beginning of the period. Financial assets were transferred from Level 2 to Level 1 since certain equity prices used a last sales price from a data provider at the end of the period and a bid price from a data provider at the beginning of the period.

Transfers into and out of Levels 1 and 2 at June 30, 2013 were as follows:

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		Level 1 - Quoted and Unadjusted Prices				Level 2 -  Other Significant Observable Inputs
		Transfers In		Transfers (Out)		Transfers In		Transfers (Out)
Common Stocks		$        124,032		$        (1,864,655)		$        1,864,655		$         (124,032)
Total		$        124,032		$        (1,864,655)		$        1,864,655		$         (124,032)

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, 2013		Realized loss		Change in unrealized appreciation/ (depreciation)		Sales proceeds		Transfer into Level 3		Balance as of June 30, 2013
Domestic Common Stocks		$ 22,311,336		$ (139)		$ 830,072		$ (32,383)		$ -		$ 23,108,886
Foreign Common Stocks		1,615,421		-		(194,843)		-		-		1,420,578
Domestic Limited Partnership		50,791,303		-		1,662,906		-		-		52,454,209
Foreign Limited Partnerships		50,792,985		-		1,031,856		-		-		51,824,841
Domestic Preferred Stocks		1,777,824		-		(43,120)		-		-		1,734,704
Total		$ 127,288,869		$ (139)		$ 3,286,871		$ (32,383)		$ -		$ 130,543,218

The table below provides additional information about the Level 3 Fair Value Measurements as of June 30, 2013:

 

Quantitative Information about Level 3 Fair Value Measurements
Asset Class		Fair Value (USD)		Valuation Technique		Unobservable Inputs(a)		Range
Domestic Common Stocks:
Banks & Thrifts		$9,785,983		Comparable Company Approach		Discount for lack of marketability		10%
						Price to Tangible Book Value Multiple		.83x-1.36x
		$370,662		Direct Offering Price Approach		Transaction Price		$0.41
Diversified Financial Services		$1,625,850		Comparable Company Approach		Discount for lack of marketability		10%
						Price to Tangible Book		1.12x-1.22x

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						Value Multiple
		$1,237,217		Book Value Approach		Book Value Multiple		1.00x
Insurance		$6,246,191		Comparable Company Approach		Discount for lack of marketability		10%
						Price to Tangible Book Value Multiple		.81x
Mortgages & REITS		$72,838		Book Value Approach		Book Value Multiple		1.00x
Savings & Loans		$3,770,145		Comparable Company Approach		Discount for lack of marketability		10%
						Price to Tangible Book Value Multiple		1.24x
Domestic Preferred Stocks:		$1,734,704		Comparable Security Approach		Spread		3.5%
Foreign Common Stocks:
National Stock Exchange		$1,420,578		Comparable Company Approach		Discount for lack of marketability		10%
						Price to Earnings Multiple		27.70x

 

(a)

A change to the unobservable input may result in a significant change to the value of the investment as follows:

 

Unobservable Input		Impact to Value if Input Increases		Impact to Value if Input Decreases
Discount for Lack of Marketability		Decrease		Increase
Price to Tangible Book Value Multiple		Increase		Decrease
Transaction Price		Increase		Decrease
Book Value Multiple		Increase		Decrease
Discount		Decrease		Increase
Spread		Decrease		Increase
Price to Earnings Multiple		Increase		Decrease

Securities Transactions and Investment Income: Securities transactions are recorded as of the trade date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividend income is recorded as of 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 interest method.

Foreign Currency Translations: 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. See Foreign Issuer Risk below.

The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities denominated in foreign currencies are translated into U.S. 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

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securities transactions, foreign currency transactions and the difference between amounts of foreign interest and dividends recorded on the books of the Fund and the amounts actually received.

Foreign Issuer Risk: Investment in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. These risks may include, but are not limited to: (i) less information about non-U.S. issuers or markets may be available due to less rigorous disclosure, accounting standards or regulatory practices; (ii) many non-U.S. markets are smaller, less liquid and more volatile thus, in a changing market, the adviser may not be able to sell the Fund’s portfolio securities at times, in amounts and at prices they consider reasonable; (iii) currency exchange rates or controls may adversely affect the value of the Fund’s investments; (iv) the economies of non-U.S. countries may grow at slower rates than expected or may experience downturns or recessions; and, (v) withholdings and other non-U.S. taxes may decrease the Fund’s return.

Concentration Risk: The Fund has highly concentrated positions in certain Hedge Funds and may take concentrated positions in other securities. Concentrating investments in a fewer number of securities (including investments in Hedge Funds) may involve a degree of risk that is greater than a fund which has less concentrated investments spread out over a greater number of securities. For example, the value of the Fund’s net assets will fluctuate significantly based on the fluctuation in the value of the Hedge Funds in which it invests. In addition, investments in Hedge Funds can be highly volatile and may subject investors to heightened risk and higher operating expenses than another closed-end fund with a different investment focus.

Hedge Fund Risk: The Fund invests a significant portion of its assets in Hedge Funds. The Fund’s investments in Hedge Funds are private entities that are not registered under the 1940 Act and have limited regulatory oversight and disclosure obligations. In addition, the Hedge Funds invest in and actively trade securities and other financial instruments using different strategies and investment techniques, which involve significant risks. These strategies and techniques may include, among others, leverage, employing various types of derivatives, short selling, securities lending, and commodities’ trading. These Hedge Funds may invest a high percentage of their assets in specific sectors of the market in order to achieve a potentially greater investment return. As a result, the Hedge Funds may be more susceptible to economic, political, and regulatory developments in a particular sector of the market, positive or negative, and may experience increased volatility. These and other risks associated with Hedge Funds may cause the Fund’s net asset value to be more volatile and more susceptible to the risk of loss than that of other funds with a different investment strategy.

Industry Diversification: The Fund may not invest more than 25% of its assets in any industry or group of industries. While the Advisers do not intend to invest more than 25% of the Fund’s assets in a single industry, the Fund does not look through its investments in the Hedge Funds, some of which have significant exposure to industries within the financial sector, to determine whether the Fund exceeds the 25% limit. As a result, the Fund may be indirectly concentrated in an industry or group of industries by virtue of the Fund’s investments in Hedge Funds.

Indemnifications: Like many other companies, the Fund’s organizational documents provide that its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, both in some of its principal service contracts and in the normal course of its business, the Fund enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Fund’s maximum exposure under these arrangements is unknown as this could involve future claims against the Fund.

Note 2. Unrealized Appreciation/ (Depreciation)

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On June 30, 2013, based on cost of $265,584,234 for federal income tax purposes, aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost was $68,242,080 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value was $23,033,544, resulting in net unrealized appreciation of $45,208,536.

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 04/01/13		Purchases		Sales		Ending Share Balance as of 06/30/13		Dividend Income		Realized Gains (Losses)		Value as of 06/30/13
Perpetual Federal Savings Bank		165,930		-		-		165,930		$  28,208		$ -		$    3,152,670
Redwood Financial, Inc.		40,650		-		-		40,650		-		-		693,082
River Valley Bancorp		89,993		-		-		89,993		18,899		-		1,864,655
Third Century Bancorp		110,500		-		-		110,500		-		-		569,075
TOTAL										$ 47,107		$ -		$    6,279,482

Note 4. Restricted Securities

As of June 30, 2013, investments in securities included issues that are considered restricted. Restricted 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 valued under methods approved by the Board as reflecting fair value.

Restricted securities as of June 30, 2013 are as follows:

 

Description		Acquisition Date		Cost		Market Value		Value as Percentage of Net Assets
Bay Pond Partners, LP		10/3/11		$39,387,185		$52,454,209		16.9%
Community Bank		2/12/08		912,100		5,986,800		1.9%
First American International		11/29/05		1,052,050		829,333		0.3%
Florida Capital Group		8/23/06		2,203,175		8,117		0.0%(a)
Forethought Financial Group, Inc. - Class A		11/13/09-9/30/10		4,066,780		6,246,191		2.0%
Independence Financial Group, Inc.		9/13/04		480,000		540,600		0.2%
Maiden Holdings, Ltd., Series C		1/15/09		1,600,000		1,734,704		0.5%
MidCountry Financial Corp.		10/22/04		4,654,500		3,770,145		1.2%
National Bancshares, Inc.		6/6/06		2,128,160		370,662		0.1%
NSE India, Ltd.		4/30/10		1,517,269		1,420,578		0.5%
Ocwen Structured Investments, LLC		3/20/07 - 8/27/07		1,399,433		297,681		0.1%
South Street Securities Holdings, Inc.		12/8/03		2,500,000		1,085,250		0.3%

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Square 1 Financial, Inc.		5/3/05		3,029,000		2,453,490		0.8%
Square 1 Financial, Inc.- Class A		11/7/12		431,379		508,243		0.2%
Tiptree Financial		6/4/07-7/10/09		2,058,848		939,536		0.3%
Wolf Creek Investors (Bermuda) LP, a Wellington Management Investors (Bermuda), Ltd. share class		10/3/11		40,043,650		51,824,841		16.7%
				$ 107,463,529		$ 130,470,380		42.0%

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

Note 5. Investments in Limited Partnerships

As of June 30, 2013, the Fund held investments in Hedge Funds that are organized as limited partnerships. The Fund’s investments in the Hedge Funds are reported on the Consolidated Portfolio of Investments under the sections titled Domestic Limited Partnerships and Foreign Limited Partnerships.

The Hedge Funds’ investment objectives are to seek long-term capital appreciation through investment primarily in equity and equity-related securities of companies that derive a major portion of profits or anticipated profits from the global financial services sector and related sectors.

Since the investments in limited partnerships are not publicly traded, the Fund’s ability to make withdrawals from its investments in the limited partnerships is subject to certain restrictions which vary for each respective limited partnership. These restrictions include notice requirements for withdrawals and additional restrictions or charges for withdrawals within a certain time period following initial investment. In addition, there could be circumstances in which such restrictions can include the suspension or delay in withdrawals from the respective limited partnership, or limited withdrawals allowable only during specified times during the year. In certain circumstances a limited partner may not make withdrawals that occur less than one year following the date of admission to the partnership. The following table summarizes the Fund’s investments in limited partnerships as of June 30, 2013:

 

Description

% of Net Assets as of 6/30/13

Value as of 6/30/13

Net Unrealized Gain/(Loss) as of 6/30/13

Mgmt fees

Incentive fees

Redemption Period/ Frequency

Bay Pond Partners, LP

16.9%

$52,454,209

$13,067,024

Annual rate of 1% of net assets

20% of net profits at the end of the fiscal year

June 30 or Dec 31 upon 45 days’ notice

Wolf Creek Investors (Bermuda) LP, a Wellington Management Investors (Bermuda), Ltd. share class

16.7%

51,824,841

11,781,191

Annual rate of 1% of net assets

20% of net profits at the end of the fiscal year

At the end of each calendar quarter upon 45 days’ notice

Total

33.6%

$104,279,050

$24,848,215

The Fund did not have any outstanding unfunded commitments as of June 30, 2013.

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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 (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 28, 2013

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 28, 2013

 

By:		Nicole L. Murphey
		Nicole L. Murphey, Chief Financial Officer, Chief Accounting Officer, Vice President, Treasurer, Asst. Secretary
		(Principal Financial Officer)
Date:		August 28, 2013