<?xml version="1.0"?>
<ownershipDocument>

    <schemaVersion>X0203</schemaVersion>

    <documentType>3</documentType>

    <periodOfReport>2010-07-30</periodOfReport>

    <noSecuritiesOwned>0</noSecuritiesOwned>

    <issuer>
        <issuerCik>0001187520</issuerCik>
        <issuerName>DENALI FUND INC.</issuerName>
        <issuerTradingSymbol>DNY</issuerTradingSymbol>
    </issuer>

    <reportingOwner>
        <reportingOwnerId>
            <rptOwnerCik>0001498879</rptOwnerCik>
            <rptOwnerName>WELSH JENNIFER T</rptOwnerName>
        </reportingOwnerId>
        <reportingOwnerAddress>
            <rptOwnerStreet1>2344 SPRUCE STREET</rptOwnerStreet1>
            <rptOwnerStreet2>SUITE A</rptOwnerStreet2>
            <rptOwnerCity>BOULDER</rptOwnerCity>
            <rptOwnerState>CO</rptOwnerState>
            <rptOwnerZipCode>80302</rptOwnerZipCode>
            <rptOwnerStateDescription></rptOwnerStateDescription>
        </reportingOwnerAddress>
        <reportingOwnerRelationship>
            <isDirector>0</isDirector>
            <isOfficer>1</isOfficer>
            <isTenPercentOwner>0</isTenPercentOwner>
            <isOther>0</isOther>
            <officerTitle>Chief Compliance Officer</officerTitle>
        </reportingOwnerRelationship>
    </reportingOwner>

    <nonDerivativeTable>
        <nonDerivativeHolding>
            <securityTitle>
                <value>Common Stock</value>
            </securityTitle>
            <postTransactionAmounts>
                <sharesOwnedFollowingTransaction>
                    <value>0</value>
                </sharesOwnedFollowingTransaction>
            </postTransactionAmounts>
            <ownershipNature>
                <directOrIndirectOwnership>
                    <value>D</value>
                </directOrIndirectOwnership>
            </ownershipNature>
        </nonDerivativeHolding>
    </nonDerivativeTable>

    <ownerSignature>
        <signatureName>Jennifer T. Welsh</signatureName>
        <signatureDate>2010-08-18</signatureDate>
    </ownerSignature>
</ownershipDocument>
