UNITED STAES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. __)

Filed by Registrant [ X ]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-12

THE DENALI FUND INC.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transactions applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act

Rule 0-11(a)(2) and identity the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:

[GRAPHIC OMITTED][GRAPHIC OMITTED] The Denali Fund Inc.
2344 SPRUCE STREET, SUITE A
BOULDER, COLORADO 80302

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on April 24, 2009

To the Stockholders:

The Annual Meeting of Stockholders (the "Meeting") of The Denali Fund Inc.,
a Maryland corporation (the "Fund"), will be held at the Arizona Biltmore Resort
& Spa, 2400 East Missouri Avenue, Phoenix, Arizona 85016 at 9:00 A.M. Mountain
Standard Time (local time), on April 24, 2009.

MATTERS TO BE VOTED ON BY ALL STOCKHOLDERS OF THE FUND:

1. The election of Directors of the Fund (Proposal 1);

2. To transact such other business as may properly come before the
Meeting or any adjournments thereof.

The Board of Directors of the Fund has fixed the close of business on
February 25, 2009, as the record date for the determination of stockholders of
the Fund entitled to notice of, and to vote at, the Meeting and any
postponements or adjournments thereof. The Proxy Statement, Notice of Annual
Meeting, and proxy card are first being mailed to stockholders on or about March
18, 2009.

By Order of the Board of Directors,

/s/ Stephanie Kelley

STEPHANIE KELLEY

Secretary

March 13, 2009

- --------------------------------------------------------------------------------
EVEN IF YOU PLAN TO ATTEND THE MEETING, STOCKHOLDERS ARE URGED TO SIGN THE
ENCLOSED PROXY CARD (UNLESS AUTHORIZING THEIR PROXY VIA TOUCH-TONE TELEPHONE OR
THROUGH THE INTERNET) AND MAIL IT IN THE ENCLOSED ENVELOPE SO AS TO ENSURE A
QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
- --------------------------------------------------------------------------------

INSTRUCTIONS FOR SIGNING PROXY CARDS

The following general rules for signing proxy cards may be of assistance to
you and may avoid the time and expense to the Fund involved in validating your
vote if you fail to sign your proxy card properly.

1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.

2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the registration.

3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:

Registration Valid Signature

Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp., c/o John Doe Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee

Trust Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee, u/t/d 12/28/78 Jane B. Doe

Custodian or Estate Accounts
(1) John B. Smith, Cust., John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr., Executor

[GRAPHIC OMITTED][GRAPHIC OMITTED] The Denali Fund Inc.
2344 SPRUCE STREET, SUITE A
BOULDER, COLORADO 80302

ANNUAL MEETING OF STOCKHOLDERS

April 24, 2009

PROXY STATEMENT

This proxy statement ("Proxy Statement") for The Denali Fund Inc., a
Maryland corporation ("DNY" or the "Fund"), is furnished in connection with the
solicitation of proxies by the Fund's board of directors (collectively, the
"Board" and individually, the "Directors") for use at the annual meeting of
stockholders of the Fund to be held on April 24, 2009, at 9:00 a.m. Mountain
Standard Time (local time), at the Arizona Biltmore Resort & Spa, 2400 East
Missouri Avenue, Phoenix, Arizona 85016, and at any adjournments and
postponements thereof (the "Meeting").

A Notice of Annual Meeting of Stockholders and proxy card accompany this
Proxy Statement. Proxy solicitations may be made, beginning on or about March
18, 2009, primarily by mail, but proxy solicitations may also be made by
telephone, by Internet on the Fund's website, email, or personal interviews
conducted by officers of the Fund and BNY Mellon Shareowner Services, the
transfer agent of the Fund. Any cost of proxy solicitation and expenses incurred
in connection with the preparation of this Proxy Statement and its enclosures
will be paid by the Fund. The Fund also will reimburse brokerage firms and
others for their expenses in forwarding solicitation material to the beneficial
owners of its shares. The Board has fixed the close of business on February 25,
2009 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Meeting and any
postponements or adjournments thereof.

The Fund provides Annual and Semi-Annual reports to stockholders.
Additional copies of the Fund's most recent Annual Report are available upon
request, without charge, by writing to The Denali Fund Inc., 2344 Spruce Street,
Suite A, Boulder, Colorado 80302 or by calling (877) 561-7914. The report is
also viewable online at the Fund's website at www.thedenalifund.com. The report
is not to be regarded as proxy solicitation material.

One Proxy Statement is being delivered to multiple stockholders sharing an
address, unless the Fund has received contrary instructions from one or more of
the stockholders. The Fund will undertake to deliver promptly, upon written or
oral request, a separate copy of the proxy statement to any stockholder who
contacts the Fund in writing, or by phone, as stated above. Similarly,
stockholders sharing an address can request single copies of a future proxy
statement or annual report by contacting the Fund in writing or by contacting
the Fund's transfer agent.

Boulder Investment Advisers, L.L.C. ("BIA"), 2344 Spruce Street, Suite A,
Boulder, Colorado 80302 and Stewart Investment Advisers (also known as Stewart
West Indies Trading Company, Ltd.) ("SIA"), Bellerive, Queen Street, St. Peter,
Barbados, currently serve as co-investment advisers to the Fund. BIA and SIA are
collectively referred to herein as the "Advisers." Fund Administrative Services,
L.L.C. ("FAS"), 2344 Spruce Street, Suite A, Boulder, Colorado 80302, and ALPS
Fund Services, Inc. ("ALPS"), 1290 Broadway, Suite 1100, Denver, Colorado 80203,
serve as co-administrators to the Fund. BNY Mellon Shareowner Services ("BNY
Mellon") acts as the transfer agent for the Fund and is located at P.O. Box
358015, Pittsburgh, PA 15252-8015. The Bank of New York Mellon ("BONYM") acts as
the auction agent for the Fund's preferred shares and is located at 706 Madison
Avenue, New York, NY 10021.

If the enclosed proxy is properly executed and returned by April 24, 2009
in time to be voted at the Meeting, the Shares represented thereby will be voted
in accordance with the instructions marked thereon. Unless instructions to the
contrary are marked thereon, a proxy will be voted FOR each Proposal and, in the
discretion of the proxy holders on any other matters that may properly come
before the Meeting. Any stockholder who has given a proxy has the right to
revoke it at any time prior to its exercise either by attending the Meeting and
casting his or her votes in person or by submitting a letter of revocation or a
later-dated proxy to the Fund's secretary at the above address prior to the date
of the Meeting.

The Fund has two classes of stock: common stock, par value $0.0001 per
share (the "Common Stock"), and preferred stock, par value $0.0001 per share
(the "Preferred Stock"). The Common Stock and Preferred Stock, respectively, are
collectively referred to herein as the "Shares". On the Record Date, the
following number of Shares of the Fund were issued and outstanding:

Common Stock Preferred Stock
Outstanding Outstanding
----------------- -------------------

4,157,117 1,680

A quorum of the Fund's stockholders is required for the conduct of business
at the Meeting. Under the Fund's bylaws, a quorum is constituted by the presence
in person or by proxy of the holders of a majority of the outstanding shares
(without regard to class) of the Fund as of the Record Date. In the event that a
quorum is not present at the Meeting (including a quorum of the Preferred Stock
with respect to the election of Directors to be elected separately by the
Preferred Stock), or in the event that a quorum is present but sufficient votes
to approve one or more proposals are not received, the Chairman of the Meeting
or the persons named as proxies may propose and vote for one or more
adjournments of the Meeting to permit further solicitation of proxies with
respect to any proposal that did not receive the votes necessary for its
passage. With respect to those proposals for which there is represented a
sufficient number of votes in favor, actions taken at the Meeting will be
approved and implemented irrespective of any adjournments with respect to any
other proposals. If submitted to Stockholders, any such adjournment will require
the affirmative vote of a majority of votes cast on the matter at the Meeting.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The following table sets forth
certain information regarding the beneficial ownership of the Shares as of the
Record Date by each person who may be deemed by the Fund to beneficially own 5%
or more of the Common Stock.

Number of Common Number of Common Percentage of Common
Shares Directly Shares Beneficially Shares Beneficially
Name of Owner Owned Owned Owned
- --------------------------------------- ------------------ ----------------------- ----------------------
- --------------------------------------- ------------------ ----------------------- ----------------------

Lola Brown Trust No. 1B* 3,010,495 3,010,495 72.42%
Alaska Trust Company* 0 0** 72.42%
Stewart West Indies Trust* 0 0** 72.42%
- --------------------------------------- ------------------ ----------------------- ----------------------
- --------------------------------------- ------------------ ----------------------- ----------------------
Aggregate Shares Owned by Horejsi 3,010,495 3,010,495 72.42%
Affiliates (defined below)+
- --------------------------------------- ------------------ ----------------------- ----------------------

* The address of each is c/o Alaska Trust Company, 1029 West 3rd Avenue,
Suite 400, Anchorage, AK 99503.

** Excludes shares owned by the Lola Brown Trust No. 1B (the "Trust"). Alaska
Trust Company ("ATC") serves as a co-trustee of the Trust. ATC is a trust
company organized under the laws of Alaska; 98% of its outstanding shares
are owned by Stewart West Indies Trust ("SWIT"), an irrevocable trust
organized by Stewart R. Horejsi for the benefit of his issue; Douglas J.
Blattmachr, President of ATC, owns 2% of the outstanding shares of ATC.
SWIT is also the sole owner of SIA, the Fund's co-adviser. The officers and
directors of ATC are Mr. Blattmachr (President and Director), Stephen C.
Miller (Vice President and Director), Brandon Cintula (Vice President and
Director), Larry L. Dunlap (Director) and Richard Thwaites
(Secretary/Treasurer and Director). ATC and its officers and directors
disclaim beneficial ownership of shares owned by the Trust. SWIT disclaims
beneficial ownership of shares owned by the Trust. Together with Mr. Dunlap
and ATC, Ms. Ciciora is a trustee of the Trust and also one of the
beneficiaries of the Trust. Because two of the Trust's trustees are
required in order for the Trust to vote or exercise dispositive authority
with respect to shares owned by the Trust, Ms. Ciciora and Mr. Dunlap each
disclaim beneficial ownership of such shares.

+ As stated in Schedule 13D Amendment No. 17 filed by the Trust with the
Securities and Exchange Commission on November 20, 2008.

The following table sets forth certain information regarding the beneficial
ownership of the Preferred Stock as of the Record Date by each person who may be
deemed by the Fund to beneficially own 5% or more of the Preferred Stock.

Number of Number of Preferred Percentage of
Preferred Shares Shares Beneficially Preferred Shares
Name of Owner Directly Owned Owned Beneficially Owned
- --------------------------------------- ------------------ ----------------------- ----------------------
- --------------------------------------- ------------------ ----------------------- ----------------------

Merrill Lynch, Pierce Fenner & Smith, 0 187 11.1%
Incorporated +
- --------------------------------------- ------------------ ----------------------- ----------------------

+ As stated in Schedule 13G filed with the Securities and Exchange Commission
on January 12, 2009.

For ease of reference, the Trust, ATC and SWIT, as well as other trusts and
entities associated with the Horejsi family, are collectively referred to as the
"Horejsi Affiliates." Information as to beneficial ownership above has been
obtained from a representative of the beneficial owners; all other information
as to beneficial ownership is based on reports filed with the Securities and
Exchange Commission (the "SEC") by such beneficial owners.

As of the Record Date, Cede & Co., a nominee partnership of the Depository
Trust Company, held of record, but not beneficially, 4,156,097 shares, or 99.98%
of Common Stock outstanding of the Fund and 1,680 shares, or 100% of Preferred
Stock outstanding.

As of the Record Date, the Trust, executive officers and directors of the
Fund, as a group, owned 3,014,195 shares of Common Stock and do not own any
Preferred Stock .

In order that your Shares may be represented at the Meeting, you are
requested to vote on the following matters:

PROPOSAL 1

ELECTION OF DIRECTORS OF THE FUND

The Board is divided into three classes (Class I, Class II, and Class III).
Holders of the outstanding Common Stock and Preferred Stock vote together as a
single class to elect one Class I Director, one Class II Director, and one Class
III Director. Holders of the Preferred Stock vote as a separate class to elect
one Class II Director and one Class III Director. One class of Directors is
normally elected at each annual meeting of the stockholders to serve a
three-year term. At the Annual Meeting of Stockholders held on October 26, 2007,
Dean L. Jacobson and Susan L. Ciciora were elected as Class III Directors with a
term set to expire in 2008. However, the Fund postponed its 2008 annual meeting
of stockholders until April 24, 2009. Accordingly, because no annual meeting of
stockholders was held during 2008 for the purpose of electing Class III
Directors to the Fund, the terms of Dr. Jacobson and Ms. Ciciora "carried over"
until the 2009 Annual Meeting of Stockholders. Therefore, it is necessary to
elect two Class III Directors, with terms to expire in two years (2011), as well
as one Class I Director, with a term to expire in 2012. No Class II Directors
are up for election at this Meeting. This will retain the characteristic of the
staggered Board of Directors such that the Class I Director will serve until his
successor is duly elected and qualified in 2012, the Class II Directors will
serve until their successors are duly elected and qualified in 2010, and the
Class III Directors will serve until their successors are duly elected and
qualified in 2011. Each Class of Directors serves a three-year term.

The Fund's annual meeting of stockholders in 2008 was postponed until April
24, 2009 so as to have its annual meeting coincide with two other closed-end
funds that are under common investment management and administration with the
Fund. The Fund hopes to achieve some cost savings for the stockholders in terms
of preparing, printing, and disseminating a proxy statement, legal and
administrative costs and the costs of hosting a stockholder meeting (i.e.,
facilities and equipment, etc.). Thus, the Fund should benefit on an ongoing
basis from this one-time "adjustment" of the meeting date to elect Directors.

The Board has nominated the following Director nominees to stand for
election and serve terms as follows:

----------------------------- ------------------------------
Class I Class III
2009-12 2009-11
----------------------------- ------------------------------
Susan L. Ciciora*+ X
Dean L. Jacobson X
Joel W. Looney X

----------------------------- ------------------------------
* "Interested" director as that term is defined in the Investment Company Act
of 1940, as amended.

+ This director is elected by the holders of Preferred Stock pursuant to the
Fund's Articles Supplementary.

Holders of the Common Stock and Preferred Stock as of the Record Date are
entitled to vote on the election of Messrs. Looney and Jacobson, and only the
Preferred Stock holders as of the Record Date are entitled to vote on the
election of Ms. Ciciora. The above nominees have consented to serve as Directors
if elected at the Meeting for the term as indicated above. If the designated
nominees decline or otherwise become unavailable for election, however, the
proxy confers discretionary power on the persons named therein to vote in favor
of a substitute nominee or nominees for the Board.

INFORMATION ABOUT DIRECTORS AND OFFICERS. Set forth in the following table
is information about the nominees for election to the Board of Directors:

- ------------------------------ ------------------------ ---------------------------------------------- --------------------
Position, Length of Number of Funds
Term Served, and Term Principal Occupation(s) and Other in Fund Complex+
Name, Address*, Age of Office Directorships Held During the Past Five Years Overseen by Director
- ------------------------------ ------------------------ ---------------------------------------------- --------------------
Independent Directors
- ------------------------------ ------------------------ ---------------------------------------------- --------------------

Joel W. Looney Class I Director and Partner (since 1999), Financial Management 4
Chairman of the Board Group, LLC (investment adviser); Director
Chairman of the Fund since (since 2001), Boulder Total Return Fund,
2007. Current Nominee Inc.; Director (since 2002) and Chairman
Age: 47 for a term to expire (since 2003), Boulder Growth & Income Fund,
at the 2012 annual Inc.; Director and Chairman (since 2003),
meeting. First Opportunity Fund, Inc.

Dr. Dean L. Jacobson Class III Director of Founder and President (since 1989,) 4
the Fund since 2007. Forensic Engineering, Inc. (engineering
Age: 70 Current Nominee for a investigations); Professor Emeritus (since
term to expire at the 1997), Arizona State University; Director
2011 annual meeting. (since 2004), Boulder Total Return Fund,
Inc.; Director (since 2003), First
Opportunity Fund, Inc.; Director (since
2006), Boulder Growth & Income Fund, Inc.

Richard I. Barr Class II Director of Retired (since 2001). Manager (1963-2001), 4
the Fund since 2007. Advantage Sales and Marketing, Inc. (food
Age: 71 Current term expires brokerage); Director (since 1999) and
at the 2010 annual Chairman (since 2003), Boulder Total Return
meeting. Fund, Inc.; Director (since 2001), First
Opportunity Fund, Inc.; Director (since
2002), Boulder Growth & Income Fund, Inc.

- ------------------------------ ------------------------ ---------------------------------------------- --------------------
Interested Directors**
- ------------------------------ ------------------------ ---------------------------------------------- --------------------
John S. Horejsi*** Class II Director of Director (since 1997), Horejsi Charitable 4
the Fund since 2007. Foundation (private charitable foundation);
Age: 41 Current term expires Director (since 2004), Boulder Growth &
at the 2010 annual Income Fund, Inc.; Director (since 2006),
meeting. Boulder Total Return Fund, Inc.; Director
(since 2006), First Opportunity Fund, Inc.

Susan L. Ciciora*** Class III Director of Trustee, Lola Brown Trust No. 1B (since 4
the Fund since 2007. 1994) and the Ernest Horejsi Trust No. 1B
Age: 44 Current nominee for a (since 1992); Director (since 1997), Horejsi
term to expire at the Charitable Foundation, Inc. (private
2011 annual meeting. charitable foundation); Director (since
2001), Boulder Total Return Fund, Inc.;
Director (since 2006), Boulder Growth &
Income Fund, Inc.; Director (since 2003),
First Opportunity Fund, Inc.

* The Directors' respective addresses are c/o The Denali Fund Inc., 2344
Spruce Street, Suite A, Boulder, Colorado 80302.

** Mr. Horejsi and Ms. Ciciora are each "interested persons" as a result of
the extent of their beneficial ownership of Fund shares and by virtue of
their indirect beneficial ownership of BIA and FAS and, with respect to Ms.
Ciciora only, SIA.

*** Mr. Horejsi and Ms. Ciciora are siblings.

+ Includes the Fund, Boulder Total Return Fund, Inc., Boulder Growth & Income
Fund, Inc. and First Opportunity Fund, Inc.

- ----------------------------

The names of the executive officers of the Fund are listed in the table
below. Each officer was elected to office by the Board at a meeting held on
February 9, 2009. This table also shows certain additional information. Officers
are elected annually and each officer will hold such office until a successor
has been elected by the Board.

- ------------------------------ -------------------------- --------------------------------------------------------------
Position, Length of
Name, Address*, Age Term Served, and Term of Principal Occupation(s) and Other Directorships held
Office During the Past Five Years
- ------------------------------ -------------------------- --------------------------------------------------------------

Stephen C. Miller President of the Fund President and General Counsel (since 1999), BIA; Manager
since 2007. Appointed (since 1999), FAS; Vice President (since 1999), SIA;
Age: 56 annually. Director (1999-2004) and President (since 1999), Boulder
Total Return Fund, Inc.; Director (2002-2004) and President
(since 2002), Boulder Growth & Income Fund, Inc.; Director
and Chairman (2003-2004) and President (since 2003), First
Opportunity Fund, Inc.; Chief Compliance Officer
(2004-2007); Of Counsel (since 1991), Krassa & Miller, LLC.

Carl D. Johns Chief Financial Officer, Vice President and Treasurer (since 1999), BIA; Assistant
Chief Accounting Manager (since 1999), FAS; Vice President, Treasurer, Chief
Age: 46 Officer, Vice President Financial Officer and Chief Accounting Officer, (since 1999)
and Treasurer since Boulder Total Return Fund, Inc. , (since 2002) Boulder
2007. Appointed Growth & Income Fund, Inc., and (since 2003) First
annually. Opportunity Fund, Inc.

Joel L. Terwilliger Chief Compliance Officer Associate General Counsel (since 2006) and Chief Compliance
since 2007. Appointed Officer (since 2007), BIA, SIA, FAS, Boulder Total Return
Age: 40 annually. Fund, Inc., Boulder Growth & Income Fund, Inc, and First
Opportunity Fund, Inc.; Senior Associate/Legal Counsel
(2002-2006), Great-West Life & Annuity Insurance Company and
affiliated companies.

Stephanie J. Kelley Secretary since 2007. Secretary (since 2000), Boulder Total Return Fund, Inc.;
Appointed annually. Secretary (since 2002), Boulder Growth & Income Fund, Inc.;
Age: 52 Secretary (since 2003), First Opportunity Fund, Inc.;
Assistant Secretary and Assistant Treasurer of various other
entities affiliated with the Horejsi family; employee (since
1999), FAS.

Nicole L. Murphey Vice President since Vice President (since 2008) and Assistant Secretary (since
2008; Assistant 2000), Boulder Total Return Fund, Inc.; Vice President
Age: 32 Secretary since 2007. (since 2008) and Assistant Secretary (since 2002), Boulder
Appointed annually. Growth & Income Fund, Inc.; Vice President (since 2008) and
Assistant Secretary (since 2003), First Opportunity Fund,
Inc.; employee (since 1999), FAS.

* Unless otherwise specified, the Officers' respective addresses are c/o The
Denali Fund Inc., 2344 Spruce Street, Suite A, Boulder, Colorado 80302.

Set forth in the following table are the current Directors and nominees for
election to the Board together with the dollar range of equity securities
beneficially owned by each Director as of the Record Date, as well as the
aggregate dollar range of the Fund's equity securities in all funds overseen in
a family of investment companies (i.e., other funds managed by the Advisers).

- ---------------------------------------------------------------------------------------------------------
OWNERSHIP OF THE FUND BY DIRECTORS
- -------------------------------------- -------------------------------- ---------------------------------
Aggregate Dollar Range of Equity
Dollar Range of Equity Securities in All Funds in the
Independent Directors and Nominees Securities in the Fund Family of Investment Companies
- -------------------------------------- -------------------------------- ---------------------------------

Richard I. Barr $0 Over $100,000
Joel W. Looney $10,001 to $50,000 Over $100,000
Dean L. Jacobson $10,001 to $50,000 $10,001 to $50,000
- -------------------------------------- -------------------------------- ---------------------------------
Interested Directors and Nominees
- -------------------------------------- -------------------------------- ---------------------------------
John S. Horejsi Over $100,000+ Over $100,000
Susan L. Ciciora Over $100,000+ Over $100,000

+ 3,010,495 Shares of the Fund are held by the Trust. Ms. Ciciora is a
trustee and beneficiary under the Trust and John Horejsi is a beneficiary
under the Trust. Accordingly, Ms. Ciciora and Mr. Horejsi may be deemed to
have indirect beneficial ownership of the Shares held by the Trust. Ms.
Ciciora and Mr. Horejsi disclaim all such beneficial ownership. Neither Ms.
Ciciora nor Mr. Horejsi directly owns any Shares of the Fund.

None of the independent Directors or their family members owned
beneficially or of record any securities of the Advisers or any person directly
or indirectly controlling, controlled by, or under common control with the
Advisers.

DIRECTOR AND OFFICER COMPENSATION. The following table sets forth certain
information regarding the compensation of the Fund's Directors for the fiscal
year ended October 31, 2008. No persons (other than the independent Directors,
as set forth below) currently receive compensation from the Fund for acting as a
Director or officer. Directors and executive officers of the Fund do not receive
pension or retirement benefits from the Fund. Non-interested Directors receive
reimbursement for travel and other out-of-pocket expenses incurred in connection
with Board meetings.

Aggregate
Compensation Total Compensation from
Name of Person and Position with the from the Fund the Fund and Fund Complex
Fund Paid to Directors Paid to Directors
- ----------------------------------------- ------------------- ----------------------------

Richard I. Barr, Director $17,000 $82,000
(4 funds)

Dr. Dean L. Jacobson, Director $17,000 $79,000
(4 funds)

Joel W. Looney, Director and Chairman $21,000 $91,000
of the Board (4 funds)

Susan L. Ciciora, Director $0 $0

John S. Horejsi, Director $0 $0

Each Director of the Fund who was not a Director, officer, employee or
affiliate of the Advisers or FAS, or any of their affiliates, receives a fee of
$8,000 per annum plus $3,000 for each in person meeting, $500 for each Audit
Committee meeting and $500 for each telephonic meeting of the Board. In
addition, the Chairman of the Board receives $1,000 per meeting and the Chairman
of the Audit Committee receives $1,000 per meeting of the Audit Committee. Each
non-interested Director of the Fund is reimbursed for travel and out-of-pocket
expenses associated with attending Board and Committee meetings. The Board held
six meetings (three of which were held by telephone conference call) during the
fiscal year ended October 31, 2008. Each Director currently serving in such
capacity for the entire fiscal year attended at least 75% of the meetings of
Directors and any Committee of which he is a member. The aggregate remuneration
paid to the Directors of the Fund for acting as such during the fiscal year
ended October 31, 2008 amounted to $55,000.

COMMITTEES OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE; REPORT OF AUDIT COMMITTEE. The purpose of the Audit
Committee is to assist Board oversight of the integrity of the Fund's financial
statements, the Fund's compliance with legal and regulatory requirements, the
independent auditor's qualifications and independence and the performance of the
Fund's independent auditors. The Audit Committee reviews the scope and results
of the Fund's annual audit with the Fund's independent accountants and
recommends the engagement of such accountants. Management, however, is
responsible for the preparation, presentation and integrity of the Fund's
financial statements, and the independent accountants are responsible for
planning and carrying out proper audits and reviews. The Board of Directors
adopted a written charter for the Audit Committee on January 23, 2002 and
amended the Charter on January 25, 2008 to add the Fund. The Board of Directors
adopted minor revisions to the Charter on February 9, 2009.

The Audit Committee is composed entirely of the Fund's independent
Directors, consisting of Messrs. Barr, Jacobson and Looney. The Board of
Directors has determined that Joel Looney qualifies as an "audit committee
financial expert," as defined under the Securities and Exchange Commission's
Regulation S-K, Item 401(h). The Audit Committee is in compliance with
applicable rules of the listing requirements for closed-end fund audit
committees; including the requirement that all members of the audit committee be
"financially literate" and that at least one member of the audit committee have
"accounting or related financial management expertise," as determined by the
Board. The Audit Committee is required to conduct its operations in accordance
with applicable requirements of the Sarbanes-Oxley Act and the Public Company
Accounting Oversight Board, and the members of the Audit Committee are subject
to the fiduciary duty to exercise reasonable care in carrying out their duties.
Each member of the Audit Committee is independent, as that term is defined by
the NYSE Listing Standards. The Audit Committee met once during the fiscal year
ended October 31, 2008.

In connection with the audited financial statements as of and for the
period ended October 31, 2008, included in the Fund's Annual Report for the
period ended October 31, 2008 (the "Annual Report"), at meetings held on January
19, 2009 and again on February 9, 2009, the Audit Committee considered and
discussed the audited financial statements with management and the independent
accountants, and discussed the audit of such financial statements with the
independent accountants.

The Audit Committee has received the written disclosures and letter from
the independent accountants required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees) and has discussed with
independent accountants their independence. The Audit Committee discussed with
the independent accountants the accounting principles applied by the Fund and
such other matters brought to the attention of the Audit Committee by the
independent accountants required by Statement of Auditing Standards No. 61,
Communications With Audit Committees, as currently modified or supplemented.

The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not employed by the Fund in any
accounting, financial management or internal control capacity. Moreover, the
Audit Committee relies on and makes no independent verification of the facts
presented to it or representations made by management or the independent
accountants. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles and policies, or internal controls
and procedures, designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above do not provide assurance that
the audit of the Fund's financial statements has been carried out in accordance
with generally accepted accounting standards or that the financial statements
are presented in accordance with generally accepted accounting principles.

Based on its consideration of the audited financial statements and the
discussions referred to above with management and the independent accountants
and subject to the limitation on the responsibilities and role of the Audit
Committee set forth in the charter and those discussed above, the Audit
Committee of the Fund recommended to the Board that the audited financial
statements be included in the Fund's Annual Report and be mailed to stockholders
and filed with the SEC.

Submitted by the Audit Committee of the Fund's Board of Directors: Richard
I. Barr, Dean L. Jacobson, and Joel W. Looney.

NOMINATING COMMITTEE. The Board of Directors has a nominating committee
(the "Nominating Committee") consisting of Messrs. Looney, Jacobson and Barr,
which Nominating Committee is responsible for considering candidates for
election to the Board in the event a position is vacated or created. Each member
of the Nominating Committee is independent, as that term is defined by the NYSE
Listing Standards. The Nominating Committee met on February 23, 2009 with regard
to the nomination of the Director nominees set forth in the proposal above. The
Nominating Committee did not meet during the fiscal year ended October 31, 2008.
The Board of Directors has adopted a charter for the Nominating Committee that
is available on the Fund's website, www.thedenalifund.com.

The Nominating Committee does not have a formal process for identifying
candidates. The Nominating Committee takes into consideration such factors as it
deems appropriate when nominating candidates. These factors may include
judgment, skill, diversity, experience with investment companies and other
organizations of comparable purpose, complexity, size and subject to similar
legal restrictions and oversight, the interplay of the candidate's experience
with the experience of other Board members, and the extent to which the
candidate would be a desirable addition to the Board and any committees thereof.
The Nominating Committee will consider all qualified candidates in the same
manner. The Nominating Committee may modify its policies and procedures for
director nominees and recommendations in response to changes in the Fund's
circumstances, and as applicable legal or listing standards change.

The Nominating Committee would consider director candidates recommended by
stockholders (if a vacancy were to exist) and submitted in accordance with
applicable law and procedures as described in this Proxy Statement (see
"Submission of Stockholder Proposals" below). Such recommendations should be
mailed to the Secretary of the Fund.

The Fund does not have a compensation committee.

OTHER BOARD-RELATED MATTERS

Stockholders who wish to send communications to the Board should send them
to the address of the Fund and to the attention of the Board. All such
communications will be directed to the Board's attention.

The Fund does not have a formal policy regarding Board member attendance at
the Annual Meeting of Stockholders; however, all of the Directors of the Fund,
who were Directors at the time, attended the October 26, 2007 Annual Meeting of
Stockholders. As discussed above, the Fund did not have an annual meeting of
stockholders in 2008.

Vote Required. The election of Messrs. Looney and Jacobson as Directors of
the Fund will require the affirmative vote of a plurality of the votes cast by
holders of the Common Stock and Preferred Stock at the Meeting in person or by
proxy on Proposal 1. The election of Ms Ciciora as Director of the Fund will
require the affirmative vote of a plurality of the votes cast by the holders of
Preferred Stock at the Meeting in person or by proxy on Proposal 1. Mr. Looney
would serve a three-year term for re-election in 2012 as a Class I Director, and
Ms. Ciciora and Dr. Jacobson would serve a two-year term for re-election in 2011
as Class III Directors. Holders of record of Shares at the close of business on
the Record Date will be entitled to one vote per share on each matter as to
which they are entitled to vote at the Meeting and any postponements or
adjournments thereof.

THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION OF ALL THE NOMINEES.

SUBMISSION OF STOCKHOLDER PROPOSALS

Notice is hereby given that for a stockholder proposal to be considered for
inclusion in the Fund's proxy material relating to its 2010 annual meeting of
stockholders, the stockholder proposal must be addressed to, and received by the
Fund not earlier than October 14, 2009 and not later than November 13, 2009. Any
such proposal shall set forth as to each matter the stockholder proposes to
bring before the meeting (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and address, as they appear on the Fund's books, of the
stockholder proposing such business, (iii) the class and number of shares of the
capital stock of the Fund which are beneficially owned by the stockholder, and
(iv) any material interest of the stockholder in such business. Stockholder
proposals, including any accompanying supporting statement, may not exceed 500
words. A stockholder desiring to submit a proposal must be a record or
beneficial owner of Shares with a market value of $2,000 and must have held such
Shares for at least one year. Further, the stockholder must continue to hold
such Shares through the date on which the meeting is held. Documentary support
regarding the foregoing must be provided along with the proposal. There are
additional requirements regarding proposals of stockholders, and a stockholder
contemplating submission of a proposal is referred to Rule 14a-8 promulgated
under the 1934 Act. The timely submission of a proposal does not guarantee its
inclusion in the Fund's proxy materials.

Pursuant to the Fund's Bylaws, at any annual meeting of the stockholders,
only business that has been properly brought before the meeting will be
conducted. To be properly brought before the annual meeting, the business must
be (i) specified in the notice of meeting, (ii) by or at the direction of the
Board of Directors, or (iii) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before the annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Fund. To be timely, a stockholder's notice must be received
by the Secretary at 2344 Spruce Street, Suite A, Boulder, Colorado 80302 by 5:00
p.m. Mountain Time, not earlier than the 150th day and not later than the 120th
day prior to the first anniversary of the date of public release of the notice
for the preceding year's annual meeting. However, if the date of the annual
meeting is advanced or delayed by more than 30 days from the first anniversary
of the date of the preceding year's annual meeting, for notice by the
stockholder to be timely, it must be received by the Secretary not later than
5:00 p.m., Mountain Time, on the later of the 120th day prior to the date of
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. The public announcement
of a postponement or adjournment of an annual meeting shall not commence a new
time period for the giving of a stockholder's notice as described above.

Pursuant to the Fund's Bylaws, such stockholder's notice shall set forth
(i) as to each individual whom the stockholder proposes to nominate for election
or reelection as a director, (A) the name, age, business address and residence
address of such individual, (B) the class, series and number of any shares of
stock of the Fund that are beneficially owned by such individual, (C) the date
such shares were acquired and the investment intent of such acquisition, (D)
whether such stockholder believes any such individual is, or is not, an
"interested person" of the Fund, as defined in the 1940 Act and information
regarding such individual that is sufficient, in the discretion of the Board of
Directors or any committee thereof or any authorized officer of the Fund, to
make such determination, (E) the extent to which such individual (including such
individual's principals) has entered into any hedging transaction or ther
arrangement with the effect or intent of mitigating ot otherwise managing
profit, loss or risk of changes in the value of the common stock or the daily
quoted market price of the Fund held by such individual (including such
individual's principals), or increasing or decreasing the voting power of such
individual (including such individual's principals), including independently
verifiably information in support of the foregoing, (F) the investment strategy
or objective - including any related disclosure documents or other independently
verifiable information in support of the foregoing - for such individual
(including such individual's principals), and (G) all other information relating
to such individual that is required to be disclosed in solicitations of proxies
for election of directors in an election contest (even if an election contest is
not involved), or is otherwise required, in each case pursuant to Regulation 14A
(or any successor provision) under the Exchange Act and the rules thereunder
(including such individual's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (ii) as to any
other business that the stockholder proposes to bring before the meeting, a
description of such business, the reasons for proposing such business at the
meeting and any material interest in such business of such stockholder and any
Stockholder Associated Person (as defined below), individually or in the
aggregate, including any anticipated benefit to the stockholder and the
Stockholder Associated Person therefrom; (iii) as to the stockholder giving the
notice and any Stockholder Associated Person, the class, series and number of
all shares of stock of the applicable Fund which are owned by such stockholder
and by such Stockholder Associated Person, if any, and the nominee holder for,
and number of, shares owned beneficially but not of record by such stockholder
and by any such Stockholder Associated Person; (iv) as to the stockholder giving
the notice and any Stockholder Associated Person covered by the immediately
preceding clauses (ii) or (iii), the name and address of such stockholder, as
they appear on the applicable Fund's stock ledger and current name and address,
if different, and of such Stockholder Associated Person; and (v) to the extent
known by the stockholder giving the notice, the name and address of any other
stockholder supporting the nominee for election or reelection as a director or
the proposal of other business on the date of such stockholder's notice.
"Stockholder Associated Person" of any stockholder shall mean (i) any person
controlling, directly or indirectly, or acting in concert with, such
stockholder, (ii) any beneficial owner of shares of stock of the applicable Fund
owned of record or beneficially by such stockholder and (iii) any person
controlling, controlled by or under common control with such Stockholder
Associated Person. Joint notices to the Funds are not permissible; stockholders
may not submit more than one notice (plus the required additional documentation)
for more than one Fund.

ADDITIONAL INFORMATION

INDEPENDENT ACCOUNTANTS. At its regularly scheduled Board meeting held on
November 10, 2008, the Audit Committee, consisting of those Directors who are
not "interested persons" (as defined in the 1940 Act), selected, and the Board
ratified, Deloitte & Touche LLP ("Deloitte") of Denver, Colorado as the Fund's
independent registered public accounting firm for the Fund's fiscal year ending
October 31, 2009. Deloitte served as the Fund's independent accountants for the
Fund's fiscal year ending October 31, 2008. Briggs, Bunting & Dougherty LLP
("BB&D") served as independent accountants for the Fund's fiscal year ending
October 31, 2007. BB&D's reports on the financial statement for the year
immediately preceding their termination contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope, or accounting principles. During the fiscal year immediately preceding
BB&D's termination, there were no disagreements with such accountants on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. A representative of Deloitte will not be present at
the Meeting but will be available by telephone and will have an opportunity to
make a statement if the representative so desires and will be available to
respond to appropriate questions.

Set forth below are audit fees and non-audit related fees billed to the
Fund for professional services received from Deloitte for the Fund's fiscal year
ending October 31, 2008, and from BB&D for the Fund's fiscal year ending October
31, 2007.

Fiscal Year Ended Audit Fees Audit-Related Fees Tax Fees* All Other Fees+
--------------------- -------------------- -------------------- ------------------- --------------------

10/31/2007 $32,500 $0 $4,500 $6,250

10/31/2008 $30,350 $0 $7,250 $5,000

* "Tax Fees" are those fees billed to the Fund by Deloitte or BB&D in
connection with tax consulting services, including primarily the review of
the Fund's income tax returns, excise tax returns and Maryland property tax
returns.

+ This fee pertains to those fees billed to the Fund by Deloitte or BB&D in
connection with their agreed-upon procedures reports under the terms of the
Preferred Stock.

The Audit Committee Charter requires that the Audit Committee pre-approve
all audit and non-audit services to be provided by the auditors to the Fund, and
all non-audit services to be provided by the auditors to the Fund's investment
adviser and any service providers controlling, controlled by or under common
control with the Funds' investment adviser ("affiliates") that provide ongoing
services to each Fund, if the engagement relates directly to the operations and
financial reporting of each Fund, or to establish detailed pre-approval policies
and procedures for such services in accordance with applicable laws. All of the
audit, audit-related and tax services described above for which Deloitte billed
the Fund fees for the fiscal year ending October 31, 2008 and for which BB&D
billed the Fund fees for the fiscal year ending October 31, 2007 were
pre-approved by the Audit Committee.

Deloitte has informed the Fund that it has no direct or indirect financial
interest in the Fund. For the Fund's fiscal year ended October 31, 2008,
Deloitte did not provide any non-audit services or bill any fees for such
services to the Funds' investment adviser or any affiliates thereof that provide
services to the Fund. For the twelve months ended October 31, 2008, the Horejsi
Affiliates paid $0 to Deloitte for their services. For the twelve months ended
October 31, 2007, the Horejsi Affiliates paid $0 to BB&D. The Audit Committee
has considered and concluded that the provision of non-audit services is
compatible with maintaining the auditors' independence.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of
the 1934 Act and Section 30(h) of the 1940 Act requires the Fund's Directors and
officers, persons affiliated with the Fund's investment advisers, and persons
who own more than 10% of a registered class of the Fund's securities, to file
reports of ownership and changes of ownership with the SEC and the New York
Stock Exchange. Directors, officers, and greater-than-10% stockholders are
required by SEC regulations to furnish the Fund with copies of all Section 16(a)
forms they file. Based solely upon the Fund's review of the copies of such forms
it receives and written representations from such persons, the Fund believes
that through the date hereof all such filing requirements applicable to such
persons were complied with.

BROKER NON-VOTES AND ABSTENTIONS. An uninstructed proxy for shares held by
brokers or nominees as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular matter is a broker
"non-vote". Proxies that reflect abstentions or broker non-votes (collectively
"abstentions") will be counted as shares that are present and entitled to vote
on the matter for purposes of determining the presence of a quorum. In
circumstances where the vote to approve a matter is a percentage of votes cast,
abstentions have no effect because they are not a vote cast. Thus, they are
disregarded in determining the "votes cast" on the particular issue. However,
with respect to all the Proposals contained in this Proxy Statement, where the
vote required to approve the matter is the affirmative vote of the holders of a
percentage of the total number of votes entitled to be cast, an abstention will
have the effect of a vote "against" the respective proposals.

OTHER MATTERS TO COME BEFORE THE MEETING

The Fund does not intend to present any other business at the Meeting, nor
is it aware that any stockholder intends to do so. If, however, any other
matters are properly brought before the Meeting, the persons named in the
accompanying form of proxy will vote thereon in accordance with their
discretion.

- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. EVEN IF YOU PLAN TO ATTEND
THE MEETING, STOCKHOLDERS ARE URGED TO SIGN THE ENCLOSED PROXY CARD (UNLESS
AUTHORIZING THEIR PROXY VIA TOUCH-TONE TELEPHONE OR THROUGH THE INTERNET) AND
MAIL IT IN THE ENCLOSED ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS
IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER.
- --------------------------------------------------------------------------------

[GRAPHIC OMITTED][GRAPHIC OMITTED]

The Denali Fund Inc.

PROXY

THE DENALI FUND INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS

The undersigned holder of shares of Common Stock of The Denali Fund Inc., a
Maryland corporation (the "Fund"), hereby appoints Stephen C. Miller, Carl D.
Johns, and Nicole L. Murphey, or any of them, as proxies for the undersigned,
with full power of substitution in each of them, to attend the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at The Arizona Biltmore Resort &
Spa. 2400 East Missouri Avenue, Phoenix, Arizona at 9:00 a.m. Mountain Standard
Time (local time), on April 24, 2009, and any adjournments or postponements
thereof, to cast on behalf of the undersigned all votes that the undersigned is
entitled to cast at the Annual Meeting and to otherwise represent the
undersigned at the Annual Meeting with all the powers possessed by the
undersigned if personally present at the Meeting. The votes entitled to be cast
will be cast as instructed below. If this Proxy is executed but no instruction
is given, the votes entitled to be cast by the undersigned will be cast "FOR"
each of the proposals described in the Proxy Statement. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting and Proxy Statement (the
terms of each of which are incorporated by reference herein). In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the Meeting. A majority of the proxies present and acting
at the Annual Meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the power and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

Please indicate your vote by an "X" in the appropriate box below.

If this proxy is properly executed, the votes entitled to be cast by the
undersigned will be cast in the manner directed by the undersigned stockholder.
IF NO DIRECTION IS MADE, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL
BE CAST "FOR" THE NOMINEES IN PROPOSAL 1. ADDITIONALLY, THE VOTES ENTITLED TO BE
CAST BY THE UNDERSIGNED WILL BE CAST IN THE DISCRETION OF THE PROXY HOLDER ON
ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS
OR POSTPONEMENTS THEREOF.

Please refer to the Proxy Statement for a discussion of the Proposals.

- ------------ ------------------------------------------------------------ ----------- ------------------ -------------------------

1. Election of Directors: Nominees are: Joel W. Looney and FOR____ WITHHOLD___ FOR ALL EXCEPT ___
Dean L. Jacobson
- ------------ ------------------------------------------------------------ ----------- ------------------ -------------------------

Instruction: If you do not wish your shares voted "for" a particular nominee, mark the "For All Except" box and strike a line
through the name(s) of the nominee(s). Your shares will be voted "For" the remaining nominee(s).

THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
ELECTION OF ALL THE NOMINEES.
- ----------------------------------------------------------------------------------------------------------------------------------

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT ____

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.

NOTE: Please sign exactly as your name appears on this Proxy. If joint owners,
EACH should sign this Proxy. When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give your full title.

Signature:
-------------------------

Date:
-------------------------

Signature:
-------------------------

Date:
-------------------------

[APS PROXY CARD]

PROXY

THE DENALI FUND INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS

The undersigned holder of shares of the Auction Preferred Stock ("APS") of The
Denali Fund Inc., a Maryland corporation (the "Fund"), hereby appoints Stephen
C. Miller, Carl D. Johns, and Nicole L. Murphey, or any of them as proxies for
the undersigned, with full power of substitution in each of them, to attend the
Annual Meeting of Stockholders (the "Annual Meeting") to be held at The Arizona
Biltmore Resort & Spa, 2400 East Missouri Avenue, Phoenix, Arizona at 9:00 a.m.
Mountain Standard Time (local time), on April 24, 2009, and any adjournments or
postponements thereof, to cast on behalf of the undersigned all votes that the
undersigned is entitled to cast at the Annual Meeting and to otherwise represent
the undersigned at the Annual Meeting with all the powers possessed by the
undersigned if personally present at the Meeting. The votes entitled to be cast
will be cast as instructed below. If this Proxy is executed but no instruction
is given, the votes entitled to be cast by the undersigned will be cast "FOR"
each of the proposals described in the Proxy Statement. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting and Proxy Statement (the
terms of each of which are incorporated by reference herein). In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the Meeting. A majority of the proxies present and acting
at the Annual Meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the power and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

Please indicate your vote by an "X" in the appropriate box below.

Please refer to the Proxy Statement for a discussion of the Proposals.

- ------------ ------------------------------------------------------------ ----------- ------------------ -------------------------

1. Election of Directors: Nominees are: Joel W. Looney, FOR____ WITHHOLD___ FOR ALL EXCEPT ___
Dean L. Jacobson and Susan L. Ciciora
- ------------ ------------------------------------------------------------ ----------- ------------------ -------------------------

THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
ELECTION OF ALL THE NOMINEES.

- ----------------------------------------------------------------------------------------------------------------------------------

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT ____

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.

Signature:
-------------------------

Date:
-------------------------

Signature:
-------------------------

Date:
-------------------------