specialopps_nq.htm
 
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 811-07528


Special Opportunities Fund, Inc.
(Exact name of registrant as specified in charter)

 
615 East Michigan Street
 
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)


Andrew Dakos
Bulldog Investors, LLC
Park 80 West
250 Pehle Avenue, Suite 708
Saddle Brook, NJ 07663
(Name and address of agent for service)

Copy to:
Thomas R. Westle, Esp.
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174

1-877-607-0414
Registrant's telephone number, including area code


Date of fiscal year end: December 31, 2014


Date of reporting period:  March 31, 2014

 
 
 
 
 
 
Item 1. Schedule of Investments.
 
Special Opportunities Fund, Inc.
            
Portfolio of Investments
            
March 31, 2014 (Unaudited)
            
             
INVESTMENT COMPANIES - 73.91%
  
Shares
    
Fair Value
  
Closed-End Funds - 62.67%
            
Aberdeen Israel Fund, Inc.
     42,490     $ 774,593  
Adams Express Co. (k)
     351,652       4,564,443  
Advance Developing Markets Fund Ltd. (a)(h)
     215,538       1,451,700  
Advent/Claymore Enhanced Growth & Income Fund
     57,809       589,016  
AllianceBernstein Income Fund, Inc.
     431,754       3,169,074  
American Select Portfolio, Inc.
     126,285       1,254,641  
American Strategic Income Portfolio II
     229,651       1,908,400  
American Strategic Income Portfolio III
     562,207       3,997,292  
ARC Capital Holdings Ltd. (h)
     561,405       314,387  
Bancroft Fund, Ltd.
     79,335       1,550,999  
Blackrock Latin American Investment Trust Plc (h)
     80,000       563,160  
Boulder Growth & Income Fund, Inc.
     428,406       3,482,941  
Boulder Total Return Fund, Inc.
     184,149       4,480,345  
Brookfield Global Listed Infrastructure Income Fund, Inc.
     5,104       109,124  
Central Europe, Russia, & Turkey Fund, Inc.
     11,314       297,218  
Central Securities Corp.
     123,123       2,754,262  
Clough Global Allocation Fund
     35,635       540,939  
Clough Global Equity Fund
     151,644       2,338,350  
Delaware Investments Dividend & Income Fund, Inc.
     24,263       232,197  
DPF India Opportunities Fund (h)
     428,305       1,499,358  
DWS Global High Income Fund, Inc.
     35,876       291,672  
DWS High Income Opportunities Fund, Inc.
     168,109       2,456,073  
DWS RREEF Real Estate Fund II, Inc. (a)(c)(f)(g)
     201,612       72,580  
DWS RREEF Real Estate Fund, Inc. (a)(c)(f)(g)
     126,913       27,921  
Eaton Vance Risk-Managed Diversified Equity Income Fund
     930,027       10,509,305  
Ellsworth Fund Ltd.
     55,094       473,808  
First Opportunity Fund, Inc.
     279,106       2,601,268  
Gabelli Global Utility & Income Trust
     6,852       136,286  
General American Investors Co., Inc.
     207,718       7,317,905  
Helios Strategic Income Fund, Inc.
     177,906       1,206,203  
The India Fund, Inc.
     79,347       1,828,155  
INVESCO Asia Trust Plc (h)
     157,367       417,141  
JP Morgan Asian Investment Trust Plc (h)
     28,426       94,306  
Juridica Investments Ltd. (h)
     495,258       1,079,788  
Kubera Cross-Border Fund Ltd. (h)
     380,604       114,562  
Liberty All-Star Equity Fund
     1,751,775       10,300,437  
LMP Real Estate Income Fund, Inc.
     23,708       256,046  
Madison Strategic Sector Premium Fund
     55,945       681,410  
Marwyn Value Investors Ltd. (h)
     160,023       593,587  
MFS InterMarket Income Trust I
     69,352       577,009  
Millennium India Acquisition Co., Inc. (a)
     34,036       31,994  
Montgomery Street Income Securities, Inc.
     4,705       75,703  
Nuveen Multi-Currency Short-Term Government Income Fund
     167,971       1,762,016  
Pacific Alliance Asia Opportunities Fund Ltd. (a)(h)
     313,541       442,093  
Royce Micro-Cap Trust, Inc.
     372,346       4,557,515  
Royce Value Trust, Inc.
     237,206       3,731,250  
Swiss Helvetia Fund, Inc.
     445,495       6,406,218  
Terra Catalyst Fund (a)(h)
     23,071       24,328  
The Thai Fund, Inc.
     59,106       640,118  
Tri-Continental Corp.
     387,319       7,777,366  
Virtus Total Return Fund
     243,515       1,076,336  
Western Asset Inflation Management Fund, Inc.
     211,288       3,773,604  
The Zweig Total Return Fund, Inc.
     334,970       4,709,678  
              111,916,120  
Closed-End Funds - Preferred Shares - 1.33%
                
Oxford Lane Capital Corp., Series 2017
     91,072       2,369,693  
                 
Auction Rate Preferred Securities - 1.40% (b)(c)(f)
                
BlackRock California Municipal 2018 Term Trust - Series M7, 0.164%
     9       213,750  
BlackRock Municipal 2018 Term Trust - Series W7, 0.197%
     44       1,045,000  
Putnam Managed Municipal Income Trust - Series C
     6       225,000  
Putnam Municipal Opportunities Trust - Series C
     6       112,500  
Western Asset Premier Bond Fund - Series M, 0.120%
     46       914,250  
              2,510,500  
Business Development Company - 6.29%
                
Equus Total Return, Inc. (a)
     106,919       205,284  
Firsthand Technology Value Fund, Inc.
     272,130       5,809,975  
Keating Capital, Inc.
     58,823       359,409  
MVC Capital, Inc.
     358,872       4,862,716  
              11,237,384  
Business Development Company - Preferred Shares - 2.22%
                
MVC Capital, Inc.
     155,757       3,960,900  
Total Investment Companies (Cost $113,997,273)
             131,994,597  
                 
PREFERRED STOCKS - 3.52%
                
Capital Markets - 0.15%
                
Ladenburg Thalman Financial Services, Inc.
     11,779       265,617  
Marine - 0.03%
                
Box Ships, Inc. (h)
     2,474       58,881  
Oil, Gas & Consumable Fuels - 0.13%
                
Miller Energy Resources, Inc.
     9,316       225,634  
Real Estate Investment Trusts - 3.21%
                
Preferred Apartment Communities, Inc. (a)(c)(f)
     6,083       5,742,291  
Total Preferred Stocks (Cost $6,243,880)
             6,292,423  
                 
COMMON STOCKS - 15.06%
                
Health Care Providers & Services - 0.00%
                
Healthcare Corp. of America (Acquired 10/24/2012, Cost $0) (a)(c)(j)
     10,000       3,075  
Insurance - 2.01%
                
Stewart Information Services Corp.
     102,260       3,592,394  
IT Services - 0.06%
                
JetPay Corp. (a)
     39,596       96,614  
Life Insurance - 1.87%
                
Imperial Holdings, Inc. (a)
     581,622       3,344,326  
Real Estate - 0.18%
                
Gyrodyne Dividend Notes (c)
     10,914       106,957  
Gyrodyne Special Distribution LLC (c)
     10,914       203,328  
              310,285  
Real Estate Investment Trusts - 1.54%
                
Anworth Mortgage Asset Corp.
     169,042       838,448  
Gladstone Land Corp.
     2,582       36,510  
Independence Realty Trust, Inc.
     114,442       1,019,678  
Orchid Island Capital, Inc.
     35,699       424,104  
Preferred Apartment Communities, Inc.
     45,485       366,382  
Wheeler Real Estate Investment Trust, Inc.
     15,717       72,141  
              2,757,263  
Software - 0.14%
                
Single Touch Systems, Inc. (a)
     623,270       246,192  
Special Purpose Acquisition Vehicle - 9.26% (a)
                
Aquasition Corp. (h)(i)
     400,000       4,084,000  
Capitol Acquisition Corp. II
     155,122       1,527,952  
Chart Acquisition Corp.
     124,265       1,235,194  
CIS Acquisition Ltd. (h)
     144,147       1,470,299  
Collabrium Japan Acquisition Corp. (h)
     208,234       2,155,222  
Global Defense & National Security Systems, Inc.
     142,712       1,444,246  
Hennessy Capital Acquisition Corp. (a)
     65,223       656,143  
Infinity Cross Border Acquisition Corp.
     49,689       396,021  
Levy Acquisition Corp.
     37,874       382,527  
MergeWorthRx Corp.
     23,185       187,103  
Quartet Merger Corp.
     132,553       1,344,087  
Quinpario Acquisition Corp.
     91,455       996,860  
ROI Acquisition Corp. II
     57,484       571,966  
Silver Eagle Acquisition Corp.
     9,016       87,095  
              16,538,715  
Total Common Stocks (Cost $24,596,763)
             26,888,864  
                 
   
Principal
          
   
Amount
          
CORPORATE BONDS - 0.32% (b)
                
Washington Mutual Inc.
                
0.000%, 09/17/2012 (c)(d)(f)
   $ 3,000,000       75,000  
JC Penney Corp., Inc.
                
6.375%, 10/15/2036
     650,000       495,625  
Total Corporate Bonds (Cost $461,786)
             570,625  
                 
PROMISSORY NOTES - 1.25% (b)(c)(f)
                
Symbios Holdings, Inc.
                
15.00%, 06/16/2014
     450,000       0  
UBPS Secured Convertible Promissory Note
                
12.000%, 12/28/2014
     234,000       234,000  
Wheeler Real Estate Investment Trust, Inc. Convertible
                
9.000%, 12/15/2018 (Acquired 12/16/2013, Cost $1,200,000) (j)
     1,200,000       1,200,000  
Wheeler Real Estate Investment Trust, Inc. Non-Convertible
                
9.000%, 12/15/2015 (Acquired 12/16/2013, Cost $800,000) (j)
     800,000       800,000  
Total Promissory Notes (Cost $2,684,000)
             2,234,000  
                 
CONVERTIBLE BONDS - 1.75% (b)
                
Imperial Holdings, Inc.
                
8.500%, 02/15/2019
     2,941,000       3,119,298  
Total Convertible Bonds (Cost $2,941,000)
             3,119,298  
                 
   
Shares
          
WARRANTS - 0.58% (a)
                
Aquasition Corp.
                
Expiration: January 2018
     400,000       104,000  
Exercise Price: $11.50 (h)
                
Arabella Exploration, Inc.
                
Expiration: December 2016
     46,598       48,928  
Exercise Price: $5.00 (h)
                
Capitol Acquisition Corp. II
                
Expiration: May 2016
     77,561       31,800  
Exercise Price: $11.50
                
Chart Acquisition Corp.
                
Expiration: December 2017
     124,265       65,860  
Exercise Price: $11.50
                
CIS Acquisition Ltd. - Class A
                
Expiration: December 2017
     144,147       28,829  
Exercise Price: $10.00 (h)
                
Collabrium Japan Acquisition Corp.
                
Expiration: December 2017
     208,234       29,986  
Exercise Price: $11.50 (h)
                
EvryWare Global, Inc.
                
Expiration: May 2018
     48,370       16,929  
Exercise Price: $6.00
                
Healthcare Corp. of America
                
Expiration: November 2016
     33,753       3,713  
Exercise Price: $7.50
                
Expiration: July 2018
     5,000       413  
Exercise Price: $11.50 (Acquired 10/24/2012, Cost $0) (c)(j)
                
Hemisphere Media Group, Inc.
                
Expiration: April 2018
     166,726       195,069  
Exercise Price: $6.00
                
Infinity Cross Border Acquisition Corp.
                
Expiration: July 2016
     301,149       210,804  
Exercise Price: $7.00
                
Integrated Drilling Equipment Holdings Corp.
                
Expiration: December 2017
     205,929       6,178  
Exercise Price: $11.50
                
Net Element, Inc.
                
Expiration: October 2017
     191,697       19,170  
Exercise Price: $7.50
                
Preferred Apartment Communities
                
Expiration: March 2017
     6,083       61  
Exercise Price: $9.00 (c)(f)
                
Pingtan Marine Enterprise Ltd.
                
Expiration: February 2018
     52,798       10,560  
Exercise Price: $12.00 (h)
                
Prime Acquisition Corp.
                
Expiration: March 2018
     50,142       13,538  
Exercise Price: $5.00 (h)
                
RLJ Entertainment, Inc.
                
Expiration: October 2017
     436,744       109,186  
Exercise Price: $12.00
                
Silver Eagle Acquisition Corp.
                
Expiration: July 2018
     9,016       6,041  
Exercise Price: $11.50
                
Tecnoglass, Inc.
                
Expiration: December 2016
     47,914       136,555  
Exercise Price: $8.00 (h)
                
Wheeler Real Estate Investment Trust, Inc.
                
Expiration: December 2018
     84,211       0  
Exercise Price: $4.75 (c)(f)
                
Total Warrants (Cost $853,715)
             1,037,620  
                 
                 
MONEY MARKET FUNDS - 3.54%
                
Fidelity Institutional Government Portfolio - Class I, 0.010% (e)
     3,162,524       3,162,524  
Fidelity Institutional Tax-Exempt Portfolio - Class I, 0.010% (e)
     3,162,949       3,162,949  
Total Money Market Funds (Cost $6,325,473)
             6,325,473  
                 
Total Investments (Cost $158,103,890) - 99.93%
             178,462,900  
Other Assets in Excess of Liabilities - 0.07%
             127,411  
TOTAL NET ASSETS - 100.00%
           $ 178,590,311  
 
Percenatge are stated as a percent of net assets.
 
(a)
  
Non-income producing security.
(b)
  
The coupon rates shown represent the rates at March 31, 2014.
(c)
  
Fair valued securities. The total market value of these securities was $10,976,126, representing 6.15% of net assets.
(d)
  
Default or other conditions exist and security is not presently accruing income.
(e)
  
The rate shown represents the 7-day yield at March 31, 2014.
(f)
  
Illiquid security. The total market value of these securities was $10,662,353, representing 5.97% of net assets.
(g)
  
Security undergoing full liquidation with all proceeds paid out to shareholders.
(h)
  
Foreign-issued security.
(i)
  
Affiliated security.
(j)
  
Restricted security.
(k)
  
All or a portion of this security is pledged as collateral for securities sold short.
 
 
Schedule of Securities Sold Short
                
March 31, 2014 (Unaudited)
                
   
Shares
    
Value
  
First American Financial Corp.
     60,913     $ 1,617,240  
Total Securities Sold Short (Proceeds $1,606,030)
           $ 1,617,240  

 
 
 
 
 
Valuation of investments—The Fund calculates its net asset value based on the current market value for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers. Independent pricing sources may use last reported sale prices or if not available the most recent bid price, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. If a market value is not available from an independent pricing source or a broker-dealer for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”). Various factors may be reviewed in order to make a good faith determination of a security’s fair value. The auction rate preferred securities and the structured life settlement notes are valued at cost, unless other observable market events occur. The purchase price, or cost, of these securities is arrived at through an arms length transaction between a willing buyer and seller in the secondary market and is indicative of the value on the secondary market. Current transactions in similar securities in the marketplace are evaluated. Factors for other securities may include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. If events occur that materially affect the value of securities between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities may be fair valued. The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the Board or its delegate determines that this does not represent fair value.

The Fund has adopted fair valuation accounting standards that establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various input and valuation techniques used in measuring fair value. Fair value inputs are summarized in the three broad levels listed below:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

Level 2—Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

Level 3—Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The Fund adopted Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-04 (“ASU 2011-04”), Fair Value Measurement: Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS, which, among other things, clarifies existing disclosure requirements provided by ASC 820 regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value.

The significant unobservable inputs used in fair value measurement of the Fund’s investment companies, corporate bonds, promissory notes, and structured finance notes are (1) cost and (2) indicative bids or price ranges from dealers, brokers, or market makers. Significant changes in any of these inputs in isolation may result in a change in higher fair value measurement.

In accordance with procedures established by the Fund’s Board of Directors, the Adviser shall initially value non-publicly-traded securities (for which a current market value is not readily available) at their acquisition cost less related expenses, where identifiable, unless and until the Adviser determines that such value does not represent fair value.

The Adviser sends a memorandum to the Chairman of the Valuation Committee with respect to any non-publicly-traded securities that are valued using a method other than cost detailing the reason, factors considered, and impact on the Fund’s NAV. If the Chairman determines that such fair valuation(s) require the involvement of the Valuation Committee, a special meeting of the Valuation Committee is called as soon as practicable to discuss such fair valuation(s). The Valuation Committee of the Board consists of at least two non-interested Directors, as defined by the Investment Company Act of 1940.

At each regular quarterly Board meeting, the Adviser delivers a written report (the “Quarterly Report”) to the Board regarding any recommendations of fair valuation during the past quarter, including fair valuations which have not changed. The Board reviews the Quarterly Report and discusses the valuation of the fair valued securities.

The Valuation Committee reviews all Quarterly Reports and any other interim reports, and reviews and approves the valuation of all fair valued securities. This review includes a review and discussion of an updated fair valuation summary with appropriate levels of representatives of the Adviser’s management.
 

 
 
 
 
 
The following is a summary of the fair valuations according to the inputs used as of March 31, 2014 (Unaudited) in valuing the Fund's investments:
 
     
Quoted Prices in Active Markets for Identical Investments (Level 1)*
    
Significant Other
Observable Inputs
Investments (Level 2)*
    
Unobservable Inputs
(Level 3) ***
    
Total
   
   
Investment Companies
     $ 129,244,707     $ 138,889     $ 2,611,001     $ 131,994,597
Preferred Stocks
       550,132       -       5,742,291       6,292,423
Common Stocks
                                
Health Care Providers & Services
       -       -       3,075       3,075
Insurance
       3,592,394       -       -       3,592,394
IT Services
       96,614       -       -       96,614
Life Insurance
       3,344,326       -       -       3,344,326
Real Estate
       -       -       310,285       310,285
Real Estate Investments Trusts
       2,757,263       -       -       2,757,263
Software
       246,192       -       -       246,192
Special Purpose Acquisition Vehicle
       10,138,252       6,400,463       -       16,538,715
Corporate Bonds
       -       495,625       75,000       570,625
Promissory Notes
       -       -       2,234,000       2,234,000
Convertible Bonds
       -       3,119,298       -       3,119,298
Warrants
       183,791       853,355       474       1,037,620
Money Market Funds
       6,325,473       -       -       6,325,473
Total
     $ 156,479,144     $ 11,007,630     $ 10,976,126     $ 178,462,900
                                 
Liabilities:
                                
Securities Sold Short
     $ 1,617,240     $ -     $ -     $ 1,617,240
 
* Transfers between Levels are recognized at the end of the reporting period.
 
** Transfers between Level 1 and Level 2 securities as of March 31, 2014 resulted from securities priced previously with an official close price (Level 1 securities) or on days where there is not an official close price the bid price is used (Level 2 securities).
 
 
 
 
 
 
Transfers as of March 31, 2014 are summarized in the table below:
 
Transfers into Level 1
 $ 5,364,173  
Transfers out of Level 1
   2,077,096  
Net transfers in and/or out of Level 1
 $ 3,287,077  
       
Transfers into Level 2
 $ 2,077,096  
Transfers out of Level 2
   5,364,173  
Net transfers in and/or out of Level 2
 $ (3,287,077 )
       
***The Fund measures Level 3 activity as of the beginning and end of each financial reporting period.
 
 
 
 
 
 
Level 3 Reconciliation Disclosure
 
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
                     
Category
  
Balance
as of 12/31/2013
    
Acquisitions
    
Dispositions
    
Realized Gain
    
Change
in unrealized appreciation (depreciation)
    
Transfers into
Level 3
    
Balance
as of
3/31/2014
  
Closed End Funds
   $ 100,501     $ -     $ -     $ -     $ -     $ -     $ 100,501  
Auction Rate Preferred Securities
     5,186,250       -       (3,025,000 )     474,812       (125,562 )     -       2,510,500  
Preferred Stock
     5,721,001       -       -       -       21,290       -       5,742,291  
Common Stock
     261,236       -       -       -       52,124       -       313,360  
Corporate Bonds
     75,000       -       -       -       -       -       75,000  
Promissory Notes
     2,234,000       -       -       -       -       -       2,234,000  
Warrants
     173       -       -       -       301       -       474  
    $ 13,578,161     $ -     $ (3,025,000 )   $ 474,812     $ (51,847 )   $ -     $ 10,976,126  
 
 
 
 
 
 
 
The following table presents additional information about valuation methodologies and inputs used for investments that are measured at fair value and categorized within Level 3 as of March 31, 2014:
 
   
Fair Value March 31, 2014
    
Valuation
Methodologies
    
Unobservable
Input(1)
    
Impact to Valuation from
an increase in Input(2)
Closed End Funds
   $ 100,501    
Market Assessment and Company-Specific Information
    
Discount to Last Reported Net Asset Value
    
Decrease
Auction Rate Preferred Securities
     2,510,500    
Market Comparables/Cost
    
Comparability Adjustments/ Broker Indications/ Company Announcements
    
Increase
Preferred Stock
     5,742,291    
Amortized Cost
    
Market Assessments/ Financial Assessments
    
Increase
Common Stock
     313,360    
Market Transactions Approach
    
Discount to Market Price for Share Restrictions
    
Decrease
Corporate Bonds
     75,000    
Market Transactions Approach
    
Single Broker Quote
    
Increase
Promissory Notes
     2,234,000    
Cost and Market Assessment
    
Terms of the Note/ Financial Assessments/ Company Announcements
    
Increase
Warrants
     474    
Market Transactions Approach
    
Discount to Market Price for Share Restrictions
    
Decrease
 
(1)
In determining certain of these inputs, management evaluates a variety of factors including economic conditions, foreign exchange rates, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities.  Management has determined that market participants would take these inputs into account when valuing the investments.
   
(2)
This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect.


 
 
 
 
The cost basis of investments for federal income tax purposes at March 31, 2014 was as follows*:
 
Cost of investments
   $ 158,103,890  
Gross unrealized appreciation on 
     investments 
     22,415,360  
Gross unrealized depreciation on 
     investments
     (2,056,350 )
Gross unrealized depreciation on 
     short sales
     (11,210 )
Net unrealized appreciation  
   $ 20,347,800  
 
* Because tax adjustments are calculated annually, the above table reflects the tax adjustments outstanding at the Fund’s previous fiscal year end.  For the previous fiscal year’s federal income tax information, please refer to the Notes to Financial Statements section in the Fund’s most recent semi-annual or annual report.


 
 
 
 
Special Opportunities Fund
 
The fair value of derivative instruments as reported within this Schedule of Investments as of March 31, 2014:
         
         
Derivatives not accounted for
as hedging instruments
  
Statement of Assets &
   Liabilities Location
  
Value
Equity Contracts - Warrants
  
 Investments, at value
   $ 1,037,620
           
 
The effect of derivative instruments on income for the period ended March 31, 2014:
      
           
    Amount of Realized Gain on Derivatives Recognized in Income  
 
Derivatives not accounted for
as hedging instruments
  
Statement of Operations
            Location
  
Value
Equity Contracts - Warrants
  
Net Realized Gain
   $ 102,401
   
  on Investments
      
           
    Change in Unrealized Appreciation on Derivatives Recognized in Income  
 
Derivatives not accounted for
as hedging instruments
  
Statement of Operations
            Location
  
Total
Equity Contracts - Warrants
  
   Net change in unrealized
   $ 53,555
   
appreciation of investments
      


 
 
 
 
The following issuer is affiliated with the Fund; that is, the Fund held 5% or more of the outstanding Voting shares during the period ended December 31, 2013 through March 31, 2014.  As defined in Section (2)(a)(3) of the Investment Company Act of 1940, such issuers are:
 
                               
Issuer Name
Share
Balance
at
Dec. 31,
2013
  
Additions
  
Reductions
  
Share
Balance
at
March 31,
2014
  
Realized
Gain
  
Dividend
Income
  
Value
at
March 31,
2014
  
Acquisition
Cost
Aquasition Corp.*
400,000
  
-
  
-
  
400,000
  
-
  
-
  
4,084,000
  
3,915,747
                               
                               
* Aquasition Corp. is a Special Purpose Acquisition Company (SPAC). A SPAC is a publicly-traded buyout company that raises money in order to pursue the acquisition of an existing company.
 

 
 
 
 
 
Item 2. Controls and Procedures.
 
(a)  
The Registrant’s President and Chief Financial Officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) (17 CFR 270.30a-3(c)) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rule 13a-15(b) or Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(d)).

(b)  
There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) (17 CFR 270.30a-3(d)) that occurred during the Registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Item 3. Exhibits.
 
Separate certifications for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)).  Filed herewith.
 
 
 
 
 
 
 
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)  Special Opportunities Fund, Inc.                                                                                                                                 

By (Signature and Title) /s/ Andrew Dakos                                                                                                                                                 
 Andrew Dakos, President

Date  May 21, 2014                                                                                                                                                                      



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 (Signature and Title) /s/ Andrew Dakos                                                 
 Andrew Dakos, President

Date  May 21, 2014                                                                                                                

 
By (Signature and Title) /s/ Thomas Antonucci                                                                                                                                      
 Thomas Antonucci, Chief Financial Officer

Date  May 21, 2014