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:  September 30, 2014

 
 
 
 
 
 
Item 1. Schedule of Investments.
 
Special Opportunities Fund, Inc.
            
Portfolio of Investments
            
September 30, 2014 (Unaudited)
            
             
INVESTMENT COMPANIES - 72.81%
  
Shares
    
Fair Value
  
Closed-End Funds - 62.81%
            
Aberdeen Israel Fund, Inc.
     25,325     $ 440,148  
Adams Express Co. (j)
     351,652       4,902,029  
Advance Developing Markets Fund Ltd. (a)(h)
     191,414       1,360,704  
AllianceBernstein Income Fund, Inc.
     599,725       4,497,937  
ARC Capital Holdings Ltd. (g)(h)
     561,405       124,913  
Atlantis Japan Growth Fund Ltd. (a)(h)
     56,000       108,487  
Bancroft Fund, Ltd.
     79,335       1,567,660  
Blackrock Latin American Investment Trust PLC (h)
     80,000       578,423  
Boulder Growth & Income Fund, Inc.
     428,406       3,787,109  
Boulder Total Return Fund, Inc.
     184,149       4,850,485  
Central Europe, Russia, & Turkey Fund, Inc.
     10,484       260,318  
Central Securities Corp.
     136,479       3,136,287  
Clough Global Equity Fund
     209,749       3,005,703  
Deutsche Global High Income Fund
     70,932       574,549  
Deutsche High Income Opportunities Fund
     270,864       3,965,449  
Diversified Real Asset Income Fund
     489,942       8,686,672  
DWS RREEF Real Estate Fund, Inc. (a)(c)(f)(g)
     126,913       48,227  
DWS RREEF Real Estate Fund II, Inc. (a)(c)(f)(g)
     201,612       114,919  
Ellsworth Fund Ltd.
     55,094       476,563  
First Opportunity Fund, Inc.
     279,106       2,704,537  
Gabelli Equity Trust, Inc.
     24,787       158,141  
The GDL Fund
     15,000       158,180  
General American Investors Co., Inc.
     388,050       14,381,133  
Herzfeld Caribbean Basin Fd
     23,520       188,160  
JP Morgan Asian Investment Trust PLC (h)
     28,426       97,464  
Juridica Investments Ltd. (h)
     495,258       1,137,524  
Kubera Cross-Border Fund Ltd. (g)(h)
     380,604       101,811  
Liberty All Star Equity Fund
     1,751,775       10,212,848  
LMP Real Estate Income Fund, Inc.
     148,745       1,670,406  
Madison Strategic Sector Premium Fund
     7,470       92,553  
Marwyn Value Investors Ltd. (h)
     160,023       549,970  
MFS Intermarket Income Trust I
     107,420       896,957  
Millennium India Acquisition Co., Inc. (a)
     34,036       26,208  
Nuveen Diversified Currency Opportunities Fund
     988,014       10,532,229  
Nuveen Dividend Advantage Municipal Fund 3
     160,143       2,189,155  
Nuveen Dividend Advantage Municipal Income Fund
     115,587       1,630,933  
Nuveen Flexible Investment Income Fund
     8,813       154,316  
Nuveen Global Income Opportunties Fund
     262,695       3,246,910  
Nuveen Municipal Advantage Fund, Inc.
     38,037       513,119  
Nuveen Quality Income Municipal Fund, Inc.
     8,205       112,326  
Pacific Alliance Asia Opportunity Fund Ltd. (a)(h)
     294,172       448,612  
The Prospect Japan Fund Ltd. (a)(h)
     240,144       416,558  
Royce Value Trust, Inc.
     128,515       1,863,468  
Swiss Helvetia Fund, Inc.
     518,558       7,016,090  
Terra Catalyst Fund (h)
     20,319       36,151  
Tri-Continental Corp.
     387,319       8,083,348  
Virtus Total Return Fund
     287,299       1,335,940  
The Zweig Total Return Fund, Inc.
     161,168       2,232,177  
              114,673,806  
                 
Closed End Funds - Preferred Shares - 0.67%
                
Oxford Lane Capital Corp. - Series 2017
     47,781       1,230,356  
                 
Auction Rate Preferred Securities - 0.74% (c)(f)
                
BlackRock Municipal 2018 Term Trust - Series W7, 0.088% (b)
     43       1,021,250  
Putnam Managed Municipal Income Trust - Series C
     6       225,000  
Putnam Municipal Opportunities Trust - Series C
     6       112,500  
              1,358,750  
Business Development Company - 6.56%
                
BDCA Venture, Inc.
     62,231       326,711  
Equus Total Return, Inc. (a)
     106,919       236,291  
Fifth Street Senior Floating Rate Corp.
     45,019       532,125  
Firsthand Technology Value Fund, Inc.
     272,130       6,533,841  
MVC Capital, Inc.
     403,584       4,342,564  
              11,971,532  
Business Development Company - Preferred Shares - 2.03%
                
MVC Capital, Inc.
     147,760       3,696,955  
Total Investment Companies (Cost $117,750,431)
             132,931,399  
                 
PREFERRED STOCKS - 3.33%
                
Marine - 0.03%
                
Box Ships, Inc. (h)
     2,474       58,369  
Oil, Gas & Consumable Fuels - 0.13%
                
Miller Energy Resources, Inc.
     9,316       231,661  
Real Estate Investment Trusts - 3.17%
                
Preferred Apartment Communities, Inc. (c)(f)
     6,083       5,784,872  
Total Preferred Stocks (Cost $5,949,405)
             6,074,902  
                 
CONVERTIBLE PREFERRED STOCKS - 0.17%
                
Real Estate Investment Trusts - 0.17%
                
Wheeler Real Estate Investment Trust
     13,085       310,115  
Total Convertible Preferred Stocks (Cost $326,994)
             310,115  
                 
COMMON STOCKS - 15.34%
                
Commercial Services & Supplies - 0.07%
                
Quest Resource Holding Corp. (a)
     70,769       121,723  
Construction Materials - 0.01%
                
Tecnoglass, Inc. (a)(h)
     2,437       26,856  
Consumer Finance - 2.05%
                
Imperial Holdings, Inc. (a)
     581,622       3,751,462  
Health Care Providers & Services - 0.00%
                
Healthcare Corp. of America (Acquired 10/24/2012, Cost $0) (a)(c)(i)
     10,000       150  
Insurance - 4.59%
                
Stewart Information Services Corp.
     285,486       8,379,014  
IT Services - 0.03%
                
JetPay Corp. (a)
     39,596       60,582  
Real Estate Investment Trusts - 3.05%
                
Five Oaks Investment Corp.
     15,791       165,806  
Gladstone Land Corp.
     2,582       31,009  
Gyrodyne Company of America, Inc.
     2,616       13,054  
Gyrodyne Dividend Notes (c)
     11,119       92,618  
Gyrodyne Special Distribution LLC (c)
     10,914       173,205  
Preferred Apartment Communities, Inc.
     31,562       262,596  
Winthrop Realty Trust
     320,219       4,825,700  
              5,563,988  
Software - 0.14%
                
Single Touch Systems, Inc. (a)
     623,270       261,773  
Special Purpose Acquisition Vehicle - 5.24% (a)
                
1347 Capital Corp.
     76,600       773,660  
Capitol Acquisition Corp. II
     155,122       1,521,747  
CIS Acquisition Ltd. (h)
     18,395       189,468  
Garnero Group Acquisition Co. (h)
     153,199       1,531,990  
Global Defense & National Security Systems, Inc.
     142,712       1,464,225  
Hennessy Capital Acquisition Corp.
     65,223       639,186  
Levy Acquisition Corp.
     37,874       366,620  
MergeWorthRx Corp.
     23,185       190,813  
Quartet Merger Corp. (h)
     132,553       1,269,858  
ROI Acquisition Corp II
     57,484       566,217  
Silver Eagle Acquisition Corp.
     9,016       89,619  
Sino Mercury Acquisition Corp.
     33,634       336,340  
Terrapin 3 Acquisition Corp.
     62,138       624,487  
              9,564,230  
Thrifts & Mortgage Finance - 0.16%
                
Federal Home Loan Mortgage Corp. (a)
     107,146       282,865  
Total Common Stocks (Cost $26,683,927)
             28,012,643  
                 
LIQUIDATION CLAIMS - 2.03% (a)(f)
                
The Home Insurance Company in Liquidation
     1       1,620,938  
The Home Insurance Company in Liquidation II
     1       2,078,125  
Total Liquidation Claims (Cost $3,738,000)
             3,699,063  
                 
   
Principal
          
   
Amount
          
CONVERTIBLE BONDS - 1.88% (b)
                
Imperial Holdings, Inc.
                
8.500%, 02/15/2019
     2,941,000       3,426,265  
Total Convertible Bonds (Cost $2,941,000)
             3,426,265  
                 
CORPORATE BONDS - 0.29% (b)
                
JC Penney Corp., Inc.
                
6.375%, 10/15/2036
     650,000       503,750  
Washington Mutual, Inc.
                
0.000%, 09/17/2012 (c)(d)(f)
     3,000,000       30,000  
WMI Holdings Corp.
                
13.000%, 03/19/2030 - 1st Lien
     359       352  
13.000%, 03/19/2030 - 2nd Lien
     3,775       3,699  
Total Corporate Bonds (Cost $463,391)
             537,801  
                 
PROMISSORY NOTES - 1.22% (b)(c)(f)
                
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) (i)
     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) (i)
     800,000       800,000  
Total Promissory Notes (Cost $2,234,000)
             2,234,000  
                 
   
Shares
          
RIGHTS - 0.06% (a)
                
Gabelli Equity Trust, Inc.
     24,787       1,433  
Quartet Merger Corp. (h)
     132,553       112,670  
Total Rights (Cost $89,357)
             114,103  
                 
WARRANTS - 0.41% (a)
                
Aquasition Corp.
                
Expiration: January 2018
     400,000       64,000  
Exercise Price: $11.50 (h)
                
Arabella Exploration, Inc.
                
Expiration: December 2016
     25,448       39,953  
Exercise Price: $5.00 (h)
                
Capitol Acquisition Corp. II
                
Expiration: May 2016
     77,561       26,371  
Exercise Price: $11.50
                
Chart Acquisition Corp.
                
Expiration: December 2017
     124,265       68,346  
Exercise Price: $11.50
                
CIS Acquisition Ltd.
                
Expiration: December 2017
     61,826       24,730  
Exercise Price: $10.00 (h)
                
Collabrium Japan Acquisition Corp.
                
Expiration: December 2017
     208,234       37,482  
Exercise Price: $11.50 (h)
                
EvryWare Global, Inc.
                
Expiration: May 2018
     48,370       4,111  
Exercise Price: $6.00
                
Healthcare Corp. of America
                
Expiration: November 2016
     33,753       71  
Exercise Price: $7.50
                
Expiration: July 2018
     5,000       8  
Exercise Price: $11.50 (Acquired 10/24/2012, Cost $0) (c)(i)
                
Hemisphere Media Group, Inc.
                
Expiration: April 2018
     166,726       183,399  
Exercise Price: $6.00 (f)
                
Hennessy Capital Acquisition Corp.
                
Expiration: March 2019
     65,223       34,242  
Exercise Price: $5.75
                
Integrated Drilling Equipment Holdings Corp.
                
Expiration: December 2017
     205,929       6,178  
Exercise Price: $11.50
                
Levy Acquisition Corp.
                
Expiration: January 2018
     26,866       9,403  
Exercise Price: $11.50
                
Net Element, Inc.
                
Expiration: October 2017
     159,476       28,706  
Exercise Price: $7.50
                
Perferred Apartment Communities
                
Expiration: March 2017
     6,083       61  
Exercise Price: $9.00 (c)(f)
                
Pingtan Marine Enterprise Ltd.
                
Expiration: February 2018
     52,798       7,920  
Exercise Price: $12.00 (h)
                
Prime Acquisition Corp.
                
Expiration: March 2018
     50,142       9,025  
Exercise Price: $5.00 (h)
                
Quest Resource Holding Corp.
                
Expiration: September 2019
     70,769       708  
Exercise Price: $2.50 (c)(f)
                
RLJ Entertainment, Inc.
                
Expiration: October 2017
     436,744       41,491  
Exercise Price: $12.00
                
ROI Acquisition Corp II
                
Expiration: September 2018
     57,484       12,646  
Exercise Price: $11.50
                
Silver Eagle Acquisition Corp.
                
Expiration: July 2018
     9,016       4,057  
Exercise Price: $11.50
                
Tecnoglass, Inc.
                
Expiration: December 2016
     45,477       143,252  
Exercise Price: $8.00 (h)
                
Wheeler Real Estate Investment Trust, Inc.
                
Expiration: December 2018
     84,211       0  
Exercise Price: $4.75 (c)(f)
                
Expiration: April 2019
     15,702       6,281  
Exercise Price: $5.50
                
Total Warrants (Cost $691,863)
             752,441  
                 
MONEY MARKET FUNDS - 1.74%
                
Fidelity Institutional Government Portfolio - Class I, 0.010% (e)
     1,582,420       1,582,420  
Fidelity Institutional Tax-Exempt Portfolio - Class I, 0.010% (e)
     1,582,421       1,582,421  
Total Money Market Funds (Cost $3,164,841)
             3,164,841  
                 
Total Investments (Cost $164,033,209) - 99.28%
             181,257,573  
Other Assets in Excess of Liabilities - 0.72%
             1,306,839  
TOTAL NET ASSETS - 100.00%
           $ 182,564,412  
 
Percenatges are stated as a percent of net assets.
                
   
(a)
  
Non-income producing security.
                
(b)
  
The coupon rates shown represent the rates at September 30, 2014.
                
(c)
  
Fair valued securities. The total market value of these securities was $9,837,518, representing 5.39% 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 September 30, 2014.
                
(f)
  
Illiquid security. The total market value of these securities was $13,453,999, representing 7.37% of net assets.
                
(g)
  
Security currently undergoing a full liquidation with all proceeds paid out to shareholders.
                
(h)
  
Foreign-issued security.
                
(i)
  
Restricted security.
                
(j)
  
All or a portion of this security is pledged as collateral for securities sold short.
                
 
Schedule of Securities Sold Short
                
September 30, 2014 (Unaudited)
                
   
Shares
    
Value
  
First American Financial Corp.
     (63,973 )   $ (1,734,948 )
Total Securities Sold Short (Proceeds $1,688,821)
           $ (1,734,948 )

 

 
 
 
 
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 September 30, 2014 in valuing the Fund's investments:
        
                         
   
Quoted Prices in
                   
   
Active Markets for
    
Significant Other
              
   
Identical Investments
(Level 1)*
    
Observable Inputs
(Level 2)*
    
Unobservable Inputs
(Level 3)**
    
Total
  
Investment Companies
   $ 131,347,144     $ 62,359     $ 1,521,896     $ 132,931,399  
Preferred Stocks
                                
Marine
     58,369       -       -       58,369  
Oil, Gas & Consumable Fuels
     231,661       -       -       231,661  
Real Estate Investment Trusts
     -       -       5,784,872       5,784,872  
Convertible Preferred Stocks
     310,115       -       -       310,115  
Common Stocks
                                
Commercial Services & Supplies
     121,723       -       -       121,723  
Construction Materials
     -       26,856       -       26,856  
Consumer Finance
     3,751,462       -       -       3,751,462  
Health Care Providers & Services
     -       -       150       150  
Insurance
     8,379,014       -       -       8,379,014  
IT Services
     60,582       -       -       60,582  
Real Estate Investments Trusts
     5,298,165       -       265,823       5,563,988  
Software
     261,773       -       -       261,773  
Special Purpose Acquisition Vehicle
     7,910,536       1,653,694       -       9,564,230  
Thrifts & Mortgage Finance
     282,865       -       -       282,865  
Home Insurance Claims
     -       3,699,063       -       3,699,063  
Convertible Bonds
     -       3,426,265       -       3,426,265  
Corporate Bonds
     -       537,801       -       537,801  
Promissory Notes
     -       -       2,234,000       2,234,000  
Rights
     114,103       -       -       114,103  
Warrants
     218,329       533,336       776       752,441  
Money Market Funds
     3,164,841       -       -       3,164,841  
Total
   $ 161,510,682     $ 9,939,374     $ 9,807,517     $ 181,257,573  
                                 
                                 
Liabilities:
                                
Securities Sold Short
   $ (1,734,948 )   $ -     $ -     $ (1,734,948 )
                                 
* Transfers between Levels are recognized at the end of the reporting period.
                          
**The Fund measures Level 3 activity as of the beginning and end of each financial reporting period.
                  
 
 
 
 
 
 
 
Transfers between Level 1 and Level 2 securities as of September 30, 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 September 30, 2014 are summarized in the table below:
   
Transfers into Level 1
                                
Investment Companies
   $ 550,424                          
Common Stock
                                
Special Purpose Acquisition Vehicle
     1,521,747                          
Warrants
     24,730                          
Transfers out of Level 1
                                
Investment Companies
     26,208                          
Common Stock
                                
Special Purpose Acquisition Vehicle
     1,653,693                          
Warrants
     305,884                          
Net transfers in and/or out of Level 1
   $ 111,116                          
                                 
Transfers into Level 2
                                
Investment Companies
   $ 26,208                          
Common Stock
                                
Special Purpose Acquisition Vehicle
     1,653,693                          
Warrants
     305,884                          
Transfers out of Level 2
                                
Investment Companies
     550,424                          
Common Stock
                                
Special Purpose Acquisition Vehicle
     1,521,747                          
Warrants
     24,730                          
Net transfers in and/or out of Level 2
   $ (111,116 )                        

 
 
 
 
 
 
Level 3 Reconciliation Disclosure
                                      
                                       
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
        
                                           
   
Balance
as of
12/31/2013
    
Acquisitions
    
Dispositions
    
Realized
Gain (Loss)
    
Change
in unrealized appreciation (depreciation)
    
Transfers into / (out of)
Level 3
    
Balance
as of
9/30/2014
  
Closed End Funds
   $ 100,501     $ -     $ -     $ -     $ 62,645     $ -     $ 163,146  
Auction Rate Preferred 
   Securities
     5,186,250       -       (4,390,500 )     713,437       (150,437 )     -       1,358,750  
Preferred Stock
     5,721,001       -       -       -       63,871       -       5,784,872  
Common Stock
     261,236       2,228       -       -       2,509       -       265,973  
Corporate Bonds
     75,000       -       -       -       (45,000 )     (30,000 )     -  
Promissory Notes
     2,234,000       -       -       -       -       -       2,234,000  
Warrants
     173       708       -       -       (105 )     -       776  
    $ 13,578,161     $ 2,936     $ (4,390,500 )   $ 713,437     $ (66,517 )   $ (30,000 )   $ 9,807,517  
 
 
   
Fair Value
September 30,
2014
  
Valuation
Methodologies
  
Unobservable Input(1)
  
Impact to Valuation
from an increase
in Input(2)
Closed End Funds
   $ 163,146  
Market Assessment and
Company-Specfic Information
  
Discount to Last Reported
Net Asset Value
  
Decrease
Auction Rate Preferred
   Securities
   $ 1,358,750  
Market Comparables
  
Comparability Adjustments/ Broker Indications/
Company Announcements
  
Increase
Preferred Stock
   $ 5,784,872  
Cost
  
Market Assessments/
Financial Assessements
  
Increase
Common Stock
   $ 265,973  
Market Transactions Approach
  
Discount to Market Price for
Share Restrictions
  
Decrease
Promissory Notes   $ 2,234,000   Cost  
Terms of the Note/ Financial Assessements/
Company Announcements
    
Increase
Warrants
   $ 776  
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 September 30, 2014 was as follows*:
 
Cost of investments
   $ 164,033,209  
Gross unrealized appreciation on investments 
     20,979,546  
Gross unrealized depreciation  on investments
     (3,755,182 )
Gross unrealized depreciation on short sales
     (46,127 )
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 September 30, 2014:
 
         
Derivatives not accounted for
as hedging instruments
Statement of Assets &
Liabilities Location
  
Value
  
Equity Contracts - Warrants
Investments, at value
   $ 752,441  
 
The effect of derivative instruments on income for the period ended September 30, 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
   $ 330,552  
   
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
   $ (69,772 )
   
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 September 30, 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
 Sept. 30,
2014
    
Realized
Gain
    
Dividend
Income
    
Value at
Sept. 30,
2014
    
Acquisition
Cost
  
Aquasition Corp.*
     400,000       28,661       (428,661 )     -       206,832       -       -     $ 4,208,376  
                                                                 
* 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   November 25, 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   November 25, 2014                                                                                                                              

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

Date   November 25, 2014