specialopps_nq.htm
 
As filed with the Securities and Exchange Commission on November 29, 2011



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
Brooklyn Capital Management, 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: 12/31/2011
 
Date of reporting period:  9/30/2011

 
 
 
 
Item 1. Schedule of Investments.
 
Special Opportunities Fund, Inc.
            
Portfolio of investments - September 30, 2011 (Unaudited)
            
               
INVESTMENT COMPANIES - 67.96%
  
Shares
    
Value
  
Closed-End Funds - 48.83%
            
Adams Express Company
     276,839     $ 2,549,687  
AllianceBernstein Income Fund
     111,446       888,225  
Alpine Global Premier Properties Fund
     434,885       2,322,286  
American Strategic Income Portfolio II
     25,965       211,874  
American Strategic Income Portfolio III
     28,452       195,181  
Bancroft Fund, Ltd.
     41,401       612,735  
BlackRock Credit Allocation Income Trust IV
     58,814       675,185  
Boulder Growth & Income Fund, Inc.
     316,668       1,729,007  
Boulder Total Return Fund, Inc. (a)
     184,149       2,486,012  
Diamond Hill Financial Trends Fund, Inc.
     23,503       177,213  
DWS RREEF Real Estate Fund, Inc. (a)(c)(f)(g)
     126,913       11,803  
DWS RREEF Real Estate Fund II, Inc. (a)(c)(f)(g)
     201,612       28,830  
Eaton Vance Risk-Managed Diversified Equity Income Fund
     125,830       1,377,839  
Federated Enhanced Treasury Income Fund
     4,532       67,980  
First Opportunity Fund, Inc. (a)
     279,106       1,685,800  
First Trust Strategic High Income Fund III
     111,408       442,290  
Gabelli Global Multimedia Trust, Inc.
     421,652       2,639,542  
The GDL Fund
     33,327       397,258  
The Greater China Fund, Inc.
     32,172       313,999  
The Ibero-America Fund, Inc.
     83,394       467,840  
Korea Equity Fund, Inc. (a)
     10,361       115,940  
Liberty All-Star Equity Fund, Inc.
     1,216,118       4,986,083  
Liberty All-Star Growth Fund, Inc.
     349,392       1,257,811  
LMP Capital and Income Fund, Inc.
     85,386       977,670  
Macquarie Global Infrastructure Total Return Fund, Inc.
     80,776       1,237,488  
Morgan Stanley Asia Pacific Fund, Inc.
     33,095       464,323  
Neuberger Berman Real Estate Securities Income Fund, Inc.
     6,520       22,950  
The New Ireland Fund, Inc.
     188,171       1,324,724  
Nuveen Multi-Strategy Income and Growth Fund 2
     20,432       160,596  
Royce Focus Trust, Inc.
     17,500       105,700  
Royce Micro-Cap Trust, Inc.
     440,426       3,364,854  
Royce Value Trust, Inc.
     348,093       3,856,869  
Shelton Greater China Fund (a)
     82,342       487,465  
SunAmerica Focused Alpha Growth Fund, Inc.
     225,093       3,961,636  
SunAmerica Focused Alpha Large-Cap Fund, Inc.
     36,307       568,205  
Tri-Continental Corporation
     387,319       4,926,697  
TS&W/Claymore Tax-Advantaged Balanced Fund
     227,567       2,482,756  
The Zweig Total Return Fund, Inc.
     535,885       1,618,373  
                51,200,726  
                   
Auction Rate Preferred Securities - 16.60% (b)(c)
                
BlackRock California Municipal 2018 Term Trust - Series M7, 0.259%
     100       2,250,000  
BlackRock Municipal 2018 Term Trust - Series W7, 0.244%
     100       2,250,000  
BlackRock Municipal Bond Trust - Series R7, 0.244%
     75       1,687,500  
BlackRock Municipal Bond Trust - Series T7, 0.244%
     75       1,687,500  
BlackRock Municipal Income Quality Trust - Series F7, 0.244%
     60       1,350,000  
BlackRock MuniHoldings Fund, Inc. - Series C, 1.335%
     25       562,500  
BlackRock MuniHoldings Fund II, Inc. - Series A, 0.244%
     50       1,125,000  
BlackRock New York Municipal Bond Trust - Series T7, 0.244%
     52       1,300,000  
Federated Premier Intermediate Municipal Income Fund - Series A, 0.055%
     132       2,825,625  
Invesco Quality Municipal Investment Trust - Series A, 0.066%
     53       2,226,000  
MFS High Yield Municipal Trust - Series F, 0.244%
     1       18,750  
Western Asset Premier Bond Fund - Series M, 0.060%
     6       120,000  
                17,402,875  
                   
Business Development Company - 2.53%
                
Capital Southwest Corporation
     1,468       108,632  
Equus Total Return, Inc. (a)
     106,919       201,008  
MVC Capital, Inc.
     163,994       1,717,017  
Prospect Capital Corporation
     75,047       631,145  
                2,657,802  
Total Investment Companies (Cost $73,321,032)
             71,261,403  
                   
COMMON STOCKS - 25.76%
                
Oil and Gas Field Exploration Services - 0.03%
                
Zion Oil & Gas, Inc. (a)(h)
     14,090       27,616  
Pharmaceuticals Preparations - 0.08%
                
Myrexis, Inc. (a)
     31,255       85,639  
Real Estate Investment Trusts - 0.51%
                
Gyrodyne Company of America, Inc. (a)
     9,942       531,996  
Special Purpose Acquisition Vehicle - 25.14%
                
Australia Acquisition Corporation (a)
     250,000       2,427,500  
Azteca Acquisition Corporation (a)(h)
     189,924       1,899,240  
Blue Wolf Mongolia Holdings Corporation (a)
     50,273       481,615  
Cazador Acquisition Corporation, Ltd. (a)
     200,000       1,938,000  
China Growth Equity Investment, Ltd. (a)
     52,798       501,053  
China VantagePoint Acquisition Company (a)(i)
     27,130       153,285  
Empeiria Acquisition Corporation (a)
     182,343       1,825,253  
FlatWorld Acquisition Corporation (a)(h)
     105,702       1,004,169  
Global Cornerstone Holdings, Ltd. (a)(h)
     115,935       1,147,757  
Global Eagle Acquisition Corporation (a)
     54,028       513,266  
Hicks Acquisition Company II, Inc. (a)
     248,537       2,385,955  
JWC Acquisition Corporation (a)
     377,578       3,643,628  
L&L Acquisition Corporation (a)
     100,000       970,000  
Lone Oak Acquisition Corp. (a)
     81,430       627,011  
Nautilus Marine Acquisition Corporation (a)
     127,846       1,208,145  
Prime Acquisition Corporation (a)
     65,008       617,576  
RLJ Acquisition, Inc. (a)
     312,788       2,971,486  
SCG Financial Acquisition Corporation (a)
     154,865       1,455,731  
Universal Business Payment Solutions Acquisition Corporation (a)(h)
     100,000       591,000  
                26,361,670  
Total Common Stocks (Cost $27,182,778)
             27,006,921  
                   
     
Principal
          
     
Amount
          
CORPORATE BONDS - 4.21%
                
Washington Mutual, Inc.
                
0.000%, 09/17/2012 (d)
   $ 3,000,000       3,000,000  
5.250%, 09/15/2017 (d)
     1,300,000       1,417,000  
Total Corporate Bonds (Cost $4,454,338)
             4,417,000  
                   
CONVERTIBLE BONDS - 0.33%
                
RB Foods, Inc.
                
12.000%, 11/18/2011 (c)
     350,000       350,000  
Total Convertible Bonds (Cost $350,000)
             350,000  
                   
STRUCTURED LIFE SETTLEMENT NOTES - 0.92%
                
Cedar Lane Series A-2 Notes (c)(f)
     959,378       959,378  
Total Structured Life Settlement Notes (Cost $959,378)
             959,378  
                   
     
Shares
          
WARRANTS - 0.66%
                
Australia Acquisition Corporation
                
Expiration: October 2015
     250,000       62,500  
Exercise Price: $11.50 (a)
                
Blue Wolf Mongolia Holdings Corporation
                
Expiration: July 2016
     50,273       30,164  
Exercise Price: $12.00 (a)
                
Cazador Acquisition Corporation, Ltd.
                
Expiration: October 2015
     228,491       68,547  
Exercise Price: $7.50 (a)
                
China Growth Equity Investment, Ltd.
                
Expiration: February 2013
     52,798       18,479  
Exercise Price: $12.00 (a)
                
FlatWorld Acquisition Corporation
                
Expiration: September 2012
     30,248       9,074  
Exercise Price: $11.00 (a)
                
Hicks Acquisition Company II, Inc.
                
Expiration: July 2017
     200,000       90,000  
Exercise Price: $12.00 (a)
                
JWC Acquisition Corporation
                
Expiration: November 2015
     150,000       82,500  
Exercise Price: $11.50 (a)
                
L&L Acquisition Corporation
                
Expiration: November 2015
     100,000       42,000  
Exercise Price: $11.50 (a)
                
Lone Oak Acquisition Corp.
                
Expiration: March 2016
     81,430       24,429  
Exercise Price: $5.00 (a)
                
Nautilus Marine Acquisition Corporation
                
Expiration: July 2016
     127,846       38,354  
Exercise Price: $11.50 (a)
                
Prime Acquisition Corporation
                
Expiration: March 2016
     51,442       23,149  
Exercise Price: $7.50 (a)
                
RLJ Acquisition, Inc.
                
Expiration: February 2016
     353,462       141,385  
Exercise Price: $12.00 (a)
                
SCG Financial Acquisition Corporation
                
Expiration: May 2016
     154,865       54,203  
Exercise Price: $11.50 (a)
                
Zion Oil & Gas, Inc.
                
Expiration: August 2012
     20,170       5,646  
Exercise Price: $3.50 (a)
                
Total Warrants (Cost $816,979)
             690,430  
                   
MONEY MARKET FUNDS - 0.74%
                
Fidelity Institutional Government Portfolio - Class I, 0.01% (e)
     391,443       391,443  
Fidelity Institutional Tax-Exempt Portfolio - Class I, 0.01% (e)
     387,689       387,689  
Total Money Market Funds (Cost $779,132)
             779,132  
Total Investments (Cost $107,863,637) - 100.58%
             105,464,264  
Liabilities in Excess of Other Assets - (0.58)%
             (604,281 )
TOTAL NET ASSETS - 100.00%
           $ 104,859,983  
                   
Percentage are stated as a percent of net assets.
                
                   
(a)
Non-income producing security.
                
(b)
The coupon rates shown represent the rates at September 30, 2011.
          
(c)
Fair valued securities. The total market value of these securities was $18,752,886, representing 17.88% 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, 2011.
                
(f)
Illiquid security.
                
(g)
Security currently undergoing a full liquidation with all proceeds paid out to shareholders.
  
(h)
Each unit consists of one share of common stock and one warrant.
          
(i)
Each unit consists of one share of common stock, one half of a non-transferrable warrant and one half of a transferrable warrant.
  
 
 
 
 
 
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 into 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 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 following is a summary of the fair valuations according to the inputs used as of September 30, 2011 in valuing the Fund's investments:
  
 
   
Quoted Prices in Active
    
Significant Other
              
   
Markets for Identical
    
Observable Inputs
    
Unobservable Inputs
  
   
Investments (Level 1)
    
(Level 2)
    
(Level 3)
    
Total
  
Investment Companies
   $ 53,350,055     $ 508,473     $ 17,402,875     $ 71,261,403  
Common Stocks
     6,656,104       20,350,817       -       27,006,921  
Corporate Bonds
     -       4,417,000       -       4,417,000  
Convertible Bonds
     -       -       350,000       350,000  
Structured Life Settlement Notes
     -       -       959,378       959,378  
Warrants
     164,193       526,237       -       690,430  
Money Market Funds
     779,132       -       -       779,132  
Total
   $ 60,949,484     $ 25,802,527     $ 18,712,253     $ 105,464,264  
 
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
         
Balance as of December 31, 2010
 $
19,966,625
  
Accrued discounts / premiums
  
                                -
  
Realized gain (loss)
    
                      754,812
  
Change in unrealized appreciation (depreciation)
  
                      906,563
  
Purchases
    
                   3,314,375
  
Sales
    
                 (6,230,122
 )
Transfers in and / or out of Level 3
  
                                -
  
Balance as of September 30, 2011
 $
18,712,253
  
 
There were transfers from Level 1 to Level 2 of $8,008,339 using market value as of September 30, 2011. The transfers were due to lack of trading volume on September 30, 2011.  There were transfers from Level 2 to Level 1 of $6,701,396 using market value as of September 30, 2011. The transfers were due to increased trading volume on September 30, 2011. Transfers between levels are recognized at the end of the reporting period.
 
The cost basis of investments for federal income tax purposes at September 30, 2011 was as follows*:

Cost of investments                                                                        $107,863,637
Gross unrealized appreciation                                                           2,517,367
Gross unrealized depreciation                                                          (4,916,740)
Net unrealized depreciation                                                            $(2,399,373)

*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.
 
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 28, 2011                                                                                      



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 28, 2011                                                                                      

 
By (Signature and Title)  /s/   Gerald Hellerman                                                
Gerald Hellerman, Chief Financial Officer

Date  November 28, 2011