N-CSR 1 sof-ncsra.htm SPECIAL OPPORTUNITIES FUND, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES


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 10570
(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: 12/31/2017


Date of reporting period:  12/31/2017


Item 1. Reports to Stockholders.

Special Opportunities Fund, Inc.
(SPE)
Annual Report
For the year ended
December 31, 2017
 
 
 



Special Opportunities Fund, Inc.
 

February 26, 2018
 
Dear Fellow Shareholders:
 
In the second half of 2017, the net asset value (NAV) of the common stock of Special Opportunities Fund increased by 6.29% (after accounting for the year-end cash dividend of $1.33 per share) to close at $16.70. For the entire year, the net asset value (NAV) was up by 15.93%. The price of the common stock was $14.88 at the end of 2017, a discount of 10.90% from the NAV. By comparison, the S&P 500 Index advanced by 11.42% in the second half of the year and 21.83% for the entire year.
 
As a result of the aforementioned dividend of $1.33 per share, a holder of convertible preferred stock who elects to convert it to common stock would currently receive 1.4828 shares of common stock in exchange for each share of convertible preferred stock (which equates to a conversion price of $16.86 per share). The most recent NAV and diluted NAV of the Fund’s common stock (assuming all shares of convertible preferred stock are converted to common stock) are provided weekly on its website at www.specialopportunitiesfundinc.com.
 
Here are updates on some of our significant positions.
 
In July 2017 Emergent Capital (EMGC.PK), which owns a large portfolio of life insurance policies, completed its recapitalization. We participated in the recap and currently own common stock and convertible notes, both of which have increased in value. Emergent recently announced a proposed acquisition of a specialty finance company in exchange for 6.4 million shares of stock. Although complete details of the transaction have not yet been disclosed, we see the effort to diversify Emergent’s existing platform as a positive.
 
In our last letter, we said that we expected shareholders of Stewart Information Services (STC), a provider of title insurance and other services in connection with real estate transactions, to put pressure on the Board to take steps to maximize shareholder value, including pursuing a sale of the company sooner rather than later. On January 26, 2018, Starboard, a well-known activist firm, delivered a letter to Stewart in which it proposed nominating a slate of three director candidates for election to the Board at the annual meeting of stockholders. We are cautiously optimistic that the prospect of a proxy contest will be a catalyst to a sale.
 
The Fund is part of a group that owns over 8% of the outstanding shares of The Swiss Helvetia Fund (SWZ). At SWZ’s annual meeting last year, we elected two of SWZ’s five directors. The shares currently trade at a discount of about 10% to net asset value (NAV). We believe that shareholder support for a liquidity event at or close to NAV has increased since last year and by the end of this quarter we will decide whether to take further action to achieve that goal.
 


1

Special Opportunities Fund, Inc.
 

Several large shareholders have publicly called for a sale of Hill International (HIL), another of our large holdings. We agree with them. As Barron’s reported a few months ago:
 
 
With its clean balance sheet, Hill is trading at revenue and EBITDA multiples substantially below its peers. However, as the company demonstrates improved profitability, this valuation gap should close. It has been reported that the company hired a banker to explore strategic alternatives, but any sale of the company is unlikely until it completes its financial restatement. An acquisition price at one-times sales for Hill would equate to an $8-to-$9 price per share.
 
We have a good relationship with senior management of Hill and intend to advocate for a sale of the company sooner rather than later.
 
As we said in our last letter, dividends on our 7.625% Series A Cumulative Redeemable Preferred Stock of Brookfield DTLA Fund Office Trust Investor Inc. (DTLA-) have been in arrears for several years. The sum of the face value of the preferred and accrued dividends is about $40 per share, well above the stock’s current price of about $26 because of uncertainty about if (and when) the accrued dividends will be paid. On December 11, 2017, we took a step toward enhancing the value of our investment when Andy Dakos and I were elected as directors to represent the interests of the preferred stockholders. We are looking forward to engaging with our fellow directors and management at the next board meeting in late March.
 
We have continued to opportunistically acquire shares of several closed-end funds managed by Aberdeen at discounts to their NAVs. The proposed merger of these funds is progressing and once completed, we expect a significant self-tender offer for shares of the surviving fund at 99% of NAV in the second quarter of 2018. In addition, the surviving fund will implement additional measures to mitigate any possible widening of the discount in the future.
 
Our investment in New York REIT (NYRT) which is liquidating its portfolio of New York real estate, has been disappointing thus far. However, after paying distributions of $5.07, it has been significantly de-risked. The current share price is about $2.00 and management’s most recent estimate (adjusted for distributions paid) is that at least $2.86 per share will be distributed over time. We think that disparity is largely due to the likelihood that the shares will stop trading by the end of this year and it may take several years to complete the liquidation process. From this point on, NYRT should produce a very good rate of return.
 
We lost a proxy contest for Putnam High Income Securities Fund (PCF) in April 2017. Since then, we have increased our position and our group of investors
 

2

Special Opportunities Fund, Inc.
 
 

affiliated with Bulldog Investors (which includes the Fund) now owns about 15% of the outstanding shares. We recently gave notice of our intent to conduct a proxy contest to gain control of the board and to cause PCF to launch a significant self-tender offer at or close to NAV.
 
We have continued to build a position in Delaware Enhanced Global Dividend and Income Fund (DEX) whose stock is currently trading at about an 8% discount from NAV. Stockholders that are value oriented like us hold large positions in DEX. To avoid a proxy contest, we think management may well opt take measures to address the discount before the annual meeting.
 
In August 2016 Winthrop Realty Trust’s shares were converted into non-transferable liquidating trust units. Winthrop’s largest asset is its interest in a retail/hotel construction project in the tourist-heavy Times Square area of Manhattan which is expected to be completed and sold shortly, followed by a large cash distribution. The property is home to the recently opened NFL Experience Times Square, jointly produced by the NFL and Cirque du Soleil that, according to NFL Commissioner Roger Goodell, “create[s] a captivating and authentic football experience that enables fans to step into the locker room and onto the field of an NFL stadium.” Online reviews have been very positive. We continue to believe that this investment will provide a rate of return that more than compensates for its lack of liquidity.
 
We remind you that the Fund has a policy of seeking instructions from time to time from stockholders with regard to the voting of proxies for certain closed-end funds whose shares the Fund owns. The specific closed-end funds for which the Fund seeks proxy voting instructions from stockholders are available on the Fund’s website and we urge you to check it from time to time if you would like to provide such instructions. You may also email us at proxyinstructions@bulldoginvestors.com if you would like to receive an email notification when the Fund seeks proxy voting instructions for a closed-end fund whose shares it owns.
 
Sincerely yours,
 

Phillip Goldstein
Chairman
 


3

 
 
 
 
 
 
 
 
(This Page Intentionally Left Blank.)
 
 
 
 
 
 
 
 
 

 
4

Special Opportunities Fund, Inc.
 
 
Performance at a glance (unaudited)
 
Average annual total returns for common stock for the periods ended 12/31/2017
Net asset value returns
1 year
5 years
Since 1/25/10
10 years*
Special Opportunities Fund, Inc.
15.93%
7.94%
8.72%
7.68%
         
Market price returns
       
Special Opportunities Fund, Inc.
18.71%
9.09%
8.71%
8.34%
         
Index returns
       
S&P 500® Index
21.83%
15.79%
14.28%
8.50%
 
Share price as of 12/31/17
 
Net asset value
$16.70
Market price
$14.88
 
Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investor’s share, when sold, may be worth more or less than their original cost. The Fund’s common stock net asset value (“NAV”) return assumes, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on payable dates for dividends and other distributions payable through December 31, 2009 and reinvested at the NAV on the ex-dividend date for dividends and other distributions payable after December 31, 2009. The Fund’s common stock market price returns assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Fund’s Dividend Reinvestment Plan (which was terminated on January 1, 2010) for dividends and other distributions payable through December 31, 2009 and reinvested at the lower of the NAV or the closing market price on the ex-dividend date for dividends and other distributions payable after December 31, 2009. NAV and market price returns for the period of less than one year have not been annualized. Returns do not reflect the deduction of taxes that a shareholder could pay on Fund dividends and other distributions, if any, or the sale of Fund shares.
 
*
The Fund’s investment objective and investment adviser have changed. See Note 1 of the Notes to financial statements for more information about the change in investment objective and see Note 2 of the Notes to financial statements for more information about the change in investment adviser. On January 25, 2010, the Fund began investing using its new investment objective, therefore, performance prior to that date is not relevant.
 
The S&P 500® Index is a capital weighted, unmanaged index that represents the aggregate market value of the common equity of 500 stocks primarily traded on the New York Stock Exchange.
 

5

Special Opportunities Fund, Inc.
 

Portfolio composition as of 12/31/2017(1) (Unaudited)
 
   
Value
   
Percent
 
Investment Companies
 
$
103,496,294
     
72.91
%
Common Stocks
   
59,264,980
     
41.75
 
Preferred Stocks
   
10,980,115
     
7.74
 
Money Market Funds
   
8,447,637
     
5.95
 
Corporate Notes
   
6,186,000
     
4.36
 
Liquidating Trusts
   
3,045,599
     
2.15
 
Convertible Notes
   
2,209,971
     
1.55
 
Senior Secured Notes
   
1,600,000
     
1.13
 
Warrants
   
508,763
     
0.36
 
Rights
   
319,495
     
0.22
 
Corporate Bonds
   
15,000
     
0.01
 
Total Investments
 
$
196,073,854
     
138.13
%
Other Assets in Excess of Liabilities
   
1,471,992
     
1.04
 
Preferred Stock
   
(55,599,400
)
   
(39.17
)
Total Net Assets
 
$
141,946,446
     
100.00
%

(1)
As a percentage of net assets.
 


6

Special Opportunities Fund, Inc.
 

Portfolio of investments—December 31, 2017

   
Shares
   
Value
 
INVESTMENT COMPANIES—72.91%
           
Closed-End Funds—69.98%
           
Aberdeen Chile Fund, Inc.
   
270,819
   
$
2,418,414
 
Aberdeen Emerging Markets Smaller Co. Opportunities Fund, Inc.
   
52,511
     
763,510
 
Aberdeen Greater China Fund, Inc.
   
138,369
     
1,724,092
 
Aberdeen Indonesia Fund, Inc.
   
124,140
     
948,430
 
Aberdeen Israel Fund, Inc.
   
114,992
     
2,199,797
 
Aberdeen Japan Equity Fund, Inc.
   
237,740
     
2,143,820
 
Aberdeen Latin America Equity Fund, Inc.
   
47,501
     
1,269,227
 
Aberdeen Singapore Fund, Inc.
   
174,593
     
2,168,445
 
Adams Diversified Equity Fund, Inc.
   
236,589
     
3,555,933
 
Alliance California Municipal Income Fund, Inc.
   
35,471
     
482,051
 
Alpine Global Premier Properties Fund
   
123,487
     
832,302
 
Alternative Asset Opps PCC Ltd. (a)(c)(f)(g)(h)
   
48,436
     
327
 
Asia Pacific Fund, Inc.
   
15,851
     
228,491
 
Asia Tigers Fund, Inc.
   
64,010
     
791,804
 
BlackRock New York Municipal Income Quality Trust
   
22,638
     
297,916
 
Boulder Growth & Income Fund, Inc.
   
423,000
     
4,691,070
 
British Empire Trust PLC (g)
   
9,873
     
96,576
 
Central Securities Corp.
   
233,873
     
6,408,120
 
China Fund, Inc.
   
291,673
     
6,314,720
 
Delaware Enhanced Global Dividend & Income Fund
   
316,580
     
3,840,115
 
Delaware Investments Dividend & Income Fund, Inc.
   
80,628
     
865,138
 
Deutsche High Income Opportunities Fund, Inc.
   
269,657
     
4,050,248
 
Deutsche Multi-Market Income Trust
   
357,688
     
3,165,539
 
Deutsche Strategic Income Trust
   
90,574
     
1,126,731
 
Dividend and Income Fund
   
14,878
     
199,812
 
Franklin Universal Trust
   
214,422
     
1,537,406
 
Gabelli Equity Trust, Inc.
   
61,961
     
383,539
 
Gabelli Global Small and Mid Cap Value Trust (a)
   
11,855
     
151,033
 
General American Investors Co., Inc.
   
46,245
     
1,590,828
 
Herzfeld Caribbean Basin Fund, Inc.
   
45,996
     
328,871
 
Invesco Pennsylvania Value Municipal Income Trust
   
62,566
     
760,177
 
Japan Smaller Capitalization Fund, Inc.
   
320,472
     
3,784,774
 
Juridica Investments Ltd. (g)(h)
   
495,258
     
69,375
 
Lazard Global Total Return and Income Fund, Inc.
   
80,671
     
1,452,078
 
Lazard World Dividend & Income Fund, Inc.
   
104,261
     
1,212,555
 
 
The accompanying notes are an integral part of these financial statements.
 


7

Special Opportunities Fund, Inc.
 

Portfolio of investments—December 31, 2017

   
Shares
   
Value
 
INVESTMENT COMPANIES—(continued)
           
Closed-End Funds—(continued)
           
Liberty All Star Equity Fund
   
237,108
   
$
1,493,780
 
MFS Charter Income Trust
   
2,693
     
22,837
 
Morgan Stanley Asia Pacific Fund, Inc.
   
186,237
     
3,426,761
 
Morgan Stanley East Europe Fund Escrow (a)
   
97,901
     
0
 
Nuveen Connecticut Quality Municipal Income Fund
   
138,775
     
1,654,198
 
Putnam High Income Securities Fund
   
397,476
     
3,585,234
 
Royce Value Trust, Inc.
   
37,200
     
601,524
 
Source Capital, Inc.
   
73,365
     
2,990,357
 
Taiwan Fund, Inc.
   
135,029
     
2,818,055
 
The New Ireland Fund, Inc.
   
77,459
     
970,561
 
The Swiss Helvetia Fund, Inc.
   
731,399
     
9,332,651
 
The Thai Fund, Inc.
   
214,165
     
2,304,415
 
Tri-Continental Corp.
   
263,420
     
7,096,535
 
Turkish Investment Fund, Inc. (c)(f)(h)
   
129,831
     
1,187,551
 
             
99,337,723
 
Business Development Companies—2.93%
               
Equus Total Return, Inc. (a)
   
106,919
     
256,606
 
Great Elm Capital Corp.
   
139,007
     
1,367,829
 
MVC Capital, Inc.
   
239,975
     
2,534,136
 
             
4,158,571
 
Total Investment Companies (Cost $90,288,513)
           
103,496,294
 
                 
PREFERRED STOCKS—7.74%
               
Real Estate Investment Trusts—7.74%
               
Brookfield DTLA Fund Office Trust Investor, Inc.—Series A, 7.625%
   
170,778
     
4,918,406
 
Preferred Apartment Communities, Inc., 6.000% (c)(f)
   
6,083
     
6,061,709
 
Total Preferred Stocks (Cost $10,103,922)
           
10,980,115
 
                 
COMMON STOCKS—41.75%
               
                 
Consumer Finance—0.70%
               
Emergent Capital, Inc. (a)
   
2,479,753
     
991,901
 
                 
Health Care Equipment & Supplies—0.00%
               
Xtant Medical Holdings, Inc. (a)
   
99
     
57
 
 
The accompanying notes are an integral part of these financial statements.
 


8

Special Opportunities Fund, Inc.
 

Portfolio of investments—December 31, 2017

   
Shares
   
Value
 
COMMON STOCKS—(continued)
           
             
Hotels, Restaurants & Leisure—2.98%
           
Tropicana Entertainment, Inc. (a)
   
74,709
   
$
4,226,288
 
                 
Independent Power and Renewable Electricity Producers—0.04%
               
VivoPower International PLC (a)(g)
   
18,304
     
52,166
 
                 
Insurance—6.76%
               
Stewart Information Services Corp.
   
226,908
     
9,598,209
 
                 
Professional Services—4.00%
               
Hill International, Inc. (a)
   
1,041,818
     
5,677,908
 
                 
Real Estate Investment Trusts—4.80%
               
New York REIT, Inc. (a)(h)
   
1,734,956
     
6,818,377
 
                 
Real Estate Management & Development—0.06%
               
Trinity Place Holdings, Inc. (a)
   
13,152
     
91,406
 
                 
   
Shares/Units
         
Special Purpose Acquisition Vehicle—22.41% (a)
               
Andina Acquisition Corp. II (g)
   
67,789
     
698,227
 
Atlantic Acquisition Corp.
   
168,274
     
1,659,182
 
Avista Healthcare Public Acquisition Corp. (g)
   
121,090
     
1,201,213
 
Barington/Hilco Acquisition Corp.
   
15,611
     
162,511
 
Big Rock Partners Acquisition Corp. Units
   
111,602
     
1,142,224
 
Bison Capital Acquisition Corp. Units (g)
   
100,000
     
1,027,000
 
Black Ridge Acquisition Corp.
   
15,000
     
144,900
 
Black Ridge Acquisition Corp. Units
   
161,445
     
1,636,729
 
CM Seven Star Acquisition Corp. (g)
   
250,000
     
2,412,500
 
Constellation Alpha Capital Corp. (g)
   
50,000
     
486,000
 
Constellation Alpha Capital Corp. Units (g)
   
25,001
     
253,010
 
Draper Oakwood Technology Acquisition, Inc. Units
   
113,791
     
1,194,806
 
FlatWorld Acquisition Corporation (g)
   
105,702
     
8,456
 
Forum Merger Corp.
   
157,228
     
1,569,136
 
GigCapital, Inc. Units
   
77,400
     
774,000
 
Hunter Maritime Acquisition Corp. (g)
   
92,442
     
902,234
 
Hunter Maritime Acquisition Corp. Units (g)
   
1
     
10
 
I-AM Capital Acquisition Co.
   
113,791
     
1,120,841
 
Industrea Acquisition Corp. Units
   
273,098
     
2,747,366
 
KBL Merger Corp. IV Units
   
275,000
     
2,794,000
 
Leisure Acquisition Corp. Units
   
21,289
     
210,761
 
 
The accompanying notes are an integral part of these financial statements.
 


9

Special Opportunities Fund, Inc.

Portfolio of investments—December 31, 2017
 
   
Shares/Units
   
Value
 
COMMON STOCKS—(continued)
           
Special Purpose Acquisition Vehicle—(continued)
           
M I Acquisitions, Inc.
   
188,817
   
$
1,924,045
 
M III Acquisition Corp.
   
154,436
     
1,531,851
 
Modern Media Acquisition Corp.
   
106,604
     
1,046,851
 
Origo Acquisition Corp. (g)(i)
   
177,841
     
1,892,228
 
Pensare Acquisition Corp.
   
122,745
     
1,185,717
 
Pensare Acquisition Corp. Units
   
1
     
10
 
Stellar Acquisition III, Inc. (g)
   
204,002
     
2,082,860
 
             
31,808,668
 
Total Common Stocks (Cost $59,297,733)
           
59,264,980
 
                 
   
Shares
         
LIQUIDATING TRUSTS—2.15% (a)(c)(f)(h)
               
BlackRock Defined Opportunity Credit Trust
   
27,356
     
410
 
Crossroads Liquidating Trust
   
292,681
     
187,316
 
JP Morgan China Region Fund, Inc.
   
192,486
     
960,609
 
Winthrop Realty Trust
   
295,985
     
1,897,264
 
Total Liquidating Trusts (Cost $3,385,054)
           
3,045,599
 
                 
   
Principal
         
   
Amount
         
CONVERTIBLE NOTES—1.55% (b)
               
Emergent Capital, Inc.
               
5.000%, 02/15/2023
 
$
3,206,898
     
1,936,165
 
Wheeler Real Estate Investment Trust(c)(f)
               
9.000%, 12/15/2018
   
273,806
     
273,806
 
Total Convertible Notes (Cost $3,302,677)
           
2,209,971
 
                 
CORPORATE BONDS—0.01%
               
Washington Mutual, Inc. (b)(c)(d)(f)
               
0.000%, 03/17/2014
   
3,000,000
     
15,000
 
Total Corporate Bonds (Cost $0)
           
15,000
 
                 
CORPORATE NOTES—4.36% (b)
               
Great Elm Capital Corp.
               
6.500%, 09/18/2022
   
40,000
     
1,018,000
 
MVC Capital, Inc.
               
6.250%, 11/30/2022
   
200,000
     
5,168,000
 
Total Corporate Notes ($6,000,000)
           
6,186,000
 

 
The accompanying notes are an integral part of these financial statements.

10

Special Opportunities Fund, Inc.
 

Portfolio of investments—December 31, 2017

   
Principal
       
   
Amount
   
Value
 
SENIOR SECURED NOTES—1.13% (b)(c)(f)
           
Emergent Capital, Inc.
           
8.500%, 07/15/2021
  $
1,600,000
   
$
1,600,000
 
Total Senior Secured Notes (Cost $1,600,000)
           
1,600,000
 
                 
   
Shares
         
WARRANTS—0.36% (a)
               
Avista Healthcare Public Acquisition Corp.
               
Expiration: December 2021
               
Exercise Price: $11.50 (g)
   
121,090
     
33,917
 
Barington/Hilco Acquisition Corp.
               
Expiration: February 2018
               
Exercise Price: $12.50
   
15,611
     
1,093
 
Borqs Technologies, Inc.
               
Expiration: August 2022
               
Exercise Price: $12.00 (g)
   
104,449
     
18,279
 
China Lending Corp.
               
Expiration: July 2021
               
Exercise Price: $12.00 (g)
   
79,818
     
2,794
 
CM Seven Star Acquisition Corp.
               
Expiration: November 2018
               
Exercise Price: $11.50 (g)
   
125,000
     
36,250
 
COPsync, Inc.
               
Expiration: October 2020
               
Exercise Price: $3.125
   
10,794
     
5
 
Electrum Special Acquisition Corp.
               
Expiration: June 2021
               
Exercise Price: $11.50 (g)
   
46,800
     
18,954
 
Emergent Capital, Inc.
               
Expiration: October 2019
               
Exercise Price: $10.75 (c)(f)
   
8
     
0
 
Expiration: July 2025
               
Exercise Price: $0.20 (c)(f)
   
640,000
     
0
 
Forum Merger Corp.
               
Expiration: May 2022
               
Exercise Price: $11.50
   
78,614
     
53,457
 
Hemisphere Media Group, Inc.
               
Expiration: April 2018
               
Exercise Price: $12.00
   
39,430
     
5,126
 
 
The accompanying notes are an integral part of these financial statements.
 


11

Special Opportunities Fund, Inc.
 

Portfolio of investments—December 31, 2017

   
Shares
   
Value
 
WARRANTS—(continued)
           
Hunter Maritime Acquisition Corp.
           
Expiration: October 2021
           
Exercise Price: $11.50 (g)
   
46,221
   
$
13,913
 
I-AM Capital Acquisition Co.
               
Expiration: October 2022
               
Exercise Price: $11.50
   
113,791
     
37,551
 
M I Acquisitions, Inc.
               
Expiration: November 2020
               
Exercise Price: $11.50
   
188,817
     
66,086
 
M III Acquisition Corp.
               
Expiration: August 2021
               
Exercise Price: $11.50
   
131,580
     
103,948
 
Modern Media Acquisition Corp.
               
Expiration: June 2022
               
Exercise Price: $11.50
   
54,093
     
29,751
 
NextDecade Corp.
               
Expiration: July 2022
               
Exercise Price: $11.50
   
3,262
     
1,957
 
Origo Acquisition Corp.
               
Expiration: December 2021
               
Exercise Price: $11.50 (g)
   
23,814
     
11,831
 
Pensare Acquisition Corp.
               
Expiration: August 2022
               
Exercise Price: $11.50
   
19,254
     
10,590
 
Stellar Acquisition III, Inc.
               
Expiration: March 2022
               
Exercise Price: $11.50 (g)
   
204,002
     
63,261
 
Wheeler Real Estate Investment Trust, Inc.
               
Expiration: December 2018
               
Exercise Price: $4.75 (c)(f)
   
10,526
     
0
 
Total Warrants (Cost $453,679)
           
508,763
 
                 
RIGHTS—0.22% (a)
               
Atlantic Acquisition Corp.
   
68,274
     
30,041
 
CM Seven Star Acquisition Corp. (g)
   
250,000
     
80,000
 
Dividend and Income Fund
   
14,878
     
0
 
Forum Merger Corp.
   
157,228
     
103,770
 
I-AM Capital Acquisition Co.
   
113,791
     
34,137
 
Modern Media Acquisition Corp.
   
103,859
     
40,505
 
 
The accompanying notes are an integral part of these financial statements.
 


12

Special Opportunities Fund, Inc.
 

Portfolio of investments—December 31, 2017

   
Shares
   
Value
 
RIGHTS—(continued)
           
Origo Acquisition Corp. (g)
   
23,814
   
$
11,788
 
Pensare Acquisition Corp.
   
38,508
     
19,254
 
Total Rights (Cost $260,987)
           
319,495
 
                 
MONEY MARKET FUNDS—5.95%
               
Fidelity Institutional Government Portfolio—Class I, 1.140% (e)
   
4,236,331
     
4,236,331
 
STIT-Treasury Portfolio—Institutional Class, 1.160% (e)
   
4,211,306
     
4,211,306
 
Total Money Market Funds (Cost $8,447,637)
           
8,447,637
 
Total Investments (Cost $183,140,202)—138.13%
           
196,073,854
 
Other Assets in Excess of Liabilities—1.04%
           
1,471,992
 
Preferred Stock—(39.17)%
           
(55,599,400
)
TOTAL NET ASSETS—100.00%
         
$
141,946,446
 

Percentages are stated as a percent of net assets.
(a)
Non-income producing security.
(b)
The coupon rate shown represents the rate at December 31, 2017.
(c)
Fair valued securities. The total market value of these securities was $12,183,992, representing 8.58% of net assets. Value determined using significant unobservable inputs.
(d)
Default or other conditions exist and security is not presently accruing income.
(e)
The rate shown represents the 7-day yield at December 31, 2017.
(f)
Illiquid securities. The total market value of these securities was $12,183,992, representing 8.58% of net assets.
(g)
Foreign-issued security.
(h)
Security currently undergoing a full liquidation with all proceeds paid out to shareholders.
(i)
Affiliated security.

The accompanying notes are an integral part of these financial statements.
 


13

Special Opportunities Fund, Inc.
 

Statement of assets and liabilities—December 31, 2017

Assets:
     
Investments, at value:
     
Non-affiliated companies (Cost $181,244,441)
 
$
194,181,626
 
Affiliated companies (Cost $1,895,761)
   
1,892,228
 
Foreign currencies (Cost $872,513)
   
871,870
 
Dividends and interest receivable
   
1,064,658
 
Receivable for investments sold
   
21,244
 
Other assets
   
35,282
 
Total assets
   
198,066,908
 
         
Liabilities:
       
Preferred dividends accrued not yet declared
   
53,314
 
Payable for investments purchased
   
146,530
 
Advisory fees payable
   
172,014
 
Administration fees payable
   
21,444
 
Chief Compliance Officer fees payable
   
11,556
 
Director fees payable
   
14,830
 
Fund accounting fees payable
   
8,022
 
Custody fees payable
   
7,493
 
Transfer Agent fees payable
   
1,259
 
Accrued expenses and other liabilities
   
84,600
 
Total liabilities
   
521,062
 
         
Preferred Stock:
       
3.50% Convertible Preferred Stock—$0.001 par value, $25 liquidation value per share;
       
2,223,976 shares outstanding
       
Total preferred stock
   
55,599,400
 
Net assets applicable to common shareholders
 
$
141,946,446
 
         
Net assets applicable to common shareholders:
       
Common stock—$0.001 par value per common share; 199,995,800 shares authorized;
       
8,500,968 shares issued and outstanding, 14,343,863 shares held in treasury
 
$
349,592,177
 
Cost of shares held in treasury
   
(220,518,502
)
Accumulated undistributed net investment income
   
358,800
 
Accumulated net realized loss from investment activities
   
(419,049
)
Net unrealized appreciation (depreciation) on:
       
Investments
   
12,933,652
 
Foreign currency translations
   
(632
)
Net assets applicable to common shareholders
 
$
141,946,446
 
Net asset value per common share ($141,946,446 applicable to
       
8,500,968 common shares outstanding)
 
$
16.70
 
 
The accompanying notes are an integral part of these financial statements.
 


14

Special Opportunities Fund, Inc.
 

Statement of operations

  For the year ended  
  December 31, 2017  
Investment income:
     
Dividends
 
$
5,832,929
 
Interest
   
398,384
 
Total investment income
   
6,231,313
 
         
Expenses:
       
Investment advisory fees
   
1,982,345
 
Directors’ fees and expenses
   
165,216
 
Administration fees and expenses
   
114,211
 
Legal fees and expenses
   
75,755
 
Compliance fees and expenses
   
52,271
 
Audit fees
   
51,500
 
Insurance fees
   
51,135
 
Stock exchange listing fees
   
46,230
 
Accounting fees and expenses
   
45,960
 
Custody fees and expenses
   
42,914
 
Reports and notices to shareholders
   
35,225
 
Transfer agency fees and expenses
   
20,590
 
Other expenses
   
51,135
 
Net expenses
   
2,734,487
 
Net investment income
   
3,496,826
 
         
Net realized and unrealized gains (losses) from investment activities:
       
Net realized gain (loss) from:
       
Investments in securities of:
       
Non-affiliated companies
   
6,456,192
 
Affiliated companies
   
175
 
Foreign currency translations
   
(35,059
)
Distributions received from investment companies
   
1,618,653
 
Net realized gain
   
8,039,961
 
Change in net unrealized appreciation (depreciation) on:
       
Investments in securities of:
       
Non-affiliated companies
   
11,416,850
 
Affiliated companies
   
(3,533
)
Foreign currency translations
   
(632
)
Net realized and unrealized gains from investment activities
   
19,452,646
 
Increase in net assets resulting from operations
   
22,949,472
 
Distributions to preferred stockholders
   
(1,945,979
)
Net increase in net assets applicable to common shareholders resulting from operations
 
$
21,003,493
 
 
The accompanying notes are an integral part of these financial statements.
 


15

Special Opportunities Fund, Inc.
 

Statement of cash flows

  For the year ended  
  December 31, 2017  
Cash flows from operating activities:
     
Net increase in net assets applicable to common shareholders
 
$
22,949,472
 
Adjustments to reconcile net increase in net assets applicable to common
       
shareholders resulting from operations to net cash provided by operating activities:
       
Purchases of investments
   
(116,277,989
)
Proceeds from sales of investments
   
100,120,762
 
Net purchases and sales of short-term investments
   
19,800,645
 
Return of capital distributions received from underlying investments
   
6,570,705
 
Amortization and accretion of premium and discount
   
(21,791
)
Increase in dividends and interest receivable
   
(700,451
)
Decrease in receivable for investments sold
   
26,031
 
Decrease in other assets
   
2,524
 
Decrease in payable for investments purchased
   
(643,211
)
Increase in payable to Adviser
   
11,430
 
Decrease in accrued expenses and other liabilities
   
(9,321
)
Net distributions received from investment companies
   
1,618,653
 
Net realized gains from investments and foreign currency translations
   
(8,039,961
)
Net foreign currency translation
   
247,994
 
Net change in unrealized appreciation of investments
   
(11,413,317
)
Net cash provided by operating activities
   
14,242,175
 
         
Cash flows from financing activities:
       
Distributions paid to common shareholders
   
(11,306,287
)
Distributions paid to preferred shareholders
   
(1,945,979
)
Repurchase of common stock
   
(118,039
)
Net cash used in financing activities
   
(13,370,305
)
Net change in cash
 
$
871,870
 
         
Cash:
       
Beginning of year
   
 
End of year
 
$
871,870
 

The accompanying notes are an integral part of these financial statements.
 


16

Special Opportunities Fund, Inc.

Statements of changes in net assets applicable to common shareholders

   
For the
   
For the
 
   
year ended
   
year ended
 
   
December 31, 2017
   
December 31, 2016
 
From operations:
           
Net investment income
 
$
3,496,826
   
$
5,352,314
 
Net realized gain (loss) from:
               
Investments in securities of:
               
Non-affiliated companies
   
6,456,192
     
(1,598,738
)
Affiliated companies
   
175
     
 
Foreign currency translations
   
(35,059
)
   
 
Distributions received from investment companies
   
1,618,653
     
4,624,828
 
Net change in unrealized appreciation (depreciation) on:
               
Investments in securities of:
               
Non-affiliated companies
   
11,416,850
     
2,743,597
 
Affiliated companies
   
(3,533
)
   
 
Foreign currency translations
   
(632
)
   
 
Net increase in net assets resulting from operations
   
22,949,472
     
11,122,001
 
                 
Distributions paid to preferred shareholders:
               
Net investment income
   
(872,444
)
   
(500,199
)
Net realized gains from investment activities
   
(1,073,535
)
   
(174,739
)
Total dividends and distributions paid to preferred shareholders
   
(1,945,979
)
   
(674,938
)
Net increase in net assets applicable to common shareholders
               
resulting from operations
   
21,003,493
     
10,447,063
 
                 
Distributions paid to common shareholders:
               
Net investment income
   
(2,773,728
)
   
(4,939,527
)
Net realized gains from investment activities
   
(8,532,559
)
   
(1,952,399
)
Total dividends and distributions paid to common shareholders
   
(11,306,287
)
   
(6,891,926
)
                 
Capital Stock Transactions (Note 5)
               
Repurchase of common stock through tender offer
   
     
(17,951,500
)
Repurchase of common stock
   
(118,039
)
   
(4,661,968
)
Total capital stock transactions
   
(118,039
)
   
(22,613,468
)
Net increase (decrease) in net assets applicable
               
to common shareholders
   
9,579,167
     
(19,058,331
)
                 
Net assets applicable to common shareholders:
               
Beginning of year
   
132,367,279
     
151,425,610
 
End of year
 
$
141,946,446
   
$
132,367,279
 
Accumulated undistributed net investment income
 
$
358,800
   
$
174,485
 
 
The accompanying notes are an integral part of these financial statements.
 


17

Special Opportunities Fund, Inc.

Financial highlights

Selected data for a share of common stock outstanding throughout each year is presented below:
 


 

 
Net asset value, beginning of year
Net investment income(1)
Net realized and unrealized gains (losses) from investment activities
Total from investment operations
Common share equivalent of dividends paid to preferred shareholders from:
Net investment income
Net realized gains from investment activities
Net Increase in net assets attributable to common stockholders resulting form operations
Dividends and distributions paid to common shareholders from:
Net investment income
Net realized gains from investment activities
Total dividends and distributions paid to common shareholders
Anti-Dilutive effect of Common Share Repurchase
Dilutive effect of conversions of preferred shares to common shares
Dilutive effect of reinvestment of distributions by common shareholders
Net asset value, end of year
Market value, end of year
Total net asset value return(2)
Total market price return(3)
Ratio to average net assets attributable to common shares:
Total expenses, net of fee waivers by investment advisor and administrator
including interest and dividends on short positions(4)
Total expenses, before fee waivers by investment advisor and administrator
including interest and dividends on short positions(4)
Total expenses, net of fee waivers by investment advisor and administrator
excluding interest expense and dividends on short positions(5)(7)
Ratio to net investment income to average net assets before waiver(1)
Ratio to net investment income to average net assets after waiver(1)
Supplemental data:
Net assets applicable to common shareholders, end of year (000’s)
Liquidation value of preferred stock (000’s)
Portfolio turnover
Preferred Stock:
Total Shares Outstanding
Asset coverage per share of preferred shares, end of year
 


18

Special Opportunities Fund, Inc.
 
 
Financial highlights (continued)
 

For the year ended December 31,
 
2017
   
2016
   
2015
   
2014
   
2013
 
$
15.56
   
$
15.11
   
$
16.94
   
$
18.70
   
$
17.22
 
 
0.44
     
0.63
     
0.41
     
0.22
     
0.92
 
 
2.26
     
0.64
     
(1.09
)
   
1.02
     
3.00
 
 
2.70
     
1.27
     
(0.68
)
   
1.24
     
3.92
 
                                     
 
(0.10
)
   
(0.06
)
   
     
     
(0.16
)
 
(0.13
)
   
(0.02
)
   
     
     
 
 
2.47
     
1.19
     
(0.68
)
   
1.24
     
3.76
 
                                     
 
(0.33
)
   
(0.58
)
   
(0.35
)
   
(0.19
)
   
(1.10
)
 
(1.00
)
   
(0.23
)
   
(0.84
)
   
(1.29
)
   
(1.11
)
 
(1.33
)
   
(0.81
)
   
(1.19
)
   
(1.48
)
   
(2.21
)
 
0.00
(6)
   
0.07
     
0.08
     
     
 
 
     
     
     
(1.44
)
   
0.00
(6)
 
     
     
(0.04
)
   
(0.08
)
   
(0.07
)
$
16.70
   
$
15.56
   
$
15.11
   
$
16.94
   
$
18.70
 
$
14.88
   
$
13.65
   
$
13.20
   
$
15.37
   
$
17.45
 
 
15.93
%
   
8.45
%
   
(3.47
)%
   
(1.01
)%
   
21.98
%
 
18.71
%
   
9.51
%
   
(6.13
)%
   
(3.59
)%
   
31.27
%
                                     
                                     
 
1.92
%
   
1.75
%
   
1.50
%
   
1.42
%
   
2.66
%(8)
                                     
 
1.92
%
   
1.75
%
   
1.50
%
   
1.51
%
   
2.66
%(8)
                                     
 
1.92
%
   
1.75
%
   
1.50
%
   
1.40
%
   
1.83
%
 
2.45
%
   
3.61
%
   
2.40
%
   
1.18
%
   
5.66
%
 
2.45
%
   
3.61
%
   
2.40
%
   
1.27
%
   
5.66
%
                                     
$
141,946
   
$
132,367
   
$
151,426
   
$
172,203
   
$
132,074
 
$
55,599
   
$
55,599
     
N/A
     
N/A
   
$
37,424
 
 
59
%
   
49
%
   
48
%
   
59
%
   
58
%
                                     
 
2,223,976
     
2,223,976
     
N/A
     
N/A
     
748,486
 
$
89
   
$
85
     
N/A
     
N/A
   
$
226
 
 

 
19

Special Opportunities Fund, Inc.

Financial highlights (continued)

(1)
Recognition of investment income by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests.
(2)
Total net asset value return is calculated assuming a $10,000 purchase of common stock at the current net asset value on the first day of each period reported and a sale at the current net asset value on the last day of each period reported, and assuming reinvestment of dividends and other distributions at the net asset value on the ex-dividend date. Total investment return based on net asset value is hypothetical as investors can not purchase or sell Fund shares at net asset value but only at market prices. Returns do not reflect the deduction of taxes that a shareholder could pay on Fund dividends and other distributions, if any, or the sale of Fund shares.
(3)
Total market price return is calculated assuming a $10,000 purchase of common stock at the current market price on the first day of each period reported and a sale at the current market price on the last day of each period reported, and assuming reinvestment of dividends and other distributions to common shareholders at the lower of the NAV or the closing market price on the ex-dividend date. Total investment return does not reflect brokerage commissions and has not been annualized for the period of less than one year. Returns do not reflect the deduction of taxes that a shareholder could pay on Fund dividends and other distributions, if any, or the sale of Fund shares.
(4)
Does not include expenses of the investment companies in which the Fund invests.
(5)
Does not include expenses of the investment companies in which the Fund invests, interest expenses, or dividends on short positions.
(6)
Less than 0.5 cents per share.
(7)
Expense ratios net of fee waivers by investment advisor and administrator excluding interest expense and dividends on short positions based on total average net assets including liquidation value of preferred stock were 1.38%, 1.56%, N/A, N/A, and 1.43% for the years ended December 31, 2017, 2016, 2015, 2014, and 2013, respectively.
(8)
The ratio of expenses to average net assets includes preferred distribution expense. The before waiver and expense reimbursement and after waiver and expense reimbursement ratios excluding preferred distribution expense were 1.83% and 1.83%, respectively.

The accompanying notes are an integral part of these financial statements.

20

Special Opportunities Fund, Inc.
 

Notes to financial statements

Note 1
Organization and significant accounting policies
Special Opportunities Fund, Inc. (formerly, Insured Municipal Income Fund Inc.) (the “Fund”) was incorporated in Maryland on February 18, 1993, and is registered with the United States Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended, as a closed-end diversified management investment company. Effective December 21, 2009, the Fund changed its name to the Special Opportunities Fund, Inc. and changed its investment objective to total return. There can be no assurance that the Fund’s investment objective will be achieved. The Fund’s previous investment objective was to achieve a high level of current income that was exempt from federal income tax, consistent with the preservation of capital.
 
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services—Investment Companies”.
 
In the normal course of business, the Fund may enter into contracts that contain a variety of representations or that provide indemnification for certain liabilities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
 
The preparation of financial statements in accordance with Accounting Principles Generally Accepted in the United States of America requires the Fund’s management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies:
 
Valuation of investments—The Fund calculates its net asset value based on the current market value for its portfolio securities. The Fund 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
 

21

Special Opportunities Fund, Inc.
 

Notes to financial statements

reviewed in order to make a good faith determination of a security’s fair value. The auction rate preferred securities 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. U.S. and foreign debt securities including short-term debt instruments having a maturity of 60 days or less shall be valued in accordance with the price supplied by a Pricing Service using the evaluated bid price. Money market mutual funds, demand notes and repurchase agreements are valued at cost. If cost does not represent current market value the securities will be priced at fair value as determined in good faith by or under the direction of the Fund’s Board.
 
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,
 

22

Special Opportunities Fund, Inc.
 

Notes to financial statements

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 significant unobservable inputs used in the fair value measurement of the Fund’s Level 3 investments are listed in the table on page 27. Significant changes in any of these inputs in isolation may result in a change in 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 positions 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.
 
In addition to special meetings, the Valuation Committee meets prior to each regular quarterly Board meeting. At each quarterly meeting, the Adviser delivers a written report (the “Quarterly Report”) regarding any recommendations of fair valuation during the past quarter, including fair valuations which have not changed. The Valuation Committee reviews the Quarterly Report, discusses the valuation of the fair valued securities with appropriate levels of representatives from the Adviser’s management, and approves the valuation of fair valued securities.
 
The Valuation Committee also reviews other interim reports as necessary.
 
The following is a summary of the fair valuations according to the inputs used as of December 31, 2017 in valuing the Fund’s investments:
 
 

23

Special Opportunities Fund, Inc.
 

Notes to financial statements

   
Quoted Prices in
                   
   
Active Markets
                   
   
for Identical
   
Significant Other
   
Unobservable
       
   
Investments
   
Observable Inputs
   
Inputs
       
   
(Level 1)*
   
(Level 2)*
   
(Level 3)**
   
Total
 
Investment Companies
 
$
102,308,416
   
$
   
$
1,187,878
   
$
103,496,294
 
Preferred Stocks
                               
Real Estate Investment Trusts
   
4,918,406
     
     
6,061,709
     
10,980,115
 
Common Stocks
                               
Consumer Finance
   
991,901
     
     
     
991,901
 
Health Care Equipment & Supplies
   
57
     
     
     
57
 
Hotels, Restaurants & Leisure
   
4,226,288
     
     
     
4,226,288
 
Independent Power & Renewable
                               
  Electricity Producers
   
     
52,166
     
     
52,166
 
Insurance
   
9,598,209
     
     
     
9,598,209
 
Professional Services
   
5,677,908
     
     
     
5,677,908
 
Real Estate Investment Trusts
   
6,818,377
     
     
     
6,818,377
 
Real Estate Management
                               
  & Development
   
91,406
     
     
     
91,406
 
Special Purpose
                               
  Acquisition Vehicles
   
20,453,439
     
11,355,229
     
     
31,808,668
 
Liquidating Trusts
   
     
     
3,045,599
     
3,045,599
 
Convertible Notes
   
     
1,936,165
     
273,806
     
2,209,971
 
Corporate Bonds
   
     
     
15,000
     
15,000
 
Corporate Notes
   
     
6,186,000
     
     
6,186,000
 
Senior Secured Notes
   
     
     
1,600,000
     
1,600,000
 
Warrants
   
438,785
     
69,978
     
0
     
508,763
 
Rights
   
289,454
     
30,041
     
     
319,495
 
Money Market Funds
   
8,447,637
     
     
     
8,447,637
 
Total
 
$
164,260,283
   
$
19,629,579
   
$
12,183,992
   
$
196,073,854
 
 
*
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.
 

24

Special Opportunities Fund, Inc.
 

Notes to financial statements

Transfers between Level 1 and Level 2 securities as of December 31, 2017 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 December 31, 2017 are summarized in the table below:
 
Transfers into Level 1
     
Common Stock
     
Special Purpose Acquisition Vehicle
 
$
698,227
 
Transfers out of Level 1
       
Common Stock
       
Independent Power & Renewable Electricity Producers
   
(52,166
)
Special Purpose Acquisition Vehicle
   
(170,977
)
Warrants
   
(3,892
)
Net transfers in and/or out of Level 1
 
$
471,192
 
Transfers into Level 2
       
Common Stock
       
Independent Power & Renewable Electricity Producers
 
$
52,166
 
Special Purpose Acquisition Vehicle
   
170,977
 
Warrants
   
3,892
 
Transfers out of Level 2
       
Common Stock
       
Special Purpose Acquisition Vehicle
   
(698,227
)
Net transfers in and/or out of Level 2
 
$
(471,192
)
 
The fair value of derivative instruments as reported within the Schedule of Investments as of December 31, 2017:
 
Derivatives not accounted
Statement of Assets &
 
for as hedging instruments
Liabilities Location
Value
Equity Contracts—Warrants
Investments, at value
$508,763
 
25

Special Opportunities Fund, Inc.
 

Notes to financial statements

The effect of derivative instruments on the Statement of Operations for the year ended December 31, 2017:
 
 
Amount of Realized Gain on Derivatives Recognized in Income
Derivatives not accounted
Statement of
 
for as hedging instruments
Operations Location
Value
Equity Contracts—Warrants
Net Realized Gain
$106,005
 
on Investments
 
   
 
Change in Unrealized Appreciation on Derivatives Recognized in Income
Derivatives not accounted
Statement of
 
for as hedging instruments
Operations Location
Total
Equity Contracts—Warrants
Net change in unrealized
$6,188
 
appreciation of investments
 
 
The average monthly share amount of warrants during the year was 1,256,557. The average monthly market value of warrants during the year was $343,942.
 
Level 3 Reconciliation Disclosure
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
 
                     
Transfers
                   
                     
into
         
Change in
       
   
Balance
               
Level 3/
   
Realized
   
unrealized
   
Balance
 
   
as of
   
Acquis-
   
Dispo-
   
Corporate
   
Gain
   
appreciation
   
as of
 
Category
 
12/31/2016
   
itions
   
sitions
   
Actions
   
(Loss)
   
(depreciation)
   
12/31/2017
 
                                           
Closed End
                                         
Funds
 
$
31,339
   
$
1,319,977
   
$
(45,134
)
 
$
(31,960
)
 
$
3,886
   
$
(90,500
)
 
$
1,187,878
 
                                                         
Auction Rate
                                                       
Preferred
                                                       
Securities
   
348,000
     
7,718,750
     
(8,930,125
)
   
     
873,875
     
(10,500
)
   
 
                                                         
Commodity
                                                       
Partnerships
   
11,736,382
     
     
(11,736,382
)
   
     
(1,126,211
)
   
1,126,211
     
 
                                                         
Preferred
                                                       
Stocks
   
5,976,547
     
     
     
     
     
85,162
     
6,061,709
 
                                                         
Liquidating
                                                       
Trusts
   
1,957,500
     
342,128
     
     
1,582,029
     
     
(836,058
)
   
3,045,599
 
                                                         
Convertible
                                                       
Notes
   
280,000
     
     
(6,194
)
   
     
     
     
273,806
 
                                                         
Corporate
                                                       
Bonds
   
22,500
     
     
     
     
     
(7,500
)
   
15,000
 
                                                         
Senior
                                                       
Secured
                                                       
Notes
   
500,000
     
1,600,000
     
(525,000
)
   
     
25,000
     
     
1,600,000
 
                                                         
Warrants
   
0
     
0
     
     
     
     
0
     
0
 
                                                         
   
$
20,852,268
   
$
10,980,855
   
$
(21,242,835
)
 
$
1,550,339
   
$
(223,450
)
 
$
266,815
   
$
12,183,992
 


26

Special Opportunities Fund, Inc.
 

Notes to financial statements

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 December 31, 2017:
 
           
Impact to
           
Valuation
   
Fair Value
     
from an
   
December 31,
 
Valuation
Unobservable
increase in
   
2017
 
Methodologies
Input(1)
Input(2)
             
Closed End Funds
 
$
1,187,878
 
Market Assessment
Liquidation Value
Increase
         
and Company-
   
         
Specific Information
   
               
Preferred Stocks
   
6,061,709
 
Cost
Market Assessments/
Increase
           
Financial Assessments
 
               
Liquidating Trusts
   
3,045,599
 
Last Traded Price
Financial Assessments/
Increase
           
Company Announcements
 
               
Convertible Notes
   
273,806
 
Cost
Terms of the Note/ Financial
Increase
           
Assessments/ Company
 
           
Announcements
 
               
Corporate Bonds
   
15,000
 
Market Transactions
Single Broker Quote
Increase
         
Approach
   
               
Senior Secured Notes
   
1,600,000
 
Cost
Terms of the Note/ Financial
Increase
           
Assessments/ Company
 
           
Announcements
 
               
Warrants
   
0
 
Market Transactions
Discount to Market Price
Decrease
         
Approach
for Share Restrictions
 

(1)
In determining certain 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.
 
Short sales—The Fund is authorized to make short sales. Short sales are transactions where a fund sells securities it does not own in anticipation of a decline in the value of the securities.
 
Short sales carry risks of loss if the price of the security sold short increases after the sale. In this situation, when a fund replaces the borrowed security by buying the security in the securities market, the fund may pay more for the security than it has received from the purchaser in the short sale. The fund may, however, profit from a change in the value of the security sold short, if the price decreased.
 

27

Special Opportunities Fund, Inc.
 

Notes to financial statement

As collateral for its short positions, the Fund is required under the 1940 Act to maintain segregated assets consisting of cash, cash equivalents, or liquid securities. The amount of segregated assets are required to be adjusted daily to the extent additional collateral is required based on the change in fair value of the securities sold short.
 
The Fund did not engage in short sales during the year ended December 31, 2017.
 
Investment transactions and investment income—Investment transactions are recorded on the trade date. Realized gains and losses from investment transactions are calculated using the identified cost method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized using the effective yield method as adjustments to interest income and the identified cost of investments.
 
Dividends and distributions—Dividends to Common Stockholders from net investment income and distributions of net realized capital gains, if any, will be declared and paid at least annually. Dividends and distributions to common shareholders are recorded on the ex-dividend date. The amount of dividends from net investment income and distributions from net realized capital gains was determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
 
Holders of Convertible Preferred Stock receive calendar quarterly dividends at the rate of 3.50% of the Subscription Price per year. Dividends on the Convertible Preferred Stock are fully cumulative, and accumulate without interest from the date of original issuance of the Convertible Preferred Stock.
 
Note 2
Related party transactions
Bulldog Investors, LLC serves as the Fund’s Investment Adviser (the “Investment Adviser”) under the terms of the Investment Advisory Agreement effective October 10, 2009. Effective May 7, 2013 Brooklyn Capital Management, LLC changed its name to Bulldog Investors, LLC. In accordance with the investment advisory agreement, the Fund is obligated to pay the Investment Adviser a monthly investment advisory fee at an annual rate of 1.00% of the Fund’s average weekly total assets.
 
Effective January 1, 2018, the Fund pays each of its directors who is not a director, officer or employee of the Investment Adviser, the Administrator or any
 

28

Special Opportunities Fund, Inc.
 

Notes to financial statements

affiliate thereof an annual fee of $40,000, paid pro rata, quarterly plus $1,000 for each special in-person meeting (or $500 if attended by telephone) of the board of directors. As additional annual compensation, the Audit Committee Chairman and Valuation Committee Chairman will receive $5,000, and the Corporate Governance Committee Chairman will receive $3,000. For serving the Fund as Chief Compliance Officer, in addition to the aforementioned Directors’ fees, Mr. Hellerman receives annual compensation in the amount of $50,000. In addition, the Fund reimburses the directors and Chief Compliance Officer (“CCO”) for travel and out-of-pocket expenses incurred in connection with Board of Directors’ meetings and CCO due diligence requirements.
 
U.S. Bancorp Fund Services, LLC (“USBFS”), an indirect wholly-owned subsidiary of U.S. Bancorp, serves as the Fund’s Administrator and, in that capacity, performs various administrative services for the Fund. USBFS also serves as the Fund’s Fund Accountant (the “Fund Accountant”). U.S. Bank, N.A. serves as the Fund’s custodian (the “Custodian”). The Custodian is an affiliate of the Administrator. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the directors, monitors the activities of the Fund’s Custodian and Fund Accountant; coordinates the preparation and payment of the Fund’s expenses and reviews the Fund’s expense accruals. American Stock Transfer & Trust Company, LLC serves as the Fund’s Transfer Agent.
 
Note 3
Convertible Preferred Stock
At December 31, 2017, 2,223,976 shares of 3.50% Convertible Preferred Stock were outstanding. The holders of Convertible Preferred Stock may convert their shares to common stock on a quarterly basis at a conversion rate equivalent to the current conversion price of $16.86 per share of common stock (which is a current ratio of 1.4828 shares of common stock for each share of Convertible Preferred Stock held). The conversion price (and resulting conversion ratio) will be adjusted for any distributions made to or on behalf of common stockholders. Following any such conversion, shares of common stock shall be issued as soon as reasonably practicable following the next quarterly dividend payment date. Until the mandatory redemption date of the Convertible Preferred Stock, August 19, 2021, at any time following the second anniversary of the expiration date of the Convertible Preferred Stock rights offering, the Board may, in its sole discretion, redeem all or any part of the then outstanding shares of Convertible Preferred Stock at $25.00 per share. Under such circumstances, the Fund shall provide no less than 30 days’ notice to the holders of Convertible Preferred Stock that, unless such shares have been converted by a certain date, the shares will be redeemed. If, at any time from and after the date of issuance of the Convertible Preferred Stock, the market price of the common stock is equal to or greater than $18.96
 

29

Special Opportunities Fund, Inc.
 

Notes to financial statements

per share (as adjusted for dividends or other distributions made to or on behalf of holders of the common stock), the Board may, in its sole discretion, require the holders of the Convertible Preferred Stock to convert all or any part of their shares into shares of common stock at a conversion rate equivalent to the current conversion price of $16.86 per share of common stock (which is a current ratio of 1.4828 shares of common stock for each share of Convertible Preferred Stock held), subject to adjustment upon the occurrence of certain events.
 
The conversion price (and resulting conversion ratio) will be adjusted for any dividends or other distributions made to or on behalf of common stockholders. Notice of such mandatory conversion shall be provided by the Fund in accordance with its Articles of Incorporation. In connection with all conversions shareholders of Convertible Preferred Stock would receive payment for all declared and unpaid dividends on the shares of Convertible Preferred Stock held to the date of conversion, but after conversion would no longer be entitled to the dividends, liquidation preference or other rights attributable to holders of the Convertible Preferred Stock. The Convertible Preferred Stock is classified outside of the permanent equity (net assets applicable to Common Stockholders) in the accompanying financial statements in accordance with accounting for redeemable equity instruments, what requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or up occurrence of an event that is not solely within the control of the issuer. The Fund is required to meet certain asset coverage tests with respect to the Convertible Preferred Stock as required by the 1940 Act. In addition, pursuant to the Rating Agency Guidelines established by Moody’s, the Fund is required to maintain a certain discounted asset coverage. If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Convertible Preferred Stock at a redemption price of $25.00 per share, plus an amount equal to the accumulated and unpaid dividends, whether or not declared on such shares, in order to meet these requirements. Additionally, failure to meet the foregoing asset coverage requirements could restrict the Fund’s ability to pay dividends to Common Stockholders and could lead to sales of portfolio securities at inopportune times. The Fund has met these requirements since issuing the Convertible Preferred Stock.
 
Note 4
Purchases and sales of securities
For the year ended December 31, 2017, aggregate purchases and sales of portfolio securities, excluding short-term securities, were $116,277,989 and $100,120,762, respectively. The Fund did not purchase or sell U.S. government securities during the year ended December 31, 2017.
 

30

Special Opportunities Fund, Inc.
 

Notes to financial statements

Note 5
Capital share transactions
During the year ended December 31, 2017, the Fund purchased 7,582 shares of its capital stock in the open market at a cost of $118,039. The weighted average discount of these purchases comparing the average purchase price to net asset value at the close of the New York Stock Exchange was 10.44%.
 
During the year ended December 31, 2016, the Fund purchased 362,902 shares of its capital stock in the open market at a cost of $4,661,968. The weighted average discount of these purchases comparing the average purchase price to net asset value at the close of the New York Stock Exchange was 13.50%.
 
The Fund announced on September 21, 2016 that it was offering to purchase up to 1.15 million common shares of the Fund at 97% of the net asset value (NAV) per common share with the right to purchase up to an additional 2% of the outstanding shares. The offer expired October 21, 2016 and because the number of shares tendered exceeded the amount offered to be purchased the proration was 17.98%.
 
During the year ended December 31, 2015, the Fund issued 261,013 shares for the reinvestment of distributions. During the same period the Fund purchased 405,015 shares of its capital stock in the open market at a cost of $5,921,562. The weighted average discount of these purchases comparing the average purchase price to net asset value at the close of the New York Stock Exchange was 12.63%.
 
Note 6
Federal tax status
The Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provision for federal income taxes or excise taxes has been made.
 
In order to avoid imposition of the excise tax applicable to regulated investment companies, the Fund intends to declare each year as dividends in each calendar year at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years.
 

31

Special Opportunities Fund, Inc.
 

Notes to financial statements

The tax character of distributions paid to shareholders during the fiscal years ended December 31, 2017 and December 31, 2016 were as follows:
 
   
For the
   
For the
 
   
year ended
   
year ended
 
Distributions paid to common shareholders from:
 
December 31, 2017
   
December 31, 2016
 
Ordinary income
 
$
5,068,989
   
$
4,939,527
 
Long-term capital gains
   
6,237,298
     
1,952,399
 
Total distributions paid
 
$
11,306,287
   
$
6,891,926
 
                 
   
For the
   
For the
 
   
year ended
   
year ended
 
Distributions paid to preferred shareholders from:
 
December 31, 2017
   
December 31, 2016(1)
 
Ordinary income
 
$
872,444
   
$
446,885
 
Long-term capital gains
   
1,073,535
     
174,739
 
Total distributions paid
 
$
1,945,979
   
$
621,624
 
 
(1)
The difference between book and tax distributions is due to accrued, but not yet paid distributions to preferred shareholders.
 
The Fund designated as long-term capital gain dividends, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and profits for the Fund related to net capital gains to zero for the year ended December 31, 2017.
 
The following information is presented on an income tax basis as of December 31, 2017:
 
Tax cost of investments
 
$
184,449,245
 
Unrealized appreciation
   
23,367,788
 
Unrealized depreciation
   
(10,871,309
)
Net unrealized appreciation
   
12,496,479
 
Undistributed ordinary income
   
719,718
 
Undistributed long-term gains
   
 
Total distributable earnings
   
719,718
 
Other accumulated/gains losses and other temporary differences
   
(343,426
)
Total accumulated gains
 
$
12,872,771
 
 
To reflect reclassifications arising from permanent “book/tax” differences for the year ended December 31, 2017, the Fund’s accumulated undistributed net investment income was increased by $333,662 and the accumulated net realized loss from investment activities was increased by $333,662. The permanent differences are primarily attributed to passive foreign investment companies, foreign currency gain and short-term capital gain dividend reclassifications.
32

Special Opportunities Fund, Inc.
 

Notes to financial statements

Net capital losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. At December 31, 2017, the Fund deferred, on a tax basis, post October losses of $291,794.
 
At December 31, 2017, the Fund did not have capital loss carryforwards.
 
The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2014-2016), or expected to be taken in the Fund’s 2017 tax returns. The Fund identifies its major tax jurisdictions as U.S. Federal and the State of Maryland; however the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
 
Note 7
Transactions with affiliates
The following issuer is affiliated with the Fund; that is, the Fund held 5% or more of the outstanding Voting shares during the period December 31, 2016 through December 31, 2017. As defined in Section (2)(a)(3) of the Investment Company Act of 1940, such issuers are:
 
 
Share
   
Share
 
Change in
     
 
Balance at
   
Balance at
 
Unrealized
 
Value at
Acquis-
Issuer
Dec. 31,
Addi-
Reduc-
Dec. 31,
Realized
Appreciation
Dividend
Dec. 31,
ition
Name
2016
tions
tions
2017
Gain
(Depreciation)
Income
2017
Cost
                   
Origo
                 
  Acquisition
                 
  Corp.*
0
178,763
(922)
177,841
$175
$(3,533)
$—
$1,892,228
$1,895,761
 
*
Origo Acquisition Corp. is a Special Purpose Acquisition Company (SPAC). A SPAC is publicly-traded buyout company that raises money in order to pursue the acquisition of an existing company.
 
33

Special Opportunities Fund, Inc.
 

Notes to financial statements

Note 8
Additional information
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock in the open market.
 
Fund directors and officers and advisory persons to the Fund, including insiders and employees of the Fund and of the Fund’s investment adviser, may purchase or sell Fund securities from time to time, subject to the restrictions set forth in the Fund’s Code of Ethics, as amended, a copy of which is available on the Fund’s website. Please see the corporate governance section of the Fund’s website at www.specialopportunitiesfundinc.com.
 
The Fund may seek proxy voting instructions from shareholders regarding certain underlying closed-end funds held by the Fund. Please see the proxy voting instructions section on the Fund’s website at www.specialopportunitiesfundinc.com for further information.
 


34

Special Opportunities Fund, Inc.
 

Report of independent registered public accounting firm

To the Board of Directors and Shareholders of Special Opportunities Fund, Inc.
 
Opinion on the Financial Statements
 
We have audited the accompanying statement of assets and liabilities of Special Opportunities Fund, Inc., including the portfolio of investments, as of December 31, 2017, the related statement of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Special Opportunities Fund, Inc. as of December 31, 2017, the results of its operations and cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
 
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Fund’s auditor since 2009.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
 
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
February 26, 2018
 
35

Special Opportunities Fund, Inc.
 

General information (unaudited)

The Fund
Special Opportunities Fund, Inc. (the “Fund”) is a diversified, closed-end management investment company whose common shares trade on the New York Stock Exchange (“NYSE”). The Fund’s NYSE trading symbol is “SPE.” On April 21, 2010 the Fund’s symbol changed from “PIF” to “SPE.” Comparative net asset value and market price information about the Fund is available weekly in various publications.
 
Annual meeting of shareholders held on December 7, 2017
 
The Fund held an annual meeting of shareholders on December 7, 2017 to vote on the following matters:
 
(1) (a) To elect four Directors to the Fund’s Board of Directors, to be elected by the holders of the Fund’s common stock and preferred stock, voting together as a single class, to serve until the Fund’s Annual Meeting of Stockholders in 2018 and until their successors have been duly elected and qualified; and
 
(b) To elect two Directors to the Fund’s Board of Directors, to be elected by the holders of the Fund’s preferred stock, voting as a separate class, to serve until the Fund’s Annual Meeting of Stockholders in 2018 and until their successors have been duly elected and qualified.
 
Proxy results – Common Stock
The presence, in person or by proxy, of shareholders entitled to cast a majority of the votes entitled to be cast at the Meeting (i.e., the presence of a majority of the shares outstanding on the record date of October 18, 2017) was necessary to constitute a quorum for the transaction of business. At the Meeting, the holders of approximately 87.30% of the common stock outstanding as of the record date were represented in person or by proxy (7,427,670 votes), thus constituting a quorum for the matters to be voted upon by all shareholders at the Meeting.
 
The actual voting results for the agenda items were as follows:
 
Proposal to elect Ben Harris as a director:
       
FOR
% of Quorum
% of O/S
WITHHELD
7,357,270
99.05%
86.47%
70,400
 
Proposal to elect Andrew Dakos as a director:
       
FOR
% of Quorum
% of O/S
WITHHELD
6,681,603
89.96%
78.53%
746,067
 
Proposal to elect Gerald Hellerman as a director:
       
FOR
% of Quorum
% of O/S
WITHHELD
6,673,885
89.85%
78.44%
753,785
 


36

Special Opportunities Fund, Inc.

General information (unaudited)

Proposal to elect Charles C. Walden as a director:
       
FOR
% of Quorum
% of O/S
WITHHELD
7,357,270
99.05%
86.47%
70,400
 
Proxy results – Preferred Stock
The presence, in person or by proxy, of shareholders entitled to cast a majority of the votes entitled to be cast at the Meeting (i.e., the presence of a majority of the shares outstanding on the record date of October 18, 2017) was necessary to constitute a quorum for the transaction of business. At the Meeting, the holders of approximately 97.26% of the preferred stock outstanding as of the record date were represented in person or by proxy (2,163,023 votes), thus constituting a quorum for the matters to be voted upon by all shareholders at the Meeting.
 
The actual voting results for the agenda items were as follows:
 
Proposal to elect Phillip Goldstein as a director:
       
FOR
% of Quorum
% of O/S
WITHHELD
1,868,061
86.36%
84.00%
294,962
 
Proposal to elect Marc Lunder as a director:
       
FOR
% of Quorum
% of O/S
WITHHELD
2,090,937
96.67%
94.02%
72,086
 
O/S – outstanding shares
 

37

Special Opportunities Fund, Inc.
 

General information (unaudited)

Tax information
The Fund designated 18.93% of its ordinary income distribution for the year ended December 31, 2017, as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003.
 
For the year ended December 31, 2017, 11.33% of dividends paid from net ordinary income qualified for the dividends received deduction available to corporate shareholders.
 
The Fund designated 37.51% of taxable ordinary income distributions designated as short-term capital gain distributions under Internal Revenue Section 871 (k)(2)(C).
 
Quarterly Form N-Q portfolio schedule
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s Web site at http://www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. Additionally, you may obtain copies of Forms N-Q from the Fund upon request by calling 1-877-607-0414.
 
Proxy voting policies, procedures and record
You may obtain a description of the Fund’s (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Fund voted any proxies related to portfolio securities during the most recent 12-month period ended June 30 for which an SEC filing has been made, without charge, upon request by contacting the Fund directly at 1-877-607-0414, or on the EDGAR Database on the SEC’s Web site (http://www.sec.gov).
 

38

Special Opportunities Fund, Inc.
 

Supplemental information (unaudited)

The following table sets forth the directors and officers of the Fund, his name, address, age, position with the Fund, term of office and length of service with the Fund, principal occupation or employment during the past five years and other directorships held at December 31, 2017.
 
   
Term of
 
Number of
 
   
Office
 
Portfolios
 
   
and
 
in Fund
Other
 
Position(s)
Length
Principal Occupation
Complex
Directorships
Name, Address
Held with
of Time
During the Past
Overseen
held by
and Age*
the Fund
Served
Five Years
by Director**
Director
 
INTERESTED DIRECTORS
           
Andrew Dakos***
President
1 year;
Member of the Adviser since
1
Director, Emergent
(51)
as of
Since
2009; Chief Compliance Officer
 
Capital, Inc.
 
October
2009
of the Adviser from 2009-2012;
 
(f/k/a Imperial
 
2009.
 
Principal of the general partner
 
Holdings, Inc.);
     
of several private investment
 
Director,
     
partnerships in the Bulldog
 
Crossroads Capital,
     
Investors group of private funds.
 
Inc. (f/k/a BDCA
         
Venture, Inc.).
           
Phillip Goldstein***
Chairman
1 year;
Member of the Adviser since
1
Chairman, Mexico
(73)
and
Since
2009; Principal of the general
 
Equity and Income
 
Secretary
2009
partner of several private
 
Fund, Inc.; Director,
 
as of
 
investment partnerships in the
 
MVC Capital, Inc.;
 
October
 
Bulldog Investors group of
 
Director, Emergent
 
2009.
 
private funds.
 
Capital, Inc.
         
(f/k/a Imperial
         
Holdings, Inc.);
         
Director,
         
Crossroads Capital,
         
Inc. (f/k/a BDCA
         
Venture, Inc.).
 

 
39

Special Opportunities Fund, Inc.
 
 
Supplemental information (unaudited)

   
Term of
 
Number of
 
   
Office
 
Portfolios
 
   
and
 
in Fund
Other
 
Position(s)
Length
Principal Occupation
Complex
Directorships
Name, Address
Held with
of Time
During the Past
Overseen
held by
and Age*
the Fund
Served
Five Years
by Director**
Director
 
INDEPENDENT DIRECTORS
           
Gerald Hellerman****
Chief
1 year;
Managing Director of Hellerman
1
Director, Mexico
(80)
Compliance
Since
Associates (a financial and
 
Equity and Income
 
Officer
2009
corporate consulting firm) since
 
Fund, Inc.; Director,
 
as of
 
1993 (which terminated activities
 
MVC Capital, Inc.;
 
January
 
as of December, 31, 2013).
 
Director, Emergent
 
2010.
 
   
Capital, Inc. (f/k/a
         
Imperial Holdings,
         
Inc.); Director,
         
Crossroads Capital,
         
Inc. (f/k/a BDCA
         
Venture, Inc.);
         
Trustee, Fiera
         
Capital Series Trust;
         
Director, Ironsides
         
Partners Opportunity
         
Offshore Fund Ltd.
         
(until 2016);
         
Director, Brantley
         
Capital Corporation
         
(until 2013).
           
Marc Lunder
1 year;
Managing Member of Lunder
1
None
(54)
 
Effective
Capital LLC.
   
   
January 1,
     
   
2015
     
           
Ben Harris
1 year;
Principal and Director of NHI II,
1
None
(49)
 
Since
LLC and NBC Bancshares, LLC.
   
   
2009
Chief Executive Officer of
   
     
Crossroads Capital, Inc.
   
           
Charles C. Walden
1 year;
President and Owner of Sound
1
Independent
(73)
 
Since
Capital Associates, LLC
 
Chairman, Third
   
2009
(consulting firm).
 
Avenue Funds
         
(fund complex
         
consisting of five
         
funds and one
         
variable series
         
trust).
 

40

Special Opportunities Fund, Inc.
 
 
Supplemental information (unaudited)

   
Term of
 
Number of
 
   
Office
 
Portfolios
 
   
and
 
in Fund
Other
 
Position(s)
Length
Principal Occupation
Complex
Directorships
Name, Address
Held with
of Time
During the Past
Overseen
held by
and Age*
the Fund
Served
Five Years
by Director**
Director
 
OFFICERS
           
Andrew Dakos***
President
1 year;
Member of the Adviser since
n/a
n/a
(51)
as of
Since
2009; Chief Compliance
   
 
October
2009
Officer of the Adviser from
   
 
2009.
 
2009-2012; Principal of the
   
     
general partner of several
   
     
private investment partnerships
   
     
in the Bulldog Investors group
   
     
of private funds.
   
           
Rajeev Das***
Vice-
1 year;
Principal of the Adviser.
n/a
n/a
(49)
President
Since
     
 
as of
2009
     
 
October
       
 
2009.
       
           
Phillip Goldstein***
Chairman
1 year;
Member of the Adviser
n/a
n/a
(73)
and
Since
since 2009; Principal of the
   
 
Secretary
2009
general partner of several
   
 
as of
 
private investment
   
 
October
 
partnerships in the Bulldog
   
 
2009.
 
Investors group of funds.
   
           
Gerald Hellerman****
Chief
1 year;
Managing Director of Hellerman
n/a
n/a
(80)
Compliance
Since
Associates (a financial
   
 
Officer
2009
and corporate consulting
   
 
as of
 
firm) since 1993 (which
   
 
January
 
terminated activities as of
   
 
2010.
 
December, 31, 2013).
   
 

41

Special Opportunities Fund, Inc.
 

Supplemental information (unaudited)

   
Term of
 
Number of
 
   
Office
 
Portfolios
 
   
and
 
in Fund
Other
 
Position(s)
Length
Principal Occupation
Complex
Directorships
Name, Address
Held with
of Time
During the Past
Overseen
held by
and Age*
the Fund
Served
Five Years
by Director**
Director
Thomas Antonucci***
Chief
1 year;
Director of Operations
n/a
n/a
(47)
Financial
Since
of the Adviser.
   
 
Officer
2014
     
 
and
       
 
Treasurer
       
 
as of
       
 
January
       
 
2014.
       

*
 
The address for all directors and officers is c/o Special Opportunities Fund, Inc., 615 East Michigan Street, Milwaukee, WI 53202.
**
 
The Fund Complex is comprised of only the Fund.
***
 
Messrs. Dakos, Goldstein, Das, and Antonucci are each considered an “interested person” of the Fund within the meaning of the 1940 Act because of their affiliation with Bulldog Investors, LLC, the Adviser, and their positions as officers of the Fund.
****
 
Mr. Hellerman is considered an “interested person” of the Fund within the meaning of the 1940 Act because he serves as the Fund’s Chief Compliance Officer. Mr. Hellerman is not affiliated with Bulldog Investors, LLC.


42

Special Opportunities Fund, Inc.

Board approval of investment advisory agreement (unaudited)

At its in-person meeting held on September 14, 2017, the Board of Directors (the “Board”) of Special Opportunities Fund, Inc. (the “Fund”) met to consider the renewal of the Investment Advisory Agreement (the “Advisory Agreement”) between the Fund and Bulldog Investors, LLC (the “Adviser”). The Independent Directors (as defined below) and Mr. Gerald Hellerman held a telephonic executive session on September 8, 2017 (the “September 8, 2017 Meeting”) to review materials related to the renewal of the Advisory Agreement. The Board received and discussed a memorandum from the Fund’s independent legal counsel regarding the duties and responsibilities of the Board and the Independent Directors under the Investment Company Act of 1940, as amended (the “1940 Act”), in reviewing advisory contracts. Based on their evaluation of the information provided, the Directors, by a unanimous vote (including a separate vote of the Directors who are not “interested persons,” as that term is defined in the 1940 Act, as amended (the “Independent Directors”)), approved the continuation of the Advisory Agreement for an additional one-year term.
 
In considering the renewal of the Advisory Agreement and reaching their conclusions, the Independent Directors reviewed and analyzed various factors that they determined were relevant, including (a) the nature, extent, and quality of the services to be provided by the Adviser; (b) the investment performance of the Fund and the Adviser; (c) the cost of the services to be provided and the profits to be realized by the Adviser from its relationship with the Fund; and (d) the extent to which economies of scale (if any) would be realized as the Fund grows. The Independent Directors evaluated each of these factors based on their own direct experience with the Adviser and in consultation with their independent counsel. No one factor was determinative in the Board’s decision to approve the continuance of the Advisory Agreement. Greater detail regarding the Independent Directors’ consideration of the factors that led to their decision to approve the continuance of the Advisory Agreement is set forth below.
 
The materials which had been prepared by the Adviser in response to a questionnaire (known as a “15(c) questionnaire”) provided to the Adviser by Fund counsel with respect to certain matters that counsel believed relevant to the annual continuation of the Advisory Agreement under Section 15 of the 1940 Act, distributed to the Directors and reviewed by the Independent Directors and Mr. Hellerman at the September 8, 2017 Meeting included, among other things, information regarding: (a) the Adviser’s financial soundness; (b) information on the cost to the Adviser of advising the Fund and the Adviser’s profitability in connection with such advisory services; (c) the experience and responsibilities of key personnel at the Adviser; (d) the risk management policies and procedures adopted by the Adviser; (e) the investment performance of the Fund as compared to peer and/or comparable funds; (f) the Adviser’s policy with respect to selection of broker-dealers and allocation of portfolio transactions; (g) fees of the Fund as compared to peer and/or comparable funds; (h) the profitability to the Adviser derived from its
 

43

Special Opportunities Fund, Inc.
 

Board approval of investment advisory agreement (unaudited)

relationship to the Fund; (i) the Adviser’s compliance program and chief compliance officer; (j) the Adviser’s policy with respect to proxy voting; (k) affiliates and possible conflicts; and (l) other material factors affecting the Adviser.
 
The Independent Directors reviewed the Adviser’s financial information and discussed the profitability of the Adviser as it relates to advising the Fund. The Independent Directors considered both the direct and indirect benefits to the Adviser from advising the Fund. These considerations were based on material requested by the Directors specifically for the meeting, as well as the in-person presentations made by the Adviser over the course of the year. On the request of the Independent Directors, the Adviser affirmed that it would make funds available, if needed, to support its engagement with the Fund and believes in the sustainability of the Fund. After further discussion, the Independent Directors concluded that the Adviser’s profit from advising the Fund currently was not excessive and that the Adviser had adequate financial strength to support the services to the Fund.
 
The Independent Directors assessed the overall quality of services provided to the Fund. The Independent Directors then considered the Adviser’s specific responsibilities in all aspects of day-to-day management of the Fund, as well as the qualifications, experience and responsibilities of the portfolio manager and other key personnel at the Adviser involved in the day-to-day activities of the Fund. The Independent Directors noted the unique investment strategy of the Fund and the knowledge and expertise required by the Adviser’s personnel. The Independent Directors also considered the operational strength of the Adviser. The Independent Directors noted any services that extended beyond portfolio management, and considered the favorable history, reputation, qualification and background of the Adviser, as well as the qualifications of its personnel and financial condition. The Independent Directors concluded that the Adviser had sufficient quality and depth of personnel, resources, investment methods and compliance policies and procedure necessary to performing its duties under the Advisory Agreement and that the nature, overall quality, and extent of the management services were satisfactory and reliable.
 
The Independent Directors reviewed the personnel responsible for providing services to the Fund and concluded, based on their experience and interaction with the Adviser, that the Adviser (a) was able to retain quality personnel, (b) exhibited a high level of diligence and attention to detail in carrying out its responsibilities under the Advisory Agreement, (c) was very responsive to the requests of the Independent Directors, (d) had consistently kept the Independent Directors apprised of developments related to the Fund and the industry in general and (e) continued to demonstrate the ability to grow the Fund.
 

44

Special Opportunities Fund, Inc.
 

Board approval of investment advisory agreement (unaudited)

The Independent Directors discussed the performance of the Fund for the year-to-date, one-year, three-year, and five-year periods ended June 30, 2017. In assessing the quality of the portfolio management services delivered by the Adviser, the Independent Directors also compared the short-term and long-term performance of the Fund on both an absolute basis and in comparison to a peer group of allocation closed-end funds constructed by data provided by Morningstar, Inc. (the “Morningstar Peer Group”) and assembled by USBFS independently from the Adviser. The Independent Directors noted that the Board reviews the investment performance of the Fund at each quarterly meeting over the course of the year. After considering all of the information, the Independent Directors concluded that the Adviser has obtained reasonable returns for the Fund while minimizing risk. Although past performance is not a guarantee or indication of future results, the Independent Directors determined that the Fund and its shareholders were likely to benefit from the Adviser’s continued management.
 
The Independent Directors then turned to a more focused review of the cost of services and the structure of the Adviser’s fees. The Independent Directors reviewed information prepared by USBFS comparing the Fund’s contractual advisory fees with a peer group of funds, and comparing the Fund’s overall expense ratio to the expense ratios of the Morningstar Peer Group. The Independent Directors noted that the contractual investment advisory fee for the Fund was near the 0.91% Morningstar Peer Group average. The Independent Directors further noted that the then current expense ratio of 1.94% for the Fund was higher than the peer group average of 1.64%. It was noted that the Fund is unique in its industry due to its activist investment strategy and true comparisons are difficult. The Independent Directors concluded that the Fund’s expenses and management fees paid to the Adviser were fair and reasonable in light of the experience and commitment of the Adviser as well as the comparative performance, expense and management fee information.
 
The Independent Directors then discussed in greater detail, with the assistance of the Fund’s Chief Compliance Officer (the “CCO”), the Adviser’s handling of compliance matters. The CCO reported to the Independent Directors on the effectiveness of the Adviser’s compliance program. The CCO noted that the Adviser had provided certifications that: (a) it had adopted a Code of Ethics conforming to applicable regulatory requirements; and (b) it had adopted procedures reasonably necessary to prevent its access persons from violating its own Code of Ethics, to which the CCO offered his own certification that the Code of Ethics is compliant with applicable regulations. The Independent Directors also discussed the Adviser’s business continuity plan. After reviewing the Adviser’s compliance policies and procedures with respect to the Fund, based on the assurances and information provided to them by the CCO, the Independent Directors concluded that the Adviser’s policies and procedures were satisfactory.
 

45

Special Opportunities Fund, Inc.
 

Board approval of investment advisory agreement (unaudited)

After due consideration of the written and oral presentations, the Independent Directors concluded that the nature and scope of the advisory services provided was reasonable and appropriate in relation to the advisory fee and in relation to peer comparisons, that the level of services to be provided by the Adviser were expected to be maintained and that the quality of service was expected to be high.
 
Based on the factors discussed above, the Board approved the continuance of the Advisory Agreement between the Fund and Adviser on September 14, 2017.
 


46

Special Opportunities Fund, Inc.
 

New York Stock Exchange certifications (unaudited)

On January 3, 2018, the Fund submitted an annual certification to the New York Stock Exchange (“NYSE”) in which the Fund’s president certified that he was not aware, as of the date of the certification, of any violation by the Fund of the NYSE’s Corporate Governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund’s president and treasurer have made quarterly certifications, included in the filing with the SEC on Forms N-CSR and N-Q, relating to, among other things, the Fund’s disclosure controls and procedures and internal control over financial reporting.
 


47

Special Opportunities Fund, Inc.
 

Privacy policy notice

The following is a description of the Fund’s policies regarding disclosure of nonpublic personal information that you provide to the Fund or that the Fund collects from other sources. In the event that you hold shares of the Fund through a broker-dealer or other financial intermediary, the privacy policy of the financial intermediary would govern how your nonpublic personal information would be shared with unaffiliated third parties.
 
CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following nonpublic personal information about you:
 
 
1.
Information from the Consumer: this category includes information the Fund receives from you on or in applications or other forms, correspondence, or conversations (such as your name, address, phone number, social security number, assets, income and date of birth); and
 
2.
Information about the Consumer’s transactions: this category includes information about your transactions with the Fund, its affiliates, or others (such as your account number and balance, payment history, parties to transactions, cost basis information, and other financial information).
 
CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any nonpublic personal information about their current or former shareholders to unaffiliated third parties, except as required or permitted by law. The Fund is permitted by law to disclose all of the information it collects, as described above, to its service providers (such as the Custodian, administrator and transfer agent) to process your transactions and otherwise provide services to you.
 
CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic personal information to those persons who require such information to provide products or services to you. The Fund maintains physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
 
This privacy policy notice is not a part of the shareholder report.
 

48

 
 
 
 
 
(This Page Intentionally Left Blank.)
 
 
 
 
 
 


Investment Adviser
Bulldog Investors, LLC
Park 80 West
250 Pehle Avenue, Suite 708
Saddle Brook, NJ 07663

Administrator and Fund Accountant
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202

Custodian
U.S. Bank, N.A.
Custody Operations
1555 North RiverCenter Drive, Suite 302
Milwaukee, WI 53212

Transfer Agent and Registrar
American Stock Transfer & Trust Company, LLC
59 Maiden Lane
New York, NY 10038

Fund Counsel
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174

Independent Registered Public Accounting Firm
Tait, Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103

Board of Directors
Andrew Dakos
Phillip Goldstein
Ben Harris
Gerald Hellerman
Marc Lunder
Charles Walden






Special Opportunities Fund, Inc.
1-877-607-0414
www.specialopportunitiesfundinc.com

Item 2. Code of Ethics.

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer.  A new code of ethics for registrant was approved by the Board of Directors on January 17, 2018.  The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.

A copy of the registrant’s Code of Ethics is filed herewith.

Item 3. Audit Committee Financial Expert.

The registrant’s board of directors has determined that there is at least one audit committee financial expert serving on its audit committee.  Marc Lunder is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N‑CSR.

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees:

For the fiscal years ended December 31, 2017 and December 31, 2016, the aggregate Tait, Weller & Baker LLP (“TWB”) audit fees for professional services rendered to the registrant were approximately $44,500 and $44,500, respectively.

Fees included in the audit fees category are those associated with performing an audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

(b) Audit-Related Fees:

For the fiscal years ended December 31, 2017 and December 31, 2016, the aggregate audit-related fees billed by TWB for services rendered to the registrant that are related to the performance of the audit, but not reported as audit fees, were approximately $2,000 and $2,000, respectively.

Fees included in the audit-related category are those associated with (1) the review of the semi-annual report.

The Audit Committee pre-approved the fees for TWB for the cursory review of the semi-annual report.  There were no other audit-related fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal periods indicated above.
 
(c) Tax Fees:

For the fiscal years ended December 31, 2017 and December 31, 2016, the aggregate tax fees billed by TWB for professional services rendered to the registrant were $5,000 and $5,000, respectively.

Fees included in the tax fees category comprise all services performed by professional staff in the independent accountant’s tax division except those services related to the audits. This category comprises fees for review of tax compliance, Federal income tax returns and excise tax calculations.

There were no tax fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal periods indicated above.

(d) All Other Fees:

In the fiscal years ended December 31, 2017 and December 31, 2016, there were no fees billed by TWB for products and services, other than the services reported in Item 4(a)-(c) above, rendered to the registrant.

There were no “all other fees” required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal periods indicated above.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.

(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:

Audit-Related Fees:

There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended December 31, 2017 and December 31, 2016 on behalf of the registrant.

There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended December 31, 2017 and December 31, 2016 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.

Tax Fees:

There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended December 31, 2017 and December 31, 2016 on behalf of the registrant.

There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended December 31, 2017 and December 31, 2016 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.

All Other Fees:

There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended December 31, 2017 and December 31, 2016 on behalf of the registrant.

There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended December 31, 2017 and December 31, 2016 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.

(f) All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full‑time permanent employees of the principal accountant.

(g) For the fiscal years ended December 31, 2017 and December 31, 2016, the aggregate fees billed by TWB for non-audit services rendered on behalf of the registrant, its investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides (or provided during the relevant fiscal period) services to the registrant for each of the last two fiscal periods of the registrant is shown in the table below.

 
December 31, 2017
December 31, 2016
Registrant
$7,000
$7,000
Registrant’s Investment Adviser
$0
$0

(h) The registrant’s audit committee was not required to consider whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen b