specialopps_nq.htm
 
As filed with the Securities and Exchange Commission on November 24, 2010
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


 
FORM N-Q
 
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY
 



Investment Company Act file number 811-07528


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

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


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

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

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


Date of fiscal year end: 12/31/2010


Date of reporting period:  9/30/2010

 
 
 
 
Item 1. Schedule of Investments.
 
 
Special Opportunities Fund, Inc.
            
 
Portfolio of Investments
            
 
September 30, 2010 (Unaudited)
          
                 
           
Shares
  
Value
 
INVESTMENT COMPANIES - 57.59%
          
 
Closed-End Funds - 55.58%
            
 
Adams Express Company 
    
276,839
$
2,757,316
 
Bancroft Fund, Ltd. 
      
29,992
  
491,269
 
BlackRock California Investment Quality Municipal Trust (d)(i)(j)
  
1,052
  
14,760
 
Blue Chip Value Fund, Inc. (a)
      
836,893
  
2,761,747
 
Boulder Growth & Income Fund, Inc. (a)
    
316,668
  
1,969,675
 
Boulder Total Return Fund, Inc. (a)
    
184,149
  
2,784,333
 
Claymore Dividend & Income Fund 
    
38,069
  
540,199
 
Cohen & Steers Dividend Majors Fund, Inc.
    
11,040
  
124,973
 
Cohen & Steers Infrastructure Fund, Inc. 
    
27,907
  
444,279
 
DWS Dreman Value Income Edge Fund, Inc. 
    
82,164
  
1,100,998
 
DWS RREEF Real Estate Fund, Inc. (d)(i)(j)
    
126,913
  
11,803
 
DWS RREEF Real Estate Fund II, Inc. (d)(i)(j)
    
201,612
  
28,830
 
DWS RREEF World Real Estate Fund, Inc. 
    
151,216
  
2,594,866
 
First Opportunity Fund, Inc. 
      
275,606
  
1,799,707
 
First Trust/Four Corners Senior Floating Rate Income Fund (j)
  
146,729
  
2,004,318
 
Gabelli Dividend & Income Trust
    
15,607
  
217,405
 
Gabelli Global Multimedia Trust, Inc. 
    
135,290
  
1,029,557
 
H&Q Healthcare Investors 
      
181,415
  
2,191,493
 
H&Q Life Sciences Investors
      
50,626
  
485,503
 
Korea Equity Fund, Inc. (a)
      
68,639
  
758,461
 
Liberty All-Star Equity Fund, Inc. 
    
623,156
  
2,748,118
 
Liberty All-Star Growth Fund, Inc. 
    
375,519
  
1,445,748
 
LMP Capital and Income Fund, Inc. 
    
283,428
  
3,236,748
 
Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund
  
30,800
  
408,100
 
Macquarie Global Infrastructure Total Return Fund, Inc. 
  
80,776
  
1,334,420
 
NFJ Dividend Interest & Premium Strategy Fund 
    
169,446
  
2,670,469
 
RiverSource LaSalle International Real Estate Fund, Inc. 
  
163,406
  
1,521,310
 
Royce Focus Trust, Inc. (a)
      
17,500
  
111,475
 
Royce Micro-Cap Trust, Inc. (a)
    
423,851
  
3,496,771
 
Royce Value Trust, Inc. (a)
      
348,093
  
4,225,849
 
SunAmerica Focused Alpha Growth Fund, Inc. 
    
326,252
  
5,151,519
 
SunAmerica Focused Alpha Large-Cap Fund, Inc. 
    
75,644
  
1,094,569
 
Taiwan Greater China Fund (a)
      
80,078
  
538,925
 
Tri-Continental Corporation 
      
387,319
  
4,775,643
               
56,871,156
 
Business Development Company - 2.01%
          
 
Equus Total Return, Inc. (a)
    
23,359
  
55,361
 
MVC Capital, Inc. 
      
154,606
  
2,005,240
 
Total Investment Companies (Cost $54,661,852)
        
58,931,757
                 
 
AUCTION RATE PREFERRED SECURITIES - 16.02% (c)(d)
        
 
BlackRock California Municipal 2018 Term Trust - Series M7, 0.457%
100
  
2,118,750
 
BlackRock Credit Allocation Income Trust III, Inc. - Series R7, 0.330%
  
6
  
127,500
 
BlackRock Insured Municipal Income Trust - Series F7, 0.457%
  
60
  
1,275,000
 
BlackRock Municipal 2018 Term Trust - Series W7, 0.426% 
  
100
  
2,118,750
 
BlackRock Municipal Bond Trust - Series R7, 0.426%
    
75
  
1,593,750
 
BlackRock Municipal Bond Trust - Series T7, 0.426%
    
75
  
1,593,750
 
BlackRock MuniHoldings Fund, Inc. - Series C, 1.515% 
    
25
  
539,062
 
BlackRock MuniHoldings Fund II, Inc. - Series A, 0.426% 
  
50
  
1,062,500
 
BlackRock MuniHoldings New York Insured Fund, Inc. - Series B, 0.426% 
  
1
  
21,375
 
BlackRock MuniHoldings New York Insured Fund, Inc. - Series D, 0.457% 
  
9
  
192,375
 
BlackRock MuniHoldings New York Insured Fund, Inc. - Series E, 0.426% 
  
1
  
21,375
 
BlackRock New York Municipal Bond Trust - Series T7, 0.426%
  
52
  
1,040,000
 
Neuberger Berman Real Estate Securities Income Fund, Inc. - Series B, 1.500% 
44
  
926,750
 
Neuberger Berman Real Estate Securities Income Fund, Inc. - Series D, 1.500%
42
  
892,500
 
Neuberger Berman Real Estate Securities Income Fund, Inc. - Series E, 1.500%
45
  
953,438
 
Neuberger Berman Real Estate Securities Income Fund, Inc. - Series F, 1.500% 
10
  
209,375
 
 
 
 
 
 
Nuveen California Dividend Advantage Municipal Fund, Inc. - Series TH, 0.427%
8
  
180,000
 
Nuveen California Performance Plus Municipal Fund, Inc. - Series W, 0.427% 
1
  
22,500
 
Nuveen Insured Quality Municipal Fund, Inc. - Series TH, 0.427% 
  
19
  
427,500
 
Nuveen Insured Quality Municipal Fund, Inc. - Series W, 0.427% 
  
4
  
90,000
 
Nuveen Investment Quality Municipal Fund, Inc. - Series M, 0.457% 
  
4
  
90,000
 
Nuveen Performance Plus Municipal Fund, Inc. - Series W, 0.427%
  
3
  
67,500
 
Nuveen Premium Income Municipal Fund, Inc. - Series TH, 0.427%
  
33
  
742,500
 
Nuveen Premium Income Municipal Fund, Inc. - Series W, 0.427%
  
4
  
90,000
 
Total Auction Rate Preferred Securities (Cost $16,396,250)
      
16,396,250
                 
 
COMMON STOCKS - 10.39%
          
 
Gold & Silver Ores - 0.14%
          
 
Capital Gold Corporation (a)
    
30,696
  
148,262
 
Grocery Stores - 0.26%
            
 
Winn-Dixie Stores, Inc. (a)
    
37,703
  
268,822
 
Pharmaceuticals Preparations - 0.08%
          
 
Myrexis, Inc. (a)
      
19,896
  
76,799
 
Real Estate Investment Trusts - 1.00%
          
 
ARMOUR Residential REIT, Inc. 
    
68,271
  
479,262
 
Monmouth Real Estate Investment Corporation - Class A 
  
68,919
  
538,947
               
1,018,209
 
Retail-Auto Dealers & Gasoline Stations - 3.11%
          
 
Casey's General Stores, Inc. 
      
76,321
  
3,186,402
 
Special Purpose Acquisition Vehicle - 4.53%
          
 
57th Street General Acquisition Corporation (a)
  
100,000
  
966,000
 
Liberty Acquisition Holdings Corporation (a)
    
356,766
  
3,671,122
               
4,637,122
 
Variety Stores - 1.27%
            
 
BJ's Wholesale Club, Inc. (a)
    
31,214
  
1,295,381
 
Total Common Stocks (Cost $10,477,889)
        
10,630,997
                 
 
PREFERRED STOCKS - 1.08%
            
 
General Motors Corporation/Motors Liquidation Company, 7.250% (a)
  
26,853
  
204,083
 
General Motors Corporation/Motors Liquidation Company, 7.250% (a)
  
37,554
  
285,410
 
General Motors Corporation/Motors Liquidation Company, 7.250% (a)
  
57,569
  
437,524
 
General Motors Corporation/Motors Liquidation Company, 7.375% (a)
  
1,623
  
12,335
 
General Motors Corporation/Motors Liquidation Company, 7.375% (a)
  
2,000
  
15,200
 
General Motors Corporation/Motors Liquidation Company, 7.500% (a)
  
19,705
  
149,758
 
Total Preferred Stocks (Cost $1,060,313)
        
1,104,310
                 
 
CONVERTIBLE PREFERRED STOCKS - 0.88%
          
 
General Motors Corporation/Motors Liquidation Company - Series B, 5.250% (a)
14,151
  
111,086
 
General Motors Corporation/Motors Liquidation Company - Series C, 6.250% (a)
99,741
  
790,946
 
Total Convertible Preferred Stocks (Cost $865,133)
        
902,032
                 
           
Principal
    
 
CONVERTIBLE BONDS - 2.71%
    
Amount
    
 
Accuride Corporation
            
 
    7.500%, 02/26/2020 (Acquired 03/16/2010 - 08/26/2010, Cost $755,948) (f)(g)
$
343,412
  
856,813
 
GGP Limited Partnership
            
 
    3.980%, 04/15/2027 (Acquired 03/09/2010 - 08/19/2010, Cost $1,898,857) (b)(e)
1,800,000
  
1,917,000
 
Total Convertible Bonds (Cost $2,654,805)
        
2,773,813
                 
 
CORPORATE BONDS - 8.45%
          
 
Rouse Company Limited Partnership
          
 
    5.375%, 11/26/2013 (e)
      
1,000,000
  
1,123,750
 
    3.625%, 03/15/2020 (e)
      
1,000,000
  
1,065,000
 
    8.000%, 04/30/2020 (e)
      
3,000,000
  
3,480,000
               
5,668,750
 
Washington Mutual, Inc.
            
 
    0.000%, 09/17/2012 (e)
      
3,000,000
  
2,977,500
 
Total Corporate Bonds (Cost $8,450,625)
        
8,646,250
                 
 
 
 
 
 
 
STRUCTURED LIFE SETTLEMENT NOTES - 0.76%
        
 
Cedar Lane Series A-2 Notes (a)(d)(i)
    
780,000
  
780,000
 
Total Structured Life Settlement Notes (Cost $780,000)
      
780,000
                 
 
WARRANTS - 0.04%
            
 
57th Street General Acquisition Corporation
          
 
    Expiration: August 2016,
          
 
    Exercise Price: $11.50 (a)
    
100,000
  
40,000
 
Total Warrants (Cost $40,000)
          
40,000
                 
 
MONEY MARKET FUNDS - 3.37%
          
 
Fidelity Institutional Government Portfolio - Class I, 0.064% (h)
  
1,642,859
  
1,642,859
 
Fidelity Institutional Tax-Exempt Portfolio - Class I, 0.094% (h)
  
1,807,579
  
1,807,579
 
Total Money Market Funds (Cost $3,450,438)
        
3,450,438
 
Total Investments (Cost $98,837,305) - 101.29%
        
103,655,847
 
Liabilities in Excess of Other Assets - (1.29)%
        
(1,324,981)
 
TOTAL NET ASSETS - 100.00%
      
$
102,330,866
                 
                 
Percentages are stated as a percent of net assets.
        
                 
(a)
Non-income producing security.
          
(b)
Restricted under Rule 144A of the Securities Act of 1933.  Purchased in a private placement transaction; resale to the public may require registration or be limited to qualified institutional buyers.  The total market value of these securities was $1,917,000, representing 1.87% of net assets.
(c)
The coupon rates shown represent the rates at September 30, 2010.
    
(d)
Fair valued securities. The total market value of these securities was $17,231,643, representing 16.84% of net assets.
(e)
Default or other conditions exist and security is not presently accruing income.
    
(f)
Payment-in-kind security.
            
(g)
Restricted security not registered under the Securities Act of 1933.  Purchased in a private placement transaction; resale to the public may require registration or be limited to qualified institutional buyers.  The total market value of these securities was $856,813, representing 0.84% of net assets.
(h)
The rate shown represents the 7-day yield at September 30, 2010.
    
(i)
Illiquid security.
            
(j)
Security currently undergoing a full liquidation with all proceeds paid out to shareholders.
  
 
 
 
 
 
Valuation of investments—The Fund calculates its net asset value based on the current market value for its portfolio securities.  The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers.  Independent pricing sources may use last reported sale prices or if not available the most recent bid price, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities.  A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities.  If a market value is not available from an independent pricing source or a broker-dealer for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”).  Various factors may be reviewed in order to make a good faith determination of a security’s fair value.  These factors 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 are fair valued.  The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the Board or its delegate determines that this does not represent fair value.

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

 
Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
 
Level 2—Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
 
Level 3—Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “Improving Disclosures about Fair Value Measurements” (“ASU”). The ASU requires enhanced disclosures about a) transfers into and out of Levels 1 and 2, and b) purchases, sales, issuances, and settlements on a gross basis relating to Level 3 measurements. The first disclosure is effective for the first reporting period beginning after December 15, 2009, and for interim periods within those fiscal years.
 
 
 
 
 
The following is a summary of the fair valuations according to the inputs used as of September 30, 2010 in valuing the Fund's investments:
                       
    Quoted Prices in Active  
Significant Other
            
    Markets for Identical  
Observable Inputs
Unobservable Inputs
  
    Investments (Level 1)  
(Level 2)
    
(Level 3)
  
Total
  
Investment Companies
 $
                  58,876,364
  $
                     55,393
    $
                            -
  $
  58,931,757
  
Auction Rate Preferred Securities
  
                                   -
  
                                 -
    
16,396,250
  
16,396,250
  
Common Stocks
  
9,664,997
  
                       966,000
    
                               -
  
10,630,997
  
Preferred Stocks
  
                                   -
  
1,104,310
    
                               -
  
1,104,310
  
Convertible Preferred Stocks
  
                                   -
  
902,032
    
                               -
  
902,032
  
Convertible Bonds
  
                                   -
  
2,773,813
    
                               -
  
2,773,813
  
Corporate Bonds
  
                                   -
  
8,646,250
    
                               -
  
8,646,250
  
Structured Life Settlement Notes
  
                                   -
  
                                 -
    
780,000
  
780,000
  
Warrants
    
                                   -
  
40,000
    
                               -
  
40,000
  
Money Market Funds
  
3,450,438
  
                                 -
    
                               -
  
3,450,438
  
Total
   $
                  71,991,799
 $
               14,487,798
   $
            17,176,250
  $
 103,655,847
  
                       
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
                       
Balance as of December 31, 2009
         $
                             -
      
     Accrued discounts / premiums
        
                               -
      
     Realized gain (loss)
            
                     244,250
      
     Change in unrealized appreciation (depreciation)
    
                               -
      
     Net purchases (sales)
            
                16,932,000
      
     Transfers in and / or out of Level 3
        
                               -
      
Balance as of September 30, 2010
       $
             17,176,250
      
                       
There were no significant transfers into and out of Level 1 and Level 2 during the nine months ended September 30, 2010.
 
 
 
 
 
The cost basis of investments for federal income tax purposes at September 30, 2010 was as follows*:
 
Cost of investments    
$98,837,305
Gross unrealized appreciation          
5,170,695
Gross unrealized depreciation      
(352,153)
Net unrealized appreciation         
 $4,818,542

*Because tax adjustments are calculated annually, the above table reflects the tax adjustments outstanding at the Fund’s previous fiscal year end.  For the previous fiscal year’s federal income tax information, please refer to the Notes to Financial Statements section in the Fund’s most recent semi-annual or annual report.

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

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


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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


(Registrant)      Special Opportunities Fund, Inc.                       

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

Date          November 24, 2010                                                                                     



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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

Date       November 24, 2010                                                                                        
 
 
By (Signature and Title)          /s/ Gerald Hellerman                                                             
Gerald Hellerman, Chief Financial Officer

Date        November 22, 2010