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Valuation of investments—The Fund calculates its net asset value based on the current market value for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers. Independent pricing sources may use last reported sale prices or if not available the most recent bid price, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. If a market value is not available from an independent pricing source or a broker-dealer for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”). Various factors may be reviewed in order to make a good faith determination of a security’s fair value. The auction rate preferred securities 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, unless the Board or its delegate determines that this does not represent fair value.

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

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

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

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

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

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

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

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

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

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

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

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

 

Special Opportunities Fund
The fair value of derivative instruments as reported within the Schedule of Investments as of September 30, 2017:
Derivatives not accounted for as hedging instruments			Statement of Assets & Liabilities Location		Value
Equity Contracts - Warrants			Investments, at value		$                                                381,972
The effect of derivative instruments on the Statement of Operations for the period ended September 30, 2017:
		Amount of Realized Gain on Derivatives Recognized in Income
Derivatives not accounted for as hedging instruments			Statement of Operations Location		Value
Equity Contracts - Warrants			Net Realized Gain		$                                                  34,592
			on Investments
		Change in Unrealized Appreciation on Derivatives Recognized in Income
Derivatives not accounted for as hedging instruments			Statement of Operations Location		Total
Equity Contracts - Warrants			Net change in unrealized		$                                                  46,171
			appreciation of investments

 

Level 3 Reconciliation Disclosure
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
Category		Balance as of 12/31/2016				Acquisitions				Dispositions				Transfers into Level 3				Corporate Actions				Realized Gain (Loss)				Change in unrealized appreciation (depreciation)				Balance as of 9/30/2017
Closed End Funds		$	31,339			$	-			$	-			$	410			$	(31,690	)		$	577			$	99			$	735
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				-				-				-				-				-				63,872				6,040,419
Liquidating Trusts			1,957,500				342,128				-				935,923				865,172				-				(813,834	)			3,286,889
Corporate Bonds			22,500				-				-				-				-				-				(7,500	)			15,000
Promissory Notes			780,000				1,600,000				(531,194	)			-				-				25,000				-				1,873,806
Warrants			0				0				-				-				-				-				0				0
		$	20,852,268			$	9,660,878			$	(21,197,701	)		$	936,333			$	865,172			$	(226,759	)		$	358,348			$	11,216,849

 

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 September 30, 2017:
		Fair Value September 30, 2017			Valuation Methodologies	Unobservable Input(1)	Impact to Valuation from an  increase in Input(2)
Closed End Funds		$	735		Market Assessment and Company-Specfic Information	Liquidation Value	Increase
Preferred Stocks			6,040,419		Cost	Market Assessments/ Financial Assessements	Increase
Liquidating Trusts			3,286,889		Last Traded Price	Financial Assessements/ Company Announcements	Increase
Corporate Bonds			15,000		Market Transactions Approach	Single Broker Quote	Increase
Promissory Notes			1,873,806		Cost	Terms of the Note/ Financial Assessements/ Company Announcements	Increase
Warrants			0		Market Transactions Approach	Discount to Market Price for Share Restrictions	Decrease

(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.

 

 

The cost basis of investments for federal income tax purposes at September 30, 2017 was as follows*:

 

 

*Because tax adjustments are calculated annually at the end of the Fund’s fiscal year, the above table does not reflect tax adjustments for the current fiscal year.  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 annual report.

 

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