NOTES TO FINANCIAL STATEMENTS (Continued)
As of December 31, 2017

GAAP requires that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2017, permanent differences in book and tax accounting have been reclassified to paid-in capital, accumulated net investment income/loss and accumulated net realized gain/loss as follows:

As of December 31, 2017, the components of accumulated earnings (deficit) on a tax basis were as follows:

As of December 31, 2017, the Fund had accumulated capital loss carryforwards as follows:

To the extent that the Fund may realize future net capital gains, those gains will be offset by any of its unused capital loss carryforward. Future capital loss carryforward utilization in any given year may be subject to Internal Revenue Code limitations. During the year ended December 31, 2017, the Fund utilized $190,665 of capital loss carryforwards. During the year ended December 31, 2017, the Fund had capital loss carryforwards of $9,002,277 expire.

There were no distributions during the years ended December 31, 2017 and 2016.

Note 8 – Investment Transactions

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term investments, were $297,244 and $802,705, respectively

Note 9 – Borrowings

The Fund has entered into a margin agreement with Fidelity Brokerage Services, LLC, which allows the Fund to borrower money. The margin agreement is not made for any specific term or duration but is due and payable at the brokerage firm’s discretion. The Fund has a policy allowing it to borrow not more than 33% of the Fund’s Net Asset Value as of the time of borrowing for purposes of taking

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RENN FUND, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)
As of December 31, 2017

advantage of investments deemed to be in the best interest of the Fund or to borrow such amounts as deemed necessary and prudent as a temporary measure for extraordinary or emergency purposes. Federal regulations under the 1940 Act require that the Fund maintain asset coverage in relation to any borrowed amount.

The margin agreement with Fidelity Brokerage Services, LLC became effective after July 7, 2017. The average interest rate, loan balance, maximum outstanding and amount recoded as interest expense for the Fidelity Brokerage Services LLC margin account for the 4 days the Fund had outstanding borrowings were 2.35%, $2,181,849, $2,244,189 and $517. At December 31, 2017 no amounts were outstanding under the margin account.

Prior to July 7, 2017, the Fund had an agreement with Morgan Stanley Wealth Management, which allowed the Fund to borrow money. The average interest rate, average daily loan balance, maximum outstanding and amount recoded as interest expense for the Morgan Stanley Wealth Management margin account for the period January 1, 2017 to July 7, 2017 were 2.44%, $1,028,086, $2,758,947, and $25,117. The Fund had outstanding borrowings for 96 days during this period.

Note 10 – Indemnifications

In the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general indemnifications. 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 expects the risk of loss to be remote.

Note 11 – Related Party Transactions

In 2009, Russell Cleveland received options to purchase 100,000 common shares of AnchorFree, Inc., at $0.3971 per share, as compensation for financial advisory services provided to AnchorFree, Inc. prior to Mr. Cleveland’s joining the board. In accordance with the agreement between the Fund and Mr. Cleveland, the Fund received 15,023 shares at no cost when the options were exercised on January 2, 2016. Russell Cleveland disclaims any beneficial ownership in the Fund's portion.

There were no similar related party transactions during 2017.

Note 12 – Events Subsequent to the Fiscal Period End

The Fund has adopted financial reporting rules regarding subsequent events which require an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. Management has evaluated the Fund’s related events and transactions that occurred through the date of issuance of the Fund’s financial statements. There were no events or transactions that occurred during this period that materially impacted the amounts or disclosures in the Fund’s financial statements.

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RENN FUND, INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors
of RENN Fund, Inc.

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of RENN Fund, Inc. (the “Fund”), including the schedule of investments, as of December 31, 2017, the related statement of operations, the statements of changes in net assets, statement of cash flows, and financial highlights for the year 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 the Fund as of December 31, 2017, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. With respect to the statement of changes in net assets for the year ended December 31, 2016, and the financial highlights for each of the four years in the period ended December 31, 2016 have been audited by other auditors, whose report dated February 28, 2017 expressed an unqualified opinion on such financial statements and financial highlights.

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 2017.

We conducted our audit 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 audit 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 audit 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
March 1, 2018

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RENN FUND, INC.

OTHER INFORMATION
December 31, 2017 (Unaudited)

Quarterly Reports

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. A copy of each such Form N-Q is available on the SEC’s website at www.sec.gov. Such forms may also be reviewed and copied at the SEC Public Reference Room in Washington, D.C., and you may call the Public Reference Room at 1-800-SEC-0330 for information on its hours, etc.

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, upon request by calling collect (646) 495-7330. You may also obtain the description on the Fund’s website at www.horizonkinetics.com

Portfolio Proxy Voting Records

The Fund’s record of proxy voting regarding portfolio securities is presented each year for the 12-month period ended June 30. It is filed with the SEC on Form N-PX and is available by calling collect (646) 495-7330 and on the SEC’s website at www.sec.gov.

Dividend Reinvestment Plan

Pursuant to the Fund’s Dividend Reinvestment and Cash Purchase Plan (the “Plan”), a stockholder whose shares are registered in his or her own name will be deemed to have elected to have all dividends and distributions automatically reinvested in Fund shares unless he or she elects otherwise on a current basis. Stockholders whose shares are held in nominee names will likewise be treated as having elected to have their dividends and distributions reinvested. You may elect to receive cash distributions, net of withholding tax, by requesting an election form from the Fund’s Plan Agent, American Stock Transfer & Trust Co. You may terminate participation by notifying the Plan Agent in writing. If notice is received by the Plan Agent not less than 10 days prior to any dividend or distribution it will be effective immediately. Information regarding income tax consequences should be directed to your tax consultant – the Plan will furnish information by January 31 following the year of distribution as to the category of income that the distributions represent. Your questions regarding the Plan should be directed to the Fund’s Plan Agent, American Stock Transfer & Trust Company, LLC., whose telephone number is (718) 921-8200 extension 6412 and whose address is 6201 15th Ave, Brooklyn, NY 11219-5498.

Consideration of Advisory Agreement

At a meeting of the Board of Directors held on July 6, 2017, the Directors, by a unanimous vote (including a separate vote of those Directors who are not “interested persons” (as the term is defined in the 1940 Act), approved the Advisory Agreement for the Renn Fund, Inc.

In approving the Advisory Agreement, the Fund’s Board of Directors reviewed certain materials furnished by Horizon, which included information on Horizon’s investment approach and various strategies, including the proposed strategy for the Fund. In approving the Advisory Agreement, the Board of Directors considered a number of factors, including those described below. In light of the broad scope of factors and information considered, the Directors did not find it practicable to quantify or assign relative weights to the specific factors. The approval determinations were made on the basis of each Director’s business judgment after consideration of all the factors taken as a whole, although individual directors may have given different weights to certain factors and assigned various degrees of materiality to factors considered. Among other things, the Board considered the following matters and reached the following conclusions:

Nature, Extent and Quality of Investment Advisory Services. The Board, including the independent Directors, considered the nature, extent and quality of investment advisory services to be provided by Horizon to the Fund, as well as Horizon’s expected plans to promote the fund and to attempt to grow Fund assets. The Board reviewed the personnel and resources of Horizon, including the education and experience of its investment professionals, and concluded that the services to be provided by Horizon are appropriate and that the Fund is likely to benefit from the same.

Investment Performance. The Board reviewed the historical performance of Horizon’s other accounts for which Horizon employed its various equity strategies (i.e., Large Cap, Small Cap, Strategic Value, Core Value, Spin-Off, etc.) as well as the performance of various pooled investment vehicles managed by Horizon and its affiliates and compared such prior performance with the performance of

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RENN FUND, INC.

OTHER INFORMATION (Continued)
December 31, 2017 (Unaudited)

comparable advisers and investment companies. Although Horizon does not currently manage any investment funds similar in size and scope to the Fund, the Board concluded that the favorable performance of Horizon demonstrated by such comparisons was an important factor in their evaluation of the quality of services expected to be provided by Horizon under the Advisory Agreement.

Costs of the Services Provided to the Fund. The Board considered comparative data from publicly available information with respect to services rendered and the advisory fees paid to investment advisors of other investment companies with similar investment objectives. The Board also considered the Fund’s operating expenses and expense ratio compared to such other companies, as well as how those might change as a result of the Advisory Agreement. Based on its review, the Board concluded that the fee structure under the Advisory Agreement was extremely favorable for shareholders given that the Fund would not pay any management fee on net assets less than $25 million. As of December 31, 2016, the Fund’s net assets were $7.3 million. The Board also considered whether any indirect benefits would be expected to be realized by Horizon and its affiliates from its relationship with the Fund. Although the terms of the proposed Investment Advisory Agreement contemplate that Horizon may enter into “soft dollar” arrangements with non-affiliate brokers or dealers, as is typical in the industry, Horizon Kinetics has informed the Board that its current policies would not permit Horizon to enter into such arrangements. The Board also considered potential savings for the benefit of the Fund’s shareholders expected to be achieved from economies of scale as a result of Horizon Kinetics’ larger size and more extensive operations than those of the Fund’s current Adviser.

Profitability of the Investment Adviser. The Board reviewed the financial condition of Horizon, which it determined to be sound, and the expected profitability of Horizon as the Fund’s investment adviser, and concluded that the management fees that would be payable to Horizon in the future were reasonable taking into account the fees charged by other advisers for managing comparable investment companies.

Conflicts of Interest. The Board evaluated the potential for conflicts of interest and considered such matters as the experience and ability of the advisory personnel that will be assigned to the Fund; the basis of decisions to buy or sell securities for the Fund; and the substance and administration of Horizon’s code of ethics. The Board concluded that Horizon’s standards and practices relating to the identification and mitigation of possible conflicts of interests were satisfactory.

Based on the information provided to the Board and its evaluation thereof, the Board, including a majority of independent directors, voted to approve the Advisory Agreement, subject to approval by the Fund’s shareholders.

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RENN FUND, INC.