| |
RiverNorth
Opportunities Fund, Inc. | Notes
to Financial Statements |
| January
31, 2022 (Unaudited) |
security
purchased is limited to the amount paid for the security plus the transaction costs, whereas there is no maximum attainable price
of the shorted security. Therefore, in theory, securities sold short have unlimited risk. Short selling will also result in higher
transaction costs (such as interest and dividends), and may result in higher taxes, which reduce a fund’s return.
Special
Purpose Acquisition Company Risk: The Fund may invest in SPACs. SPACs are collective investment structures that pool funds
in order to seek potential acquisition opportunities. SPACs are generally publicly traded companies that raise funds through an
initial public offering (“IPO”) for the purpose of acquiring or merging with another company to be identified subsequent
to the SPAC’s IPO. The securities of a SPAC are often issued in “units” that include one share of common stock
and one right or warrant (or partial right or warrant) conveying the right to purchase additional shares or partial shares. Unless
and until an acquisition is completed, a SPAC generally invests its assets (less an amount to cover expenses) in U.S. Government
securities, money market fund securities and cash. SPACs and similar entities may be blank check companies with no operating history
or ongoing business other than to seek a potential acquisition. Accordingly, the value of their securities is particularly dependent
on the ability of the entity’s management to identify and complete a profitable acquisition. Certain SPACs may seek acquisitions
only in limited industries or regions, which may increase the volatility of their prices. If an acquisition or merger that meets
the requirements for the SPAC is not completed within a predetermined period of time, the invested funds are returned to the entity’s
shareholders, less certain permitted expenses. Accordingly, any rights or warrants issued by the SPAC will expire worthless. Certain
private investments in SPACs may be illiquid and/or be subject to restrictions on resale. Additionally, the Fund may acquire certain
private rights and other interests issued by a SPAC (commonly referred to as “founder shares”), which may be subject
to forfeiture or expire worthless and which typically have more limited liquidity than SPAC shares issued in an IPO. To the extent
the SPAC is invested in cash or similar securities, this may impact a Fund’s ability to meet its investment objective.
Private
Debt Risk: The Fund may invest in notes issued by private funds (“private debt”). Private debt often may be illiquid
and is typically not listed on an exchange and traded less actively than similar securities issued by public funds. For certain
private debt, trading may only be possible through the assistance of the broker who originally brought the security to the market
and has a relationship with the issuer. Due to the limited trading market, independent pricing services may be unable to provide
a price for private debt, and as such the fair value of the securities may be determined in good faith under procedures approved
by the Board, which typically will include the use of one or more independent broker quotes.
Rights
and Warrants Risks: Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer
at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually.
Warrants do not carry with them the right to dividends or voting rights with respect to the securities that they entitle their
holder to purchase and they do not represent any rights in the assets of the issuer. As a result, warrants may be considered to
have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to its expiration
date.
Rights
are usually granted to existing shareholders of a corporation to subscribe to shares of a new issue of common stock before it
is issued to the public. The right entitles its holder to buy common
Semi-Annual
Report | January 31, 2022 |
37 |
| |
RiverNorth
Opportunities Fund, Inc. | Notes
to Financial Statements |
| January
31, 2022 (Unaudited) |
stock
at a specified price. Rights have similar features to warrants, except that the life of a right is typically much shorter, usually
a few weeks.
During
the six months ended January 31, 2022, the Fund invested in rights and warrants, which are disclosed in the Statement of Investments.
The
effect of derivative instruments on the Statement of Assets and Liabilities as of January 31, 2022:
Asset Derivatives |
| |
Statement of Assets and Liabilities | |
| |
Risk Exposure | |
Location | |
Value | |
Equity Contracts (Rights) | |
Investments, at value | |
$ | 268,755 | |
Equity Contracts (Warrants) | |
Investments, at value | |
| 1,106,764 | |
| |
| |
$ | 1,375,519 | |
The
effect of derivative instruments on the Statement of Operations for the six months ended January 31, 2022:
| |
| |
| | |
Change in | |
| |
| |
| | |
Unrealized | |
| |
| |
Realized | | |
Appreciation/ | |
| |
| |
Gain/(Loss) | | |
(Depreciation) | |
Risk Exposure | |
Statement of Operations Location | |
on Derivatives | | |
on Derivatives | |
Equity Contracts | |
Net realized gain/(loss) on | |
| | | |
| | |
(Rights) | |
investments/ Net change in | |
| | | |
| | |
| |
unrealized | |
| | | |
| | |
| |
appreciation/depreciation on | |
| | | |
| | |
| |
investments | |
$ | 90,100 | | |
$ | (119,247 | ) |
Equity Contracts | |
Net realized gain/(loss) on | |
| | | |
| | |
(Warrants) | |
investments/ Net change in | |
| | | |
| | |
| |
unrealized | |
| | | |
| | |
| |
appreciation/depreciation on | |
| | | |
| | |
| |
investments | |
| 160,720 | | |
| (872,627 | ) |
Total | |
| |
$ | 250,820 | | |
$ | (991,874 | ) |
The
Fund’s average value of rights and warrants held for the six months ended January 31, 2022 were $111,782 and $803,955 respectively.
Market
and Geopolitical Risk: The value of your investment in the Fund is based on the market prices of the securities the Fund holds.
These prices change daily due to economic and other events that affect markets generally, as well as those that affect particular
regions, countries, industries, companies or governments. These price movements, sometimes called volatility, may be greater or
less depending on the types of securities the Fund owns and the markets in which the securities trade. The increasing interconnectivity
between global economies and financial markets increases the likelihood that events or conditions in one region or financial market
may adversely impact
| |
RiverNorth
Opportunities Fund, Inc. | Notes
to Financial Statements |
| January
31, 2022 (Unaudited) |
issuers
in a different country, region or financial market. Securities in the Fund’s portfolio may underperform due to inflation
(or expectations for inflation), interest rates, global demand for particular products or resources, natural disasters, pandemics,
epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of global events similar
to those in recent years, such as terrorist attacks around the world, natural disasters, social and political discord or debt
crises and downgrades, among others, may result in market volatility and may have long term effects on both the U.S. and global
financial markets. It is difficult to predict when similar events affecting the U.S. or global financial markets may occur, the
effects that such events may have and the duration of those effects. Any such event(s) could have a significant adverse impact
on the value and risk profile of the Fund’s portfolio. There is a risk that you may lose money by investing in the Fund.
Other:
The Fund holds certain investments which pay dividends to their shareholders based upon available funds from operations. It
is possible for these dividends to exceed the underlying investments’ taxable earnings and profits resulting in the excess
portion of such dividends being designated as a return of capital. Distributions received from investments in securities that
represent a return of capital or long-term capital gains are recorded as a reduction of the cost of investments or as a realized
gain, respectively.
3.
INVESTMENT ADVISORY AND OTHER AGREEMENTS
ALPS
Advisors, Inc. (“AAI”) serves as the Fund’s investment adviser pursuant to an Investment Advisory Agreement
with the Fund. As compensation for its services to the Fund, AAI receives an annual investment advisory fee of 1.00% based on
the Fund’s average daily Managed Assets (as defined below). Pursuant to an Investment Sub-Advisory Agreement, AAI has retained
RiverNorth Capital Management, LLC (“RiverNorth” or the "Sub-Adviser") as the Fund’s sub-adviser and
AAI pays RiverNorth an annual fee of 0.85% based on the Fund’s average daily Managed Assets.
ALPS
Fund Services, Inc. (‘‘AFS’’), an affiliate of AAI, serves as administrator to the Fund. Under an Administration,
Bookkeeping and Pricing Services Agreement, AFS is responsible for calculating the net asset values, providing additional fund
accounting and tax services, and providing fund administration and compliance-related services to the Fund. AFS is entitled to
receive a monthly fee, accrued daily based on the Fund’s average Managed Assets, as defined below, plus a fixed fee for
completion of certain regulatory filings and reimbursement for certain out-of-pocket expenses.
DST
Systems, Inc. (‘‘DST’’), the parent company of AAI and AFS, serves as the Transfer Agent to the Fund.
Under the Transfer Agency Agreement, DST is responsible for maintaining all shareholder records of the Fund. DST is entitled to
receive an annual minimum fee of $22,500 plus out-of-pocket expenses. DST is a wholly-owned subsidiary of SS&C Technologies
Holdings, Inc. (“SS&C”), a publicly traded company listed on the NASDAQ Global Select Market.
The
Fund pays no salaries or compensation to its officers or to interested Directors employed by the Adviser or Sub-Adviser. For their
services, the Directors of the Fund, which are not affiliated with the Adviser or Sub-Adviser, receive an annual retainer in the
amount of $17,000, an additional $2,000 for attending each meeting of the Board and $1,000 for attending a special meeting of
the Board. In addition, the Independent Chairman receives an additional $10,000
Semi-Annual Report | January
31, 2022 |
39 |
| |
RiverNorth
Opportunities Fund, Inc. | Notes
to Financial Statements |
| January
31, 2022 (Unaudited) |
annually.
The Directors, which are not affiliated with the Adviser or Sub-Adviser, are also reimbursed for all reasonable out-of-pocket
expenses relating to attendance at meetings of the Board.
Certain
officers of the Fund are also employees of AAI and AFS. A Director is an officer of RiverNorth.
Managed
Assets: For these purposes, the term Managed Assets is defined as the total assets of the Fund, including assets attributable
to leverage, minus liabilities (other than debt representing leverage and any preferred stock that may be outstanding), calculated
as of 4:00 p.m. Eastern time on such day or as of such other time or times as the Board may determine in accordance with the provisions
of applicable law and of the declaration and bylaws of the Fund and with resolutions of the Board as from time to time in force.
4.
LEVERAGE
The
Fund may use leverage for investment purposes, which may include the use of borrowings, the issuance of preferred stock, and/or
the use of derivatives or other transactions that may provide leverage (such as the investment of proceeds received from selling
securities short). The Sub-Adviser will assess whether or not to engage in leverage based on its assessment of conditions in the
debt and credit markets. Leverage, if used, may take the form of a borrowing or the issuance of preferred stock, although the
Fund currently anticipates that leverage will primarily be obtained through the use of bank borrowings or other similar term loans.
The
provisions of the 1940 Act further provide that the Fund may borrow or issue notes or debt securities in an amount up to 33 1/3%
of its total assets or may issue preferred shares in an amount up to 50% of the Fund’s total assets (including the proceeds
from leverage). Notwithstanding each of the limits discussed above, the Fund may enter into derivatives or other transactions
(e.g., total return swaps) that may provide leverage (other than through borrowings or the issuance of preferred stock), but which
are not subject to the above foregoing limitations, if the Fund earmarks or segregates liquid assets (or enters into offsetting
positions) in accordance with applicable SEC regulations and interpretations to cover its obligations under those transactions
and instruments. However, these transactions will entail additional expenses (e.g., transaction costs) which will be borne by
the Fund.
If
the net rate of return on the Fund’s investments purchased with the leverage proceeds exceeds the interest or dividend rate
payable on the leverage, such excess earnings will be available to pay higher dividends to the Fund’s stockholders. If the
net rate of return on the Fund’s investments purchased with leverage proceeds does not exceed the costs of leverage, the
return to stockholders will be less than if leverage had not been used. The use of leverage magnifies gains and losses to stockholders.
Since the stockholders pay all expenses related to the issuance of debt or use of leverage, any use of leverage would create a
greater risk of loss for stockholders than if leverage is not used. There can be no assurance that a leveraging strategy will
be successful during any period in which it is employed.
The
Fund has entered into a $65,000,000 credit agreement for margin financing with Pershing LLC (the "Pershing Credit Agreement").
Per the Pershing Credit Agreement, the Fund may borrow at an interest rate of 1.10% plus the Overnight Bank Funding Rate.
| |
RiverNorth
Opportunities Fund, Inc. | Notes
to Financial Statements |
| January
31, 2022 (Unaudited) |
The
average annualized interest rate charged, the average outstanding loan payable and the maximum outstanding loan payable for the
six months ended January 31, 2022 was as follows:
Average Interest Rate* | |
1.17% |
Average Outstanding Loan Payable* | |
$27,881,356 |
Maximum Outstanding Loan Payable | |
$30,000,000 |
| * | The
average is calculated based on the actual number of days with an outstanding principal balance. |
At
January 31, 2022, the Fund had $30,000,000 in principal balance outstanding.
5.
DISTRIBUTIONS
The
Fund intends to make regular monthly distributions to stockholders at a constant and fixed (but not guaranteed) rate that is reset
annually to a rate equal to a percentage of the average of the Fund’s NAV per share (the “Distribution Amount”),
as reported for the final five trading days of the preceding calendar year (the “Distribution Rate Calculation”).
The Distribution Amount is set by the Board and may be adjusted from time to time. The Fund’s intention is that monthly
distributions paid to stockholders throughout a calendar year will be at least equal to the Distribution Amount (plus any additional
amounts that may be required to be included in a distribution for federal or excise tax purposes) and that, on the close of the
calendar year, the Distribution Amount applicable to the following calendar year will be reset based upon the new results of the
Distribution Rate Calculation.
Dividends
and distributions may be payable in cash or shares of common stock, with stockholders having the option to receive additional
common stock in lieu of cash. The Fund may at times, in its discretion, pay out less than the entire amount of net investment
income earned in any particular period and may at times pay out such accumulated undistributed income in addition to net investment
income earned in other periods in order to permit the fund to maintain a more stable level of distributions. As a result, the
dividend paid by the Fund to common stockholders for any particular period may be more or less than the amount of net investment
income earned by the Fund during such period. Any distribution that is treated as a return of capital generally will reduce a
shareholder’s basis in his or her shares, which may increase the capital gain or reduce the capital loss realized upon the
sale of such shares. Any amounts received in excess of a shareholder’s basis are generally treated as capital gain, assuming
the shares are held as capital assets. The Fund’s ability to maintain a stable level of distributions to stockholders will
depend on a number of factors, including the stability of income received from its investments and the costs of any leverage.
As portfolio and market conditions change, the amount of dividends on the Fund’s common stock could change. For federal
income tax purposes, the Fund is required to distribute substantially all of its net investment income each year to both reduce
its federal income tax liability and to avoid a potential federal excise tax. The Fund intends to distribute all realized net
capital gains, if any, at least annually.
6.
CAPITAL TRANSACTIONS
The
Fund’s authorized capital stock consists of 37,500,000 shares of common stock, $0.0001 par value per share, all of which
is initially classified as common shares. Under the rules of the NYSE
Semi-Annual Report | January
31, 2022 |
41 |
| |
RiverNorth
Opportunities Fund, Inc. | Notes
to Financial Statements |
| January
31, 2022 (Unaudited) |
applicable
to listed companies, the Fund is required to hold an annual meeting of stockholders in each year.
Under
the Fund’s Charter, the Board is authorized to classify and reclassify any unissued shares of stock into other classes or
series of stock and authorize the issuance of shares of stock without obtaining stockholder approval. Also, the Fund’s Board,
with the approval of a majority of the entire Board, but without any action by the stockholders of the Fund, may amend the Fund’s
Charter from time to time to increase or decrease the aggregate number of shares of stock of the Fund or the number of shares
of stock of any class or series that the Fund has authority to issue.
During
the year ended July 31, 2021 and the six months ended January 31, 2022, the Board approved rights offerings to participating shareholders
of record who were allowed to subscribe for new common shares of the Fund. Record date shareholders received one right for each
common share held on the respective record dates. For every three rights held, a holder of the rights was entitled to buy one
new common share of the Fund. Record date shareholders who fully exercised all rights initially issued to them in the primary
subscription were entitled to buy those common shares that were not purchased by other record date shareholders. The Fund issued
new shares of common stock at 95% of NAV per share for the October 2, 2020 rights offering, and at 97.5% of NAV per share for
the October 1, 2021 rights offering. Offering costs were charged to paid-in-capital upon the exercise of the rights.
The
shares of common stock issued, subscription price, and offering costs for the rights offerings were as follows:
|
|
Shares
of |
|
|
|
|
|
|
Expiration |
common |
|
Gross |
Offering |
|
|
|
stock |
Subscription |
|
|
Record
Date |
Date |
issued |
price |
Proceeds |
costs |
Net
Proceeds |
|
October |
November |
|
|
|
|
|
|
2,
2020 |
6, 2020 |
575,706 |
$14.08 |
$8,105,940 |
$177,881 |
$7,928,059 |
|
October |
November |
4,373,407 |
$16.81 |
$73,516,972 |
$223,000 |
$73,293,972 |
|
1,
2021 |
5, 2021 |
|
|
|
|
|
|
On
August 31, 2018, the Fund entered into a sales agreement with Jones Trading Institutional Services LLC ("Jones"), under
which the Fund may from time to time offer and sell up to 3,300,000 of the Fund's common stock in an "at-the-market"
offering. On November 11, 2020, the agreement with Jones was terminated and the Fund entered into a distribution agreement with
ALPS Distributors, Inc. (“ADI”), pursuant to which the Fund may offer and sell up to 3,196,130 shares of the Fund's
common stock from time to time through ADI. On September 17, 2021, the Fund entered into a new distribution agreement with ADI,
pursuant to which the Fund may offer and sell an additional 5,000,000 shares of the Fund's common stock from time to time through
ADI, for a total of 8,196,130 shares.
RiverNorth
Opportunities Fund, Inc. |
Notes
to Financial Statements |
|
January
31, 2022 (Unaudited) |
The
shares of common stock issued, gross proceeds from the sale of shares, and commissions to Jones and ADI were as follows:
Period
Ended | | |
Shares
of common stock issued | | |
Gross
Proceeds | | |
Commissions | | |
Offering
Costs | | |
Net
Proceeds | |
July 31,
2021 | | |
| 2,455,650 | | |
$ | 43,382,997 | | |
$ | 437,175 | * | |
$ | 194,394 | | |
$ | 42,751,428 | |
January 31, 2022 | | |
| 835,695 | | |
$ | 14,935,406 | | |
$ | 149,355 | * | |
$ | 3,896 | | |
$ | 14,782,155 | |
| * | Includes
commissions in the amount of $84,904 and $29,871 retained by the Fund's related party
distributor, ADI for the year ended July 31, 2021 and the six months ended January 31,
2022, respectively. |
The
Fund's 2020 rights offering and previous at-the-market offerings were made under the shelf registration statement that was initially
effective with the SEC on July 26, 2018. Offering costs incurred through January, 31, 2022 as a result of the Fund's shelf registration
statement initially effective with the SEC on September 17, 2021 are approximately $226,896. The Fund's 2021 rights offerings
and the current at-the-market offering were made under this shelf registration statement. Management estimates an additional $683,295
of costs expected to be incurred resulting in total offering costs of approximately $910,191. The Statement of Assets and Liabilities
reflects the current offering costs of $5,367 as deferred offering costs. These offering costs, as well as offering costs incurred
subsequent to January 31, 2022, will be charged to paid-in-capital upon the issuance of shares.
Additional
shares of the Fund may be issued under certain circumstances, including pursuant to the Fund’s Automatic Dividend Reinvestment
Plan, as defined within the Fund’s organizational documents. Additional information concerning the Automatic Dividend Reinvestment
Plan is included within this report.
As
of January 31, 2022, investments in securities included a security that is considered restricted. Restricted securities are often
purchased in private placement transactions, are not registered under the Securities Act of 1933, and may have contractual restrictions
on resale.
| |
| | |
| | |
| | |
Value
as | |
| |
Acquisition | | |
| | |
| | |
Percentage
of | |
Description | |
Date | | |
Cost | | |
Value | | |
Net
Assets | |
Business
Development Corp. of America | |
| 12/3/2019 | | |
$ | 300,000 | | |
$ | 312,894 | | |
| 0.11 | % |
TOTAL | |
| | | |
$ | 300,000 | | |
$ | 312,894 | | |
| 0.11 | % |
Purchases
and Sales of Securities: For the six months ended January 31, 2022, the cost of purchases and proceeds from sales of securities,
excluding short-term securities, were $271,987,468, and $165,404,396, respectively.
Semi-Annual
Report | January 31, 2022 |
43 |
RiverNorth
Opportunities Fund, Inc. |
Notes
to Financial Statements |
|
January
31, 2022 (Unaudited) |
Classification
of Distributions: Net investment income/(loss) and net realized gain/(loss) may differ for financial statement and tax purposes.
The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund.
The
amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized
at fiscal year-end and are not available for the six months ended January 31, 2022.
The
tax character of distributions paid during the year ended July 31, 2021 was as follows:
| |
For
the Year Ended | |
| |
July
31, 2021 | |
Ordinary Income | |
$ | 21,674,120 | |
Tax-Exempt
Income | |
| 172,302 | |
Total | |
$ | 21,846,422 | |
Tax
Basis of Investments: Net unrealized appreciation/(depreciation) of investments based on federal tax cost as of January 31,
2022, was as follows:
Cost
of investments for income tax purposes | |
$ | 282,996,344 | |
Gross appreciation on
investments (excess of value over tax cost)(a) | |
| 14,725,723 | |
Gross
depreciation on investments (excess of tax cost over value)(a) | |
| (11,314,259 | ) |
Net
unrealized appreciation on investments | |
$ | 3,411,464 | |
| (a) | Includes
appreciation/(depreciation) on securities sold short. |
The
differences between book-basis and tax-basis are primarily due to wash sales, investments in passive foreign investment companies,
and the tax treatment of certain other investments.
Federal
Income Tax Status: For federal income tax purposes, the Fund currently qualifies, and intends to remain qualified, as a regulated
investment company under the provisions of Subchapter M of the Internal Revenue Code of 1986, as amended, by distributing substantially
all of its investment company taxable net income and realized gain, not offset by capital loss carryforwards, if any, to its shareholders.
No provision for federal income taxes has been made.
As
of and during the six months ended January 31, 2022, the Fund did not have a liability for any unrecognized tax benefits in the
accompanying financial statements. The Fund recognizes the
RiverNorth
Opportunities Fund, Inc. |
Notes
to Financial Statements |
|
January
31, 2022 (Unaudited) |
interest
and penalties, if any, related to the unrecognized tax benefits as income tax expense in the Statement of Operations. Management
has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax periods and has concluded that
no provision for federal income tax is required in the Fund’s financial statements. During the year, the Fund did not incur
any interest or penalties. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns
are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is
generally three years after the filing of the tax return.
Under
the Fund’s organizational documents, its officers and Directors are indemnified against certain liabilities arising out
of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts
with service providers that may contain general indemnification clauses. The Fund’s maximum exposure under those arrangements
is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred.
Subsequent
to January 31, 2022, the Fund paid the following distributions:
|
|
|
Rate |
Ex-Date |
Record
Date |
Payable
Date |
(per
share) |
February
10, 2022 |
February
11, 2022 |
February
28, 2022 |
$0.17 |
March
16, 2022 |
March
17, 2022 |
March
31, 2022 |
$0.17 |
On
March 17, 2022, the Board of the Fund approved, subject to stockholder approval, a new investment advisory agreement with RiverNorth
Capital Management. Stockholders of the Fund will receive a related proxy statement describing the proposal and will be asked
to consider the approval of the new investment advisory agreement at a special shareholder meeting that will take place in the
second quarter of this year. If approved by shareholders, the Fund anticipates the new investment advisory agreement will take
effect in the third quarter of 2022. At that time, the Fund's current investment advisory agreement with AAI and the Fund's current
sub-advisory agreement with RiverNorth will be terminated.
Semi-Annual
Report | January 31, 2022 |
45 |
|
Approval
of Investment Advisory |
RiverNorth
Opportunities Fund, Inc. |
and
Sub-Advisory Agreements |
|
January
31, 2022 (Unaudited) |
At
the August 10, 2021 meeting (“Meeting”) of the Board of Directors (the “Board” or the “Directors”)
of RiverNorth Opportunities Fund, Inc. (the “Fund”), the Board, including those Directors who are not “interested
persons” of the Fund (the “Independent Directors”), as that term is defined in the Investment Company Act of
1940, as amended (the “1940 Act”), renewed an Investment Advisory Agreement between the Fund and ALPS Advisors, Inc.
(the “Adviser” or “AAI”), and an Investment Sub-Advisory Agreement, between the Adviser and RiverNorth
Capital Management, LLC (the “Sub-Adviser” or “RiverNorth”), with respect to the Fund (collectively, the
“Agreements”), upon the terms and conditions set forth therein.
The
Directors relied upon the advice of independent legal counsel and their own business judgment in determining the material factors
to be considered in evaluating the Agreements and the weight to be given to each such factor. The Directors’ conclusions
were based on an evaluation of all of the information provided and were not the result of any one factor. Moreover, each Director
may have afforded different weight to the various factors in reaching conclusions with respect to the Advisory Agreement and the
Sub-Advisory Agreement. Although not meant to be all-inclusive, the following portion of the minutes summarizes the factors considered
and conclusions reached by the Directors in the executive session and at the Meeting in determining to renew the Advisory Agreement
and the Sub-Advisory Agreement.
Nature,
Extent, and Quality of Services. In examining the nature, extent and quality of the investment advisory services provided
by AAI, the Directors considered the qualifications, experience and capability of AAI’s management and other personnel and
the extent of care and conscientiousness with which AAI performs its duties. In this regard, the Directors considered, among other
matters, the process by which AAI its responsibilities with respect to the Fund, including ongoing due diligence regarding product
structure, resources, personnel, technology, performance, compliance and oversight of RiverNorth. The Board noted that AAI had
seen recent turnover in its management, but noted the experience of the personnel assuming management roles. Further, the Directors
noted that the day to day team servicing the Fund (other than the Treasurer) remained consistent and noted the quality and expertise
of this team. The Board acknowledged the addition of certain individuals to AAI’s team had provided the Fund with excellent
support in managing the Fund’s operations.
With
respect to the nature, extent and quality of the services provided by RiverNorth, the Directors considered RiverNorth’s
investment management process it uses in managing the assets of the Fund, including the experience and capability of RiverNorth’s
management and other personnel responsible for the portfolio management of the Fund and compliance with the Fund’s investment
policies and restrictions. The Board noted that the RiverNorth personnel servicing the Fund continued to be consistent and acknowledged
the fact that RiverNorth was considered a leader in the CEF field. The Directors also considered the continued favorable assessment
provided by AAI as to the nature and quality of the services provided by RiverNorth and the ability of RiverNorth to fulfill its
contractual obligations. The partnership between AAI and RiverNorth were considered by the Board, noting that the expanding operational
and investment efficiencies of this partnership continue to benefit the Fund.
Based
on the totality of the information considered, the Directors agreed that the Fund had already, and was likely to continue to benefit
from the nature, extent and quality of AAI’s and RiverNorth’s
|
Approval
of Investment Advisory |
RiverNorth
Opportunities Fund, Inc. |
and
Sub-Advisory Agreements |
|
January
31, 2022 (Unaudited) |
services
based on their respective experience, operations and resources and strong track record in their roles as the Fund’s adviser
and sub-adviser, respectively.
Investment
Performance of the Fund. The Board reviewed the Fund’s investment performance over time and compared that performance
to other funds in a peer group comparison report from FUSE, an independent research firm that, among other services, provides
assistance to investment companies in connection with the advisory agreement approval process. The Board considered the Fund’s
NAV and market price returns relative to the returns for funds in the peer groups, noting on a NAV basis, the Fund had underperformed
the FUSE peer group median for the one-year, three- year and five-year periods and outperformed the FUSE peer group median since
inception. Using market price returns, the Directors acknowledged that the Fund underperformed the FUSE peer group median return
for the one-year, three-year and since inception periods and outperformed the FUSE peer group median return for the five-year
period. In comparison to the benchmark, the Morningstar Moderate Aggressive Target Risk Index, the Board noted that the Fund underperformed
for the one-year, three-year, five-year, and since inception periods. The Board considered the discussion during the Meeting of
the differences in the peer group as compared to the Fund. The Directors also considered the Fund’s strong risk adjusted
returns since inception. After considering all of the information provided, the Board agreed that the Fund’s performance
supported the renewal of the Agreements with AAI and RiverNorth.
Fees
and Expenses. The Board considered the fees payable under the Agreements and reviewed the information compiled by FUSE comparing
the Fund’s management fees and expense ratio to other funds in the peer group, the peer group created by RiverNorth, as
well as comparisons to fees paid by other funds advised by AAI and RiverNorth. It was noted that the Fund’s net management
fee and the Fund’s expense ratio (as a percentage of net assets) were both lower than the FUSE peer group medians. The Board
noted that the Fund was one of the smallest of any fund in either peer group, and accordingly, may not be benefiting from the
resulting economies of scale that these peer funds had achieved. Further, the Board noted the Fund’s management fee was
in-line or lower than most other CEFs advised by AAI after taking into account the sub-advisory fee paid by AAI to RiverNorth
and required additional work as compared with the one CEF that had a lower net fee. With regard to RiverNorth’s sub-advisory
fee, the Directors considered that the fees charged by RiverNorth for its work with the Fund were similar or lower to a majority
of accounts managed by RiverNorth using similar strategies. The Directors further considered AAI’s belief that the compensation
payable to RiverNorth was reasonable, appropriate and fair in light of the nature and quality of the services provided to the
Fund.
The
Directors also noted the firms’ limited ability to control the Fund’s other expenses. Finally, the Directors considered
that these other expenses were more directly related to the size of the Fund, as these other Fund expenses generally were not
charged on an asset-level basis.
Profitability
and Economies of Scale. In reviewing the profitability information provided by each of AAI and RiverNorth, the Directors considered
whether the firms had realized (or would be expected to realize) economies of scale related to its work with the Fund such that
such economies should be shared with the Fund’s stockholders. The Board acknowledged that AAI had not yet begun to realize
profits indicating it had realized economies of scale with respect to its work with the Fund. The Board considered the information
provided by the Sub-Adviser regarding profitability from its relationship with the Fund. The Board noted that the Sub-Adviser’s
profitability was not a significant
Semi-Annual
Report | January 31, 2022 |
47 |
|
Approval
of Investment Advisory |
RiverNorth
Opportunities Fund, Inc. |
and
Sub-Advisory Agreements |
|
January
31, 2022 (Unaudited) |
factor
considered by the Board, as the sub-advisory fee is paid by the Adviser out of the advisory fee paid to it by the Fund, and not
by the Fund. With respect to whether assets had already risen, or would be expected to increase, to a level such that economies
of scale might be realized by AAI and RiverNorth, the Board considered the each firm’s view that the Fund’s closed-end
structure limited the likelihood of significant future increases in the Fund’s asset levels which would reach the point
where the imposition of breakpoints in the management fees would be appropriate; noting the Fund’s offerings had not currently
changed this belief.
Indirect
Benefits. The Board considered any ancillary or indirect benefits that could accrue to AAI or RiverNorth as a result of their
relationships with the Fund. The Directors considered details related to certain marketing services provided by AAI, as well as
related to services that affiliates of AAI provided to the Fund: ALPS served as the Fund’s administrator and accountant,
and DST Systems, Inc., an affiliate of AAI and ALPS, served as the Fund’s transfer agent. The Board also considered that
RiverNorth did not expect to receive any such ancillary benefits beyond reputational benefits related to its role with Fund. The
Board concluded that the benefits accruing to AAI and RiverNorth by virtue of their relationships to the Fund appeared to be reasonable.
After
evaluation of the performance, fee and expense information and the profitability, ancillary benefits and other considerations
as described above, and in light of the nature, extent and quality of services provided by AAI and RiverNorth, the Board concluded
that the level of fees to be paid to each of AAI and RiverNorth was reasonable.
Conclusion.
Having requested and received such information from each of AAI and RiverNorth as the Board believed to be reasonably necessary
to evaluate the terms of the Agreements, and as assisted by the advice of independent counsel, the Board, including the Independent
Directors, concluded that renewal of the Agreements were in the best interests of the Fund and its stockholders.
| RiverNorth
Opportunities Fund, Inc. | Dividend
Reinvestment Plan |
| | January
31, 2022 (Unaudited) |
RiverNorth
Opportunities Fund, Inc. (the “Fund”) has a dividend reinvestment plan commonly referred to as an “opt-out”
plan. Unless the registered owner of the Fund’s shares of common stock (the “Common Shares”) elects to receive
cash by contacting (the "Plan Administrator"), all dividends declared on Common Shares will be automatically reinvested
by the Plan Administrator for shareholders in the Fund’s Automatic Dividend Reinvestment Plan (the “Plan”),
in additional Common Shares. Common Shareholders who elect not to participate in the Plan will receive all dividends and other
distributions in cash paid by check mailed directly to the shareholder of record (or, if the Common Shares are held in street
or other nominee name, then to such nominee) by the Plan Administrator as dividend disbursing agent. Participation in the Plan
is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination or resumption will be effective with respect
to any subsequently declared dividend or other distribution. Such notice will be effective with respect to a particular dividend
or other distribution (together, a “Dividend”). Some brokers may automatically elect to receive cash on behalf of
Common Shareholders and may re-invest that cash in additional Common Shares.
Whenever
the Fund declares a Dividend payable in cash, non-participants in the Plan will receive cash and participants in the Plan will
receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Administrator for the participants’
accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Common
Shares from the Fund (“Newly Issued Common Shares”) or (ii) by purchase of outstanding Common Shares on the open market
(“Open-Market Purchases”) on the New York Stock Exchange (“NYSE”) or elsewhere. If, on the payment date
for any Dividend, the closing market price plus estimated brokerage commissions per Common Share is equal to or greater than the
net asset value per Common Share, the Plan Administrator will invest the Dividend amount in Newly Issued Common Shares on behalf
of the participants. The number of Newly Issued Common Shares to be credited to each participant’s account will be determined
by dividing the dollar amount of the Dividend by the Fund’s net asset value per Common Share on the payment date. If, on
the payment date for any Dividend, the net asset value per Common Share is greater than the closing market value plus estimated
brokerage commissions (i.e., the Fund’s Common Shares are trading at a discount), the Plan Administrator will invest the
Dividend amount in Common Shares acquired on behalf of the participants in Open-Market Purchases.
In
the event of a market discount on the payment date for any Dividend, the Plan Administrator will have until the last business
day before the next date on which the Common Shares trade on an “ex- dividend” basis or 30 days after the payment
date for such Dividend, whichever is sooner (the “Last Purchase Date”), to invest the Dividend amount in Common Shares
acquired in Open-Market Purchases. It is contemplated that the Fund will pay monthly income Dividends. If, before the Plan Administrator
has completed its Open-Market Purchases, the market price per Common Share exceeds the net asset value per Common Share, the average
per Common Share purchase price paid by the Plan Administrator may exceed the net asset value of the Common Shares, resulting
in the acquisition of fewer Common Shares than if the Dividend had been paid in Newly Issued Common Shares on the Dividend payment
date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan provides that if the Plan Administrator
is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market discount shifts
to a market premium during the purchase period, the Plan Administrator may cease making Open-Market Purchases and may invest the
uninvested portion of the Dividend amount in Newly
Semi-Annual
Report | January 31, 2022 |
49 |
| RiverNorth
Opportunities Fund, Inc. | Dividend
Reinvestment Plan |
| | January
31, 2022 (Unaudited) |
Issued
Common Shares at the net asset value per Common Share at the close of business on the Last Purchase Date.
The
Plan Administrator maintains all shareholders’ accounts in the Plan and furnishes written confirmation of all transactions
in the accounts, including information needed by shareholders for tax records. Common Shares in the account of each Plan participant
will be held by the Plan Administrator on behalf of the Plan participant, and each shareholder proxy will include those shares
purchased or received pursuant to the Plan. The Plan Administrator will forward all proxy solicitation materials to participants
and vote proxies for shares held under the Plan in accordance with the instructions of the participants.
Beneficial
owners of Common Shares who hold their Common Shares in the name of a broker or nominee should contact the broker or nominee to
determine whether and how they may participate in the Plan. In the case of Common Shareholders such as banks, brokers or nominees
which hold shares for others who are the beneficial owners, the Plan Administrator will administer the Plan on the basis of the
number of Common Shares certified from time to time by the record shareholder’s name and held for the account of beneficial
owners who participate in the Plan.
There
will be no brokerage charges with respect to Common Shares issued directly by the Fund. However, each participant will pay a pro
rata share of brokerage commissions incurred in connection with Open-Market Purchases. The automatic reinvestment of Dividends
will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such
Dividends. Participants that request a sale of Common Shares through the Plan Administrator are subject to brokerage commissions.
The
Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases
in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.
All
correspondence or questions concerning the Plan should be directed to the Plan Administrator at Mail Stop: RiverNorth Opp, 430
West 7th Street, Kansas City, MO 64105-1407.
| RiverNorth
Opportunities Fund, Inc. | Additional
Information |
| | January
31, 2022 (Unaudited) |
The
Fund files a complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (“SEC”) for
the first and third quarters of each fiscal year on Form N-PORT within 60 days after the end of the period. Copies of the Fund’s
Form N-PORT are available without a charge, upon request, by contacting the Fund at 1-855-830-1222 and on the SEC’s website
at http://www.sec.gov.
A
description of the Fund’s proxy voting policies and procedures is available (1) without charge, upon request, by calling
1-855-830-1222, (2) on the Fund’s website located at http://www.rivernorthcef.com, or (3) on the SEC’s website at
http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the twelve-month
period ended June 30th is available on the SEC’s website at http://www.sec.gov.
| UNAUDITED
TAX
INFORMATION |
Of
the distributions paid by the Fund from ordinary income for the calendar year ended December 31, 2021, the following percentages
met the requirements to be treated as qualifying for the corporate dividends received deduction and qualified dividend income:
|
Dividend
Received Deduction |
Qualified
Dividend Income |
RiverNorth
Opportunities Fund |
3.20% |
2.99% |
In
early 2022, if applicable, shareholders of record received this information for the distributions paid to them by the Funds during
the calendar year 2021 via Form 1099. The Fund will notify shareholders in early 2023 of amounts paid to them by the Fund, if
any, during the calendar year 2022.
| CUSTODIAN
AND
TRANSFER AGENT |
State
Street Bank and Trust Company, located at State Street Financial Center, One Lincoln Street, Boston, MA 02111, serves as the Fund’s
custodian and maintains custody of the securities and cash of the Fund.
DST
Systems, Inc., located at 333 West 11th Street, 5th Floor, Kansas City, Missouri 64105, serves as the Fund’s transfer agent
and registrar.
Dechert
LLP, located at 1095 Avenue of the Americas, New York, New York 10036, serves as legal counsel to the Fund.
| INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM |
Cohen
& Company, Ltd. is the independent registered public accounting firm for the Fund.
Semi-Annual
Report | January 31, 2022 |
51 |
| RiverNorth
Opportunities Fund, Inc. | Data
Privacy Policies and Procedures |
FACTS |
WHAT
DOES RIVERNORTH OPPORTUNITIES FUND DO WITH YOUR PERSONAL INFORMATION? |
WHY? |
Financial
companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all
sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read
this notice carefully to understand what we do. |
WHAT? |
The
types of personal information we collect and share depend on the product or service you have with us. This information can
include: |
|
|
|
•
Social Security number |
•
Purchase History |
|
•
Assets |
• Account
Balances |
|
•
Retirement Assets |
•
Account Transactions |
|
•
Transaction History |
•
Wire Transfer Instructions |
|
•
Checking Account Information |
|
|
When
you are no longer our customer, we continue to share your information as described in this notice. |
HOW? |
All
financial companies need to share customers’ personal information to run their everyday business. In the section below,
we list the reasons financial companies can share their customers’ personal information; the reasons RiverNorth Opportunities
Fund chooses to share; and whether you can limit this sharing. |
REASONS
WE CAN SHARE YOUR PERSONAL INFORMATION |
DOES
RIVERNORTH
OPPORTUNITIES
INCOME FUND
SHARE? |
CAN
YOU
LIMIT THIS
SHARING? |
For
our everyday business purposes – such as to process your transactions, maintain your account(s), respond to
court orders and legal investigations, or report to credit bureaus
|
Yes
|
No
|
For
our marketing purposes – to offer our products and services to you |
No
|
We
don't share
|
For
joint marketing with other financial companies
|
No |
We
don't share |
For
our affiliates’ everyday business purposes –
information
about your transactions and experiences |
No
|
We
don't share
|
For
our affiliates’ everyday business purposes –
information
about your creditworthiness
|
No
|
We
don't share
|
For
nonaffiliates to market to you |
No |
We
don't share |
QUESTIONS? |
Call
1-855-838-9485 |
|
|
RiverNorth
Opportunities Fund, Inc. |
Data
Privacy Policies and Procedures |
|
WHO
WE ARE |
Who
is providing this notice? |
RiverNorth
Opportunities Fund |
WHAT
WE DO |
How
does RiverNorth Opportunities Fund protect my personal information?
|
To
protect your personal information from unauthorized access and use, we use security measures
that comply with federal law. These measures include computer safeguards and secured
files and buildings.
Our
service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic
personal information.
|
How
does RiverNorth Opportunities Fund collect my personal information?
|
We
collect your personal information, for example, when you
•
Open an account
•
Provide account information
•
Give us your contact information
•
Make deposits or withdrawals from your account
•
Make a wire transfer
•
Tell us where to send the money
•
Tells us who receives the money
•
Show your government-issued ID
• Show your driver’s license
We
also collect your personal information from other companies.
|
Why
can’t I limit all sharing?
|
Federal
law gives you the right to limit only:
•
Sharing for affiliates’ everyday business purposes – information about your creditworthiness
•
Affiliates from using your information to market to you
•
Sharing for nonaffiliates to market to you
State
laws and individual companies may give you additional rights to limit sharing.
|
DEFINITIONS |
Affiliates
|
Companies
related by common ownership or control. They can be financial and nonfinancial companies.
•
RiverNorth Opportunities Fund does not share with our affiliates for marketing purposes.
|
Nonaffiliates
|
Companies
not related by common ownership or control. They can be financial and nonfinancial companies.
•
RiverNorth Opportunities Fund does not share with nonaffiliates so they can market to you.
|
Joint
marketing
|
A
formal agreement between nonaffiliated financial companies that together market financial
products or services to you.
•
RiverNorth Opportunities Fund does not jointly market.
|
Semi-Annual
Report | January 31, 2022 |
53 |
|
|
|
|
RiverNorth
Capital Management, LLC |
ALPS
Advisors, Inc. |
433
W. Van Buren Street, 1150-E |
1290
Broadway, Suite 1000 |
Chicago,
IL 60607 |
Denver,
CO 80203 |
Secondary
market support provided to the Fund by ALPS Advisors Inc.’s
affiliate, ALPS Portfolio Solutions Distributor, Inc., a FINRA member.