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Filed
Pursuant to Rule 424(b)(2)
Registration
No. 333-261239
Prospectus
Supplement
(to Prospectus dated January 25, 2022)
RiverNorth
Opportunities Fund, Inc.
6,227,000
Shares of Common Stock
Subscription
Rights for Shares of Common Stock
6,227,000
Shares of Common Stock Issuable Upon Exercise of Rights to Subscribe for Such Shares
RiverNorth
Opportunities Fund, Inc. (the “Fund”) is issuing transferable subscription rights (“Rights”) to its stockholders
of record as of October 14, 2022 (the “Record Date” and such stockholders, “Record Date Stockholders”).
These Rights will allow Record Date Stockholders to subscribe for new shares of common stock, $0.0001 par value per share (the
“Common Shares”), of the Fund in an aggregate amount of up to 6,227,000 Common Shares (the “Offer”). Record
Date Stockholders will receive one Right for each Common Share held on the Record Date. For every three Rights held, a Record
Date Stockholder is entitled to purchase one Common Share of the Fund. Record Date Stockholders who fully exercise their Rights
may also, in certain circumstances, purchase additional Common Shares pursuant to an over-subscription privilege. The number of
Rights to be issued to a Record Date Stockholder will be rounded up to the nearest number of Rights evenly divisible by three.
Fractional shares will not be issued upon the exercise of the Rights. Accordingly, new Common Shares may be purchased only pursuant
to the exercise of Rights in integral multiples of three.
The
Rights are transferable and will be admitted for trading on the New York Stock Exchange (“NYSE”) under the symbol
“RIV RT” during the course of the Offer. The Fund’s Common Shares are currently listed, and the new Common Shares
issued in this Offer will also be listed, on the NYSE under the symbol “RIV.” As of October 3, 2022, the last reported
net asset value (“NAV”) per Common Share was $12.44, and the last reported sales price per Common Share on the NYSE
was $12.88.
The
Offer will expire at 5:00 p.m., Eastern Time, on November 8, 2022, unless the Offer is extended as described in this Prospectus
Supplement (the “Expiration Date”). The subscription price per Common Share will be determined based upon a formula
equal to 95% of the reported NAV or 95% of the market price per Common Share, whichever is higher, on the Expiration Date, unless
the Offer is extended. Market price per Common Share will be determined based on the average of the last reported sales price
of a Common Share on the NYSE for the five trading days preceding (and not inclusive of) the Expiration Date.
Rights
holders will not know the subscription price at the time of exercise and will be required initially to pay for both the Common
Shares subscribed for pursuant to the primary subscription and, if eligible, any additional Common Shares subscribed for pursuant
to the over-subscription privilege, at the estimated subscription price of $11.82 per Common Share and, except in limited circumstances,
will not be able to rescind their subscription. Rights acquired in the secondary market may not participate in the over-subscription
privilege.
Exercising
your Rights and investing in the Fund involves a high degree of risk and may be considered speculative. Before exercising your
Rights and investing in the Fund, you should read the discussion of the material risks in “Risks” beginning on page
19 of the accompanying Prospectus.
In
addition, you should consider the following:
| ● | Stockholders
who do not exercise their Rights will, at the completion of the Offer, own a smaller
proportional interest in the Fund than if they exercised their Rights, which will proportionately
decrease the relative voting power of those stockholders. |
| ● | Because
the Subscription Price per Common Share may be below the NAV per Common Share on the
Expiration Date, you will likely experience an immediate dilution of the aggregate NAV
of your Common Shares if you do not participate in the Offer and you will likely experience
a reduction in the NAV per share of your common stock whether or not you participate
in the Offer. |
| ● | All
participating and non-participating stockholders will experience an immediate dilution
of the aggregate NAV of your Common Shares because you will indirectly bear the expenses
of the Offer. This will disproportionately affect holders of Common Shares (“Stockholders”)
who do not exercise their Rights. |
| ● | The
Fund cannot state precisely the extent of this dilution if you do not exercise your Rights
because the Fund does not know what the Subscription Price per Common Share will be when
the Offer expires, or what proportion of the Rights will be exercised. Assuming the full
Primary Subscription is exercised, the Fund’s NAV per share of common stock would
be decreased by approximately $0.16 or 1.29% per Common Share. Actual amounts may vary
due to rounding, the final subscription price, the amount of Rights exercised and other
estimates. |
Neither
the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of
these securities or determined if this Prospectus Supplement or the accompanying Prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
|
Per
Common Share |
Total(3) |
Estimated subscription price(1) |
$11.82 |
$73,603,140 |
Estimated sales load |
$0.00 |
$0.00 |
Estimated primary offering expenses(2) |
$0.02 |
$154,306 |
Estimated net proceeds to Fund(1) |
$11.80 |
$73,448,834 |
| (1) | Estimated
as if October 3, 2022 was the expiration date. As of the close of October 3, 2022, the
Fund’s NAV per Common Share was $12.44 and the average of the last reported sales
price the five trading days preceding (and not inclusive of) October 3, 2022 was $12.17.
See “Terms of the Offer - The Subscription Price.” |
| (2) | Offering
expenses payable by the Fund (and indirectly by all of the Fund’s Stockholders,
including those who do not exercise their Rights) are estimated at approximately $154,306,
which includes fees to the subscription agent and information agent estimated to be approximately
$55,000 in the aggregate, inclusive of out of pocket expenses. |
| (3) | Assumes
all Rights are exercised at the estimated subscription price per Common Share. All of
the Rights offered may not be exercised and the price may be higher or lower than the
estimated amount. |
Assuming
all Common Shares offered are purchased in the Offer, the proportionate interest held by non-exercising Stockholders will decrease
upon completion of the Offer. As with any Common Shares, the price of the Fund’s Common Shares fluctuates with market conditions
and other factors. As of October 3, 2022, the Common Shares were trading at a premium to their NAV. Since the inception of the
Fund, the Common Shares have traded at a premium of as much as 11.89% and a discount of as much as 15.76%. As described more fully
in this Prospectus Supplement, Record Date Stockholders who fully exercise all Rights initially issued to them are entitled to
buy those Common Shares referred to as “over-subscription shares,” that were not purchased by other Rights holders.
If enough over-subscription shares are available, all such requests will be honored in full. If the requests for over-subscription
shares exceed the over-subscription shares available, the available over-subscription shares will be allocated pro rata
among those fully exercising Record Date Stockholders who over-subscribe based on the number of Rights originally issued to them
by the Fund.
The
Fund is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended
(the “1940 Act”). The Fund’s investment objective is total return consisting of capital appreciation and current
income. The Fund seeks to achieve its investment objective by pursuing a tactical asset allocation strategy and opportunistically
investing under normal circumstances in closed-end funds, exchange-traded funds (“ETFs”), business development companies
(“BDCs”) and special purpose acquisition companies (“SPACs” and collectively, “Underlying Funds”).
Under normal market conditions, the Fund will invest at least 80% of its Managed Assets in Underlying Funds. “Managed Assets”
means 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). The Underlying Funds in which the Fund invests will not include those
that are advised or subadvised by RiverNorth Capital Management, LLC (the “Adviser” or “RiverNorth”) or
its affiliates.
Effective
October 1, 2022, RiverNorth serves as the adviser to the Fund pursuant to the Fund's investment management agreement with RiverNorth
dated October 1, 2022.
As
of July 31, 2022, RiverNorth had approximately $5.4 billion of assets under management. The Adviser’s address is 360 South
Rosemary Avenue, Suite 1420, West Palm Beach, FL 33401 and its telephone number is (561) 484-7185. The Fund’s address is
1290 Broadway, Suite 1000, Denver, Colorado 80203, and its telephone number is (303) 623-2577.
An
investment in the Fund is not appropriate for all investors. There is no assurance that the Fund will achieve its investment objective.
This
Prospectus Supplement and accompanying Prospectus sets forth concisely the information about the Fund and the Offer that a prospective
investor ought to know before investing in the Fund and participating in the Offer. You should read this Prospectus Supplement
and accompanying Prospectus, which contains important information about the Fund, before deciding whether to invest in the Fund’s
Common Shares, and retain it for future reference. A Statement of Additional Information dated January 25, 2022 (the “SAI”),
containing additional information about the Fund, has been filed with the SEC and is incorporated by reference in its entirety
into the accompanying Prospectus, which means that it is part of the accompanying Prospectus for legal purposes. You may request
a free copy of the SAI, the Fund’s Annual and Semi-Annual Reports, request other information about the Fund and make stockholder
inquiries by calling (855) 830-1222, (toll-free) or by writing to the Fund at 1290 Broadway, Suite 1000, Denver, Colorado 80203,
or obtain a copy of such documents (and other information regarding the Fund) by visiting the Fund’s website at www.rivernorth.com/riv
(information included on the website does not form a part of this Prospectus Supplement or accompanying Prospectus), or from
the SEC’s website (http://www.sec.gov). For additional information all holders of Rights should contact the Information
Agent, Georgeson LLC (“Georgeson” or the “Information Agent”) toll free at (888) 624-2255 or send a written
request to Georgeson at 1290 Avenue of the Americas, 9th floor, New York, NY 10104.
Investing
in the Fund’s Common Shares involves certain risks. See “Risks” beginning on page 19 of the accompanying Prospectus.
Principal
Investment Strategies. The Fund seeks to achieve its investment objective by pursuing a tactical asset allocation strategy
and opportunistically investing under normal circumstances in Underlying Funds. Under normal market conditions, the Fund will
invest at least 80% of its Managed Assets in Underlying Funds. “Managed Assets” means 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). The Underlying Funds in which the Fund invests will not include those that are advised or subadvised by the
Adviser or its affiliates.
In
selecting closed-end funds, the Adviser will opportunistically utilize a combination of short-term and longer-term trading strategies
to seek to derive value from the discount and premium spreads associated with closed-end funds. The Adviser employs both a quantitative
and qualitative approach in its selection of closed-end funds and has developed proprietary screening models and trading algorithms
to trade closed-end funds. The Fund will invest in other Underlying Funds (that are not closed-end funds) to gain exposure to
specific asset classes when the Adviser believes closed-end fund discount or premium spreads are not attractive or to manage overall
closed-end fund exposure in the Fund.
The
Adviser has the flexibility to change the Fund’s asset allocation based on its ongoing analysis of the equity, fixed income
and alternative asset markets. The Adviser considers various quantitative and qualitative factors relating to the domestic and
foreign securities markets and economies when making asset allocation and security selection decisions. While the Adviser continuously
evaluates these factors, material shifts in the Fund’s asset class exposures will typically take place over longer periods
of time.
Under
normal market conditions, the Fund intends to maintain long positions in Underlying Funds, but may engage in short sales for investment
purposes. When the Fund engages in a short sale, it sells a security it does not own and, to complete the sale, borrows the same
security from a broker or other institution. The Fund may benefit from a short position when the shorted security decreased in
value. The Fund may also at times establish hedging positions. Hedging positions may include short sales and derivatives, such
as options and swaps. Under normal market conditions, no more than 30% of the Fund’s Managed Assets will be in hedging positions.
The Fund’s investments in derivatives will be included under the 80% policy noted above so long as the underlying asset
of such derivatives is a closed-end fund or Underlying Fund, respectively.
The
Fund also may invest up to 20% of its Managed Assets in exchange-traded notes (“ETNs”), certain derivatives, such
as options and swaps, cash and cash equivalents. Such investments will not be counted towards the Fund’s 80% policy.
The
Fund’s NAV will vary and its distribution rate may vary and both may be affected by numerous factors, including changes
in the market spread over a specified benchmark, market interest rates and performance. Fluctuations in NAV may be magnified as
a result of the Fund’s use of leverage. An investment in the Fund may not be appropriate for all investors.
Leverage.
The Fund may borrow money and/or issue preferred stock, notes or debt securities for investment purposes. These practices
are known as leveraging. Since the holders of Common Shares 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 the Common Shares than if leverage is not used. The Fund currently
anticipates that if employed, 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.
The
Fund’s Common Shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other
insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency.
Capitalized
terms used herein that are not otherwise defined shall have the meanings assigned to them in the accompanying Prospectus.
Prospectus
Supplement dated October 11, 2022
TABLE
OF CONTENTS
Prospectus
Supplement
Prospectus
|
Page |
Prospectus Summary |
1 |
Summary of Fund Expenses |
18 |
Financial Highlights |
19 |
The Fund |
22 |
The Offering |
22 |
Use of Proceeds |
23 |
Investment Objective, Strategies
and Policies |
23 |
Use of Leverage |
26 |
Risks |
26 |
Management of the Fund |
27 |
Net Asset Value |
28 |
Dividends and Distributions |
29 |
Plan of Distribution |
30 |
Dividend Reinvestment Plan |
32 |
Description of the Common Shares |
33 |
Certain Provisions of the Fund’s
Charter and Bylaws and of Maryland Law |
37 |
Repurchase of Shares |
43 |
Conversion to Open-End Fund |
43 |
U.S. Federal Income Tax Matters |
44 |
Custodian and Transfer Agent |
47 |
Legal Matters |
47 |
Control Persons |
47 |
Additional Information |
48 |
The Fund’s Privacy Policy |
48 |
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This
Prospectus Supplement, the accompanying Prospectus and the statement of additional information contain “forward-looking
statements.” Forward-looking statements can be identified by the words “may,” “will,” “intend,”
“expect,” “estimate,” “continue,” “plan,” “anticipate,” and similar
terms and the negative of such terms. By their nature, all forward-looking statements involve risks and uncertainties, and actual
results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially
affect the Fund’s actual results are the performance of the portfolio of securities the Fund holds, the price at which the
Fund’s Common Shares will trade in the public markets and other factors discussed in the Fund’s periodic filings with
the SEC. Currently known risk factors that could cause actual results to differ materially from the Fund’s expectations
include, but are not limited to, the factors described in the “Risks” section of the accompanying Prospectus. The
Fund urges you to review carefully that section for a more detailed discussion of the risks of an investment in the Fund’s
securities.
Although
the Fund believes that the expectations expressed in the Fund’s forward-looking statements are reasonable, actual results
could differ materially from those projected or assumed in the Fund’s forward-looking statements. The Fund’s future
financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject
to inherent risks and uncertainties, such as those disclosed in the “Risks” section of the accompanying Prospectus.
All forward-looking statements contained or incorporated by reference in this Prospectus Supplement or the accompanying Prospectus
are made as of the date of this Prospectus Supplement or the accompanying Prospectus, as the case may be. Except for the Fund’s
ongoing obligations under the federal securities laws, the Fund does not intend, and the Fund undertakes no obligation, to update
any forward-looking statement.
PROSPECTUS
SUPPLEMENT SUMMARY
This
is only a summary of information contained elsewhere in this Prospectus Supplement and the accompanying Prospectus. This summary
does not contain all of the information that you should consider before investing in the Fund’s shares of common stock (the
“Common Shares”). You should carefully read the more detailed information contained in this Prospectus Supplement
and the accompanying Prospectus and the statement of additional information (“SAI”), dated January 25, 2022, especially
the information set forth under the heading “Risks.”
The
Fund
RiverNorth
Opportunities Fund, Inc. (the “Fund”) is a Maryland corporation registered as a diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). An investment in the Fund
may not be appropriate for all investors. There can be no assurance that the Fund will achieve its investment objective.
Purpose
of the Offer
The
Board of Directors of the Fund (the “Board”), based on the recommendation of RiverNorth Capital Management, LLC (the
“Adviser” or “RiverNorth”), has determined that it would be in the best interest of the Fund and its existing
stockholders to increase the assets of the Fund so that the Fund may be in a better position to take advantage of investment opportunities
that may arise without having to reduce existing Fund holdings.
The
Board also believes that a larger number of outstanding Common Shares and a larger number of holders of common stock (“Stockholders”)
could increase the level of market interest in and visibility of the Fund, and improve the trading liquidity of the Fund’s
shares on the NYSE. In making this determination, the Board considered a number of factors, including potential benefits and costs.
This rights offering seeks to reward existing Stockholders by giving them the opportunity to purchase additional Common Shares
at a price that may be below the market price and/or NAV without incurring any commission or charge. The distribution of these
rights, which themselves may have intrinsic value, will also give non-participating Stockholders the potential of receiving a
cash payment upon the sale of their rights, which may be viewed as partial compensation for the possible dilution of their interests
in the Fund as a result of this offer.
The
Board believes that increasing the size of the Fund may result in certain economies of scale which may lower the Fund’s
expenses as a proportion of average net assets because the Fund’s fixed costs can be spread over a larger asset base. There
can be no assurance that by increasing the size of the Fund, the Fund’s expense ratio will be lowered. There can be no assurance
that this rights offering (or the investment of the proceeds of this rights offering) will be successful or that the level of
trading on the Fund’s shares on the NYSE will increase.
Important
Terms of the Offer
The
Fund is issuing transferable subscription rights (“Rights”) to its Stockholders of record as of October 14, 2022 (the
“Record Date” and such stockholders, “Record Date Stockholders”). These Rights will allow Record Date
Stockholders to subscribe for new Common Shares of the Fund in an aggregate amount of approximately 6,227,000 Common Shares (the
“Offer”). Record Date Stockholders will receive one Right for each Common Share held on the Record Date. For every
three Rights held, you are entitled to purchase one new Common Share of the Fund. Record Date Stockholders who fully exercise
their Rights may also, in certain circumstances, purchase additional Common Shares pursuant to an over-subscription privilege.
The number of Rights to be issued to each Record Date Stockholder will be rounded up to the nearest number of Rights evenly divisible
by three. Fractional shares will not be issued upon the exercise of the Rights. Accordingly, new Common Shares may be purchased
only pursuant to the exercise of Rights in integral multiples of three.
The
Rights are transferable and will be admitted for trading on the NYSE under the symbol “RIV RT” during the course of
the Offer. The Fund’s Common Shares are currently listed, and the new Common Shares issued in this Offer will also be listed,
on the NYSE under the symbol “RIV”. On October 3, 2022, the last reported net asset value (“NAV”) per
Common Share was $12.44, and the last reported sales price per Common Share on the NYSE was $12.88.
The
Offer will expire at 5:00 p.m., Eastern Time, on November 8, 2022, unless the Offer is extended as described in this Prospectus
Supplement (the “Expiration Date”).
The
subscription price (“Subscription Price”) per Common Share will be determined based upon a formula equal to 95% of
the reported NAV or 95% of the market price per Common Share, whichever is higher, on the Expiration Date, unless the Offer is
extended. Market price per Common Share will be determined based on the average of the last reported sales price of a Common Share
on the NYSE for the five trading days preceding (and not inclusive of) the Expiration Date. Common Shares of the Fund, as a closed-end
fund, can trade at a discount to NAV. Upon expiration of the Offer, the Fund expects that Common Shares will likely be issued
at a price below NAV per share.
Rights
holders may not know the Subscription Price at the time of exercise and will be required initially to pay for both the Common
Shares subscribed for pursuant to the primary subscription and, if eligible, any additional Common Shares subscribed for pursuant
to the over-subscription privilege at the estimated Subscription Price of $11.82 per Common Share and, except in limited circumstances,
will not be able to rescind their subscription.
Rights
acquired in the secondary market may not participate in the over-subscription privilege.
The
Rights exercisable for one Common Share for each three Rights exercised at the Subscription Price will be referred to in the remainder
of this Prospectus Supplement as the “primary subscription.”
The
Fund will not be issuing share certificates for the Common Shares issued pursuant to this Offer. Issuance of Common Shares will
be made electronically via book entry by DST Systems, Inc. (“DST”), the Fund’s transfer agent.
Important
Dates to Remember
Please
note that the dates in the table below may change if the Offer is extended.
Event |
Date |
Record
Date |
October
14, 2022 |
Subscription
Period |
October
17 to November 8, 2022* |
Expiration
Date |
November
8, 2022* |
Payment
for Guarantees of Delivery Due |
November
10, 2022* |
Confirmation
to Participants |
November
17, 2022* |
| * | Unless
the Offer is extended. |
Over-Subscription
Privilege
Record
Date Stockholders who fully exercise all Rights initially issued to them are entitled to buy those Common Shares, referred to
as “over-subscription shares,” that were not purchased by other Rights holders at the same Subscription Price. If
enough over-subscription shares are available, all such requests will be honored in full. If the requests for over-subscription
shares exceed the over-subscription shares available, the available over-subscription shares will be allocated pro rata
among those fully exercising Record Date Stockholders who over-subscribe based on the number of Rights originally issued to them
by the Fund. Common Shares acquired pursuant to the over-subscription privilege are subject to allotment.
Rights
acquired in the secondary market may not participate in the over-subscription privilege.
If
Stockholders do not participate in the over-subscription offer (if any), their percentage ownership may be further diluted.
Notwithstanding
the above, the Board has the right in its absolute discretion, to eliminate the over-subscription privilege with respect to the
over-subscription shares if it considers it to be in the best interest of the Fund to do so. The Board may make that determination
at any time, without prior notice to Rights holders or others, up to and including the seventh day following the Expiration Date.
See “Terms of the Offer - Over-Subscription Privilege.”
Sale
of Rights
The
Rights are transferable until the completion of the Subscription Period and will be admitted for trading on the NYSE. Although
no assurance can be given that a market for the Rights will develop, trading in the Rights on the NYSE will begin on or around
the Record Date and may be conducted until the close of trading on the last NYSE trading day prior to the completion of the Subscription
Period. For purposes of this Prospectus Supplement, a “Business Day” means any day on which trading is conducted on
the NYSE.
The
value of the Rights, if any, will be reflected by the market price. Rights may be sold by individual holders or may be submitted
to the Subscription Agent for sale (please see “Terms of the Offer - Method of Transferring Rights”). Any Rights submitted
to the Subscription Agent for sale must be received by the Subscription Agent on or before November 1, 2022, five Business Days
prior to the completion of the Subscription Period, due to normal settlement procedures. Selling stockholders are responsible
for all brokerage commissions incurred by the Subscription Agent as well as other fees and expenses associated with a transfer
of Rights.
Rights
that are sold will not confer any right to acquire any Common Shares in the over-subscription, and any Record Date Stockholder
who sells any Rights initially issued to such Stockholder will not be eligible to participate in the over-subscription.
Trading
of the Rights on the NYSE will be conducted on a when-issued basis until and including the date on which the Subscription Certificates
are mailed to Record Date Stockholders, and thereafter will be conducted on a regular way basis until and including the last NYSE
trading day prior to the completion of the Subscription Period. Common Shares will begin trading ex-Rights one Business Day prior
to the Record Date.
If
the Subscription Agent receives Rights for sale in a timely manner, it will use its best efforts to sell the Rights on the NYSE.
The Subscription Agent will also attempt to sell any Rights (i) a Rights holder is unable to exercise because the Rights represent
the right to subscribe for less than one new Common Share or (ii) attributable to Stockholders whose record addresses are outside
the United States or who have an Army Post Office (“APO”) or Fleet Post Office (“FPO”) address. See “Restrictions
on Foreign Stockholders” and “Terms of the Offer - Foreign Restrictions.”
Any
commissions will be paid by the selling Rights holders. Neither the Fund nor the Subscription Agent will be responsible if Rights
cannot be sold and neither has guaranteed any minimum sales price for the Rights. If the Rights can be sold, sales of these Rights
will be deemed to have been effected at the weighted average price received by the Subscription Agent on the day such Rights are
sold, less any applicable brokerage commissions, taxes and other expenses.
Stockholders
are urged to obtain a recent trading price for the Rights on the NYSE from their broker, bank, financial advisor or the financial
press.
Banks,
broker-dealers and trust companies that hold Common Shares for the accounts of others are advised to notify those persons who
purchase Rights in the secondary market that such Rights will not participate in the over-subscription privilege.
Method
for Exercising Rights
Rights
may be exercised by completing and signing the reverse side of the subscription certificate evidencing the Rights (the “Subscription
Certificate”) and mailing it in the envelope provided, or otherwise delivering the completed and signed Subscription Certificate
to Computershare Trust Company, N.A. and Computershare Inc. (the “Subscription Agent”), together with payment for
the Common Shares as described below under “Payment for Shares of Stock.” Rights may also be exercised through a Rights
holder’s broker, who may charge the Rights holder a servicing fee in connection with such exercise. See “Terms of
the Offer - Method for Exercising Rights” and “Terms of the Offer - Payment for Shares of Stock.”
Restrictions
on Foreign Stockholders
Subscription
Certificates will only be mailed to Record Date Stockholders whose addresses are within the United States (other than an APO or
FPO address). Record Date Stockholders whose addresses are outside the United States or who have an APO or FPO address and who
wish to subscribe to the Offer either in part or in full should contact the Information Agent or Subscription Agent in writing
or by recorded telephone conversation no later than five Business Days prior to the Expiration Date. The Fund will determine whether
the Offer may be made to any such Record Date Stockholder. The Offer will not be made in any jurisdiction where it would be unlawful
to do so. If the Subscription Agent has received no instruction by the fifth Business Day prior to the Expiration Date or the
Fund has determined that the Offer may not be made to a particular Record Date Stockholder, the Subscription Agent will attempt
to sell all of such stockholder’s Rights and remit the net proceeds, if any, to such stockholder. If the Rights can be sold,
sales of these Rights will be deemed to have been effected at the weighted average price received by the Subscription Agent on
the day the Rights are sold, less any applicable brokerage commissions, taxes and other expenses.
U.S.
Federal Income Tax Matters
The
Fund urges you to consult your own tax adviser with respect to the particular tax consequences of the Offer. See “Terms
of the Offer-Certain U.S. Federal Income Tax Matters” for more information on the tax consequences of the Offer.
Adviser
Effective
October 1, 2022, RiverNorth Capital Management, LLC (the “Adviser” or “RiverNorth”) serves as the adviser
to the Fund pursuant to the Fund's investment management agreement with RiverNorth dated October 1, 2022.
As
of July 31, 2022, RiverNorth had approximately $5.4 billion of assets under management. The Adviser’s address is 360 South
Rosemary Avenue, Suite 1420, West Palm Beach, FL 33401 and its telephone number is (561) 484-7185. The Fund’s address is
1290 Broadway, Suite 1000, Denver, Colorado 80203, and its telephone number is (303) 623-2577.
Effective
October 1, 2022, the Fund pays the Adviser a management fee payable on a monthly basis at the annual rate of 1.30% of the Fund’s
average daily Managed Assets for the services it provides. This management fee paid by the Fund to the Adviser is essentially
an all-in fee structure (the “unified management fee”) and, as part of the unified management fee, the Adviser provides
or causes to be furnished all supervisory and administrative and other services reasonably necessary for the operation of the
Fund, except (unless otherwise described in this Prospectus or otherwise agreed to in writing), the Fund pays, in addition to
the unified management fee, taxes and governmental fees (if any) levied against the Fund; brokerage fees and commissions and other
portfolio transaction expenses incurred by or for the Fund; costs of borrowing money including interest expenses or engaging in
other types of leverage financing; dividend and/or interest expenses and other costs associated with the Fund’s issuance,
offering, redemption and maintenance of preferred shares or other instruments for the purpose of incurring leverage; fees and
expenses of any underlying funds in which the Fund invests; dividend and interest expenses on short positions taken by the Fund;
fees and expenses, including travel expenses and fees and expenses of legal counsel retained for the benefit of the Fund or directors
of the Fund who are not officers, employees, partners, stockholders or members of the Adviser or its affiliates; fees and expenses
associated with and incident to stockholder meetings and proxy solicitations involving contested elections of directors, stockholder
proposals or other non-routine matters that are not initiated or proposed by the Adviser; legal, marketing, printing, accounting
and other expenses associated with any future share offerings, such as rights offerings and shelf offerings, following the Fund’s
initial offering; expenses associated with tender offers and other share repurchases and redemptions; and other extraordinary
expenses, including extraordinary legal expenses, as may arise, including, without limit, expenses incurred in connection with
litigation, proceedings, other claims and the legal obligations of the Fund to indemnify its directors, officers, employees, stockholders,
distributors and agents with respect thereto. Prior to October 1, 2022, ALPS Advisors, Inc. (“ALPS”) served as the
Fund’s investment adviser, and the Fund paid ALPS a management fee payable on a monthly basis at the annual rate of 1.00%
of the Fund’s average daily Managed Assets for the services and facilities it provides. The management fee paid by the Fund
to ALPS was essentially a variable fee structure where the Fund paid an advisory fee under the prior investment advisory agreement
with ALPS and also paid “variable fees” to cover other Fund expenses (including administrative services).
Benefits
to the Adviser
The
Adviser will benefit from the Offer because each firm’s fee is based on the Fund’s Managed Assets. See “Management
of the Fund” on page 19 of the accompanying Prospectus. It is not possible to state precisely the amount of additional
compensation the Adviser will receive as a result of the Offer because the proceeds of the Offer will be invested in additional
portfolio securities, which will fluctuate in value. However, assuming all Rights are exercised at the estimated Subscription
Price of $11.82 and that the Fund receives the maximum proceeds of the Offer, the annual compensation to be received by the Adviser
would be increased by approximately $955,000. In determining that the Offer was in the best interest of stockholders, the Board
was cognizant of this benefit.
Dilution
and other Investment Considerations
Stockholders
who do not exercise their Rights will, at the completion of the Offer, own a smaller proportional interest in the Fund than if
they exercised their Rights, which will proportionately decrease the relative voting power of those stockholders. Because the
Subscription Price per Common Share may be below the NAV per Common Share on the Expiration Date, you will likely experience a
reduction in the NAV per Common Share of your Common Shares whether or not you participate in the Offer. In addition, whether
or not you exercise your Rights, you will experience a dilution of NAV of the Common Shares because you will indirectly bear the
expenses of this Offer, which include, among other items, SEC registration fees, printing expenses and the fees assessed by service
providers. This dilution of NAV will disproportionately affect Stockholders who do not exercise their Rights. The Fund cannot
state precisely the extent of this dilution if you do not exercise your Rights because the Fund does not know what the NAV per
Common Share will be when the Offer expires, or what proportion of the Rights will be exercised.
Assuming,
for example, that all Rights are exercised, the Subscription Price is $11.82 and the Fund’s NAV per Common Share at the
expiration of the Offer is $12.44, the Fund’s NAV per Common Share (after payment of estimated offering expenses) would
be reduced by approximately $0.16 or 1.29% per Common Share. See “Dilution and other Investment Considerations.”
If
you do not wish to exercise your Rights, you should consider selling them as set forth in this Prospectus Supplement. The Fund
cannot give any assurance, however, that a market for the Rights will develop or that the Rights will have any marketable value.
The
offer may increase the volatility of the market price of the Common Shares. In addition, the Offer could be under-subscribed,
in which case ALPS will not have as much proceeds to invest on behalf of the Fund. See “Dilution and other Investment Considerations.”
Use
of Proceeds
Unless
otherwise specified in this Prospectus Supplement, the Fund anticipates that investment of the proceeds will be made in accordance
with the Fund’s investment objective and policies as appropriate investment opportunities are identified. It is currently
anticipated that the Fund will be able to invest substantially all of the net proceeds of an offering of Common Shares in accordance
with its investment objective and policies within three months after the completion of such offering. Pending such investment,
the proceeds will be held in high quality short-term debt securities and instruments. See “Use of Proceeds.”
Dividends
and Distributions
The
Board approved an amended distribution policy under which 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. At times, to maintain a stable level
of distributions, the Fund may pay out less than all of its net investment income or pay out accumulated undistributed income,
or return capital, in addition to current net investment income. Any distribution that is treated as a return of capital generally
will reduce a stockholder’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. See “Dividends and Distributions.”
SUMMARY
OF FUND EXPENSES
The
following table is intended to assist investors in understanding the fees and expenses (annualized) that an investor in Common
Shares would bear, directly or indirectly.
The
table shows Fund expenses as a percentage of net assets attributable to Common Shares. The following table should not be considered
a representation of the Fund’s future expenses. Actual expenses may be greater or less than those shown below.
Stockholder
Transaction Expenses |
|
Sales
Load |
None |
Dividend
Reinvestment Plan Fees |
None(2) |
Expenses
of the Offer |
|
Offering
Expenses Borne by Stockholders of the Fund
(as a percentage of net assets attributable to Common
Shares before the Offer) |
0.07%(1) |
Annual
Expenses |
As
a Percentage of Net Assets
Attributable to Common
Shares(1)(6) |
Management
Fee(3) |
1.81% |
Interest
Expense on Borrowings(5) |
0.07% |
Dividends
on Preferred Shares(4) |
2.36% |
Dividend
and Interest Expense on Short Sales(5) |
0.27% |
Other
Expenses(5) |
0.05% |
Acquired
Fund Fees and Expenses(6) |
1.24% |
Total
Annual Expenses(7) |
5.80% |
Expense
Example(6)
The
purpose of the following table is to help a holder of Common Shares understand the fees and expenses that such holder would bear
directly or indirectly. The following example illustrates the expenses that you would pay on a $1,000 investment in Common Shares,
including the estimated costs of the Offer to be borne by the Stockholders of $154,306, assuming (1) that the Fund’s net
assets following (and after giving effect to) the Offer do not increase or decrease, (2) that the Fund incurs total annual expenses
of 5.80% of its net assets in years 1 through 10 and (3) a 5% annual return.
|
1
year |
3
years |
5
years |
10
years |
Total
Expenses Incurred |
$58 |
$172 |
$285 |
$558 |
The
example should not be considered a representation of future expenses. Actual expenses may be greater or less than those assumed.
| (1) | The
fees and expenses of the Offer will be borne by the Fund and indirectly by all of its Stockholders, including those who did not
exercise their Rights. The amount shown as Offering Expenses Borne by Stockholders of the Fund is calculated as a percentage of
the Fund’s net assets as of October 3, 2022, and assumes no Common Shares are sold in the Offer. Assuming a fully subscribed
Offer, this percentage would equal 0.05%. The expenses of the Offer to be paid by the Fund are not included in the Annual Expenses
table. Offering expenses borne by Stockholders will result in a reduction of capital of the Fund and the NAV of the Common Shares. |
| (2) | There
will be no brokerage charges with respect to Common Shares issued directly by the Fund under the dividend reinvestment plan. You
may pay brokerage charges in connection with open market purchases or if you direct the plan agent to sell your Common Shares
held in a dividend reinvestment account. |
| (3) | The
management fee paid by the Fund to the Adviser is essentially an all-in fee structure (the “unified management fee”),
including the fee paid to the Adviser for advisory, supervisory, administrative, shareholder servicing and other services. However,
the Fund (and not the Adviser) will be responsible for certain additional fees and expenses, which are reflected in the table
above, that are not covered by the unified management fee. The unified management fee is charged as a percentage of the Fund’s
average daily Managed Assets, as opposed to net assets. If leverage is used, Managed Assets will be greater in amount than net
assets, because Managed Assets includes borrowings for investment purposes. The management fee of 1.30% of the Fund’s Managed
Assets represents 1.81% of net assets attributable to Common Shares. |
| (4) | Dividends
on Preferred Shares represent the estimated dividend expense adjusted to assume (i) 3,910,000 shares of 6.00% Series A Cumulative
Perpetual Preferred Stock with a liquidation preference of $97,750,000 was outstanding for the entire 12 months of operations
after July 31, 2022. |
| (5) | Other
Expenses, Interest Expense on Borrowings and Dividend and Interest Expense on Short Sales are estimated as of July 31, 2022. |
| (6) | The
“Acquired Fund Fees and Expenses” disclosed above are based on the expense ratios for the most recent fiscal year
of the Underlying Funds in which the Fund anticipates investing, which may change substantially over time and, therefore, significantly
affect Acquired Fund Fees and Expenses. These amounts are based on the total expense ratio disclosed in each Underlying Fund’s
most recent stockholder report. Some of the Underlying Funds in which the Fund intends to invest charge incentive fees based on
the Underlying Funds’ performance. The 1.24% shown as Acquired Fund Fees and Expenses reflects estimated operating expenses
of the Underlying Funds and transaction-related fees. Certain Underlying Funds in which the Fund intends to invest generally charge
a management fee of 1.00% to 2.00%, which are included in “Acquired Fund Fees and Expenses,” as applicable. The Acquired
Fund Fees and Expenses disclosed above, however, do not reflect any performance-based fees or allocations paid by the Underlying
Funds that are calculated solely on the realization and/or distribution of gains, or on the sum of such gains and unrealized appreciation
of assets distributed in-kind, as such fees and allocations for a particular period may be unrelated to the cost of investing
in the Underlying Funds. Acquired Fund Fees and Expenses are borne indirectly by the Fund, but they will not be reflected in the
Fund’s financial statements; and the information presented in the table will differ from that presented in the Fund’s
financial highlights. |
| (7) | The
example should not be considered a representation of future expenses and includes the expenses of the Offer. The example assumes
that the estimated “Other Expenses” set forth in the table are accurate and that all dividends and distributions are
reinvested at the NAV of the Common Shares. Actual expenses may be greater or less than those assumed. Moreover, the Fund’s
actual rate of return may be greater or less than the hypothetical 5% annual return shown in the example. |
The
purpose of the table and the example above is to help investors understand the fees and expenses that they, as Stockholders, would
bear directly or indirectly. For additional information with respect to the Fund’s expenses, see “Management of the
Fund” on page 19 of the accompanying Prospectus.
INFORMATION
REGARDING SENIOR SECURITIES
The
following table sets forth certain information regarding the Fund’s senior securities as of the end of each of
the Fund’s prior fiscal periods since the Fund’s inception. This information has been derived from our audited financial
statements, which are incorporated by reference into the statement of additional information. The Fund’s senior securities
during this time period are comprised of outstanding indebtedness, which constitutes a “senior security” as defined
in the 1940 Act.
Senior
Securities Representing Indebtedness
Period/Fiscal Year Ended | | |
Senior Securities | |
Principal Amount Outstanding | | |
Asset Coverage | | |
Involuntary Liquidating Preference per Unit | | |
Average Market Value Per Unit (4) | |
July 31, 2022 | | |
Credit Facility | |
| | | |
| | | |
| | | |
| | |
| | |
Series A Cumulative Preferred Stock | |
$ | 97,750,000 | | |
$ | 89 | (3) | |
$ | 25.00 | | |
$ | 24.41 | |
July 31, 2021 | | |
Credit Facility | |
$ | -- | | |
$ | -- | | |
$ | -- | | |
$ | -- | |
July 31, 2020 | | |
Credit Facility | |
$ | 7,500,000 | (1) | |
$ | 19,556 | (2) | |
$ | -- | | |
$ | -- | |
July 31, 2019 | | |
Credit Facility | |
$ | -- | | |
$ | -- | | |
$ | -- | | |
$ | -- | |
July 31, 2018(5) | | |
Credit Facility | |
$ | -- | | |
$ | -- | | |
$ | -- | | |
$ | -- | |
October 31, 2017 | | |
Credit Facility | |
$ | -- | | |
$ | -- | | |
$ | -- | | |
$ | -- | |
October 31, 2016(6) | | |
Credit Facility | |
$ | -- | | |
$ | -- | | |
$ | -- | | |
$ | -- | |
| (1) | Principal amount outstanding represents the principal amount
owed by the Fund to lenders under credit facility arrangements in place at the time. |
| (2) | The asset coverage ratio for the Credit Facility is calculated
by subtracting the Fund's total liabilities and indebtedness not represented by senior securities from the Fund's total assets, dividing
the result by the aggregate amount of the Fund's senior securities representing indebtedness then outstanding, and then multiplying by
$1,000. |
| (3) | The asset coverage ratio for a class of senior securities representing
stock is calculated as the Fund's total assets, less all liabilities and indebtedness not represented by the Fund's senior securities,
divided by secured senior securities representing indebtedness plus the aggregate of the involuntary liquidation preference of secured
senior securities which are stock. With respect to the Preferred Stock, the asset coverage per unit figure is expressed in terms of dollar
amounts per share of outstanding Preferred Stock (based on a liquidation preference of $25). |
| (4) | Represents the average of the daily closing market price per
share as reported on the NYSE during the respective period. |
| (5) | Effective July 16, 2018, the Board approved changing the fiscal
year-end of the Fund from October 31 to July 31. |
| (6) | For the period December 24, 2015, commencement of operations,
to October 31, 2016. |
CAPITALIZATION
The
following table sets forth the Fund’s capitalization using figures for the Offer as of October 3, 2022:
| ● | on
a historical basis as of July 31, 2022 |
| ● | on
a pro forma as adjusted basis to reflect (1) the assumed sale of 6,227,000 of the Fund’s
Common Shares at $11.82 per share (the estimated the Subscription Price) in an offering
under this Prospectus Supplement and the accompanying Prospectus, and (2) the investment
of net proceeds assumed from such offering in accordance with the Fund’s investment
objective and policies, after deducting the estimated offering expenses payable by the
Fund of $154,306. |
| |
Actual | | |
As
Adjusted (unaudited) | |
Common Shares, $0.0001 par value per share,
37,500,000 shares authorized, 18,291,243 outstanding (actual), 24,518,243 shares outstanding (as adjusted) | |
$ |
268,860,599 | | |
$ |
342,309,433 | |
Total
Distributable Earnings (Loss) | |
| (20,170,869 | ) | |
| (20,170,869 | ) |
Total
Capitalization | |
$ | 248,689,730 | | |
$ | 322,138,564 | |
USE
OF PROCEEDS
The
Fund estimates the net proceeds of the Offer to be approximately $73,448,834. This figure is based on an estimated Subscription
Price per Common Share of $11.82 and assumes all new Common Shares offered are sold and that the expenses related to the Offer
estimated at approximately $154,306 are paid.
The
Adviser anticipates that investment of the proceeds will be made in accordance with the Fund’s investment objective and
policies as appropriate investment opportunities are identified, which is expected to be completed or substantially completed
within approximately three months from receipt. Pending such investment, the proceeds will be held in high quality short-term
debt securities and instruments.
DESCRIPTION
OF THE OFFER
Purpose
of the Offer
The
Board has determined, based on the recommendation of the Adviser, that it would be in the best interests of the Fund and its existing
Stockholders to increase the assets of the Fund available for investment, thereby permitting the Fund to be in a better position
to more fully take advantage of investment opportunities that may arise without having to reduce existing Fund holdings. In making
this determination, the Board considered a number of factors, including potential benefits and costs. The Offer seeks to reward
existing Stockholders by giving them the right to purchase additional Common Shares at a price that may be below market and/or
NAV without incurring any commission charge. The distribution to Stockholders of transferable Rights, which themselves may have
intrinsic value, will also afford non-subscribing stockholders the potential of receiving a cash payment upon sale of such Rights,
receipt of which may be viewed as partial compensation for the possible dilution of their interests in the Fund.
The
Adviser will benefit from the Offer because each firm’s fee is based on the Fund’s Managed Assets. See “Management
of the Fund” in the accompanying Prospectus. It is not possible to state precisely the amount of additional compensation
the Adviser will receive as a result of the Offer because the proceeds of the Offer will be invested in additional portfolio securities,
which will fluctuate in value. However, assuming all Rights are exercised at the estimated Subscription Price of $11.82 and that
the Fund receives the maximum proceeds of the Offer, the annual compensation to be received by the Adviser would be increased
by approximately $955,000. In determining that the Offer was in the best interest of Stockholders, the Board was cognizant of
this benefit.
This
is the Fund’s sixth rights offering. The Fund may, in the future and at its discretion, choose to make additional rights
offerings from time to time for a number of shares and on terms that may not be similar to the Offer. The Offer may not be successful.
The completion of the Offer may result in an immediate dilution of the NAV per Common Share for all existing Stockholders, including
those who fully exercise their Rights.
Important
Terms of the Offer
The
Fund is issuing to Record Date Stockholders Rights to subscribe for additional Common Shares. Each Record Date Stockholder is
being issued one transferable Right for each Common Share owned on the Record Date. The Offer entitles the holder to acquire at
the Subscription Price one Common Share for each three Rights held, rounded up to the nearest number of Rights evenly divisible
by three. Fractional shares will not be issued upon the exercise of the Rights. Accordingly, Common Shares may be purchased only
pursuant to the exercise of Rights in integral multiples of three.
In
the case of Common Shares held of record by Cede & Co. (“Cede”) as nominee for the Depository Trust Company (“DTC”)
or any other depository or nominee, the number of Rights issued to Cede or such other depository or nominee will be adjusted to
permit rounding up (to the nearest number of Rights evenly divisible by three) of the Rights to be received by beneficial owners
for whom it is the holder of record only if Cede or such other depository or nominee provides to the Fund on or before the close
of business on October 24, 2022 a written representation to the number of Rights required for such rounding.
Rights
may be exercised at any time during the period (the “Subscription Period”), which commences on October 17, 2022 and
ends at 5:00 p.m., Eastern Time, on November 8, 2022, unless extended by the Fund. See “Expiration of the Offer.”
If
all of the Rights are exercised in the primary subscription, the Fund will experience an approximate 33% increase in Common Shares
outstanding.
In
addition, any Record Date Stockholder who fully exercises all Rights initially issued to him is entitled to subscribe for Common
Shares available for Primary Subscription (the “Primary Subscription Shares”) that were not otherwise subscribed for
by other Rights holders on the Primary Subscription.
The
entitlement to subscribe for unsubscribed Primary Subscription Shares is available only to those Record Date Stockholders who
fully exercise all Rights initially issued to them and only on the basis of their Record Date holdings and will be referred to
in the remainder of this Prospectus Supplement as the “Over-Subscription Privilege.”
For
purposes of determining the maximum number of Shares a Record Date Stockholder may acquire pursuant to the Offer, broker-dealers
whose Common Shares are held of record by Cede, nominee for DTC, or by any other depository or nominee, will be deemed to be the
holders of the Rights that are issued to Cede or such other depository or nominee on their behalf. Common Shares acquired pursuant
to the Over-Subscription Privilege are subject to allotment, which is more fully discussed below under “Over-Subscription
Privilege.” Rights acquired in the secondary market may not participate in the Over-Subscription Privilege.
The
method by which Rights may be exercised and Common Shares paid for is set forth below in “Method of Exercising Rights”
and “Payment for Shares of Stock.” A Rights holder will have no right to rescind a purchase after the Subscription
Agent has received payment. See “Payment for Shares of Stock” below. Common Shares issued pursuant to an exercise
of Rights will be listed on the NYSE. Common Shares issued in connection with the Offer will not be evidenced by share certificates.
The
Rights are transferable until the Expiration Date and will be admitted for trading on the NYSE. Although no assurance can be given
that a market for the Rights will develop, trading in the Rights on the NYSE will begin on or around the Record Date and may be
conducted until the close of trading on the last NYSE trading day prior to the Expiration Date due to normal settlement procedures.
Rights
that are sold will not confer any right to acquire any Common Shares in the Over-Subscription Privilege. Trading of the Rights
on the NYSE will be conducted on a when-issued basis until and including the date on which the Subscription Certificates are mailed
to Record Date Stockholders and thereafter, will be conducted on a regular way basis until and including the last NYSE trading
day prior to the Expiration Date. The method by which Rights may be transferred is set forth below under “Method of Transferring
Rights.” The Common Shares will begin trading ex-Rights one Business Day prior to the Record Date.
Nominees
who hold Common Shares for the account of others, such as banks, broker-dealers, or depositories for securities, should notify
the respective beneficial owners of such Shares as soon as possible to ascertain such beneficial owners’ intentions and
to obtain instructions with respect to the Rights. Nominees should also notify holders purchasing Rights in the secondary market
that such Rights may not participate in the Over-Subscription Privilege. If the beneficial owner so instructs, the nominee will
complete the Subscription Certificate and submit it to the Subscription Agent with proper payment. In addition, beneficial owners
of the Common Shares or Rights held through such a nominee should contact the nominee and request the nominee to effect transactions
in accordance with such beneficial owner’s instructions.
The
Fund will not be issuing share certificates for the Common Shares issued pursuant to this Offer. Issuance of Common Shares will
be made electronically via book entry by DST, the Fund’s transfer agent.
Subscription
Price
The
Subscription Price will be determined based upon a formula equal to 95% of the reported NAV or 95% of the market price per Common
Share, whichever is higher, on the Expiration Date, unless the Offer is extended. Market price per Common Share will be determined
based on the average of the last reported sales price of a Common Share on the NYSE for the five trading days preceding (and not
inclusive of) the Expiration Date. Based on reported NAV and market price per Common Share as of October 3, 2022, the Subscription
Price would be $11.82 (the “estimated Subscription Price”).
Because
the expiration date of the subscription period will be November 8, 2022 (unless the Fund extends the Subscription Period), Rights
holders may not know the Subscription Price at the time of exercise and will be required initially to pay for both the Common
Shares subscribed for pursuant to the Primary Subscription (i.e., the Rights to acquire new Common Shares during the Subscription
Period) and, if eligible, any additional Common Shares subscribed for pursuant to the Over-Subscription Privilege at the estimated
Subscription Price of $11.82 per Common Share and, except in limited circumstances, will not be able to rescind their subscription.
The
Fund announced the Offer after the close of trading on October 4, 2022. The NAV per Common Share at the close of business on October
3, 2022 was $12.44. The last reported sales price of a Common Share on the NYSE on that date was $12.88, representing a premium
of 3.54% in relation to the then current NAV per Common Share and a discount of -2.17% in relation to the estimated Subscription
Price.
Common
Shares of the Fund, as a closed-end fund, can trade at a discount to NAV. Upon expiration of the Offer, Common Shares will likely
be issued at a price below NAV per share.
Over-Subscription
Privilege
The
Board has the right in its absolute discretion to eliminate the Over-Subscription Privilege if it considers it to be in the best
interest of the Fund to do so. The Board may make that determination at any time, without prior notice to Rights holders or others,
up to and including the seventh day following the Expiration Date. If the Over-Subscription Privilege is not eliminated, it will
operate as set forth below.
Rights
holders who are Record Date Stockholders are entitled to subscribe for additional Common Shares at the same Subscription Price
pursuant to the Over-Subscription Privilege, subject to certain limitations and subject to allotment.
Record
Date Stockholders who fully exercise all Rights initially issued to them are entitled to buy those Common Shares that were not
purchased by other Rights holders (the “Over-Subscription Shares”) at the same Subscription Price. If enough Over-Subscription
Shares are available, all such requests will be honored in full. If the requests for Over-Subscription Shares exceed the Over-Subscription
Shares available, the available Over-Subscription Shares will be allocated pro rata among those Record Date Stockholders
who over-subscribe based on the number of Rights originally issued to them by the Fund.
Record
Date Stockholders who are fully exercising their Rights during the Subscription Period should indicate, on the Subscription Certificate
that they submit with respect to the exercise of the Rights issued to them, how many Common Shares they are willing to acquire
pursuant to the Over-Subscription Privilege. Rights acquired in the secondary market may not participate in the Over-Subscription
Privilege.
To
the extent sufficient Over-Subscription Shares are not available to fulfill all over-subscription requests, the Over-Subscription
Shares will be allocated pro-rata among those Record Date Stockholders who over-subscribe based on the number of Rights originally
issued to them by the Fund. The allocation process may involve a series of allocations in order to assure that the Over-Subscription
Shares available are distributed on a pro rata basis.
The
formula to be used in allocating the Over-Subscription Shares available is as follows: (Stockholder’s number of Rights originally
issued to them by the Fund divided by the total number of Rights of all over-subscribing Record Date Stockholders) multiplied
by Over-Subscription Shares available for distribution.
Banks,
broker-dealers, trustees and other nominee holders of Rights will be required to certify to the Subscription Agent, before any
Over-Subscription Privilege may be exercised with respect to any particular beneficial owner, as to the aggregate number of Rights
exercised during the Subscription Period and the number of Common Shares subscribed for pursuant to the Over-Subscription Privilege
by such beneficial owner and that such beneficial owner’s subscription was exercised in full. Nominee holder over-subscription
forms and beneficial owner certification forms will be distributed to banks, broker-dealers, trustees and other nominee holders
of rights with the Subscription Certificates. Nominees should also notify holders purchasing Rights in the secondary market that
such Rights may not participate in the Over-Subscription Privilege.
The
Fund will not offer or sell any Common Shares that are not subscribed for during the Subscription Period or pursuant to the Over-Subscription
Privilege.
Sale
and Transferability of Rights
The
value of the Rights, if any, will be reflected by the market price of the Rights. Rights may be sold by individual holders or
may be submitted to the Subscription Agent for sale. Any Rights submitted to the Subscription Agent for sale must be received
by the Subscription Agent on or before November 1, 2022, five Business Days prior to the completion of the Subscription Period,
due to normal settlement procedures.
Rights
that are sold will not confer any right to acquire any Common Shares in the Over-Subscription, and any Record Date Stockholder
who sells any Rights initially issued to such Stockholder will not be eligible to participate in the Over-Subscription Privilege.
The
Rights evidenced by a single Subscription Certificate may be transferred in whole by endorsing the Subscription Certificate for
transfer in accordance with the accompanying instructions. A portion of the Rights evidenced by a single Subscription Certificate
(but not fractional Rights) may be transferred by delivering to the Subscription Agent a Subscription Certificate properly endorsed
for transfer, with instructions to register the portion of the Rights evidenced thereby in the name of the transferee (and to
issue a new Subscription Certificate to the transferee evidencing the transferred Rights). In this event, a new Subscription Certificate
evidencing the balance of the Rights will be issued to the Rights holder or, if the Rights holder so instructs, to an additional
transferee.
Holders
wishing to transfer all or a portion of their Rights (but not fractional Rights) should allow at least five Business Days prior
to the Expiration Date for (i) the transfer instructions to be received and processed by the Subscription Agent, (ii) a new Subscription
Certificate to be issued and transmitted to the transferee or transferees with respect to transferred Rights, and to the transferor
with respect to retained Rights, if any, and (iii) the Rights evidenced by the new Subscription Certificates to be exercised or
sold by the recipients thereof. Neither the Fund nor the Subscription Agent shall have any liability to a transferee or transferor
of Rights if Subscription Certificates are not received in time for exercise or sale prior to the Expiration Date.
Except
for the fees charged by the Subscription Agent (which will be paid by the Fund as described below), all commissions, fees and
other expenses (including brokerage commissions and transfer taxes) incurred in connection with the purchase, sale or exercise
of Rights will be for the account of the transferor of the Rights, and none of these commissions, fees or expenses will be paid
by the Fund or the Subscription Agent.
The
Fund anticipates that the Rights will be eligible for transfer through, and that the exercise of the Offer may be effected through,
the facilities of DTC.
Sales
by Subscription Agent
Holders
of Rights who are unable or do not wish to exercise any or all of their Rights may instruct the Subscription Agent to sell any
unexercised Rights. The Subscription Certificates representing the Rights to be sold by the Subscription Agent must be received
on or before November 1, 2022, the fifth business day before the Expiration Date. Upon the timely receipt of the appropriate instructions
to sell Rights, the Subscription Agent will use its best efforts to complete the sale and will remit the proceeds of sale, net
of commissions, to the holders. The Subscription Agent will also attempt to sell any Rights (i) a Rights holder is unable to exercise
because the Rights represent the right to subscribe for less than one new Common Share or (ii) attributable to stockholders whose
record addresses are outside the United States or who have an APO or FPO address.
If
the Rights can be sold, sales of the Rights will be deemed to have been effected at the weighted average price received by the
Subscription Agent on the day such Rights are sold, less any applicable brokerage commissions, taxes and other expenses. The selling
Rights holder will pay all brokerage commissions incurred by the Subscription Agent.
The
Subscription Agent will automatically attempt to sell any unexercised Rights that remain unclaimed as a result of Subscription
Certificates being returned by the postal authorities as undeliverable as of the fifth Business Day prior to the Expiration Date.
These sales will be made net of commissions on behalf of the nonclaiming Rights holders. Proceeds from those sales will be held
by the Fund’s transfer agent, for the account of the nonclaiming Rights holder until the proceeds are either claimed or
escheated. There can be no assurance that the Subscription Agent will be able to complete the sale of any of these Rights and
neither the Fund nor the Subscription Agent has guaranteed any minimum sales price for the Rights. All of these Rights will be
sold at the market price, if any, through an exchange or market trading the Rights.
Stockholders
are urged to obtain a recent trading price for the Rights on the NYSE from their broker, bank, financial advisor or the financial
press.
Method
for Exercising Rights
Rights
may be exercised by completing and signing the reverse side of the Subscription Certificate and mailing it in the envelope provided,
or otherwise delivering the completed and signed Subscription Certificate to the Subscription Agent, together with payment for
the Common Shares as described below under “Payment for Shares of Stock.” Rights may also be exercised through a Rights
holder’s broker, who may charge the Rights holder a servicing fee in connection with such exercise.
Completed
Subscription Certificates must be received by the Subscription Agent prior to 5:00 p.m. Eastern Time, on the Expiration Date (unless
payment is effected by means of a notice of guaranteed delivery as described below under “Payment for Shares of Stock”).
The Subscription Certificate and payment should be delivered to the Subscription Agent at the following addresses:
If
By Mail: |
Computershare
Trust Company, N.A.
Attn: Corporate Actions Voluntary Offer
P.O. Box 43011
Providence, RI 02940-3011 |
|
|
If
By Overnight Courier: |
Computershare
Trust Company, N.A.
Attn: Corporate Actions Voluntary Offer
150 Royall Street
Suite V
Canton, MA 02021 |
Subscription
Agent
The
Subscription Agent is Computershare Trust Company, N.A. and Computershare Inc., collectively. The Subscription Agent will receive
from the Fund an amount estimated to be approximately $45,000, comprised of the fee for its services and the reimbursement for
certain expenses related to the Offer.
Information
Agent
Inquiries
by all holders of Rights should be directed to: the Information Agent, Georgeson, toll-free at (888) 624-2255 or please send a
written request to: 1290 Avenue of the Americas, 9th floor, New York, NY 10104; holders may also consult their brokers or nominees.
Expiration
of the Offer
The
Offer will expire at 5:00 p.m., Eastern Time, on November 8, 2022, unless extended by the Fund (the “Expiration Date”).
Rights will expire on the Expiration Date and thereafter may not be exercised.
Payment
for Shares of Stock
Holders
of Rights who acquire Common Shares on Primary Subscription or pursuant to the Over-Subscription Privilege may choose between
the following methods of payment:
| (1) | A
subscription will be accepted by the Subscription Agent if, prior to 5:00 p.m., Eastern Time, on the Expiration Date, the Subscription
Agent has received a written notice of guaranteed delivery from a bank, a trust company, or an NYSE member, guaranteeing delivery
of: (i) payment for the Common Shares subscribed for in the Primary Subscription and additional Common Shares subscribed for pursuant
to the Over-Subscription Privilege to the Subscription Agent based on the estimated Subscription Price of $11.82 per Common Share,
and (ii) a properly completed and executed Subscription Certificate. |
The
Subscription Agent will not honor a notice of guaranteed delivery if a properly completed and executed Subscription Certificate
and full payment is not received by the Subscription Agent by the close of business on the second Business Day after the Expiration
Date. The notice of guaranteed delivery may be delivered to the Subscription Agent in the same manner as Subscription Certificates
at the addresses set forth above, or may be transmitted to the Subscription Agent email transmission to canoticeofguarantee@computershare.com.
Any transmission of other materials will not be accepted and will not be considered a valid submission for the Offer. This e-mail
transmission can only be used for the notice of guaranteed delivery.
| (2) | Alternatively,
a holder of Rights can send the Subscription Certificate together with payment in the form of a personal check drawn upon a U.S.
bank payable to the Subscription Agent. To be accepted, the payment, together with the executed Subscription Certificate, must
be received by the Subscription Agent at the addresses noted above prior to 5:00 p.m., Eastern Time, on the Expiration Date. The
Subscription Agent will deposit all checks received by it prior to the Expiration Date into a segregated account pending proration
and distribution of the Common Shares issued pursuant to the Offer. The Subscription Agent will not accept cash as a means of
payment for Common Shares issued pursuant to the Offer. |
EXCEPT
AS OTHERWISE SET FORTH BELOW, A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY PERSONAL CHECK DRAWN UPON
A U.S. BANK , MUST BE PAYABLE TO THE SUBSCRIPTION AGENT, COMPUTERSHARE (ACTING ON BEHALF OF COMPUTERSHARE TRUST COMPANY, N.A.),
AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION CERTIFICATE TO BE ACCEPTED.
If
the aggregate Subscription Price paid by a Record Date Stockholder is insufficient to purchase the number of Common Shares that
the holder indicates are being subscribed for, or if a Record Date Stockholder does not specify the number of Common Shares to
be purchased, then the Record Date Stockholder will be deemed to have exercised first, the Primary Subscription Rights (if not
already fully exercised) and second, the Over-Subscription Privilege to the full extent of the payment tendered. If the aggregate
Subscription Price paid by such holder is greater than the Common Shares he has indicated an intention to subscribe, then the
Rights holder will be deemed to have exercised first, the Primary Subscription Rights (if not already fully subscribed) and second,
the Over-Subscription Privilege to the full extent of the excess payment tendered.
Any
payment required from a holder of Rights must be received by the Subscription Agent by the Expiration Date, or if the Rights holder
has elected to make payment by means of a notice of guaranteed delivery, on the second Business Day after the Expiration Date.
Whichever of the two methods of payment described above is used, issuance and delivery of the Common Shares purchased are subject
to collection of checks and actual payment pursuant to any notice of guaranteed delivery.
Within
six Business Days following the Expiration Date (the “Confirmation Date”), documentation will be sent by the Subscription
Agent to each holder of Rights (or, if the Common Shares are held by Cede or any other depository or nominee, to Cede or such
other depository or nominee), showing (i) the number of Common Shares acquired pursuant to the Primary Subscription, (ii) the
number of Over-Subscription Shares, if any, acquired pursuant to the Over-Subscription Privilege, (iii) the per Common Share and
total purchase price for the Common Shares and (iv) any excess to be refunded by the Fund to such holder as a result of payment
for Common Shares pursuant to the Over-Subscription Privilege which the holder is not acquiring.
Any
excess payment to be refunded by the Fund to a holder of Rights, or to be paid to a holder of Rights as a result of sales of Rights
on his behalf by the Subscription Agent or exercises by Record Date Stockholders of their Over-Subscription Privilege, will be
mailed by the Subscription Agent to the holder within ten Business Days after the Expiration Date. If any Rights holder exercises
its right to acquire Common Shares pursuant to the Over-Subscription Privilege, any excess payment which would otherwise be refunded
to the Rights holder will be applied by the Fund toward payment for Common Shares acquired pursuant to exercise of the Over-Subscription
Privilege, if any.
A
Rights holder will have no right to rescind a purchase after the Subscription Agent has received payment either by means of a
notice of guaranteed delivery or a check.
If
a holder of Rights who acquires Common Shares pursuant to the Primary Subscription or the Over-Subscription Privilege does not
make payment of any amounts due, the Fund reserves the right to take any or all of the following actions: (i) find other purchasers
for such subscribed-for and unpaid-for Common Shares; (ii) apply any payment actually received by it toward the purchase of the
greatest whole number of Common Shares which could be acquired by such holder upon exercise of the Primary Subscription or the
Over-Subscription Privilege; (iii) sell all or a portion of the Common Shares purchased by the holder, in the open market, and
apply the proceeds to the amounts owed; and (iv) exercise any and all other rights or remedies to which it may be entitled, including,
without limitation, the right to set off against payments actually received by it with respect to such subscribed Common Shares
and to enforce the relevant guaranty of payment.
Nominees
who hold Common Shares for the account of others, such as brokers, dealers or depositories for securities, should notify the respective
beneficial owners of the Common Shares as soon as possible to ascertain such beneficial owners’ intentions and to obtain
instructions with respect to the Rights. If the beneficial owner so instructs, the record holder of the Rights should complete
Subscription Certificates and submit them to the Subscription Agent with the proper payment. In addition, beneficial owners of
Common Shares or Rights held through such a nominee should contact the nominee and request the nominee to effect transactions
in accordance with the beneficial owner’s instructions. Banks, broker-dealers and trust companies that hold Common Shares
for the accounts of others are advised to notify those persons that purchase Rights in the secondary market that such Rights may
not participate in the Over-Subscription Privilege.
THE
INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION CERTIFICATES SHOULD BE READ CAREFULLY AND FOLLOWED IN DETAIL. DO NOT SEND SUBSCRIPTION
CERTIFICATES TO THE FUND.
The
method of delivery of Subscription Certificates and payment of the aggregate Subscription Price to the Subscription Agent will
be at the election and risk of the Rights holders, but, if sent by mail, it is recommended that the certificates and payments
be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the Subscription Agent and clearance of payment prior to 5:00 p.m., Eastern Time, on the Expiration Date. Because
uncertified personal checks may take at least five Business Days or more to clear, you are strongly urged to pay, or arrange for
payment to be delivered to the Agent as promptly as possible to ensure the check has sufficient time to clear. Payments by certified
bank check, cashier’s check or money order will not be accepted.
All
questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Fund,
whose determinations will be final and binding. The Fund, in its sole discretion, may waive any defect or irregularity, or permit
a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such
time as the Fund determines in its sole discretion. Neither the Fund nor the Subscription Agent will be under any duty to give
notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability
for failure to give such notification.
Rights
holders who have exercised their rights will have no right to rescind their subscription after receipt by the subscription agent
of the completed Subscription Certificate together with payment for Common Shares, except as described under “Notice of
net asset value decline.”
Foreign
Restrictions
Subscription
Certificates will only be mailed to Record Date Stockholders whose addresses are within the United States (other than an APO or
FPO address). Record Date Stockholders whose addresses are outside the United States or who have an APO or FPO address and who
wish to subscribe to the Offer either in part or in full should contact the Information Agent or Subscription Agent in writing
or by recorded telephone conversation no later than five Business Days prior to the Expiration Date. The Fund will determine whether
the Offer may be made to any such Record Date Stockholder. If the Subscription Agent has received no instruction by the fifth
Business Day prior to the Expiration Date or the Fund has determined that the Offer may not be made to a particular Stockholder,
the Subscription Agent will attempt to sell all of such Stockholder’s Rights and remit the net proceeds, if any, to such
Stockholder. If the Rights can be sold, sales of these Rights will be deemed to have been effected at the weighted average price
received by the Subscription Agent on the day the Rights are sold, less any applicable brokerage commissions, taxes and other
expenses.
Notice
of Net Asset Value Decline
In
accordance with SEC regulatory requirements, the Fund has undertaken to suspend the Offer until the Fund amends this Prospectus
Supplement if, after the effective date of this Prospectus Supplement, the Fund’s NAV declines more than 10% from the Fund’s
NAV as of that date. If this occurs, the Expiration Date will be extended and the Fund will notify Record Date Stockholders of
the decline and permit them to cancel their exercise of Rights.
Delivery
of Shares
Participants
in the Fund’s dividend reinvestment plan (the “Plan”) will have any Common Shares acquired pursuant to the Offer
credited to their stockholder dividend reinvestment accounts in the Plan. Stockholders whose shares are held of record by DTC
or by any other depository or nominee on their behalf or their broker-dealers’ behalf will have any Shares acquired during
the subscription period credited to the account of DTC or other depository or nominee. No certificates will be issued or delivered
with respect to Common Shares issued and sold in the Offer.
Certain
U.S. Federal Income Tax Matters
The
following is a general summary of certain material U.S. federal income tax consequences of the Offer under the provisions of the
Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated under it, and other applicable
authorities in effect as of the date of this Prospectus Supplement that are generally applicable to Record Date Stockholders and
other Rights holders who are “United States persons” within the meaning of the Code, and does not address any foreign,
state, local or other tax consequences. These authorities may be changed, possibly with retroactive effect, or subject to new
legislative, administrative or judicial action. The Fund has not requested a ruling from the Internal Revenue Service or an opinion
of legal counsel as to any tax matters related to the Offer. This discussion does not take into account any considerations that
may relate to special classes of Record Date Stockholders or other Rights holders. Record Date Stockholders and other Rights holders
should consult their tax advisors regarding the tax consequences, including U.S. federal, state, local, foreign or other tax consequences,
relevant to their particular circumstances.
The
Fund believes that the value of a Right will not be includible in the income of a Record Date Stockholder at the time the Right
is issued, and the Fund will not report to the Internal Revenue Service that a Record Date Stockholder has income as a result
of the issuance of the Right; however, there is no guidance directly on point concerning certain aspects of the Offer. The remainder
of this discussion assumes that the receipt of the Rights by Record Date Stockholders will not be a taxable event for U.S. federal
income tax purposes.
Except
as provided below, the basis of a Right issued to a Record Date Stockholder will be zero, and the basis of the Common Share with
respect to which the Right was issued (the “Old Common Share”) will remain unchanged. A Record Date Stockholder is
required to allocate the basis of the Old Common Share between the Old Common Share and the Right in proportion to their respective
fair market values on the date of distribution only if (i) either (a) the fair market value of the Right on the date of distribution
is at least 5% of the fair market value of the Old Common Share (not including the Right) on that date, or (b) the Record Date
Stockholder affirmatively elects (by attaching a statement to the Record Date Stockholder’s federal income tax return for
the year in which the Right is received) to allocate the basis of the Old Common Share between the Old Common Share and the Right,
and (ii) the Right does not expire unexercised in the hands of the Record Date Stockholder (i.e., the Record Date Stockholder
either exercises or sells the Right).
No
loss will be recognized by a Record Date Stockholder if a Right distributed to the Record Date Stockholder expires unexercised
in the hands of the Record Date Stockholder. The basis of a Right purchased in the market will generally be its purchase price.
If a Right that has been purchased in the market expires unexercised, the holder will recognize a loss equal to the basis of the
Right.
Any
gain or loss on the sale of a Right or, in the case of a Right purchased in the market, any loss from a Right that expires unexercised,
will be a capital gain or loss if the Right is held as a capital asset (which in the case of a Right issued to a Record Date Stockholders
will depend on whether the Old Common Share is held as a capital asset), and will be a long-term capital gain or loss if the holding
period of the Right exceeds (or is deemed to exceed) twelve months. The deductibility of capital losses is subject to limitation.
The holding period of a Right issued to a Record Date Stockholder will include the holding period of the Old Common Share with
respect to which the Right was issued.
No
gain or loss will be recognized by a Rights holder upon the exercise of a Right, and the basis of any share acquired upon exercise
of Rights (the “New Common Share”) will equal the sum of the basis, if any, of the Rights and the subscription price
for the New Common Share. When a Rights holder exercises Rights, the Rights holder’s holding period in the New Common Share
does not include the holding period of the Rights; rather, the holding period for the New Common Share will begin no earlier than
the day following the date of exercise of the Rights.
You
should consult a tax advisor regarding the U.S. federal tax consequences of acquiring, holding, disposing of and exercising Rights,
and of allowing Rights to expire, in your particular circumstances, as well as any tax consequences that may arise under the laws
of any state, local or foreign taxing jurisdiction.
Employee
Plan Considerations
The
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Code contain certain fiduciary responsibility
and prohibited transaction provisions applicable to Rights holders that are employee benefit plans subject to ERISA or Section
4975 of the Code, including corporate savings and 401(k) plans, Keogh Plans of self-employed individuals and Individual Retirement
Accounts (“IRA”) (each, a “Benefit Plan” and collectively, “Benefit Plans”). Due to the complexity
of these rules and the penalties for noncompliance, fiduciaries of Benefit Plans and other retirement plans should consult with
their counsel and advisors regarding the consequences of their exercise or transfer of Rights under ERISA and the Code.
The
exercise of Rights will require the future funding of cash. See “The Offer - Subscription Price.” Benefit Plans should
be aware that additional contributions of cash to the Benefit Plan necessary in order to fund the exercise of Rights may be treated
as Benefit Plan contributions and, particularly when taken together with contributions previously made, may result in issues under
the rules governing contributions and reductions, and give rise to possible excise taxes. For example, in the case of Benefit
Plans qualified under Section 401(a) of the Code, and certain other retirement plans, additional cash contributions could cause
the maximum contribution limitations of Section 415 of the Code and other tax-qualification rules to be violated. Benefit Plans
contemplating making additional cash contributions to the Benefit Plan to fund the exercise of Rights should consult with their
counsel prior to making such contributions. There may also be reportable distributions, and other adverse tax and ERISA consequences,
if Rights are sold or transferred by a Benefit Plan. If any portion of an IRA is used as security for a loan, the portion so used
could be treated as distributed to the IRA depositor, and other adverse consequences could arise.
Additional
special issues may arise in the case of any Benefit Plan sponsored or maintained by the Fund or any affiliate thereof.
ERISA
contains fiduciary responsibility requirements, and ERISA and the Code contain prohibited transaction rules, that may impact the
exercise or transfer of Rights. Due to the complexity of these rules and the penalties for noncompliance, Benefit Plans should
consult with their counsel and other advisors regarding the consequences of their exercise or transfer of Rights under ERISA and
the Code.
DILUTION
AND OTHER INVESTMENT CONSIDERATIONS FOR THE OFFER
Estimated
Dilution.
Assuming,
for example, that all Rights are exercised, the Subscription Price is $11.82 and the Fund’s NAV per Common Share at the
expiration of the Offer is $12.44, the Fund’s NAV per Common Share (after payment of estimated offering expenses) would
be reduced by approximately $(0.16) (-1.29%) per Common Share.
Stockholders
who do not exercise their Rights will, at the completion of the Offer, own a smaller proportional interest in the Fund than if
they exercised their Rights, which will proportionately decrease the relative voting power of those stockholders. Because the
Subscription Price per Common Share will be below the NAV per Common Share on the Expiration Date, you will experience an immediate
dilution of the aggregate NAV of your Common Shares if you do not participate in the Offer and you will experience a reduction
in the NAV per share of Common Shares of your Common Shares whether or not you participate in the Offer. In addition, whether
or not you exercise your Rights, you will experience a dilution of net asset of the Common Shares because you will indirectly
bear the expenses of this Offer, which include, among other items, SEC registration fees, printing expenses and the fees assessed
by service providers. This dilution of NAV will disproportionately affect Stockholders who do not exercise their Rights. The Fund
cannot state precisely the extent of this dilution if you do not exercise your Rights because the Fund does not know what the
NAV per share of Common Shares will be when the Offer expires, or what proportion of the Rights will be exercised.
The
Fund cannot state precisely the amount of any dilution because it is not known at this time what the subscription price or NAV
per share of Common Shares will be on the Expiration Date or what proportion of the Rights will be exercised. The Offer may increase
the volatility of the market price of the Fund’s Common Shares. In addition, the Offer could be under-subscribed, in which
case ALPS will not have as much proceeds to invest on behalf of the Fund (see “Use of Proceeds”). The likely impact
of the Offer on NAV per share of Common Shares is shown by the following example, assuming a $11.82 estimated Subscription Price
per Common Share:
Example
(assumes that NAV per share is above Subscription Price per share)(1)
NAV(2) |
$12.44 |
Subscription
Price |
$11.82 |
Reduction
in NAV($)(3) |
$(0.16) |
Reduction
in NAV(%)(3) |
-1.29% |
| (1) | This
example assumes that the full Primary Subscription is exercised. Actual amounts may vary due to rounding. |
| (2) | This
example assumes that the Fund’s NAV on the Expiration Date is $12.44 per share of Common Shares and that the Fund’s
average market price is greater than the NAV on that date. The Subscription Price used in this example was determined based on
a formula equal to 95% of the reported NAV on the Expiration Date or 95% of the average of the last reported sales price of a
Common Share on the NYSE for the five trading days preceding (and not inclusive of) the Expiration Date, whichever is higher,
unless the Offer is extended. |
| (3) | Assumes
$154,306 in estimated offering expenses. |
If
you do not wish to exercise your Rights, you should consider selling them as set forth in this Prospectus Supplement and accompanying
Prospectus. Any cash you receive from selling your Rights should serve as partial compensation for any possible dilution of your
interest in the Fund. The Fund cannot give assurance, however, that a market for the Rights will develop or that the Rights will
have any marketable value.
Risk
of Increase in Share Price Volatility; Decrease in Share Price.
The
Offer may result in increased volatility in the market price of the Common Shares or a decrease in the market price of the Fund’s
Common Shares,
Under-Subscription.
It
is possible that the Offer will not be fully subscribed. Under-subscription of the Offer could have an impact on the net proceeds
of the Offer and whether the Fund achieves its stated goals of the Offer.
Effect
on Large Stockholders
The
Fund’s largest Stockholders, Record Date Stockholders of more than 5% of the outstanding Common Shares of the Fund, could
increase their percentage ownership in the Fund through the exercise of the Primary Subscription and Over-Subscription Privilege.
DIVIDENDS
AND DISTRIBUTIONS
The
Board approved an amended distribution policy under which 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. 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. 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 Shares 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.
The
Adviser has received an order granting an exemption from Section 19(b) of the 1940 Act and Rule 19b-1 thereunder to permit the
Fund, subject to certain terms and conditions, to include realized long-term capital gains as a part of its regular distributions
to Common Stockholders more frequently than would otherwise be permitted by the 1940 Act (generally once per taxable year). The
Adviser is not currently relying on the exemptive order, but has in the past and may again in the future. To the extent that the
Adviser relies on the exemptive order, the Fund will be required to comply with the terms and conditions therein, which, among
other things, requires the Fund to make certain disclosures to shareholders and prospective shareholders regarding distributions,
and would require the Fund’s Board to make determinations regarding the appropriateness of use of the distribution policy.
The exemptive order terms and conditions also require that the Fund may not make any public offering of the Fund’s Common
Shares other than (a) a rights offering below NAV to Common Stockholders; (b) an offering in connection with a dividend reinvestment
plan, merger, consolidation, acquisition, spin-off or reorganization of the Fund; or (c) an offering other than an offering described
in conditions (a) and (b) above, provided that, with respect to such other offering: (i) the Fund’s annualized distribution
rate for the six months ending on the last day of the month ended immediately prior to the most recent distribution record date,
expressed as a percentage of NAV as of the date, is no more than one percentage point greater than the Fund’s average annual
total return for the five-year period ending on the date; and (ii) the transmittal letter accompanying any registration statement
filed with the SEC in connection with such offering discloses that the Fund has received an order under Section 19(b) to permit
it to make periodic distributions of long-term capital gains with respect to its Common Shares as frequently as twelve times each
year. Under such a distribution policy, it is possible that the Fund might distribute more than its income and net realized capital
gains; therefore, distributions to shareholders may result in a return of capital. The amount treated as a return of capital will
reduce a shareholder’s adjusted basis in the shareholder’s shares, thereby increasing the potential gain or reducing
the potential loss on the sale of shares. There is no assurance that the Fund will rely on the exemptive order in the future.
Under
the 1940 Act, the Fund is not permitted to incur indebtedness unless immediately after such incurrence the Fund has an asset coverage
of at least 300% of the aggregate outstanding principal balance of indebtedness. Additionally, under the 1940 Act, the Fund may
not declare any dividend or other distribution upon any class of its capital shares, or purchase any such capital shares, unless
the aggregate indebtedness of the Fund has, at the time of the declaration of any such dividend or distribution or at the time
of any such purchase, an asset coverage of at least 300% after deducting the amount of such dividend, distribution, or purchase
price, as the case may be.
While
any preferred stock is outstanding, the Fund may not declare any cash dividend or other distribution on its Common Shares, unless
at the time of such declaration, (i) all accumulated preferred dividends have been paid and (ii) the NAV of the Fund’s portfolio
(determined after deducting the amount of such dividend or other distribution) is at least 200% of the liquidation value of the
outstanding preferred shares (expected to be equal to the original purchase price per share plus any accumulated and unpaid dividends
thereon).
In
addition to the limitations imposed by the 1940 Act described above, certain lenders may impose additional restrictions on the
payment of dividends or distributions on the Common Shares in the event of a default on the Fund’s borrowings. If the Fund’s
ability to make distributions on its Common Shares is limited, such limitations could, under certain circumstances, impair the
ability of the Fund to maintain its qualification for federal income tax purposes as a regulated investment company, which would
have adverse tax consequences for shareholders. See “Use of Leverage” and “U.S. Federal Income Tax Matters”
in the accompanying Prospectus.
LEGAL
MATTERS
Certain
legal matters in connection with the Common Shares will be passed upon for the Fund by Faegre Drinker Biddle & Reath LLP.
Faegre Drinker Biddle & Reath LLP may rely as to certain matters of Maryland law on the opinion of McDermott Will & Emery
LLP.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Cohen
& Company, Ltd., 342 North Water St., Suite 830, Milwaukee, WI 53202 serves as the independent registered public accounting
firm of the Fund and will annually render an opinion on the financial statements of the Fund.
INCORPORATION
BY REFERENCE
This
Prospectus Supplement and the accompanying Prospectus constitutes part of a registration statement that the Fund has filed with
the SEC. The Fund is permitted to “incorporate by reference” the information that it files with the SEC, which means
that the Fund can disclose important information to you by referring you to those documents. The information incorporated by reference
is an important part of this Prospectus, and later information that the Fund files with the SEC will automatically update and
supersede this information.
The
documents listed below, and any reports and other documents subsequently filed with the SEC pursuant to Rule 30(b)(2) under the
1940 Act and Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering, are incorporated
by reference into this Prospectus and deemed to be part of this Prospectus from the date of the filing of such reports and documents:
| ● | the
Fund’s Statement of Additional Information, dated January 25, 2022, filed with
this Prospectus; |
| ● | the
Fund’s Annual Report on Form N-CSR for the fiscal year ended July 31, 2022, filed with
the SEC on September 30, 2022; |
| ● | the
Fund’s Semi-Annual Report on Form N-CSRS for the period ended January 31, 2022, filed
with the SEC on April 1, 2022; |
| ● | the
Fund’s definitive proxy statement on Schedule 14A for the 2022 annual meeting of shareholders,
filed with the SEC on July 15, 2022; |
| ● | the
Fund’s definitive proxy statement on Schedule 14A for a special meeting of shareholders,
filed with the SEC on May 13, 2022; and |
| ● | the
Fund’s description of common shares contained in our Registration Statement on Form 8-A (File No. 333-169317) filed with the SEC on December 17, 2015. |
ADDITIONAL
INFORMATION
The
Fund will be subject to the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance
therewith files reports and other information with the SEC. The SEC maintains a website at http://www.sec.gov containing
reports, proxy and information statements and other information regarding registrants, including the Fund (when available), that
file electronically with the SEC.
This
Prospectus Supplement and accompanying Prospectus constitutes part of a Registration Statement filed by the Fund with the SEC
under the Securities Act and the 1940 Act. This Prospectus Supplement and accompanying Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the Registration Statement and related exhibits for further
information with respect to the Fund and the Common Shares offered hereby. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such
reference. The complete Registration Statement may be obtained from the SEC upon payment of the fee prescribed by its rules and
regulations or free of charge through the SEC’s website (http://www.sec.gov).
PROSPECTUS DATED JANUARY 25, 2022
RiverNorth Opportunities Fund, Inc.
$598,667,769
Shares of Common Stock
Shares of Preferred Stock
Subscription Rights for Shares of Common
Stock
Subscription Rights for Shares of
Preferred Stock
Subscription Rights for Common and Preferred
Stock
Follow-on Offerings
RiverNorth Opportunities Fund, Inc. (the “Fund”)
is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940
Act”). The Fund’s investment objective is total return consisting of capital appreciation and current income. The Fund seeks
to achieve its investment objective by pursuing a tactical asset allocation strategy and opportunistically investing under normal circumstances
in closed-end funds, exchange-traded funds (“ETFs”), business development companies (“BDCs” and collectively,
“Underlying Funds”) and special purpose acquisition companies (“SPACs”).Under normal market conditions, the Fund
will invest at least 80% of its Managed Assets in Underlying Funds and SPACs. “Managed Assets” means 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). The Underlying Funds in which the Fund invests will not include those that are advised or subadvised by ALPS Advisors,
Inc. (the “Adviser” or “ALPS”), RiverNorth Capital Management, LLC (the “Subadviser”) or their affiliates.
ALPS Advisors, Inc. serves as the Fund’s
investment adviser and the Fund’s subadviser is RiverNorth Capital Management, LLC. As of September 30, 2021, ALPS had approximately
$18 billion of assets under management. The Adviser’s address is 1290 Broadway, Suite 1000, Denver, CO 80203. The Fund’s
address is 1290 Broadway, Suite 1000, Denver, Colorado 80203, and its telephone number is (303) 623-2577. As of September 30, 2021,
RiverNorth had approximately $5.5 billion of assets under management. The Subadviser’s address is 433 West Van Buren, 1150-E,
Chicago, IL 60607 and its telephone number is (561) 484-7185.
The Fund may offer, from time to time, up to
$598,667,769 aggregate initial offering price of (i) shares of common stock, $0.0001 par value per share (“Common Shares”),
(ii) shares of preferred stock (“Preferred Shares”), (iii) subscription rights to purchase Common Shares, Preferred
Shares or both (“Rights”) and/or (iv) any follow-on offering (“Follow-on Offering” and together with the
Common Shares, Preferred Shares, and Rights, “Securities”) in one or more offerings in amounts, at prices and on terms
set forth in one or more supplements to this Prospectus (each a “Prospectus Supplement”). Follow-on Offerings may
include offerings of Common Shares, offerings of Preferred Shares, offerings of Rights, and offerings made in transactions that are
deemed to be “at the market” as defined in Rule 415 under the Securities Act of 1933, as amended (the
“Securities Act”), including sales made directly on the New York Stock Exchange or sales made to or through a market
maker other than on an exchange. You should read this Prospectus and any related Prospectus Supplement carefully before you decide
to invest in the Securities.
The Fund may offer Securities (1) directly
to one or more purchasers, (2) through agents that the Fund may designate from time to time or (3) to or through underwriters or
dealers. The Prospectus Supplement relating to a particular offering of Securities will identify any agents or underwriters involved
in the sale of Securities, and will set forth any applicable purchase price, fee, commission or discount arrangement between the
Fund and agents or underwriters or among underwriters or the basis upon which such amount may be calculated. The Fund may not sell
Securities through agents, underwriters or dealers without delivery of this Prospectus and a Prospectus Supplement. See “Plan
of Distribution.”
An investment in the Fund is not appropriate for all investors.
No assurances can be given that the Fund will achieve its investment objective.
This Prospectus sets forth concisely the
information about the Fund and the Securities that a prospective investor ought to know before investing in the Fund and
participating in an offer. You should read this Prospectus, which contains important information about the Fund, before deciding
whether to invest in the Fund’s common stock, and retain it for future reference. A Statement of Additional Information dated
January 25, 2022 (the “SAI”), containing additional information about the Fund, has been filed with the Securities and
Exchange Commission (“SEC”) and is incorporated by reference in its entirety into this Prospectus, which means that it
is part of this Prospectus for legal purposes. You may request a free copy of the SAI, the Fund’s Annual and Semi-Annual
Reports, request other information about the Fund and make shareholder inquiries by calling (855) 830-1222, (toll-free) or by
writing to the Fund at 1290 Broadway, Suite 1000, Denver, Colorado 80203, or obtain a copy of such documents (and other information
regarding the Fund) by visiting the Fund’s website at www.rivernorthcef.com (information included on the website does not form
a part of this Prospectus), or from the SEC’s website (http://www.sec.gov).
Investing in Fund’s common stock involves
certain risks. See “Risks” beginning on page 19 of this Prospectus.
Principal Investment Strategies. The
Fund seeks to achieve its investment objective by pursuing a tactical asset allocation strategy and opportunistically investing under
normal circumstances in Underlying Funds and SPACs. Under normal market conditions, the Fund will invest at least 80% of its Managed Assets
in Underlying Funds and SPACs. “Managed Assets” means 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). The Underlying Funds and SPACs
in which the Fund invests will not include those that are advised or subadvised by the Adviser, the Subadviser or their affiliates.
The currently outstanding shares of the Fund’s
common stock are, and the shares of the Fund’s common stock offered in this Prospectus will be, subject to notice of issuance, listed
on the New York Stock Exchange (“NYSE”) under the trading or “ticker” symbol “RIV.” As of January
13, 2022, the last reported sale price for the Fund’s Common Shares on the New York Stock Exchange (“NYSE”) was $16.64
per Common Share, and the NAV of the Fund’s Common Shares was $16.19 per Common Share, representing a premium to NAV of 2.78%.
Leverage. The Fund may borrow
money and/or issue preferred stock, notes or debt securities for investment purposes. These practices are known as leveraging.
Since the holders of common stock 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 the shares of common stock than if leverage is not used.
The Fund currently anticipates that if
employed, 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 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.
The amount of distributions that the Fund may pay
is not guaranteed. The Fund may pay distributions in a significant part from sources that may not be available in the future and that
are unrelated to the Fund’s performance such as a return of capital (which is a non-taxable distribution).
This Prospectus is part of a registration
statement on Form N-2 that the Fund filed with the SEC using a “shelf” registration process. Under this process, the
Fund may offer, from time to time, up to $598,667,769 aggregate initial offering price of Securities in one or more offerings in
amounts, at prices and on terms set forth in one or more Prospectus Supplements. The Prospectus Supplement may also add, update
or change information contained in this Prospectus. You should carefully read this Prospectus and any accompanying Prospectus Supplement,
together with the additional information described under the heading “Where You Can Find More Information.”
You should rely only on the information
contained or incorporated by reference in this Prospectus and any accompanying Prospectus Supplement. The Fund has not authorized
any other person to provide you with different information. If anyone provides you with different or inconsistent information,
you should not rely on it. The Fund is not making an offer to sell these securities in any jurisdiction where the offer or sale
is not permitted. You should assume that the information contained or the representations made herein are accurate only as of the
date on the cover page of this Prospectus. The Fund’s business, financial condition and prospects may have changed since
that date. The Fund will amend this Prospectus and any accompanying Prospectus Supplement if, during the period that this Prospectus
and any accompanying Prospectus Supplement is required to be delivered, there are any subsequent material changes.
WHERE YOU CAN FIND MORE INFORMATION
The Fund is subject to the informational
requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Investment Company Act of 1940 (“1940
Act”) and in accordance therewith files, or will file, reports and other information with the SEC. Reports, proxy statements
and other information filed by the Fund with the SEC pursuant to the informational requirements of the Exchange Act and the
1940 Act can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Washington, D.C.
20549. The SEC maintains a web site at www.sec.gov containing reports, proxy and information statements and other information regarding
registrants, including the Fund, that file electronically with the SEC.
This Prospectus constitutes part of a Registration
Statement filed by the Fund with the SEC under the Securities Act of 1933 (“Securities Act”) and the 1940 Act. This
Prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the Fund and the Common Shares offered hereby. Any statements
contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the SEC. Each such statement
is qualified in its entirety by such reference. The complete Registration Statement may be obtained from the SEC upon payment of
the fee prescribed by its rules and regulations or free of charge through the SEC’s website (www.sec.gov).
The Fund will provide without charge to
each person, including any beneficial owner, to whom this Prospectus is delivered, upon written or oral request, a copy of any
and all of the information that has been incorporated by reference in this Prospectus or any accompanying Prospectus Supplement.
You may request such information by calling toll-free 1-855-830-1222 or you may obtain a copy (and other information regarding
the Fund) from the SEC’s website (www.sec.gov). Free copies of the Fund’s Prospectus, Statement of Additional Information
and any incorporated information will also be available from the Fund’s website at www.rivernorthcef.com. Information contained
on the Fund’s website is not incorporated by reference into this Prospectus or any Prospectus Supplement and should not be
considered to be part of this Prospectus or any Prospectus Supplement.
INCORPORATION BY REFERENCE
This Prospectus is part of a registration
statement that the Fund has filed with the SEC. The Fund is permitted to “incorporate by reference”
the information that it files with the SEC, which means that the Fund can disclose important information to you by referring
you to those documents. The information incorporated by reference is an important part of this Prospectus, and later information
that the Fund files with the SEC will automatically update and supersede this information.
The documents listed below, and any reports
and other documents subsequently filed with the SEC pursuant to Rule 30(b)(2) under the 1940 Act and Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, prior to the termination of the offering, are incorporated by reference into this Prospectus and
deemed to be part of this Prospectus from the date of the filing of such reports and documents:
| ● | the Fund’s Statement of Additional Information, dated January 25, 2022, filed with this
Prospectus (“SAI”); |
| ● | the Fund’s Annual Report on
Form N-CSR for the fiscal year ended July 31, 2021, filed with the SEC on October 8, 2021
(“Annual Report”); |
| ● | the Fund’s Semi-Annual Report
on Form N-CSRS for the period ended January 31, 2021, filed with the SEC on April 8, 2021; |
| ● | the Fund’s definitive proxy
statement on Schedule 14A for our 2021 annual meeting of shareholders, filed with the
SEC on July 2, 2021 (“Proxy Statement”); and |
| ● | the Fund’s description of common
shares contained in our Registration Statement on Form 8-A (File No. 333-169317) filed with
the SEC on December 17, 2015. |
To obtain copies of these filings, see
“Where You Can Find More Information.”
The Fund’s securities do not represent
a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
The Securities and Exchange Commission
has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
TABLE OF CONTENTS
|
Page |
Prospectus Summary |
1 |
Summary of Fund Expenses |
13 |
Financial Highlights |
14 |
Information Regarding Senior Securities |
14 |
The Fund |
15 |
The Offering |
15 |
Use of Proceeds |
15 |
Investment Objective, Strategies and Policies |
15 |
Use of Leverage |
18 |
Risks |
19 |
Management of the Fund |
19 |
Net Asset Value |
20 |
Dividends and Distributions |
20 |
Plan of Distribution |
21 |
Dividend Reinvestment Plan |
23 |
Description of the Fund’s Securities |
24 |
Certain Provisions of the Fund’s Charter and Bylaws and of Maryland Law |
28 |
Repurchase of Shares |
34 |
Conversion to Open-End Fund |
34 |
U.S. Federal Income Tax Matters |
34 |
Custodian and Transfer Agent |
37 |
Legal Matters |
37 |
Control Persons |
37 |
Additional Information |
37 |
Incorporation By Reference |
38 |
The Fund’s Privacy Policy |
38 |
You should rely only on the information
contained or incorporated by reference in this Prospectus. The Fund has not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information, you should not rely on it. The Fund is not making
an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the
information provided by this Prospectus and any related Prospectus Supplement is accurate as of any date other than the date on
the front of this Prospectus and any related Prospectus Supplement. The Fund’s business, financial condition and results
of operations may have changed since that date.
PROSPECTUS SUMMARY
The following summary is qualified in
its entirety by reference to the more detailed information appearing elsewhere in this Prospectus. This summary does not contain
all of the information that you should consider before investing in the Fund’s shares of common stock (the “Common
Shares”). You should review the more detailed information contained in this Prospectus and in the Statement of Additional
Information, especially the information set forth under the heading “Risks.”
The Fund |
RiverNorth Opportunities Fund, Inc. (the “Fund”) is a Maryland corporation registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). An investment in the Fund may not be appropriate for all investors. There can be no assurance that the Fund will achieve its investment objective. As of the date of this Prospectus, the Fund had not issued any shares of preferred stock (“Preferred Shares”). |
The Offering |
The Fund may offer, from time to time, up to
$598,667,769 aggregate initial offering price of (i) Common Shares, (ii) Preferred Shares, (iii) subscription rights to purchase Common
Shares, Preferred Shares or both (“Rights”) and/or (iv) any follow-on offering (“Follow-on Offering” and
together with the Common Shares, Preferred Shares and Rights, “Securities”) in one or more offerings in amounts, at
prices and on terms set forth in one or more supplements to this Prospectus (each a “Prospectus Supplement”). Follow-on
Offerings may include offerings of Common Shares, offerings of Preferred Shares, offerings of Rights, and offerings made in
transactions that are deemed to be “at the market” as defined in Rule 415 Securities Act, including sales made directly
on the NYSE or sales made to or through a market maker other than on an exchange. You should read this Prospectus and any related
Prospectus Supplement carefully before you decide to invest in the Securities.
The Fund may offer Securities (1) directly
to one or more purchasers, (2) through agents that the Fund may designate from time to time or (3) to or through underwriters or
dealers. The Prospectus Supplement relating to a particular offering of Securities will identify any agents or underwriters involved
in the sale of Securities, and will set forth any applicable purchase price, fee, commission or discount arrangement between the
Fund and agents or underwriters or among underwriters or the basis upon which such amount may be calculated. The Fund may not sell
Securities through agents, underwriters or dealers without delivery of this Prospectus and a Prospectus Supplement. See “Plan
of Distribution.” |
Use of Proceeds |
Unless otherwise specified in a Prospectus Supplement, ALPS Advisors, Inc. (the “Adviser” or “ALPS”), the Fund’s investment adviser, anticipates that investment of the proceeds will be made in accordance with the Fund’s investment objective and policies as appropriate investment opportunities are identified. It is currently anticipated that the Fund will be able to invest substantially all of the net proceeds of an offering of Securities in accordance with its investment objective and policies within three months after the completion of such offering. Pending such investment, the proceeds will be held in high quality short-term debt securities and instruments. A delay in the anticipated use of proceeds could lower returns and reduce the Fund’s distribution to holders of Common Shares (“Common Stockholders”). |
Investment Objective |
The Fund’s investment objective is total return consisting of capital appreciation and current income. There is no assurance that the Fund will achieve its investment objective. |
Principal Investment Strategies |
The Fund seeks to achieve its investment objective
by pursuing a tactical asset allocation strategy and opportunistically investing under normal circumstances in closed-end funds, exchange
traded funds (“ETFs”), business development companies (“BDCs” and collectively, “Underlying Funds”)
and special purpose acquisition companies (“SPACs”). RiverNorth Capital Management, LLC (the “Subadviser”) has
the flexibility to change the Fund’s asset allocation based on its ongoing analysis of the equity, fixed income and alternative
asset markets. The Subadviser considers various quantitative and qualitative factors relating to the domestic and foreign securities markets
and economies when making asset allocation and security selection decisions. While the Subadviser continuously evaluates these factors,
material shifts in the Fund’s asset class exposures will typically take place over longer periods of time.
Under normal market conditions, the Fund will invest at least 80% of its
Managed Assets in Underlying Funds and SPACs. “Managed Assets” means 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). The Underlying
Funds and SPACs in which the Fund invests will not include those that are advised or subadvised by the Adviser, the Subadviser or their
affiliates. The Fund directly, and therefore Common Stockholders indirectly, will bear the expenses of the Underlying Funds and SPACs.
|
|
Under normal market conditions: (i) no more than 80%
of the Fund’s Managed Assets will be invested in “equity” Underlying Funds and SPACs; (ii) no more than 60% of the Fund’s
Managed Assets will be invested in “fixed income” Underlying Funds and SPACs; (iii) no more than 30% of the Fund’s Managed
Assets will be invested in “global equity” Underlying Funds and SPACs; (iv) no more than 15% of the Fund’s Managed Assets
will be invested in “emerging market equity” Underlying Funds and SPACs; (v) no more than 30% of the Fund’s Managed
Assets will be invested in “high yield” (also known as “junk bond”) and “senior loan” Underlying Funds
and SPACs; (vi) no more than 15% of the Fund’s Managed Assets will be invested in “emerging market income” Underlying
Funds and SPACs; (vii) no more than 10% of the Fund’s Managed Assets will be invested in “real estate” Underlying Funds
and SPACs; and (viii) no more than 15% of the Fund’s Managed Assets will be invested in “energy master limited partnership”
(“MLP”) Underlying Funds and SPACs. Underlying Funds and SPACs included in the 30% limitation applicable to investments in
“global equity” Underlying Funds and SPACs may include Underlying Funds and SPACs that invest a portion of their assets in
emerging markets securities. The Fund will also limit its investments in closed-end funds (including BDCs) that have been in operation
for less than one year to no more than 10% of the Fund’s Managed Assets. The Fund will not invest in inverse ETFs and leveraged
ETFs. The types of Underlying Funds and SPACs referenced in this paragraph will be categorized in accordance with the fund categories
established and maintained by Morningstar, Inc. The investment parameters stated above (and elsewhere in this Prospectus) apply only at
the time of purchase.
In selecting closed-end funds, the Subadviser
opportunistically utilizes a combination of short-term and longer-term trading strategies to seek to derive value from the discount
and premium spreads associated with closed-end funds. The Subadviser employs both a quantitative and qualitative approach in its
selection of closed-end funds and has developed proprietary screening models and algorithms to trade closed-end funds. The Subadviser
employs the following trading strategies, among others:
Statistical Analysis (Mean Reversion)
· Using
proprietary quantitative models, the Subadviser seeks to identify closed-end funds that are trading at compelling absolute and
/ or relative discounts (i.e., trading at a market price lower than its net asset value).
· The
Fund will attempt to capitalize on the perceived mispricing if the Subadviser believes that the discount widening is irrational
and expects the discount to narrow to longer-term mean valuations (i.e., the current discount will approach the price of the longer-term valuation).
Corporate Actions
· The
Subadviser will pursue investments in closed-end funds that have announced, or the Subadviser believes are likely to announce,
certain corporate actions that may drive value for their shareholders.
· The
Subadviser has developed trading strategies that focus on closed-end fund tender offers, rights offerings, shareholder distributions,
open-endings (i.e., conversion of a closed-end fund to an open-end mutual fund) and liquidations (the disposition of a Fund's assets).
The Fund will invest in other Underlying Funds and
SPACs (that are not closed-end funds) to gain exposure to specific asset classes when the Subadviser believes closed-end fund discount
or premium spreads are not attractive or to manage overall closed-end fund exposure in the Fund.
Under normal circumstances, the Fund intends to maintain
long positions in Underlying Funds and SPACs, but may engage in short sales for investment purposes. When the Fund engages in a short
sale, it sells a security it does not own and, to complete the sale, borrows the same security from a broker or other institution. The
Fund may benefit from a short position when the shorted security decreases in value. The Fund may also at times establish hedging positions.
Hedging positions may include short sales and derivatives, such as options and swaps (“Hedging Positions”). Under normal market
conditions, no more than 30% of the Fund’s Managed Assets will be in Hedging Positions. The Subadviser intends to use Hedging Positions
to lower the Fund’s volatility but they may also be used to seek to enhance the Fund’s return. The Fund’s investments
in derivatives will be included under the 80% policy noted above so long as the underlying asset of such derivatives is a closed-end fund
or Underlying Fund, respectively.
The Subadviser performs both a quantitative
and qualitative analysis, including fundamental and technical analysis to assess the relative risk and reward potential, for each
SPAC investment. Among other things, the Subadviser will evaluate the management team’s strategy, experience, deal flow,
and demonstrated track record in building enterprise value. The Subadviser will also evaluate the terms of each SPAC offering,
including the aggregate amount of the offering, the offering price of the securities, the equity yield to termination, the option
value of warrants, the sponsor’s interest in the SPAC, and the expected liquidity of the SPAC’s securities. The Fund
will purchase securities of SPACs in their initial public offerings and in the secondary market. |
|
The Fund also may invest up to 20% of its
Managed Assets in exchange-traded notes (“ETNs”), certain derivatives, such as options and swaps, cash and cash equivalents.
Such investments will not be counted towards the Fund’s 80% policy.
There are no limits on the Fund’s
portfolio turnover, and the Fund may buy and sell securities to take advantage of potential short-term trading opportunities without
regard to length of time and when the Subadviser believes investment considerations warrant such action.
The Fund may attempt to enhance the return
on the cash portion of its portfolio (and not for hedging purposes) by investing in a total return swap agreement. A total return
swap agreement provides the Fund with a return based on the performance of an underlying asset, in exchange for fee payments to
a counterparty based on a specific rate. The difference in the value of these income streams is recorded daily by the Fund, and
is typically settled in cash at least monthly. If the underlying asset declines in value over the term of the swap, the Fund would
be required to pay the dollar value of that decline plus any applicable fees to the counterparty. The Fund may use its own NAV
or any other reference asset that the Subadviser chooses as the underlying asset in a total return swap. The Fund will limit the
notional amount of all total return swaps in the aggregate to 15% of the Fund’s Managed Assets. See “Investment Objective,
Strategies and Policies—Principal Investment Strategies.” |
Use of Leverage |
The Fund may borrow money and/or issue
Preferred Shares, notes or debt securities for investment purposes. These practices are known as leveraging. The Subadviser 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 Shares, 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
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 Common 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 Common Stockholders will be less than if leverage had
not been used. The use of leverage magnifies gains and losses to Common Stockholders. Since the holders of Common Shares 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 the Common
Shares 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. See “Use of Leverage” and “Risks—Leverage Risks.” |
Adviser and Subadviser
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The Fund pays the Adviser a management fee payable on a monthly basis at the annual rate of 1.00% of the Fund’s average daily Managed Assets for the services and facilities it provides. The Adviser (not the Fund) has agreed to pay the Subadviser a subadvisory fee payable on a monthly basis at the annual rate of 0.85% of the Fund’s average daily Managed Assets for the services it provides. As a result, the Adviser and the Subadviser are paid more if the Fund uses leverage directly, which creates a potential conflict of interest for the Adviser and the Subadviser. The Subadviser will seek to manage that potential conflict by utilizing leverage only when it determines such action is in the best interests of the Fund. For more information on the Adviser and the Subadviser, as well as the fees and expenses, see “Summary of Fund Expenses” and “Management of the Fund.” |
Administrator |
ALPS Fund Services, Inc. (“AFS”) is the Fund’s administrator. Under an Administration, Bookkeeping and Pricing Services Agreement (the “Administration Agreement”), AFS is responsible for calculating NAVs, providing additional fund accounting and tax services, and providing fund administration and compliance-related services. See “Management of the Fund.” |
Dividends and Distributions |
The Board of Directors of the Fund (the “Board”) approved an amended distribution policy, under which 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. At times, to maintain a stable level of distributions, the Fund may pay out less than all of its net investment income or pay out accumulated undistributed income, or return capital, in addition to current net investment income. Any distribution that is treated as a return of capital generally will reduce a stockholder’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. See “Dividends and Distributions.” |
Dividend Reinvestment Plan |
The Fund has a dividend reinvestment plan (the “Plan”) commonly referred to as an “opt-out” plan. Each Common Stockholder who participates in the Plan will have all distributions of dividends and capital gains automatically reinvested in additional Common Shares. Shareholders who elect not to participate in the Plan will receive all distributions in cash. Stockholders whose Common Shares are held 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. See “Dividend Reinvestment Plan” and “U.S. Federal Income Tax Matters.” |
Listing of Common Shares |
The Fund’s Common Shares are currently listed on the NYSE under the symbol “RIV.” As of January 13, 2022, the last reported sale price for the Fund’s Common Shares on the NYSE was $16.64 per Common Share, and the NAV of the Fund’s Common Shares was $16.19 per Common Share, representing a premium to NAV of 2.78%. In connection with any offering of Rights, the Fund will provide information in the Prospectus Supplement of the expected trading market, if any, for Rights. |
Risk Considerations |
Risk is inherent in all investing.
Investing in any investment company security involves risk, including the risk that you may receive little or no return on your
investment or even that you may lose part or all of your investment. Therefore, before investing in the Common Shares, you should
consider the following risks as well as the other information in this Prospectus. See “Risks” below for more information
about risk.
Structural Risks:
Not a Complete Investment Program.
The Fund is intended for investors seeking total return consisting of capital appreciation and current income over the long-term
and is not intended to be a short-term trading vehicle. An investment in the Common Shares of the Fund should not be considered
a complete investment program. Each investor should take into account the Fund’s investment objective and other characteristics,
as well as the investor’s other investments, when considering an investment in the Common Shares. An investment in the Fund
may not be appropriate for all investors.
Risks Associated with Offerings of
Additional Common Shares. The voting power of current Common Stockholders will be diluted to the extent that current Common
Stockholders do not purchase Common Shares in any future offerings of Common Shares or do not purchase sufficient Common Shares
to maintain their percentage interest. If the Fund is unable to invest the proceeds of such offering as intended, the Fund’s
per Common Share distribution may decrease and the Fund may not participate in market advances to the same extent as if such proceeds
were fully invested as planned. If the Fund sells Common Shares at a price below NAV pursuant to the consent of Common Stockholders,
stockholders will experience a dilution of the aggregate NAV per Common Share because the sale price will be less than the Fund’s
then-current NAV per Common Share. Similarly, were the expenses of the offering to exceed the amount by which the sale price exceeded
the Fund’s then current NAV per Common Share, stockholders would experience a dilution of the aggregate NAV per Common Share.
This dilution will be experienced by all stockholders, irrespective of whether they purchase Common Shares in any such offering.
See “Description of the Common Shares–Common Shares.” |
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Additional Risks of Rights.
There are additional risks associated with an offering of Rights. Stockholders who do not exercise their Rights may, at the completion
of such an offering, own a smaller proportional interest in the Fund than if they exercised their Rights. As a result of such an
offering, a stockholder may experience dilution in NAV per share if the subscription price per share is below the NAV per share
on the expiration date. If the subscription price per share is below the NAV per share of the Fund’s Common Shares on the
expiration date, a stockholder will experience an immediate dilution of the aggregate NAV of such stockholder’s Common Shares
if the stockholder does not participate in such an offering and the stockholder will experience a reduction in the NAV per share
of such stockholder’s Common Shares whether or not the stockholder participates in such an offering. Such a reduction in
NAV per share may have the effect of reducing market price of the Common Share. The Fund cannot state precisely the extent of this
dilution (if any) if the stockholder does not exercise such stockholder’s Rights because the Fund does not know what the
NAV per share will be when the offer expires or what proportion of the Rights will be exercised. If the subscription price is substantially
less than the then current NAV per Common Share at the expiration of a rights offering, such dilution could be substantial. Any
such dilution or accretion will depend upon whether (i) such stockholders participate in the rights offering and (ii) the Fund’s
NAV per Common Share is above or below the subscription price on the expiration date of the rights offering. In addition to the
economic dilution described above, if a Common Stockholder does not exercise all of their rights, the Common Stockholder will incur
voting dilution as a result of this rights offering. This voting dilution will occur because the Common Stockholder will own a
smaller proportionate interest in the Fund after the rights offering than prior to the rights offering. There is a risk that changes
in market conditions may result in the underlying Common Shares purchasable upon exercise of the subscription rights being less
attractive to investors at the conclusion of the subscription period. This may reduce or eliminate the value of the subscription
rights. If investors exercise only a portion of the rights, the number of Common Shares issued may be reduced, and the Common Shares
may trade at less favorable prices than larger offerings for similar securities. Subscription rights issued by the Fund may be
transferable or non-transferable rights. In a non-transferable rights offering, Common Stockholders who do not wish to exercise
their rights will be unable to sell their rights. In a transferrable rights offering, the Fund will use its best efforts to ensure
an adequate trading market for the rights; however, investors may find that there is no market to sell rights they do not wish
to exercise.
Leverage Risks. The Fund may borrow money, or issue debt or preferred stock. Since Common
Stockholders pay all expenses related to the issuance of debt or use of leverage, the use of leverage through borrowing of money, issuance
of debt securities or the issuance of preferred stock for investment purposes creates risks for the holders of Common Shares. Leverage
is a speculative technique that exposes the Fund to greater risk and increased costs than if it were not implemented. Increases and decreases
in the value of the Fund’s portfolio will be magnified when the Fund uses leverage. As a result, leverage may cause greater changes
in the Fund’s NAV. The Fund will also have to pay interest on its borrowings or dividends on preferred stock, if any, which may
reduce the Fund’s return. The leverage costs may be greater than the Fund’s return on the underlying investment. The Fund’s
leveraging strategy may not be successful. Leverage risk would also apply to the Fund’s investments in Underlying Funds and SPACs
to the extent an Underlying Fund or SPAC uses leverage. See “Use of Leverage” and “Risks—Leverage Risks.”
Market Discount. Common stock
of closed-end funds frequently trades at a discount from its NAV. This risk may be greater for investors selling their shares in
a relatively short period of time after completion of the initial offering. The Common Shares may trade at a price that is less
than the Fund’s NAV. This risk would also apply to the Fund’s investments in closed-end funds.
Anti-Takeover Provisions.
Maryland law and the Fund’s Charter and Bylaws include provisions that could limit the ability of other entities or persons
to acquire control of the Fund or convert the Fund to open-end status. These provisions could deprive the holders of Common Shares
of opportunities to sell their Common Shares at a premium over the then current market price of the Common Shares or at NAV. See
“Certain Provisions of the Fund’s Charter and Bylaws and of Maryland Law.” This risk would also apply to many
of the Fund’s investments in closed-end funds.
Investment-Related Risks:
The risks listed below are in alphabetical order. With the exception of
Underlying Fund risk (and except as otherwise noted below), the following risks apply to the direct investments the Fund may make, and
generally apply to the Fund’s investments in Underlying Funds and SPACs. That said, each risk described below may not apply to each
Underlying Fund or SPAC investment. Similarly, an Underlying Fund may be subject to additional or different risks than those described
below. |
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Asset Allocation Risks. To
the extent that the Subadviser’s asset allocation strategy may fail to produce the intended result, the Fund’s return
may suffer. Additionally, the active asset allocation style of the Fund leads to changing allocations over time and represents
a risk to investors who target fixed asset allocations. See “Risks—Asset Allocation Risks.”
Convertible Securities Risks.
The Underlying Funds may invest in convertible securities. The market value of convertible securities tends to fall when prevailing
interest rates rise. The value of convertible securities also tends to change whenever the market value of the underlying common
or preferred stock fluctuates. Convertible securities tend to be of lower credit quality. See “Risks—Convertible Securities
Risks.”
Defensive Measures. The Fund
may invest up to 100% of its assets in cash, cash equivalents and short-term investments as a defensive measure in response to
adverse market conditions or opportunistically at the discretion of the Subadviser. During these periods, the Fund may not be pursuing
its investment objective. See “Risks—Defensive Measures.”
Derivatives Risks. The Fund
and the Underlying Funds may enter into derivatives transactions. Derivative transactions involve investment techniques and risks
different from those associated with investments in Underlying Funds. Generally, a derivative is a financial contract the value
of which depends upon, or is derived from, the value of an underlying asset, reference rate, or index, and may relate to individual
debt or equity instruments, interest rates, currencies or currency exchange rates, commodities, related indexes, and other assets.
Derivatives can be volatile and involve various types and degrees of risk, depending upon the characteristics of a particular derivative.
Derivatives may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in
a derivative could have a large potential impact on the performance of the Fund or an Underlying Fund. The Fund or an Underlying
Fund could experience a loss if derivatives do not perform as anticipated, if they are not correlated with the performance of other
investments which they are used to hedge or if the fund is unable to liquidate a position because of an illiquid secondary market.
When used for speculative purposes, derivatives will produce enhanced investment exposure, which will magnify gains and losses.
The Fund and the Underlying Funds also will be subject to credit risk with respect to the counterparties to the derivatives contracts
purchased by such fund. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract
due to financial difficulties, the Fund or an Underlying Fund may experience significant delays in obtaining any recovery under
the derivative contract in a bankruptcy or other reorganization proceeding. The Fund or an Underlying Fund may obtain only a limited
recovery or may obtain no recovery in such circumstances. See “Risks—Derivatives Risks” and “Risks—Options
and Futures Risks.”
In October 2020, the SEC adopted a final
rule related to the use of derivatives, short sales, reverse repurchase agreements and certain other transactions by registered
investment companies that will rescind and withdraw the guidance of the SEC and its staff regarding asset segregation and cover
transactions reflected in the Fund’s asset segregation and cover practices discussed herein. The final rule requires Funds
to trade derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase agreements
and similar financing transactions) subject to a value-at-risk (“VaR”) leverage limit, certain derivatives risk management
program and reporting requirements. Generally, these requirements apply unless a Fund qualifies as a “limited derivatives
user,” as defined in the final rule. Under the final rule, when a Fund trades reverse repurchase agreements or similar financing
transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse
repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness
when calculating the Fund’s asset coverage ratio or treat all such transactions as derivatives transactions. Reverse repurchase
agreements or similar financing transactions aggregated with other indebtedness do not need to be included in the calculation of
whether a Fund is a limited derivatives user, but for funds subject to the VaR testing, reverse repurchase agreements and similar
financing transactions must be included for purposes of such testing whether treated as derivatives transactions or not. The SEC
also provided guidance in connection with the new rule regarding use of securities lending collateral that may limit the Fund’s
securities lending activities. Compliance with these new requirements will be required after an eighteen-month transition period.
Following the compliance date, these requirements may limit the ability of a Fund to use derivatives and reverse repurchase agreements
and similar financing transactions as part of its investment strategies. These requirements may increase the cost of a Fund’s
investments and cost of doing business, which could adversely affect investors. |
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Defaulted and Distressed Securities
Risks. The Underlying Funds may invest directly in defaulted and distressed securities. Legal difficulties and negotiations
with creditors and other claimants are common when dealing with defaulted or distressed companies. Defaulted or distressed companies
may be insolvent or in bankruptcy. In the event of a default, an Underlying Fund may incur additional expenses to seek recovery.
The repayment of defaulted bonds is subject to significant uncertainties, and in some cases, there may be no recovery of repayment.
Defaulted bonds might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer might not make any
interest or other payments. With distressed investing, often there is a time lag between when a fund makes an investment and when
an Underlying Fund realizes the value of the investment. In addition, an Underlying Fund may incur legal and other monitoring costs
in protecting the value of the Underlying Fund’s claims. See “Risks—Defaulted and Distressed Securities Risks.”
Equity Securities Risks.
The Underlying Funds may invest in equity securities. While equity securities have historically generated higher average returns
than fixed income securities, equity securities have also experienced significantly more volatility in those returns. An adverse
event, such as an unfavorable earnings report, may depress the value of an issuer’s equity securities held by an Underlying
Fund. Equity security prices fluctuate for several reasons, including changes in investors’ perceptions of the financial
condition of an issuer or the general condition of the relevant stock market, or when political or economic events affecting the
issuers occur. The value of an Underlying Fund’s shares will go up and down due to movement in the collective returns of
the individual securities held by the Underlying Fund. Common stocks are subordinate to preferred stocks and debt in a company’s
capital structure, and if a company is liquidated, the claims of secured and unsecured creditors and owners of preferred stocks
take precedence over the claims of those who own Common Shares. In addition, equity security prices may be particularly sensitive
to rising interest rates, as the cost of capital rises and borrowing costs increase See “Risks—Equity Securities Risks.”
Exchange-Traded Note Risks.
The Fund and the Underlying Funds may invest in ETNs, which are notes representing unsecured debt issued by an underwriting bank.
ETNs are typically linked to the performance of an index plus a specified rate of interest that could be earned on cash collateral.
The value of an ETN may be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity
in underlying markets, changes in the applicable interest rates, changes in the issuer’s credit rating and economic, legal,
political or geographic events that affect the referenced index. ETNs typically mature 30 years from the date of issue. There may
be restrictions on a fund’s right to liquidate its investment in an ETN prior to maturity (for example, a fund may only be
able to offer its ETN for repurchase by the issuer on a weekly basis), and there may be limited availability of a secondary market.
See “Risks—Exchange-Traded Note Risks.”
Fixed Income Risks. The Underlying
Funds may invest in fixed income securities. Fixed income securities increase or decrease in value based on changes in interest
rates. If rates increase, the value of a fund’s fixed income securities generally declines. On the other hand, if rates fall,
the value of the fixed income securities generally increases. This risk is increased in the case of issuers of high yield securities,
also known as “junk bonds.” High yield securities are predominantly speculative with respect to the issuer’s
capacity to pay interest and repay principal in accordance with the terms of the obligation. In typical interest rate environments,
the prices of longer-term fixed income securities generally fluctuate more than the prices of shorter-term fixed income securities
as interest rates change. These risks may be greater in the current market environment because certain interest rates are near
historically low levels. The issuer of a fixed income security may not be able to make interest and principal payments when due.
In general, lower rated fixed income securities carry a greater degree of credit risk. See “Risks—Fixed Income Risks.”
Foreign Investing Risks.
The Fund and the Underlying Funds may invest in foreign securities. Investments in foreign securities may be affected by currency
controls and exchange rates; different accounting, auditing, financial reporting, and legal standards and practices; expropriation;
changes in tax policy; social, political and economic instability; greater market volatility; differing securities market structures;
higher transaction costs; and various administrative difficulties, such as delays in clearing and settling portfolio transactions
or in receiving payment of dividends. In addition, changes in government administrations or economic or monetary policies in the
United States or abroad could result in appreciation or depreciation of the Fund’s or Underlying Fund’s securities.
These risks may be heightened in connection with investments in emerging or developing countries. To the extent that a Fund or
Underlying Fund invests in depositary receipts, the Fund or Underlying Fund will be subject to many of the same risks as when investing
directly in foreign securities. The effect of recent, worldwide economic instability on specific foreign markets or issuers may
be difficult to predict or evaluate, and some national economies continue to show profound instability, which may in turn affect
their international trading partners. See “Risks—Foreign Investing Risks.” |
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Illiquid Securities Risks.
The Underlying Funds may invest in illiquid securities. It may not be possible to sell or otherwise dispose of illiquid securities
both at the price and within the time period deemed desirable by the Fund. Illiquid securities also may be difficult to value.
See “Risks—Illiquid Securities Risks.”
Initial Public Offerings Risks.
The Fund and the Underlying Funds may purchase securities in initial public offerings (“IPOs”). Investing in IPOs has
added risks because the shares are frequently volatile in price. As a result, their performance can be more volatile and they face
greater risk of business failure, which could increase the volatility of an Underlying Fund’s portfolio. See “Risks—Initial
Public Offerings Risks.”
Investment and Market Risks.
An investment in Common Shares is subject to investment risk, including the possible loss of the entire principal amount invested.
An investment in Common Shares represents an indirect investment in the Underlying Funds owned by the Fund. The value of the Underlying
Funds, like other market investments, may move up or down, sometimes rapidly and unpredictably. Overall stock market risks may
also affect the value of the Fund or the Underlying Funds. Factors such as domestic and foreign economic growth and market conditions,
interest rate levels and political events affect the securities markets. The Common Shares at any point in time may be worth less
than the original investment, even after taking into account any reinvestment of dividends and distributions.
Legislation, Policy and Regulatory
Risks. At any time after the date of this Prospectus, legislation or additional regulations may be enacted that could negatively
affect the assets of the Fund or the issuers of such assets. Recent changes in the U.S. political landscape and changing approaches
to regulation may have a negative impact on the entities and/or securities in which the Fund or an Underlying Fund invests. Legislation
or regulation may also change the way in which the Fund or an Underlying Fund is regulated. New or amended regulations may be imposed
by the Commodity Futures Trading Commission (“CFTC”), the SEC, the Board of Governors of the Federal Reserve System
(the “Federal Reserve”) or other financial regulators, other governmental regulatory authorities or self-regulatory
organizations that supervise the financial markets that could adversely affect the Fund or the Underlying Funds. In particular,
these agencies are empowered to promulgate a variety of new rules pursuant to financial reform legislation in the United States.
There can be no assurance that future legislation, regulation or deregulation will not have a material adverse effect on the Fund
or will not impair the ability of the Fund to achieve its investment objective. The Fund and the Underlying Funds also may be adversely
affected by changes in the enforcement or interpretation of existing statutes and rules by these governmental agencies.
See “Risks—Legislation, Policy
and Regulatory Risks.”
Management Risks. The Subadviser’s
judgments about the attractiveness, value and potential appreciation of a particular asset class or individual security in which
the Fund invests may prove to be incorrect and there is no guarantee that the Subadviser’s judgment will produce the desired
results. Similarly, the Fund’s investments in Underlying Funds are subject to the judgment of the Underlying Funds’
managers which may prove to be incorrect. In addition, the Subadviser will have limited information as to the portfolio holdings
of the Underlying Funds at any given time. This may result in the Subadviser having less ability to respond to changing market
conditions. The Fund may allocate its assets so as to under-emphasize or over-emphasize ETFs or other investments under the wrong
market conditions, in which case the Fund’s NAV may be adversely affected. See “Risks—Management Risks.”
Market Disruption and Geopolitical
Risks. The value of your investment in the Fund is based on the values of the Fund’s investments, which may change
due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries,
companies or governments. These 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 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. The occurrence
of such events may be sudden and unexpected, and 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, liquidity and risk profile of the Fund’s portfolio, as well as its ability to sell securities
to meet redemptions. There is a risk that you may lose money by investing in the Fund. |
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Social, political, economic and other conditions
and events, such as natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts and social unrest,
may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets. As
global systems, economies and financial markets are increasingly interconnected, events that once had only local impact are now
more likely to have regional or even global effects. Events that occur in one country, region or financial market will, more frequently,
adversely impact issuers in other countries, regions or markets. These impacts can be exacerbated by failures of governments and
societies to adequately respond to an emerging event or threat. These types of events quickly and significantly impact markets
in the U.S. and across the globe leading to extreme market volatility and disruption. The extent and nature of the impact on supply
chains or economies and markets from these events is unknown, particularly if a health emergency or other similar event, such as
the COVID-19 (the “Coronavirus”) outbreak, persists for an extended period of time. Social, political, economic and
other conditions and events, such as natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts
and social unrest, could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines,
and generally have a significant impact on the economies and financial markets and the Adviser’s investment advisory activities
and services of other service providers, which in turn could adversely affect the Fund’s investments and other operations.
The value of the Fund’s investment may decrease as a result of such events, particularly if these events adversely impact
the operations and effectiveness of the Adviser or key service providers or if these events disrupt systems and processes necessary
or beneficial to the investment advisory or other activities on behalf the Fund. See “Risks—Market Disruption and Geopolitical
Risks.”
Master Limited Partnerships Risks.
The Underlying Funds may invest in MLPs. Investments in publicly traded MLPs, which are limited partnerships or limited liability
companies taxable as partnerships, involve some risks that differ from an investment in the common stock of a corporation, including
risks related to limited control and limited rights to vote on matters affecting MLPs, risks related to potential conflicts of
interest between an MLP and the MLP’s general partner, cash flow risks, dilution risks and risks related to the general partner’s
right to require unit-holders to sell their common units at an undesirable time or price. MLPs may derive income and gains from
the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas,
oil, or products thereof), or the marketing of any mineral or natural resources. MLPs may be subject to legal and other restrictions
on resale or will otherwise be less liquid than publicly traded securities. Certain MLP securities may trade in lower volumes due
to their smaller capitalizations. Accordingly, those MLPs may be subject to more abrupt or erratic price movements and may lack
sufficient market liquidity to enable an Underlying Fund to effect sales at an advantageous time or without a substantial drop
in price. As a result, these investments may be difficult to dispose of at a fair price at the times when an Underlying Fund believes
it is desirable to do so. MLPs are generally considered interest-rate sensitive investments. During periods of interest rate volatility,
these investments may not provide attractive returns, which may adversely impact the overall performance of the Fund or an Underlying
Fund. The benefit an Underlying Fund will derive from its investment in MLPs will be largely dependent on the MLPs being treated
as partnerships and not as corporations for federal income tax purposes. Therefore, treatment of an MLP as a corporation for federal
income tax purposes would result in a reduction in the after-tax return to an Underlying Fund, likely causing a reduction in the
value of the Common Shares. See “Risks—Master Limited Partnerships Risks.”
Micro-, Small- and Medium-Sized Company
Risks. The Underlying Funds may invest in securities without regard to market capitalization. Investments in securities
of micro-, small- and medium-sized companies may be subject to more abrupt or erratic market movements than larger, more established
companies, because these securities typically are traded in lower volume and issuers are typically more subject to changes in earnings
and future earnings prospects. These risks are intensified for investments in micro-cap companies. See “Risks—Micro-,
Small- and Medium-Sized Company Risks.” |
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Options and Futures Risks.
The Fund and the Underlying Funds may invest in options and futures contracts. The use of futures and options transactions entails
certain special risks. In particular, the variable degree of correlation between price movements of futures contracts and price
movements in the related securities position of the fund could create the possibility that losses on the hedging instrument are
greater than gains in the value of the fund’s position. In addition, futures and options markets could be illiquid in some
circumstances and certain over-the-counter options could have no markets. As a result, in certain markets, the fund might not be
able to close out a transaction without incurring substantial losses. Although the fund’s use of futures and options transactions
for hedging should tend to minimize the risk of loss due to a decline in the value of the hedged position, at the same time it
will tend to limit any potential gain to the fund that might result from an increase in value of the position. There is also the
risk of loss by the fund of margin deposits in the event of bankruptcy of a broker with whom the Fund has an open position in a
futures contract or option thereon. Finally, the daily variation margin requirements for futures contracts create a greater ongoing
potential financial risk than would purchases of options, in which case the exposure is limited to the cost of the initial premium.
See “Risks—Options and Futures Risks.”
Private Debt Risk. The Fund
may invest in debt issued by non-listed funds and BDCs (“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 publicly traded-vehicles. For certain
Private Debt investments, 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. See “Risks—Private
Debt.”
REIT Risks. The Underlying
Funds may invest in equity and mortgage real estate investment trusts (“REITs”). Equity REITs invest in real estate,
and mortgage REITs invest in loans secured by real estate. The value of equity REITs may be affected by changes in the value of
the underlying property owned by the REITs, while the value of mortgage REITs may be affected by the quality of any credit extended.
Investment in REITs involves risks similar to those associated with investing in small capitalization companies, and REITs (especially
mortgage REITs) are subject to interest rate risks. See “Risks—REIT Risks.”
Securities Lending Risks. The
Underlying Funds may lose money when they loan portfolio securities if the borrower fails to return the securities and the collateral
provided has declined in value and/or the Underlying Fund cannot convert the collateral to cash for any reason. See “Risks—Securities
Lending Risks.”
Securities Risks. The value
of the Common Shares or the shares of an Underlying Fund may decrease in response to the activities and financial prospects of
individual securities in the Fund’s or Underlying Fund’s portfolio. See “Risks—Securities Risks.”
Senior Loan Risks. The Underlying
Funds may invest in senior secured floating rate and fixed-rate loans (“Senior Loans”). There is less readily available
and reliable information about most Senior Loans than is the case for many other types of instruments, including listed securities.
Senior Loans are not listed on any national securities exchange or automated quotation system and as such, many Senior Loans are
illiquid, meaning that the Fund or Underlying Fund may not be able to sell them quickly at a fair price. To the extent that a secondary
market does exist for certain Senior Loans, the market is more volatile than for liquid, listed securities and may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement periods. The market for Senior Loans could be disrupted
in the event of an economic downturn or a substantial increase or decrease in interest rates. Senior Loans, like most other debt
obligations, are subject to the risk of default. Default in the payment of interest or principal on a Senior Loan will result in
a reduction of income to the Fund, a reduction in the value of the Senior Loan and a potential decrease in the Fund’s NAV
of the Common Shares. See “Risks—Senior Loan Risks.”
Short Sale Risks. The Fund
and the Underlying Funds may engage in short sales. A short sale is a transaction in which a fund sells a security it does not own in
anticipation that the market price of that security will decline. To establish a short position, a fund must first borrow the security
from a broker or other institution. The fund may not always be able to borrow a security at a particular time or at an acceptable price.
Accordingly, there is a risk that a fund may be unable to implement its investment strategy due to the lack of available securities or
for other reasons. After selling a borrowed security, a fund is obligated to “cover” the short sale by purchasing and returning
the security to the lender at a later date. The Fund and the Underlying Funds cannot guarantee that the security will be available at
an acceptable price. Positions in shorted securities are speculative and more risky than long positions (purchases) in securities because
the maximum sustainable loss on a 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. See “Risks—Short Sale Risks.” |
|
Special Purpose Acquisition Companies
Risks: 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.
Structured Notes Risks. The
Underlying Funds may invest in structured notes. Structured notes are subject to a number of fixed income risks including general
market risk, interest rate risk, and the risk that the issuer on the note may fail to make interest and/or principal payments when
due, or may default on its obligations entirely. In addition, because the performance of structured notes tracks the performance
of the underlying debt obligation, structured notes generally are subject to more risk than investing in a simple note or bond
issued by the same issuer. See “Risks—Structured Notes Risks.”
Swap Risks. The Fund and
the Underlying Funds may invest in interest rate, index, total return and currency swap agreements. All of these agreements are considered
derivatives. Swaps could result in losses if interest or foreign currency exchange rates or credit quality changes are not correctly
anticipated by the Subadviser or Underlying Fund manager. Total return swaps could result in losses if the reference index, security,
or investments do not perform as anticipated. Total return swaps involve an enhanced risk that the issuer or counterparty will fail to
perform its contractual obligations. Total return swaps may effectively add leverage to the Fund’s portfolio because the Fund would
be subject to investment exposure on the full notional amount of the swap. To the extent the Fund or an Underlying Fund enters into a
total return swap on equity securities, the Fund or an Underlying Fund will receive the positive performance of a notional amount of
such securities underlying the total return swap. In exchange, the Fund or the Underlying Fund will be obligated to pay the negative
performance of such notional amount of securities. Therefore, the Fund or the Underlying Fund assumes the risk of a substantial decrease
in the market value of the equity securities. The use of swaps may not always be successful; using them could lower Fund total return,
their prices can be highly volatile, and the potential loss from the use of swaps can exceed the Fund’s initial investment in such
instruments. Some, but not all, swaps may be cleared, in which case a central clearing counterparty stands between each buyer and seller
and effectively guarantees performance of each contract, to the extent of its available resources for such purpose. As a result, the
counterparty risk is now shifted from bilateral risk between the parties to the individual credit risk of the central clearing counterparty.
Even in such case, there can be no assurance that a clearing house, or its members, will satisfy the clearing house’s obligations
to the Fund or an Underlying Fund. See “Risks—Swap Risks.” |
|
Underlying Fund Risks. The
Fund will incur the fees and expenses of its investments in Underlying Funds, which may be greater than if the Fund invested in
the securities held by the Underlying Funds directly. There is also the risk that the Fund may suffer losses due to the investment
practices or operations of the Underlying Funds. To the extent that the Fund invests in one or more Underlying Funds that concentrate
in a particular industry, the Fund would be vulnerable to factors affecting that industry and the concentrating Underlying Funds’
performance, and that of the Fund, may be more volatile than Underlying Funds that do not concentrate. In addition, one Underlying
Fund may purchase a security that another Underlying Fund is selling.
As the Fund will invest at least 80% of
its Managed Assets in Underlying Funds, the Fund’s performance will depend to a greater extent on the overall performance
of closed-end funds, ETFs, BDCs and SPACs generally, in addition to the performance of the specific Underlying Funds (and other
assets) in which the Fund invests. The use of leverage by Underlying Funds magnifies gains and losses on amounts invested and increases
the risks associated with investing in Underlying Funds. Further, the Underlying Funds are not subject to the Fund’s investment
policies and restrictions. The Fund generally receives information regarding the portfolio holdings of Underlying Funds only when
that information is made available to the public. The Fund cannot dictate how the Underlying Funds invest their assets. The Underlying
Funds may invest their assets in securities and other instruments, and may use investment techniques and strategies, that are not
described in this Prospectus. Common Stockholders will bear two layers of fees and expenses with respect to the Fund’s investments
in Underlying Funds because each of the Fund and the Underlying Fund will charge fees and incur separate expenses. In addition,
subject to applicable 1940 Act limitations, the Underlying Funds themselves may purchase securities issued by registered and unregistered
funds (e.g., common stock, preferred stock, auction rate preferred stock), and those investments would be subject to the risks
associated with Underlying Funds and unregistered funds (including a third layer of fees and expenses, i.e., the Underlying Fund
will indirectly bear fees and expenses charged by the funds in which the Underlying Fund invests, in addition to the Underlying
Fund’s own fees and expenses). An Underlying Fund with positive performance may indirectly receive a performance fee from
the Fund, even when the Fund’s overall returns are negative. Additionally, the Fund’s investment in an Underlying Fund
may result in the Fund’s receipt of cash in excess of the Underlying Fund’s earnings; if the Fund distributes these
amounts, the distributions could constitute a return of capital to Fund shareholders for federal income tax purposes. As a result
of these factors, the use of the fund of funds structure by the Fund could therefore affect the amount, timing and character of
distributions to shareholders.
The Fund may invest in BDCs. BDCs generally
invest in less mature U.S. private companies or thinly traded U.S. public companies which involve greater risk than well-established
publicly-traded companies. While BDCs are expected to generate income in the form of dividends, certain BDCs during certain periods
of time may not generate such income. The Fund will indirectly bear its proportionate share of any management fees and other operating
expenses incurred by the BDCs and of any performance-based or incentive fees payable by the BDCs in which it invests, in addition
to the expenses paid by the Fund. The use of leverage by BDCs magnifies gains and losses on amounts invested and increases the
risks associated with investing in BDCs. A BDC may make investments with a larger amount of risk of volatility and loss of principal
than other investment options and may also be highly speculative and aggressive.
Index-based ETFs (and other index funds)
in which the Fund may invest may not be able to replicate exactly the performance of the indices they track or benchmark due to
transactions costs and other expenses of the ETFs. The Fund may also invest in actively managed ETFs that are subject to management
risk as the ETF’s investment adviser will apply certain investment techniques and risk analyses in making investment decisions.
In addition, ETFs may trade at a price above (premium) or below (discount) their net asset value, especially during periods of
significant market volatility or stress, causing investors to pay significantly more or less than the value of the ETF’s
underlying portfolio. Furthermore, in times of market stress, adverse developments for underlying portfolio holdings, market makers
or authorized participants may in turn decrease the ETF’s liquidity and/or significantly increase the difference between
the trading price and NAV of the ETF, and such developments could also prevent an active trading market for ETF shares to halt
or contract significantly. There can be no guarantee that these will produce the desired results.
The shares of closed-end funds frequently
trade at a discount to their NAV. There can be no assurance that the market discount on shares of any closed-end fund purchased by the
Fund will ever decrease, and it is possible that the discount may increase. Underlying Funds may not be able to match or outperform their
benchmarks. |
|
The Fund may be restricted by provisions
of the 1940 Act that generally limit the amount the Fund and its affiliates can invest in any one Underlying Fund to 3% of the
Underlying Fund’s outstanding voting stock. As a result, the Fund may hold a smaller position in an Underlying Fund than
if it were not subject to this restriction. In addition, to comply with provisions of the 1940 Act, in any matter upon which Underlying
Fund stockholders are solicited to vote, the Subadviser may be required to vote Underlying Fund shares in the same proportion as
shares held by other stockholders of the Underlying Fund. However, pursuant to exemptive orders issued by the SEC to various ETF
fund sponsors, the Fund is permitted to invest in such Underlying Funds in excess of the limits set forth in the 1940 Act subject
to certain terms and conditions set forth in such exemptive orders. See “Risks—Underlying Fund Risks.”
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. See “Risks—Warrants
Risks.” |
Anti-Takeover Provisions in Maryland Law and the Fund’s Charter and Bylaws |
Maryland law and the Fund’s Charter and Bylaws include provisions that could limit the ability of other entities or persons to acquire control of the Fund. These provisions could deprive the holders of Common Shares of opportunities to sell their Common Shares at a premium over the then current market price of the Common Shares or at NAV. See “Certain Provisions of the Fund’s Charter and Bylaws and of Maryland Law.” |
Custodian and Transfer Agent |
State Street Bank and Trust Company acts as the Fund’s custodian. DST Systems, Inc. (“DST”) acts as the Fund’s transfer agent and registrar. See “Custodian and Transfer Agent.” |
SUMMARY OF FUND EXPENSES
The following table is intended to assist
investors in understanding the fees and expenses (annualized) that an investor in Common Shares would bear, directly or indirectly.
The table is based on the capital structure of the Fund as of July 31, 2021.
The table shows Fund expenses as a percentage
of net assets attributable to Common Shares. The following table should not be considered a representation of the Fund’s
future expenses. Actual expenses may be greater or less than those shown below.
Shareholder Transaction Expenses |
As a Percentage of Offering Price | |
Sales Load (1) |
| — | % |
Expenses Borne by Common Stockholders of the Fund (1) |
| — | % |
Dividend Reinvestment Plan Fees |
| None | (2) |
Preferred Shares Offering Expenses Borne by the Fund (1) |
| — | % |
Annual Expenses |
|
As a Percentage of Net Assets Attributable to Common Shares(1)(6) |
|
Management Fee (3) |
|
1.00% |
|
Dividend and Interest Expense on Short Sales (4) |
|
0.45% |
|
Interest Expense on Borrowings (4) |
|
0.02% |
|
Dividends on Preferred Shares (5) |
|
0.00% |
|
Other Expenses (4) |
|
0.44% |
|
Acquired Fund Fees and Expenses (6) |
|
1.68% |
|
Total Annual Expenses |
|
3.59% |
|
Example (7)
The purpose of the following table is to
help a holder of Common Shares understand the fees and expenses that such holder would bear directly or indirectly. The following
example illustrates the expenses that you would pay on a $1,000 investment in Common Shares, assuming (1) that the Fund incurs
total annual expenses of 3.59% of its net assets in years 1 through 10 and (2) a 5% annual return.
| |
| 1 year | | |
| 3 years | | |
| 5 years | | |
| 10 years | |
Total Expenses Incurred | |
$ | 36 | | |
$ | 110 | | |
$ | 186 | | |
$ | 385 | |
The example should not be considered
a representation of future expenses. Actual expenses may be greater or less than those assumed.
| (1) | If Common Shares or Preferred Shares to which this Prospectus relates are sold to or through underwriters,
the Prospectus Supplement will set forth any applicable sales load and the estimated offering expenses borne by the Fund. |
| (2) | There will be no brokerage charges with respect to Common Shares issued directly by the Fund under
the dividend reinvestment plan. You will pay brokerage charges in connection with open market purchases or if you direct the plan
agent to sell your Common Shares held in a dividend reinvestment account. |
| (3) | The management fee is equal to 1.00% of the Fund’s average daily Managed Assets, as opposed
to net assets as shown in the table above. If leverage is used, Managed Assets will be greater in amount than net assets, because
Managed Assets includes borrowings for investment purposes. |
| (4) | Other Expenses, Interest Expense on Borrowings and Dividend and Interest Expense on Short Sales
are estimated based on the Fund’s Annual report dated July 31, 2021. |
| (5) | As of the date of this Prospectus, the Fund has not issued any Preferred Shares. The applicable
prospectus supplement will set forth the expenses related to any Preferred Shares issued in the future. |
| (6) | The “Acquired Fund Fees and Expenses” disclosed above are based
on the expense ratios for the most recent fiscal year of the Underlying Funds and SPACs in which the Fund anticipates investing, which
may change substantially over time and, therefore, significantly affect Acquired Fund Fees and Expenses. These amounts are based on the
total expense ratio disclosed in each Underlying Fund’s most recent stockholder report. Some of the Underlying Funds and SPACs in
which the Fund intends to invest charge incentive fees based on the Underlying Funds’ or SPACs’ performance. The 1.68% shown
as Acquired Fund Fees and Expenses reflects estimated operating expenses of the Underlying Funds or SPACs and transaction-related fees.
Certain Underlying Funds or SPACs in which the Fund intends to invest generally charge a management fee of 1.00% to 2.00%, which are included
in “Acquired Fund Fees and Expenses,” as applicable. The Acquired Fund Fees and Expenses disclosed above, however, do not
reflect any performance-based fees or allocations paid by the Underlying Funds and SPACs that are calculated solely on the realization
and/or distribution of gains, or on the sum of such gains and unrealized appreciation of assets distributed in-kind, as such fees and
allocations for a particular period may be unrelated to the cost of investing in the Underlying Funds and SPACs. Acquired Fund Fees and
Expenses are borne indirectly by the Fund, but they will not be reflected in the Fund’s financial statements; and the information
presented in the table will differ from that presented in the Fund’s financial highlights. |
| (7) | The example should not be considered a representation of future expenses and includes the expenses
of the offering. The example assumes that the estimated “Other Expenses” set forth in the table are accurate and that
all dividends and distributions are reinvested at the Common Share NAVs. Actual expenses may be greater or less than those assumed.
Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical 5% annual return shown in the example. |
FINANCIAL HIGHLIGHTS
The
Fund’s audited Financial Highlights for the period from December 24, 2015 to October 31, 2016, fiscal year ended October 31,
2017, period ended July 31, 2018, fiscal years ended July 31, 2019, July 31, 2020 and the annual report for the fiscal year ended
July 31, 2021 are contained in the Fund’s Form
N-CSR filed with the SEC on October 8, 2021 are
incorporated by reference.
INFORMATION
REGARDING SENIOR SECURITIES
The following table sets forth certain unaudited information
regarding the Fund’s senior securities as of the end of each of the Fund’s prior fiscal years since the Fund’s inception.
Audited information regarding the Fund’s senior securities is incorporated by reference from the Fund’s Form N-CSR. The Fund’s
senior securities during this time period are comprised of outstanding indebtedness, which constitutes a “senior security”
as defined in the 1940 Act.
Senior Securities Representing Indebtedness
Period/Fiscal Year Ended |
Principal Amount Outstanding1 |
Asset Coverage Per $1,0002 |
July 31, 2021 |
None |
N/A |
July 31, 2020 |
$7,500,000 |
$19,556 |
July 31, 2019 |
None |
N/A |
July 31, 20183 |
None |
N/A |
October 31, 2017 |
None |
N/A |
October 31, 20164 |
None |
N/A |
| (1) | Principal amount outstanding represents the principal amount owed by the Fund to lenders under
credit facility arrangements in place at the time. |
| (2) | Calculated by subtracting the Fund’s total liabilities (excluding the principal amount of
Loan Payable) from the Fund’s total assets and dividing by the principal amount of the Loan Payable and then multiplying
by $1,000. |
| (3) | Effective July 16, 2018, the Board approved changing the fiscal year-end of the Fund from October
31 to July 31. |
| (4) | For the period December 24, 2015, commencement of operations, to October 31, 2016. |
THE FUND
The Fund is a diversified, closed-end management
investment company registered under the 1940 Act. The Fund was organized as a Maryland corporation on September 9, 2010. The Fund’s
principal office is located at 1290 Broadway, Suite 1000, Denver, CO 80203, and its telephone number is (855) 830-1222.
THE OFFERING
The Fund may offer, from time to time,
up to $598,667,769 aggregate initial offering price of Common Shares, Preferred Shares, Rights and/or any Follow-on Offering in
one or more offerings in amounts, at prices and on terms set forth in one or more Prospectus Supplements. Follow-on Offerings may
include offerings of Common Shares, offerings of Preferred Shares, offerings of Rights, and offerings made in transactions that
are deemed to be “at the market” as defined in Rule 415 under the Securities Act, including sales made directly on
the NYSE or sales made to or through a market maker other than on an exchange. You should read this Prospectus and any related
Prospectus Supplement carefully before you decide to invest in the Securities.
The Fund may offer Securities (1) directly
to one or more purchasers, (2) through agents that the Fund may designate from time to time or (3) to or through underwriters or
dealers. The Prospectus Supplement relating to a particular offering of Securities will identify any agents or underwriters involved
in the sale of Securities, and will set forth any applicable purchase price, fee, commission or discount arrangement between the
Fund and agents or underwriters or among underwriters or the basis upon which such amount may be calculated. The Fund may not sell
Securities through agents, underwriters or dealers without delivery of this Prospectus and a Prospectus Supplement. See “Plan
of Distribution.”
USE OF PROCEEDS
Unless otherwise specified in a Prospectus
Supplement, the Adviser anticipates that investment of the proceeds will be made in accordance with the Fund’s investment
objective and policies as appropriate investment opportunities are identified. It is currently anticipated that the Fund will be
able to invest substantially all of the net proceeds of an offering of Securities in accordance with its investment objective and
policies within three months after the completion of such offering. Pending such investment, the proceeds will be held in high
quality short-term debt securities and instruments. A delay in the anticipated use of proceeds could lower returns and reduce the
Fund’s distribution to Common Stockholders.
INVESTMENT OBJECTIVE, STRATEGIES AND
POLICIES
Investment Objective
The Fund’s investment objective is total return consisting
of capital appreciation and current income. There is no assurance that the Fund will achieve its investment objective.
Principal Investment Strategies
The Fund seeks to achieve its investment objective
by pursuing a tactical asset allocation strategy and opportunistically investing under normal circumstances in closed-end funds, exchange-traded
funds (“ETFs”), business development companies (“BDCs” and collectively, “Underlying Funds”) and special
purpose acquisition companies (“SPACs”). BDCs are a type of closed-end fund that invests in small companies in the initial
stages of their development and are similar to venture capital funds. SPACs are collective investment structures that pool funds in order
to seek potential acquisition opportunities. The Subadviser has the flexibility to change the Fund’s asset allocation based on its
ongoing analysis of the equity, fixed income and alternative asset markets. The Subadviser considers various quantitative and qualitative
factors relating to the domestic and foreign securities markets and economies when making asset allocation and security selection decisions.
While the Subadviser continuously evaluates these factors, material shifts in the Fund’s asset class exposures will typically take
place over longer periods of time. In addition, the Fund, in seeking to achieve its investment objective, will not take activist positions
in the Underlying Funds or SPACs.
Under normal market conditions, the Fund will invest
at least 80% of its Managed Assets in Underlying Funds and SPACs. The Fund directly, and therefore Common Stockholders indirectly, will
bear the expenses of the Underlying Funds or SPACs.
Under normal market conditions: (i) no more than 80%
of the Fund’s Managed Assets will be invested in “equity” Underlying Funds and SPACs; (ii) no more than 60% of the Fund’s
Managed Assets will be invested in “fixed income” Underlying Funds and SPACs; (iii) no more than 30% of the Fund’s Managed
Assets will be invested in “global equity” Underlying Funds and SPACs; (iv) no more than 15% of the Fund’s Managed Assets
will be invested in “emerging market equity” Underlying Funds; (v) no more than 30% of the Fund’s Managed Assets will
be invested in “high yield” (also known as “junk bond”) and “senior loan” Underlying Funds and SPACs;
(vi) no more than 15% of the Fund’s Managed Assets will be invested in “emerging market income” Underlying Funds and
SPACs; (vii) no more than 10% of the Fund’s Managed Assets will be invested in “real estate” Underlying Funds and SPACs;
and (viii) no more than 15% of the Fund’s Managed Assets will be invested in “energy master limited partnership” (“MLP”)
Underlying Funds and SPACs. Underlying Funds and SPACs included in the 30% limitation applicable to investments in “global equity”
Underlying Funds and SPACs may include Underlying Funds and SPACs that invest a portion of their assets in emerging markets securities.
The Fund will also limit its investments in closed-end funds (including BDCs) that have been in operation for less than one year to no
more than 10% of the Fund’s Managed Assets. The Fund will not invest in inverse ETFs and leveraged ETFs. The types of Underlying
Funds and SPACs referenced in this paragraph will be categorized in accordance with the fund categories established and maintained by
Morningstar, Inc. The investment parameters stated above (and elsewhere in this Prospectus) apply only at the time of purchase. The Underlying
Funds and SPACs in which the Fund invests will not include those that are advised or subadvised by the Adviser, the Subadviser or their
affiliates.
In selecting closed-end funds, the Subadviser
opportunistically utilizes a combination of short-term and longer-term trading strategies to seek to derive value from the discount
and premium spreads associated with closed-end funds. The Fund benefits if it purchases a closed-end fund at a discount and the
discount narrows. In addition, the Fund may purchase closed-end funds at a premium if the Subadviser believes the premium will
increase. The Subadviser employs both a quantitative and qualitative approach in its selection of closed-end funds and has developed
proprietary screening models and trading algorithms to trade closed-end funds. The Subadviser employs the following trading strategies,
among others:
Statistical Analysis (Mean Reversion)
|
● |
Using proprietary quantitative models, the Subadviser seeks to identify closed-end funds that are trading at compelling absolute and / or relative discounts. |
|
● |
The Fund will attempt to capitalize on the perceived mispricing if the Subadviser believes that the discount widening is irrational and expects the discount to narrow to longer-term mean valuations. |
Corporate Actions
|
● |
The Subadviser will pursue investments in closed-end funds that have announced, or the Subadviser believes are likely to announce, certain corporate actions that may drive value for their shareholders. |
|
● |
The Subadviser has developed trading strategies that focus on closed-end fund tender offers, rights offerings, shareholder distributions, open-endings and liquidations. |
The Fund will invest in other Underlying Funds and
SPACs (that are not closed-end funds) to gain exposure to specific asset classes when the Subadviser believes closed-end fund discount
or premium spreads are not attractive or to manage overall closed-end fund exposure in the Fund.
An index-based ETF is an investment company that seeks
to track the performance of a particular market index. These indices include not only broad-market indices, but more specific indices
as well, including those relating to particular sectors, markets, regions and industries. The Subadviser selects ETFs based on their ability
to offer specific sector and style exposure in a cost and tax efficient manner. The Fund purchases ETF shares on the secondary market.
Unlike a fund that allocates its assets among mutual funds based on the perceived ability of the advisers to those mutual funds, the Subadviser
actively manages the Fund’s portfolio among the Underlying Funds and SPACs based on the Subadviser’s research and analysis
of the market and the investment merit of the Underlying Funds and SPACs themselves. In evaluating the investment merit of Underlying
Funds and SPACs, the Subadviser analyzes the asset class, the portfolio manager(s) and the adviser, past performance, recent portfolio
holdings and concentration risks.
Under normal circumstances, the Fund intends to maintain
long positions in Underlying Funds and SPACs, however, may engage in short sales for investment purposes. When the Fund engages in a short
sale, it sells a security it does not own and, to complete the sale, borrows the same security from a broker or other institution. The
Fund may benefit from a short position when the shorted security decreases in value. The Fund may also at times establish hedging positions.
Hedging positions may include short sales and derivatives, such as options and swaps (“Hedging Positions”). Under normal market
conditions, no more than 30% of the Fund’s Managed Assets will be in Hedging Positions. The Fund’s investments in derivatives
will be included under the 80% policy noted above so long as the underlying asset of such derivatives is a closed-end fund or Underlying
Fund, respectively. The Subadviser intends to use Hedging Positions to lower the Fund’s volatility but they may also be used to
seek to enhance the Fund’s return. A short sale is a transaction in which the Fund sells a security that it does not own in anticipation
of a decline in the market price of the security. To complete the short sale, the Fund must arrange through a broker to borrow the security
in order to deliver it to the buyer. The Fund is obligated to replace the borrowed security by purchasing it at a market price at or prior
to the time it must be returned to the lender. The price at which the Fund is required to replace the borrowed security may be more or
less than the price at which the security was sold by the Fund. The Fund will incur a loss if the price of the security sold short increases
between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the
price of the security declines between those dates.
The Subadviser performs both a quantitative
and qualitative analysis, including fundamental and technical analysis to assess the relative risk and reward potential for each
SPAC investment. Among other things, the Subadviser will evaluate the management team’s strategy, experience, deal flow,
and demonstrated track record in building enterprise value. The Subadviser will also evaluate the terms of each SPAC offering,
including the aggregate amount of the offering, the offering price of the securities, the equity yield to termination, the option
value of warrants, the sponsor’s interest in the SPAC, and the expected liquidity of the SPAC’s securities. The Fund
will purchase securities of SPACs in their initial public offerings and in the secondary market.
In selecting SPAC investments, the Subadviser
will also utilize trading strategies and programs to seek to derive value from buying and selling SPAC securities, including units,
common shares and warrants. Under normal market conditions, the Fund intends to purchase SPAC securities in an initial public offering
and opportunistically buy and sell SPAC securities on the secondary market prior to a SPAC’s initial business combination.
The Fund does not intend to hold common shares after a SPAC’s initial business combination has been completed other than
common shares obtained temporarily through the conversion of a SPAC’s warrants into common shares. The Fund may redeem common
shares of a SPAC in exchange for the Fund’s pro rata portion of the SPAC’s trust account.
The Fund also may invest up to 20% of its
Managed Assets in exchange-traded notes (“ETNs”), certain derivatives, such as options and swaps, cash and cash equivalents.
Such investments will not be counted towards the Fund’s 80% policy. ETNs are debt securities whose returns are linked to
a particular index.
The Fund may invest directly in debt securities
issued by certain credit-oriented unlisted funds and BDCs (“Private Debt”) identified by the Subadviser in its due
diligence process. The Subadviser believes that investments in Private Debt can provide the Fund with the opportunity to obtain
more favorable terms and similar risk profiles to similar publicly traded debt investments available. Private Debt often may be
illiquid and is typically not listed on an exchange and traded less actively than similar securities issued by publicly traded-vehicles.
For certain Private Debt investments, 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 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.
In selecting appropriate Private Debt investments
for the Fund, the Subadviser completes a fundamental and technical analysis of the issuer, with a focus on reducing downside risk.
As part of this analysis, the Subadviser evaluates the manager’s experience and ability based on historical track record
regarding credit performance of previously originated loans and meetings with the management team. In addition, the Subadviser
reviews the issuer’s investment portfolio, including the issuer’s asset diversification across type and sector, before
further evaluating the issuer’s financials to review its capital structure, particularly details of any existing leverage
and the maximum leverage permitted on any senior debt of the issuer. Once comfort is reached regarding the issuer’s investment
portfolio, manager, and capital structure, the Subadviser then evaluates details of the terms of the Private Debt opportunity,
beginning with a review to ensure appropriate covenants are contained within to limit the Fund’s downside risk across a range
of scenarios (which typically will include a minimum level of subordination requirement.) Following, the Subadviser will review
and weigh pricing levels on the Private Debt compared to other opportunities in the market to assess relative value and arrive
at an investment decision. Opportunities for the Fund to make investments in Private Debt may be limited, especially those which
fit the Subadviser’s investment criteria.
The Fund may attempt to enhance the return
on the cash portion of its portfolio by investing in a total return swap agreement. A total return swap agreement provides the
Fund with a return based on the performance of an underlying asset, in exchange for fee payments to a counterparty based on a specific
rate. The difference in the value of these income streams is recorded daily by the Fund, and is typically settled in cash at least
monthly. If the underlying asset declines in value over the term of the swap, the Fund would be required to pay the dollar value
of that decline plus any applicable fees to the counterparty. The Fund may use its own NAV or any other reference asset that the
Subadviser chooses as the underlying asset in a total return swap. The Fund will limit the notional amount of all total return
swaps in the aggregate to 15% of the Fund’s Managed Assets. Using the Fund’s own NAV as the underlying asset in the
total return swap serves to reduce cash drag (the impact of cash on the Fund’s overall return) by replacing it with the impact
of market exposure based upon the Fund’s own investment holdings. This type of total return swap would provide the Fund with
a return based on its NAV. Like any total return swap, the Fund would be subject to counterparty risk and the risk that its own
NAV declines in value.
The Fund generally seeks to hold securities
for the long term, but may liquidate positions in order to change the Fund’s asset allocation or to generate cash to invest
in more attractive opportunities, which may result in a larger portion of any net gains being realized as short-term capital gains.
In addition, a negative change in the fundamental or qualitative characteristics of the issuer may cause the Subadviser to sell
a security. Finally, the Subadviser may sell a security when its price approaches, meets or exceeds the Subadviser’s target
price. For instance, the Subadviser may sell shares of a closed-end fund when it is no longer selling at a discount. This may result
in a high rate of portfolio turnover.
The Fund’s investment objective is
non-fundamental and may be changed by the Board without Common Stockholder approval. Common Stockholders will, however, receive
at least 60 days prior notice of any change in this investment objective.
USE OF LEVERAGE
The Fund may borrow money and/or issue Preferred Shares,
notes or debt securities for investment purposes. These practices are known as leveraging. The Fund may utilize leverage to purchase portfolio
securities and for portfolio or cash management purposes. The Fund also may borrow money as a temporary measure for extraordinary or emergency
purposes, including settlement of securities transactions, which otherwise might require untimely dispositions of the Fund’s portfolio
securities. The Fund currently anticipates that if employed, leverage will primarily be obtained through the use of bank borrowings or
other similar term loans. The Underlying Funds and SPACs that the Fund invests in may also use leverage. The Fund may be subject to certain
restrictions on investments imposed by lenders or by one or more rating agencies that may issue ratings for any senior securities issued
by the Fund. Borrowing covenants or rating agency guidelines may impose asset coverage or Fund composition requirements that are more
stringent than those imposed on the Fund by the 1940 Act.
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
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 Shares), 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. These types of transactions have the
potential to increase returns to Common Stockholders, but they also involve additional risks. This additional leverage will increase
the volatility of the Fund’s investment portfolio and could result in larger losses than if the transactions were not entered
into. However, to the extent that the Fund enters into offsetting transactions or owns positions covering its obligations, the
leveraging effect is expected to be minimized or eliminated.
Under the 1940 Act, the Fund is not permitted
to incur indebtedness unless immediately after doing so the Fund has an asset coverage of at least 300% of the aggregate outstanding
principal balance of indebtedness (i.e., such indebtedness may not exceed 33 1/3% of the value of the Fund’s total assets
including the amount borrowed). Additionally, under the 1940 Act, the Fund may not declare any dividend or other distribution upon
any class of its shares, or purchase any such shares, unless the aggregate indebtedness of the Fund has, at the time of the declaration
of any such dividend or distribution or at the time of any such purchase, asset coverage of at least 300% after deducting the amount
of such dividend, distribution, or purchase price, as the case may be. With respect to asset coverage for preferred shares, under
the 1940 Act, the Fund is not permitted to issue Preferred Shares unless immediately after such issuance the total asset value
of the Fund’s portfolio is at least 200% of the liquidation value of the outstanding preferred stock (i.e., such liquidation
value may not exceed 50% of the Fund’s Managed Assets). In addition, the Fund is not permitted to declare any cash dividend
or other distribution on its Common Shares unless, at the time of such declaration, the NAV of the Fund’s portfolio (determined
after deducting the amount of such dividend or other distribution) is at least 200% of such liquidation value of the Preferred
Shares. If preferred stock is issued, the Fund intends, to the extent possible, to purchase or redeem shares, from time to time,
to maintain coverage of any Preferred Shares of at least 200%. Normally, holders of Common Shares will elect the directors of the
Fund except that the holders of any preferred stock will elect two directors. In the event the Fund failed to pay dividends on
its Preferred Shares for two years, holders of Preferred Shares would be entitled to elect a majority of the directors until the
dividends are paid.
RISKS
The information contained under the heading “Summary
of Updated Information Regarding the Fund—Risks” in the Fund’s Annual Report is incorporated herein by reference.
Each of the risk factors contained thereunder is a principal risk of the Fund. Investors should consider the specific risk factors and
special considerations associated with investing in the Fund. An investment in the Fund is subject to investment risk, including the
possible loss of your entire investment. A Prospectus Supplement relating to an offering of the Fund’s securities may identify
additional risk associated with such offering.
MANAGEMENT OF THE FUND
Board of Directors
The Board has overall responsibility for
management of the Fund. The Board decides upon matters of general policy and generally oversees the actions of the Adviser, the
Subadviser and other service providers of the Fund. The name and business address of the Board and officers of the Fund, and their
principal occupations and other affiliations during the past five years, are set forth under “Board Members and Officers”
in the SAI.
Adviser
ALPS Advisors, Inc., a wholly owned subsidiary
of ALPS Holdings, Inc., is the Fund’s investment adviser. The Adviser is responsible for, among other things, furnishing
a continual investment program for the Fund in accordance with its investment objective and policies, coordinating and monitoring
the investment activities of the Subadviser, and managing and administering the Fund’s business affairs, each subject to
the general supervision and direction of the Board. The Adviser commenced business operations in December 2006 upon the acquisition
of an existing investment advisory operation, is registered with the SEC and as of September 30, 2021, managed approximately $18 billion. The Adviser is located at 1290 Broadway, Suite 1000, Denver, CO 80203, and is affiliated with the Fund’s administrator
and transfer agent. ALPS Holdings, Inc. is an indirect wholly owned subsidiary of SS&C Technologies Holdings, Inc., a publicly
traded company.
Subadviser
RiverNorth Capital Management, LLC, a wholly
owned subsidiary of RiverNorth Financial Holdings, LLC, which in turn is majority owned by RiverNorth Holding Co., is the Fund’s
subadviser and makes the day-to-day investment decisions for the Fund. Founded in 2000, the Subadviser is located at 433 West Van
Buren, 1150-E, Chicago, IL 60607. The Subadviser is registered with the SEC and as of September 30, 2021, manages approximately
$5.5 billion.
Portfolio Management
Patrick W. Galley, CFA, is the Fund’s
co-portfolio manager. Mr. Galley is the Chief Executive Officer and Chief Investment Officer for the Subadviser. Mr. Galley heads
the firm’s research and investment team and oversees all portfolio management activities at the Subadviser. Mr. Galley also
serves as the President and Chairman of all of RiverNorth’s other proprietary registered investment funds. Prior to joining
the Subadviser in 2004, he was most recently a Vice President at Bank of America in the Global Investment Bank’s Portfolio
Management group, where he specialized in analyzing and structuring corporate transactions for investment management firms in addition
to closed-end and open-end funds, hedge funds, funds of funds, structured investment vehicles and insurance/reinsurance companies.
Mr. Galley graduated with honors from Rochester Institute of Technology with a B.S. in Finance. He has received the Chartered Financial
Analyst (CFA) designation, is a member of the CFA Institute and is a member of the CFA Society of Chicago.
Stephen O’Neill, CFA, is the Fund’s
other co-portfolio manager. Mr. O’Neill is a Portfolio Manager for the Subadviser. Mr. O’Neill conducts qualitative
and quantitative analysis of closed-end funds and their respective asset classes. Prior to joining the Subadviser in 2007, he was
most recently an Assistant Vice President at Bank of America in the Global Investment Bank’s Portfolio Management group.
At Bank of America, he specialized in the corporate real estate, asset management, and structured finance industries. Mr. O’Neill
graduated magna cum laude from Miami University in Oxford, Ohio with a B.S. in finance and a minor in economics. Mr. O’Neill
has received the Chartered Financial Analyst (CFA) designation, is a member of the CFA Institute and is a member of the CFA Society
of Chicago.
The Fund’s SAI provides information
about the compensation received by Mr. Galley and Mr. O’Neill, other accounts that they manage and their ownership of the
Fund’s equity securities.
Investment Advisory and Subadvisory Agreements
Pursuant to an Investment Advisory Agreement,
the Adviser is responsible for managing the Fund’s affairs, subject at all times to the general oversight of the Fund’s
Board. The Fund has agreed to pay the Adviser a management fee payable on a monthly basis at the annual rate of 1.00% of the Fund’s
average daily Managed Assets for the service it provides.
In addition to the fees of the Adviser,
the Fund pays all other costs and expenses of its operations, including, but not limited to, compensation of its directors (other
than those affiliated with the Adviser or the Subadviser), custodial expenses, transfer agency and dividend disbursing expenses,
legal fees, expenses of independent auditors, expenses of repurchasing shares, expenses of any leverage, expenses of preparing,
printing and distributing prospectuses, stockholder reports, notices, proxy statements and reports to governmental agencies, and
taxes, if any.
Pursuant to a Subadvisory Agreement, the
Adviser has delegated daily management of the Fund’s portfolio to the Subadviser, who is paid by the Adviser and not the
Fund. The Adviser (and not the Fund) has agreed to pay the Subadviser a subadvisory fee payable on a monthly basis at the annual
rate of 0.85% of the Fund’s average daily Managed Assets for the service it provides.
Because the fees received by the Adviser
and the Subadviser are based on the Managed Assets of the Fund, the Adviser and the Subadviser have a financial incentive for the
Fund to use leverage, which may create a conflict of interest between the Adviser and the Subadviser, on the one hand, and the
holders of Common Shares, on the other. Because leverage costs will be borne by the Fund at a specified interest rate, the Fund’s
investment management fees and other expenses, including expenses incurred as a result of any leverage, are paid only by the holders
of Common Shares and not by holders of Preferred Shares or through borrowings. See “Use of Leverage.”
A discussion of the basis for the Board’s
most recent renewal of the Investment Advisory Agreement and the Subadvisory Agreement is provided in the Semi-Annual Report for
the fiscal period ended January 31, 2021. In addition, under a License Agreement, the Subadviser has consented to the use by the
Fund of the identifying word or name “RiverNorth” in the name of the Fund, and to use of certain associated trademarks.
Such consent is conditioned upon the employment of the Subadviser or an affiliate thereof as investment subadviser to the Fund.
If at any time the Fund ceases to employ the Subadviser or an affiliate as investment subadviser of the Fund, the Fund may be required
to cease using the word or name “RiverNorth” in the name of the Fund, and cease making use of the associated trademarks,
as promptly as practicable.
Administrative Services
The Fund’s administrator is ALPS
Fund Services, Inc. (“AFS”), an affiliate of the Adviser and the Fund’s transfer agent. AFS is a service company
and SEC-registered transfer agent. Under the Administration Agreement, AFS is responsible for calculating NAVs, providing additional
fund accounting and tax services, and providing fund administration and compliance-related services. The address of AFS is 1290
Broadway, Suite 1000, Denver, CO 80203. For its services, the Fund pays AFS customary fees based on the Fund’s Managed Assets
plus out of pocket expenses and a fixed fee for completion of certain regulatory filings.
NET ASSET VALUE
NAV is determined daily as of the close
of the regular trading session on the NYSE (usually 4:00 p.m., Eastern time). NAV is calculated by dividing the value of all of
the securities and other assets of the Fund, less the liabilities (including accrued expenses and indebtedness) and the aggregate
liquidation value of any outstanding Preferred Shares, by the total number of Common Shares outstanding.
The Fund’s assets, including its investments
in Underlying Funds and SPACs, are generally valued at their market value using market quotations. The Fund may use pricing services to
provide market quotations. If market quotations are not available or, in the Subadviser’s opinion, market quotations do not reflect
market value, or if an event occurs after the close of trading on the domestic or foreign exchange or market on which the security is
principally traded (but prior to the time the NAV is calculated) that materially affects market value, the security will be valued at
fair value according to policies approved by the Fund’s Board. For example, if trading in a portfolio security is halted and does
not resume before the Fund calculates its NAV, the security may need to be fair valued using the Fund’s fair value pricing policies.
Fair valuation involves subjective judgments and it is possible that the fair value determined for a security may differ materially from
the value that could be realized upon the sale of the security. The Fund will invest in Underlying Funds and SPACs. The Fund’s NAV
is calculated based, in part, upon the market prices of the Underlying Funds and SPACs in its portfolio, and the prospectuses of those
companies explain the circumstances under which they will use fair value pricing and the effects of doing so.
DIVIDENDS AND DISTRIBUTIONS
The Board approved an amended distribution
policy, under which 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. 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. 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 Shares 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.
The Adviser has received an order granting
an exemption from Section 19(b) of the 1940 Act and Rule 19b-1 thereunder to permit the Fund, subject to certain terms and conditions,
to include realized long-term capital gains as a part of its regular distributions to Common Stockholders more frequently than
would otherwise be permitted by the 1940 Act (generally once per taxable year). The Adviser is not currently relying on the exemptive
order, but has in the past and may again in the future. To the extent that the Adviser relies on the exemptive order, the Fund
will be required to comply with the terms and conditions therein, which, among other things, requires the Fund to make certain
disclosures to shareholders and prospective shareholders regarding distributions, and would require the Fund’s Board to make
determinations regarding the appropriateness of use of the distribution policy. The exemptive order terms and conditions also require
that the Fund may not make any public offering of the Fund’s Common Shares other than (a) a rights offering below NAV to
Common Stockholders; (b) an offering in connection with a dividend reinvestment plan, merger, consolidation, acquisition, spin-off
or reorganization of the Fund; or (c) an offering other than an offering described in conditions (a) and (b) above, provided that,
with respect to such other offering: (i) the Fund’s annualized distribution rate for the six months ending on the last day
of the month ended immediately prior to the most recent distribution record date, expressed as a percentage of NAV as of the date,
is no more than one percentage point greater than the Fund’s average annual total return for the five-year period ending
on the date; and (ii) the transmittal letter accompanying any registration statement filed with the SEC in connection with such
offering discloses that the Fund has received an order under Section 19(b) to permit it to make periodic distributions of long-term
capital gains with respect to its Common Shares as frequently as twelve times each year. Under such a distribution policy, it is
possible that the Fund might distribute more than its income and net realized capital gains; therefore, distributions to shareholders
may result in a return of capital. The amount treated as a return of capital will reduce a shareholder’s adjusted basis in
the shareholder’s shares, thereby increasing the potential gain or reducing the potential loss on the sale of shares. There
is no assurance that the Fund will rely on the exemptive order in the future.
Under the 1940 Act, the Fund is not permitted
to incur indebtedness unless immediately after such incurrence the Fund has an asset coverage of at least 300% of the aggregate
outstanding principal balance of indebtedness. Additionally, under the 1940 Act, the Fund may not declare any dividend or other
distribution upon any class of its capital shares, or purchase any such capital shares, unless the aggregate indebtedness of the
Fund has, at the time of the declaration of any such dividend or distribution or at the time of any such purchase, an asset coverage
of at least 300% after deducting the amount of such dividend, distribution, or purchase price, as the case may be.
While any Preferred Shares is outstanding,
the Fund may not declare any cash dividend or other distribution on its Common Shares, unless at the time of such declaration,
(i) all accumulated preferred dividends have been paid and (ii) the NAV of the Fund’s portfolio (determined after deducting
the amount of such dividend or other distribution) is at least 200% of the liquidation value of the outstanding Preferred Shares
(expected to be equal to the original purchase price per share plus any accumulated and unpaid dividends thereon).
In addition to the limitations imposed
by the 1940 Act described above, certain lenders may impose additional restrictions on the payment of dividends or distributions
on the Common Shares in the event of a default on the Fund’s borrowings. If the Fund’s ability to make distributions
on its Common Shares is limited, such limitations could, under certain circumstances, impair the ability of the Fund to maintain
its qualification for federal income tax purposes as a regulated investment company, which would have adverse tax consequences
for shareholders. See “Use of Leverage” and “U.S. Federal Income Tax Matters.”
PLAN OF DISTRIBUTION
The Fund may sell up to $598,667,769 in
aggregate initial offering price of (i) Common Shares, (ii) Preferred Shares, (iii) Rights and/or (iv) any Follow-on Offering from
time to time under this Prospectus and any related Prospectus Supplement (1) directly to one or more purchases, including existing
shareholders in a rights offering; (2) through agents; (3) through underwriters; (4) through dealers; or (5) pursuant to the Plan.
Each Prospectus Supplement relating to an offering of securities will state the terms of the offering, including:
| ● | the names of any agents, underwriters or dealers; |
| ● | any sales loads or other items constituting underwriters’ compensation; |
| ● | any discounts, commissions, or fees allowed or paid to dealers or agents; |
| ● | the public offering or purchase price of the offered Securities and the net proceeds the Fund will
receive from the sale; and |
| ● | any securities exchange on which the offered Securities may be listed. |
In the case of a rights offering, the applicable
Prospectus Supplement will set forth the number of Common Shares and/or Preferred Shares issuable upon the exercise of each right
and the other terms of such rights offering. The transferable subscription rights offered by means of this Prospectus and applicable
Prospectus Supplement, including any related over-subscription privilege and any follow-on offering, if applicable, may be convertible
or exchangeable into Common Shares at a ratio not to exceed one Common Share received for every three rights converted, exercised
or exchanged on an aggregate basis such that the exercise of all rights in any transferable subscription rights offering will not
cumulatively result in more than a 331/3 percentage increase in the outstanding Common Shares of the Fund.
Direct Sales
The Fund may sell Securities directly to,
and solicit offers from, institutional investors or others who may be deemed to be underwriters as defined in the Securities Act
for any resales of the securities. In this case, no underwriters or agents would be involved. The Fund may use electronic media,
including the Internet, to sell offered securities directly. The Fund will describe the terms of any of those sales in a Prospectus
Supplement.
By Agents
The Fund may offer Securities through agents
that the Fund may designate. The Fund will name any agent involved in the offer and sale and describe any commissions payable by
the Fund in the Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement, the agents will be acting on a
best efforts basis for the period of their appointment.
By Underwriters
The Fund may offer and sell Securities
from time to time to one or more underwriters who would purchase the Securities as principal for resale to the public, either on
a firm commitment or best efforts basis. If the Fund sells Securities to underwriters, the Fund will execute an underwriting agreement
with them at the time of the sale and will name them in the Prospectus Supplement. In connection with these sales, the underwriters
may be deemed to have received compensation from the Fund in the form of underwriting discounts and commissions. The underwriters
also may receive commissions from purchasers of Securities for whom they may act as agent. Unless otherwise stated in the Prospectus
Supplement, the underwriters will not be obligated to purchase the Securities unless the conditions set forth in the underwriting
agreement are satisfied, and if the underwriters purchase any of the Securities, they will be required to purchase all of the offered
Securities. The underwriters may sell the offered Securities to or through dealers, and those dealers may receive discounts, concessions
or commissions from the underwriters as well as from the purchasers for whom they may act as agent. Any public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time.
In connection with an offering of Common
Shares, if a Prospectus Supplement so indicates, the Fund may grant the underwriters an option to purchase additional Common Shares
at the public offering price, less the underwriting discounts and commissions, within 45 days from the date of the Prospectus Supplement,
to cover any overallotments.
By Dealers
The Fund may offer and sell Securities
from time to time to one or more dealers who would purchase the securities as principal. The dealers then may resell the offered
Securities to the public at fixed or varying prices to be determined by those dealers at the time of resale. The Fund will set
forth the names of the dealers and the terms of the transaction in the Prospectus Supplement.
General Information
Agents, underwriters, or dealers participating
in an offering of Securities may be deemed to be underwriters, and any discounts and commission received by them and any profit
realized by them on resale of the offered Securities for whom they act as agent, may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Fund may offer to sell securities either
at a fixed price or at prices that may vary, at market prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices.
To facilitate an offering of Common Shares
in an underwritten transaction and in accordance with industry practice, the underwriters may engage in transactions that stabilize,
maintain, or otherwise affect the market price of the Common Shares or any other Security. Those transactions may include overallotment,
entering stabilizing bids, effecting syndicate covering transactions, and reclaiming selling concessions allowed to an underwriter
or a dealer.
|
● |
An overallotment in connection with an offering creates a short position in the common stock for the underwriter’s own account. |
|
● |
An underwriter may place a stabilizing bid to purchase the Common Shares for the purpose of pegging, fixing, or maintaining the price of the Common Shares. |
|
● |
Underwriters may engage in syndicate covering transactions to cover overallotments or to stabilize the price of the Common Shares by bidding for, and purchasing, the Common Shares or any other Securities in the open market in order to reduce a short position created in connection with the offering. |
|
● |
The managing underwriter may impose a penalty bid on a syndicate member to reclaim a selling concession in connection with an offering when the Common Shares originally sold by the syndicate member is purchased in syndicate covering transactions or otherwise. |
Any of these activities may stabilize or
maintain the market price of the Securities above independent market levels. The underwriters are not required to engage in these
activities, and may end any of these activities at any time.
In connection with any rights offering, the Fund may
also enter into a standby underwriting arrangement with one or more underwriters pursuant to which the underwriter(s) will purchase Common
Shares and/or Preferred Shares remaining unsubscribed for after the rights offering.
Any underwriters to whom the offered Securities
are sold for offering and sale may make a market in the offered Securities, but the underwriters will not be obligated to do so
and may discontinue any market-making at any time without notice. There can be no assurance that there will be a liquid trading
market for the offered Securities.
Under agreements entered into with the
Fund, underwriters and agents may be entitled to indemnification by the Fund and the Adviser against certain civil liabilities,
including liabilities under the Securities Act, or to contribution for payments the underwriters or agents may be required to make.
The underwriters, agents, and their affiliates
may engage in financial or other business transactions with the Fund in the ordinary course of business.
Pursuant to a requirement of the Financial
Industry Regulatory Authority, Inc. (“FINRA”), the maximum compensation to be received by any FINRA member or independent
broker-dealer may not be greater than eight percent (8%) of the gross proceeds received by the Fund for the sale of any securities
being registered pursuant to SEC Rule 415 under the Securities Act.
The aggregate offering price specified on the cover of this
Prospectus relates to the offering of the Securities not yet issued as of the date of this Prospectus.
To the extent permitted under the 1940
Act and the rules and regulations promulgated thereunder, the underwriters may from time to time act as a broker or dealer and
receive fees in connection with the execution of portfolio transactions on behalf of the Fund after the underwriters have ceased
to be underwriters and, subject to certain restrictions, each may act as a broker while it is an underwriter.
A Prospectus and accompanying Prospectus
Supplement in electronic form may be made available on the websites maintained by underwriters. The underwriters may agree to allocate
a number of Securities for sale to their online brokerage account holders. Such allocations of Securities for internet distributions
will be made on the same basis as other allocations. In addition, Securities may be sold by the underwriters to securities dealers
who resell Securities to online brokerage account holders.
DIVIDEND REINVESTMENT PLAN
The Fund has a dividend reinvestment plan
commonly referred to as an “opt-out” plan. Unless the registered owner of Common Shares elects to receive cash by contacting
DST Systems, Inc. (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 Stockholders 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 Stockholders 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 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 NAV 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 NAV per Common Share on the payment
date. If, on the payment date for any Dividend, the NAV 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 NAV per Common Share, the average per Common Share purchase price paid by the Plan Administrator
may exceed the NAV 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 Issued Common Shares at the
NAV 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 Stockholders 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. See “U.S. Federal Income Tax
Matters” below. 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 DST Systems, Inc., 333 West 11th Street, 5th Floor, Kansas City, Missouri 64105.
DESCRIPTION OF THE FUND’S SECURITIES
The following summary of the terms of the Common
Shares does not purport to be complete and is subject to and qualified in its entirety by reference to the Maryland General Corporation
Law, and to the Fund’s Charter and the Fund’s Bylaws, copies of which are filed as exhibits to this Registration Statement.
The Fund’s authorized capital stock consists
of 37,500,000 shares of stock, $0.0001 par value per share, all of which are classified as Common Shares. As of the date of this
Prospectus, ALPS Advisors, Inc. did not own of record or beneficially any Common Shares.
In general, stockholders or subscribers for
the Fund’s stock have no personal liability for the debts and obligations of the Fund because of their status as stockholders
or subscribers, except to the extent that the subscription price or other agreed consideration for the stock has not been paid.
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.
Common Shares
The Common Shares to be issued in an offering
will be, upon payment as described in this Prospectus, fully paid and non-assessable. The Common Shares have no preemptive, conversion,
exchange, appraisal or redemption rights, and each share has equal voting, dividend, distribution and liquidation rights.
Common Stockholders are entitled to receive
dividends if and when the Board declares dividends from funds legally available. Whenever Preferred Shares or borrowings are outstanding,
Common Stockholders will not be entitled to receive any distributions from the Fund unless all accrued dividends on the Preferred
Shares and interest and principal payments on borrowings have been paid, and unless the applicable asset coverage requirements
under the 1940 Act would be satisfied after giving effect to the distribution as described above.
In the event of the Fund’s liquidation,
dissolution or winding up, Common Stockholders would be entitled to share ratably in all of the Fund’s assets that are legally
available for distribution after the Fund pays all debts and other liabilities and subject to any preferential rights of holders
of Preferred Shares, if any Preferred Shares are outstanding at such time.
Common Stockholders are entitled to one vote
per share. All voting rights for the election of Directors are noncumulative, which means that, assuming there is no Preferred
Shares outstanding, the holders of more than 50% of the Common Shares will elect 100% of the Directors then nominated for election
if they choose to do so and, in such event, the holders of the remaining Common Shares will not be able to elect any Directors.
The total amount of outstanding shares of the Company’s
common stock will not increase by more than one-third as a result of the proposed rights offering.
The Fund’s Charter authorizes the Board
to classify and reclassify any unissued Common Shares into other classes or series of stock. Prior to issuance of shares of each
class or series, the Board is required by Maryland law and by the Fund’s Charter to set the terms, preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption for each class or series. Thus, the Board could authorize the issuance of stock of a class of series with
terms and conditions that could have the effect of delaying, deferring or preventing a transaction or a change in control that
might involve a premium price for holders of the Fund’s Common Shares or otherwise be in their best interest. As of the date
of this Prospectus, the Fund has no plans to classify or reclassify any unissued Common Shares.
Under the rules of the NYSE applicable to listed
companies, the Fund is required to hold an annual meeting of stockholders in each year.
The provisions of the 1940 Act generally require
that the public offering price (less underwriting commissions and discounts) of common shares sold by a closed-end investment company
must equal or exceed the NAV of such company’s common shares (calculated within 48 hours of the pricing of such offering),
unless such sale is made in connection with an offering to existing holders of shares of common stock or with the consent of a
majority of its common stockholders. The Fund may, from time to time, seek the consent of Common Stockholders to permit the issuance
and sale by the Fund of Common Shares at a price below the Fund’s then- current NAV, subject to certain conditions. If such
consent is obtained, the Fund may, contemporaneous with and in no event more than one year following the receipt of such consent,
sell Common Shares at a price below NAV in accordance with any conditions adopted in connection with the giving of such consent.
Additional information regarding any consent of Common Stockholders obtained by the Fund and the applicable conditions imposed
on the issuance and sale by the Fund of Common Shares at a price below NAV will be disclosed in the Prospectus Supplement relating
to any such offering of Common Shares at a price below NAV. Until such consent of Common Stockholders, if any, is obtained, the
Fund may not sell Common Shares at a price below NAV. Because the Fund’s advisory fee is based upon average Managed Assets,
the Adviser’s interest in recommending the issuance and sale of Common Shares at a price below NAV may conflict with the
interests of the Fund and its Common Stockholders.
Subscription Rights
The Fund may issue subscription rights to (i)
holders of Common Shares to purchase Common Shares and/or Preferred Shares or (ii) holders of Preferred Shares to purchase Preferred
Shares. Subscription rights may be issued independently or together with any other offered security and may or may not be transferable
by the person purchasing or receiving the subscription rights. In connection with a subscription rights offering to holders of
Common Shares and/or Preferred Shares, the Fund would distribute certificates evidencing the subscription rights and a Prospectus
Supplement, containing all of the material terms of the subscription rights agreement relating to such subscription rights (the
“Subscription Rights Agreement”), to our common or preferred shareholders as of the record date that we set for determining
the shareholders eligible to receive subscription rights in such subscription rights offering. For complete terms of the subscription
rights, please refer to the actual terms of such subscription rights which will be set forth in the Subscription Rights Agreement.
The applicable Prospectus Supplement would
describe the following terms of subscription rights in respect of which this Prospectus is being delivered:
|
● |
the period of time the offering would remain open (which will be open a minimum number of days such that all record holders would be eligible to participate in the offering and will not be open longer than 120 days); |
|
● |
The title of such subscription rights; |
|
● |
the exercise price for such subscription rights (or method of calculation thereof); |
|
● |
the number of such subscription rights issued in respect of each Common Share; |
|
● |
The number of subscription rights required to purchase a single Preferred Shares; |
|
● |
the extent to which such subscription rights are transferable and the market on which they may be traded if they are transferable; |
|
● |
if applicable, a discussion of the material U.S. federal income tax considerations applicable to the issuance or exercise of such subscription rights; |
|
● |
the date on which the right to exercise such subscription rights will commence, and the date on which such right will expire (subject to any extension); |
|
● |
the extent to which such subscription rights include an over-subscription privilege with respect to unsubscribed securities and the terms of such over-subscription privilege; |
|
● |
any termination right the Fund may have in connection with such subscription rights offering; |
|
● |
the expected trading market, if any, for rights; and |
|
● |
any other terms of such subscription rights, including exercise, settlement and other procedures and limitations relating to the transfer and exercise of such subscription rights. |
Exercise of Subscription Rights.
Each subscription right would entitle the holder of the subscription right to purchase for cash such number of shares at such exercise
price as in each case is set forth in, or be determinable as set forth in the Prospectus Supplement relating to the subscription
rights offered thereby. Subscription rights would be exercisable at any time up to the close of business on the expiration date
for such subscription rights set forth in the Prospectus Supplement. After the close of business on the expiration date, all unexercised
subscription rights would become void.
Upon expiration of the rights offering and
the receipt of payment and the subscription rights certificate properly completed and duly executed at the corporate trust office
of the subscription rights agent or any other office indicated in the Prospectus Supplement, the Fund would issue, as soon as practicable,
the Common Shares and/or Preferred Shares purchased as a result of such exercise. To the extent permissible under applicable law,
the Fund may determine to offer any unsubscribed offered securities directly to persons other than shareholders, to or through
agents, underwriters or dealers or through a combination of such methods, as set forth in the applicable Prospectus Supplement.
The Common Shares are listed on the NYSE under
the symbol “RIV” and began trading on the NYSE on December 24, 2015. In connection with the offering of Rights, the
Fund will provide information in the Prospectus Supplement for the expected trading market, if any, for Rights. Shares of closed-end
investment companies often trade on an exchange at prices lower than NAV. The Fund’s Common Shares have traded in the market
at both premiums to and discounts from NAV. The following table shows, for each fiscal quarter since the quarter ended January
31, 2016; (i) high and low NAVs per share of common stock, (ii) the high and low sale prices per share of common stock, as reported
in the consolidated transaction reporting system, and (iii) the percentage by which the Common Shares traded at a premium over,
or discount from, the high and low NAVs per shares of common stock. The Fund’s NAV per Common Share is determined on a daily
basis.
Subscription Rights to Purchase Common
and Preferred Shares
The Fund may issue subscription rights, which
would entitle holders to purchase both Common Shares and Preferred Shares in a ratio to be set forth in the applicable prospectus
supplement. In accordance with the 1940 Act, at least three subscription rights to purchase Common Shares would be required to
subscribe for one Common Share. It is expected that subscription rights to purchase both Common Shares and Preferred Shares would
require holders to purchase an equal number of Common Shares and Preferred Shares, and would not permit holders to purchase an
unequal number of Common Shares or Preferred Shares, or purchase only Common Shares or only Preferred Shares. For example, such
an offering might be structured such that three subscription rights would entitle an investor to purchase one Common Share and
one Preferred Share, and such investor would not be able to choose to purchase only a Common Share or only a Preferred Share upon
the exercise of his, her or its subscription rights.
The Common Shares and Preferred Shares issued
pursuant to the exercise of any such subscription rights, however, would at all times be separately tradeable securities. Such
Common Shares and Preferred Shares would not be issued as a “unit” or “combination” and would not be listed
or traded as a “unit” or “combination” on a securities exchange, such as the NYSE, at any time. The applicable
prospectus supplement will set forth additional details regarding an offering of subscription rights to purchase Common Shares
and Preferred Shares.
Quarter Ended | | |
Market Price | | |
NAV at | | |
Market Premium (Discount) to NAV at | |
| | |
| | |
High | | |
Low | | |
Market High | | |
Market Low | | |
Market High | | |
Market Low | |
2021 | | |
| October 31 | | |
$ | 18.75 | | |
$ | 16.71 | | |
$ | 17.07 | | |
$ | 16.89 | | |
| 9.84 | % | |
| -1.07 | % |
| | |
| July 31 | | |
| 18.75 | | |
| 16.75 | | |
| 17.24 | | |
| 17.02 | | |
| 8.76 | % | |
| -1.59 | % |
| | |
| April 30 | | |
| 17.88 | | |
| 16.71 | | |
| 17.23 | | |
| 16.61 | | |
| 3.77 | % | |
| 0.60 | % |
| | |
| January 31 | | |
| 17.07 | | |
| 13.81 | | |
| 16.48 | | |
| 14.53 | | |
| 3.58 | % | |
| -4.96 | % |
2020 | | |
| October 31 | | |
| 16.09 | | |
| 13.75 | | |
| 15.29 | | |
| 14.49 | | |
| 5.23 | % | |
| -5.11 | % |
| | |
| July 31 | | |
| 15.55 | | |
| 12.52 | | |
| 14.95 | | |
| 13.58 | | |
| 4.01 | % | |
| -7.81 | % |
| | |
| April 30 | | |
| 17.00 | | |
| 8.65 | | |
| 17.01 | | |
| 11.72 | | |
| -0.06 | % | |
| -26.19 | % |
| | |
| January 31 | | |
| 17.10 | | |
| 15.85 | | |
| 17.30 | | |
| 16.79 | | |
| -1.16 | % | |
| -5.60 | % |
2019 | | |
| October 31 | | |
| 17.32 | | |
| 16.09 | | |
| 17.13 | | |
| 16.90 | | |
| 1.11 | % | |
| -4.79 | % |
| | |
| July 31 | | |
| 17.75 | | |
| 16.44 | | |
| 17.54 | | |
| 17.14 | | |
| 1.20 | % | |
| -4.08 | % |
| | |
| April 30 | | |
| 17.36 | | |
| 16.44 | | |
| 17.49 | | |
| 17.50 | | |
| -0.74 | % | |
| -6.06 | % |
| | |
| January 31 | | |
| 17.30 | | |
| 14.20 | | |
| 17.79 | | |
| 15.90 | | |
| -2.75 | % | |
| -10.69 | % |
2018 | | |
| October 31 | | |
| 20.04 | | |
| 16.76 | | |
| 19.02 | | |
| 17.57 | | |
| 5.36 | % | |
| -4.61 | % |
| | |
| July 31 | | |
| 21.63 | | |
| 18.80 | | |
| 19.47 | | |
| 18.98 | | |
| 11.09 | % | |
| 0.96 | % |
| | |
| April 30 | | |
| 21.36 | | |
| 20.02 | | |
| 19.76 | | |
| 19.67 | | |
| 8.10 | % | |
| 1.78 | % |
| | |
| January 31 | | |
| 21.09 | | |
| 19.10 | | |
| 19.98 | | |
| 19.87 | | |
| 5.56 | % | |
| -3.88 | % |
2017 | | |
| October 31 | | |
| 21.51 | | |
| 19.70 | | |
| 20.89 | | |
| 20.59 | | |
| 2.97 | % | |
| -4.32 | % |
| | |
| July 31 | | |
| 21.57 | | |
| 19.42 | | |
| 20.80 | | |
| 20.68 | | |
| 3.70 | % | |
| -6.09 | % |
| | |
| April 30 | | |
| 20.13 | | |
| 19.19 | | |
| 20.87 | | |
| 20.56 | | |
| -3.55 | % | |
| -6.66 | % |
| | |
| January 31 | | |
| 19.65 | | |
| 18.00 | | |
| 20.23 | | |
| 19.64 | | |
| -2.87 | % | |
| -8.35 | % |
2016 | | |
| October 31 | | |
| 20.59 | | |
| 18.67 | | |
| 20.88 | | |
| 20.33 | | |
| -1.39 | % | |
| -8.17 | % |
| | |
| July 31 | | |
| 19.71 | | |
| 17.79 | | |
| 20.70 | | |
| 19.73 | | |
| -4.78 | % | |
| -9.83 | % |
| | |
| April 30 | | |
| 19.79 | | |
| 15.31 | | |
| 19.99 | | |
| 17.73 | | |
| -1.00 | % | |
| -13.65 | % |
| | |
| January 31 | | |
| 20.81 | | |
| 18.66 | | |
| 18.03 | | |
| 18.06 | | |
| 15.42 | % | |
| 3.32 | % |
As of January 13, 2022, the NAV per Common Share
was $16.19, trading prices ranged between $16.50 and $16.66 (representing a premium to NAV of 1.91% and 2.90%, respectively) and the
closing price per Common Share was $16.64 (representing a premium to NAV of 2.78%).
Preferred Stock
The Fund’s Charter authorizes the Board
to classify and reclassify any unissued shares of stock into other classes or series of stock, including preferred stock, without
the approval of the holders of the Common Shares. Prior to issuance of any shares of preferred stock, the Board is required by
Maryland law and by the Fund’s Charter to set the terms, preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for such shares. Thus,
the Board could authorize the issuance of shares of preferred stock with terms and conditions that could have the effect of delaying,
deferring or preventing a transaction or a change in control that might involve a premium price for holders of the Fund’s
Common Shares or otherwise be in their best interest. The Prospectus Supplement for any potential offering of preferred shares
will describe the terms and conditions for those shares. No shares of preferred stock are presently authorized or outstanding.
Any issuance of shares of preferred stock must
comply with the requirements of the 1940 Act. Specifically, the Fund is not permitted under the 1940 Act to issue preferred stock
unless immediately after such issuance the total asset value of the Fund’s portfolio is at least 200% of the liquidation
value of the outstanding preferred stock. Among other requirements, including other voting rights, the 1940 Act requires that the
holders of any preferred stock, voting separately as a single class, have the right to elect at least two Directors at all times.
In addition, subject to the prior rights, if any, of the holders of any other class of senior securities outstanding, the holders
of any preferred stock would have the right to elect a majority of the Fund’s Directors at any time two years’ dividends
on any preferred stock are unpaid.
Preferred Shares of the Fund would be senior
to the common shares with respect to the payment of dividends and the distributions of the assets of the Fund upon liquidation.
In addition, all Preferred Shares of the Fund would be pari passu with one another and junior to the Fund’s senior securities
representing indebtedness. See “Use of Leverage.”
The applicable prospectus supplement will set
forth whether or not the shares of the Fund’s preferred stock offered in this Prospectus will be listed or traded on any
securities exchange. If the shares of the Fund’s preferred stock are not listed on a securities exchange, there may be no
active secondary trading market for such shares and an investment in such shares may be illiquid.
Outstanding Securities
As of January 13, 2022, the Fund’s Common Shares
were the only outstanding securities issued by the Fund. As of the same date, the Fund had 17,667,348 Common Shares outstanding:
(1) | | |
| (2) | | |
| (3) | | |
| (4) | |
Title of Class | | |
| Amount Authorized | | |
| Amount Held by Fund or for its account | | |
| Amount
Outstanding Exclusive of Amount Shown under (3) As of January 13, 2022 | |
Common Stock | | |
| 37,500,000 | | |
| None | | |
| 17,667,348 | |
CERTAIN PROVISIONS OF THE FUND’S CHARTER
AND BYLAWS AND OF MARYLAND LAW
The following summary of certain provisions
of the Maryland General Corporation Law and of the Charter and Bylaws of the Fund does not purport to be complete and is subject
to and qualified in its entirety by reference to the Maryland General Corporation Law, and to the Fund’s Charter and the
Fund’s Bylaws, copies of which are exhibits to the Registration Statement.
General
The Maryland General Corporation Law (the “MGCL”)
and the Fund’s Charter and Bylaws contain provisions that could have the effect of limiting the ability of other entities
or persons to acquire control of the Fund, to cause it to engage in certain transactions or to modify its structure.
These provisions could have the effect of depriving
stockholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund in a tender offer or similar transaction. On the other hand, since these provisions may require
persons seeking control of the Fund to negotiate with the Fund’s management regarding the price to be paid for the shares
required to obtain such control, they promote continuity and stability and they enhance the Fund’s ability to pursue long-term
strategies that are consistent with its investment objective.
The Board has concluded that the potential
benefits of these provisions outweigh their possible disadvantages.
Classified Board of Directors
The Fund’s Board is divided into three
classes of directors serving staggered three-year terms. Directors of each class are elected to serve for three-year terms and
until their successors are duly elected and qualify and at each annual meeting one class of directors are elected by the stockholders.
A classified Board promotes continuity and stability of management but makes it more difficult for stockholders to change a majority
of the directors because it generally takes at least two annual elections of directors for this to occur. The Fund believes that
classification of the Board will help to assure the continuity and stability of the Fund’s strategies and policies as determined
by the Board.
Election of Directors
The MGCL provides that unless the charter or
bylaws of a corporation provide otherwise, which the Fund’s Charter and the Fund’s Bylaws do not, a plurality of all
the votes cast at a meeting at which a quorum is present is sufficient to elect a director. Each Common Share may be voted for
as many individuals as there are directors to be elected and for whose election the Common Share is entitled to be voted.
As a result of this requirement, it is possible
that no nominee would receive the required vote in an election of directors. In the case of a failure to elect one or more directors
because the nominees receive votes constituting less than the required vote, the incumbent directors would hold over and continue
to serve until the next election of directors and until their successors are duly elected and qualify.
Number of Directors; Vacancies
The Fund’s Charter provides that the
number of directors will be set only by the Board in accordance with the Bylaws. The Bylaws provide that a majority of the Fund’s
entire Board may at any time increase or decrease the number of directors, provided that there may be no fewer than three directors
and no more than 15 directors and that no change in the number of directors shall have any effect on the tenure of office of any
director.
The Fund’s Charter provides that the
Fund elects, at such time as the Fund becomes eligible to make such an election, to be subject to the provision of Subtitle 8 of
Title 3 of the MGCL regarding the filling of vacancies on the Board. Accordingly, at such time, except as may be provided by the
Board in setting the terms of any class or series of Preferred Shares, any and all vacancies on the Board may be filled only by
the affirmative vote of two-thirds of the remaining directors in office, and any director elected to fill a vacancy will serve
for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies,
subject to any applicable requirements of the 1940 Act.
Removal of Directors
The Fund’s Charter provides that, subject
to the rights of the holders of one or more class or series of the Fund’s Preferred Shares to elect or remove directors,
a director may be removed from office only for cause (as defined in the Charter) and then only by the affirmative vote of the holders
of at least two-thirds of the votes entitled to be cast generally in the election of directors.
Absence of Cumulative Voting
There is no cumulative voting in the election
of the Fund’s directors. Cumulative voting means that holders of stock of a corporation are entitled, in the election of
directors, to cast a number of votes equal to the number of shares that they own multiplied by the number of directors to be elected.
Because a stockholder entitled to cumulative voting may cast all of his or her votes for one nominee or disperse his or her votes
among nominees as he or she chooses, cumulative voting is generally considered to increase the ability of minority shareholders
to elect nominees to a corporation’s Board. In general, the absence of cumulative voting means that the holders of a majority
of the Fund’s shares can elect all of the directors then standing for election and the holders of the remaining shares will
not be able to elect any directors.
Approval of Extraordinary Corporate Actions
The Fund’s Charter requires the favorable
vote of two-thirds of the entire Board and the favorable vote of the holders of at least two-thirds of the common stock and shares
of preferred stock (if any) entitled to be voted on the matter, voting together as a single class, to advise, approve, adopt or
authorize the following:
|
● |
a “Business Combination,” which includes the following: |
|
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a merger, consolidation or statutory share exchange of the Fund with another corporation; |
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an issuance or transfer by the Fund (in one or a series of transactions in any 12 month period) of any securities of the Fund to any person or entity for cash, securities or other property (or combination thereof) having an aggregate fair market value of $1,000,000 or more, excluding issuances or transfers of debt securities of the Fund, sales of securities of the Fund in connection with a public offering, issuances of securities of the Fund pursuant to a dividend reinvestment plan adopted by the Fund, issuances of securities of the Fund upon the exercise of any stock subscription rights distributed by the Fund and portfolio transactions effected by the Fund in the ordinary course of business; or |
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a sale, lease, exchange, mortgage, pledge, transfer or other disposition by the Fund (in one or a series of transactions in any 12 month period) to or with any person or entity of any assets of the Fund having an aggregate fair market value of $1,000,000 or more except for portfolio transactions (including pledges of portfolio securities in connection with borrowings) effected by the Fund in the ordinary course of its business; |
| ● | the conversion of the Fund from closed-end company to an open-end
company, and any amendments necessary to effect the conversion |
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the voluntary liquidation or dissolution of the Fund or charter amendment to terminate the Fund’s existence; |
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unless the 1940 Act or federal law requires a lesser vote, any stockholder proposal as to specific investment decisions made or to be made with respect to the Fund’s assets as to which stockholder approval is required under federal or Maryland law. |
However, the stockholder vote described above
will not be required with respect to the foregoing transactions (other than those as to which stockholder approval is required
under federal or Maryland law) if they are approved by a vote of two-thirds of the Continuing Directors (as defined below). In
that case, if Maryland law requires stockholder approval, the affirmative vote of a majority of the votes entitled to be cast thereon
by stockholders of the Fund will be required. In addition, if the Fund has any Preferred Shares outstanding, the holders of a majority
of the outstanding shares of the Preferred Shares, voting separately as a class, would be required under the 1940 Act to adopt
any plan of reorganization that would adversely affect the holders of the Preferred Shares, to convert the Fund to an open-end
investment company or to deviate from any of the Fund’s fundamental investment policies.
“Continuing Director” means any
member of the Board who is not an Interested Party (as defined below) or an affiliate of an Interested Party and has been a member
of the Board for a period of at least 12 months, or has been a member of the Board since December 2, 2013, or is a successor of
a Continuing Director who is unaffiliated with an Interested Party and is recommended to succeed a Continuing Director by a majority
of the Continuing Directors then on the Board.
“Interested Party” means any person,
other than an investment company advised by the Adviser or any of its affiliates, which enters, or proposes to enter, into a Business
Combination with the Fund.
In addition, the Fund’s Charter requires
the favorable vote of two-thirds of the entire Board to advise, approve, adopt or authorize any of the following:
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the election and removal of officers; |
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the nomination of candidates to the Board (including the election of directors to fill vacancies on the Board resulting from the increase in size of the Board or the death, resignation or removal of a director, in which case the affirmative vote of two-thirds of the remaining directors in office shall be required); |
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the creation of and delegation of authority and appointment of members to committees of the Board; |
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amendments to the Fund’s Bylaws (which may only be effected by the Board, not the stockholders); |
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Charter amendments and any other action requiring stockholder approval; and |
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entering into, terminating or amending an investment advisory agreement. |
The Board has determined that the foregoing
supermajority requirements applicable to certain votes of the directors and the stockholders, which are greater than the minimum
requirements permitted under Maryland law or the 1940 Act, are in the best interests of the Fund. Reference should be made to the
Charter on file with the SEC for the full text of these provisions.
Action by Shareholders
Under the MGCL, stockholder action can be taken
only at an annual or special meeting of stockholders or, unless the charter provides for stockholder action by less than unanimous
written consent (which is not the case in the Fund’s Charter), by unanimous written consent in lieu of a meeting. These provisions,
combined with the requirements of the Fund’s Bylaws regarding the calling of a stockholder-requested special meeting, as
discussed below, may have the effect of delaying consideration of a stockholder proposal until the next annual meeting.
Procedures for Stockholder Nominations and Proposals
The Fund’s Bylaws provide that any stockholder
desiring to make a nomination for the election of directors or a proposal for new business at a meeting of stockholders must comply
with the advance notice provisions of the Bylaws. Nominations and proposals that fail to follow the prescribed procedures will
not be considered. The Board believes that it is in the Fund’s best interests to provide sufficient time to enable management
to disclose to stockholders information about a slate of nominations for directors or proposals for new business. This advance
notice requirement also may give management time to solicit its own proxies in an attempt to defeat any slate of nominations should
management determine that doing so is in the best interest of stockholders generally. Similarly, adequate advance notice of stockholder
proposals will give management time to study such proposals and to determine whether to recommend to the stockholders that such
proposals be adopted. For stockholder proposals to be included in the Fund’s proxy materials, the stockholder must comply
with all timing and information requirements of the Exchange Act.
Calling of Special Meetings of Shareholders
The Fund’s Bylaws provide that special
meetings of stockholders may be called by the Board and certain of its officers. Additionally, the Fund’s Bylaws provide
that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting,
a special meeting of stockholders will be called by the Fund’s Secretary upon the written request of stockholders entitled
to cast not less than a majority of all the votes entitled to be cast at such meeting.
No Appraisal Rights
As permitted by the MGCL, the Fund’s
Charter provides that stockholders will not be entitled to exercise appraisal rights, unless the Fund’s Board determines
that such rights apply.
Limitations on Liabilities
The Fund’s Charter provides that the
personal liability of the Fund’s directors and officers for monetary damages is eliminated to the fullest extent permitted
by Maryland law. Maryland law currently provides that directors and officers of corporations that have adopted such a provision
will generally not be so liable, except to the extent that (i) it is proved that the person actually received an improper benefit
or profit in money, property, or services for the amount of the benefit or profit in money, property, or services actually received;
and (ii) a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding
that the person’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding.
The Fund’s Charter authorizes the Fund,
to the maximum extent permitted by Maryland law to obligate the Fund to indemnify and advance expenses to the Fund’s directors
and officers. The Fund’s Bylaws provide that the Fund will indemnify its officers and directors against liabilities to the
fullest extent permitted by Maryland law and the 1940 Act, including the advancement of costs and expenses under the procedures and the fullest extent permitted by law. The rights of indemnification provided in the Fund’s Charter and Bylaws are not exclusive of any
other rights which may be available under any insurance or other agreement, by resolution of shareholders or directors or otherwise.
Authorized Shares
The Fund’s Charter authorizes the issuance
of 37,500,000 Common Shares, and authorizes a majority of the Fund’s Board, without shareholder approval, to increase or
decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Fund has the
authority to issue, to authorize the issuance of shares of the Fund’s common and preferred stock, and to classify and reclassify
any unissued shares into one or more classes or series of stock and set the terms thereof. The authority of a majority of the Fund’s Board to increase the Fund’s
authorized capital stock or any class or series thereof without shareholder approval, may be used by the Fund’s Board consistent
with its duties to deter attempts to gain control of the Fund. Further, the Board could authorize the issuance of Preferred Shares
with terms and conditions that could have the effect of discouraging a takeover or other transaction that some of the Fund’s
shareholders might believe to be in their best interests.
Anti-Takeover Provisions of Maryland Law
Maryland Business Combination Act
The provisions of the Maryland Business Combination
Act (the “MBCA”) do not apply to a closed-end investment company, such as the Fund, unless it has affirmatively elected
to be subject to the MBCA by a resolution of its board of directors. To date, the Fund has not made such an election but may make
such an election under Maryland law at any time. Any such election, however, could be subject to certain of the 1940 Act limitations
discussed below under “Maryland Control Share Acquisition Act” and would not apply to any person who had become an
interested stockholder (as defined below) before the time that the resolution was adopted.
Under the MBCA, “business combinations”
between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five
years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations
include a merger, consolidation, share exchange, or, in circumstances specified in the MBCA, an asset transfer or issuance or reclassification
of equity securities. An interested stockholder is defined as:
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any person who beneficially owns ten percent or more of the voting power of the corporation’s shares; or |
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an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding voting stock of the corporation. |
A person is not an interested stockholder under
the MBCA if the board of directors approved in advance the transaction by which he otherwise would have become an interested stockholder.
However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined by the board.
After the five-year prohibition, any business
combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors
of the corporation and approved by the affirmative vote of at least:
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80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and |
|
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two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. |
These super-majority vote requirements do not
apply if the corporation’s common stockholders receive a minimum price, as defined in the MBCA, for their shares in the form
of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
The MBCA permits various exemptions from its
provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder
becomes an interested stockholder.
Maryland Control Share Acquisition Act
The provisions of the Maryland Control Share
Acquisition Act (the “MCSAA”) do not apply to a closed-end investment company, such as the Fund, unless it has affirmatively
elected to be subject to the MCSAA by a resolution of its board of directors. To date, the Fund has not made such an election but
may make such an election under Maryland law at any time. Any such election, however, would be subject to the 1940 Act limitations
discussed below and would not apply to any person who had become a holder of control shares (as defined below) before the time
that the resolution was adopted.
The MCSAA provides that control shares of a
Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds
of the votes entitled to be cast on the matter. Shares owned by the acquirer, by officers of the acquirer or by an employee of
the acquirer who is also a director of the acquirer are excluded from shares entitled to vote on the matter. Control shares are
voting shares of stock which, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer
is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer
to exercise voting power in electing directors within one of the following ranges of voting power:
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one-tenth or more but less than one-third, |
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one-third or more but less than a majority, or |
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a majority or more of all voting power. |
Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means
the acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a
control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be
held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting
is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request
for a meeting is made, the corporation may itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting
or if the acquiring person does not deliver an acquiring person statement as required by the MCSAA, then the corporation may redeem
for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right
of the corporation to redeem control shares is subject to certain conditions and limitations. Fair value is determined, without
regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer
or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for
control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled
to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal
rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.
Section 18(i) of the 1940 Act provides that
“every share of stock...issued by a registered management company shall be a voting stock and have equal voting rights with
every other outstanding voting stock.”
Therefore, the Fund is prevented by the 1940
Act from issuing a class of shares with voting rights that vary within that class. There are currently different views on whether
or not the MCSAA conflicts with Section 18(i) of the 1940 Act. One view is that implementation of the MCSAA would conflict with
the 1940 Act because it would deprive certain shares of their voting rights. Another view is that implementation of the MCSAA would
not conflict with the 1940 Act because it would limit the voting rights of stockholders who choose to acquire shares of stock that
put them within the specified percentages of ownership rather than limiting the voting rights of the shares themselves. In a May
27, 2020 statement, the staff of the SEC’s Division of Investment Management (the “Staff”) stated that it would
not recommend enforcement action to the SEC against a closed-end fund under Section 18(i) of the 1940 Act for opting in to and
triggering a control share statute if the decision to do so by the board of the fund was taken with reasonable care on a basis
consistent with other applicable duties and laws and the duty to the fund and its shareholders generally. In light of the foregoing,
the Fund will not elect to be subject to the MCSAA in the absence of a judgment of a federal court of competent jurisdiction or
the issuance of a rule or regulation of the SEC or a published interpretation by the SEC or its staff that the provisions of the
MCSAA are not inconsistent with the provisions of the 1940 Act, or a change to the provisions of the 1940 Act having the same effect.
Additionally, if the Fund elected to be subject
to the MCSAA, it would not apply (a) to shares acquired in a merger, consolidation or share exchange if the Fund is a party to
the transaction or (b) to acquisitions approved or exempted by the Fund’s Charter or the Fund’s Bylaws.
Maryland Unsolicited Takeovers Act
Subtitle 8 of Title 3 of the Maryland General
Corporation Law permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least
three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors
and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:
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a two-thirds vote requirement for removing a director; |
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a requirement that the number of directors be fixed only by vote of directors; |
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a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred; and |
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a majority requirement for the calling of a special meeting of stockholders. |
The charter of a corporation may contain a
provision or the board of directors may adopt a provision that prohibits the corporation from electing to be subject to any or
all of the provisions of Subtitle 8.
The Subtitle 8 elections are not currently
relevant to the Fund, because provisions in the Fund’s Charter and Bylaws unrelated to Subtitle 8 (except with respect to
Board vacancies) already make the Fund subject to each of the five provisions set forth above.
REPURCHASE OF SHARES
Shares of closed-end funds (like the Fund)
often trade at a discount to NAV, although it is possible that they may trade at a premium above NAV. The market price of the Common
Shares will be determined by such factors as relative demand for and supply of shares in the market, the Fund’s NAV, general
market and economic conditions and other factors beyond the control of the Fund.
Although Common Stockholders will not have
the right to redeem their shares, the Fund may (but is not obligated to) take action to repurchase shares in the open market or
make tender offers for its shares at NAV. During the pendency of any tender offer, the Fund will publish how Common Stockholders
may readily ascertain the NAV. For more information see “Repurchase of Shares” in the SAI. Repurchase of the Common
Shares may have the effect of reducing any market discount to NAV.
There is no assurance that, if action is undertaken
to repurchase or tender for shares, such action will result in the shares trading at a price which approximates their NAV. Although
share repurchases and tenders could have a favorable effect on the market price of the shares, you should be aware that the acquisition
of shares by the Fund will decrease the total assets of the Fund and, therefore, have the effect of increasing the Fund’s
expense ratio and may adversely affect the ability of the Fund to pursue its investment objective. To the extent the Fund may need
to liquidate investments to fund repurchases of shares, this may result in portfolio turnover which will result in additional expenses
being borne by the Fund and its shareholders. The Board currently considers the following factors to be relevant to a potential
decision to repurchase shares: the extent and duration of the discount, the liquidity of the Fund’s portfolio, and the impact
of any action on the Fund and market considerations. Any share repurchases or tender offers will be made in accordance with the
requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act.
CONVERSION TO OPEN-END FUND
The Fund may be converted to an open-end investment
company at any time if approved by the Board and the stockholders. See “Certain Provisions of the Fund’s Charter and
Bylaws and of Maryland Law” for a discussion of the voting requirements applicable to conversion of the Fund to an open-end
investment company and any related Charter amendments. If the Fund converted to an open-end investment company, it would be required
to redeem all Preferred Shares of the Fund then outstanding (requiring in turn that it liquidate a portion of its investment portfolio).
Conversion to open-end status could also require the Fund to modify certain investment restrictions and policies. Shareholders
of an open-end investment company may require the company to redeem their shares at any time (except in certain circumstances as
authorized by or permitted under the 1940 Act) at their NAV, less such redemption charge, if any, as might be in effect at the
time of redemption. In order to avoid maintaining large cash positions or liquidating favorable investments to meet redemptions,
open-end investment companies typically engage in a continuous offering of their shares. Open-end investment companies are thus
subject to periodic asset in-flows and out-flows that can complicate portfolio management. The Board may at any time (but is not
required to) propose conversion of the Fund to open-end status, depending upon its judgment regarding the advisability of such
action in light of circumstances then prevailing.
U.S. FEDERAL INCOME TAX MATTERS
The following is a summary discussion of certain
U.S. federal income tax consequences that may be relevant to a shareholder that acquires, holds and/or disposes of Common Shares
of the Fund. This discussion only addresses U.S. federal income tax consequences to U.S. shareholders who hold their shares as
capital assets and does not address all of the U.S. federal income tax consequences that may be relevant to particular shareholders
in light of their individual circumstances. This discussion also does not address the tax consequences to shareholders who are
subject to special rules, including, without limitation, banks and other financial institutions, insurance companies, dealers in
securities or foreign currencies, traders in securities that have elected to mark-to-market their securities holdings, foreign
holders, persons who hold their shares as or in a hedge against currency risk, or as part of a constructive sale, straddle or conversion
transaction, or tax-exempt or tax-deferred plans, accounts, or entities. In addition, the discussion does not address any state,
local, or foreign tax consequences. The discussion reflects applicable income tax laws of the United States as of the date hereof,
which tax laws may be changed or subject to new interpretations by the courts or the Internal Revenue Service (“IRS”)
retroactively or prospectively, which could affect the continued validity of this summary. No attempt is made to present a detailed
explanation of all U.S. federal income tax concerns affecting the Fund and its shareholders, and the discussion set forth herein
does not constitute tax advice. Investors are urged to consult their own tax advisors before making an investment in the Fund
to determine the specific tax consequences to them of investing in the Fund, including the applicable federal, state, local and
foreign tax consequences as well as the effect of possible changes in tax laws.
The Fund intends to elect to be treated, and
to qualify each year, as a “regulated investment company” under Subchapter M of the Code, so that it will generally
not pay U.S. federal income tax on income and capital gains timely distributed (or treated as being distributed, as described below)
to shareholders. If the Fund qualifies as a regulated investment company and distributes to its shareholders at least 90% of the
sum of (i) its “investment company taxable income” as that term is defined in the Code (which includes, among other
things, dividends, taxable interest, the excess of any net short-term capital gains over net long-term capital losses and certain
net foreign exchange gains as reduced by certain deductible expenses) without regard to the deduction for dividends paid, and (ii)
the excess of its gross tax-exempt interest, if any, over certain disallowed deductions, the Fund will be relieved of U.S. federal
income tax on any income of the Fund, including long-term capital gains, distributed to shareholders. However, if the Fund retains
any investment company taxable income or “net capital gain” (i.e., the excess of net long-term capital gain over net
short-term capital loss), it will be subject to U.S. federal income tax at regular corporate federal income tax rates (currently
at a maximum rate of 21%) on the amount retained. The Fund intends to distribute at least annually all or substantially all of
its investment company taxable income (determined without regard to the deduction for dividends paid), net tax-exempt interest,
if any, and net capital gain. Under the Code, the Fund will generally be subject to a nondeductible 4% federal excise tax on the
portion of its undistributed ordinary income and capital gains if it fails to meet certain distribution requirements with respect
to each calendar year. In order to avoid the 4% federal excise tax, the required minimum distribution is generally equal to the
sum of 98% of the Fund’s ordinary income (computed on a calendar year basis, and taking into account certain deferrals and
elections), plus 98.2% of the Fund’s capital gain net income (generally computed for the one-year period ending on October
31) plus undistributed amounts from prior years on which the Fund paid no federal income tax. The Fund generally intends to make
distributions in a timely manner in an amount at least equal to the required minimum distribution and therefore, under normal circumstances,
does not expect to be subject to this excise tax. However, the Fund may also decide to distribute less and pay the federal excise
taxes.
If, for any taxable year, the Fund did not
qualify as a regulated investment company for U.S. federal income tax purposes, it would be treated as a U.S. corporation subject
to U.S. federal income tax, and possibly state and local income tax, and distributions to its shareholders would not be deductible
by the Fund in computing its taxable income. In such event, the Fund’s distributions, to the extent derived from the Fund’s
current or accumulated earnings and profits, would generally constitute ordinary dividends, which would generally be eligible for
the dividends received deduction available to corporate shareholders, and non-corporate shareholders would generally be able to
treat such distributions as “qualified dividend income” eligible for reduced rates of U.S. federal income taxation,
provided in each case that certain holding period and other requirements are satisfied.
A Common Stockholder will have all dividends
and distributions automatically reinvested in Common Shares of the Fund (unless the stockholder “opts out” of the Plan).
For shareholders subject to U.S. federal income tax, all dividends will generally be taxable regardless of whether the shareholder
takes them in cash or they are reinvested in additional shares of the Fund. Distributions of the Fund’s investment company
taxable income (determined without regard to the deduction for dividends paid) will generally be taxable as ordinary income to
the extent of the Fund’s current and accumulated earnings and profits. However, a portion of such distributions derived from
certain corporate dividends, if any, may qualify for either the dividends received deduction available to corporate shareholders
under Section 243 of the Code or the reduced rates of U.S. federal income taxation for “qualified dividend income”
available to non-corporate shareholders under Section 1(h)(11) of the Code, provided in each case certain holding period and other
requirements are met. Distributions of net capital gain, if any, that are properly reported by the Fund are generally taxable as
long-term capital gain for U.S. federal income tax purposes without regard to the length of time a shareholder has held shares
of the Fund. If the Fund received dividends from an Underlying Fund that qualifies as a regulated investment company, and the Underlying
Fund reports such dividends as qualified dividend income or as eligible for the dividends received deduction, then the Fund is
permitted in turn to report a portion of its distributions as qualified dividend income and/or as eligible for the dividends received
deduction, provided the Fund meets holding period and other requirements with respect to shares of the Underlying Fund.
A distribution of an amount in excess of the
Fund’s current and accumulated earnings and profits, if any, will be treated by a shareholder as a tax-free return of capital,
which is applied against and reduces the shareholder’s basis in his, her or its shares. Distributions in excess of the Fund’s
current and accumulated earnings and profits may be more likely as a result of the Fund’s distribution policy - see “Dividends
and Distributions” above. To the extent that the amount of any such distribution exceeds the shareholder’s basis in
his, her, or its shares, the excess will be treated by the shareholder as gain from the sale or exchange of such shares. The U.S.
federal income tax status of all dividends and distributions will be designated by the Fund and reported to shareholders annually.
The Fund can provide no assurance regarding the portion of its dividends that will qualify for the dividends received deduction
or for qualified dividend income treatment.
The Fund intends to distribute all realized
net capital gains, if any, at least annually. If, however, the Fund were to retain any net capital gain, the Fund may designate
the retained amount as undistributed capital gains in a notice to shareholders who, if subject to U.S. federal income tax on long-term
capital gains, (i) will be required to include in income as long-term capital gain, their proportionate share of such undistributed
amount, and (ii) will be entitled to credit their proportionate share of the federal income tax paid by the Fund on the undistributed
amount against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities.
If such an event occurs, the tax basis of shares owned by a shareholder of the Fund will, for U.S. federal income tax purposes,
generally be increased by the difference between the amount of undistributed net capital gain included in the shareholder’s
gross income and the tax deemed paid by the shareholder.
Any dividend declared by the Fund in October,
November or December with a record date in such a month and paid during the following January will be treated for U.S. federal
income tax purposes as paid by the Fund and received by shareholders on December 31 of the calendar year in which it is declared.
If a shareholder’s distributions are
automatically reinvested in additional Common Shares, for U.S. federal income tax purposes, the shareholder will be treated as
having received a taxable distribution in the amount of the cash dividend that the shareholder would have received if the shareholder
had elected to receive cash, unless the distribution is in newly issued shares of the Fund that are trading at or above NAV, in
which case the shareholder will be treated as receiving a taxable distribution equal to the fair market value of the stock the
shareholder receives.
Certain of the investment practices of the
Fund or an Underlying Fund are subject to special and complex federal income tax provisions that may, among other things, (i) disallow,
suspend or otherwise limit the allowance of certain losses or deductions, (ii) convert tax-advantaged, long-term capital gains
and qualified dividend income into higher taxed short-term capital gain or ordinary income, (iii) convert an ordinary loss or a
deduction into a capital loss (the deductibility of which is more limited), (iv) cause the Fund or an Underlying Fund to recognize
income or gain without a corresponding receipt of cash, (v) adversely affect the timing as to when a purchase or sale of stock
or securities is deemed to occur, (vi) produce income that will not be qualifying income for purposes of the 90% income test and
(vii) adversely alter the intended characterization of certain complex financial transactions. These rules could therefore affect
the character, amount and timing of distributions to shareholders. The Fund will monitor its investments and transactions and may
make certain federal income tax elections where applicable in order to mitigate the effect of these provisions, if possible.
The Fund will not be able to offset gains distributed
by one Underlying Fund in which it invests against losses realized by another Underlying Fund in which the Fund invests. Redemptions of
shares in an Underlying Fund, including those resulting from changes in the allocation among Underlying Funds and SPACs, could also cause
additional distributable gains to shareholders of the Fund. A portion of any such gains may be short-term capital gains that would be
distributable as ordinary income to shareholders of the Fund. Further, a portion of losses on redemptions of shares in the Underlying
Funds and SPACs may be deferred under the wash sale rules. Additionally, the Fund’s investment in an Underlying Fund may result
in the Fund’s receipt of cash in excess of the Underlying Fund’s earnings; if the Fund distributes these amounts, the distributions
could constitute a return of capital to Fund shareholders for federal income tax purposes. As a result of these factors, the use of the
fund of funds structure by the Fund could therefore affect the amount, timing and character of distributions to shareholders.
Investments in distressed debt obligations
that are at risk of or in default may present special federal income tax issues for the Fund or an Underlying Fund. The federal
income tax consequences to a holder of such securities are not entirely certain. If the Fund’s or an Underlying Fund taxed
as a RIC’s characterization of such investments were successfully challenged by the IRS or the IRS issues guidance regarding
investments in such securities, it may affect whether the Fund has made sufficient distributions or otherwise satisfied the requirements
to maintain its qualification as a regulated investment company and avoid federal income and excise taxes.
The Fund or an Underlying Fund may be subject
to withholding and other taxes imposed by foreign countries, including taxes on interest, dividends and capital gains with respect
to its investments in those countries, which would, if imposed, reduce the yield on or return from those investments. Tax treaties
between certain countries and the U.S. may reduce or eliminate such taxes in some cases. If more than 50% of the value of the Fund’s
total assets at the close of its taxable year consists of stock or securities of foreign corporations, or if at least 50% of the
value of the Fund’s total assets at the close of each quarter of its taxable year is represented by interests in other regulated
investment companies, the Fund may elect to “pass through” to its shareholders the amount of foreign taxes paid or
deemed paid by the Fund. If the Fund so elects, each of its shareholders would be required to include in gross income, even though
not actually received, its pro rata share of the foreign taxes paid or deemed paid by the Fund, but would be treated as having
paid its pro rata share of such foreign taxes and would therefore be allowed to either deduct such amount in computing taxable
income or use such amount (subject to various limitations) as a foreign tax credit against federal income tax (but not both).
Sales, exchanges and other dispositions of
the Fund’s shares generally are taxable events for shareholders that are subject to U.S. federal income tax. Shareholders
should consult their own tax advisors with reference to their individual circumstances to determine whether any particular transaction
in the Fund’s shares is properly treated as a sale or exchange for federal income tax purposes, as the following discussion
assumes, and the tax treatment of any gains or losses recognized in such transactions. Gain or loss will generally be equal to
the difference between the amount of cash and the fair market value of other property received and the shareholder’s adjusted
tax basis in the shares sold or exchanged. Such gain or loss will generally be characterized as capital gain or loss and will be
long-term if the shareholder’s holding period for the shares is more than one year and short-term if it is one year or less.
However, any loss realized by a shareholder upon the sale or other disposition of shares with a tax holding period of six months
or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital
gain with respect to such shares. For the purposes of calculating the six-month period, the holding period is suspended for any
periods during which the shareholder’s risk of loss is diminished as a result of holding one or more other positions in substantially
similar or related property or through certain options, short sales or contractual obligations to sell. The ability to deduct capital
losses may be limited. In addition, losses on sales or other dispositions of shares may be disallowed under the “wash sale”
rules in the event that substantially identical stock or securities are acquired (including those made pursuant to reinvestment
of dividends) within a period of 61 days beginning 30 days before and ending 30 days after a sale or other disposition of shares.
In such a case, the disallowed portion of any loss generally would be included in the U.S. federal income tax basis of the shares
acquired.
An additional 3.8% Medicare tax is imposed
on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains
from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such
person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income”
(in the case of an estate or trust) exceeds certain threshold amounts. Because the Fund does not expect to distribute dividends
that would give rise to an adjustment to an individual’s alternative minimum taxable income, an investment in the Common
Shares should not, by itself, cause the holders of Common Shares to become subject to alternative minimum tax.
The Fund is required in certain circumstances
to backup withhold at a current rate of 24% on reportable payments including dividends, capital gain distributions, and proceeds
of sales or other dispositions of the Fund’s shares paid to certain holders of the Fund’s shares who do not furnish
the Fund with their correct social security number or other taxpayer identification number and certain certifications, or who are
otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to
a shareholder may be refunded or credited against such shareholder’s U.S. federal income tax liability, if any, provided
that the required information is timely furnished to the IRS.
This Prospectus does not address the U.S. federal
income tax consequences to a non-U.S. shareholder of an investment in Common Shares. Non-U.S. shareholders should consult their
tax advisors concerning the tax consequences of ownership of shares of the Fund, including the possibility that distributions may
be subject to a 30% U.S. withholding tax (or a reduced rate of withholding provided by an applicable treaty if the investor provides
proper certification of its non-U.S. status).
The foregoing is a general and abbreviated
summary of the provisions of the Code and the Treasury regulations thereunder currently in effect as they directly govern the taxation
of the Fund and its shareholders. These provisions are subject to change by legislative or administrative action, and any such
change may be retroactive. A more complete discussion of the federal income tax rules applicable to the Fund can be found in the
SAI, which is incorporated by reference into this Prospectus. Shareholders are urged to consult their tax advisors regarding specific
questions as to U.S. federal, foreign, state, and local income or other taxes before making an investment in the Fund.
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. For its services, the custodian receives a monthly fee based upon, among other things,
the average value of the total assets of the Fund, plus certain charges for securities transactions.
DST Systems, Inc., an affiliate of the Adviser
and the Fund’s administrator, located at 333 West 11th Street, 5th floor, Kansas City, Missouri 64105, serves as the Fund’s
transfer agent and registrar.
LEGAL MATTERS
Certain legal matters in connection with the
Common Shares will be passed upon for the Fund by Dechert LLP, New York, New York. Dechert LLP may rely as to certain matters of
Maryland law on McDermott Will & Emery LLP.
CONTROL PERSONS
Based on a review of Schedule 13D and Schedule
13G filings as of the date of this Prospectus, there are no persons who control the Fund. For purposes of the foregoing statement,
“control” means (1) the beneficial ownership, either directly or through one or more controlled companies, of more
than 25% of the voting securities of a company; (2) the acknowledgment or assertion by either the controlled or controlling party
of the existence of control; or (3) an adjudication under Section 2(a)(9) of the 1940 Act, which has become final, that control
exists.
ADDITIONAL INFORMATION
The Fund is subject to the informational requirements
of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith files reports and other information with the
SEC. Reports, proxy statements and other information filed by the Fund with the SEC pursuant to the informational requirements
of such Acts can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Washington,
D.C. 20549. The SEC maintains a web site at http://www.sec.gov containing reports, proxy and information statements and other information
regarding registrants, including the Fund, that file electronically with the SEC.
This Prospectus constitutes part of a Registration
Statement filed by the Fund with the SEC under the Securities Act and the 1940 Act. This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the Registration Statement and related exhibits for further
information with respect to the Fund and the Common Shares offered hereby. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such
reference. The complete Registration Statement may be obtained from the SEC upon payment of the fee prescribed by its rules and
regulations or free of charge through the SEC’s website (http://www.sec.gov).
INCORPORATION BY
REFERENCE
This Prospectus is part of a registration statement
that the Fund has filed with the SEC. The Fund is permitted to “incorporate by reference” the information that it files
with the SEC, which means that the Fund can disclose important information to you by referring you to those documents. The information
incorporated by reference is an important part of this Prospectus, and later information that the Fund files with the SEC will
automatically update and supersede this information.
The documents listed below, and any reports
and other documents subsequently filed with the SEC pursuant to Rule 30(b)(2) under the 1940 Act and Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, prior to the termination of the offering, are incorporated by reference into this Prospectus and
deemed to be part of this Prospectus from the date of the filing of such reports and documents:
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● |
the Fund’s Statement of Additional Information, dated January 25,
2022, filed with this Prospectus (“SAI”); |
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● |
the Fund’s Annual Report on Form N-CSR for
the fiscal year ended July 31, 2021, filed with the SEC on October 8, 2021 (“Annual Report”); |
|
● |
the Fund’s Semi-Annual Report on Form N-CSRS for
the period ended January 31, 2021, filed with the SEC on April 8, 2021; |
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● |
the Fund’s definitive proxy statement on Schedule 14A for
our 2021 annual meeting of shareholders, filed with the SEC on July 2, 2021 (“Proxy Statement”); and |
|
● |
the Fund’s description of common shares contained in our
Registration Statement on Form 8-A (File No. 333-169317) filed with the SEC on December 17, 2015. |
To obtain copies of these filings, see “Where
You Can Find More Information.”
THE FUND’S PRIVACY POLICY
The Fund is committed to ensuring your financial
privacy. This notice is being sent to comply with privacy regulations of the Securities and Exchange Commission. The Fund has in
effect the following policy with respect to nonpublic personal information about its customers:
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● |
Only such information received from you, through application forms or otherwise, and information about your Fund transactions will be collected. |
|
● |
None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). |
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● |
Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information. |
|
● |
The Fund does not currently obtain consumer information. If the Fund were to obtain consumer information at any time in the future, it would employ appropriate procedural safeguards that comply with federal standards to protect against unauthorized access to and properly dispose of consumer information. |
For more information about the Fund’s
privacy policies call (855) 830-1222 (toll-free).
6,227,000
Shares of Common Stock |
Subscription
Rights for Shares of Common Stock
RiverNorth
Opportunities Fund, Inc.
PROSPECTUS
SUPPLEMENT
October
11, 2022
RiverNorth Opportunities (NYSE:RIV)
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From Jul 2024 to Aug 2024
RiverNorth Opportunities (NYSE:RIV)
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From Aug 2023 to Aug 2024