| RiverNorth Opportunities Fund, Inc. | Notes to Financial Statements |
October 31, 2016
1. ORGANIZATION
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”). The Fund commenced operations on December 24, 2015. Prior to that date, the Fund had no operations other than matters relating to its organization and the sale and issuance of 5,155 common shares of beneficial interest in the Fund (“Common Shares”) to ALPS Advisors, Inc. (“AAI”) at a price of $19.40 per share, net of 3.00% sales load. AAI and RiverNorth Capital Management LLC (“RiverNorth”) agreed to pay all of the Fund’s organizational expenses and certain offering expenses. 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 and exchange-traded funds (“ETFs” and collectively, “Underlying Funds”). Underlying Funds also may include business development companies (“BDCs”). All Underlying Funds are registered under the Securities Act of 1933, as amended (the “Securities Act”). The Fund incurs higher and additional expenses when it invests in Underlying Funds. 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.
Under normal circumstances, 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 decreases in value.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates: The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements during the period reported. Management believes the estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Fund ultimately realizes upon sale of the securities. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. The financial statements have been prepared as of the close of the New York Stock Exchange (“NYSE”) on October 31, 2016.
Portfolio Valuation: The net asset value per common share of the Fund is determined daily, on each day that the NYSE is open for trading, as of the close of regular trading on the NYSE (normally 4:00 p.m. New York time). The Fund’s net asset value per common share is calculated by dividing the value of the Fund’s total assets, less its liabilities by the number of shares outstanding.
| RiverNorth Opportunities Fund, Inc. | Notes to Financial Statements |
October 31, 2016
The Board of Directors (the “Board”) has established the following procedures for valuation of the Fund’s assets under normal market conditions. Marketable securities listed on foreign or U.S. securities exchanges generally are valued at closing sale prices or, if there were no sales, at the mean between the closing bid and ask prices on the exchange where such securities are primarily traded. If the independent primary or secondary pricing service is unable to provide a price for a security, if the price provided by the independent primary or secondary pricing service is deemed unreliable, or if events occurring after the close of the market for a security but before the time as of which the Fund values its common shares would materially affect net asset value, such security will be valued at its fair value as determined in good faith under procedures approved by the Board.
When applicable, fair value of an investment is determined by the Fund’s Fair Valuation Committee as a designee of the Board. In fair valuing the Fund’s investments, consideration is given to several factors, which may include, among others, the following: the fundamental business data relating to the issuer, borrower, or counterparty; an evaluation of the forces which influence the market in which the investments are purchased and sold; the type, size and cost of the investment; the information as to any transactions in or offers for the investment; the price and extent of public trading in similar securities (or equity securities) of the issuer, or comparable companies; the coupon payments, yield data/cash flow data; the quality, value and saleability of collateral, if any, securing the investment; the business prospects of the issuer, borrower, or counterparty, as applicable, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer’s, borrower’s, or counterparty’s management; the prospects for the industry of the issuer, borrower, or counterparty, as applicable, and multiples (of earnings and/or cash flow) being paid for similar businesses in that industry; one or more independent broker quotes for the sale price of the portfolio security; and other relevant factors.
Securities Transactions and Investment Income: Investment security transactions are accounted for on a trade date basis. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities transactions and unrealized appreciation and depreciation of securities are determined using the first-in/first-out cost basis method for both financial reporting and tax purposes.
Fair Value Measurements: The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
| Annual Report | October 31, 2016 | 13 |
| RiverNorth Opportunities Fund, Inc. | Notes to Financial Statements |
October 31, 2016
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
| Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Fund has the ability to access at the measurement date; |
| Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
| Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Fund’s investments as of October 31, 2016:
| Investments in Securities at Value | | Level 1 - Quoted Prices | | | Level 2 - Other Significant Observable Inputs | | | Level 3 - Significant Unobservable Inputs | | | Total | |
| Closed-End Funds | | $ | 62,351,368 | | | $ | – | | | $ | – | | | $ | 62,351,368 | |
| Business Development Companies | | | 2,674,122 | | | | – | | | | – | | | | 2,674,122 | |
| Business Development Company Bonds | | | 1,131,056 | | | | – | | | | – | | | | 1,131,056 | |
| Convertible Preferred Stock | | | 16,575 | | | | – | | | | – | | | | 16,575 | |
| Short Term Investments | | | 5,144,004 | | | | – | | | | – | | | | 5,144,004 | |
| Total | | $ | 71,317,125 | | | $ | – | | | $ | – | | | $ | 71,317,125 | |
The Fund recognizes transfers between levels as of the end of the period. For the period ended October 31, 2016, the Fund did not have any significant transfers between Level 1 and Level 2 securities. The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
Short Sale Risks. The Fund and the Underlying Funds may engage in short sales. A short sale is a transaction in which the Fund sells a security it does not own in anticipation that the market price of that security will decline. 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. The Fund did not engage in short selling during the period ended October 31, 2016. However, the Fund did pledge collateral for future short sale transactions.
| RiverNorth Opportunities Fund, Inc. | Notes to Financial Statements |
October 31, 2016
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
AAI serves as the Fund’s investment adviser pursuant to an Investment Advisory Agreement with the Fund. As compensation for its services to the Fund, AAI receives an annual investment advisory fee of 1.00% based on the Fund’s average daily Managed Assets (as defined below). Pursuant to an Investment Sub-Advisory Agreement, AAI has retained as the Fund’s sub-adviser and pays RiverNorth an annual fee of 0.85% based on the Fund’s average daily Managed Assets.
ALPS Fund Services, Inc. (“AFS”), an affiliate of AAI, serves as administrator to the Fund. Under an Administration, Bookkeeping and Pricing Services Agreement, AFS is responsible for calculating the net asset values, providing additional fund accounting and tax services, and providing fund administration and compliance-related services to the Fund. AFS is entitled to receive a monthly fee, accrued daily based on the Fund’s average Managed Assets, as defined below, plus reimbursement for certain out-of-pocket expenses.
DST Systems, Inc. (“DST”), the parent company of AAI and AFS, serves as the Transfer Agent to the Fund. Under the Transfer Agency Agreement, DST is responsible for maintaining all shareholder records of the Fund. DST is entitled to receive an annual minimum fee of $22,500 plus out-of-pocket expenses.
The Fund pays no salaries or compensation to any of its interested Directors or its Officers. For their services, the four independent Directors of the Fund receive an annual retainer in the amount of $17,000, an additional $2,000 for attending each meeting of the Board and $1,000 for attending a special meeting of the Board. The independent Directors are also reimbursed for all reasonable out-of-pocket expenses relating to attendance at meetings of the Board.
A Director and certain Officers of the Fund are also officers of AAI. A Director is an officer of RiverNorth.
Managed Assets: For these purposes, the term Managed Assets is defined as the total assets of the Fund, including assets attributable to leverage, minus liabilities (other than debt representing leverage and any preferred stock that may be outstanding), calculated as of 4:00 p.m. Eastern time on such day or as of such other time or times as the Board may determine in accordance with the provisions of applicable law and of the declaration and bylaws of the Fund and with resolutions of the Board of Directors as from time to time in force.
The Fund may use leverage through borrowings or the issuance of preferred stock, in an aggregate amount of up to 15% of the Fund’s Managed Assets immediately after such borrowings or issuance. The Underlying Funds that the Fund invests in may also use leverage; provided, however, it is the intention of the Fund that the Fund’s direct use of leverage and the Fund’s overall exposure to leverage utilized by all the Underlying Funds will not exceed 33 1/3% of the Fund’s Managed Assets. The sub-adviser will assess whether or not to engage in leverage based on its assessment of conditions in the debt and credit markets. Leverage, if used, is expected to take the form of a borrowing or the issuance of preferred stock, although the Fund currently anticipates that leverage will initially be obtained through the use of bank borrowings or other similar term loans. As of October 31, 2016, the Fund utilized no direct leverage; it only had exposure to leverage through the investments in its underlying funds.
| Annual Report | October 31, 2016 | 15 |
| RiverNorth Opportunities Fund, Inc. | Notes to Financial Statements |
October 31, 2016
4. DISTRIBUTIONS
The Fund intends to distribute to common shareholders regular monthly cash distributions of its net investment income. In addition, the Fund intends to distribute its net realized capital gains, if any, at least annually. 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 shareholder’s basis in his or her shares, which may increase the capital gain or reduce the capital loss realized upon the sale of such shares. Any amounts received in excess of a shareholder’s basis are generally treated as capital gain, assuming the shares are held as capital assets.
Subsequent to October 31, 2016, the Fund paid the following regular monthly distributions:
| Ex-Date | Record Date | Payable Date | Rate (per share) |
| November 17, 2016 | November 21, 2016 | November 30, 2016 | $0.140 |
| December 15, 2016 | December 19, 2016 | December 28, 2016 | $0.140 |
In addition to regular monthly distributions, for the first year following the completion of the Fund’s initial public offering, the Fund intends to pay quarterly distributions (each, a “Contingent Quarterly Special Distribution”) to common shareholders. The date on which the amount of the Contingent Quarterly Special Distribution will be measured (each, a “Quarterly Special Distribution Measurement Date”) for the first Contingent Quarterly Special Distribution was March 15, 2016 and subsequent Quarterly Special Distribution Measurement Dates occur every three months thereafter (a “Quarterly Special Distribution Period”) on the 15th day of each such month (or, if such date is not a business day, on the first business day thereafter) during the one-year period following the completion of the offering. The aggregate amount payable for each Quarterly Special Distribution Period is expected to be equal to 50% of the amount by which the net asset value of the Fund as of the applicable Quarterly Special Distribution Measurement Date (the “Measurement NAV”) exceeds the net asset value of the Fund as of the most recent prior Quarterly Special Distribution Measurement Date for which a Contingent Quarterly Special Distribution was paid (the “Benchmark NAV”). The calculation of the Measurement NAV and the Benchmark NAV will be appropriately adjusted to reflect distributions paid or to be paid by the Fund. There can be no assurance that the net asset value of the Fund will increase or any Contingent Quarterly Special Distribution will be made by the Fund. The Board will review the Contingent Quarterly Special Distribution Program from time to time and may determine to modify, suspend or cancel the program.
| RiverNorth Opportunities Fund, Inc. | Notes to Financial Statements |
October 31, 2016
Contingent Quarterly Special Distributions paid for the period ended October 31, 2016 were as follows:
| Ex-Date | Record Date | Payable Date | Rate (per share) |
| April 19, 2016 | April 21, 2016 | April 28, 2016 | $0.035 |
| July 21, 2016 | July 25, 2016 | July 28, 2016 | $0.540 |
| October 18, 2016 | October 20, 2016 | October 27, 2016 | $0.343 |
5. CAPITAL TRANSACTIONS
The Fund’s authorized capital stock consists of 37,500,000 shares of common stock, $0.0001 par value per share, all of which is initially classified as common shares. Under the rules of the NYSE applicable to listed companies, the Fund is required to hold an annual meeting of stockholders in each year.
Under the Fund’s Charter, the Board is authorized to classify and reclassify any unissued shares of stock into other classes or series of stock and authorize the issuance of shares of stock without obtaining stockholder approval. Also, the Fund’s Board, with the approval of a majority of the entire Board, but without any action by the stockholders of the Fund, may amend the Fund’s Charter from time to time to increase or decrease the aggregate number of shares of stock of the Fund or the number of shares of stock of any class or series that the Fund has authority to issue.
The Fund issued 3,755,155 common shares in its initial public offering on December 24, 2015. These common shares were issued at $20.00 per share before the underwriting discount of $0.60 per share. Offering costs of $150,206 (representing $0.04 per common share) were offset against proceeds of the offerings and have been charged to paid-in capital of the common shares. AAI and RiverNorth agreed to pay those offering costs of the Fund (other than the sales load) that exceeded $0.04 per common share.
Additional shares of the Fund may be issued under certain circumstances pursuant to the Fund’s Automatic Dividend Reinvestment Plan, as defined within the Fund’s organizational documents. Additional information concerning the Automatic Dividend Reinvestment Plan is included within this report.
6. PORTFOLIO INFORMATION
Purchases and Sales of Securities: For the period ended October 31, 2016, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $133,838,157 and $72,246,537, respectively.
7. TAXES
Classification of Distributions: Net investment income/(loss) and net realized gain/(loss) may differ for financial statement and tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund.
| Annual Report | October 31, 2016 | 17 |
| RiverNorth Opportunities Fund, Inc. | Notes to Financial Statements |
October 31, 2016
The tax character of distributions paid during the period ended October 31, 2016 was as follows:
| | | For the Period Ended October 31, 2016 | |
| Ordinary Income | | $ | 6,496,219 | |
| Long-Term Capital Gain | | | 1,682,509 | |
| Total | | $ | 8,178,728 | |
Components of Earnings: Tax components of distributable earnings are determined in accordance with income tax regulations which may differ from composition of net assets reported under accounting principles generally accepted in the United States. Accordingly, for the period ended October 31, 2016, certain differences were reclassified.
The reclassifications were as follows:
| Paid-in capital | Accumulated net investment income | Accumulated net realized gain |
| $(216) | $3,932,807 | $(3,932,591) |
These differences are primarily attributed to the different tax treatment of non-deductible expenses and distribution reclassifications.
Tax Basis of Distributable Earnings: Tax components of distributable earnings are determined in accordance with income tax regulations which may differ from composition of net assets reported under GAAP.
As of October 31, 2016, the components of distributable earnings on a tax basis were as follows:
| Undistributed Ordinary Income | | $ | – | |
| Accumulated Capital Gain | | | 140,371 | |
| Unrealized Appreciation | | | 1,195,862 | |
| Total | | $ | 1,336,233 | |
| RiverNorth Opportunities Fund, Inc. | Notes to Financial Statements |
October 31, 2016
Tax Basis of Investments: Net unrealized appreciation/(depreciation) of investments based on federal tax cost as of October 31, 2016, was as follows:
| Cost of investments for income tax purposes | | $ | 70,121,263 | |
| Gross appreciation on investments (excess of value over tax cost) | | | 2,277,575 | |
| Gross depreciation on investments (excess of tax cost over value) | | | (1,081,713 | ) |
| Net unrealized appreciation on investments | | $ | 1,195,862 | |
The differences between book-basis and tax-basis are primarily due to wash sales.
Federal Income Tax Status: For federal income tax purposes, the Fund currently qualifies, and intends to remain qualified, as a regulated investment company under the provisions of Subchapter M of the Internal Revenue Code of 1986, as amended, by distributing substantially all of its investment company taxable net income and realized gain, not offset by capital loss carryforwards, if any, to its shareholders. No provision for federal income taxes has been made. During the period, the Fund paid an excise tax of $216 as required under Internal Revenue Code §4982. As of October 31, 2016, $162 of the $216 excise tax paid was included in Other expenses on the Statement of Operations.
As of and during the period ended October 31, 2016, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Being that the Fund commenced operations on December 24, 2015, no tax returns have been filed for the Fund as of the date of this report.
8. SUBSEQUENT EVENTS
Effective November 30, 2016; the Fund entered into a $15,000,000 secured committed line of credit agreement with State Street Bank and Trust Company (“SSB”), which by its terms expires on November 29, 2017, subject to the restrictions and terms of the credit agreement. For borrowing under this credit agreement, the Fund will be charged either an interest rate of:
| (1) | 1.00% (per annum) plus the One-Month LIBOR rate (London Interbank Offered Rate) or |
| (2) | as of any day, the higher of (a) 1.05% (per annum) plus the daily Federal Funds Rate as in effect on that day, and (b) 1.05% (per annum) plus the One-Month LIBOR rate as in effect on that day. |
Borrowing under this credit agreement, the Fund is charged a commitment fee on the average daily unused balance of the line of credit at the rate of 0.15% per annum. Per the terms of the credit agreement, the Fund paid an upfront fee of 0.10% on the total line of credit balance. The Fund pledges its investment securities as the collateral for the line of credit per the terms of the agreement.
| Annual Report | October 31, 2016 | 19 |
| RiverNorth Opportunities Fund, Inc. | Dividend Reinvestment Plan |
October 31, 2016 (Unaudited)
RiverNorth Opportunities Fund, Inc. (the “Fund”) has a dividend reinvestment plan commonly referred to as an “opt-out” plan. Unless the registered owner of the Fund’s common stock (the “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 Shareholders who elect not to participate in the Plan will receive all dividends and other distributions in cash paid by check mailed directly to the shareholder of record (or, if the Common Shares are held in street or other nominee name, then to such nominee) by the Plan Administrator as dividend disbursing agent. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Plan Administrator prior to the dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution. Such notice will be effective with respect to a particular dividend or other distribution (together, a “Dividend”). Some brokers may automatically elect to receive cash on behalf of Common Shareholders and may re-invest that cash in additional Common Shares.
Whenever the Fund declares a Dividend payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Administrator for the participants’ accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Common Shares from the Fund (“Newly Issued Common Shares”) or (ii) by purchase of outstanding Common Shares on the open market (“Open-Market Purchases”) on the New York Stock Exchange (“NYSE”) or elsewhere. If, on the payment date for any Dividend, the closing market price plus estimated brokerage commissions per Common Share is equal to or greater than the net asset value per Common Share, the Plan Administrator will invest the Dividend amount in Newly Issued Common Shares on behalf of the participants. The number of Newly Issued Common Shares to be credited to each participant’s account will be determined by dividing the dollar amount of the Dividend by the Fund’s net asset value per Common Share on the payment date. If, on the payment date for any Dividend, the net asset value per Common Share is greater than the closing market value plus estimated brokerage commissions (i.e., the Fund’s Common Shares are trading at a discount), the Plan Administrator will invest the Dividend amount in Common Shares acquired on behalf of the participants in Open-Market Purchases.
In the event of a market discount on the payment date for any Dividend, the Plan Administrator will have until the last business day before the next date on which the Common Shares trade on an “ex-dividend” basis or 30 days after the payment date for such Dividend, whichever is sooner (the “Last Purchase Date”), to invest the Dividend amount in Common Shares acquired in Open-Market Purchases. It is contemplated that the Fund will pay monthly income Dividends. If, before the Plan Administrator has completed its Open-Market Purchases, the market price per Common Share exceeds the net asset value per Common Share, the average per Common Share purchase price paid by the Plan Administrator may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if the Dividend had been paid in Newly Issued Common Shares on the Dividend payment date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan provides that if the Plan Administrator is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Administrator may cease making Open-Market Purchases and may invest the uninvested portion of the Dividend amount in Newly Issued Common Shares at the net asset value per Common Share at the close of business on the Last Purchase Date.
| RiverNorth Opportunities Fund, Inc. | Dividend Reinvestment Plan |
October 31, 2016 (Unaudited)
The Plan Administrator maintains all shareholders’ accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common Shares in the account of each Plan participant will be held by the Plan Administrator on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The Plan Administrator will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions of the participants.
Beneficial owners of Common Shares who hold their Common Shares in the name of a broker or nominee should contact the broker or nominee to determine whether and how they may participate in the Plan. In the case of Common Shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Plan Administrator will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder’s name and held for the account of beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to Common Shares issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with Open-Market Purchases. The automatic reinvestment of Dividends will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such Dividends. Participants that request a sale of Common Shares through the Plan Administrator are subject to brokerage commissions.
The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.
All correspondence or questions concerning the Plan should be directed to the Plan Administrator at Mail Stop: RiverNorth Opp, 430 West 7th Street, Kansas City, MO 64105-1407.
| Annual Report | October 31, 2016 | 21 |
| RiverNorth Opportunities Fund, Inc. | Report of Independent Registered Public Accounting Firm |
October 31, 2016
To the Shareholders and Board of Directors of RiverNorth Opportunities Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of RiverNorth Opportunities Fund, Inc. (the “Fund”) as of October 31, 2016, and the related statements of operations and changes in net assets, and the financial highlights for the period December 24, 2015 (commencement of operations) through October 31, 2016. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2016, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of RiverNorth Opportunities Fund, Inc. as of October 31, 2016, the results of its operations, changes in its net assets, and the financial highlights for the period December 24, 2015 (commencement of operations) through October 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
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| |
| COHEN & COMPANY, LTD. |
| Cleveland, Ohio |
| December 23, 2016 |
| RiverNorth Opportunities Fund, Inc. | Directors and Officers |
October 31, 2016 (Unaudited)
| INDEPENDENT DIRECTORS |
Name and Year of Birth | Position(s) Held with Registrant | Term of Office(1) and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex(2) Overseen by Director | Other Directorships(3) Held by Director During Past 5 Years |
John K. Carter
(1952) | Director | Initial term expires in 2017. Has served since 2013.(4) | Managing Partner, Global Recruiters of St. Petersburg (a financial services consulting and recruiting firm) (2012 to present); Business Unit Head, Transamerica Asset Management (2006 to 2012). | 4 | RiverNorth Funds (3 funds) (since 2006). Director, Chairman of the Board of Directors, Transamerica Funds (120 funds) (2006 to 2012). Board Member, United Way of Tampa Bay (2011 to 2012). |
J. Wayne Hutchens
(1944) | Director | Initial term expires in 2017. Has served since April 2013.(4) | Mr. Hutchens is currently retired. From April 2006 to December 2012, he served as President and CEO of the University of Colorado (CU) Foundation and from April 2009 to December 2012, he was Executive Director of the CU Real Estate Foundation. Mr. Hutchens is also Trustee of the Denver Museum of Nature and Science (2000 to present), Director of AMG National Trust Bank (June 2012 to present) and Trustee of Children’s Hospital Colorado (May 2012 to present). Prior to these positions, Mr. Hutchens spent 29 years in the banking industry, retiring as Chairman of Chase Bank Colorado. | 1 | ALPS Series Trust (9 funds) (2012 to present). |
John S. Oakes
(1943) | Director | Initial term expires in 2018. Has served since 2013.(4) | Principal, Financial Search and Consulting (a recruiting and consulting firm) (2013 to present); Regional Vice President, Securities America (a broker-dealer) (2007 to 2013). | 4 | RiverNorth Funds (3 funds) (since 2006). |
| Annual Report | October 31, 2016 | 23 |
| RiverNorth Opportunities Fund, Inc. | Directors and Officers |
October 31, 2016 (Unaudited)
| INDEPENDENT DIRECTORS |
Name and Year of Birth | Position(s) Held with Registrant | Term of Office(1) and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex(2) Overseen by Director | Other Directorships(3) Held by Director During Past 5 Years |
David M. Swanson
(1957) | Director | Initial term expires in 2019. He has served since 2013.(4) | Founder & Managing Partner of SwanDog Strategic Marketing. Previously, he served as Executive Vice President of Calamos Investments (April 2004 to March 2006), Chief Operating Officer of Van Kampen Investments (October 2002 to April 2004), and Managing Director of Morgan Stanley (February 2000 to April 2004). | 11 | Managed Portfolio Series (28 funds) (2006 to present); Trustee, ALPS Variable Investment Trust (10 funds) (2006 to present). |
| RiverNorth Opportunities Fund, Inc. | Directors and Officers |
October 31, 2016 (Unaudited)
INTERESTED BOARD MEMBERS(5) AND OFFICERS | |
Name and Year of Birth | Position(s) Held with Registrant | Term of Office(1) and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex(2) Overseen by Director | Other Directorships(3) Held by Director During Past 5 Years |
Thomas A. Carter(6)
(1966) | Chairman, Director and President | Initial term expires in 2017. Has served since 2013.(4) | Mr. Carter joined ALPS in 1994 and is currently President and Director of the Adviser, and APSD, and Executive Vice President and Director of ALPS, ADI and AHI. Because of his position with AHI, ALPS, ADI, the Adviser and APSD, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touche LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder. | 33 | Trustee of ALPS ETF Trust (21 funds), ALPS Variable Investment Trust (10 funds) and Principal Real Estate Income Fund (1 fund). |
Patrick W. Galley
(1975) | Director | Initial term expires in 2019. Has served since 2013. (4) | Chief Investment Officer, RiverNorth Capital Management, LLC. (2004 to present); Board of Managers of RiverNorth Capital Management, LLC and RiverNorth Securities, LLC (since 2010) and Board of Directors RiverNorth Holdings, Co. (since 2010). | 4 | RiverNorth Funds (3 funds) (since 2006). |
| Annual Report | October 31, 2016 | 25 |
| RiverNorth Opportunities Fund, Inc. | Directors and Officers |
October 31, 2016 (Unaudited)
INTERESTED BOARD MEMBERS(5) AND OFFICERS | | |
Name and Year of Birth | Position(s) Held with Registrant | Term of Office(1) and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex(2) Overseen by Director | Other Directorships(3) Held by Director During Past 5 Years |
Patrick D. Buchanan
(1972) | Treasurer | Has served since 2015. | Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of the ALPS ETF Trust, ALPS Variable Investment Trust, Principal Real Estate Income Fund and Clough Funds Trust. | N/A | N/A |
Erin D. Nelson
(1977) | Chief Compliance Officer | Has served since 2015. | Erin Nelson became Senior Vice-President and Chief Compliance Officer of AAI on July 1, 2015 and prior to that served as Vice President and Deputy Chief Compliance Officer of AAI since January 1, 2015. Prior to January 1, 2015, Ms. Nelson was Vice-President and Assistant General Counsel of ALPS Fund Services, Inc. Because of her position with AAI, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Nelson is also the CCO of ALPS ETF Trust, ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and Principal Real Estate Income Fund. | N/A | N/A |
| RiverNorth Opportunities Fund, Inc. | Directors and Officers |
October 31, 2016 (Unaudited)
INTERESTED BOARD MEMBERS(5) AND OFFICERS | | |
Name and Year of Birth | Position(s) Held with Registrant | Term of Office(1) and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex(2) Overseen by Director | Other Directorships(3) Held by Director During Past 5 Years |
Abigail J. Murray
(1975) | Secretary | Has served since 2015. | Ms. Murray joined ALPS in April 2015. She is currently Vice President and Senior Counsel of ALPS. Prior to joining ALPS, Ms. Murray was an Attorney and Managing Member at Murray & Rouvina PLC from 2014 to 2015 and an Associate with Vedder Price P.C. from 2007 to 2014. Ms. Murray is also the Secretary of ALPS ETF Trust, Clough Global Allocation Fund, Clough Global Equity Fund, Clough Global Opportunities Fund, Clough Funds Trust, The Caldwell & Orkin Funds, Inc. and Principal Real Estate Income Fund and Assistant Secretary of Elevation ETF Trust. | N/A | N/A |
Andrea E. Kuchli
(1985) | Assistant Secretary | Has served since 2016. | Ms. Kuchli has been Vice President and Senior Counsel of ALPS Fund Services, Inc. and the Adviser since February 2015. Prior to that Ms. Kuchli served as an Associate Attorney with Davis Graham & Stubbs LLP from April 2014 to February 2015, and as an Associate Attorney with Dechert LLP from September 2011 to April 2014. Ms. Kuchli is also Secretary of the Elevation ETF Trust, Secretary of the Principal Real Estate Income Fund, Assistant Secretary of the James Advantage Funds (May 2015 – present), and Assistant Secretary of the ALPS ETF Trust. | N/A | N/A |
| Annual Report | October 31, 2016 | 27 |
| RiverNorth Opportunities Fund, Inc. | Directors and Officers |
October 31, 2016 (Unaudited)
INTERESTED BOARD MEMBERS(5) AND OFFICERS | | |
Name and Year of Birth | Position(s) Held with Registrant | Term of Office(1) and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex(2) Overseen by Director | Other Directorships(3) Held by Director During Past 5 Years |
Andrew Meloni
(1969) | Assistant Treasurer | Has served since 2016 | Mr. Meloni is a Fund Controller for ALPS Fund Services, Inc. Mr. Meloni joined ALPS in 2007 and because of his position with ALPS, he is deemed an affiliate of the Fund as defined under the 1940 Act. Mr. Meloni is also Assistant Treasurer to the Liberty All - Star Equity Fund, Liberty All - Star Growth Fund, Inc. and Principal Real Estate Income Fund. | N/A | N/A |
| (1) | After a Director’s initial term, each Director is expected to serve a three-year term. |
| (2) | The term “Fund Complex” means two or more registered investment companies that: |
| (a) | hold themselves out to investors as related companies for purposes of investment and investor services; or |
| (b) | have a common investment adviser or that have an investment adviser that is an affiliated person of the investment adviser of any of the other registered investment companies. |
For Messrs. John Carter, Galley and Oakes, the Fund complex consists of the Fund (1 Fund) and the RiverNorth Funds (3 Funds). For Mr. Swanson, the Fund complex consists of the Fund (1 Fund) and the ALPS Variable Insurance Trust (10 Funds). For Mr. Thomas Carter, the Fund complex consists of the Fund (1 Fund), the Principal Real Estate Income Fund (1 Fund), ALPS Variable Insurance Trust (10 Funds) and the ALPS ETF Trust (21 Funds). For Mr. Hutchens, the Fund complex consists of the Fund (1 Fund).
| (3) | The numbers enclosed in the parentheticals represent the number of funds overseen in each respective directorship held by the Director. |
| (4) | The Fund began trading in 2015. |
| (5) | “Interested Board Members” refers to those Board Members who constitute “interested persons” of the Fund as defined in the 1940 Act. |
| (6) | Mr. Carter is considered to be an “Interested Board Member” because of his affiliation with the Adviser and ALPS. |
The Statement of Additional Information includes additional information about the Fund's Trustees and is available, without charge, upon request by calling (toll-free) 1-855-830-1222.
| RiverNorth Opportunities Fund, Inc. | Additional Information |
October 31, 2016 (Unaudited)
PORTFOLIO HOLDINGS
The Fund files a complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q within 60 days after the end of the period. Copies of the Fund’s Form N-Q are available without a charge, upon request, by contacting the Fund at 1-855-830-1222 and on the SEC’s website at http://www.sec.gov. You may also review and copy Form N–Q at the SEC’s Public Reference Room in Washington, D.C. For more information about the operation of the Public Reference Room, please call the SEC at 1-800-SEC-0330.
PROXY VOTING
A description of the Fund’s proxy voting policies and procedures is available (1) without charge, upon request, by calling 1-855-830-1222, (2) on the Fund’s website located at http://www.rivernorthcef.com, or (3) on the SEC’s website at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the twelve-month period ended June 30th is available on the SEC’s website at http://www.sec.gov.
SECTION 19(A) NOTICES
The following table sets forth the estimated amount of the sources of distribution for purposes of Section 19 of the Investment Company Act of 1940, as amended, and the related rules adopted there under. A Fund estimates the following percentages, of the total distribution amount per share, attributable to (i) current and prior fiscal year net investment income, (ii) net realized short-term capital gain, (iii) net realized long-term capital gain and (iv) return of capital or other capital source as a percentage of the total distribution amount. These percentages are disclosed for the fiscal year-to-date cumulative distribution amount per share for the Fund. The amounts and sources of distributions reported in these 19(a) notices are only estimates and not for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during the remainder of the calendar year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
| Per Share Cumulative Distributions for the period ended October 31, 2016* |
| Net Investment Income | Net Realized Capital Gains | Return of Capital | Total Per Share |
| $1.1581 | $0.8203 | $0.1996 | $2.1780 |
| Percentage of the Total Cumulative Distributions for the period ended October 31, 2016* |
| Net Investment Income | Net Realized Capital Gains | Return of Capital | Total Per Share |
| 53.17% | 37.67% | 9.16% | 100.00% |
| * | The Fund commenced operations on December 24, 2015. |
| Annual Report | October 31, 2016 | 29 |
| RiverNorth Opportunities Fund, Inc. | Additional Information |
October 31, 2016 (Unaudited)
UNAUDITED TAX INFORMATION
The Fund will notify shareholders in early 2017 of amounts paid to them by the Fund, if any, during the calendar year 2016.
Pursuant to Section 852(b)(3) of the Internal Revenue Code, the Fund designated $1,682,509 as long-term capital gain dividends.
DATA PRIVACY POLICIES AND PROCEDURES
Policy Statement: The Fund has in effect the following policy with respect to nonpublic personal information about its customers:
| · | Only such information received from customers, through application forms or otherwise, and information about customers’ Fund transactions will be collected. |
| · | None of such information about customers (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). |
| · | Policies and procedures (including physical, electronic and procedural safeguards) are in place and designed to protect the confidentiality and properly disposal 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.
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 will maintain custody of the securities and cash of the Fund.
DST Systems, Inc., located at 333 West 11th Street, 5th Floor, Kansas City, Missouri 64105, serves as the Fund’s transfer agent and registrar.
LEGAL COUNSEL
Dechert LLP, New York, New York, serves as legal counsel to the Trust.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Cohen & Company, Ltd. is the independent registered public accounting firm for the Fund.
Intentionally Left Blank
RiverNorth Capital Management, LLC
325 N. LaSalle Street, Suite 645
Chicago, IL 60654
Secondary market support provided to the Fund by ALPS Fund Services, Inc.’s affiliate, ALPS Portfolio Solutions Distributor, Inc., a FINRA member.
The Registrant’s Board of Directors has determined that the Registrant has as least one audit committee financial expert serving on its Audit Committee. The Board of Directors has designated J. Wayne Hutchens as the Registrant’s “audit committee financial expert.” Mr. Hutchens is “independent” as defined in paragraph (a)(2) of Item 3 to Form N-CSR.
The Registrant has a separately designated standing Audit Committee established in accordance with Section 3 (a)(58)(A) of the Exchange Act and is comprised of the following members:
J. Wayne Hutchens, Chairman
John K. Carter
John S. Oakes
David M. Swanson
Attached, as Exhibit Item 7, is a copy of the policies and procedures of the Registrant.
Patrick W. Galley, CFA
Mr. Galley is the Fund’s co-portfolio manager. Mr. Galley is the 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 RiverNorth 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.
Mr. Galley’s and Mr. O’Neill’s total compensation which is paid by the Subadviser (and not the Fund) includes a base salary fixed from year to year and a variable performance bonus consisting of cash incentives, which may include mandatory investments in the Fund. The amounts paid to Mr. Galley and Mr. O’Neill are based on a percentage of the fees earned by the Subadviser from managing the Fund and other investment accounts. The performance bonus reflects individual performance and the performance of the Subadviser’s business as a whole. Mr. Galley and Mr. O’Neill also participate in a 401K program on the same basis as other officers of the Subadviser.
Not applicable.
There have been no material changes by which shareholders may recommend nominees to the Board of Directors.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RIVERNORTH OPPORTUNITIES FUND, INC.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
