Opinion
on the Financial Statements
We
have audited the accompanying statement of assets and liabilities, including the schedule of investments, of RiverNorth Opportunistic
Municipal Income Fund, Inc. (the “Fund”) as of June 30, 2022, the related statements of operations and cash flows
for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the related
notes, and the financial highlights for each of the four periods in the period then ended (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Fund as of June 30, 2022, the results of its operations and its cash flows for the year then ended, the changes in net
assets for each of the two years in the period then ended, and the financial highlights for each of the four periods in the period
then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the
Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or
fraud.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as
of June 30, 2022, by correspondence with the custodian, trust administrators, and brokers; when replies were not received from
brokers, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
We
have served as the auditor of one or more of RiverNorth Capital Management, LLC’s investment companies since 2006.
COHEN & COMPANY, LTD.
Cleveland,
Ohio
August
29, 2022
36 |
(888)
848-7569 | www.rivernorth.com |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Dividend
Reinvestment Plan |
June
30, 2022 (Unaudited) |
The
Fund has an automatic 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 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. Reinvested Dividends
will increase the Fund’s Managed Assets on which the management fee is payable to the Adviser (and by the Adviser to the
Sub-Adviser).
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.
Annual Report | June 30,
2022 |
37 |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Dividend
Reinvestment Plan |
June
30, 2022 (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, even though such participants have not received any cash with which to pay the resulting tax. 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 (844) 569-4750.
38 |
(888)
848-7569 | www.rivernorth.com |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
The
following information in this annual report is a summary of certain information about the Fund and changes since the Fund’s
most recent annual report for June 30, 2021 (the “prior disclosure date”). This information may not reflect all of
the changes that have occurred since you purchased the Fund.
Investment
Objectives
There
have been no changes in the Fund’s investment objectives since the prior disclosure date that have not been approved by shareholders.
The
Fund’s primary investment objective is current income exempt from regular U.S. federal income taxes (but which may be includable
in taxable income for purposes of the Federal alternative minimum tax). The Fund’s secondary investment objective is total return.
Principal
Investment Strategies and Policies
Since
the prior disclosure date, the limitations on the amount of the Fund's Managed Assets that may be in Hedging Positions (defined below)
have been eliminated.
Under
normal market conditions, the Fund seeks to achieve its investment objectives by investing, directly or indirectly, at least 80% of its
Managed Assets (defined below) in municipal bonds, the interest on which is, in the opinion of bond counsel to the issuers, generally
excludable from gross income for regular U.S. federal income tax purposes, except that the interest may be includable in taxable income
for purposes of the Federal alternative minimum tax (“Municipal Bonds”). In order to qualify to pay exempt-interest dividends,
which are items of interest excludable from gross income for federal income tax purposes, the Fund seeks to invest at least 50% of its
Managed Assets directly in such Municipal Bonds.
Municipal
Bonds are debt obligations, which may have a variety of issuers, including governmental entities or other qualifying issuers. Issuers
may be states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies
and instrumentalities. Such territories of the United States include Puerto Rico. Municipal Bonds include, among other instruments, general
obligation bonds, revenue bonds, municipal leases, certificates of participation, private activity bonds, moral obligation bonds, and
tobacco settlement bonds, as well as short-term, tax-exempt obligations such as municipal notes and variable rate demand obligations.
The
Fund seeks to allocate its assets between the two principal strategies described below. RiverNorth Capital Management, LLC (the “Adviser”)
determines the portion of the Fund’s Managed Assets to allocate to each strategy and may, from time to time, adjust the allocations.
Under normal market conditions, the Fund may allocate between 25% and 50% of its Managed Assets to the Tactical Municipal Closed-End
Fund Strategy and 50% to 75% of its Managed Assets to the Municipal Bond Income Strategy.
Tactical
Municipal Closed-End Fund Strategy (25%-50% of Managed Assets). This strategy seeks to (i) generate returns through investments in
closed-end funds, exchange-traded funds (“ETFs”) and other investment companies (collectively, the “Underlying Funds”)
that invest, under normal market conditions, at least 80% of their net assets, plus the amount of any borrowings for investment purposes,
in Municipal Bonds, and (ii) derive value from the discount and premium spreads associated with closed-end funds that invest, under normal
market conditions, at least 80% of their net assets, plus the amount of any borrowings for investment purposes, in Municipal Bonds. All
Underlying Funds will be registered under the Securities Act of 1933, as amended (the “Securities Act”).
Annual Report | June 30,
2022 |
39 |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Under
normal market conditions, the Fund limits its investments in closed-end funds that have been in operation for less than one year to no
more than 10% of the Fund’s Managed Assets allocated to the Tactical Municipal Closed-End Fund Strategy. The Fund will not invest
in inverse ETFs or leveraged ETFs. Under normal market conditions, the Fund may not invest more than 20% of its Managed Assets in the
Tactical Municipal Closed-End Fund Strategy in single state municipal closed-end funds. The Fund’s shareholders will indirectly
bear the expenses, including the management fees, of the Underlying Funds.
Under
Section 12(d)(1)(A) of the 1940 Act, the Fund may hold securities of an Underlying Fund in amounts which (i) do not exceed 3% of the
total outstanding voting stock of the Underlying Fund, (ii) do not exceed 5% of the value of the Fund’s total assets and (iii)
when added to all other Underlying Fund securities held by the Fund, do not exceed 10% of the value of the Fund’s total assets.
These limits may be exceeded when permitted under Rule 12d1-4. The Fund intends to rely on either Section 12(d)(1)(F) of the 1940 Act,
which provides that the provisions of Section 12(d)(1)(A) shall not apply to securities purchased or otherwise acquired by the Fund if
(i) immediately after such purchase or acquisition not more than 3% of the total outstanding stock of such Underlying Fund is owned by
the Fund and all affiliated persons of the Fund, and (ii) certain requirements are met with respect to sales charges, or Rule 12d1-4.
The
Fund may invest in Underlying Funds that invest in securities that are rated below investment grade, including those receiving the lowest
ratings from Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”),
Fitch Ratings, a part of the Fitch Group (“Fitch”), or Moody’s Investor Services, Inc. (“Moody’s”),
or comparably rated by another nationally recognized statistical rating organization (“NRSRO”) or, if unrated, determined
by the Adviser or MacKay Shields LLC (the “Subadviser”) to be of comparable credit quality, which indicates that the security
is in default or has little prospect for full recovery of principal or interest. Below investment grade securities (such as securities
rated below BBB- by S&P or Fitch or below Baa3 by Moody’s) are commonly referred to as “junk” and “high yield”
securities. Below investment grade securities are considered speculative with respect to the issuer’s capacity to pay interest
and repay principal. The Underlying Funds in which the Fund invests may invest in securities receiving the lowest ratings from the NRSROs,
including securities rated C by Moody’s or D- by S&P. Lower rated below investment grade securities are considered more vulnerable
to nonpayment than other below investment grade securities and their issuers are more dependent on favorable business, financial and
economic conditions to meet their financial commitments. The lowest rated below investment grade securities are typically already in
default.
The
Underlying Funds in which the Fund invests will not include those that are advised or subadvised by the Adviser, the Subadviser or their
affiliates.
Municipal
Bond Income Strategy (50%-75% of Managed Assets). This strategy seeks to capitalize on inefficiencies in the tax-exempt and tax-advantaged
securities markets through investments in Municipal Bonds. Under normal market conditions, the Fund may not directly invest more than
25% of the Managed Assets allocated to the Municipal Bond Income Strategy in Municipal Bonds in any one industry or in any one state
of origin, and the Fund may not directly invest more than 5% of the Managed Assets allocated to this strategy in the Municipal Bonds
of any one issuer, except that the foregoing industry and issuer restrictions shall not apply to general obligation bonds and the Fund
will consider the obligor or borrower underlying the Municipal Bond to be the “issuer.” The Fund may invest up to 30% of
the Managed Assets allocated to the Municipal Bond Income Strategy in Municipal Bonds that pay interest that may be includable in taxable
income for purposes of the Federal alternative minimum tax. The Fund can invest, directly or indirectly through Underlying Funds, in
bonds of any maturity; however, under this strategy, it will generally invest in Municipal Bonds that have a maturity of five years or
longer at the time of purchase.
40 |
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848-7569 | www.rivernorth.com |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Under
normal market conditions, the Fund invests at least 65% of the Fund’s Managed Assets allocated to the Municipal Bond Income Strategy
directly in investment grade Municipal Bonds. The Subadviser invests no more than 20% of the Managed Assets allocated to the Municipal
Bond Income Strategy in Municipal Bonds rated at or below Caa1 by Moody’s or CCC+ by S&P or Fitch, or comparably rated by another
NRSRO, including unrated bonds judged to be of equivalent quality as determined by the Adviser or Subadviser, as applicable. Investment
grade securities are those rated Baa or higher by Moody’s (although Moody’s considers securities rated Baa to have speculative
characteristics) or BBB or higher by S&P or rated similarly by another NRSRO or, if unrated, judged to be of equivalent quality as
determined by the Adviser or Subadviser, as applicable. If the independent ratings agencies assign different ratings to the same security,
the Fund will use the higher rating for purposes of determining the security’s credit quality. Subject to the foregoing limitations,
the Fund may invest in securities receiving the lowest ratings from the NRSROs, including securities rated C by Moody’s or D- by
S&P, which indicates that the security is in default or has little prospect for full recovery of principal or interest.
Under
normal market conditions, the Fund, or the Underlying Funds in which the Fund invests, invests at least 50% of its Managed Assets, directly
or indirectly in investment grade Municipal Bonds.
“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). Such assets attributable to leverage include the portion of assets in tender
option bond trusts of which the Fund owns TOB Residuals (as defined below) that has been effectively financed by the trust’s issuance
of TOB Floaters (as defined below).
Other
Investments. The Fund may invest, directly or indirectly, up to 20% of its Managed Assets in taxable municipal securities. Any portion
of the Fund’s assets invested in taxable municipal securities do not count toward the 50%-75% of the Fund’s assets allocated
to Municipal Bonds.
The
Fund may at times establish hedging positions, which may include short sales and derivatives, such as options, futures and swaps (“Hedging
Positions”). Such Hedging Positions may be used to attempt to protect against possible changes in the value of securities held
in or to be purchased for the Fund's portfolio and to manage the effective maturity or duration of the Fund's portfolio. The Fund's Hedging
Positions may, however, result in income or gain to the Fund that is not exempt from regular U.S. federal income taxes.
Annual Report | June 30,
2022 |
41 |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
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. The Fund may benefit from a short position when the shorted security decreases in value by more than the cost of the
transaction but will suffer a loss on a short sale if the security’s value does not decline or increase. The Fund will not engage
in any short sales of securities issued by closed-end funds.
The
Fund also may attempt to enhance the return on the cash portion of its portfolio by investing in total return swap agreements. 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 net asset value (“NAV”)
or any other reference asset that the Adviser or Subadviser chooses as the underlying asset in a total return swap. The Fund limits the
notional amount of all total return swaps in the aggregate to 15% of the Fund’s Managed Assets.
In
addition to the foregoing principal investment strategies of the Fund, the Adviser also may allocate the Fund’s Managed Assets
among cash and short-term investments. 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 Adviser or Subadviser believes
investment considerations warrant such action. High portfolio turnover may result in the realization of net short-term capital gains
by the Fund which, when distributed to common shareholders, will be taxable as ordinary income. In addition, a higher portfolio turnover
rate results in correspondingly greater brokerage commissions and other transactional expenses that are borne by the Fund.
All
percentage limitations are measured at the time of investment and may be exceeded on a going-forward basis as a result of credit rating
downgrades or market value fluctuations of the Fund’s portfolio securities. Unless otherwise specified herein, the Fund may count
its holdings in Underlying Funds towards various guideline tests, including the 80% policy so long as the earnings on the underlying
holdings of such Underlying Funds are exempt from regular U.S. federal income taxes (but which may be includable in taxable income for
purposes of the Federal alternative minimum tax).
Unless
otherwise specified, the investment policies and limitations of the Fund are not considered to be fundamental by the Fund and can be
changed without a vote of the common shareholders. The Fund’s primary investment objective, 80% policy and certain investment restrictions
specifically identified as such in the Fund’s Statement of Additional Information are considered fundamental and may not be changed
without the approval of the holders of a majority of the outstanding voting securities of the Fund, as defined in the 1940 Act, which
includes common shares and Preferred Shares, if any, voting together as a single class, and the holders of the outstanding preferred
shares, if any, voting as a single class.
42 |
(888)
848-7569 | www.rivernorth.com |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Portfolio
Composition
Set
forth below is a description of the various types of Municipal Bonds in which the Fund may invest. Obligations are included within the
term “Municipal Bonds” if the interest paid thereon is excluded from gross income for U.S. federal income tax purposes in
the opinion of bond counsel to the issuer.
Municipal
Bonds are either general obligation or revenue bonds and typically are issued to finance public projects, such as roads or public buildings,
to pay general operating expenses or to refinance outstanding debt. Municipal Bonds may also be issued for private activities, such as
housing, medical and educational facility construction or for privately owned industrial development and pollution control projects.
General obligation bonds are backed by the full faith and credit and taxing authority of the issuer and may be repaid from any revenue
source. Revenue bonds may be repaid only from the revenues of a specific facility or source. The Fund also may purchase Municipal Bonds
that represent lease obligations. These carry special risks because the issuer of the bonds may not be obligated to appropriate money
annually to make payments under the lease.
The
Municipal Bonds in which the Fund primarily invests pay interest or income that, in the opinion of bond counsel to the issuer, is exempt
from regular U.S. federal income tax. The Adviser and the Subadviser will not conduct their own analysis of the tax status of the interest
paid by Municipal Bonds held by the Fund, but will rely on the opinion of counsel to the issuer of each such instrument. The Fund may
also invest in Municipal Bonds issued by United States Territories (such as Puerto Rico or Guam) that are exempt from regular U.S. federal
income tax. In addition, the Fund may invest in other securities that pay interest or income that is, or make other distributions that
are, exempt from regular U.S. federal income tax and/or state and local taxes, regardless of the technical structure of the issuer of
the instrument. The Fund treats all of such tax-exempt securities as Municipal Bonds.
The
yields on Municipal Bonds are dependent on a variety of factors, including prevailing interest rates and the condition of the general
money market and the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issuer.
The market value of Municipal Bonds will vary with changes in interest rate levels and as a result of changing evaluations of the ability
of bond issuers to meet interest and principal payments.
General
Obligation Bonds. General obligation bonds are backed by the issuer’s full faith and credit and taxing authority for the payment
of principal and interest. The taxing authority of any governmental entity may be limited, however, by provisions of its state constitution
or laws, and an entity’s creditworthiness will depend on many factors, including potential erosion of its tax base due to population
declines, natural disasters, declines in the state’s industrial base or inability to attract new industries, economic limits on
the ability to tax without eroding the tax base, state legislative proposals or voter initiatives to limit ad valorem real property taxes
(i.e., taxes based upon an assessed value of the property) and the extent to which the entity relies on federal or state aid, access
to capital markets or other factors beyond the state’s or entity’s control. Accordingly, the capacity of the issuer of a
general obligation bond as to the timely payment of interest and the repayment of principal when due is affected by the issuer’s
maintenance of its tax base.
Annual Report | June 30,
2022 |
43 |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Revenue
Bonds. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise tax or other specific revenue sources such as payments from the user of the facility being financed.
Accordingly, the timely payment of interest and the repayment of principal in accordance with the terms of the revenue or special obligation
bond is a function of the economic viability of such facility or such revenue source.
Private
Activity Bonds. Private activity bonds are issued by or on behalf of public authorities to obtain funds to provide privately operated
housing facilities, airport, mass transit or port facilities, sewage disposal, solid waste disposal or hazardous waste treatment or disposal
facilities and certain local facilities for water supply, gas or electricity. Other types of private activity bonds, the proceeds of
which are used for the construction, equipping, repair or improvement of privately operated industrial or commercial facilities, may
constitute Municipal Bonds, although the current U.S. federal income tax laws place substantial limitations on the size of such issues.
Private
activity bonds are secured primarily by revenues derived from loan repayments or lease payments due from the entity, which may or may
not be guaranteed by a parent company or otherwise secured. Private activity bonds generally are not secured by a pledge of the taxing
power of the issuer of such bonds. Therefore, an investor should be aware that repayment of such bonds generally depends on the revenues
of a private entity and be aware of the risks that such an investment may entail. Continued ability of an entity to generate sufficient
revenues for the payment of principal and interest on such bonds will be affected by many factors including the size of the entity, capital
structure, demand for its products or services, competition, general economic conditions, government regulation and the entity’s
dependence on revenues for the operation of the particular facility being financed. The Fund expects that, due to investments in private
activity bonds, a portion of the distributions it makes on the Common Shares will be includable in the federal alternative minimum taxable
income.
Moral
Obligation Bonds. The Fund also may invest in “moral obligation” bonds, which are normally issued by special purpose
public authorities. If an issuer of moral obligation bonds is unable to meet its obligations, the repayment of such bonds becomes a moral
commitment but not a legal obligation of the state or municipality in question.
Municipal
Lease Obligations and Certificates of Participation. Also included within the general category of Municipal Bonds are participations
in lease obligations or installment purchase contract obligations of municipal authorities or entities (hereinafter collectively called
“Municipal Lease Obligations”). Although a Municipal Lease Obligation does not constitute a general obligation of the municipality
for which the municipality’s taxing power is pledged, a Municipal Lease Obligation is ordinarily backed by the municipality’s
covenant to budget for, appropriate and make the payments due under the Municipal Lease Obligation. However, certain Municipal Lease
Obligations contain “non-appropriation” clauses which provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a “non-appropriation”
lease, a Fund’s ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession
of the leased property, without recourse to the general credit of the lessee, and the disposition or re-leasing of the property might
prove difficult. A certificate of participation represents an undivided interest in an unmanaged pool of municipal leases, an installment
purchase agreement or other instruments.
44 |
(888)
848-7569 | www.rivernorth.com |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
The
certificates are typically issued by a municipal agency, a trust or other entity that has received an assignment of the payments to be
made by the state or political subdivision under such leases or installment purchase agreements. In addition, such participations generally
provide the Fund with the right to demand payment, on not more than seven days’ notice, of all or any part of the Fund’s
participation interest in the underlying leases, plus accrued interest.
Tobacco
Settlement Bonds. Included in the general category of Municipal Bonds in which the Fund may invest are “tobacco settlement
bonds.” The Fund may invest in tobacco settlement bonds, which are municipal securities that are backed solely by expected revenues
to be derived from lawsuits involving tobacco related deaths and illnesses which were settled between certain states and American tobacco
companies. Tobacco settlement bonds are secured by an issuing state’s proportionate share in the Master Settlement Agreement (“MSA”).
The MSA is an agreement, reached out of court in November 1998 between 46 states and nearly all of the U.S. tobacco manufacturers. The
MSA provides for annual payments in perpetuity by the manufacturers to the states in exchange for releasing all claims against the manufacturers
and a pledge of no further litigation. Tobacco manufacturers pay into a master escrow trust based on their market share, and each state
receives a fixed percentage of the payment as set forth in the MSA. A number of states have securitized the future flow of those payments
by selling bonds pursuant to indentures or through distinct governmental entities created for such purpose. The principal and interest
payments on the bonds are backed by the future revenue flow related to the MSA. Annual payments on the bonds, and thus risk to the Fund,
are highly dependent on the receipt of future settlement payments to the state or its governmental entity.
Zero
Coupon Bonds. The Fund may invest in zero-coupon bonds. A zero coupon bond is a bond that does not pay interest either for the entire
life of the obligation or for an initial period after the issuance of the obligation. When held to its maturity, its return comes from
the difference between the purchase price and its maturity value. A zero coupon bond is normally issued and traded at a deep discount
from face value. Zero coupon bonds allow an issuer to avoid or delay the need to generate cash to meet current interest payments and,
as a result, may involve greater credit risk than bonds that pay interest currently or in cash. The market prices of zero coupon bonds
are affected to a greater extent by changes in prevailing levels of interest rates and thereby tend to be more volatile in price than
securities that pay interest periodically. In addition, the Fund would be required to distribute the income on any of these instruments
as it accrues, even though the Fund will not receive all of the income on a current basis or in cash. Thus, the Fund may have to sell
other investments, including when it may not be advisable to do so, to make income distributions to its common shareholders.
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. In addition, the Fund may enter into derivative and other transactions that have the effect of leverage. Such other
transactions may include tender option bond transactions (as described herein). The Adviser determines whether or not to engage
in leverage based on its assessment of conditions in the debt and credit markets. As of the time immediately after it enters into
any of the foregoing transactions, the Fund will seek to limit its overall effective leverage to 45% of its Managed Assets. On
December 24, 2020, the Fund entered into a credit agreement for margin financing with Pershing LLC (the “Pershing Facility”).
The Pershing Facility permits the Fund to borrow funds that are collateralized by assets held in a special custody account held
at State Street Bank & Trust Co. pursuant to a Special Custody and Pledge Agreement. Borrowings under the Pershing Facility
bear interest at the overnight bank funding rate plus 90 basis points for a term of 60 calendar days. The average principal balance
and interest rate for the period during which the credit facility was utilized for the year ended June 22, 2022 was approximately
$13,000,000 and 2.37%, respectively. At June 22, 2022, the principal balance outstanding was $13,000,000 at an interest rate of
2.37%.
Annual Report | June 30,
2022 |
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Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
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The
Fund currently anticipates that leverage will be obtained through borrowings from banks or other financial institutions and the
use of proceeds received from tender option bond transactions. To date, the Fund has not issued any Preferred Shares or debt securities.
The
provisions of the 1940 Act 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). The Fund’s use of derivatives and other transactions are not subject to such limitations if the Fund earmarks
or segregates liquid assets (or enters into offsetting positions) in accordance with applicable Securities and Exchange Commission
(“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. With respect to
the Fund’s anticipated investments in TOB Residuals issued by a tender option bond trust (as further discussed below under
“—Tender Option Bonds”), the Fund will segregate (or earmark) unencumbered liquid assets (other than the bonds
deposited into the tender option bond trust) with a value at least equal to the amount of the TOB Floaters issued by such trust
plus accrued interest, if any, to the extent necessary for the Fund to comply with the foregoing requirements of the 1940 Act.
The
use of leverage by the Fund can magnify the effect of any losses. If the income and gains earned on the securities and investments
purchased with leverage proceeds are greater than the cost of the leverage, returns will be greater than if leverage had not been
used. Conversely, if the income and gains from the securities and investments purchased with such proceeds do not cover the cost
of leverage, returns will be less than if leverage had not been used. The use of leverage magnifies gains and losses to Common
Shareholders. 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 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.
Tender
Option Bonds. The Fund may leverage its assets through the use of proceeds received from tender option bond transactions.
In a tender option bond transaction, a tender option bond trust (a “TOB Issuer”) is typically established by forming
a special purpose trust into which the Fund, or an agent on behalf of the Fund, transfers municipal bonds or other municipal securities.
A TOB Issuer typically issues two classes of beneficial interests: short-term floating rate notes (“TOB Floaters”),
which are sold to third party investors, and residual interest municipal tender option bonds (“TOB Residuals”), which
are generally issued to the Fund. The Fund may invest in both TOB Floaters and TOB Residuals, including TOB Floaters and TOB Residuals
issued by the same TOB Issuer. The Fund may not invest more than 5% of its Managed Assets in any single TOB Issuer. The Fund does
not currently intend to invest in TOB Residuals issued by a TOB Issuer that was not formed for the Fund, although it reserves
the right to do so in the future.
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Opportunistic Municipal Income Fund, Inc.
Summary
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June
30, 2022 (Unaudited) |
Under
accounting rules, securities of the Fund that are deposited into a TOB Issuer are treated as investments of the Fund, and are
presented on the Fund’s Schedule of Investments and outstanding TOB Floaters issued by a TOB Issuer are presented as liabilities
in the Fund’s Statement of Assets and Liabilities. Interest income from the underlying security is recorded by the Fund
on an accrual basis. Interest expense incurred on the TOB Floaters and other expenses related to remarketing, administration and
trustee services to a TOB Issuer are reported as expenses of the Fund.
For
TOB Floaters, generally, the interest rate earned will be based upon the market rates for municipal securities with maturities
or remarketing provisions that are comparable in duration to the periodic interval of the tender option, which may vary from weekly,
to monthly, to extended periods of one year or multiple years. Since the option feature has a shorter term than the final maturity
or first call date of the underlying securities deposited in the TOB Issuer, the Fund, if it is the holder of the TOB Floaters,
relies upon the terms of the agreement with the financial institution furnishing the option as well as the credit strength of
that institution. As further assurance of liquidity, the terms of the TOB Issuer provide for a liquidation of the municipal security
deposited in the TOB Issuer and the application of the proceeds to pay off the TOB Floaters.
There
are inherent risks with respect to investing in a TOB Issuer. These risks include, among others, the bankruptcy or default of
the issuer of the securities deposited in the TOB Issuer, a substantial downgrade in the credit quality of the issuer of the securities
deposited in the TOB Issuer, the inability of the TOB Issuer to obtain liquidity support for the TOB Floaters, a substantial decline
in the market value of the securities deposited in the TOB Issuer, or the inability of the sponsor to remarket any TOB Floaters
tendered to it by holders of the TOB Floaters.
Effects
of Leverage. The aggregate principal amount of borrowings under the Pershing Facility and the use of proceeds from tender option
bond transactions represented approximately 44.40% of Managed Assets as of June 30, 2022. Asset coverage with respect to borrowings under
the Pershing Facility was 1,566% and from tender option bond transactions was 263%. Borrowings under the Pershing Facility initially
bore interest at the overnight bank funding rate plus 90 basis points for a term of 60 calendar days. On March 28, 2022, the Fund entered
into an amendment to the Pershing Facility that revised the interest rate to the overnight bank funding rate plus 80 basis points. As
of June 30, 2022, total annual interest rate on the Pershing Facility was 2.37% of the principal amount outstanding, while the average
daily weighted interest rate applicable to the leverage attended through the use of tender option bond transactions during the period
ending June 30, 2022 was 1.17% of the note obligation outstanding. The total weighted average cost of the leverage outstanding as of
June 30, 2022 (inclusive of the Pershing Facility and leverage attended through the use of tender option bond transactions) was 0.76%
of the principal amount outstanding. Assuming that the Fund’s leverage costs remain as described above (at an assumed annual cost
of 0.76% of the principal amount outstanding) the annual return that the Fund’s portfolio must experience (net of expenses) in
order to cover its leverage costs would be 0.34%.
The
following table is furnished in response to requirements of the SEC. It is designed to illustrate
the effect of leverage on total return on common shares, assuming investment portfolio total
returns (comprised of income, net expenses and changes in the value of investments held in
the Fund’s portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio
returns are hypothetical figures and are not necessarily indicative of what the Fund’s
investment portfolio returns will be. In other words, the Fund’s actual returns may
be greater or less than those appearing in the table below. The table further reflects the
use of leverage representing approximately 44.40% of the Fund’s Managed Assets and
the Fund’s assumed annual leverage costs rate of 0.76% of the principal amounts outstanding.
Annual Report | June 30,
2022 |
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RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Assumed
Portfolio Return |
-10.00% |
-5.00% |
0.00% |
5.00% |
10.00% |
Common Share Total Return |
-18.59% |
-9.60% |
-0.61% |
8.39% |
17.38% |
Total
return is composed of two elements—the dividends on common shares paid by the Fund (the amount of which is largely determined by
the Fund’s net investment income after paying the cost of leverage) and realized and unrealized gains or losses on the value of
the securities the Fund owns. As the table shows, leverage generally increases the return to common shareholders when portfolio return
is positive or greater than the costs of leverage and decreases return when the portfolio return is negative or less than the costs of
leverage.
During
the time in which the Fund is using leverage, the amount of the fees paid to the Adviser (and from the Adviser to the Subadviser) for
investment management services (and subadvisory services) is higher than if the Fund did not use leverage because the fees paid are calculated
based on the Fund’s Managed Assets. This may create a conflict of interest between the Adviser and the Subadviser, on the one hand,
and the common shareholders, on the other. Also, because the leverage costs will be borne by the Fund at a specified interest rate, only
the Fund’s common shareholders will bear the cost of the Fund’s management fees and other expenses. There can be no assurance
that a leveraging strategy will be successful during any period in which it is employed.
Risk
Factors
Investing
in the Fund involves certain risks relating to its structure and investment objective. You should carefully consider these risk factors,
together with all of the other information included in this report, before deciding whether to make an investment in the Fund. An investment
in the Fund may not be appropriate for all investors, and an investment in the Common Shares of the Fund should not be considered a complete
investment program.
The
risks set forth below are not the only risks of the Fund, and the Fund may face other risks that have not yet been identified, which
are not currently deemed material or which are not yet predictable. If any of the following risks occur, the Fund’s financial condition
and results of operations could be materially adversely affected. In such case, the Fund’s NAV and the trading price of its securities
could decline, and you may lose all or part of your investment.
Investment-Related
Risks:
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 closed-end funds, exchange-traded funds (“ETFs”) and
business development companies (“BDCs,” and, together with the Fund’s investments in closed-end funds and ETFs, the
“Underlying Funds”). That said, each risk described below may not apply to each Underlying Fund.
Investment
and Market Risks. An investment in the Fund is subject to investment risk, including the possible loss of the entire principal amount
invested. The value of the Fund or the Underlying Funds, like other market investments, may move up or down, sometimes rapidly and unpredictably.
Overall stock market risks may also affect the net asset value of the Fund or the Underlying Funds. Factors such as economic growth and
market conditions, interest rate levels and political events affect the securities markets. An investment in the Fund may at any point
in time be worth less than the original investment, even after taking into account any reinvestment of dividends and distributions.
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Opportunistic Municipal Income Fund, Inc.
Summary
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June
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Management
Risks. The Adviser’s and 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 Adviser’s
or the Subadviser’s judgment, as applicable, will produce the desired results.
Securities
Risks. The value of the Fund or an Underlying Fund may decrease in response to the activities and financial prospects of individual
securities in the Fund’s portfolio.
Municipal
Bond Risks. The Fund’s indirect and direct investments in Municipal Bonds include certain risks. Municipal Bonds may be affected
significantly by the economic, regulatory or political developments affecting the ability of Municipal Bonds issuers to pay interest
or repay principal. This risk may be increased during periods of economic downturn or political turmoil. Many municipal securities may
be called or redeemed prior to their stated maturity. Issuers of municipal securities might seek protection under bankruptcy laws, causing
holders of municipal securities to experience delays in collecting principal and interest or prevent such holders from collecting all
principal and interest to which they are entitled. In addition, there may be less information available about Municipal Bond investments
than comparable debt and equity investments requiring a greater dependence on the Adviser’s and Sub-Adviser’s analytical
abilities.
Certain
types of Municipal Bonds may be subject to specific risks. General obligation bonds are obligations involving the credit of an issuer
possessing taxing power and are payable from such issuer’s general revenues and not from any particular source, and are subject
to risks related to the issuer’s ability to raise tax revenues and ability to maintain an adequate tax base. Revenue bonds are
subject to the risk that the underlying facilities may not generate sufficient income to pay expenses and interest costs, lack recourse
to ensure payment, or might be subordinate to other debtors. Municipal lease obligations and certificates of participation are subject
to the added risk that the governmental lessee will fail to appropriate funds to enable it to meet its payment obligations under the
lease. Moral obligation bonds are generally issued by special purpose public authorities of a state or municipality. If the issuer is
unable to meet its obligations, repayment of these bonds becomes a moral commitment, but not a legal obligation, of the state or municipality.
Municipalities and other public authorities issue private activity bonds to finance development of facilities for use by a private enterprise,
which is solely responsible for paying the principal and interest on the bond.
Failure
of Municipal Bonds to meet regulatory requirements may cause the interest received by the Fund and distributed to shareholders to be
taxable, which may apply retroactively to the date of the issuance of the bond. Municipal bonds are also subject to interest rate, credit,
and liquidity risk, which are discussed generally under this Risks Factors section.
The
current COVID-19 pandemic has significantly stressed the financial resources of many municipalities and other issuers of municipal securities,
which may impair their ability to meet their financial obligations and may harm the value or liquidity of the Fund’s investments
in municipal securities. In particular, responses by municipalities to the COVID-19 pandemic have caused disruptions in business activities.
These and other effects of the COVID-19 pandemic, such as increased unemployment levels, have impacted tax and other revenues of municipalities
and other issuers of municipal securities and the financial conditions of such issuers. As a result, there is increased budgetary and
financial pressure on municipalities and heightened risk of default or other adverse credit or similar events for issuers of municipal
securities, which would adversely impact the Fund’s investments.
Annual Report | June 30,
2022 |
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RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
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State
Specific and Industry Risk. While the Fund may not directly invest more than 25% of its Managed Assets in Municipal Bonds in any
one industry or in any one state of origin, indirect investments through Underlying Funds might increase the Fund’s exposure to
economic, political or regulatory occurrences affecting a particular state or industry.
Puerto
Rico Municipal Bond Risks. Municipal obligations issued by the Commonwealth of Puerto Rico or its political subdivisions,
agencies, instrumentalities, or public corporations may be affected by economic, market, political, and social conditions in Puerto Rico.
Puerto Rico currently is experiencing significant fiscal and economic challenges. These challenges may negatively affect the value of
the Fund’s investments in Puerto Rico Municipal Bonds. Legislation or further downgrades or defaults may place additional strain
on the Puerto Rico economy and may negatively affect the value, liquidity, and volatility of the Fund’s investments in Puerto Rico
Municipal Bonds.
Tobacco
Settlement Bond Risks. Tobacco settlement bonds are municipal securities that are backed solely by expected revenues to be derived
from lawsuits involving tobacco-related deaths and illnesses, which were settled between certain states and American tobacco companies.
Tobacco settlement bonds are secured by an issuing state’s proportionate share an agreement between 46 states and nearly all of
the U.S. tobacco manufacturers, under which, the actual amount of future settlement payments by tobacco manufacturers is dependent on
many factors, including, but not limited to, annual domestic cigarette shipments, cigarette consumption, increased taxes, inflation,
financial capability of tobacco companies, and the possibility of tobacco manufacturer bankruptcy. Payments made by tobacco manufacturers
could be negatively impacted if the decrease in tobacco consumption is significantly greater than the forecasted decline.
Credit
and Below Investment Grade Securities Risks. Credit risk is the risk that an issuer of a security may be unable or unwilling to make
dividend, interest and principal payments when due and the related risk that the value of a security may decline because of concerns
about the issuer’s ability or willingness to make such payments. Credit risk may be heightened for the Fund because it and the
Underlying Funds may invest in below investment grade securities (“junk” and “high yield” securities). Securities
of below investment grade quality are regarded as having speculative characteristics with respect to the issuer’s capacity to pay
interest and repay principal, and may be subject to higher price volatility and default risk than investment grade securities of comparable
terms and duration. Issuers of lower grade securities may be highly leveraged and may not have available to them more traditional methods
of financing. The prices of these lower grade securities are typically more sensitive to negative developments, such as a decline in
the issuer’s revenues or a general economic downturn. The secondary market for lower rated securities may not be as liquid as the
secondary market for more highly rated securities, a factor which may have an adverse effect on the Fund’s ability to dispose of
a particular security.
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RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
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June
30, 2022 (Unaudited) |
Interest
Rate Risk. Generally, when market interest rates rise, bond prices fall, and vice versa. Interest rate risk is the risk that the
municipal securities in the Fund’s portfolio will decline in value because of increases in market interest rates. As interest rates
decline, issuers of municipal securities may prepay principal earlier than scheduled, forcing the Fund to reinvest in lower-yielding
municipal securities and potentially reducing the Fund’s income. As interest rates increase, slower than expected principal payments
may extend the average life of municipal securities, potentially locking in a below-market interest rate and reducing the Fund’s
value. In typical market interest rate environments, the prices of longer-term municipal securities generally fluctuate more than prices
of shorter-term municipal securities as interest rates change.
LIBOR
Risk. Certain of the Fund's or Underlying Funds’ investments, payment obligations and financing terms may be based on floating
rates, such as LIBOR, Euro Interbank Offered Rate and other similar types of reference rates (each, a “Reference Rate”).
In July of 2017, the head of the UK Financial Conduct Authority ("FCA") announced a desire to phase out the use of LIBOR by
the end of 2021. The FCA and ICE Benchmark Administrator have since announced that most LIBOR settings will no longer be published after
December 31, 2021 and a majority of U.S. dollar LIBOR settings will cease publication after June 30, 2023. The U.S. Federal Reserve,
based on the recommendations of the New York Federal Reserve's Alternative Reference Rate Committee (comprised of major derivative market
participants and their regulators), has begun publishing Secured Overnight Financial Rate Data ("SOFR") that is intended to
replace U.S. dollar LIBOR. Proposals for alternative reference rates for other currencies have also been announced or have already begun
publication. Markets are slowly developing in response to these new reference rates. Uncertainty related to the liquidity impact of the
change in rates, and how to appropriately adjust these rates at the time of transition, poses risks for the Fund. The expected discontinuation
of LIBOR could have a significant impact on the financial markets in general and may also present heightened risk to market participants,
including public companies, investment advisers, investment companies, and broker-dealers. The risks associated with this discontinuation
and transition will be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed
in a timely manner. Accordingly, it is difficult to predict the full impact of the transition away from LIBOR on the Fund or the Underlying
Funds until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market
practices become settled. The transition process might lead to increased volatility and illiquidity in markets for instruments whose
terms currently include LIBOR. It could also lead to a reduction in the value of some LIBOR-based investments. Since the usefulness of
LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the completion of the transition.
All of the aforementioned may adversely affect the Fund’s performance or NAV.
Inflation/Deflation
Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation
decreases the value of money. As inflation increases, the real value of the Common Shares and distributions can decline. Deflation risk
is the risk that prices throughout the economy decline over time– the opposite of inflation. Deflation may have an adverse effect
on the creditworthiness of issuers and may make issuer defaults more likely, which may result in a decline in the value of the Fund’s
portfolio.
Tactical
Municipal Closed-End Fund Strategy Risk. The Fund invests in closed-end funds as a principal part of the Tactical Municipal Closed-End
Fund Strategy. The Fund may invest in shares of closed-end funds that are trading at a discount to NAV or at a premium to NAV. There
can be no assurance that the market discount on shares of any closed-end fund purchased by the Fund will ever decrease.
Annual Report | June 30,
2022 |
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RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
In
fact, it is possible that this market discount may increase and the Fund may suffer realized or unrealized capital losses due to further
decline in the market price of the securities of such closed-end funds, thereby adversely affecting the NAV of the Fund’s Common
Shares. Similarly, there can be no assurance that any shares of a closed-end fund purchased by the Fund at a premium will continue to
trade at a premium or that the premium will not decrease subsequent to a purchase of such shares by the Fund.
Underlying
Fund Risks. Because the Fund invests in Underlying Funds, the risks associated with investing in the Fund are closely related to
the risks associated with the securities and other investments held by the Underlying Funds. The ability of the Fund to achieve its investment
objective will depend upon the ability of the Underlying Funds to achieve their investment objectives. There can be no assurance that
the investment objective of any Underlying Fund will be achieved.
The
Fund’s net asset value will fluctuate in response to changes in the net asset values of the Underlying Funds in which it invests
and will be particularly sensitive to the risks associated with each of the Underlying Funds. Shareholders will bear additional 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, which may be magnified if the Underlying Funds use leverage.
Defaulted
and Distressed Securities Risks. The Fund and the Underlying Funds may invest in defaulted and distressed securities. Defaulted or
distressed issuers may be insolvent, in bankruptcy or undergoing some other form of financial restructuring. In the event of a default,
the Fund or an Underlying Fund may incur additional expenses to seek recovery. The repayment of defaulted bonds is subject to significant
uncertainties, may be delayed, or there may be partial or no recovery of repayment. There is often a time lag between when the Fund and
an Underlying Fund makes an investment and when the Fund and the Underlying Fund realizes the value of the investment.
Illiquid
Securities Risks. The Fund and 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 a fund. Illiquid securities also may
be difficult to value or be more volatile investments.
Valuation
Risk. There is no central place or national exchange for fixed-income securities trading. Uncertainties in the conditions of the
financial market, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate
asset pricing. As a result, the Fund may be subject to risk that when a fixed-income security is sold in the market, the amount received
by the Fund is less than the value of such fixed-income security carried on the Fund’s books.
Tender
Option Bonds Risks. The Fund’s participation in tender option bond transactions may reduce the Fund’s returns and/or
increase volatility. Investments in tender option bond transactions expose the Fund to counterparty risk and leverage risk. An investment
in a tender option bond transaction typically will involve greater risk than an investment in a municipal fixed rate security, including
the risk of loss of principal. Distributions on TOB Residuals will bear an inverse relationship to short-term municipal security interest
rates. Distributions on TOB Residuals paid to the Fund will be reduced or, in the extreme, eliminated as short-term municipal interest
rates rise and will increase when short-term municipal interest rates fall. The value of TOB Residuals may decline rapidly in times of
rising interest rates.
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Opportunistic Municipal Income Fund, Inc.
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The
Fund’s use of proceeds received from tender option bond transactions will create economic leverage, creating an opportunity for
increased income and returns, but will also create the possibility that long-term returns will be diminished if the cost of the TOB Floaters
exceeds the return on the securities deposited in the TOB Issuer. If the income and gains earned on Municipal Bonds deposited in a TOB
Issuer that issues TOB Residuals to the Fund are greater than the payments due on the TOB Floaters, the Fund’s returns will be
greater than if it had not invested in the TOB Residuals.
Insurance
Risks. The Fund may purchase Municipal Bonds that are secured by insurance, bank credit agreements or escrow accounts. The insurance
feature of a Municipal Bond does not guarantee the full payment of principal and interest through the life of an insured obligation,
the market value of the insured obligation or the NAV of the shares represented by such insured obligation.
Tax
Risks. Future laws, regulations, rulings or court decisions may cause interest on municipal securities to be subject, directly or
indirectly, to U.S. federal income taxation; interest on state municipal securities to be subject to state or local income taxation;
the value of state municipal securities to be subject to state or local intangible personal property tax; or may otherwise prevent the
Fund from realizing the full current benefit of the tax-exempt status of such securities. Any such change could also affect the market
price of such securities, and thus the value of an investment in the Fund.
Derivatives
Risks. The Fund and the Underlying Funds may enter into derivatives which have risks different from those associated with the Fund’s
other investments. 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
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. Except with respect to the Fund’s
investments in total return swaps, the Fund expects its use of derivative instruments will be for hedging purposes. 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, the Fund or an Underlying Fund may obtain
only a limited recovery or may obtain no recovery in such circumstances.
Annual Report | June 30,
2022 |
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RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Options
and Futures Risks. Options and futures contracts may be more volatile than investments made directly in the underlying securities,
involve additional costs, and may involve a small initial investment relative to the risk assumed. 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,
a fund may not be able to close out a transaction without incurring substantial losses. Although a 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 a fund that might result from an increase in value of the position.
Market
Disruption and Geopolitical Risks. The Fund and Underlying Funds may be adversely affected by uncertainties and events around the
world, such as terrorism, political developments, and changes in government policies, taxation, restrictions on foreign investment and
currency repatriation, currency fluctuations and other developments in the laws and regulations of the countries in which they are invested.
Assets of issuers, including those held in the Fund’s or an Underlying Fund’s portfolio, could be direct targets, or indirect
casualties, of an act of terrorism.
Russia/Ukraine
Market Risk. In February 2022, Russia commenced a military attack on Ukraine. The outbreak of hostilities between the two countries
and the threat of wider-spread hostilities could have a severe adverse effect on the region and global economies, including significant
negative impacts on the markets for certain securities and commodities, such as oil and natural gas. In addition, sanctions imposed on
Russia by the United States and other countries, and any sanctions imposed in the future, could have a significant adverse impact on
the Russian economy and related markets. The price and liquidity of investments may fluctuate widely as a result of the conflict and
related events. How long the armed conflict and related events will last cannot be predicted. These tensions and any related events could
have a significant impact on Fund performance and the value of Fund investments. The inclusion of Russia/Ukraine Market Risk under the
Risk Factors section is a material change since the prior disclosure date.
Pandemic
Risk. Beginning in the first quarter of 2020, financial markets in the United States and around the world experienced extreme and
in many cases unprecedented volatility and severe losses due to the global pandemic caused by COVID-19, a novel coronavirus, and since
then, the number of cases has fluctuated and new "variants" have been confirmed around the world. The pandemic has resulted
in a wide range of social and economic disruptions, including closed borders, voluntary or compelled quarantines of large populations,
stressed healthcare systems, reduced or prohibited domestic or international travel, supply chain disruptions, and so-called “stay-at-home”
orders throughout much of the United States and many other countries. The fall-out from these disruptions has included the rapid closure
of businesses deemed “non-essential” by federal, state, or local governments and rapidly increasing unemployment, as well
as greatly reduced liquidity for certain instruments at times. Some sectors of the economy and individual issuers have experienced particularly
large losses. Such disruptions may continue for an extended period of time or reoccur in the future to a similar or greater extent. In
response, the U.S. government and the Federal Reserve have taken extraordinary actions to support the domestic economy and financial
markets, resulting in very low interest rates and in some cases negative yields. Although vaccines for COVID-19 have become more widely
available, it is unknown how long circumstances related to the pandemic will persist, whether they will reoccur in the future, whether
efforts to support the economy and financial markets will be successful, and what additional implications may follow from the pandemic.
54 |
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848-7569 | www.rivernorth.com |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
The
impact of these events and other epidemics or pandemics in the future could adversely affect Fund performance.
Swap
Risks. The Fund and the Underlying Funds may enter into various swap agreements. Swap agreements are subject to interest rate risks;
credit risks; the risk that the counterparty to the swap will default on its obligation to pay the Fund and the risk that the Fund will
not be able to meet its obligations to pay the counterparty to the swap. In addition, there is the risk that a swap may be terminated
by the Fund or the counterparty in accordance with its terms. Each of these could cause the Fund to incur losses and fail to obtain its
investment objective.
Short
Sale Risks. Short sales are expected to be utilized by the Fund, if at all, for hedging purposes. 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. Positions in shorted
securities are speculative and riskier 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 and may also result in higher transaction costs
and higher taxes.
Rating
Agency Risk. Ratings represent an NRSRO’s opinion regarding the quality of the security and are not a guarantee of quality.
NRSROs may fail to make timely credit ratings in response to subsequent events. In addition, NRSROs are subject to an inherent conflict
of interest because they are often compensated by the same issuers whose securities they grade.
United
States Credit Rating Downgrade Risk. On August 5, 2011, S&P lowered its long-term sovereign credit rating on the United States
to “AA+” from “AAA.” In general, a lower rating could increase the volatility in both stock and bond markets,
result in higher interest rates and lower Treasury prices and increase the costs of all types of debt.
Legislation
and Regulatory Risks. At any time, legislation or additional regulations may be enacted that could negatively affect the assets of
the Fund, securities held by the Fund or the issuers of such securities. Fund shareholders may incur increased costs resulting from such
legislation or additional regulation. 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.
On
October 28, 2020, the SEC adopted Rule 18f-4 under the 1940 Act providing for the regulation of the use of derivatives and certain related
instruments by registered investment companies. Rule 18f-4 prescribes specific value-at-risk leverage limits for certain derivatives
users. In addition, Rule 18f-4 requires certain derivatives users to adopt and implement a derivatives risk management program (including
the appointment of a derivatives risk manager and the implementation of certain testing requirements) and prescribes reporting requirements
in respect of derivatives. Subject to certain conditions, if a fund qualifies as a “limited derivatives user,” as defined
in Rule 18f-4, it is not subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC rescinded
certain of its prior guidance regarding asset segregation and coverage requirements in respect of derivatives transactions and related
instruments. The Fund was required to comply with Rule 18f-4 beginning August 19, 2022 and has adopted procedures for investing in derivatives
and other transactions in compliance with Rule 18f-4.
Annual Report | June 30,
2022 |
55 |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
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 Adviser or Subadviser. During these periods, the
Fund may not be pursuing its investment objectives.
Structural
Risks:
Market
Discount. Common stock of closed-end funds frequently trades at a discount from its net asset value. This risk may be greater for
investors selling their shares in a relatively short period of time after completion of the initial offering. The Fund’s common
shares may trade at a price that is less than the initial offering price. This risk would also apply to the Fund’s investments
in closed-end funds.
Limited
Term and Eligible Tender Offer Risk. The Fund is scheduled to terminate on or around October 25, 2030 (the “Termination Date”)
unless it is converted to a perpetual fund, as described below. The Fund’s investment objectives and policies are not designed
to seek to return to investors their initial investment and such investors and investors that purchase shares of the Fund may receive
more or less than their original investment.
The
Board may, but is not required to, cause the Fund to conduct a tender offer to all common shareholders at a price equal to the NAV (an
“Eligible Tender Offer”). If the Fund conducts an Eligible Tender Offer, there can be no assurance that the Fund’s
net assets would not fall below $100 million (the “Termination Threshold”), in which case the Eligible Tender Offer will
be terminated, and the Fund will terminate on or before the Termination Date (subject to possible extensions). If the Fund’s net
assets are equal or greater than the Termination Threshold, the Fund will have a perpetual existence upon the affirmative vote of a majority
of the Board, without shareholder approval.
An
Eligible Tender Offer or liquidation may require the Fund to sell securities when it otherwise would not, or at reduced prices, leading
to losses for the Fund and increased transaction expenses. Thereafter, remaining shareholders may only be able to sell their shares at
a discount to NAV. The Adviser may have a conflict of interest in recommending that the Fund have a perpetual existence.
The
potential required sale of portfolio securities, purchase of tendered shares in an Eligible Tender Offer, and/or potential liquidation
of the Fund may also have adverse tax consequences for the Fund and shareholders. In addition, the completion of an Eligible Tender Offer
may cause disruptions and changes in the Fund’s investment portfolio, increase the proportional burden of the Fund’s expenses
on the remaining shareholders, and adversely impact the secondary market trading of such shares.
Investment
Style Risk. The Fund is managed by allocating the Fund’s assets to two different strategies, which cause the Fund to underperform
funds that do not limit their investments to these two strategies during periods when these strategies underperform other types of investments.
Multi-Manager
Risk. The Adviser and the Subadviser’s investment styles may not always be complementary, which could adversely affect the
performance of the Fund. The Adviser and the Subadviser may, at any time, take positions that in effect may be opposite of positions
taken by each other, incurring brokerage and other transaction costs without accomplishing any net investment results. The multi-manager
approach could increase the Fund’s portfolio turnover rates, which may result in higher trading costs and tax consequences associated
with portfolio turnover that may adversely affect the Fund’s performance. Further, if the Subadviser is not retained, Fund performance
will become dependent on the Adviser or a new subadviser successfully implementing the municipal bond income strategy, which might have
adverse effect on an investment in the Fund.
56 |
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848-7569 | www.rivernorth.com |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Asset
Allocation Risk. To the extent that the Adviser’s asset allocation between the Fund’s principal investment strategies
may fail to produce the intended result, the Fund’s return may suffer. Additionally, the potentially active asset allocation style
of the Fund may lead to changing allocations over time and represent a risk to investors who target fixed asset allocations.
Leverage
Risks. 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 net asset value. The leverage costs may be greater than the Fund’s return on the
underlying investments made from the proceeds of leverage. The Fund’s leveraging strategy may not be successful. Leverage risk
would also apply to the Fund’s investments in Underlying Funds to the extent an Underlying Fund uses leverage. To the extent the
Fund uses leverage and invests in Underlying Funds that also use leverage, the risks associated with leverage will be magnified, potentially
significantly.
Portfolio
Turnover Risk. The Fund’s annual portfolio turnover rate may vary greatly from year to year. High portfolio turnover may result
in the realization of net short-term capital gains by the Fund which, when distributed to shareholders, will be taxable as ordinary income.
In addition, a higher portfolio turnover rate results in correspondingly greater brokerage commissions and other transactional expenses
that are borne by the Fund. Portfolio turnover rate is not considered a limiting factor in the execution of investment decisions for
the Fund.
Potential
Conflicts of Interest Risk. The Adviser and the Subadviser each manages and/or advises other investment funds or accounts with the
same or similar investment objectives and strategies as the Fund, and, as a result may face conflict of interests regarding the implementation
of the Fund’s strategy and allocation between funds and accounts. This may limit the Fund’s ability to take full advantage
of the investment opportunity or affect the market price of the investment. Each party may also have incentives to favor one account
over another due to different fees paid to such accounts. While each party has adopted policies and procedures that address these potential
conflicts of interest, there is no guarantee that the policies will be successful in mitigating the conflicts of interest that arise.
In addition, the Fund’s use of leverage will increase the amount of the fees paid to the Adviser and Subadviser, creating a financial
incentive for the Adviser to leverage the Fund.
Stockholder
Activism. The Fund may in the future become the target of stockholder activism. Stockholder activism could result in substantial
costs and divert management’s and the Board’s attention and resources from its business. Also, the Fund may be required to
incur significant legal and other expenses related to any activist stockholder matters. Further, the Fund’s stock price could be
subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism.
Annual Report | June 30,
2022 |
57 |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Cybersecurity
Risk. A cybersecurity breach may disrupt the business operations of the Fund or its service providers. A breach may allow an unauthorized
party to gain access to Fund assets, customer data, or proprietary information, or cause the Fund and/or its service providers to suffer
data corruption or lose operational functionality.
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 to convert the Fund to open-end status, including the adoption of a staggered Board of Directors
and the supermajority voting requirements. These provisions could deprive the common shareholders of opportunities to sell their common
shares at a premium over the then current market price of the common shares or at NAV.
Risks
Associated with Additional Offerings. There are risks associated with offerings of additional common or preferred shares of the Fund.
The voting power of current shareholders will be diluted to the extent that current shareholders do not purchase shares in any future
offerings of shares or do not purchase sufficient shares to maintain their percentage interest. In addition, the sale of shares in an
offering may have an adverse effect on prices in the secondary market for the Fund’s shares by increasing the number of shares
available, which may put downward pressure on the market price of the Fund’s Shares. These sales also might make it more difficult
for the Fund to sell additional equity securities in the future at a time and price the Fund deems appropriate.
In
the event any additional series of fixed rate preferred shares are issued and such shares are intended to be listed on an exchange, prior
application will have been made to list such shares. During an initial period, which is not expected to exceed 30 days after the date
of its initial issuance, such shares may not be listed on any securities exchange. During such period, the underwriters may make a market
in such shares, although they will have no obligation to do so. Consequently, an investment in such shares may be illiquid during such
period. Fixed rate preferred shares may trade at a premium to or discount from liquidation value.
There
are risks associated with an offering of Rights (in addition to the risks discussed herein related to the offering of shares and preferred
shares). Shareholders 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 shareholder may experience dilution in net asset
value per share if the subscription price per share is below the net asset value per share on the expiration date. In addition to the
economic dilution described above, if a shareholder does not exercise all of their Rights, the shareholder will incur voting dilution
as a result of the Rights offering. This voting dilution will occur because the shareholder 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 or preferred shares purchasable upon exercise
of Rights being less attractive to investors at the conclusion of the subscription period. This may reduce or eliminate the value of
the Rights. If investors exercise only a portion of the rights, the number of shares issued may be reduced, and the shares may trade
at less favorable prices than larger offerings for similar securities. Rights issued by the Fund may be transferable or non-transferable
rights.
58 |
(888)
848-7569 | www.rivernorth.com |
RiverNorth
Opportunistic Municipal Income Fund, Inc.
Summary
of Updated Information Regarding the Fund |
June
30, 2022 (Unaudited) |
Secondary
Market for the Common Shares. The issuance of shares of the Fund through the Fund’s dividend reinvestment plan (“Plan”)
may have an adverse effect on the secondary market for the Fund’s shares. The increase in the number of outstanding shares
resulting from the issuances pursuant to the Plan and the discount to the market price at which such shares may be issued, may
put downward pressure on the market price for the Common Shares. When the shares are trading at a premium, the Fund may also issue
shares that may be sold through private transactions effected on the NYSE or through broker-dealers. The increase in the number
of outstanding shares resulting from these offerings may put downward pressure on the market price for such shares.
Portfolio
Manager Information
There
have been no changes in the Fund's portfolio managers or background since the prior disclosure date.
Fund
Organizational Structure
Since
the prior disclosure date, there have been no changes in the Fund’s charter or by-laws that would delay or prevent a change
of control of the Fund that have not been approved by shareholders.
Annual Report | June 30,
2022 |
59 |
RiverNorth
Opportunistic Municipal Income Fund, Inc.