Company: RFMZ
Filing Date: 2025-03-07
Form Type: N-CSRS
Source: 0001398344-25-005064
Chunk: 11

Company: RiverNorth Flexible Municipal Income Fund II, Inc.
Filing Date: 2025-03-07
Form: N-CSRS
Chunk 11
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 holds TOB Residuals. In connection with Fund-sponsored
TOBs, the Fund may contract with a third-party to perform some or all of the Fund’s duties as sponsor. The Fund’s role under
the Fund-sponsored TOB structure may increase its operational and regulatory risk. If the third-party is unable to perform its obligations
as an administrative agent, the Fund itself would be subject to such obligations or would need to secure a replacement agent. The obligations
that the Fund may be required to undertake could include reporting and recordkeeping obligations under the IRC and federal securities
laws and contractual obligations with other TOB service providers.

RiverNorth Flexible Municipal Income Fund II, Inc.

Under the Fund-sponsored TOB structure, the TOB
Issuer receives Underlying Securities from the Fund through (or as) the sponsor and then issues TOB Floaters to third party investors
and TOB Residuals to the Fund. The Fund is paid the cash (less transaction expenses, which are borne by the Fund) received by the TOB
Issuer from the sale of TOB Floaters and typically will invest the cash in additional municipal bonds or other investments permitted by
its investment policies. TOB Floaters may have first priority on the cash flow from the securities held by the TOB Issuer and are enhanced
with a liquidity support arrangement from a bank or an affiliate of the sponsor (the “liquidity provider”), which allows holders
to tender their position back to the TOB Issuer at par (plus accrued interest). The Fund, in addition to receiving cash from the sale
of TOB Floaters, also receives TOB Residuals. TOB Residuals provide the Fund with the right to (1) cause the holders of TOB Floaters to
tender their notes to the TOB Issuer at par (plus accrued interest), and (2) acquire the Underlying Securities from the TOB Issuer. In
addition, all voting rights and decisions to be made with respect to any other rights relating to the Underlying Securities deposited
in the TOB Issuer are passed through to the Fund, as the holder of TOB Residuals. Such a transaction, in effect, creates exposure for
the Fund to the entire return of the Underlying Securities deposited in the TOB Issuer, with a net cash investment by the Fund that is
less than the value of the Underlying Securities deposited in the TOB Issuer. This multiplies the positive or negative impact of the Underlying