Company: RFMZ
Filing Date: 2025-09-05
Form Type: N-CSR
Source: 0001398344-25-017693
Chunk: 5

Company: RiverNorth Flexible Municipal Income Fund II, Inc.
Filing Date: 2025-09-05
Form: N-CSR
Chunk 5
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 fiscal year ended June 30, 2025. The sleeve’s exposure to the underlying net asset values
of CEFs detracted from returns relative to the Fund’s primary benchmark.

MacKay Municipal Bond Income Strategy

During the 12 months ended June 30, 2025, the municipal
yield curve steepened, and the long end of the curve underperformed most other fixed income asset classes. The market experienced significant
volatility due to several factors, including the November 2024 presidential election, economic uncertainty, and potential changes in Federal
Reserve interest rate policy.

Municipal bond supply has been robust over the last
two years, driven by increased responsibilities on state and local governments and a backlog of infrastructure projects needing financing.
According to the Bond Buyer, October 2024 saw a remarkable total of $64.7 billion in issuance, the second highest in at least the
last decade. Weekly records were set in the first quarter of 2025, with issuance exceeding $20 billion twice. The second quarter of 2025
also set a record with $160.6 billion in new issuance.

The introduction of new tariffs in April and a deficit-raising
reconciliation bill contributed to increased volatility in fixed income yields. These factors caused a steepening of yield curves during
the second quarter of 2025, putting additional pressure on long-duration tax-exempt bonds. This is best illustrated by looking at the
change in the 30-year Municipal/US. Treasury ratio. Thirty-year ratios started 2025 at 81.4%, widened to as much as 104% and finished
in June 2025 at 95%. We believe these cheaper ratio levels represent compelling valuations for both traditional and non-traditional municipal
bond investors.

During the reporting period, the Fund improved the
structure of its holdings, while shifting some of the leverage to bonds that exhibit the potential for spread tightening. The Fund’s
holdings within the special tax, transportation and local general obligation sectors were the largest drags on both relative and absolute
returns, while premium coupon structures such as 5.25% and 5.5% coupons and exposure to certain credits in Puerto Rico and the Virgin
Islands represented positive contributions toward returns. An underweight exposure to 4% coupons versus the benchmark also represented
positive relative returns.

HOW WAS THE FUND POSITIONED AT THE END OF THE FISCAL YEAR?

The Fund allocated 37% of Managed Assets to the RiverNorth