Company: RFMZ
Filing Date: 2025-03-07
Form Type: N-CSRS
Source: 0001398344-25-005064
Chunk: 19

Company: RiverNorth Flexible Municipal Income Fund II, Inc.
Filing Date: 2025-03-07
Form: N-CSRS
Chunk 19
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 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 In connection with the adoption of Rule 18f-4, the SEC rescinded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. With respect to reverse repurchase agreements, tender option bonds or other similar financing transactions in particular,
Rule 18f-4 permits a fund to enter into such transactions if the fund either (i) complies with the asset coverage requirements of Section
18 of the 1940 Act, and combines the aggregate amount of indebtedness associated with all tender option bonds or similar financing with
the aggregate amount of any other senior securities representing indebtedness when calculating the relevant asset coverage ratio, or (ii)
treats all tender option bonds or similar financing transactions as derivatives transactions for all purposes under Rule 18f-4. 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.

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RiverNorth Flexible Municipal Income Fund II, Inc.

Market Risk Factors: In pursuit of its
investment objectives, the Fund may seek to use derivatives to increase or decrease its exposure to the following market risk factors:

Equity Risk: Equity risk relates to the change in
value of equity securities as they relate to increases or decreases in the general market.

Interest Rate Risk: Interest rate risk relates to
the risk that the municipal securities in the Fund’s portfolio will decline in value because of increases in market interest rates.

Risk of Investing in Derivatives

The Fund’s use of derivatives can result
in losses due to unanticipated changes in the market risk factors and the overall market. Derivatives may have little or no initial cash
investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This
use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase
the volatility of the Fund’s performance.

Additional associated risks from investing in
derivatives also exist and potentially could have significant effects on the valuation of the derivative