RiverNorth Specialty Finance Corporation*

Ticker: RSF

* Formerly known as RiverNorth Marketplace Lending Corporation. The Fund began trading on the New York Stock Exchange (NYSE) effective June 12, 2019 under the ticker symbol RSF. Previously the Fund was known as RMPLX and was purchased directly.

Literature
Investment Objective & Strategy Overview
Fund Highlights
Structural Highlights
Fund Info
Preferred Issue
Portfolio Detail
Performance
Portfolio Managers
Distributions
Tender Offer Schedule
Disclosures & Definitions

Fund Data as of 8.3.2020

NYSE Ticker NAV Market Price Premium/Discount Total Net Assets
RSF $17.27 $14.75 -14.59% $94.57M

Literature

Podcast
Andrew Kerai, co-portfolio manager of RiverNorth Specialty Finance Corporation talked about the recent investment strategy shift and improving portfolio credit quality in the COVID-19 marketplace on The NAVigator.

Investment Objective & Strategy Overview

The objective of RiverNorth Specialty Finance Corporation is to seek a high level of current income.

The Fund seeks to achieve its investment objective by investing in credit instruments, including a portfolio of securities of specialty finance and other Financial companies that the Fund's Advisor, RiverNorth Capital Management, LLC ("RiverNorth") believes offer attractive opportunities for income.

The Fund may invest in income-producing securities of any maturity and credit quality, including below investment grade, and equity securities, including exchange traded funds and registered closed-end funds.

Fund Highlights

Structural Highlights

Fund Information

** Managed assets include assets attributable to leverage.

*** Pursuant to Rule 23c-3 of the 1940 Act, the Fund must make a quarterly repurchase offer of at least 5% of the Fund's outstanding shares. The Fund's Board of Directors will set the actual level of the quarterly repurchase offers. It is possible that a repurchase offer may be oversubscribed, in which case shareholders may only have a portion of their shares repurchased. Subject to the above, quarterly repurchase offers and liquidity are limited.

Preferred Issue

5.875% Series A Term Preferred Stock Due 2024

Preferred Issue: Distributions

Record Date Ex-Date Payable Date Total Distribution
02.01.18 01.31.18 02.15.18 $0.44880
05.01.18 04.30.18 05.15.18 $0.36719
08.01.18 07.31.18 08.15.18 $0.36719
11.01.18 10.31.18 11.15.18 $0.36719
02.01.19 01.31.19 02.15.19 $0.36719
05.01.19 04.30.19 05.15.19 $0.36719
08.01.19 07.31.19 08.15.19 $0.36719
11.01.19 10.31.19 11.15.19 $0.36719
02.03.20 01.31.20 2.18.20 $0.36719
05.01.20 04.30.20 5.15.20 $0.36719
08.03.20 07.31.20 8.17.20 - -
11.02.20 10.30.20 11.16.20 - -

The distribution was calculated based on the preferred shares Liquidation Preference of $25.00 per share and most current distribution rate per share of 5.875%. Distributions may be paid from sources of income other than ordinary income, such as net realized short-term capital gains, net realized long term capital gains and return of capital. The current distribution has been paid from ordinary income. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. If a distribution includes anything other than net investment income, the Fund provides a Section 19(a) notice of the best estimate of its distribution sources at that time. These estimates may not match the final tax characterization (for the full year's distributions) contained in shareholders' 1099-DIV forms after the end of the year.

Portfolio Detail as of 6.30.2020

Portfolio Statistics
Distribution Yield3 14.55
Leverage Ratio4 29.10%
Duration - Whole Loan Portfolio1 1.00 years
Weighted Average FICO5 742
Total Number of Loans 8,197
Average Loan Size $6,726

Portfolio asset allocations are estimates made by the adviser and are subject to change.

Portfolio Composition: Allocation By Loan Type
Type Exposure
Cash 23%
Investment Company Notes 20%
Small Business Whole Loans 17%
Consumer Whole Loans 17%
Marketplace Lending ABS Debt Securities 12%
Marketplace Lending ABS Residual Securities 6%
BDC Equity Securities 5%
Cash 23%
Investment Company Notes 20%
Small Business Whole Loans 17%
Consumer Whole Loans 17%
Marketplace Lending ABS Debt Securities 12%
Marketplace Lending ABS Residual Securities 6%
BDC Equity Securities 5%
Geographic Breakdown: Top 10 States
Top 10 States Total Exposure: 58.4%
California 15.1%
Texas 8.1%
Florida 7.6%
New York 6.6%
Georgia 4.0%
Virginia 3.8%
North Carolina 3.5%
Ohio 3.5%
New Jersey 3.4%
Pennsylvania 2.8%

Allocations are estimates made by the adviser and subject to change.

Performance (net of fees) 

Total Returns for the Period Ending 6.30.2020

  June 3 Month 1 Year 3 Year Since
Inception*†
RiverNorth Specialty Finance Corporation
Net Asset Value
-0.12% -4.78% -8.49% -1.83% -0.02%
RiverNorth Specialty Finance Corporation
Market Price
-0.60% -4.78% -16.84% -6.49% -3.81%
Bloomberg Barclays U.S. Aggregate Bond Index6 0.63% 2.90% 8.74% 5.32% 4.04%

† Annualized   * RSF Inception Date: 9.22.2016

Performance data quoted represents past performance, which is not a guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Total return measures net investment income and capital gain or loss from portfolio investments. All performance shown assumes reinvestment of dividends and capital gains distributions. Other fees and expenses are applicable to an investment in this fund.

The Fund's gross expense ratio is 2.27%. The net expense ratio is 2.24%, which is lower due to a contractual fee waiver. This ratio reflects the direct and indirect expenses paid by the Fund. The net expense ratio represents the percentage paid by investors.

The Fund operating expense of 1.95% is equal to the net expense ratio minus the Loan Servicing Fee incurred by the Fund. The Fund's Management Fee is 1.25%.

The Fund began trading on the NYSE effective June 12, 2019 under the ticker symbol RSF. Formerly the Fund was known as RMPLX and was purchased directly. The performance data above reflects shares of the Fund when it was known as RMPLX. Longer dated market price returns are a blend of the NAV return until June 11th, 2019 combined with the market price return thereafter.

Portfolio Managers

Patrick Galley, CFA

Patrick joined RiverNorth in 2004 and serves as Chief Executive Officer and Chief Investment Officer. Patrick is responsible for strategic planning and business development and oversees all portfolio management activities at RiverNorth. In addition, Patrick serves as the President and Chairman of all RiverNorth proprietary funds.

Read full bio »

Andrew Kerai, CFA

Andrew joined RiverNorth in 2015 and serves as Portfolio Manager and Senior Credit Strategist. Andrew works with the firm's marketplace lending investment team in analyzing credit performance and portfolio positioning within the strategy.

Read full bio »

Janae Stanton

Janae joined RiverNorth in 2016 and serves as a Portfolio Manager and Credit & Portfolio Risk Manager. Janae is responsible for quantitative portfolio analysis and asset valuation of the firm's marketplace lending strategy assets, with a focus on building proprietary default and prepayment models.

Read full bio »

Distributions

Record Date Ex-Date Payable
Date
Income Short Term
Gains
Long Term
Gains
Total Distributions Section 19a-1
Notice
DISTRIBUTIONS PAID
12.28.16 12.29.16 12.30.16 $0.35489 $0.00000 $0.00000 $0.35489 - -
3.29.17 3.30.17 3.31.17 $0.49891 $0.00000 $0.00000 $0.49891 - -
5.26.17 5.30.17 5.31.17 $0.39000 $0.00000 $0.00000 $0.39000 - -
8.29.17 8.30.17 8.31.17 $0.41000 $0.00000 $0.00000 $0.41000 - -
11.28.17 11.29.17 11.30.17 $0.59744 $0.00000 $0.00000 $0.59744 - -
12.27.17 12.28.17 12.29.17 $0.34260 $0.00000 $0.00000 $0.34260 - -
2.26.18 2.27.18 2.28.18 $0.47570 $0.00000 $0.00000 $0.47570 - -
5.25.18 5.29.18 5.30.18 $0.70210 $0.00000 $0.00000 $0.70210 - -
8.28.18 8.29.18 8.30.18 $0.64180 $0.00000 $0.00000 $0.64180 - -
11.27.18 11.28.18 11.29.18 $0.45830 $0.00000 $0.00000 $0.45830 - -
2.25.19 2.26.19 2.27.19 $0.44049 $0.00000 $0.00000 $0.44049 - -
5.28.19 5.29.19 5.30.19 $0.43714 $0.00000 $0.00000 $0.43714 - -
7.11.19 7.10.19 7.31.19 $0.36000 $0.00000 $0.00000 $0.36000 - -
8.15.19 8.14.19 8.30.19 $0.18000 $0.00000 $0.00000 $0.18000 - -
9.12.19 9.11.19 9.30.19 $0.18000 $0.00000 $0.00000 $0.18000 - -
10.17.19 10.16.19 10.31.19 $0.18000 $0.00000 $0.00000 $0.18000 - -
11.14.19 11.13.19 11.29.19 $0.18000 $0.00000 $0.00000 $0.18000 November
12.12.19 12.11.19 12.31.19 $0.18000 $0.00000 $0.00000 $0.18000 December
1.17.20 1.16.20 1.31.20 $0.18000 $0.00000 $0.00000 $0.18000 January
2.14.20 2.13.20 2.28.20 $0.18000 $0.00000 $0.00000 $0.18000 February
3.17.20 3.16.20 3.31.20 $0.18000 $0.00000 $0.00000 $0.18000 March
4.16.20 4.15.20 4.30.20 $0.18000 $0.00000 $0.00000 $0.18000 April
5.15.20 5.14.20 5.29.20 $0.18000 $0.00000 $0.00000 $0.18000 May
6.16.20 6.15.20 6.30.20 $0.18000 $0.00000 $0.00000 $0.18000 June
7.17.20 7.16.20 7.31.20 $0.14530 $0.00000 $0.00000 $0.14530 - -
DISTRIBUTIONS DECLARED
8.14.20 8.13.20 8.31.20 $0.14530 $0.00000 $0.00000 $0.14530 - -
9.16.20 9.15.20 9.30.20 $0.14530 $0.00000 $0.00000 $0.14530 - -
DISTRIBUTION DATES
10.16.20 10.15.20 10.30.20 - - - - - - - - - -
11.13.20 11.12.20 11.30.20 - - - - - - - - - -
12.17.20 12.16.20 12.31.20 - - - - - - - - - -

Tentative Tender Offer Schedule

Period Tender Date
Q3 2020 7.8.2020
Q4 2020 10.14.2020

Disclosures & Definitions

See the prospectus for a more detailed description of Fund risks. Investing involves risk. Principal loss is possible.

The profitability of specialty finance and other financial companies is largely dependent upon the availability and cost of capital funds, and may fluctuate significantly in response to changes in interest rates, as well as changes in general economic conditions If the borrower of Alternative Credit (as defined below) in which the Fund invests is unable to make its payments on a loan, the Fund may be greatly limited in its ability to recover any outstanding principal and interest under such loan, as (among other reasons) the Fund may not have direct recourse against the borrower or may otherwise be limited in its ability to directly enforce its rights under the loan, whether through the borrower or the platform through which such loan was originated, the loan may be unsecured or under collateralized, and/or it may be impracticable to commence a legal proceeding against the defaulting borrower. Substantially all of the Alternative Credit in which the Fund invests will not be guaranteed or insured by a third party. In addition, the Alternative Credit Instruments in which the Fund may invest will not be backed by any governmental authority. Prospective borrowers supply a variety of information regarding the purpose of the loan, income, occupation and employment status (as applicable) to the lending platforms. As a general matter, platforms do not verify the majority of this information, which may be incomplete, inaccurate, false or misleading. Prospective borrowers may misrepresent any of the information they provide to the platforms, including their intentions for the use of the loan proceeds. Alternative Credit Instruments are generally not rated by the nationally recognized statistical rating organizations (“NRSROs”). Such unrated instruments, however, are considered to be comparable in quality to securities falling into any of the ratings categories used by such NRSROs to classify “junk” bonds (i.e., below investment grade securities). Accordingly, the Fund’s unrated Alternative Credit Instrument investments constitute highly risky and speculative investments similar to investments in “junk” bonds, notwithstanding that the Fund is not permitted to invest in loans that are of subprime quality at the time of investment. Although the Fund is not permitted to invest in loans that are of subprime quality at the time of investment, an investment in the Fund’s Shares should be considered speculative and involving a high degree of risk, including the risk of loss of investment. There can be no assurance that payments due on underlying loans, including Alternative Credit, will be made.

Diversification does not ensure a profit or a guarantee against loss.

1 Duration is calculated by RiverNorth and is a measure of the sensitivity of the price of a fixed income investment to a change in interest rates. Duration is expressed as a number of years.

2 Yield is the income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.

3 Based on the Fund's most recent distribution date of 6.30.2020 market price (MP) $14.85 and most current distribution rate per share of $0.18000. Distributions have been paid from sources of income other than ordinary income, such as net realized short-term capital gains, net realized long-term capital gains and return of capital. Based on current estimates, we anticipate the current distribution has been paid from ordinary income. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. If a distribution includes anything other than net investment income, the Fund provides a Section 19(a) notice of the best estimate of its distribution sources at that time. These estimates may not match the final tax characterization (for the full year's distributions) contained in shareholders' 1099-DIV forms after the end of the year.

4 Leverage ratio is the amount outstanding for all debt and preferred securities divided by the Total Managed Assets of the Fund.

5 The weighted average of all the FICO scores in the Fund. It is calculated by weighting the FICO score of each loan by its outstanding balance. The measure gives investors an idea of how creditworthy the Fund's underlying loans are overall. The lower the weighted average FICO score, the less creditworthy, and riskier the portfolio. Related: FICO score is a type of credit score created by the Fair Isaac Corporation. Lenders use borrowers' FICO scores along with other details on borrowers' credit reports to assess and determine whether to extend credit. Small business loans do not have FICO scores.

6 The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index of investment-grade fixed-rate debt issues with maturities of at least one year. The index cannot be invested in directly and does not reflect fees and expenses. The Barclays Capital U.S. Aggregate Bond Index is listed for broad market comparison purposes only. The securities in the index do not correlate to those held in the Fund. Leverage creates risks which may adversely affect returns.

As of the prospectus dated 3.23.2020, the Adviser has agreed to waive or reimburse expenses of the Fund (other than brokerage fees and commissions; loan servicing fees; borrowing costs such as (i) interest and (ii) dividends on securities sold short; taxes; indirect expenses incurred by the underlying funds in which the Fund may invest; the cost of leverage; and extraordinary expenses) to the extent necessary to limit the Fund's total annual operating expenses at 1.95% of the average daily Managed Assets for that period. The Adviser may recover from the Fund expenses reimbursed for three years after the date of the payment or waiver if the Fund's operating expenses, including the recovered expenses, falls below the expense cap. The amount of any recovery, taken together with the fees and expenses of the Fund at the time of recovery, will not exceed the lesser of (i) the expense cap in effect at the time the expenses were reimbursed, and (ii) the expense cap in effect at the time the recovery is sought. Subject to the foregoing waiver or reimbursement of Fund expenses, the Shareholders will indirectly bear all of the expenses of the Fund. The net expense ratio represents the percentage paid by investors.

CFA® is a trademark owned by the CFA Institute.

Past performance is no guarantee of future results.