CEF Market Update & RiverNorth Funds Review

Portfolio Manager Steve O'Neill provides insight into the closed-end fund market for the month of March and reviews RiverNorth's mutual fund strategies for Q1 2016.

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[BEGIN VIDEO TRANSCRIPT]

ALLEN: Steve, when we last got together in both January and February, it was a tale of capital markets volatility. We had markets down, then way down, then recovered in both those months. Now, when we look at March, how did capital markets do, and how did the closed-end fund market itself do?

STEVE: Sure, it was certainly a v-shaped recovery for the capital markets and closed-end funds as a whole. There was a lot of volatility, but for the quarter, looking as a whole, it's up about 1.6% for taxable closed-end funds and munis had a huge quarter, they were up about 5.6%.

ALLEN: Steve, I noticed discounts are now inside of about 6% for the all closed-end fund market. We've been recently talking about discounts as wide as 8-9%. With discounts narrowing, does that limit the opportunity set for you across the mutual funds?

STEVE: In my opinion, no. When you think about the market cap weighted average at about 5.8%, I think it's important to understand where those components come from. I mentioned that munis had a huge quarter. Closed-end fund investors tend to buy assets as they go up in price and discounts have narrowed on many closed-end funds. They are a surprisingly narrow 2%, and that's about 30% of the market. Then you have very large covered call closed-end funds that have been kicking off fairly high yields that have attracted investors that are trading at mid-to-low single digits as well. Maybe 40% of the market, in my opinion, is too narrow to focus on, but the remainder is always going to give us some opportunity. Today, we'll talk about the average discounts in our portfolios in a little bit, but I'm seeing a lot of opportunity in closed-end funds that are still in that 8-12% range. We certainly have been trimming some of the winners in the portfolios, munis specifically, but there's a lot of parts of the closed-end fund market that remain very much out of favor.

ALLEN: If I hear you correctly, the sum of the parts may look a little narrower than they used to, but when you dig down into some of the sub-asset classes, some of these things still trade at a pretty wide discount.

STEVE: Definitely.

ALLEN: Steve, we haven't talked about our mutual funds in quite some time. Maybe this will be a good time to talk a little bit about the positioning and just things that are going on across RiverNorth's four mutual funds. Starting with the more equity-tilted funds, that being RiverNorth Core Opportunity and RiverNorth Equity Opportunity, can you just give us some highlights about what's been going on in those two strategies?

STEVE: The RiverNorth Core Opportunity Fund is about 50% invested in equities today and 50% fixed income. On the equity portfolio, we have roughly three quarters of our exposure in US stocks and 25% international, including emerging markets. On the fixed income side, our portfolio consists of mostly mortgage and corporate credit. When you look at the closed-end fund allocation, it's about 75% of the portfolio. The average discount for this portfolio is 13.5% at 3.31. In thinking about the different groups, equity closed-end funds, obviously, we're looking at wider discounts than average and funds with large distribution rates. In a world where everyone's buying the cheapest seats you have possible, I think it's a competitive advantage for closed-end funds that have a high distribution rate. If and when investors come back to the closed-end fund market on the equity side, I think they'll favor some of the wider discounts with high distribution rates. On the fixed income side, there's a lot of good opportunity to own multi-sector fixed-income funds. In many cases, we're buying cousins of some of the popular open-end funds at 90 cents to the dollar, which always surprises me that people are pouring money into a large open-end mutual fund, but completely ignoring its cousin in the closed-end fund market.

ALLEN: So they're paying par or NAV, if you will, for the open-end version of a closed-end fund strategy they can buy at a discount to NAV.

STEVE: Yes, I mean that happens across market cycles, but today there really is quite an opportunity because the closed-end fund market tends to launch IPOs of funds that have become popular, and those popular funds remain that way. It's just strange to me that people continue to buy open-end funds at par or net asset value, when you can buy closed-end funds that in many cases are the widest they've been in years.

ALLEN: Steve, any other comments on Core Opportunity or Equity Opportunity funds?

STEVE: Sure, on the Equity Opportunity fund, that is one of our smaller funds, that's about 85% or 80% invested in closed-end funds. That portfolio's about 90% invested in US equities, and about 10% international. This is a concentrated portfolio with the fewest investments across our fund complex. The average discount is quite wide at 17.5%.

ALLEN: Steve, turning our attention to RiverNorth's fixed income strategies, RiverNorth Doubleline Strategic Income Fund, and RiverNorth Oaktree High Income Fund, can you talk about what's been happening in those two portfolios?

STEVE: Yeah, as our listeners know and our investors, the RiverNorth Doubleline Strategic Income Fund is a diversified fixed income portfolio. Again, there we have an overweight to corporate and mortgage credit. RiverNorth is managing roughly 50% of the portfolio. We have Doubleline Capital managing the balance. In Jeffrey and his team's portfolio, we have about 30% of the portfolio invested in his opportunistic income sleeve, which is focused on mortgage-backed securities, and then 20% of the portfolio in a core bond strategy. Going to the RiverNorth portfolio, we are running a diversified fixed income closed-end fund trading strategy. The average discount there is about 11%. We talk about the average discount for bond funds being low single digits, but in my opinion, there's a lot of opportunity to own, in many cases, large, liquid closed-end bond funds that are trading at very attractive discounts.

ALLEN: Steve, how about River Oaktree High Income Fund?

STEVE: Yeah, the Oaktree portfolio, this is a portfolio managed with Oaktree Capital. About 40% of the portfolio is invested in high yield bonds, 40% invested in bank loans, and the 20% is other fixed income, mostly non-agency mortgage-backed securities and emerging market bonds. The way we get that exposure is that Oaktree's managing roughly two-thirds of the portfolio, and RiverNorth's managing a third of the portfolio. I mentioned it earlier, but there are pockets of the closed-end fund space that I think are exceptionally attractive, and high-yield bonds and bank loans remain very much out of favor. We're excited about the opportunity in this portfolio to own some bank loan funds and high yield funds that if they've been trading at premiums at some point in the last two years, and we're looking at an average discount on this portfolio of roughly 11%.

ALLEN: Steve, to summarize, first on the closed-end fund market, March was a good month in and of itself, and also produced a pretty good quarter for closed-end funds, both on a discount narrowing and a total return standpoint. Then moving to the four RiverNorth mutual funds, things are fairly similar to the way they've been positioned for the last quarter or two, but the fact that discounts have narrowed some does not diminish your opportunity set in any way.

STEVE: For sure, I think the first quarter was a good one for closed-end funds. Rates remain low. The expectations for rates have been certainly modest relative to where they had been about a year ago, and so when closed-end funds are borrowing for their leverage, it's a good sign when rates are low. Credit performed well in the first quarter. There's a lot of corporate credit in the closed-end fund space. When oil is rallying the way it has off the February lows, that's another good thing given the high correlation with credit. It was a good quarter for closed-end funds. It's our view here at RiverNorth, closed-end funds tend to have momentum… investors like to buy things as they go up in price. I think that we should continue to see some discount narrowing as investors look at the space and say, "I can still buy attractive discounts for many asset classes." Frankly, the prices of stock's going down, and so people like to see some positive performance year-to-date.

ALLEN: Steve, thanks as always for your comments.

STEVE: Thank you.

[END VIDEO TRANSCRIPT]

Video recorded 4.14.2016

Produced by RiverNorth Capital Management, LLC ("RiverNorth" "we" or "us").

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This information is provided for informational purposes only and should not be considered tax, legal, or investment advice. References to specific securities, asset classes, and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. Opinions referenced are as of the day recorded and are subject to change due to changes in the market, economic conditions, or changes in the legal and/or regulatory environment and may not necessarily come to pass.

Past performance is not a guarantee of future results. Diversification does not ensure a profit or guarantee against loss.

Investing involves risk. Principal loss is possible.

An investor should consider the investment objectives, risks, charges and expenses of the Funds (or of the Investment Company) carefully before investing. To obtain a prospectus containing this or other information, please call (888) 848-7569 or download the file from www.rivernorth.com. Read the prospectus carefully before you invest.

The Funds are distributed by ALPS Distributors, Inc. Member FINRA. Allen Webb is a registered representative of ALPS Distributors, Inc.

ALPS Distributors, Inc. is not affiliated with RiverNorth Capital Management, LLC, DoubleLine Capital LP or Oakree Capital Management, L.P.

NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE

DEFINITIONS

The price at which a closed-end fund trades often varies from its NAV. Some funds have market prices below their net asset values - referred to as a discount. Conversely, some funds have market prices above their net asset values - referred to as a premium.

Market Capitalization (Market Cap) is the total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share.

Muni is short for municipal bonds.

An Initial Public Offering (IPO) is the first sale of stock by a private company to the public.

Russia Default/LTCM Crisis: Long-term capital management (LTCM) was a large hedge fund that nearly collapsed the global markets as a result of high-risk trading strategies. The default of Russian government bonds led to sustained massive losses for LTCM. The Fund was eventually bailed out by the Federal Reserve.

Fed Tightening: As concerns over a brewing housing bubble mounted, the Federal Reserve began to hike rates in June 2004 and continued hiking all the way through July 2006. The Federal Reserve "made money tight" by raising short-term interest rates (also known as the Fed funds, or discount rate), which increased the cost of borrowing and effectively reduced its attractiveness.

Quant Crash: During the week of August 6, 2007, a number of high-profile and highly successful quantitative long/short equity hedge funds experienced unprecedented losses.

Lehman Collapse: Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. Lehman faced an unprecedented loss due to the continuing subprime mortgage crisis, having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages.

S&P 667: The S&P 500 reached its financial crisis low of 667 in March 2009. The S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy based on the changing aggregate market value of these 500 stocks.

Flash Crash: The quick drop and recovery in securities prices that occurred shortly after 2:30pm Eastern Standard Time on May 6, 2010. Initial reports that the crash was caused by a mistyped order proved to be erroneous, and the causes of the flash crash remain unknown.

Muni Bond Fears: Municipal bonds experienced a major sell off as worried investors fled the market. The fears generated from a growing concern that states, cities, and counties faced huge budget shortfalls and were at risk of default.

US Debt Downgrade: Standard & Poor’s (a credit rating agency) removed the United States government from its list of risk-free borrowers for the first time. Global stock markets declined following the announcement.

Fed Taper Talk: Federal Reserve Chairman Ben Bernanke announced that the central bank would begin paring back its $85-billion-a-month bond-buying program should the economic data continue to improve. This caused an aggressive stock market sell off and an increase in interest rates.

INDEX DEFINITIONS

The High Yield CEF index total return and discount statistics are based upon the Morningstar Un-weighted High Yield CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a high yield investment strategy. High yield closed-end funds are defined as funds that seek high current income through investing in non-investment grade debt instruments.

The Preferred CEF index total return and discount statistics are based upon the Morningstar Un-weighted Preferred CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a preferred investment strategy. Preferred closed-end funds are defined as funds that invest primarily in preferred and/or convertible preferred stocks.

The Municipal Bond CEF index total return and discount statistics are based upon the Morningstar Un-weighted Municipal Bond CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a municipal bond investment strategy. Municipal bond closed-end funds are defined as funds that invest in a diversified portfolio of investment-grade municipal bonds in a variety of sectors and States.

The Global Income CEF index total return and discount statistics are based upon the Morningstar Un-weighted Global Income CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a global income investment strategy. Global income closed-end funds are defined as funds that invest primarily in a mixture of U.S. and foreign government and corporate debt, with an emphasis on developed countries.

The Investment Grade CEF index total return and discount statistics are based upon the Morningstar Un-weighted Investment Grade CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a investment grade investment strategy. Investment grade closed-end funds are defined as funds that invest primarily in investment grade debt instruments.

The Emerging Income CEF index total return and discount statistics are based upon the Morningstar Un-weighted Emerging Income CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing an emerging income investment strategy. Emerging income closed-end funds are defined as funds that invest primarily in emerging market government and corporate debt securities.

The Multi-Sector Bond CEF index total return and discount statistics are based upon the Morningstar Un-weighted Multi-Sector Bond CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a multi-sector bond investment strategy. Multi-sector bond closed-end funds are defined as funds that invest across several fixed income asset classes, with typically less than 50% in any one of these asset classes.

The Bank Loan CEF index total return and discount statistics are based upon the Morningstar Un-weighted Bank Loan CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a bank loan investment strategy. Bank loan closed-end funds are defined as funds that invest primarily in collateralized senior bank loans issued by corporations. Most of these securities are typically rated below investment grade.

The Convertible CEF index total return and discount statistics are based upon the Morningstar Un-weighted Convertible CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a convertible investment strategy. Convertible closed-end funds are defined as funds that invest primarily in Convertibles bonds / Convertible preferred stock.

The Mortgage Bond CEF index total return and discount statistics are based upon the Morningstar Un-weighted Mortgage Bond CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a mortgage bond investment strategy. Mortgage bond closed-end funds are defined as funds that invest primarily in a variety of mortgage-backed securities and mortgage derivatives.

The Government and Agency CEF index total return and discount statistics are based upon the Morningstar Un-weighted Government and Agency CEF Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a government and agency investment strategy. Government and Agency closed-end funds are defined as funds that invest primarily in U.S. Treasuries and Agency debt.

The Emerging Market Equity index total return and discount statistics are based upon the Morningstar Un-weighted Emerging Market Equity Index, which is the average of all closed-end funds categorized by Morningstar as utilizing an emerging market equity investment strategy. Emerging Market Equity closed-end funds are defined as funds that invest primarily in emerging market government and corporate debt securities.

The Covered Call index total return and discount statistics are based upon the Morningstar Un-weighted Covered Call Index, which is the average of all closed-end funds categorized by Morningstar as utilizing a covered call investment strategy. Covered call closed-end funds are defined as funds investing in equities and generate additional income by writing calls on at least 50% of their portfolio.

The Global Equity index total return and discount statistics are based upon the Morningstar Un-weighted Global Equity index, which is the average of all closed-end funds categorized by Morningstar as utilizing a global equity investment strategy. Global equity closed-end funds are defined as funds that invest primarily in equity securities in U.S. and foreign countries, with an emphasis on developed countries. Most of these funds seek long-term capital appreciation rather than high income.

The Domestic Equity index total return and discount statistics are based upon the Morningstar Un-weighted Domestic Equity index, which is the average of all closed-end funds categorized by Morningstar as utilizing a domestic equity investment strategy. Domestic equity closed-end funds are defined as funds investing their assets primarily in U.S. equity securities; generally, these funds are seeking long-term capital appreciation rather than income.

The Hybrid index total return and discount statistics are based upon the Morningstar Un-weighted Hybrid index, which is the average of all closed-end funds categorized by Morningstar as utilizing a hybrid investment strategy. Hybrid closed-end funds are funds investing in both equity and fixed-income securities in U.S. and foreign countries, with an emphasis on developed countries. Funds are categorized into this peer group if they have a policy of investing no more than 70% of their assets in either equities or fixed income.

The indexes cannot be invested in directly and do not reflect fees and expenses.

FUND RISKS

More detailed information regarding these risks can be found in the Fund's prospectus.

RiverNorth Core Opportunity Fund:

Borrowing Risk – borrowings increase fund expenses and are subject to repayment, possibly at inopportune times.

Closed-End Fund Risk – closed-end funds are exchange traded, may trade at a discount to their net asset values and may deploy leverage.

Derivatives Risk – derivatives are subject to counterparty risk.

Equity Risk – equity securities may experience volatility and the value of equity securities may move in opposite directions from each other and from other equity markets generally.

Convertible Security Risk – the market value of convertible securities adjusts with interest rates and the value of the underlying stock.

Exchange Traded Note Risk – exchange traded notes represent unsecured debt of the issuer and may be influenced by interest rates, credit ratings of the issuer or changes in value of the reference index.

Fixed Income Risk – the market value of fixed income securities adjusts with interest rates and the securities are subject to issuer default.

Foreign/Emerging Market Risk – foreign securities may be subject to inefficient or volatile markets, different regulatory regimes or different tax policies. These risks may be enhanced in emerging markets.

Investment Style Risk – investment strategies may come in and out of favor with investors and may underperform or outperform at times.

Management Risk – there is no guarantee that the adviser's investment decisions will produce the desired results.

Large Shareholder Purchase and Redemption Risk – The Fund may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Fund.

Market Risk – economic conditions, interest rates and political events may affect the securities markets.

Preferred Stock Risk – preferred stocks generally pay dividends, but may be less liquid than common stocks, have less priority than debt instruments and may be subject to redemption by the issuer.

REIT Risk – the value of REITs changes with the value of the underlying properties and changes in interest rates and are subject to additional fees.

Security Risk – The value of the Fund may decrease in response to the activities and financial pros pects of individual securities in the Fund's portfolio.

Short Sale Risk – short positions are speculative, are subject to transaction costs and are riskier than long positions in securities.

Small-Cap Risk – small-cap companies are more susceptible to failure, are often thinly traded and have more volatile stock prices.

Structured Notes Risk – because of the embedded derivative feature, structured notes are subject to more risk than investing in a simple note or bond.

Swap Risk – swap agreements are subject to counterparty default risk and may not perform as intended.

Tax Risk – new federal or state governmental action could adversely affect the tax-exempt status of securities held by the Fund, resulting in higher tax liability for shareholders and potentially hurting Fund performance as well.

Underlying Fund Risk – underlying funds have additional fees, may utilize leverage, may not correlate to an intended index and may trade at a discount to their net asset values.

RiverNorth/DoubleLine Strategic Income Fund:

Asset-Backed Security Risk – the risk that the value of the underlying assets will impair the value of the security.

Borrowing Risk – borrowings increase fund expenses and are subject to repayment, possibly at inopportune times.

Closed-End Fund Risk – closed-end funds are exchange traded, may trade at a discount to their net asset values and may deploy leverage.

Convertible Security Risk – the market value of convertible securities adjusts with interest rates and the value of the underlying stock.

Currency Risk – foreign currencies will rise or decline relative to the U.S. dollar.

Defaulted Securities Risk – defaulted securities carry the risk of uncertainty of repayment.

Derivatives Risk – derivatives are subject to counterparty risk.

Equity Risk – equity securities may experience volatility and the value of equity securities may move in opposite directions from each other and from other equity markets generally.

Exchange Traded Note Risk – exchange traded notes represent unsecured debt of the issuer and may be influenced by interest rates, credit ratings of the issuer or changes in value of the reference index.

Fixed Income Risk– the market value of fixed income securities adjusts with interest rates and the securities are subject to issuer default.

Foreign/Emerging Market Risk – foreign securities may be subject to inefficient or volatile markets, different regulatory regimes or different tax policies. These risks may be enhanced in emerging markets.

Investment Style Risk – investment strategies may come in and out of favor with investors and may underperform or outperform at times.

Liquidity Risk – illiquid investments may be difficult or impossible to sell.

Large Shareholder Purchase and Redemption Risk – The Fund may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Fund.

Management Risk – there is no guarantee that the adviser's or sub-adviser’s investment decisions will produce the desired results.

Market Risk – economic conditions, interest rates and political events may affect the securities markets.

Mortgage-Backed Security Risk – mortgage backed securities are subject to credit risk, pre-payment risk and devaluation of the underlying collateral.

Preferred Stock Risk – preferred stocks generally pay dividends, but may be less liquid than common stocks, have less priority than debt instruments and may be subject to redemption by the issuer.

Rating Agency Risk – rating agencies may change their ratings or ratings may not accurately reflect a debt issuer's creditworthiness.

REIT Risk – the value of REITs changes with the value of the underlying properties and changes in interest rates and are subject to additional fees.

Security Risk – The value of the Fund may decrease in response to the activities and financial prospects of individual securities in the Fund's portfolio.

Structured Notes Risk – because of the embedded derivative feature, structured notes are subject to more risk than investing in a simple note or bond.

Swap Risk – swap agreements are subject to counterparty default risk and may not perform as intended.

Tax Risk – new federal or state governmental action could adversely affect the tax-exempt status of securities held by the Fund, resulting in higher tax liability for shareholders and potentially hurting Fund performance as well.

Underlying Fund Risk – underlying funds have additional fees, may utilize leverage, may not correlate to an intended index and may trade at a discount to their net asset values.

Valuation Risk – Loans and fixed-income securities are traded "over the counter" and because there is no centralized information regarding trading, the valuation of loans and fixed-income securities may vary.

RiverNorth Equity Opportunity Fund:

Borrowing Risk – borrowings increase fund expenses and are subject to repayment, possibly at inopportune times.

Closed-End Fund Risk – closed-end funds are exchange traded, may trade at a discount to their net asset values and may deploy leverage.

Convertible Security Risk – the market value of convertible securities adjusts with interest rates and the value of the underlying stock. Currency Risk – foreign currencies will rise or decline relative to the U.S. dollar.

Derivatives Risk – derivatives are subject to counterparty risk.

Equity Risk – equity securities may experience volatility and the value of equity securities may move in opposite directions from each other and from other equity markets generally.

Fixed Income Risk – the market value of fixed income securities adjusts with interest rates and the securities are subject to issuer default.

Foreign/Emerging Market Risk – foreign securities may be subject to inefficient or volatile markets, different regulatory regimes or different tax policies. These risks may be enhanced in emerging markets.

Investment Style Risk – investment strategies may come in and out of favor with investors and may underperform or outperform at times.

Large Shareholder Purchase and Redemption Risk – The Fund may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Fund.

Mid-Cap Risk – mid-cap companies may be more susceptible to adverse business or economic events than large-cap companies.

Management Risk – there is no guarantee that the adviser’s investment decisions will produce the desired results.

Market Risk – economic conditions, interest rates and political events may affect the securities markets.

Portfolio Turnover Risk – increased portfolio turnover results in higher brokerage expenses and may impact the tax status of distributions.

Preferred Stock Risk – preferred stocks generally pay dividends, but may be less liquid than common stocks, have less priority than debt instruments and may be subject to redemption by the issuer.

Security Risk – The value of the Fund may decrease in response to the activities and financial prospects of individual securities in the Fund's portfolio.

Small-Cap Risk – small-cap companies are more susceptible to failure, are often thinly traded and have more volatile stock prices.

Swap Risk – swap agreements are subject to counterparty default risk and may not perform as intended.

Tax Risk – new federal or state governmental action could adversely affect the tax-exempt status of securities held by the Fund, resulting in higher tax liability for shareholders and potentially hurting Fund performance as well.

Underlying Fund Risk – underlying funds have additional fees, may utilize leverage, may not correlate to an intended index and may trade at a discount to their net asset values.

RiverNorth/Oaktree High Income Fund:

Borrowing Risk – borrowings increase fund expenses and are subject to repayment, possibly at inopportune times.

Closed-End Fund Risk – closed-end funds are exchange traded, may trade at a discount to their net asset values and may deploy leverage.

Convertible Security Risk – the market value of convertible securities adjusts with interest rates and the value of the underlying stock.

Credit Derivatives Risk – the use of credit derivatives is highly specialized, involves default, counterparty and liquidity risks and may not perfectly correlate to the underlying asset or liability being hedged.

Currency Risk – foreign currencies will rise or decline relative to the U.S. dollar.

Derivatives Risk – derivatives are subject to counterparty risk.

Distressed and Defaulted Securities Risk – defaulted securities carry the risk of uncertainty of repayment.

Equity Risk – equity securities may experience volatility and the value of equity securities may move in opposite directions from each other and from other equity markets generally.

Exchange Traded Note Risk – exchange traded notes represent unsecured debt of the issuer and may be influenced by interest rates, credit ratings of the issuer or changes in value of the reference index.

Fixed Income Risk – the market value of fixed income securities adjusts with interest rates and the securities are subject to issuer default.

Foreign/Emerging Market Risk – foreign securities may be subject to inefficient or volatile markets, different regulatory regimes or different tax policies. These risks may be enhanced in emerging markets.

Floating Interest Rate Risk – loans pay interest based on the London Interbank Offered Rate (LIBOR) and a decline in LIBOR could negatively impact the Fund's return.

Investment Style Risk – investment strategies may come in and out of favor with investors and may underperform or outperform at times.

Large Shareholder Purchase and Redemption Risk – The Fund may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Fund.

Liquidity Risk – illiquid investments may be difficult or impossible to sell.

Loans Risk – loans may be unrated or rated below investment grade and the pledged collateral may lose value. Secondary trading in loans is not fully-developed and may result in illiquidity.

Management Risk – there is no guarantee that the adviser's or sub-adviser's investment decisions will produce the desired results.

Market Risk – economic conditions, interest rates and political events may affect the securities markets.

Preferred Stock Risk – preferred stocks generally pay dividends, but may be less liquid than common stocks, have less priority than debt instruments and may be subject to redemption by the issuer.

Security Risk – the value of the Fund may increase or decrease in response to the prospects of the issuers of securities and loans held in the Fund.

Swap Risk – swap agreements are subject to counterparty default risk and may not perform as intended.

Tax Risk – new federal or state governmental action could adversely affect the tax-exempt status of securities held by the Fund, resulting in higher tax liability for shareholders and potentially hurting Fund performance as well.

Underlying Fund Risk – underlying funds have additional fees, may utilize leverage, may not correlate to an intended index and may trade at a discount to their net asset values.

Valuation Risk – Loans and fixed-income securities are traded "over the counter" and because there is no centralized information regarding trading, the valuation of loans and fixed-income securities may vary.