SEC Company Response from RiverNorth (OPP) — Aug 15, 2016
RiverNorth/DoubleLine Strategic Opportunity Fund, Inc. (OPP, OPP-PA, OPP-PB, OPP-PC) (CIK 0001678130)
Date: Aug. 15, 2016 · CIK: 0001678130 · Accession: 0001398344-16-016812
AI Filing Summary & Sentiment
File numbers found in text: 333-212400, 811-23166
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CORRESP 1 filename1.htm August 15, 2016 Via EDGAR Correspondence Filing Dominic Minore, Esq. Division of Investment Management Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: RiverNorth/DoubleLine Strategic Opportunity Fund, Inc. (the “Fund”) File Nos. 333-212400, 811-23166 Dear Mr. Minore: We have received your comments regarding the Registration Statement for the above captioned Fund in your letter of July 29, 2016. This letter serves to respond to your comments. For your convenience, we have structured our response to address each of your comments in the order in which they were presented in your letter. Registration Statement Calculation of Registration Fee Under the Securities Act of 1933 (cover page) In a footnote to the “Amount Being Registered” column, disclose that Common Shares issued pursuant to the exercise of the underwriters’ over-allotment option are also being registered. Response: The above referenced footnote has been added as requested to disclose that Common Shares issued pursuant to the exercise of the underwriters’ over-allotment option are also being registered. Prospectus Outside Front Cover Principal Investment Strategies In the last paragraph, disclose whether there is any maximum amount of the Fund’s Managed Assets that may be invested in junk/high-yield securities. Also clarify that below investment grade securities are known as junk and high yield. Response: The prospectus has been revised to clarify that below investment grade securities are known as “junk” and “high yield” securities. The Fund has included on the outside front cover page that, under normal market circumstances, the Fund may invest up to 60% of the Fund’s Managed Assets allocated to the Tactical Closed-End Fund Income Strategy in below investment grade and senior loan Underlying Funds and may invest up to 50% of the Fund’s Managed Assets allocated to the Opportunistic Income Strategy in below investment grade securities. In footnote (2), specify the dollar amount of the “certain expenses” that the Fund has agreed to reimburse the underwriters, and briefly identify each category of such reimbursable expenses. Response: The above referenced footnote has been revised as requested to specify that “the Fund has agreed to reimburse the underwriters for the reasonable fees and disbursements of counsel to the underwriters in connection with the review by FINRA of the terms of the sale of the Common Shares in an amount not to exceed $25,000 in the aggregate.” Expand footnote (3) to the pricing table to disclose that payment of organizational and offering expenses, as well as expenses for which the Fund has agreed to reimburse the underwriters, although payable by the Fund are indirectly paid by investors in this offering. Also clarify that the consequent effect of this will be to immediately reduce the net asset value of each Common Share purchased in this offering. Response The above referenced footnote has been revised as requested. The maximum dollar amounts payable by the Fund, as described under “Additional Underwriter Compensation” section of the prospectus, should also be summarized in footnote (3). Response: The above referenced footnote has been revised as requested to provide the maximum dollar amount (as a percentage of the total public offering price of the Common Shares sold in the offering) payable by the Fund to underwriters. In your response letter, please confirm that all of the information that precedes the section captioned “Table of Contents” will appear on the outside front cover of the prospectus in at least 10-point type. Response: The Fund confirms that all of the required information that precedes the section captioned “Table of Contents” will appear on the outside front cover of the prospectus in at least 10-point type. Table of Contents In the paragraph appearing after the Table of Contents, clarify that any material changes occurring during the period in which a current prospectus is required to be delivered will be reflected in an amended prospectus that will be delivered to prospective investors. -2- Response: The paragraph appearing after the Table of Contents has been revised as requested. Prospectus Summary Principal Investment Strategies and Policies (page 1) May the Fund invest in private funds and/or private investment companies? If so, then disclose that the Fund will limit its investments in all private funds to no more than 35% of its net assets (private funds include, but are not limited to, private REITs, private oil and gas funds, private commodity pools, private real estate funds as well as private investment companies, such as private equity funds and hedge funds). Further disclose that the Fund will limit its investments in entities that are excluded from the definition of “investment company” under the Investment Company Act of 1940 (the “ICA”) solely by Section 3(c)(1) or Section 3(c)(7) of the ICA (typically private equity funds and hedge funds) to no more than 15% of its net assets subject to the overall limit of investing no more than 35% of its net assets in private funds. Response: The Fund does not intend to initially invest and will not materially invest (e.g. greater than 5% of the Fund’s Managed Assets) in private funds and/or private investment companies. The Fund has updated the SAI to provide disclosure with respect to such investments. It appears from the description of the Fund’s principal investment strategies and policies that a significant portion of the Fund’s Managed Assets may be either directly or indirectly invested within the mortgage sector. Please disclose the overall estimated percentage of the Fund’s Managed Assets that are likely to be invested directly or indirectly within the mortgage sector. Response: Pursuant to the Staff’s request, the Fund has revised the prospectus to disclose that at least 50% of the Managed Assets allocated to the Opportunistic Income Strategy will be invested in mortgage-backed securities. May the Fund invest in any Underlying Funds that are affiliated with either the Adviser or Subadviser? If so, please expand the disclosure to identify the affiliated Underlying Funds in which the Fund may invest and highlight any limitations imposed on the Fund’s ability to invest in such Underlying Funds. In the event that the Fund intends to invest in affiliated Underlying Funds then, in your response letter, please address how the Fund will comply with the applicable provisions of sections 12 and 17 of the ICA. Response: Please refer the Prospectus Summary under “Principal Investment Strategies and Policies—Tactical Closed-End Fund Income Strategy” which states that “[t]he Underlying Funds in which the Fund invests will not include those that are advised or subadvised by the Adviser, the Subadviser or their affiliates. -3- Because there is no specific information regarding where along the “below investment grade” rating spectrum the Fund’s investments would fall, please delete references to specific letter grades, such as references to “rated below ‘BBB-’ ” or “below ‘Baa3’.” Response: The Fund has removed specific references to letter grades except when defining the “below investment grade” and where the Fund has a specific limitation along the “below investment grade” rating spectrum. In this regard, the please note the following additional language with respect to the Fund’s Opportunistic Income Strategy: “Under this strategy, the Fund may invest in securities of any credit quality, including securities that are rated below investment grade, except that the Fund will invest at least 20% of the Managed Assets allocated to this strategy in securities rated investment grade (or unrated securities judged by the Subadviser to be of comparable quality). In addition, the Subadviser does not currently expect that the Fund will invest more than 15% of the Managed Assets allocated to this strategy in corporate debt securities (excluding mortgage-backed securities) or sovereign debt instruments rated “Caa” or below by Moody’s and “CCC” or below by S&P (or unrated securities determined by the Subadviser to be of comparable quality).” The disclosure on page 3 states that, under normal market conditions, no more than 30% of the Fund’s Managed Assets allocated to the Tactical Closed-End Fund Income Strategy will be in Hedged Positions. Please expand the disclosure to identify how the Fund intends to value derivatives for purposes of determining compliance with the 30% cap. Response: Pursuant to your request, the prospectus has been revised to clarify that, for purposes of the above referenced 30% cap, the Fund will use the market value (and not the notional value) of its derivatives. The disclosure further states that the Adviser may also use Hedging Positions “to seek to enhance the Fund’s return.” Please clarify, here and elsewhere in the prospectus, the extent to which the Adviser (as well as the Subadviser) may use the Fund’s Managed Assets for speculative purposes. Response: The Fund has revised the prospectus remove the reference of the use of Hedging Positions “to seek to enhance Fund’s return,” as the Fund does not anticipate the use of the referenced Hedging Positions for speculative purposes as a principal investment strategy (e.g. greater that 5%). The Fund has clarified that, under the Tactical Closed-End Fund Income Strategy, the Fund may also attempt to enhance the return on the cash portion of its portfolio by investing in total return swaps, in the aggregate of up to 15% of the Fund’s Managed Assets. Opportunistic Income Strategy (page 3) The disclosure states that the Fund will invest no more than 20% of its Managed Assets that are allocated to the Opportunistic Income Strategy in non-U.S. investments. Please expand the disclosure to state the maximum percentage of the Fund’s Managed Assets may be invested in the securities of emerging market issuers within this 20% limitation. Additionally, disclose the overall maximum percentage of the Fund’s Managed Assets that may be invested in the securities of non-U.S. issuers, and any overall limit on investing the Fund’s Managed Assets in the securities of emerging market issuers should also be disclosed. -4- Response: The Fund has revised the disclosure to state that up to 20% of the Fund’s Managed Assets allocated to the Opportunistic Income Strategy may be invested in securities of non-U.S. issuers, including emerging market issuers. Please note that the Fund has additionally disclosed that, under the Fund’s Tactical Closed-End Fund Income Strategy, no more than 25% of the Fund’s Managed Assets allocated to the strategy will be invested in “emerging market issuers” Underlying Funds. Given the above limitations, Fund does not maintain an investment limitation with respect to the overall Fund’s Managed Assets that may be invested in the securities of non-U.S. issuers, or limit the overall Fund’s Managed Assets in the securities of emerging market issuers. Use of Leverage (page 6) The disclosure states that the Fund may obtain leverage by issuing Preferred Shares or entering into reverse repurchase agreements. Disclose whether or not the Fund expects to issue Preferred Shares within 12 months from the date of the prospectus. If the Fund expects to issue Preferred Shares during this 12-month period then, under a separately captioned section of the prospectus summary, briefly highlight the characteristics of the Preferred Shares likely to be issued by the Fund and the related material risks to holders of its Common Shares. Additionally, provide an estimate of the costs of issuing and servicing Preferred Shares in a line item presentation to the Fund’s fee table. Response: The Fund has revised the Prospectus to reflect that it does not expect to issue Preferred Shares within 12 months of the date of the Prospectus. Add a separately captioned section of the prospectus summary to highlight the characteristics and risks presented by reverse repurchase agreements. Response: Pursuant to your request, the prospectus has been revised to highlight the characteristics and risks presented by reverse repurchase agreements. Disclose that drops in asset values may magnify losses or totally eliminate the Fund’s equity in a leveraged investment. Response: The Fund has added disclosure relating to the effects of leverage as follows: “The use of leverage by the Fund can magnify the effect of any losses. If the income and gains earned on the securities and investments purchased with leverage proceeds are greater than the cost of the leverage, returns will be greater than if leverage had not been used. Conversely, if the income and gains from the securities and investments purchased with such proceeds do not cover the cost of leverage, returns will be less than if leverage had not been used.” -5- Dividends and Distributions (page 7) Expand the first paragraph to disclose that there can be no assurances that the Fund will achieve any level of distributions to its Common Shareholders. Response: The following disclosure has been added to “Dividends and Distributions” “There is no assurance the Fund will make this initial monthly distribution or continue to pay regular monthly distributions or that it will do so at a particular rate.” Dividend Reinvestment Plan (page 8) In the penultimate sentence, clarify how a Common Shareholder can “opt out” of the Plan. Further disclose that Common Shareholders who receive distributions in the form of additional Common Shares will nonetheless be required to pay applicable federal, state and local taxes on the reinvested dividends but will not receive a corresponding cash distribution with which to pay any applicable tax. Response: The “Dividend Reinvestment Plan” in the Prospectus Summary has been revised as follows: “The automatic reinvestment of dividends and distributions in Common Shares will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends and distributions, even though such participants have not received any cash with which to pay the resulting tax. . . . All correspondence or questions concerning the Plan, including how a Common Shareholder may opt out of the Plan, should be directed to the Plan Administrator at [ , ]. Beneficial owners of Common Shares who hold their Common Shares in the name of a broker or nominee should contact the broker or nominee to determine whether and how they may participate in, or opt out of, the Plan.” Risk Considerations (page 8) Please add a risk factor to highlight each material potential conflict of interest that a prudent investor should be made aware of in connection with his or her decision whether to invest in shares of the Fund. Also, add a section to the prospectus that expands upon the actual and potential conflicts of interest that may arise and highlight the policies and procedures that the Fund has adopted to identify, address and resolve conflicts of interest. Response: The prospectus has been revised to include a risk factor for “Potential Conflicts of Interest Risk,” which also cross-references the disclosure in the SAI under “Management of the Fund—Conflicts of Interest.” This risk factor describes the potential conflicts of interest that may arise. In addition, this risk factor highlights that the Fund, Adviser and/or the Subadviser (as applicable) have adopted policies and procedures that address the potential conflicts described in this section, including policies and procedures to address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all accounts of the Adviser and Subadviser are treated equitably. -6- Investment-Related Risks (page 10) Please add a separately captioned ri