INVESTMENT PORTFOLIO (unaudited)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
|
|
|
|
|
|
|
|
|
Shares |
|
Value ($) |
|
|
Common Stocks 61.0% |
|
|
COMMUNICATION SERVICES 1.3% |
|
|
27,134 |
|
|
MidWave Wireless, Inc. (fka Terrestar Corp.)(a)(b)(c)(d) |
|
|
9,068,997 |
|
|
194,300 |
|
|
Telesat(a) |
|
|
2,778,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,847,487 |
|
|
|
|
|
|
|
|
|
|
|
CONSUMER DISCRETIONARY 0.0% |
|
|
1,450 |
|
|
Toys R Us(a)(b)(c) |
|
|
14,371 |
|
|
|
|
|
|
|
|
|
|
|
ENERGY 0.0% |
|
|
1,118,286 |
|
|
Value Creation, Inc.(a)(b)(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEALTHCARE 2.7% |
|
|
12,026,660 |
|
|
CCS Medical Inc.(a)(b)(c)(e) |
|
|
24,979,372 |
|
|
|
|
|
|
|
|
|
|
|
MATERIALS 0.2% |
|
|
299,032 |
|
|
MPM Holdings, Inc.(a)(b)(c) |
|
|
1,495,160 |
|
|
|
|
|
|
|
|
|
|
|
REAL ESTATE 56.8% |
|
|
1,474,379 |
|
|
Allenby(a)(b)(c)(e) |
|
|
|
|
|
10,359,801 |
|
|
Claymore(a)(b)(c)(e) |
|
|
|
|
|
25,463 |
|
|
Independence Realty Trust, Inc. |
|
|
358,265 |
|
|
2,356,665 |
|
|
IQHQ, Inc.(a)(b)(c) |
|
|
55,593,727 |
|
|
34,512 |
|
|
LLV Holdco LLC - Series A, Membership Interest(a)(b)(c)(e) |
|
|
4,198,885 |
|
|
436 |
|
|
LLV Holdco LLC - Series B, Membership Interest(a)(b)(c)(e) |
|
|
53,003 |
|
|
1,290,361 |
|
|
NexPoint Diversified Real Estate Trust, REIT(e) |
|
|
11,239,044 |
|
|
4,372,286 |
|
|
NexPoint Real Estate Finance, REIT(e) |
|
|
71,530,596 |
|
|
189,910 |
|
|
NexPoint Residential Trust, Inc., REIT(e) |
|
|
6,111,304 |
|
|
32,203 |
|
|
NexPoint Storage Partners, Inc.(a)(b)(c)(e) |
|
|
39,151,958 |
|
|
61,963,747 |
|
|
NFRO Diversified REIT, LLC(a)(b)(c)(e) |
|
|
63,541,406 |
|
|
2,276,658 |
|
|
NFRO Holdings, LLC(a)(b)(c)(e) |
|
|
66,098,120 |
|
|
90,436,434 |
|
|
NFRO Self Storage REIT, LLC(a)(b)(c)(e) |
|
|
123,650,029 |
|
|
3,498,563 |
|
|
NFRO SFR REIT, LLC(a)(b)(c)(e) |
|
|
84,579,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
526,105,959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common Stocks (Cost $858,709,160) |
|
|
564,442,349 |
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount ($) |
|
|
|
|
U.S. Senior Loans (f) 27.0% |
|
|
COMMUNICATION SERVICES 1.0% |
|
|
9,296,202 |
|
|
MidWave Wireless, Inc. (fka Terrestar Corp.), Term Loan D, 1st Lien, 02/27/28
(b)(c) |
|
|
9,254,369 |
|
|
67,398 |
|
|
MidWave Wireless, Inc. (fka Terrestar Corp.), Term Loan H, 1st Lien, 02/28/24
(b)(c) |
|
|
67,094 |
|
|
72,237 |
|
|
MidWave Wireless, Inc. (fka Terrestar Corp.), Term Loan, 1st Lien, 02/28/24
(b)(c) |
|
|
71,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,393,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount ($) |
|
Value ($) |
|
|
U.S. Senior Loans (continued) |
|
|
ENERGY 0.7% |
|
|
6,403,998 |
|
|
Quarternorth Energy Holding, Term Loan, 2nd Lien, 08/27/26 |
|
|
6,390,645 |
|
|
|
|
|
|
|
|
|
|
|
HEALTHCARE 3.2% |
|
|
16,404,781 |
|
|
Carestream Health Inc., Term Loan, 1st Lien, 09/30/27 |
|
|
13,070,017 |
|
|
16,539,354 |
|
|
CCS Medical Inc., Junior Credit Term Loan, 1st Lien, 01/04/27 (b)(c)(e) |
|
|
16,175,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,245,506 |
|
|
|
|
|
|
|
|
|
|
|
INFORMATION TECHNOLOGY 6.7% |
|
|
61,411,237 |
|
|
EDS Legacy Partners, 12/14/23 (b)(c)(e) |
|
|
62,197,301 |
|
|
|
|
|
|
|
|
|
|
|
REAL ESTATE 15.4% |
|
|
16,067,396 |
|
|
LLV Holdco LLC, Revolving Exit Loan, 12/31/23 (b)(c)(e) |
|
|
14,846,274 |
|
|
65,000,000 |
|
|
NexPoint SFR Operating Partnership, LP, 05/24/27 (b)(c)(e) |
|
|
64,220,000 |
|
|
11,000,000 |
|
|
06/30/27 (b)(c)(e) |
|
|
10,868,000 |
|
|
6,400,000 |
|
|
NHT Operating Partnership LLC Convertible Promissory Note, 09/30/42 (b)(c)(e) |
|
|
6,064,000 |
|
|
42,777,343 |
|
|
NHT Operating Partnership LLC Promissory Note, 02/14/27 (b)(c)(e) |
|
|
40,531,532 |
|
|
6,500,000 |
|
|
NREF Operating IV REIT Sub, LLC, (b)(c)(e) |
|
|
6,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,029,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Senior Loans (Cost $281,220,262) |
|
|
250,256,633 |
|
|
|
|
|
|
|
|
Collateralized Loan Obligations 10.0% |
|
|
5,800,000 |
|
|
ACAS CLO, Series 2018-1A, Class FRR TSFR3M
+ 8.172%, 13.48%, 10/18/2028 (g)(h) |
|
|
2,694,680 |
|
|
2,000,000 |
|
|
Apex Credit CLO,
Series 2019-1A, Class D TSFR3M + 7.362%, 12.67%, 4/18/2032 (g)(h) |
|
|
1,726,400 |
|
|
1,500,000 |
|
|
Atlas Senior Loan Fund,
Series 2017-8A, Class F TSFR3M + 7.412%, 12.72%, 1/16/2030 (g)(h) |
|
|
776,625 |
|
|
2,400,000 |
|
|
Atlas Senior Loan Fund XII,
Series 2018-12A, Class E TSFR3M + 6.212%, 11.56%, 10/24/2031 (g)(h) |
|
|
1,588,800 |
|
|
1,250,000 |
|
|
Cathedral Lake CLO,
Series 2017-1A, Class DR TSFR3M + 7.512%, 12.82%, 10/15/2029 (g)(h) |
|
|
791,875 |
|
INVESTMENT PORTFOLIO (unaudited) (continued)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
|
|
|
|
|
|
|
|
|
Principal Amount ($) |
|
Value ($) |
|
|
Collateralized Loan Obligations (continued) |
|
|
2,000,000 |
|
|
Cathedral Lake VII,
Series 2021-7RA, Class E TSFR3M + 8.032%, 13.34%, 1/15/2032 (g)(h) |
|
|
1,760,000 |
|
|
5,462,500 |
|
|
CIFC Funding, Series 2013-2A 0.00%, 10/18/2030
(g)(h)(i) |
|
|
846,687 |
|
|
1,000,000 |
|
|
CIFC Funding,
Series 2018-1A, Class ER2 TSFR3M + 6.112%, 11.42%, 1/18/2031 (g)(h) |
|
|
900,000 |
|
|
2,500,000 |
|
|
CIFC Funding, Series 2014-1A 0.00%, 1/18/2031
(g)(h)(i) |
|
|
400,000 |
|
|
3,324,756 |
|
|
CIFC Funding, Series 2014-4RA 0.00%, 1/17/2035
(g)(h)(i)(j) |
|
|
741,421 |
|
|
3,000,000 |
|
|
CIFC Funding, Series 2015-1A 0.00%, 1/22/2031
(g)(h)(i)(j) |
|
|
660,000 |
|
|
3,000,000 |
|
|
Clover Credit Partners CLO III, Series 2017-1A,
Class F TSFR3M + 8.212%, 13.52%, 10/15/2029 (g)(h) |
|
|
1,545,000 |
|
|
1,537,000 |
|
|
Dryden 36 Senior Loan Fund, Series 2019-36A,
Class ER2 TSFR3M + 7.142%, 12.45%, 4/15/2029 (g)(h) |
|
|
1,374,846 |
|
|
4,000,000 |
|
|
Eaton Vance CLO,
Series 2019-1A, Class F TSFR3M + 8.512%, 13.82%, 4/15/2031 (g)(h) |
|
|
3,800,000 |
|
|
31,785,405 |
|
|
FREMF Mortgage Trust, Series 2021-KF103,
Class CS SOFR30A + 6.250%, 11.56%, 1/25/2031 (g)(h) |
|
|
31,974,130 |
|
|
5,450,000 |
|
|
Galaxy XXVI CLO,
Series 2018-26A, Class F TSFR3M + 8.262%, 13.64%, 11/22/2031 (g)(h) |
|
|
4,360,000 |
|
|
1,000,000 |
|
|
GoldenTree Loan Management US CLO 3,
Series 2018-3A, Class F TSFR3M + 6.762%, 12.09%, 4/20/2030 (g)(h) |
|
|
831,250 |
|
|
2,500,000 |
|
|
GoldenTree Loan Opportunities
IX, Series 2018-9A, Class FR2 TSFR3M + 7.902%, 13.27%, 10/29/2029 (g)(h) |
|
|
2,143,333 |
|
|
2,125,000 |
|
|
ICG US CLO,
Series 2022-1A, Class DJ TSFR3M + 5.730%, 11.06%, 7/20/2035 (g)(h) |
|
|
2,047,119 |
|
|
3,000,000 |
|
|
KKR CLO 18,
Series 2017-18, Class E TSFR3M + 6.712%, 12.02%, 7/18/2030 (g)(h) |
|
|
2,870,550 |
|
|
1,400,000 |
|
|
Madison Park Funding XX, Series 2018-20A,
Class ER TSFR3M + 5.562%, 10.92%, 7/27/2030 (g)(h) |
|
|
1,229,200 |
|
|
|
|
|
|
|
|
|
|
Principal Amount ($) |
|
Value ($) |
|
|
Collateralized Loan Obligations (continued) |
|
|
2,350,000 |
|
|
Madison Park Funding XXIV, Series 2019-24A,
Class ER TSFR3M + 7.462%, 12.79%, 10/20/2029 (g)(h) |
|
|
2,293,952 |
|
|
2,000,000 |
|
|
Madison Park Funding XXIX, Series 2018-29A,
Class F TSFR3M + 7.832%, 13.14%, 10/18/2030 (g)(h) |
|
|
1,716,000 |
|
|
1,000,000 |
|
|
Madison Park Funding XXX, Series 2018-30A,
Class F TSFR3M + 7.112%, 12.42%, 4/15/2029 (g)(h) |
|
|
938,300 |
|
|
490,000 |
|
|
Magnetite VII, Ltd., Series 2018-7A,
Class ER2 TSFR3M + 6.762%, 12.07%, 1/15/2028 (g)(h) |
|
|
441,000 |
|
|
2,500,000 |
|
|
Man GLG US CLO, Series 2018-1A,
Class DR TSFR3M + 6.162%, 11.49%, 4/22/2030 (g)(h) |
|
|
1,970,563 |
|
|
4,000,000 |
|
|
Northwoods Capital XII-B,
Ltd., Series 2018-12BA, Class F TSFR3M + 8.432%, 13.84%, 6/15/2031 (g)(h) |
|
|
2,640,000 |
|
|
2,900,000 |
|
|
OHA Credit Partners XII, Series 2018- 12A,
Class FR TSFR3M + 7.942%, 13.29%, 7/23/2030 (g)(h) |
|
|
2,483,125 |
|
|
3,110,000 |
|
|
OZLM XXII, Ltd.,
Series 2018-22A, Class E TSFR3M + 7.652%, 12.96%, 1/17/2031 (g)(h) |
|
|
1,803,800 |
|
|
2,000,000 |
|
|
Park Avenue Institutional Advisers CLO,
Series 2021-2A, Class E TSFR3M + 7.272%, 12.58%, 7/15/2034 (g)(h) |
|
|
1,780,000 |
|
|
3,150,000 |
|
|
Saranac CLO III, Ltd.,
Series 2018-3A, Class ER US0003M + 7.500%, 13.16%, 6/22/2030 (g)(h) |
|
|
1,709,663 |
|
|
2,000,000 |
|
|
Symphony CLO XXVI,
Series 2021-26A, Class ER TSFR3M + 7.762%, 13.09%, 4/20/2033 (g)(h) |
|
|
2,020,000 |
|
|
5,955,627 |
|
|
THL Credit Wind River, Series 2014-2A 0.00%,
1/15/2031 (g)(h)(i) |
|
|
973,745 |
|
|
1,000,000 |
|
|
Vibrant CLO 1X,
Series 2018-9A, Class D TSFR3M + 6.512%, 11.84%, 7/20/2031 (g)(h) |
|
|
775,900 |
|
|
1,275,000 |
|
|
Voya CLO, Series 2018-2A, Class DR TSFR3M
+ 5.862%, 11.21%, 4/25/2031 (g)(h) |
|
|
976,268 |
|
INVESTMENT PORTFOLIO (unaudited) (continued)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
|
|
|
|
|
|
|
|
|
Principal Amount ($) |
|
Value ($) |
|
|
Collateralized Loan Obligations (continued) |
|
|
1,000,000 |
|
|
Webster Park CLO,
Series 2018-1A, Class ER TSFR3M + 8.012%, 13.34%, 7/20/2030 (g)(h) |
|
|
780,000 |
|
|
3,000,000 |
|
|
Zais CLO 3, Ltd.,
Series 2018-3A, Class DR TSFR3M + 7.172%, 12.48%, 7/15/2031 (g)(h) |
|
|
1,815,000 |
|
|
3,300,000 |
|
|
Zais CLO 8, Ltd.,
Series 2018-1A, Class E TSFR3M + 5.512%, 10.82%, 4/15/2029 (g)(h) |
|
|
2,334,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Collateralized Loan Obligations (Cost $109,225,328) |
|
|
92,513,982 |
|
|
|
|
|
|
|
Shares |
|
|
|
|
LLC Interest 6.4% |
|
|
957 |
|
|
NEXLS LLC(b)(c)(e) |
|
|
50,566,555 |
|
|
10,000,000 |
|
|
SFR WLIF III, LLC(b)(c)(e) |
|
|
9,305,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LLC Interest (Cost $47,084,362) |
|
|
59,871,555 |
|
|
|
|
|
|
|
Units |
|
|
|
|
Warrants 4.5% |
|
|
ENERGY 4.5% |
|
|
5,801 |
|
|
Arch Resources, Expires 10/08/2023(a) |
|
|
713,349 |
|
|
85,465 |
|
|
Quarternorth Energy Holding Inc. Tranche 1, Expires 08/27/2029(a) |
|
|
1,901,596 |
|
|
164,598 |
|
|
Quarternorth Energy Holding Inc. Tranche 2, Expires 08/27/2029(a) |
|
|
1,563,681 |
|
|
280,160 |
|
|
Quarternorth Energy Holding Inc. Tranche 3, Expires 08/27/2029(a) |
|
|
37,261,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Warrants (Cost $34,068,518) |
|
|
41,439,906 |
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
Preferred Stock 3.4% |
|
|
FINANCIALS 0.5% |
|
|
3,980 |
|
|
Eastland CLO 1.00%, 05/01/2022(a)(b)(c) |
|
|
20,194 |
|
|
34,500 |
|
|
Eastland CLO II (a)(b)(c)(k)(l) |
|
|
175,048 |
|
|
8,860 |
|
|
Gleneagles CLO, 12/30/2049(a)(b)(c)(k) |
|
|
58,589 |
|
|
40,000 |
|
|
Granite Point Mortgage Trust REIT 7.00%(l)(m) |
|
|
680,000 |
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
Value ($) |
|
|
Preferred Stock (continued) |
|
|
62,600 |
|
|
Grayson CLO, 11/01/2021(a)(b)(c)(k) |
|
|
344,218 |
|
|
150,977 |
|
|
NexPoint Real Estate Finance REIT 8.50%(e)(l) |
|
|
3,187,124 |
|
|
12,553 |
|
|
Rockwall CDO, 08/01/2024(a)(b)(c)(k) |
|
|
45,453 |
|
|
4,800 |
|
|
Rockwall CDO (a)(b)(c)(k)(l) |
|
|
9,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,520,357 |
|
|
|
|
|
|
|
|
|
|
|
HEALTHCARE 2.4% |
|
|
414,378 |
|
|
Apnimed (a)(b)(c)(k)(l) |
|
|
4,600,010 |
|
|
2,361,111 |
|
|
Sapience Therapeutics Inc. 8.00%(a)(b)(c)(l) |
|
|
7,862,500 |
|
|
3,440,476 |
|
|
Sapience Therapeutics Inc, Class B 8.00%(a)(b)(c)(l) |
|
|
9,736,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,199,057 |
|
|
|
|
|
|
|
|
|
|
|
REAL ESTATE 0.5% |
|
|
325,976 |
|
|
Braemar Hotels & Resorts, Inc. 5.50%(a)(l) |
|
|
3,895,413 |
|
|
47,300 |
|
|
Wheeler Real Estate Investment Trust 10.75%(a)(l)(n) |
|
|
492,393 |
|
|
82,301 |
|
|
Wheeler Real Estate Investment Trust 9.00%(a)(l) |
|
|
123,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,511,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Preferred Stock (Cost $75,904,189) |
|
|
31,230,672 |
|
|
|
|
|
|
|
Principal Amount ($) |
|
|
|
|
Corporate Bonds & Notes 0.4% |
|
|
COMMUNICATION SERVICES 0.0% |
|
|
3,100 |
|
|
iHeartCommunications, Inc. 6.38%, 05/01/26 |
|
|
2,676 |
|
|
|
|
|
|
|
|
|
|
|
FINANCIALS 0.4% |
|
|
4,000,000 |
|
|
South Street Securities Funding LLC 6.25%, 12/30/26 (h) |
|
|
3,460,000 |
|
|
|
|
|
|
|
|
|
|
|
INDUSTRIALS 0.0% |
|
|
7,500,000 |
|
|
American Airlines 12/31/49 (b)(c)(i)(o)(p) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UTILITIES 0.0% |
|
|
15,222,107 |
|
|
Bruce Mansfield Pass-Through Trust 6.85%, 06/01/34 (p) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Bonds & Notes (Cost $4,110,339) |
|
|
3,462,676 |
|
|
|
|
|
|
|
INVESTMENT PORTFOLIO (unaudited) (continued)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
|
|
|
|
|
|
|
|
|
Shares |
|
Value ($) |
|
|
Master Limited Partnership 0.3% |
|
|
ENERGY 0.3% |
|
|
179,200 |
|
|
Energy Transfer L.P. |
|
|
2,514,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Master Limited Partnership (Cost $1,869,174) |
|
|
2,514,176 |
|
|
|
|
|
|
|
|
Registered Investment Company 0.1% |
|
|
86,246 |
|
|
Highland Global Allocation Fund (e) |
|
|
689,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Registered Investment Company (Cost $495,630) |
|
|
689,968 |
|
|
|
|
|
|
|
|
|
Units |
|
|
|
|
Rights 0.0% |
|
|
UTILITIES 0.0% |
|
|
4,933 |
|
|
Texas Competitive Electric Holdings Co., LLC (a) |
|
|
5,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Rights (Cost $) |
|
|
5,957 |
|
|
|
|
|
|
|
|
|
Principal Amount ($) |
|
|
|
|
Repurchase Agreement(q)(r) 0.0% |
|
|
5 |
|
|
RBC Dominion Securities 5.300%, dated 09/29/2023 to be repurchased on 10/02/2023, repurchase
price $5 (collateralized by U.S. Government and Treasury obligations, ranging in par value $0 - $1, 0.000% - 7.000%, 10/05/2023 - 09/01/2053; with total market value $12) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Repurchase Agreement (Cost $5) |
|
|
5 |
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
Cash Equivalent 0.4% |
|
|
MONEY MARKET FUND(s) 0.4% |
|
|
4,061,129 |
|
|
Dreyfus Treasury Obligations Cash Management, Institutional Class 5.230% |
|
|
4,061,129 |
|
|
|
|
|
|
|
|
|
|
|
Total Cash Equivalent (Cost $4,061,129) |
|
|
4,061,129 |
|
|
|
|
|
|
|
|
Total Investments 113.5% |
|
|
1,050,489,008 |
|
|
|
|
|
|
|
|
(Cost $1,416,748,096) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Value ($) |
|
|
Securities Sold Short (0.7)% |
|
|
Common Stock (0.7)% |
|
|
INFORMATION TECHNOLOGY (0.7)% |
|
|
(41,100) |
|
|
Texas Instruments, Inc. |
|
|
(6,535,311 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common Stock (Proceeds $4,920,256) |
|
|
(6,535,311 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities Sold Short (0.7)% (Proceeds $4,920,256) |
|
|
(6,535,311 |
) |
|
|
|
|
|
|
|
|
|
|
Other Assets & Liabilities, Net (12.8)%(t) |
|
|
(118,278,151 |
) |
|
|
|
|
|
|
|
Net Assets 100.0% |
|
|
925,675,546 |
|
|
|
|
|
|
|
(a) |
Non-income producing security. |
(b) |
Securities with a total aggregate value of $785,944,466, or 84.9% of net assets, were classified as
Level 3 within the three-tier fair value hierarchy. |
(c) |
Represents fair value as determined by the Investment Adviser pursuant to the policies and procedures approved
by the Board of Trustees (the Board). The Board has designated the Investment Adviser as valuation designee for the Fund pursuant to Rule 2a-5 of the Investment Company Act of 1940, as
amended. The Investment Adviser considers fair valued securities to be securities for which market quotations are not readily available and these securities may be valued using a combination of observable and unobservable inputs. Securities with a
total aggregate value of $785,944,466 or 84.9% of net assets, were fair valued under the Funds valuation procedures as of September 30, 2023. Please see Notes to Investment Portfolio. |
(d) |
Restricted Securities. These securities are not registered and may not be sold to the public. There are legal
and/or contractual restrictions on resale. The Fund does not have the right to demand that such securities be registered. The values of these securities are determined by valuations provided by pricing services, brokers, dealers, market makers, or
in good faith under the policies and procedures established by the Board. Additional Information regarding such securities follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Security |
|
Security Type |
|
Acquisition Date |
|
|
Cost of Security |
|
|
Fair Value at Period End |
|
|
Percent of Net Assets |
|
MidWave Wireless, Inc. (fka Terrestar Corp.) |
|
Common Stock |
|
|
3/16/2018 |
|
|
$ |
3,093,276 |
|
|
$ |
9,068,997 |
|
|
|
1.0 |
% |
(e) |
Affiliated issuer. Assets with a total aggregate fair value of $780,284,582, or 84.3% of net assets, were
affiliated with the Fund as of September 30, 2023. |
INVESTMENT PORTFOLIO (unaudited) (continued)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
(f) |
Senior loans (also called bank loans, leveraged loans, or floating rate loans) in which the Fund invests
generally pay interest at rates which are periodically determined by reference to a base lending rate plus a spread (unless otherwise identified, all senior loans carry a variable rate of interest). These base lending rates are generally
(i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the Secured Overnight Financing Rate (SOFR) or (iii) the Certificate of Deposit rate.
As of September 30, 2023, the SOFR 1 Month and SOFR 3 Month rates were 5.43% and 5.66%, respectively. Senior loans, while exempt from registration under the Securities Act of 1933, as amended (the 1933 Act), contain certain
restrictions on resale and cannot be sold publicly. Senior secured floating rate loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual
requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity maybe substantially less than the stated maturity shown. |
(g) |
Variable or floating rate security. The rate shown is the effective interest rate as of period end. The rates
on certain securities are not based on published reference rates and spreads and are either determined by the issuer or agent based on current market conditions; by using a formula based on the rates of underlying loans; or by adjusting periodically
based on prevailing interest rates. |
(h) |
Securities exempt from registration under Rule 144A of the 1933 Act. These securities may only be resold in
transactions exempt from registration to qualified institutional buyers. The Board has determined these investments to be liquid. At September 30, 2023, these securities amounted to $95,973,982 or 10.4% of net assets. |
(i) |
No interest rate available. |
(j) |
Interest only security (IO). These types of securities represent the right to receive the monthly
interest payments on an underlying pool of mortgages. Payments of principal on the pool reduce the value of the interest only holding. |
(k) |
There is currently no rate available. |
(l) |
Perpetual security with no stated maturity date. |
(m) |
Variable or floating rate security. The base lending rates are generally the lending rate offered by one or
more European banks such as the SOFR. The interest rate shown reflects the rate in effect September 30, 2023. |
(n) |
Step Coupon Security. Coupon rate will either increase (step-up bond)
or decrease (step-down bond) at regular intervals until maturity. Interest rate shown reflects the rate currently in effect. |
(o) |
Represents value held in escrow pending future events. No interest is being accrued.
|
(p) |
The issuer is, or is in danger of being, in default of its payment obligation. |
(q) |
Tri-Party Repurchase Agreement. |
(r) |
This security was purchased with cash collateral held from securities on loan. The total value of such
securities as of September 30, 2023 was $5. |
(s) |
Rate reported is 7 day effective yield. |
(t) |
As of September 30, 2023, $6,538,599 in cash was segregated or on deposit with the brokers to cover
investments sold short and is included in Other Assets & Liabilities, Net. |
INVESTMENT PORTFOLIO (unaudited) (concluded)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
Reverse Repurchase Agreement outstanding as of September 30, 2023 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty |
|
Collateral Pledged |
|
Interest Rate % |
|
|
Trade Date |
|
|
Repurchase Amount |
|
|
Principal Amount |
|
|
Value |
|
Mizuho Securities |
|
FREMF Mortgage Trust, Series 2021- KF103, Class CS, 11/02/2022 |
|
|
7.2 |
|
|
|
9/18/2023 |
|
|
$ |
(19,119,000 |
) |
|
$ |
(19,119,000 |
) |
|
$ |
(19,119,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Reverse Repurchase Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(19,119,000 |
) |
|
$ |
(19,119,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO INVESTMENT PORTFOLIO (unaudited)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
Organization
Highland Income Fund (the Fund) is organized as an unincorporated business trust under the laws of The Commonwealth of Massachusetts. The Fund is
registered with the U.S. Securities and Exchange Commission (the SEC) under the Investment Company Act of 1940, as amended (the 1940 Act), as a non-diversified, closed-end management investment company. On September 25, 2017, the Fund acquired the assets of Highland Floating Rate Opportunities Fund (the Predecessor Fund), a series of Highland Funds I, a
Delaware statutory trust. The Fund is the successor to the accounting and performance information of the Predecessor Fund.
Valuation of Investments
Pursuant to Rule 2a-5 under the 1940 Act, the Funds Board of Trustees (the Board) has
designated NexPoint Asset Management, L.P. (formerly Highland Capital Management Fund Advisors, L.P.) (NexPoint or the Investment Adviser) as the Funds valuation designee to perform the fair valuation determination for
securities and other assets held by the Fund. NexPoint acting through its Valuation Committee, is responsible for determining the fair value of investments for which market quotations are not readily available. The Valuation Committee is
comprised of officers of NexPoint and certain of NexPoints affiliated companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is subject to Board oversight and certain reporting and other
requirements intended to provide the Board the information it needs to oversee NexPoints fair value determinations.
The Funds investments are
recorded at fair value. In computing the Funds net assets attributable to shares, securities with readily available market quotations on the NYSE, National Association of Securities Dealers Automated Quotation (NASDAQ) or other
nationally recognized exchange, use the closing quotations on the respective exchange for valuation of those securities. Securities for which there are no readily available market quotations will be valued pursuant to policies adopted by NexPoint
and approved by the Board. Typically, such securities will be valued at the mean between the most recently quoted bid and ask prices provided by the principal market makers. If there is more than one such principal market maker, the value shall be
the average of such means. Securities without a sale price or quotations from principal market makers on the valuation day may be priced by an independent pricing service. Generally, the Funds loan and bond positions are not traded on
exchanges and consequently are valued based on a mean of the bid and ask price from the third-party pricing services or broker-dealer sources that the Investment Adviser has determined to have the capability to provide appropriate pricing services.
Securities for which market quotations are not readily available, or for which the Fund has determined that the price received from a pricing service or
broker-dealer is stale or otherwise does not represent fair value (such as when events materially affecting the value of securities occur between the time when market price is determined and calculation of the Funds net asset value
(NAV)), will be valued by the Fund at fair value, as determined by the Valuation Committee in good faith in accordance with policies and procedures established by NexPoint and approved by the Board, taking into account factors reasonably
determined to be relevant, including, but not limited to: (i) the fundamental analytical data relating to the investment; (ii) the nature and duration of restrictions on disposition of the securities; and (iii) an evaluation of the
forces that influence the market in which these securities are purchased and sold. In these cases, the Funds NAV will reflect the affected portfolio securities fair value as determined in the judgment of the Valuation Committee instead
of being determined by the market. Using a fair value pricing methodology to value securities may result in a value that is different from a securitys most recent sale price and from the prices used by other investment companies to calculate
their NAVs. Determination of fair value is uncertain because it involves subjective judgments and estimates.
There can be no assurance that the
Funds valuation of a security will not differ from the amount that it realizes upon the sale of such security. Those differences could have a material impact to the Fund.
Fair Value Measurements
The Fund has performed an
analysis of all existing investments and derivative instruments to determine the significance and character of inputs to their fair value determination. The levels of fair value inputs used to measure the Funds investments are characterized
into a fair value hierarchy. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investments
valuation. The three levels of the fair value hierarchy are described below:
Level 1 |
Quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date
of measurement; |
NOTES TO INVESTMENT PORTFOLIO (unaudited) (continued)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
Level 2 |
Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active, but are valued based on executed trades; broker quotations that constitute an executable price; and alternative pricing sources supported by observable inputs are classified within Level 2.
Level 2 inputs are either directly or indirectly observable for the asset in connection with market data at the measurement date; and |
Level 3 |
Model derived valuations in which one or more significant inputs or significant value drivers are unobservable.
In certain cases, investments classified within Level 3 may include securities for which the Fund has obtained indicative quotes from broker-dealers that do not necessarily represent prices the broker may be willing to trade on, as such quotes
can be subject to material management judgment. Unobservable inputs are those inputs that reflect the Funds own assumptions that market participants would use to price the asset or liability based on the best available information.
|
The Investment Adviser has established policies and procedures, as described above and approved by the Board, to ensure that valuation
methodologies for investments and financial instruments that are categorized within all levels of the fair value hierarchy are fair and consistent. A Valuation Committee has been established to provide oversight of the valuation policies, processes
and procedures, and is comprised of personnel from the Investment Adviser and its affiliates. The Valuation Committee meets monthly to review the proposed valuations for investments and financial instruments and is responsible for evaluating the
overall fairness and consistent application of established policies.
The fair value of the Funds senior loans and bonds are generally based on
quotes received from brokers or independent pricing services. Loans, bonds and asset-backed securities with quotes that are based on actual trades with a sufficient level of activity on or near the measurement date are classified as Level 2
assets. Loans and bonds that are priced using quotes derived from implied values, indicative bids, or a limited number of actual trades are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the
values are not readily observable.
The fair value of the Funds common stocks, registered investment companies, rights and warrants that are not
actively traded on
national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades
and are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable. Exchange-traded options are valued based on the last trade price on the primary exchange on which
they trade. If an option does not trade, the mid-price, which is the mean of the bid and ask price, is utilized to value the option.
At the end of each calendar quarter, the Investment Adviser evaluates the Level 2 and 3 assets and liabilities for changes in liquidity,
including but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and
the existence of contemporaneous, observable trades in the market. Additionally, the Investment Adviser evaluates the Level 1 and 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the
Funds investments may fluctuate from period to period. Additionally, the fair value of investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially
from the values the Fund may ultimately realize. Further, such investments may be subject to legal and other restrictions on resale or otherwise less liquid than publicly traded securities.
NOTES TO INVESTMENT PORTFOLIO (unaudited) (concluded)
|
|
|
As of September 30, 2023 |
|
Highland Opportunities and Income Fund |
Affiliated Issuers
Under Section 2 (a)(3) of the Investment Company Act of 1940, as amended, a portfolio company is defined as affiliated if a fund owns five
percent or more of its outstanding voting securities or if the portfolio company is under common control. The table below shows affiliated issuers of the Fund for the period ended September 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer |
|
Shares at December 31, 2022 |
|
|
Beginning Value as of December 31, 2022 $ |
|
|
Purchases at Cost $ |
|
|
Proceeds from Sales $ |
|
|
Distribution to Return of Capital $ |
|
|
Net Realized Gain/(Loss) on Sales $ |
|
|
Change in Unrealized Appreciation/ (Depreciation) $ |
|
|
Ending Value as of September 30, 2023 $ |
|
|
Shares at September 30, 2023 |
|
|
Affiliated Income $ |
|
Majority Owned, Not Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allenby (Common Stocks) |
|
|
1,474,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,474,379 |
|
|
|
|
|
Claymore (Common Stocks) |
|
|
10,359,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,359,801 |
|
|
|
|
|
Other Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCS Medical, Inc. (U.S. Senior Loans & Common Stocks) |
|
|
27,528,327 |
|
|
|
37,670,005 |
|
|
|
1,037,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,447,168 |
|
|
|
41,154,861 |
|
|
|
28,566,014 |
|
|
|
1,352,685 |
|
EDS Legacy Partners (U.S. Senior Loans) |
|
|
61,411,237 |
|
|
|
59,271,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,925,321 |
|
|
|
62,197,301 |
|
|
|
61,411,237 |
|
|
|
4,994,211 |
|
Highland Global Allocation Fund (Registered Investment Company) |
|
|
48,649 |
|
|
|
458,274 |
|
|
|
375,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(143,524 |
) |
|
|
689,968 |
|
|
|
86,246 |
|
|
|
32,227 |
|
LLV Holdco LLC (U.S. Senior Loans & Common Stocks) |
|
|
15,508,203 |
|
|
|
19,469,085 |
|
|
|
594,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(965,065 |
) |
|
|
19,098,162 |
|
|
|
16,102,344 |
|
|
|
799,222 |
|
NEXLS LLC (LLC Interest) |
|
|
882 |
|
|
|
49,601,366 |
|
|
|
3,790,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,824,811 |
) |
|
|
50,566,555 |
|
|
|
957 |
|
|
|
|
|
NexPoint Diversified Real Estate Trust REIT (Common Stocks) |
|
|
1,275,616 |
|
|
|
14,299,655 |
|
|
|
132,491 |
|
|
|
|
|
|
|
(711,957 |
) |
|
|
|
|
|
|
(2,481,135 |
) |
|
|
11,239,044 |
|
|
|
1,290,361 |
|
|
|
(137,940 |
) |
NexPoint Real Estate Finance REIT (Common Stocks & Preferred Stock) |
|
|
4,523,263 |
|
|
|
72,294,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,423,555 |
|
|
|
74,717,720 |
|
|
|
4,523,263 |
|
|
|
6,643,704 |
|
NexPoint Residential Trust, Inc. (Common Stocks) |
|
|
186,372 |
|
|
|
8,110,910 |
|
|
|
157,251 |
|
|
|
|
|
|
|
(93,694 |
) |
|
|
|
|
|
|
(2,063,163 |
) |
|
|
6,111,304 |
|
|
|
189,910 |
|
|
|
60,788 |
|
NexPoint SFR Operating Partnership, LP (U.S. Senior Loans) |
|
|
65,000,000 |
|
|
|
63,590,800 |
|
|
|
11,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497,200 |
|
|
|
75,088,000 |
|
|
|
76,000,000 |
|
|
|
3,903,750 |
|
NexPointStorage Partners, Inc. (Common Stocks) |
|
|
32,203 |
|
|
|
38,663,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
488,844 |
|
|
|
39,151,958 |
|
|
|
32,203 |
|
|
|
|
|
NFRO Diversified REIT, LLC, NFRO Self Storage REIT, LLC, NFRO SFR REIT, LLC (Common
Stocks) |
|
|
139,114,085 |
|
|
|
333,165,821 |
|
|
|
37,160,588 |
|
|
|
|
|
|
|
(74,892,009 |
) |
|
|
|
|
|
|
(23,663,343 |
) |
|
|
271,771,057 |
|
|
|
155,898,744 |
|
|
|
689,585 |
|
NFRO Holdings, LLC (Common Stocks) |
|
|
|
|
|
|
|
|
|
|
56,916,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,181,665 |
|
|
|
66,098,120 |
|
|
|
2,276,658 |
|
|
|
|
|
NHT Operating Partnership LLC Convertible Promissory Note (U.S. Senior Loans) |
|
|
6,400,000 |
|
|
|
5,798,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265,600 |
|
|
|
6,064,000 |
|
|
|
6,400,000 |
|
|
|
148,534 |
|
NHT Operating Partnership LLC Secured Promissory Note (U.S. Senior Loans) |
|
|
42,777,343 |
|
|
|
38,769,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,762,301 |
|
|
|
40,531,532 |
|
|
|
42,777,343 |
|
|
|
1,460,885 |
|
NREF Operating IV REIT Sub, LLC (U.S. Senior Loans) |
|
|
|
|
|
|
|
|
|
|
6,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,500,000 |
|
|
|
6,500,000 |
|
|
|
265,416 |
|
SFR WLIF I, III, LLC (LLC Interest) |
|
|
10,000,000 |
|
|
|
9,408,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(103,770 |
) |
|
|
9,305,000 |
|
|
|
10,000,000 |
|
|
|
881,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
385,640,360 |
|
|
|
750,571,576 |
|
|
|
117,663,833 |
|
|
|
|
|
|
|
(75,697,670 |
) |
|
|
|
|
|
|
(12,253,157 |
) |
|
|
780,284,582 |
|
|
|
423,889,460 |
|
|
|
21,094,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds reported affiliated income from NexPoint Diversified Real Estate Trust REIT includes a return of
capital adjustment of $(711,967), resulting in the Fund reporting a negative value for income received from NexPoint Diversified Real Estate Trust REIT. Excluding the adjustment, the Fund received $574,027 in dividend income from NexPoint
Diversified Real Estate Trust REIT. |
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