1 | ||||
2 | ||||
3 | ||||
8 | ||||
9 | ||||
10 | ||||
11 | ||||
12 | ||||
14 | ||||
35 | ||||
40 |
• |
Account applications and other forms, which may include your name, address and social security number, written and electronic correspondence and telephone contacts; |
• |
Web site information, including any information captured through the use of “cookies”; and |
• |
Account history, including information about the transactions and balances in your accounts with us or our affiliates. |
Highland Opportunities and Income Fund |
Quality Breakdown as of 6/30/2023 (%) (1) |
||||
BBB |
0.58 | |||
BB |
2.73 | |||
B |
16.52 | |||
CCC |
5.70 | |||
NR |
74.47 |
Top 5 Sectors as of 6/30/2023 (%) (1)(2)(3) |
||||
Real Estate |
70.8 | |||
Collateralized Loan Obligations |
10.1 | |||
Healthcare |
7.8 | |||
LLC Interest |
6.4 | |||
Information Technology |
5.8 |
Top 10 Holdings as of 6/30/2023 (%) (1)(2)(3) |
||||||
NFRO Self Storage REIT, LLC (Common Stock) |
13.3 | |||||
NFRO SFR REIT, LLC (Common Stock) |
8.4 | |||||
NexPoint Real Estate Finance (Common Stock) |
7.3 | |||||
NFRO Holdings, LLC (Common Stock) |
6.9 | |||||
NexPoint SFR Operating Partnership, LP 7.50%, 5/24/2027 (U.S. Senior Loans) |
6.9 | |||||
EDS Legacy Partners 11.00%, 12/14/2023 (U.S. Senior Loans) |
6.6 | |||||
NFRO Diversified REIT, LLC (Common Stock) |
6.6 | |||||
IQHQ, Inc. (Common Stock) |
6.0 | |||||
NEXLS LLC (LLC Interest) |
5.4 | |||||
NHT Operating Partnership LLC Secured Promissory Note 4.21%, 2/14/2027 (U.S. Senior Loans) |
4.4 |
(1) |
Quality is calculated as a percentage of total credit instruments held by the portfolio. Sectors and holdings are calculated as a percentage of total net assets. The quality ratings reflected were issued by Standard & Poors, a nationally recognized statistical rating organization. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Quality ratings reflect the credit quality of the underlying bonds in the Fund’s portfolio and not that of the Fund itself. Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change, including daily. The ratings assigned by credit rating agencies are but one of the considerations that the Fund’s investment adviser incorporates into its credit analysis process, along with such other issuer specific factors as cash flows, capital structure and leverage ratios, ability to deleverage through free cash flow, quality of management, market positioning and access to capital, as well as such security-specific factors as the terms of the security (e.g., interest rate, and time to maturity) and the amount of any collateral. |
(2) |
Sectors and holdings are calculated as a percentage of total net assets. |
(3) |
Excludes the Fund’s investment in a cash equivalent. |
Semi-Annual Report |
1 |
June 30, 2023 |
Highland Opportunities and Income Fund |
Investment Portfolio |
The Investment Portfolio details all of the Fund’s holdings and its market value as of the last day of the reporting period. Portfolio holdings are organized by type of asset and industry to demonstrate areas of concentration and diversification. | |
Statement of Assets and Liabilities |
This statement details the Fund’s assets, liabilities, net assets and share price for each share class as of the last day of the reporting period. Net assets are calculated by subtracting all of the Fund’s liabilities (including any unpaid expenses) from the total of the Fund’s investment and noninvestment assets. The net asset value per share for each class is calculated by dividing net assets allocated to that share class by the number of shares outstanding in that class as of the last day of the reporting period. | |
Statement of Operations |
This statement reports income earned by the Fund and the expenses incurred by the Fund during the reporting period. The Statement of Operations also shows any net gain or loss the Fund realized on the sales of its holdings during the period as well as any unrealized gains or losses recognized over the period. The total of these results represents the Fund’s net increase or decrease in net assets from operations. | |
Statements of Changes in Net Assets |
These statements detail how the Fund’s net assets were affected by its operating results, distributions to shareholders and shareholder transactions (e.g., subscriptions, redemptions and distribution reinvestments) during the reporting periods. The Statements of Changes in Net Assets also details changes in the number of shares outstanding. | |
Statement of Cash Flows |
This statement reports net cash and foreign currency provided or used by operating, investing and financing activities and the net effect of those flows on cash and foreign currency during the period. | |
Financial Highlights |
The Financial Highlights demonstrate how the Fund’s net asset value per share was affected by the Fund’s operating results. The Financial Highlights also disclose the classes’ performance and certain key ratios (e.g., net expenses and net investment income as a percentage of average net assets). | |
Notes to Financial Statements |
These notes disclose the organizational background of the Fund, certain of its significant accounting policies (including those surrounding security valuation, income recognition and distributions to shareholders), federal tax information, fees and compensation paid to affiliates and significant risks and contingencies. |
2 |
Semi-Annual Report |
As of June 30, 2023 |
Highland Opportunities and Income Fund |
Shares |
Value ($) |
|||||||
Common Stocks - 60.7% |
||||||||
COMMUNICATION SERVICES - 1.2% |
||||||||
194,300 | Telesat (a) |
1,830,306 | ||||||
27,134 | TerreStar Corporation (a)(b)(c)(d) |
9,185,130 | ||||||
11,015,436 | ||||||||
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) |
— | ||||||
GAMING/LEISURE - 0.5% |
||||||||
34,512 | LLV Holdco LLC - Series A, Membership Interest (a)(b)(c)(e) |
4,334,559 | ||||||
436 | LLV Holdco LLC - Series B, Membership Interest (a)(b)(c)(e) |
54,716 | ||||||
4,389,275 | ||||||||
HEALTHCARE - 2.4% |
||||||||
12,026,660 | CCS Medical Inc. (a)(b)(c)(e) |
22,730,387 | ||||||
MATERIALS - 0.2% |
||||||||
299,032 | MPM Holdings, Inc. (a) |
1,495,160 | ||||||
REAL ESTATE - 56.4% |
||||||||
1,474,379 | Allenby (a)(b)(c)(e) |
— | ||||||
10,359,801 | Claymore (a)(b)(c)(e) |
— | ||||||
112,225 | Elme Communities, REIT |
1,844,979 | ||||||
354,533 | Healthcare Realty Trust, Class A, REIT |
6,686,493 | ||||||
25,463 | Independence Realty Trust, Inc., REIT |
463,936 | ||||||
2,356,665 | IQHQ, Inc. (a)(b)(c) |
55,593,727 | ||||||
1,275,616 | NexPoint Diversified Real Estate Trust REIT (e) |
15,970,712 | ||||||
4,372,286 | NexPoint Real Estate Finance REIT (e) |
68,163,935 | ||||||
189,910 | NexPoint Residential Trust, Inc. REIT (e) |
8,637,107 | ||||||
32,203 | NexPoint Storage Partners, Inc. (a)(b)(c)(e) |
39,151,435 | ||||||
54,716,031 | NFRO Diversified REIT, LLC (a)(b)(c)(e) |
61,178,706 | ||||||
2,276,658 | NFRO Holdings, LLC (a)(b)(c)(e) |
64,377,663 | ||||||
90,436,434 | NFRO Self Storage REIT, LLC (a)(b)(c)(e) |
123,648,039 | ||||||
3,231,395 | NFRO SFR REIT, LLC (a)(b)(c)(e) |
78,129,424 | ||||||
523,846,156 | ||||||||
Total Common Stocks (Cost $856,932,017) |
563,490,785 | |||||||
Principal Amount ($) |
||||||||
U.S. Senior Loans (f) - 26.7% |
||||||||
COMMUNICATION SERVICES - 1.0% |
||||||||
9,024,044 | TerreStar Corporation, Term Loan D, 1st Lien, 02/27/28 (b)(c) |
8,978,924 | ||||||
65,424 | TerreStar Corporation, Term Loan H, 1st Lien, 02/28/24 (b)(c) |
65,097 | ||||||
70,122 | TerreStar Corporation, Term Loan, 1st Lien, 02/28/24 (b)(c) |
69,771 | ||||||
9,113,792 | ||||||||
Principal Amount ($) |
Value ($) |
|||||||
U.S. Senior Loans (continued) |
||||||||
ENERGY - 0.7% |
||||||||
6,403,998 | Quarternorth Energy Holding, Term Loan, 2nd Lien, 08/27/26 |
6,393,335 | ||||||
GAMING/LEISURE - 1.6% |
||||||||
16,067,396 | LLV Holdco LLC, Revolving Exit Loan, 12/31/23 (b)(c)(e) |
14,621,330 | ||||||
HEALTHCARE - 3.0% |
||||||||
16,404,781 | Carestream Health Inc., Term Loan, 1st Lien, 09/30/27 |
12,008,300 | ||||||
15,977,051 | CCS Medical Inc., Junior Credit Term Loan, 1st Lien, 01/04/27 (b)(c)(e) |
15,977,051 | ||||||
27,985,351 | ||||||||
INFORMATION TECHNOLOGY - 6.6% |
||||||||
61,411,237 | EDS Legacy Partners, LIBOR USD 3 Month + 2.750%, 12/14/23 (b)(c)(e) |
61,626,177 | ||||||
REAL ESTATE - 13.8% |
||||||||
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 Secured 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 | ||||||
128,183,532 | ||||||||
Total U.S. Senior Loans (Cost $280,271,880) |
247,923,517 | |||||||
Collateralized Loan Obligations - 10.1% |
||||||||
5,800,000 | ACAS CLO, Series 2018-1A, Class FRR ICE LIBOR USD 3 Month + 7.910%, 13.17%, 10/18/2028 (g)(h) |
2,694,680 | ||||||
2,000,000 | Apex Credit CLO, Series 2019-1A, Class D ICE LIBOR USD 3 Month + 7.100%, 12.36%, 4/18/2032 (g)(h) |
1,639,000 | ||||||
1,500,000 | Atlas Senior Loan Fund, Series 2017-8A, Class F ICE LIBOR USD 3 Month + 7.150%, 12.41%, 1/16/2030 (g)(h) |
739,125 | ||||||
2,400,000 | Atlas Senior Loan Fund XII, Series 2018-12A, Class E ICE LIBOR USD 3 Month + 5.950%, 11.22%, 10/24/2031 (g)(h) |
1,560,000 | ||||||
1,250,000 | Cathedral Lake CLO, Series 2017-1A, Class DR ICE LIBOR USD 3 Month + 7.250%, 12.51%, 10/15/2029 (g)(h) |
774,500 | ||||||
2,000,000 | Cathedral Lake VII, Series 2021-7RA, Class E ICE LIBOR USD 3 Month + 7.770%, 13.03%, 1/15/2032 (g)(h) |
1,680,000 | ||||||
3,000,000 | CIFC Funding, Series 2015-1A 0.00%, 1/22/2031 (g)(h)(i)(j) |
532,500 | ||||||
1,000,000 | CIFC Funding, Series 2018-1A, Class ER2 ICE LIBOR USD 3 Month + 5.850%, 11.11%, 1/18/2031 (g)(h) |
855,000 |
See Glossary on page 7 for abbreviations along with accompanying Notes to Financial Statements. |
3 |
As of June 30, 2023 |
Highland Opportunities and Income Fund |
Principal Amount ($) |
Value ($) |
|||||||
Collateralized Loan Obligations (continued) |
||||||||
3,324,756 | CIFC Funding, Series 2014-4RA 0.00%, 1/17/2035 (g)(h)(i)(j) |
633,366 | ||||||
5,462,500 | CIFC Funding, Series 2013-2A, Class SUB0.00%, 10/18/2030 (g)(h)(i) |
874,000 | ||||||
2,500,000 | CIFC Funding, Series 2014-1A, Class SUB 0.00%, 1/18/2031 (g)(h)(i) |
375,000 | ||||||
3,000,000 | Covenant Credit Partners CLO III, Series 2017-1A, Class F ICE LIBOR USD 3 Month + 7.950%,13.21%, 10/15/2029 (g)(h) |
1,575,000 | ||||||
1,537,000 | Dryden 36 Senior Loan Fund, Series 2019-36A, Class ER2 TSFR3M + 7.142%, 12.13%, 4/15/2029 (g)(h) |
1,374,847 | ||||||
4,000,000 | Eaton Vance CLO, Series 2019-1A, Class F ICE LIBOR USD 3 Month + 8.250%, 13.51%, 4/15/2031 (g)(h) |
3,480,000 | ||||||
31,785,405 | FREMF Mortgage Trust, Series 2021- KF103, Class CS SOFR30A + 6.250%, 11.29%, 1/25/2031 (g)(h) |
32,080,413 | ||||||
5,450,000 | Galaxy XXVI CLO, Series 2018-26A, Class FICE LIBOR USD 3 Month + 8.000%, 13.38%, 11/22/2031 (g)(h) |
4,251,000 | ||||||
1,000,000 | GoldenTree Loan Management US CLO 3, Series 2018-3A, Class F ICE LIBOR USD 3 Month + 6.500%,11.75%, 4/20/2030 (g)(h) |
778,750 | ||||||
2,500,000 | GoldenTree Loan Opportunities IX, Series 2018-9A, Class FR2 ICE LIBOR USD 3 Month + 7.640%,12.94%, 10/29/2029 (g)(h) |
2,045,675 | ||||||
2,125,000 | ICG US CLO, Series 2022-1A, Class DJTSFR3M + 5.730%, 10.78%, 7/20/2035 (g)(h) |
1,983,029 | ||||||
Jay Park CLO, Ltd., Series 2018-1A, Class ER ICE LIBOR USD 3 Month + 7.350%, 4,000,000 12.60%, 10/20/2027 (g)(h) |
3,530,000 | |||||||
3,000,000 | KKR CLO 18, Series 2017-18, Class E ICE LIBOR USD 3 Month + 6.450%,11.71%, 7/18/2030 (g)(h) |
2,666,700 | ||||||
1,400,000 | Madison Park Funding XX, Series 2018-20A, Class ER ICE LIBOR USD 3 Month + 5.300%,10.59%, 7/27/2030 (g)(h) |
1,206,240 | ||||||
2,350,000 | Madison Park Funding XXIV, Series 2019-24A, Class ER TSFR3M + 7.462%, 12.51%, 10/20/2029 (g)(h) |
2,190,552 | ||||||
2,000,000 | Madison Park Funding XXIX, Series 2018-29A, Class F ICE LIBOR USD 3 Month + 7.570%, 12.83%, 10/18/2030 (g)(h) |
1,690,000 | ||||||
1,000,000 | Madison Park Funding XXX, Series 2018-30A, Class F ICE LIBOR USD 3 Month + 6.850%, 12.11%, 4/15/2029 (g)(h) |
909,800 | ||||||
490,000 | Magnetite VII, Ltd., Series 2018-7A, Class ER2 ICE LIBOR USD 3 Month + 6.500%, 11.76%, 1/15/2028 (g)(h) |
421,400 |
Principal Amount ($) |
Value ($) |
|||||||
Collateralized Loan Obligations (continued) |
||||||||
2,500,000 | Man GLG US CLO, Series 2018-1A, Class DR ICE LIBOR USD 3 Month + 5.900%, 11.15%, 4/22/2030 (g)(h) |
1,862,200 | ||||||
4,000,000 | Northwoods Capital XII-B, Ltd., Series 2018-12BA, Class F ICE LIBOR USD 3 Month + 8.170%, 13.72%, 6/15/2031 (g)(h) |
2,560,000 | ||||||
2,900,000 | OHA Credit Partners XII, Series 2018- 12A, Class FR ICE LIBOR USD 3 Month + 7.680%, 12.95%, 7/23/2030 (g)(h) |
2,324,350 | ||||||
3,110,000 | OZLM XXII, Ltd., Series 2018-22A, Class E ICE LIBOR USD 3 Month + 7.390%, 12.65%, 1/17/2031 (g)(h) |
1,803,800 | ||||||
2,000,000 | Park Avenue Institutional Advisers CLO, Series 2021-2A, Class E ICE LIBOR USD 3 Month + 7.010%,12.27%, 7/15/2034 (g)(h) |
1,720,000 | ||||||
3,150,000 | Saranac CLO III, Ltd., Series 2018-3A, Class ER ICE LIBOR USD 3 Month + 7.500%, 13.02%, 6/22/2030 (g)(h) |
1,561,613 | ||||||
2,000,000 | Symphony CLO XXVI, Series 2021-26A, Class ER ICE LIBOR USD 3 Month + 7.500%, 12.75%, 4/20/2033 (g)(h) |
1,940,000 | ||||||
5,955,627 | THL Credit Wind River, Series 2014-2A, Class SUB 0.00%, 1/15/2031 (g)(h)(i) |
893,344 | ||||||
1,000,000 | Vibrant CLO 1X, Series 2018-9A, Class D TSFR3M + 6.512%, 11.56%, 7/20/2031 (g)(h) |
723,300 | ||||||
1,275,000 | Voya CLO, Series 2018-2A, Class DR TSFR3M + 5.862%, 10.93%, 4/25/2031 (g)(h) |
976,267 | ||||||
1,000,000 | Webster Park CLO, Series 2018-1A, Class ER ICE LIBOR USD 3 Month + 7.750%, 13.00%, 7/20/2030 (g)(h) |
740,000 | ||||||
3,000,000 | Zais CLO 3, Ltd., Series 2018-3A, Class DR ICE LIBOR USD 3 Month + 6.910%, 12.17%, 7/15/2031 (g)(h) |
1,822,500 | ||||||
3,300,000 | Zais CLO 8, Ltd., Series 2018-1A, Class E ICE LIBOR USD 3 Month + 5.250%, 10.51%, 4/15/2029 (g)(h) |
2,227,500 | ||||||
Total Collateralized Loan Obligations (Cost $113,058,473) |
93,695,451 | |||||||
Shares |
||||||||
LLC Interest - 6.4% |
||||||||
957 | NEXLS LLC (b)(c)(e) |
50,117,067 | ||||||
10,000,000 | SFR WLIF III, LLC (b)(c)(e) |
9,305,000 | ||||||
Total LLC Interest (Cost $47,084,362) |
59,422,067 | |||||||
Units |
||||||||
Warrants - 3.5% |
||||||||
ENERGY - 3.5% |
||||||||
5,801 | Arch Resources, Expires 10/08/2023 (a) |
360,706 | ||||||
85,465 | Quarternorth Energy Holding Inc. Tranche 1, Expires 08/27/2029 (a) |
1,566,873 |
4 |
See Glossary on page 7 for abbreviations along with accompanying Notes to Financial Statements. |
As of June 30, 2023 |
Highland Opportunities and Income Fund |
Units |
Value ($) |
|||||||
Warrants (continued) |
||||||||
ENERGY (continued) |
||||||||
164,598 | Quarternorth Energy Holding Inc. Tranche 2, Expires 08/27/2029 (a) |
1,316,784 | ||||||
257,538 | Quarternorth Energy Holding Inc. Tranche 3, Expires 08/27/2029 (a) |
29,455,909 | ||||||
Total Warrants (Cost $31,433,055) |
32,700,272 | |||||||
Shares |
||||||||
Preferred Stock - 3.4% |
||||||||
FINANCIALS - 0.4% |
||||||||
3,980 | Eastland CLO 1.00%, 05/01/2022 (a)(b)(c) |
15,339 | ||||||
34,500 | Eastland CLO II (a)(b)(c)(k)(l) |
132,961 | ||||||
8,860 | Gleneagles CLO, 12/30/2049 (a)(b)(c)(k) |
47,404 | ||||||
40,000 | Granite Point Mortgage Trust REIT 7.00% (l)(m) |
703,600 | ||||||
62,600 | Grayson CLO , 11/01/2021 (a)(b)(c)(k) |
261,319 | ||||||
150,977 | NexPoint Real Estate Finance REIT 8.50% (e)(l) |
3,098,335 | ||||||
12,553 | Rockwall CDO, 08/01/2024 (a)(b)(c)(k) |
34,473 | ||||||
4,800 | Rockwall CDO (a)(b)(c)(k)(l) |
10,066 | ||||||
4,303,497 | ||||||||
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 - 0.6% |
||||||||
325,976 | Braemar Hotels & Resorts, Inc., REIT 5.50% (a)(l) |
4,563,664 | ||||||
47,300 | Wheeler Real Estate Investment Trust, REIT 8.75%, 09/21/2023 (a)(l)(n) |
543,950 | ||||||
82,301 | Wheeler Real Estate Investment Trust, REIT 9.00% (a)(l) |
123,452 | ||||||
5,231,066 | ||||||||
Total Preferred Stock (Cost $75,904,189) |
31,733,620 | |||||||
Principal Amount ($) |
||||||||
Corporate Bonds & Notes - 0.4% |
||||||||
COMMUNICATION SERVICES - 0.0% |
||||||||
3,100 | iHeartCommunications, Inc. 6.38%, 05/01/26 |
2,604 | ||||||
FINANCIALS - 0.4% |
||||||||
4,000,000 | South Street Securities Funding LLC 6.25%, 12/30/26 (h) |
3,400,000 | ||||||
INDUSTRIALS - 0.0% |
||||||||
7,500,000 | American Airlines 12/31/49 (b)(c)(i)(o)(p) |
— | ||||||
Principal Amount ($) |
Value ($) |
|||||||
UTILITIES - 0.0% |
||||||||
15,222,107 | Bruce Mansfield Pass-Through Trust 6.85%, 06/01/34 (p) |
— | ||||||
Total Corporate Bonds & Notes (Cost $4,095,337) |
3,402,604 | |||||||
Shares |
||||||||
Master Limited Partnership - 0.3% |
||||||||
ENERGY - 0.3% |
||||||||
179,200 | Energy Transfer L.P. |
2,275,840 | ||||||
Total Master Limited Partnership (Cost $1,869,174) |
2,275,840 | |||||||
Registered Investment Company - 0.1% |
||||||||
86,246 | Highland Global Allocation Fund (e) |
746,028 | ||||||
Total Registered Investment Company (Cost $495,630) |
746,028 | |||||||
Units |
||||||||
Rights - 0.0% |
||||||||
UTILITIES - 0.0% |
||||||||
4,933 | Texas Competitive Electric Holdings Co., LLC (a) |
5,384 | ||||||
Total Rights (Cost $—) |
5,384 | |||||||
Principal Amount ($) |
||||||||
Repurchase Agreement (q)(r) - 0.0% |
||||||||
8 | RBC 5.06%, dated 06/30/2023 to be repurchased on 07/03/2023, repurchase price $8 (collateralized by U.S. Government obligations, ranging in par value $0 - $2, 0.000% - 7.500%, 07/31/2023 - 05/20/2053; with total market value $8) |
8 | ||||||
Total Repurchase Agreement (Cost $8) |
8 | |||||||
Shares |
||||||||
Cash Equivalent - 1.3% |
||||||||
MONEY MARKET FUND(s) - 1.3% |
||||||||
12,161,638 | Dreyfus Treasury Obligations Cash Management, Institutional Class 5.000% |
12,161,638 | ||||||
Total Cash Equivalent (Cost $12,161,638) |
12,161,638 | |||||||
Total Investments - 112.9% |
1,047,557,214 |
|||||||
(Cost $1,423,305,763) |
See Glossary on page 7 for abbreviations along with accompanying Notes to Financial Statements. |
5 |
As of June 30, 2023 |
Highland Opportunities and Income Fund |
Shares |
Value ($) |
|||||||
Securities Sold Short - (0.8)% |
||||||||
Common Stocks - (0.8)% |
||||||||
INFORMATION TECHNOLOGY - (0.8)% |
||||||||
(41,100) | Texas Instruments, Inc. |
(7,398,822 | ) | |||||
Total Common Stocks (Proceeds $4,920,256) |
(7,398,822 | ) | ||||||
Total Securities Sold Short - (0.8)% (Proceeds $4,920,256) |
(7,398,822 | ) | ||||||
Other Assets & Liabilities, Net - (12.1)% (t) |
(112,099,766 |
) | ||||||
Net Assets - 100.0% |
928,058,626 |
|||||||
(a) | Non-income producing security. |
(b) | Securities with a total aggregate value of $770,042,725, or 83.0% of net assets, were classified as Level 3 within the three-tier fair value hierarchy. Please see Notes to Financial Statements for an explanation of this hierarchy, as well as a list of unobservable inputs used in the valuation of these instruments. |
(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 $770,042,725, or 83.0% of net assets, were fair valued under the Fund’s valuation procedures as of June 30, 2023. Please see Notes to Financial Statements. |
(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 |
|||||||||||||||
TerreStar Corporation |
Common Stock | 3/16/2018 | $ | 3,093,276 | $ | 9,185,130 | 1.0 | % |
(e) | Affiliated issuer. Assets with a total aggregate fair value of $770,051,203, or 83.0% of net assets, were affiliated with the Fund as of June 30, 2023. |
(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 London Interbank Offered Rate (“LIBOR”) or (iii) the Certificate of Deposit rate. As of June 30, 2023, the LIBOR USD 3 Month rate was 5.55%. 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 June 30, 2023, these securities amounted to $97,095,451 or 10.5% 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 LIBOR. The interest rate shown reflects the rate in effect June 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 June 30, 2023 was $8. |
(s) | Rate reported is 7 day effective yield. |
(t) | As of June 30, 2023, $7,266,069 in cash was segregated or on deposit with the brokers to cover investments sold short and is included in “Other Assets & Liabilities, Net”. |
Counterparty |
Collateral Pledged |
Interest Rate % |
Trade Date |
Repurchase Amount |
Principal Amount |
Value |
||||||||||||||||
Mizuho Securities | FREMF Mortgage Trust, Series 2021-KF103, Class CS, 02/01/2023 | 7.09 | 06/23/2023 | $ | (19,119,000 | ) | $ | (19,119,000 | ) | $ | (19,119,000 | ) | ||||||||||
Total Reverse Repurchase Agreement |
$ | (19,119,000 | ) | $ | (19,119,000 | ) | ||||||||||||||||
6 |
See Glossary on page 7 for abbreviations along with accompanying Notes to Financial Statements. |
Other Abbreviations: | ||
CDO | Collateralized Debt Obligation | |
ICE | Intercontinental Exchange | |
LIBOR | London Interbank Offered Rate | |
REIT | Real Estate Investment Trust | |
SOFR30A | Secured Overnight Financing Rate 30-Day Average | |
TSFR3M | Term Secured Overnight Financing Rate 3 Month | |
USD | United States Dollar |
Semi-Annual Report |
7 |
As of June 30, 2023 |
Highland Opportunities and Income Fund |
$ |
||||
Assets |
||||
Investments from unaffiliated issuers, at value |
265,344,365 | |||
Affiliated investments, at value (Note 9) |
770,051,203 | |||
Total Investments, at value (Cost $1,411,144,117) |
1,035,395,568 | |||
Repurchase Agreement, at value |
8 | |||
Cash equivalent (Note 2) |
12,161,638 | |||
Cash |
213,364 | |||
Restricted Cash - Securities Sold Short (Note 2) |
7,266,069 | |||
Receivable for: |
||||
Dividends and interest |
40,530,982 | |||
Fund shares sold |
117,724 | |||
Prepaid expenses and other assets |
306,895 | |||
Total assets |
1,095,992,248 | |||
Liabilities: |
||||
Securities sold short, at value (Proceeds $4,920,256) (Note 2) |
7,398,822 | |||
Reverse Repurchase Agreements (Note 3) |
19,119,000 | |||
Payable for: |
||||
Investment advisory and administration fees (Note 6) |
801,805 | |||
Legal fees |
545,057 | |||
Printing fees |
165,586 | |||
Collateral from securities loaned (Note 4) |
8 | |||
Accrued expenses and other liabilities |
147,095 | |||
Total liabilities |
28,177,373 | |||
Mezzanine Equity: |
||||
Cumulative preferred shares (Series A), net of deferred financing costs (Notes 1 and 2) |
139,756,249 | |||
Net Assets |
928,058,626 |
|||
Net Assets Consist of: |
||||
Paid-in capital |
1,455,543,124 | |||
Total accumulated losses |
(527,484,498 | ) | ||
Net Assets |
928,058,626 |
|||
Investments, at cost |
312,333,418 | |||
Affiliated investments, at cost (Note 9) |
1,098,810,699 | |||
Cash equivalent, at cost (Note 2) |
12,161,638 | |||
Repurchase Agreement, at cost |
8 | |||
Proceeds from securities sold short |
4,920,256 | |||
Shares outstanding ($0.001 par value; unlimited authorization) |
||||
Net asset value per share (Net assets/shares outstanding) |
13.61 |
8 |
See accompanying Notes to Financial Statements. |
For the Six Months Ended June 30, 2023 |
Highland Opportunities and Income Fund |
$ |
||||
Investment Income |
||||
Income: |
||||
Dividends from unaffiliated issuers |
7,564,002 | |||
Dividends from affiliated issuers (Note 9). |
7,816,109 | |||
Less: Foreign taxes withheld |
147,027 | |||
Securities lending income (Note 4) |
6,778 | |||
Interest from unaffiliated issuers |
10,292,785 | |||
Interest from affiliated issuers (Note 9) |
7,794,154 | |||
Interest paid in kind from unaffiliated issuers |
406,191 | |||
Interest paid in kind from affiliated issuers (Note 9) |
673,421 | |||
Total income |
34,700,467 | |||
Expenses: |
||||
Investment advisory (Note 6) |
3,390,617 | |||
Administration fees (Note 6) |
1,082,144 | |||
Interest expense, commitment fees, and financing costs |
667,770 | |||
Legal fees |
539,498 | |||
Accounting services fees |
328,178 | |||
Insurance |
157,633 | |||
Trustees fees (Note 6) |
145,188 | |||
Reports to shareholders |
120,967 | |||
Audit fees |
109,821 | |||
Dividends and fees on securities sold short (Note 2) |
101,928 | |||
Transfer agent fees |
80,631 | |||
Pricing fees |
38,113 | |||
Registration fees |
34,711 | |||
Custodian/wire agent fees |
12,033 | |||
Total operating expenses |
6,809,232 | |||
Net investment income |
27,891,235 | |||
Preferred dividend expenses |
(3,896,875 | ) | ||
Net Realized and Unrealized Gain (Loss) |
||||
Realized gain (loss) on: |
||||
Investments from unaffiliated issuers |
(2,667,515 | ) | ||
Net realized loss |
(2,667,515 | ) | ||
Net Change in Unrealized Appreciation (Depreciation) on: |
||||
Investments |
212,374 | |||
Investments in affiliated issuers |
(8,118,056 | ) | ||
Securities sold short (Note 2) |
(608,280 | ) | ||
Net change in unrealized appreciation (depreciation) |
(8,513,962 | ) | ||
Net realized and unrealized gain (loss) |
(11,181,477 | ) | ||
Total increase in net assets resulting from operations |
12,812,883 | |||
See accompanying Notes to Financial Statements. |
9 |
Highland Opportunities and Income Fund |
Six Months Ended June 30, 2023 (unaudited) ($) |
Year Ended December 31, 2022 ($) |
|||||||
Increase (Decrease) in Net Assets |
||||||||
Operations: |
||||||||
Net investment income |
27,891,235 | 92,061,653 | ||||||
Preferred dividend expenses |
(3,896,875 | ) | (7,793,750 | ) | ||||
Net realized gain (loss) |
(2,667,515 | ) | 135,802,706 | |||||
Net change in unrealized appreciation (depreciation) |
(8,513,962 | ) | (189,165,222 | ) | ||||
Net increase from operations |
12,812,883 | 30,905,387 | ||||||
Distributions Declared to Common Shareholders: |
||||||||
Distributions |
(31,489,216 | ) | (35,874,540 | ) | ||||
Return of capital |
— | (27,155,040 | ) | |||||
Total distributions: |
(31,489,216 | ) | (63,029,580 | ) | ||||
Decrease in net assets from operations and distributions |
(18,676,333 | ) | (32,124,193 | ) | ||||
Share transactions: |
||||||||
Value of distributions reinvested |
747,282 | 1,718,646 | ||||||
Shares repurchased of closed-end fund (Note 1) |
— | (24,643,897 | ) | |||||
Gains from the retirement of repurchased shares |
— | 5,422,282 | ||||||
Net increase (decrease) from shares transactions |
747,282 | (17,502,969 | ) | |||||
Total decrease in net assets |
(17,929,051 | ) | (49,627,162 | ) | ||||
Net Assets |
||||||||
Beginning of period |
945,987,677 | 995,614,839 | ||||||
End of period |
928,058,626 | 945,987,677 | ||||||
Change in Common Shares: |
||||||||
Issued for distribution reinvested |
81,146 | 152,754 | ||||||
Shares redeemed (Note 1) |
— | (1,679,705 | ) | |||||
Net increase (decrease) in fund shares |
81,146 | (1,526,951 | ) | |||||
10 |
See accompanying Notes to Financial Statements. |
For the Six Months Ended June 30, 2023 |
Highland Opportunities and Income Fund |
$ |
||||
Cash Flows Provided by Operating Activities: |
||||
Net increase in net assets resulting from operations |
12,812,883 | |||
Adjustments to Reconcile Net Increase in Net Assets Resulting from Operations to Net Cash Provided by Operating Activities: |
||||
Purchases of investment securities from unaffiliated issuers |
(1,148,597 | ) | ||
Purchases of investment securities from affiliated issuers |
(101,921,335 | ) | ||
Interest paid in kind from unaffiliated issuers |
(406,191 | ) | ||
Interest paid in kind from affiliated issuers |
(673,421 | ) | ||
Proceeds from disposition of investment securities from unaffiliated issuers |
41,250,978 | |||
Paydowns at cost |
9,343,372 | |||
Net (amortization) accretion of discount |
(631,382 | ) | ||
Proceeds from return of capital of investment securities from affiliated issuers |
74,997,073 | |||
Proceeds from sales of repurchase agreements, net |
402,711 | |||
Net realized (gain) loss on Investments from unaffiliated issuers |
2,667,515 | |||
Net change in unrealized (appreciation) depreciation on investments, investments in affiliated issuers, and securities sold short |
8,513,962 | |||
(Increase) Decrease in receivable for dividends and interest |
(12,484,807 | ) | ||
(Increase) Decrease in due from broker |
6,886 | |||
(Increase) Decrease in prepaid expenses and other assets |
50,628 | |||
Increase (Decrease) in payable for investments purchased |
(13,100,000 | ) | ||
Increase (Decrease) in payable to investment advisory |
(63,359 | ) | ||
Increase (Decrease) in payable for upon return of securities loaned |
(402,711 | ) | ||
Increase (Decrease) in payable for printing fees |
6,451 | |||
Increase (Decrease) in payable for audit fees |
(155,000 | ) | ||
Increase (Decrease) in payable for legal fees |
200,327 | |||
Increase (Decrease) in accrued expenses and other liabilities |
(150,028 | ) | ||
Net cash flow provided by operating activities |
19,115,955 | |||
Cash Flows Used In Financing Activities: |
||||
Distributions paid in cash, net of distributions reinvested |
(30,741,934 | ) | ||
Proceeds from shares sold, net of receivable |
6,391 | |||
Proceeds from reverse repurchase agreements |
(2,603,000 | ) | ||
Net cash flow used in financing activities |
(33,338,543 | ) | ||
Net decrease in cash |
(14,222,588 | ) | ||
Cash, cash equivalent, and restricted cash: |
||||
Beginning of period |
33,863,659 | |||
End of period |
19,641,071 | |||
End of period cash balances: |
||||
Cash |
213,364 | |||
Cash equivalent |
12,161,638 | |||
Restricted cash |
7,266,069 | |||
End of period |
19,641,071 | |||
Supplemental disclosure of cash flow information: |
||||
Reinvestment of distributions |
747,282 | |||
Cash paid during the period for interest expense and commitment fees |
667,770 | |||
See accompanying Notes to Financial Statements. |
11 |
Highland Opportunities and Income Fund |
For the Six Months Ended June 30, 2023 (Unaudited) |
For the Years Ended December 31, |
For the Period Ended December 31, 2018** |
For the Year Ended June 30, 2018*‡ |
|||||||||||||||||||||||||
2022 |
2021 |
2020 |
2019 |
|||||||||||||||||||||||||
Net Asset Value, Beginning of Year/Period |
$ | 13.89 | $ | 14.29 | $ | 13.32 | $ | 13.88 | $ | 14.28 | $ | 15.12 | $ | 15.01 | ||||||||||||||
Income from Investment Operations: |
||||||||||||||||||||||||||||
Net investment income (a) |
0.41 | 1.35 | 0.72 | 0.54 | 0.85 | 0.42 | 0.75 | |||||||||||||||||||||
Preferred dividend expense |
(0.06 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | (0.05 | ) | — | — | ||||||||||||||||
Net realized and unrealized gain (loss) |
(0.17 | ) | (0.80 | ) | 1.21 | (0.10 | ) | (0.29 | ) | (0.80 | ) | 0.18 | ||||||||||||||||
Total Income from Investment Operations |
0.18 | 0.44 | 1.82 | 0.33 | 0.51 | (0.38 | ) | 0.93 | ||||||||||||||||||||
Less Distributions Declared to shareholders: |
||||||||||||||||||||||||||||
From net investment income |
(0.46 | ) | (0.52 | ) | (0.22 | ) | (0.43 | ) | (0.81 | ) | (0.45 | ) | (0.72 | ) | ||||||||||||||
From return of capital |
— | (0.40 | ) | (0.70 | ) | (0.49 | ) | (0.11 | ) | (0.01 | ) | (0.10 | ) | |||||||||||||||
Total distributions declared to shareholders |
(0.46 | ) | (0.92 | ) | (0.92 | ) | (0.92 | ) | (0.92 | ) | (0.46 | ) | (0.82 | ) | ||||||||||||||
Capital Share Transactions: |
||||||||||||||||||||||||||||
Retirement of Tendered Shares (a) |
$ | — | $ | 0.08 | $ | 0.07 | $ | 0.03 | $ | 0.01 | $ | — | $ | — | ||||||||||||||
Net Asset Value, End of Year/Period (b) |
$ | 13.61 | $ | 13.89 | $ | 14.29 | $ | 13.32 | $ | 13.88 | $ | 14.28 | $ | 15.12 | ||||||||||||||
Market Value, End of Year/Period |
$ | 9.03 | $ | 10.30 | $ | 10.99 | $ | 10.28 | $ | 12.43 | $ | 12.80 | $ | 15.62 | ||||||||||||||
Market Value Total Return (c) |
(7.87 | )% | 1.70 | % | 16.35 | % | (8.29 | )% | 4.30 | % | (15.44 | )% (d) |
9.77 | % | ||||||||||||||
Ratios based on Average Managed Assets |
||||||||||||||||||||||||||||
Gross operating expenses (e)(f) |
0.72 | % | 1.15 | % | 1.44 | % | 1.83 | % | 2.28 | % | N/A | N/A | ||||||||||||||||
Net investment income (e) |
2.95 | % | 7.87 | % | 4.53 | % | 2.89 | % | 3.98 | % | N/A | N/A | ||||||||||||||||
Ratios to Average Net Assets / Supplemental Data: (g)(h) |
||||||||||||||||||||||||||||
Net Assets, End of Year/Period (000’s) |
$ | 928,059 | $ | 945,988 | $ | 995,615 | $ | 950,348 | $ | 995,405 | $ | 1,026,412 | $ | 1,085,547 | ||||||||||||||
Gross operating expenses (e)(f) |
1.45 | % | 1.32 | % | 1.67 | % | 2.68 | % | 3.39 | % | 3.10 | % | 1.79 | % | ||||||||||||||
Net investment income (e) |
5.95 | % | 8.98 | % | 5.26 | % | 4.22 | % | 5.93 | % | 5.48 | % | 4.98 | % | ||||||||||||||
Portfolio turnover rate |
8 | % | 45 | % | 38 | % | 22 | % | 18 | % | 27 | % (d) |
177 | % | ||||||||||||||
Average commission rate paid (i) |
$ | 0.0296 | $ | 0.0092 | $ | 0.0348 | $ | 0.0969 | $ | 0.0032 | $ | 0.0243 | $ | 0.0300 |
* | Per share data prior to November 3, 2017 has been adjusted to give effect to an approximately 2 to 1 reverse stock split as part of the conversion to a closed-end fund. |
** | For the six-month period ended December 31, 2018. Effective April 11, 2019, the Fund had a fiscal year change from June 30 to December 31. |
‡ | Reflects the financial highlights of Class Z of the open-end fund prior to the conversion. |
(a) | Per share data was calculated using average shares outstanding during the period. |
(b) | The Net Asset Value per share and total return have been calculated based on net assets which include adjustments made in accordance with U.S. Generally Accepted Accounting Principles required at period end for financial reporting purposes. These figures do not necessarily reflect the Net Asset Value per share or total return experienced by the shareholder at period end. |
(c) | Total return is based on market value per share for periods after November 3, 2017. Distributions are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund’s Dividend Reinvestment Plan. Prior to November 3, 2017, total return is at net asset value assuming all distributions are reinvested. For periods with waivers/reimbursements, had the Fund’s investment adviser not waived or reimbursed a portion of expenses, total return would have been lower. |
(d) | Not annualized. |
(e) | Excludes 12b-1 fees from partial period operating as an open-end fund. Following the conversion on November 3, 2017, the Fund is no longer subject to 12b-1 fees. |
(f) | Includes dividends and fees on securities sold short. |
(g) | All ratios for the period have been annualized, unless otherwise indicated. |
(h) | Supplemental expense ratios are shown below. |
(i) | Represents the total dollar amount of commissions paid on portfolio transactions divided by total number of portfolio shares purchased and sold for which commissions were charged. The period prior to the Conversion Date is not presented. |
12 |
See accompanying Notes to Financial Statements. |
Highland Opportunities and Income Fund |
For the Six Months Ended June 30, 2023 (Unaudited) |
For the Years Ended December 31, |
For the Period Ended December 31, 2018** |
For the Year Ended June 30, 2018*‡ |
|||||||||||||||||||||||||
2022 |
2021 |
2020 |
2019 |
|||||||||||||||||||||||||
Ratios based on Average Managed Assets |
||||||||||||||||||||||||||||
Net operating expenses (net of waiver/reimbursement, if applicable, but gross of all other operating expenses) |
0.72 | % | 1.15 | % | 1.44 | % | 1.83 | % | 2.28 | % | N/A | N/A | ||||||||||||||||
Interest expense and commitment fees, and preferred dividend expense |
0.48 | % | 0.70 | % | 0.74 | % | 1.17 | % | 1.27 | % | N/A | N/A | ||||||||||||||||
Dividends and fees on securities sold short |
0.01 | % | 0.02 | % | 0.02 | % | 0.02 | % | 0.01 | % | N/A | N/A | ||||||||||||||||
Ratios to Average Net Assets |
||||||||||||||||||||||||||||
Net operating expenses (net of waiver/reimbursement, if applicable, but gross of all other operating expenses) |
1.45 | % | 1.32 | % | 1.67 | % | 2.68 | % | 3.39 | % | 3.10 | % | 1.79 | % | ||||||||||||||
Interest expense and commitment fees, and preferred dividend expense |
0.97 | % | 0.80 | % | 0.86 | % | 1.71 | % | 1.90 | % | 1.63 | % | 0.49 | % | ||||||||||||||
Dividends and fees on securities sold short |
0.02 | % | 0.02 | % | 0.02 | % | 0.03 | % | 0.01 | % | — | % (j) |
— | % (j) | ||||||||||||||
Borrowing at end of year/period: |
||||||||||||||||||||||||||||
Aggregate Amount Outstanding Excluding |
||||||||||||||||||||||||||||
Preferred Shares* |
19,119,000 | 21,722,000 | — | 200,000,000 | 419,796,600 | 496,141,100 | 498,563,423 | |||||||||||||||||||||
Asset Coverage Per $1,000* |
49,550.53 | 44,549.75 | — | 5,751.74 | 3,371.16 | 3,068.79 | 3,177.35 | |||||||||||||||||||||
Aggregate Amount Outstanding Including |
||||||||||||||||||||||||||||
Preferred Shares* |
164,119,000 | 166,722,000 | 145,000,000 | 345,000,000 | 564,796,600 | 496,141,100 | 498,563,423 | |||||||||||||||||||||
Asset Coverage Per $1,000* |
6,655.88 | 6,674.04 | 7,859.92 | 3,754.63 | 2,762.41 | 3,068.79 | 3,177.35 |
* | See Note 10 for further details. |
(j) | Represents less than 0.005%. |
See accompanying Notes to Financial Statements. |
13 |
June 30, 2023 |
Highland Opportunities and Income Fund |
14 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Issuer |
Shares at December 31, 2022 |
Beginning Value as of December 31, 2022 |
Issuance Net Liquidation Value |
Deferred Issuance Costs |
Paydowns |
Balance net of Deferred Financing Costs at June 30, 2023 |
Shares at June 30, 2023 |
|||||||||||||||||||||
Cumulative preferred shares (Series A) |
5,800,000 | $ | 139,756,249 | $ | 145,000,000 | $ | 5,243,751 | $ | — | $ | 139,756,249 | 5,800,000 | ||||||||||||||||
Level 1 |
Quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement; |
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 Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information. |
Semi-Annual Report |
15 |
June 30, 2023 |
Highland Opportunities and Income Fund |
16 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Total value at June 30, 2023 ($) |
Level 1 Quoted Price ($) |
Level 2 Significant Observable Inputs ($) |
Level 3 Significant Unobservable Inputs ($) |
|||||||||||||
Highland Opportunities and Income Fund |
||||||||||||||||
Assets |
||||||||||||||||
Common Stocks |
||||||||||||||||
Communication Services |
11,015,436 | 1,830,306 | — | 9,185,130 | ||||||||||||
Consumer Discretionary |
14,371 | — | — | 14,371 | ||||||||||||
Energy |
— | — | — | — | (1) | |||||||||||
Gaming/Leisure |
4,389,275 | — | — | 4,389,275 | ||||||||||||
Healthcare |
22,730,387 | — | — | 22,730,387 | ||||||||||||
Materials |
1,495,160 | — | 1,495,160 | — | ||||||||||||
Real Estate |
523,846,156 | 101,767,162 | — | 422,078,994 | ||||||||||||
U.S. Senior Loans |
||||||||||||||||
Communication Services |
9,113,792 | — | — | 9,113,792 | ||||||||||||
Energy |
6,393,335 | — | 6,393,335 | — | ||||||||||||
Gaming/Leisure |
14,621,330 | — | — | 14,621,330 | ||||||||||||
Healthcare |
27,985,351 | — | 12,008,300 | 15,977,051 | ||||||||||||
Information Technology |
61,626,177 | — | — | 61,626,177 | ||||||||||||
Real Estate |
128,183,532 | — | — | 128,183,532 | ||||||||||||
Collateralized Loan Obligations |
93,695,451 | — | 93,695,451 | — | ||||||||||||
LLC Interest |
59,422,067 | — | — | 59,422,067 | ||||||||||||
Warrants |
||||||||||||||||
Energy |
32,700,272 | — | 32,700,272 | — | ||||||||||||
Preferred Stock |
||||||||||||||||
Financials |
4,303,497 | 3,098,335 | 703,600 | 501,562 | ||||||||||||
Healthcare |
22,199,057 | — | — | 22,199,057 | ||||||||||||
Real Estate |
5,231,066 | 4,563,664 | 667,402 | — | ||||||||||||
Corporate Bonds & Notes |
||||||||||||||||
Communication Services |
2,604 | — | 2,604 | — | ||||||||||||
Financials |
3,400,000 | — | 3,400,000 | — | ||||||||||||
Industrials |
— | — | — | — | (1) | |||||||||||
Utilities |
— | — | _ | (1) |
— | |||||||||||
Master Limited Partnerships |
||||||||||||||||
Energy |
2,275,840 | 2,275,840 | — | — | ||||||||||||
Registered Investment Company |
746,028 | 746,028 | — | — | ||||||||||||
Rights |
||||||||||||||||
Utilities |
5,384 | — | 5,384 | — | ||||||||||||
Repurchase Agreement |
8 | 8 | — | — | ||||||||||||
Cash Equivalent |
12,161,638 | 12,161,638 | — | — | ||||||||||||
Total Assets |
1,047,557,214 | 126,442,981 | 151,071,508 | 770,042,725 | ||||||||||||
Liabilities |
||||||||||||||||
Securities Sold Short |
||||||||||||||||
Common Stocks |
||||||||||||||||
Information Technology |
(7,398,822 | ) | (7,398,822 | ) | — | — | ||||||||||
Reverse Repurchase Agreement |
(19,119,000 | ) | — | (19,119,000 | ) | — | ||||||||||
Total Liabilities |
(26,517,822 | ) | (7,398,822 | ) | (19,119,000 | ) | — | |||||||||
Total |
1,021,039,392 | 119,044,159 | 131,952,508 | 770,042,725 | ||||||||||||
(1) |
This category includes securities with a value of zero. |
Semi-Annual Report |
17 |
June 30, 2023 |
Highland Opportunities and Income Fund |
Balance as of December 31, 2022 $ |
Transfers Into Level 3 $ |
Transfers Out of Level 3 $ |
Accrued Discounts (Premiums) $ |
Distribution to Return Capital $ |
Realized Gain (Loss) $ |
Net Change in Unrealized Appreciation (Depreciation) $ |
Net Purchases $ |
Net Sales $ |
Balance as of June 30, 2023 $ |
Change in Unrealized Appreciation (Depreciation) from Investments held at June 30, 2023 $ |
||||||||||||||||||||||||||||||||||
Common Stocks |
||||||||||||||||||||||||||||||||||||||||||||
Communication Services |
9,887,358 | — | — | — | — | — | (702,228 | ) | — | — | 9,185,130 | (702,228 | ) | |||||||||||||||||||||||||||||||
Consumer Discretionary |
13,895 | — | — | — | — | — | 476 | — | — | 14,371 | 476 | |||||||||||||||||||||||||||||||||
Gaming/Leisure |
5,635,995 | — | — | — | — | — | (1,246,720 | ) | — | — | 4,389,275 | (1,246,720 | ) | |||||||||||||||||||||||||||||||
Healthcare |
22,261,348 | — | — | — | — | — | 469,039 | — | — | 22,730,387 | 469,039 | |||||||||||||||||||||||||||||||||
Real Estate |
427,422,662 | — | — | — | (74,892,009 | ) | (10,154,419 | ) | 79,702,760 | — | 422,078,994 | (10,154,419 | ) | |||||||||||||||||||||||||||||||
U.S. Senior Loans |
||||||||||||||||||||||||||||||||||||||||||||
Communication Services |
8,616,085 | — | — | 7 | — | — | 4,460 | 493,240 | — | 9,113,792 | 4,460 | |||||||||||||||||||||||||||||||||
Gaming/Leisure |
13,833,090 | — | — | — | — | — | 389,664 | 398,576 | — | 14,621,330 | 389,664 | |||||||||||||||||||||||||||||||||
Healthcare |
15,408,657 | — | — | — | — | — | 93,010 | 475,384 | — | 15,977,051 | 93,010 | |||||||||||||||||||||||||||||||||
Information Technology |
59,271,980 | — | — | — | — | — | 2,354,197 | — | — | 61,626,177 | 2,354,197 | |||||||||||||||||||||||||||||||||
Real Estate |
108,158,431 | — | — | — | — | — | 2,297,758 | 17,727,343 | — | 128,183,532 | 2,297,758 | |||||||||||||||||||||||||||||||||
LLC Interest |
59,010,136 | — | — | — | — | — | (3,378,069 | ) | 3,790,000 | — | 59,422,067 | (3,378,069 | ) | |||||||||||||||||||||||||||||||
Preferred Stock |
||||||||||||||||||||||||||||||||||||||||||||
Financials |
1,266,246 | — | — | — | — | — | (764,684 | ) | — | — | 501,562 | (764,684 | ) | |||||||||||||||||||||||||||||||
Healthcare |
22,083,025 | — | — | — | — | — | 116,032 | — | — | 22,199,057 | 116,032 | |||||||||||||||||||||||||||||||||
Total |
752,868,908 | — | — | 7 | (74,892,009 | ) | — | (10,521,484 | ) | 102,587,303 | — | 770,042,725 | (10,521,484 | ) | ||||||||||||||||||||||||||||||
18 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Category |
Fair Value at 06/30/23 $ |
Valuation Technique |
Unobservable Inputs |
Range Input Value(s) (Average Input Value) |
||||||||
Common Stocks |
458,398,157 | Multiples Analysis | Unadjusted Price/MHz-PoP | $0.09 - $0.90 ($0.50) |
||||||||
NAV / sh multiple | 1.10x - 1.45x (1.28x) |
|||||||||||
Revenue Multiples | 0.33x - 0.43x (0.38x) |
|||||||||||
Net Asset Value | N/A | $28.00 | ||||||||||
Liquidation Analysis | Recovery Rate | 40% - 100% (70%) |
||||||||||
Discounted Cash Flow | Discount Rate | 7.50% - 32.50% (13.30%) |
||||||||||
Capitalization Rate | 5.25% - 9.50% (6.83%) |
|||||||||||
Transaction Analysis | Multiple of EBITDA less CAPEX | 8.00x - 10.50x (9.25x) |
||||||||||
Price per Sq. Ft. | $22.00 - $33.00 ($28.67) |
|||||||||||
Transaction Indication of Value | Enterprise Value ($mm) | $788 - $1,010 ($899) |
||||||||||
Cost Price ($mm) | $14.90 | |||||||||||
U.S. Senior Loans |
229,521,882 | Discounted Cash Flow | Discount Rate | 7.50% - 20.00% (10.23%) |
||||||||
Volatility Analysis | Volatility | 25.00% - 60.00% (42.50%) |
||||||||||
Preferred Stock |
22,700,619 | NAV Approach | Discount Rate | 70.0% | ||||||||
Option Pricing Model | Volatility | 40% - 60% (50%) |
||||||||||
Transaction Indication of Value | Recap Price | $11.10 | ||||||||||
LLC Interest |
59,422,067 | Discounted Cash Flow | Discount Rate | 5.48% - 14.00% (9.72%) |
||||||||
770,042,725 |
Semi-Annual Report |
19 |
June 30, 2023 |
Highland Opportunities and Income Fund |
20 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Semi-Annual Report |
21 |
June 30, 2023 |
Highland Opportunities and Income Fund |
Gross Amount of Recognized Assets (Value of Securities on Loan) |
Value of Cash Collateral Received (1) |
Value of Non-Cash Collateral Received |
Net Amount | |||
$— | $— | $— | $— |
(1) |
Collateral received in excess of market value of securities on loan is not presented in this table. The total cash collateral received by the Fund is disclosed in the Statement of Assets and Liabilities. |
22 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Overnight and Continuous |
<30 Days |
Between 30 & 90 Days |
>90 Days |
Total |
||||||||||||||||
Repurchase Agreement |
$ | 8 | $ | — | $ | — | $ | — | $ | 8 | ||||||||||
Total |
$ | 8 | $ | — | $ | — | $ | — | $ | 8 | ||||||||||
Distributable Earnings (Accumulated Losses) |
Paid-in-Capital |
|||
$4,877,268 | $ | (4,877,268 | ) |
Other Temporary Losses |
Accumulated Capital Losses |
Unrealized Appreciation (Depreciation) (1) |
||||||
$— | $ | (193,465,924 | ) | $ | (315,342,241 | ) |
(1) |
Any differences between book-basis and tax-basis net unrealized appreciation/(depreciation) are primarily due to wash sales, non-taxable dividends, partnerships, PFICs, REIT basis adjustments and difference in premium amortization methods for book and tax. |
Semi-Annual Report |
23 |
June 30, 2023 |
Highland Opportunities and Income Fund |
No Expiration Short-Term |
No Expiration Long-Term |
Total |
||||||
$— | $ | (193,465,924 | ) | $ | (193,465,924 | ) |
Ordinary Income |
Long-term Capital Gain |
Return of Capital |
||||||||||
2022 |
$ | 35,874,540 | $ | — | $ | 27,155,040 | ||||||
2021 |
15,595,827 | — | 50,110,849 |
Gross Appreciation |
Gross Depreciation |
Net Appreciation/ (Depreciation) |
Cost |
|||||||||
$128,000,247 | $ | (503,748,796 | ) | $ | (375,748,549 | ) | $ | 1,423,305,763 |
Annual Fee Rate to the Investment Advisor |
> 1 Billion |
> 2 Billion |
||||||
0.65% | 0.60 | % | 0.55 | % |
24 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Semi-Annual Report |
25 |
June 30, 2023 |
Highland Opportunities and Income Fund |
26 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Semi-Annual Report |
27 |
June 30, 2023 |
Highland Opportunities and Income Fund |
28 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Semi-Annual Report |
29 |
June 30, 2023 |
Highland Opportunities and Income Fund |
30 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
U.S Government Securities |
Other Securities |
|||||||||||
Purchases |
Sales |
Purchases |
Sales |
|||||||||
$— | $ | — | $ | 84,751,594 | $ | 107,827,369 |
Semi-Annual Report |
31 |
June 30, 2023 |
Highland Opportunities and Income Fund |
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 June 30, 2023 $ |
Shares at June 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 | 475,385 | — | — | — | 562,048 | 38,707,438 | 28,003,711 | 893,659 | ||||||||||||||||||||||||||||||
EDS Legacy Partners (U.S. Senior Loans) |
61,411,237 | 59,271,980 | — | — | — | — | 2,354,197 | 61,626,177 | 61,411,237 | 3,267,163 | ||||||||||||||||||||||||||||||
Highland Global Allocation Fund (Registered Investment Company) |
48,649 | 458,274 | 375,218 | — | — | — | (87,464 | ) | 746,028 | 86,246 | 40,310 | |||||||||||||||||||||||||||||
LLV Holdco LLC (U.S. Senior Loans & Common Stocks) |
15,508,203 | 19,469,085 | 594,142 | — | — | — | (1,052,622 | ) | 19,010,605 | 16,102,344 | 592,019 | |||||||||||||||||||||||||||||
NEXLS LLC (LLC Interest) |
882 | 49,601,366 | 3,790,000 | — | — | — | (3,274,299 | ) | 50,117,067 | 957 | — | |||||||||||||||||||||||||||||
NexPoint Diversified Real Estate Trust REIT (Common Stocks) |
1,275,616 | 14,299,655 | — | — | — | — | 1,671,057 | 15,970,712 | 1,275,616 | 382,685 | ||||||||||||||||||||||||||||||
NexPoint Real Estate Finance REIT (Common Stocks & Preferred Stock) |
4,523,263 | 72,294,165 | — | — | — | — | (1,031,895 | ) | 71,262,270 | 4,523,263 | 6,150,445 | |||||||||||||||||||||||||||||
NexPoint Residential Trust, Inc. (Common Stocks) |
186,372 | 8,110,910 | 157,251 | — | (105,064 | ) | — | 474,010 | 8,637,107 | 189,910 | 52,228 | |||||||||||||||||||||||||||||
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 | 2,478,750 | ||||||||||||||||||||||||||||||
NexPoint Storage Partners, Inc. (Common Stocks) |
32,203 | 38,663,114 | — | — | — | — | 488,321 | 39,151,435 | 32,203 | — | ||||||||||||||||||||||||||||||
NFRO Diversified REIT, LLC, NFRO Self Storage REIT, LLC, NFRO SFR REIT, LLC (Common Stocks) |
139,114,085 | 333,165,821 | 22,786,305 | — | (74,892,009 | ) | — | (18,103,948 | ) | 262,956,169 | 148,383,860 | 689,585 | ||||||||||||||||||||||||||||
NFRO Holdings, LLC (Common Stocks) |
— | — | 56,916,455 | — | — | — | 7,461,208 | 64,377,663 | 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 | 81,254 |
32 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
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 June 30, 2023 $ |
Shares at June 30, 2023 |
Affiliated Income $ |
||||||||||||||||||||||||||||||
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 | 1,011,189 | ||||||||||||||||||||||||||||||
NREF Operating IV REIT Sub, LLC (U.S. Senior Loans) |
— | — | 6,500,000 | — | — | — | — | 6,500,000 | 6,500,000 | 143,541 | ||||||||||||||||||||||||||||||
SFR WLIF 1, III, LLC (LLC Interest) |
10,000,000 | 9,408,770 | — | — | — | — | (103,770 | ) | 9,305,000 | 10,000,000 | 500,856 | |||||||||||||||||||||||||||||
Total |
385,640,360 | 750,571,576 | 102,594,756 | — | (74,997,073 | ) | — | (8,118,056 | ) | 770,051,203 | 415,797,528 | 16,283,684 | ||||||||||||||||||||||||||||
Date |
Amount Outstanding Excluding Preferred Shares $ |
Asset Coverage of Indebtedness Excluding Preferred Shares % |
Amount Outstanding Including Preferred Shares $ |
Asset Coverage of Indebtedness Including Preferred Shares (2) % |
||||||||||||
6/30/2023 |
||||||||||||||||
12/31/2022 |
||||||||||||||||
12/31/2021 |
||||||||||||||||
12/31/2020 |
||||||||||||||||
12/31/2019 |
||||||||||||||||
12/31/2018 (1) |
||||||||||||||||
6/30/2018 |
||||||||||||||||
6/30/2017 |
||||||||||||||||
6/30/2016 |
||||||||||||||||
6/30/2015 |
||||||||||||||||
6/30/2014 |
||||||||||||||||
6/30/2013 |
1 |
For the six-month period ended December 31, 2018. Effective April 11, 2019, the Fund had a fiscal year change from June 30 to December 31. |
2 |
As referenced in Note 1, the Fund issued $145mm in preferred shares subject to the 200% Asset Coverage of Indebtedness requirements under the 1940 Act. |
NFRO Diversified REIT, LLC June 30, 2023 $ |
NFRO Self Storage REIT Sub, LLC June 30, 2023 $ |
NFRO SFR REIT, LLC June 30, 2023 $ |
||||||||||
Balance Sheet: |
||||||||||||
Current Assets |
14,048,000 | 681,000 | 789,000 | |||||||||
Noncurrent Assets |
227,615,000 | 134,882,000 | 77,031,000 | |||||||||
Total Assets |
241,663,000 | 135,563,000 | 77,820,000 | |||||||||
Current Liabilities |
24,073,000 | 500.000 | — | |||||||||
Noncurrent Liabilities |
160,244,000 | — | — | |||||||||
Total Liabilities |
184,317,000 | 500,000 | — | |||||||||
Preferred Stock |
1,000 | 104,000 | — | |||||||||
Non-Controlling interest (in consolidated investments) |
3,629,000 | — | — | |||||||||
Invested Equity |
53,716,000 | 134,959,000 | 77,820,000 | |||||||||
Total Equity |
57,346,000 | 135,063,000 | 77,820,000 | |||||||||
Semi-Annual Report |
33 |
June 30, 2023 |
Highland Opportunities and Income Fund |
NFRO Diversified REIT, LLC For the Six Months Ended June 30,2023 $ |
NFRO Self Storage REIT Sub, LLC For the Six Months Ended June 30,2023 $ |
NFRO SFR REIT, LLC For the Six Months Ended June 30, 2023 $ |
||||||||||
Summary of Operations: |
||||||||||||
Net Sales |
1,812,000 | 4,194,000 | 1,940,000 | |||||||||
Gross Profit (Loss) |
(3,559,000 | ) | 594,000 | 1,940,000 | ||||||||
Net Income (Loss) |
(11,314,000 | ) | 594,000 | (1,162,000 | ) | |||||||
Net Income (Loss) attributable to non-controlling interest (in consolidated investments), preferred shares, and other comprehensive income |
87,000 | 7,500,000 | — |
34 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
• | commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”) and other real estate credit investments, which include existing first and second mortgages on real estate, either originated or acquired in the secondary market, and secured, unsecured and/or |
Semi-Annual Report |
35 |
June 30, 2023 |
Highland Opportunities and Income Fund |
convertible notes offered by real estate operating companies (“REOCs”) and REITs; |
• | publicly traded REITs managed by affiliated or unaffiliated asset managers and their foreign equivalents (“Public REITs”); |
• | REOCs; |
• | private real estate investment funds managed by affiliated or unaffiliated institutional asset managers (“Private Real Estate Investment Funds”); |
• | registered closed-end funds that invest principally in real estate (collectively, “Public Investment Funds”); |
• | real estate exchange traded funds (“ETFs”); and |
• | publicly-registered non-traded REITs (“Non-Traded REITs”) and private REITs, generally wholly-owned by the Fund or wholly-owned or managed by an affiliate. |
36 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Semi-Annual Report |
37 |
June 30, 2023 |
Highland Opportunities and Income Fund |
38 |
Semi-Annual Report |
June 30, 2023 |
Highland Opportunities and Income Fund |
Nominees/Trustees |
Number of Shares Voted |
Percentage of Outstanding Shares |
||||||
Dr. Bob Froehlich |
||||||||
For |
3,108,442 | 93.38 | % | |||||
Withheld |
220,398 | 6.62 | % | |||||
Dorri McWhorter |
||||||||
For |
52,109,731 | 86.15 | % | |||||
Withheld |
8,381,244 | 13.85 | % |
Semi-Annual Report |
39 |
40 |
Semi-Annual Report |
Highland Opportunities and Income Fund |
Semi-Annual Report, June 30, 2023 |
www.nexpointassetmgmt.com |
HFRO-SAR-0623 |
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the Semi-Annual Report to Shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
There has been no change, as of the date of this filing, in any of the portfolio managers identified in response to paragraph (a)(1) of this Item in Highland Opportunities and Income Fund’s (the “Registrant”) most recently filed annual report on Form N-CSR.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the Registrant’s Board.
Item 11. Controls and Procedures.
(a) The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act (17 CFR 270.30a-3 (c)) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a)
(1) Gross income from securities lending activities: $0
(2) All fees and/or compensation for securities lending activities and related services: $0
(3) Aggregate fees/compensation: $0
(4) Net income from securities lending activities: $ 6,778
(b) The Registrant may lend up to 33 1/3% of the Registrant’s total assets held by the Fund’s custodian to certain qualified brokers, except those securities which the Registrant or the Advisor specifically identifies as not being available. By lending its investment securities, the Registrant attempts to increase its net investment income through the receipt of interest on the loan. Any gain or loss in the market price of the securities loaned that might occur and any interest or dividends declared during the term of the loan would accrue to the account of the Registrant. Risks of delay in recovery of the securities or even loss of rights in the collateral may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the collateral decreases below the value of the securities loaned. Upon entering into a securities lending transaction, the Registrant receives cash or other
securities as collateral in an amount equal to or exceeding 100% of the current market value of the loaned securities with respect to securities of the U.S. government or its agencies, 102% of the current market value of the loaned securities with respect to U.S. securities and 105% of the current market value of the loaned securities with respect to foreign securities. Any cash received as collateral is generally invested by the Fund’s custodian acting in its capacity as securities lending agent. Non-cash collateral is not disclosed in the Registrant’s Statement of Assets and Liabilities as it is held by the lending agent on behalf of the Registrant and the Registrant does not have the ability to re-hypothecate those securities. A portion of the dividends received on the collateral may be rebated to the borrower of the securities and the remainder is split between the Fund’s custodian, as the securities lending agent, and the Registrant.
Item 13. Exhibits.
(a)(1) | Not applicable. | |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. | |
(a)(3) | Not applicable. | |
(a)(4) | Not applicable. | |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HIGHLAND OPPORTUNITIES AND INCOME FUND | ||
By (Signature and Title): | /s/ Frank Waterhouse | |
Frank Waterhouse | ||
Treasurer, Principal Executive Officer and Principal Financial and Accounting Officer |
Date: September 8, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By (Signature and Title): | /s/ Frank Waterhouse | |
Frank Waterhouse | ||
Treasurer, Principal Executive Officer and Principal Financial and Accounting Officer |
Date: September 8, 2023