SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by
the Registrant ☒ Filed by a Party other than the Registrant ☐
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appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Sec. 240.14a-12 |
Highland Opportunities and Income Fund
(formerly Highland Income Fund)
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the
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HIGHLAND OPPORTUNITIES AND INCOME FUND
(formerly Highland Income Fund)
300 Crescent Court
Suite 700
Dallas, Texas
75201
(800) 357-9167
May 17, 2024
Dear Shareholder:
Enclosed you will find the proxy materials for the 2024 Annual Meeting of Shareholders of Highland Opportunities and Income Fund (the Fund) to be
held at 300 Crescent Court, Suite 700, Dallas, Texas 75201, on Wednesday, June 26, 2024, at 8:30 a.m. Central Time (the Annual Meeting). Details regarding the business to be conducted at the Annual Meeting are more fully described
in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.
In addition to voting on the Proposal described in the Notice of Annual
Meeting of Shareholders and Proxy Statement, you will have an opportunity to hear a report on the Fund and to discuss other matters of interest to you as a shareholder.
It is very important that your shares be represented at the Annual Meeting. Whether or not you plan to attend, please complete, date, sign and mail the
enclosed proxy card, which provides options for voting, to assure that your shares are represented at the Annual Meeting.
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Sincerely, |
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/s/ Frank Waterhouse |
Frank Waterhouse Principal Executive Officer,
Principal Financial Officer, Principal Accounting Officer and Treasurer |
HIGHLAND OPPORTUNITIES AND INCOME FUND
300 Crescent Court
Suite 700
Dallas, Texas
75201
(800) 357-9167
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 26, 2024
The
Annual Meeting of Shareholders of Highland Opportunities and Income Fund, a Massachusetts business trust (the Fund), will be held at 300 Crescent Court, Suite 700, Dallas, Texas 75201, on Wednesday, June 26, 2024, at 8:30 a.m.
Central Time (the Annual Meeting), for the following purposes:
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To elect John Honis as a Class III Trustee of the Fund, to serve for a three-year term expiring at the
2027 Annual Meeting or until his successor is duly elected and qualifies (the Proposal); and |
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To transact such other business as may properly come before the Annual Meeting and any adjournment or
postponements thereof. |
The Board of Trustees recommends a vote FOR the Proposal. The close of business on May 10, 2024 has
been fixed as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponements thereof. Please call Morrow Sodali Fund Solutions at
(833) 812-4844 for directions on how to attend the Annual Meeting.
Important Notice Regarding
Availability of Proxy Materials for the Shareholder Meeting to be held on June 26, 2024: Copies of these proxy materials, including the Funds annual shareholder report, the Notice for the Annual Meeting, the Proxy Statement and the form
of proxy, are available to you on the Internet at https://proxyvotinginfo.com/p/hfro2024.
Copies of the proxy materials are available upon
request, without charge, by calling Morrow Sodali Fund Solutions at (833) 812-4844 or by sending an e-mail to msfs-meetinginfo@morrowsodali.com, subject line: Highland
Opportunities and Income Fund 100158 Fulfillment.
Shareholders are encouraged to read all of the proxy materials before voting as the proxy
materials contain important information necessary to make an informed decision.
The Board of Trustees is requesting your vote. Your vote is
important regardless of the number of shares that you own. Please complete and sign the enclosed proxy card and return it promptly in the enclosed envelope, which needs no postage if mailed in the United States. If you desire to vote in person at
the Annual Meeting you may revoke your proxy at any time before it is exercised.
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By Order of the Board of Trustees, |
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/s/ Stephanie Vitiello |
Stephanie Vitiello Secretary |
May 17, 2024
Dallas,
Texas
HIGHLAND OPPORTUNITIES AND INCOME FUND
300 Crescent Court
Suite 700
Dallas, Texas
75201
(800) 357-9167
PROXY STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
JUNE 26, 2024
This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Trustees of Highland Opportunities and Income Fund,
a Massachusetts business trust (the Fund or HFRO), for use at the Funds Annual Meeting of Shareholders to be held at 300 Crescent Court, Suite 700, Dallas, Texas 75201, on Wednesday, June 26, 2024, at 8:30
a.m. Central Time, and at any and all adjournments or postponements thereof (the Annual Meeting), for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders dated May 17, 2024. The Fund is a closed-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act).
NexPoint Asset Management, L.P., a Delaware limited partnership (NexPoint or the Adviser), serves as the investment adviser and the
administrator to the Fund. The Funds principal executive office and the principal executive office of NexPoint are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201.
This Proxy Statement and the accompanying Notice of Annual Meeting of Shareholders and form of proxy are being provided to shareholders on or about
May 17, 2024. The Board of Trustees (the Board) has fixed the close of business on May 10, 2024 as the record date (the Record Date) for the determination of shareholders entitled to receive notice of, and to vote
at, the Annual Meeting. As of the Record Date, 66,894,537 shares of the Funds common shares (Common Shares), par value $0.001 per share, were issued and outstanding, and 5,800,000 5.375% Series A Cumulative Preferred Shares
(Preferred Shares), with a liquidation preference of $25.00 per share, were issued and outstanding. Shareholders of the Fund are entitled to one vote for each Fund share held and fractional votes for each fractional Fund share held.
Holders of both the Common Shares and the Preferred Shares, voting as a single class, are entitled to vote for the election of John Honis as a Class III Trustee.
If the form of proxy is properly executed and returned in time to be voted at the Annual Meeting, the shares covered thereby will be voted at the Annual
Meeting in accordance with the instructions marked thereon. All properly executed proxies received by the Board that do not specify how shares should be voted will be voted (i) FOR the election as a Trustee of the nominee
listed in the Proposal; and (ii) in the discretion of the persons named as proxies in connection with any other matter which may properly come before the Annual Meeting or any adjournment or postponements thereof.
The Board does not know of any matters to be considered at the Annual Meeting other than the election of the Trustee referred to in this Proxy Statement. A
shareholder may revoke his or her proxy any time before it is exercised by (i) voting in person at the Annual Meeting, (ii) giving written notice of such revocation to the Secretary of the Fund or (iii) returning a later-dated proxy
before the Annual Meeting.
The presence in person or by proxy of the holders of 33 1/3% of the aggregate Common Shares and Preferred Shares, voting as a
single class, shall constitute a Quorum for the Funds Annual Meeting with respect to the election of John Honis.
If a Quorum is not present at the
Annual Meeting, or if a Quorum is present but sufficient votes to approve the Proposal are not received, the persons named as proxies may propose one or more adjournments or postponements of the Annual Meeting to permit further solicitation of
proxies. Any adjournment or
1
postponement will require the affirmative vote of a majority of those shares that are represented at the Annual Meeting in person or by proxy, whether or not a Quorum is present.
Shares represented by properly executed proxies with respect to which (i) a vote is withheld, (ii) the shareholder abstains, or (iii) a broker
does not vote (i.e., broker non-votes) will be treated as shares that are present and entitled to vote for purposes of determining a Quorum. Assuming the presence of a Quorum, abstentions and
broker non-votes will have no effect on the outcome of the vote on the Proposal.
In addition to
soliciting proxies by mail, the Funds officers and employees of the Adviser may solicit proxies by internet or by telephone. Copies of the Notice for the Annual Meeting, the Proxy Statement and the form of proxy are available at
https://proxyvotinginfo.com/p/hfro2024. The Fund has engaged Morrow Sodali Fund Solutions, at Morrow Sodali Fund Solutions, 333 Ludlow Street, 5th Floor, South Tower, Stamford, CT 06902 for inquiries, to provide shareholder meeting services,
including the distribution of this Proxy Statement and related materials to shareholders as well as assisting the Fund in soliciting proxies for the Annual Meeting at an approximate cost of $27,800. The costs of proxy solicitation and expenses
incurred in connection with preparing this Proxy Statement and its enclosures will be paid by the Fund.
HOW TO VOTE
You can vote in advance in one of three ways:
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via the internet
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The web address and instructions for voting VIA THE INTERNET can be found on the enclosed proxy card or voting instruction form. You will be required to provide your control number located on the proxy card. |
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by phone
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The toll-free number for voting BY TELEPHONE voting can be found on the enclosed proxy card or voting instruction form. You will be required to provide your control number located on the proxy card. |
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by mail
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Sign, date and return your proxy card if you are a shareholder of record or voting instruction form if you are a beneficial owner to authorize a proxy BY MAIL. |
If the Annual Meeting is postponed or adjourned, these times will be extended to 11:59 p.m., Eastern Time, on the day
before the reconvened meeting.
2
PROPOSAL
ELECTION OF TRUSTEE
The Funds Board
is currently composed of five Trustees, four of whom are not interested persons of the Fund (as defined in the 1940 Act) (the Independent Trustees). The Independent Trustees of the Board are Bryan A. Ward, Ethan Powell,
Dr. Bob Froehlich and Dorri McWhorter. Mr. John Honis is treated as an Interested Trustee of the Fund in light of certain relationships between Mr. Honis and historically affiliated entities of the Adviser.
At the Annual Meeting, the holders of the Funds Common and Preferred Shares, voting as a single class, are being asked to
re-elect John Honis as a Class III Trustee of the Fund, to serve for a three-year term until the 2027 annual meeting of shareholders or until his successor is duly elected and qualified. Mr. Honis is
currently serving as a Class III Trustee of the Fund and has agreed to continue to serve as a Class III Trustee, if re-elected. If Mr. Honis is not available for
re-election at the time of the Annual Meeting, the persons named as proxies will vote for such substitute nominee(s) as the Funds Governance and Compliance Committee may select.
The Funds Board is divided into three classes with the term of office of one class expiring each year. Mr. John Honis is currently serving as a
Class III Trustee and was last elected to serve until the 2024 annual meeting of shareholders at the Funds annual meeting of shareholders held on June 11, 2021. Dr. Bob Froehlich and Dorri McWhorter are currently serving as
Class II Trustees. Dr. Froehlich and Ms. McWhorter were last elected to serve until the 2026 annual meeting of shareholders at the Funds annual meeting of shareholders held on June 16, 2023. Ethan Powell and Bryan A. Ward
are currently serving as Class I Trustees. Messrs. Powell and Ward were last elected to serve until the 2025 annual meeting of shareholders at the Funds annual meeting of shareholders held on June 14, 2022. Mr. Honis will
continue to serve as a Class III Trustee if re-elected at the Annual Meeting until the 2027 annual meeting of shareholders or until his successor is duly elected and qualifies. The Funds Trustees
are not required to attend the Funds annual shareholder meetings.
Vote Required for Election of Trustee
The election of Mr. Honis requires the affirmative vote of the holders of a plurality of the Common and Preferred Shares of the Fund, voting as a single
class, and represented in person or by proxy at the Annual Meeting and entitled to vote for the election of a Trustee.
Abstentions and broker non-votes (i.e., shares held in street name by brokers or nominees that indicate on their proxies that they do not have discretionary authority to vote such shares as to the election of a Trustee)
are counted as present at the Annual Meeting for purposes of determining a Quorum, but, assuming the presence of a Quorum, will have no effect on the outcome of the vote on the Proposal.
Under the Funds Declaration of Trust, Statement of Preferences for the Preferred Shares and the 1940 Act, the holders of the Funds Preferred
Shares, voting as a separate class, to the exclusion of holders of all other securities and classes of capital shares of the Fund, are entitled to elect two of the Funds Trustees. The holders of the Funds Preferred Shares are entitled to
elect the minimum number of additional Trustees that would represent a majority of the Trustees in the event that dividends on the Funds Preferred Shares become in arrears for two full years and until all arrearages are eliminated. No dividend
arrearages exist as of the date of this Proxy Statement.
Dr. Froehlich and Mr. Powell have been designated as the trustees representing the
holders of the Preferred Shares. This means that Dr. Froehlich, as a Class II Trustee, will be re-elected solely by the holders of the Preferred Shares at the Annual Meeting of Shareholders in 2026
and Mr. Powell, as a Class I Trustee, will be re-elected solely by the holders of the Preferred Shares at the Annual Meeting of Shareholders in 2025. The holders of the outstanding capital shares of
the Fund, including the holders of the Preferred Shares, voting as a single class, elect the balance of the Trustees.
THE BOARD, INCLUDING ALL OF THE
INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RE-ELECTION OF THE NOMINEE AS A TRUSTEE.
3
Qualifications and Additional Information about the Nominee for Trustee and the Continuing Trustees
The following provides an overview of the considerations that led the Board to conclude that the nominee for Trustee or the individuals serving as continuing
Trustees of the Fund should be nominated or so serve, as well as the nominees and each Trustees name and certain biographical information as reported by them to the Fund. Among the factors the Board considered when concluding that an
individual should be a nominee for Trustee or serve on the Board were the following: the individuals experience, skills, expertise, education, knowledge, diversity, personal and professional integrity, character, business judgment, time
availability in light of other commitments, dedication, the candidates ability to qualify as an Independent Trustee and the existence of any other relationships that might give rise to a conflict of interest and other relevant factors that the
Funds Governance and Compliance Committee considers appropriate in the context of the needs of the Board (e.g., whether a candidate is an audit committee financial expert under the federal securities laws). Additional
information regarding the qualification requirements applicable to Trustees is outlined in the Funds Bylaws.
In respect of the Trustee nominee and
each continuing Trustee, the individuals professional accomplishments and prior experience, including, in some cases, in fields related to the operations of the Fund, were a significant factor in the determination that each of the individuals
should be a nominee for Trustee or serve as a Trustee of the Fund. The Trustee nominees and each continuing Trustees professional experience and additional considerations that contributed to the Boards conclusion that an individual
should serve on the Board are summarized in the table below.
The Fund Complex, as referred to herein consists of: the Fund, each series of
NexPoint Funds I (NFI), each series of NexPoint Funds II (NFII), Highland Global Allocation Fund (GAF), NexPoint Real Estate Strategies Fund (NRESF), and NexPoint Capital, Inc. (the BDC), a
closed-end management investment company that has elected to be treated as a business development company under the 1940 Act.
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Name, Date of Birth, Position(s) with the Fund and Length of
Time Served, Term of Office1 and Number of Portfolios in the Fund Complex Overseen by the Trustee |
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Principal Occupations(s) During the Past Five Years and
Other Directorships/Trusteeships Held During the Past
Five Years |
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Experience, Qualifications,
Attributes, Skills for Board Membership |
Independent Trustees |
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Dr. Bob Froehlich (4/28/1953)
Trustee since August 2017;
3 year term (expiring at 2026 annual meeting).
7 funds |
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Retired.
Director of KC Concessions, Inc. (since January 2013); Director of American Sports Enterprise, Inc. (since January 2013); Chairman and owner, Kane County
Cougars Baseball Club (since January 2013); Director of The Midwest League of Professional Baseball Clubs, Inc. (from January 2013 to December 2021); Director of Kane County Cougars Foundation, Inc. (since January 2013); Director of Galen Robotics,
Inc. (from August 2016 to September 2023); Director and Special Advisor to Vault Data, LLC (since February 2018); Director of American Association of Professional Baseball, Inc. (since February 2021); Director of National Amateur Fall Baseball
Federation (since December 2023) and Executive Director of Kane County Cougars Baseball Foundation Inc. since July 2023 (remaining as Director). |
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Significant experience in the financial industry; significant managerial and executive experience; significant experience on other boards of directors, including as a member of several audit
committees. |
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Name, Date of Birth, Position(s) with the Fund and Length of
Time Served, Term of Office1 and Number of Portfolios in the Fund Complex Overseen by the Trustee |
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Principal Occupations(s) During the Past Five Years and
Other Directorships/Trusteeships Held During the Past
Five Years |
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Experience, Qualifications,
Attributes, Skills for Board Membership |
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Ethan Powell (6/20/1975)
Trustee since August 2017; Chairman of the Board since August 2017; 3 year term
(expiring at 2025 annual meeting). 7 funds |
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Principal and CIO of Brookmont Capital Management, LLC since May 2020; CEO, Chairman and Founder of Impact Shares LLC since December 2015;
Trustee of the Fund Complex from June 2012 until July 2013 and since December 2013; and Director of Kelly Strategic Management since August 2021.
Trustee of Impact Shares Funds I Trust |
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Significant experience in the financial industry; significant executive experience including past service as an officer of funds in the Fund Complex; significant administrative and managerial experience. |
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Bryan A. Ward (2/4/1955)
Trustee since August 2017
3 year term (expiring at 2025 annual meeting).
7 funds |
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President Private Banking, Lakeside Bank since September 2023; Business Development Banker, CrossFirst Bank since January 2023
(President-Dallas from October 2020 until January 2023 and Senior Advisor from April 2019 until October 2022); Private Investor, BW Consulting, LLC since 2014; and Anderson Consulting/Accenture (from 1991 to 2013).
Director of Equity Metrix, LLC |
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Significant experience on this and/or other boards of directors/trustees, Audit Committee Chair; significant managerial and executive experience; significant experience as a management consultant. |
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Dorri McWhorter (6/30/1973)
Trustee since May 2022;
3 year term (expiring at 2026 annual meeting).
7 funds |
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President & CEO, YMCA of Metropolitan Chicago (2021-Present); Chief Executive Officer, YWCA Metropolitan Chicago (2013-2021).
Board Director of William Blair Funds (since 2019); Board Director of Skyway Concession
Company, LLC (since 2018); Board Director of Illinois CPA Society (2017-2022); Board Director of Lifeway Foods, Inc. (since 2020); Board Director of Green Thumb Industries, Inc. (February 2022 to October 2022); Member of Financial Accounting
Standards Advisory Council (since 2021); Board Director of LanzaTech Global, Inc. (since 2023). |
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Significant managerial and executive experience, including experience as president and chief executive officer; significant background and experience in financial accounting; significant experience on other boards of directors,
including for other registered investment companies. |
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Interested Trustee |
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John Honis2
(6/16/1958)
Trustee since August 2017;
3 year term (expiring at 2024 annual meeting).
7 funds |
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President of Rand Advisors, LLC (August 2013 August 2022); Manager of Turtle Bay Resort, LLC (August 2011 December 2018); and President of Valience Group, LLC since July 2021. |
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Significant experience in the financial industry; significant managerial and executive experience, including experience as president, chief executive officer or chief restructuring officer of five telecommunication firms;
experience on other boards of directors. |
5
1 |
On an annual basis, as a matter of Board policy, the Governance and Compliance Committee reviews each
Trustees performance and determines whether to extend each such Trustees service for another year. The Board adopted a retirement policy wherein the Governance and Compliance Committee shall not recommend the continued service as a
Trustee of a Board member who is older than 80 years of age at the time the Governance and Compliance Committee reports its findings to the Board. |
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In light of certain relationships between Mr. Honis and historically affiliated entities of the Adviser,
including Highland Capital Management, L.P. (HCMLP), arising out of HCMLPs pending Chapter 11 proceedings, Mr. Honis is treated as an Interested Trustee of the Trust effective January 28, 2020. |
Information about the Funds Executive Officers
Set
forth below are the names and certain information regarding the Funds executive officers. Such officers serve at the pleasure of the Trustees or until their successors have been duly elected and qualified. The Trustees may fill any vacancy in
office or add any additional officers at any time.
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Name, Date of Birth, Position(s) held with the Fund and Length of
Time Served, Term of Office |
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Principal Occupations(s) During the Past Five
Years |
Dustin Norris (1/6/1984)
Executive Vice President since April 2019; Indefinite Term |
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Head of Distribution and Chief Product Strategist at NexPoint Advisors, L.P. since March 2019; President of NexPoint Securities, Inc. since April 2018; Officer of the Fund Complex since November 2012. |
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Frank Waterhouse (4/14/1971)
Treasurer since May 2015; Principal Accounting Officer since October 2017; Principal
Executive Officer and Principal Financial Officer since April 2021; Indefinite Term |
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Chief Financial Officer of Skyview Group since February 2021; Chief Financial Officer and Partner of HCMLP from December 2011 and March 2015, respectively, to February 2021; Treasurer of the Fund Complex since May 2015; Principal
Financial Officer of HCMLP from October 2017 to February 2021; Principal Executive Officer of HCMLP from February 2018 to February 2021. |
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Stephanie Vitiello (6/21/1983)
Secretary since April 2021; Chief Compliance Officer and Anti-Money Laundering Officer
since November 2021; Indefinite Term |
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Chief Compliance Officer and Counsel of Skyview Group since February 2021. Prior to her current role at Skyview Group, Ms. Vitiello served as Managing Director Distressed, Assistant General Counsel, Associate General
Counsel and In-House Counsel for HCMLP. |
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Will Mabry (7/2/1986)
Assistant Treasurer since April 2021; Indefinite Term |
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Director, Fund Analysis of Skyview Group since February 2021. Prior to his current role at Skyview Group, Mr. Mabry served as Senior Manager Fund Analysis, Manager Fund Analysis, and Senior Fund Analyst for
HCMLP. |
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The address for each officer is c/o NexPoint Asset Management, L.P., 300 Crescent Court, Suite 700, Dallas,
Texas 75201. |
6
Beneficial Ownership of Shares
Set forth in the table below is the dollar range of shares of the Fund and the aggregate dollar range of shares beneficially owned by each Trustee of the Fund.
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Name of Trustee |
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Dollar Range of Shares of the Fund1 |
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Aggregate Dollar Range of Equity Securities1 Owned in All
Registered Investment Companies Overseen by Trustee in the Fund Complex |
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Independent Trustees |
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Ethan Powell |
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10,001-$50,000 |
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$10,001-$50,000 |
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Dr. Bob Froehlich |
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$ |
10,001-$50,000 |
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Over $100,000 |
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Bryan A. Ward |
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None |
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$10,001-$50,000 |
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Dorri McWhorter |
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None |
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None |
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Interested Trustee |
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John Honis |
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None |
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None |
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Based on market value as of February 28, 2024. |
As of February 28, 2024, the Trustees and officers of the Fund as a group owned less than 0.01% of the Funds outstanding shares.
As of February 28, 2024, none of the Independent Trustees or their immediate family members owned beneficially or of record any securities issued by the
Adviser, the principal underwriter, or any person controlling, controlled by, or under common control with the Adviser or principal underwriter.
Role
of the Board of Trustees, Leadership Structure and Risk Oversight
The Role of the Board
The Board oversees the management and operations of the Fund. Like most registered investment companies, the day-to-day management and operation of the Fund is performed by various service providers to the Fund, such as the Adviser, and the distributor, administrator, custodian, and transfer agent. The Board has
appointed senior employees of certain of these service providers as officers of the Fund, with responsibility to monitor and report to the Board on the Funds operations. The Board receives regular reports from these officers and service
providers regarding the Funds operations. For example, the Treasurer provides reports as to financial reporting matters and investment personnel report on the performance of the Fund. The Board has appointed a Chief Compliance Officer who
administers the Funds compliance program and regularly reports to the Board as to compliance matters. Some of these reports are provided as part of formal Board meetings, which are typically held quarterly, and involve the Boards review
of, among other items, recent Fund operations. The Board also periodically holds telephonic meetings as part of its review of the Funds activities. From time to time one or more members of the Board may also meet with management in less formal
settings, between scheduled Board meetings, to discuss various topics. In all cases, however, the role of the Board and of any individual Trustee is one of oversight and not of management of the day-to-day affairs of the Fund and its oversight role does not make the Board a guarantor of the Funds investments, operations or activities.
Board Structure and Leadership
The Board has
structured itself in a manner that it believes allows it to perform its oversight function effectively. The Board consists of five Trustees, four of whom are not interested persons, as defined in the 1940 Act and are
independent as defined in Rule 303A.02 of the New York Stock Exchange Listed Company Manual. The remaining Trustee, Mr. Honis, is currently treated as an interested person of the Fund (an Interested Trustee).
Mr. Powell serves as Chairman of the Board. The Trustees meet periodically throughout the year to oversee the Funds activities, review contractual arrangements with service providers for the Fund and review the Funds
7
performance. During the fiscal year ended December 31, 2023, the Board convened nine times. Each Trustee attended at least 75% of the aggregate of the total number of meetings of the Board
and Committees on which he or she served during the periods that he or she served. The Fund encourages, but does not require, Trustees to attend the Annual Meeting.
The Board periodically reviews its leadership structure, including the role of the Chairman. The Board also completes an annual self-assessment during which
it reviews its leadership and Committee structure and considers whether its structure remains appropriate in light of the Funds current operations. The Board believes that its leadership structure, including the current percentage of the Board
who are Independent Trustees is appropriate given its specific characteristics. These characteristics include: (i) the extent to which the work of the Board is conducted through the standing committees, and that the Audit and Qualified Legal
Compliance Committee (the Audit Committee) and the Governance and Compliance Committee meetings are each chaired by an Independent Trustee; (ii) the extent to which the Independent Trustees meet as needed, together with their
independent legal counsel, in the absence of members of management and any member of the Board who is considered an interested person of the Fund; and (iii) Mr. Powells and Mr. Honis previous positions with the
Adviser and historical affiliates of the Adviser, which enhances the Boards understanding of the operations of the Adviser.
Board Oversight
of Risk Management. The Boards role is one of oversight, rather than active management. This oversight extends to the Funds risk management processes. These processes are embedded in the responsibilities of officers of, and
service providers to, the Fund. For example, the Adviser and other service providers to the Fund are primarily responsible for the management of the Funds investment risks. The Board has not established a formal risk oversight committee;
however, much of the regular work of the Board and its standing Committees addresses aspects of risk oversight. For example, the Trustees seek to understand the key risks facing the Fund, including those involving conflicts of interest; how
management identifies and monitors these risks on an ongoing basis; how management develops and implements controls to mitigate these risks; and how management tests the effectiveness of those controls.
In the course of providing that oversight, the Board receives a wide range of reports on the Funds activities from the Adviser and other service
providers, including reports regarding the Funds investment portfolio, the compliance of the Fund with applicable laws, and the Funds financial accounting and reporting. The Board also meets periodically with the Funds Chief
Compliance Officer to receive reports regarding the compliance of the Fund with the federal securities laws and the Funds internal compliance policies and procedures and meets with the Funds Chief Compliance Officer periodically,
including at least annually, to review the Chief Compliance Officers annual report, including the Chief Compliance Officers risk-based analysis for the Fund. The Boards Audit Committee also meets regularly with the Treasurer and
the Funds independent registered public accounting firm to discuss, among other things, the internal control structure of the Funds financial reporting function. The Board also meets periodically with the portfolio managers of the Fund
to receive reports regarding the management of the Fund, including its investment risks.
The Board recognizes that not all risks that may affect the Fund
can be identified, that it may not be practical or cost-effective to eliminate or mitigate certain risks, that it may be necessary to bear certain risks (such as investment-related risks) to achieve the Funds goals, that reports received by
the Trustees with respect to risk management matters are typically summaries of the relevant information, and that the processes, procedures and controls employed to address risks may be limited in their effectiveness. As a result of the foregoing
and other factors, risk management oversight by the Board and by the Committees is subject to substantial limitations.
Committees of the Board
The Board conducts much of its work through certain standing Committees. The Board has three Committees, the Audit Committee, the Governance and
Compliance Committee, and the Administration and Operations Committee, each of which are discussed in greater detail below. The Board has adopted charters for each of these committees.
8
The Audit and Qualified Legal Compliance Committee. The members of the Audit Committee are
Dr. Froehlich, Messrs. Ward and Powell and Ms. McWhorter, each of whom is independent for purposes of the 1940 Act. The Audit Committee is responsible for (i) approving the Funds independent accountants, (ii) reviewing with
the Funds independent accountants the plans and results of the audit engagement and the adequacy of the Funds internal accounting controls and (iii) approving professional services provided by the Funds independent
accountants. The Audit Committee is charged with compliance with Rules 205.2(k) and 205.3(c) of Title 17 of the Code of Federal Regulations regarding alternative reporting procedures for attorneys representing the Fund who appear and practice before
the SEC on behalf of the Fund. The Audit Committee also oversees valuations determined by the Adviser, who pursuant to Rule 2a-5 under the 1940 Act, has been designated by the Board as the Funds
valuation designee to perform the fair valuation determination for securities and other assets held by the Fund in accordance with valuation policies and procedures established by the Adviser and approved by the Board. In addition, each member of
the Audit Committee meets the current independence and experience requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the 1934 Act). The Audit Committee met four times
during the fiscal year ended December 31, 2023. Mr. Ward acts as the Chairman of the Audit Committee and as the audit committee financial expert.
The Governance and Compliance Committee. The Funds Governance and Compliance Committees function is to oversee and make
recommendations to the full Board or the Independent Trustees, as applicable, with respect to the governance of the Fund, selection and nomination of Trustees, compensation of Trustees, and related matters, as well as to oversee and assist Board
oversight of the Funds compliance with legal and regulatory requirements and to seek to address any potential conflicts of interest between the Fund and NexPoint in connection with any potential or existing litigation or other legal proceeding
related to securities held by the Fund and the Adviser or another client of the Adviser. The Governance and Compliance Committee is also responsible for evaluating each Trustee and determining whether to recommend each Trustees continued
service in that capacity. The Governance and Compliance Committee will consider recommendations for Trustee nominees from shareholders sent to the Secretary of the Fund, 300 Crescent Court, Suite 700, Dallas, Texas 75201. A nomination submission
must include all information relating to the recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Trustees, as well as information sufficient to evaluate the recommended nominees ability
to meet the responsibilities of a Trustee of the Fund. Nomination submissions must be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional
information must be provided regarding the recommended nominee as reasonably requested by the Governance and Compliance Committee. The Governance and Compliance Committee is currently comprised of Dr. Froehlich, Messrs. Ward and Powell and
Ms. McWhorter, each of whom is independent for purposes of the 1940 Act. Dr. Froehlich serves as the Chairman of the Governance and Compliance Committee. The Governance and Compliance Committee met six times during the fiscal year ended
December 31, 2023.
The Administration and Operations Committee (formerly the Distribution and Alternatives Oversight
Committee). The members of the Administration and Operations Committee are Dr. Froehlich, Messrs. Honis, Ward and Powell and Ms. McWhorter. The Administration and Operations Committee is responsible for
reviewing arrangements with financial intermediaries who provide service to the Fund, including Fund payments to financial intermediaries, and for overseeing any funds that, in the Boards determination, employ alternative investment
strategies. Mr. Honis serves as Chairman of the Administration and Operations Committee. The Administration and Operations Committee met five times during the fiscal year ended December 31, 2023.
Remuneration of Trustees and Executive Officers
The
executive officers of the Fund receive no direct remuneration from the Fund. Each Trustee who oversees all of the funds in the Fund Complex receives an annual retainer of $150,000 payable in quarterly installments and allocated among each portfolio
in the Fund Complex based upon relative net assets. The Trustees are reimbursed for actual out-of-pocket expenses relating to attendance at meetings. The Trustees do not
receive any separate compensation in connection with service on Committees or for attending Board or Committee Meetings;
9
however, the Chairman of the Board and the Chairman of the Audit Committee each receive an additional payment of $10,000 payable in quarterly installments and allocated among each portfolio in
the Fund Complex based on relative net assets. The Trustees do not have any pension or retirement plan.
The following table summarizes the compensation
paid by the Fund to its Trustees and the aggregate compensation paid by the Fund Complex to the Trustees for services rendered in the fiscal year ended December 31, 2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Trustee |
|
Aggregate Compensation From the Fund |
|
|
Pension or Retirement Benefits Accrued as Part of the Funds Expense |
|
|
Estimated Annual Benefits Upon Retirement |
|
|
Aggregate Compensation from the Fund Complex |
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan A. Ward |
|
$ |
55,753 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
160,000 |
|
Dr. Bob Froehlich |
|
$ |
52,269 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
150,000 |
|
Ethan Powell |
|
$ |
55,753 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
160,000 |
|
Dorri McWhorter |
|
$ |
52,269 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
150,000 |
|
|
|
|
|
|
Interested Trustee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Honis |
|
$ |
52,269 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
150,000 |
|
Share Ownership and Certain Beneficial Owners
To the knowledge of management of the Fund and the Board, the following shareholder(s) or groups, as the term is defined in Section 13(d) of
the 1934 Act, beneficially owned, or were owners of record of, more than 5% of the Funds outstanding Common Shares as of February 28, 2024:
|
|
|
|
|
|
|
Title of Class |
|
Name and Address of
Beneficial Owner |
|
Amount and Nature of Beneficial Ownership* |
|
Percentage of Class |
Common Shares |
|
Morgan Stanley Smith Barney LLC P.O. Box
703 New York, NY 10014 |
|
12,407,340 |
|
18.42% |
|
|
|
|
Common Shares |
|
Charles Schwab 211 Main St
San Francisco, CA |
|
9,477,282 |
|
14.07% |
|
|
|
|
Common Shares |
|
National Financial Services LLC For Exclusive
Benefit of Our Customers 499 Washington Boulevard Attn:
Mutual Fund Dept., 4th Floor Jersey City, NJ 07310 |
|
9,005,066 |
|
13.37% |
|
|
|
|
Common Shares |
|
Wells Fargo Clearing Services LLC P.O. Box
5268 Sioux Falls, SD 57117 |
|
4,357,335 |
|
6.47% |
|
|
|
|
Common Shares |
|
Raymond James 880 Carrillon Parkway
St. Petersburg, FL 33716 |
|
4,096,611 |
|
6.08% |
|
|
|
|
Common Shares |
|
LPL Financial, LLC 1055 LPL Way
Fort Mill, SC 29715 |
|
3,809,928 |
|
5.66% |
10
|
|
|
|
|
|
|
Title of Class |
|
Name and Address of
Beneficial Owner |
|
Amount and Nature of Beneficial Ownership* |
|
Percentage of Class |
|
|
|
|
Common Shares |
|
RBC Capital Markets, LLC 3 World Financial
Center 200 Vesey St. New York, NY 10281 |
|
3,787,254 |
|
5.62% |
|
|
|
|
Common Shares |
|
Pershing, LLC One Pershing Plaza
Jersey City, NJ 07399 |
|
3,392,919 |
|
5.04% |
* |
Each owner owned shares as a nominee. |
To the knowledge of management of the Fund and the Board, the following Preferred Shares shareholder(s) or groups, as the term is defined in
Section 13(d) of the 1934 Act, beneficially owned, or were owners of record of, more than 5% of the Funds outstanding Preferred Shares as of February 28, 2024:
|
|
|
|
|
|
|
Title of Class |
|
Name and Address of
Beneficial Owner |
|
Amount and Nature of Beneficial
Ownership |
|
Percentage of Class |
Preferred Shares |
|
Morgan Stanley Smith Barney LLC P.O. Box
703 New York, NY 10014 |
|
14,751,230 |
|
20.71% |
|
|
|
|
Preferred Shares |
|
National Financial Services LLC For Exclusive
Benefit of Our Customers 499 Washington Boulevard Attn:
Mutual Fund Dept., 4th Floor Jersey City, NJ 07310 |
|
9,134,503 |
|
12.82% |
Certain Relationships and Related Party Transactions
Members of senior management also serve as officers of other investment managers affiliated with the Adviser that do and may in the future manage investment
funds, accounts or other investment vehicles with investment objectives similar to those of the Fund. In addition, the Funds executive officers and trustees and the partners of the Adviser serve or may serve as officers, directors or
principals of entities that operate in the same, or related, lines of business as the Fund does or of investment funds, accounts or other investment vehicles managed by the Funds affiliates. These investment funds, accounts or other investment
vehicles may have investment objectives similar to the Funds investment objective.
As a result, the Fund may not be given the opportunity to
participate in certain investments made by investment funds, accounts or other investment vehicles managed by the Adviser or its affiliates. However, in order to fulfill its fiduciary duties to each of its clients, the Adviser intends to allocate
investment opportunities in a manner that is fair and equitable over time and is consistent with the Advisers allocation policy, investment objective and strategies so that the Fund is not disadvantaged in relation to any other client. Where
the Fund is able to co-invest consistent with the requirements of the 1940 Act, if sufficient securities or loan amounts are available to satisfy the Funds and each such accounts proposed
demand, the opportunity will be allocated in accordance with the Advisers pre-transaction determination. If there is an insufficient amount of an investment opportunity to satisfy the Funds demand
and that of other accounts sponsored or managed by the Adviser or its affiliates, the allocation policy provides that allocations among the Fund and such other accounts will generally be made pro rata based on the amount that each such party would
have invested if sufficient securities or loan amounts were available. Where the Fund is unable to co-invest consistent with the requirements of the 1940 Act, the Advisers allocation policy further
provides for investments to be allocated on a random or rotational basis to assure that all clients have fair and equitable access to such investment opportunities.
11
The Board, in consultation with the Funds Chief Executive Officer, Chief Compliance Officer and legal
counsel, may review potential related party transactions and, during these reviews, it may also consider any conflicts of interest brought to its attention pursuant to the Funds Code of Conduct or the Funds or the Advisers Rule 17j-1 Code of Ethics.
The Fund has entered into an investment advisory agreement with the Adviser
pursuant to which the Adviser has agreed to provide investment advisory services to the Fund. In exchange for these services, the Fund will pay the Adviser a fee for investment management services. The Funds contractual advisory fee for the
year ended December 31, 2023 was 0.65% for assets up to $1 billion, 0.60% for assets between $1 billion and $2 billion and 0.55% for assets above $2 billion.
The Fund has entered into an administration agreement with the Adviser. For its services, the Adviser receives an annual fee, payable monthly, in an amount
equal to 0.20% of the average weekly value of the Funds Managed Assets.
Under a separate
sub-administration agreement, the Adviser delegates certain administrative functions to SEI Investments Global Funds Services (SEI), located at 1 Freedom Valley Drive, Oaks, Pennsylvania
19456. The Adviser pays SEI directly for these sub-administration services.
The Adviser has entered into a
Services Agreement with Skyview Group (Skyview), pursuant to which the Adviser will receive administrative and operational support services to enable it to provide the required advisory services to the Fund.
Certain Skyview personnel became dual-employees of NexPoint Services, Inc., a wholly-owned subsidiary of the Adviser. The same services are being performed by
the dual-employees. The Adviser, and not the Fund, will compensate all Adviser, Skyview, and dual-employee personnel who provide services to the Fund.
In
the future, the Fund may engage the Adviser or certain of its affiliates to provide services other than those discussed above. Any arrangements would be subject to approval by the Board prior to the Adviser or its affiliates being engaged to provide
services to the Fund.
Delinquent Section 16(a) Reports
Section 16(a) of the 1934 Act and Section 30(h) of the 1940 Act, and the rules thereunder, require that the Funds Trustees and officers, the
Adviser, certain persons affiliated with the Adviser, and persons who own beneficially, directly or indirectly, more than 10% of the Funds outstanding interests (collectively, Section 16 reporting persons), file initial
reports of beneficial ownership and reports of changes in beneficial ownership of Fund interests with the SEC and the New York Stock Exchange. Section 16 reporting persons are required by SEC regulations to furnish to the Fund copies of all
Section 16(a) forms they file with respect to shares of the Fund. The Fund believes that during the past fiscal year, the Officers, Trustees and greater than 10% beneficial holders of the Fund complied with all applicable filing requirements.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Cohen & Company, Ltd. (Cohen), an independent registered public accounting firm located at 1350 Euclid Avenue, Suite 800, Cleveland, OH
44115, currently serves as the independent registered public accounting firm for the Fund. Representatives of Cohen will not be present at the Annual Meeting, but Cohen has been given the opportunity to make a statement if they desire to do so and
will be available should any matter arise requiring their presence. After reviewing the Funds audited financial statements for the fiscal year ended December 31, 2023, the Funds Audit Committee recommended to the Funds Board
that such statements be included in the Funds Annual Report to Shareholders for the fiscal year ended December 31, 2023. A copy of the Audit
12
Committees report appears below. On September 25, 2017, the Fund acquired the assets of Highland Floating Rate Opportunities Fund (the Predecessor Fund), a series of
NexPoint Funds I, a Delaware statutory trust. The Fund is the successor to the accounting and performance information of the Predecessor Fund.
Independent Registered Public Accounting Firm Fees and Services
The following chart reflects fees paid to Cohen in the Funds last two fiscal years. One hundred percent (100%) of all services provided by Cohen to
the Fund in each year were pre-approved and no fees were subject to pre-approval by the Audit Committee pursuant to Rule
2-01(c)(7)(i)(C) of Regulation S-X. The audit services are approved by the Audit Committee pursuant to an audit engagement letter, and, in accordance with the
Funds pre-approval policies and procedures, the Audit Committee of the Fund must pre-approve all non-audit services
provided by Cohen, and all non-audit services provided by Cohen to the Adviser, or any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the Fund
that are related to the operations and financial reporting of the Fund. In some circumstances, when certain services were not recognized at the time of the engagement to be non-audit services, the pre-approval requirement may be waived if the aggregate amount of the fees for such non-audit services constitutes less than five percent of the total amount of revenues paid
to Cohen by the Fund during the fiscal year in which the non-audit services are provided. Cohen provided non-audit services to the Adviser during the Funds last
two fiscal years, but these services did not relate directly to the operations and financial reporting of the Fund, and therefore were not subject to pre-approval pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. Cohen did not provide any non-audit services to any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the Fund. The Audit Committee has considered whether the provision of non-audit services that were rendered to the Adviser was compatible with
maintaining Cohens independence.
|
|
|
|
|
|
|
|
|
|
|
Fiscal year Ended December 31, 2022 |
|
|
Fiscal year Ended December 31, 2023 |
|
Audit Fees paid by Fund |
|
$ |
162,750 |
|
|
$ |
218,000 |
|
Audit-Related Fees paid by Fund1 |
|
$ |
0 |
|
|
$ |
0 |
|
Tax Fees paid by Fund2 |
|
$ |
14,000 |
|
|
$ |
18,000 |
|
All Other Fees paid by Fund |
|
$ |
0 |
|
|
$ |
0 |
|
Aggregate Non-Audit Fees paid by Fund and Adviser |
|
$ |
0 |
|
|
$ |
0 |
|
1 |
The nature of the services related to agreed-upon procedures, performed on the Funds semi-annual
financial statements. |
2 |
The nature of the services related to assistance on the Funds tax returns and excise tax calculations.
|
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of the Funds year-end consolidated financial statements and reviews of the interim consolidated financial statements included in quarterly reports and services that are normally provided by the auditor in connection with
statutory and regulatory filings. These services also include the required audits of the Funds internal controls over financial reporting.
Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the
performance of the audit or review of the Funds consolidated financial statements and are not reported under Audit Fees. These services include attestation services that are not required by statute or regulation, consultations
concerning financial accounting and reporting standards, and fees related to requests for documentation and information from regulatory and other government agencies.
Tax Fees. Tax fees consist of fees billed for professional services for tax compliance. These services include assistance regarding
federal, state, and local tax compliance.
All Other Fees. All other fees include fees for products and services other than the
services reported above.
13
Report of the Audit Committee
The Audit Committee oversees the Funds accounting and financial reporting processes and the audits of the Funds financial statements. Management is
responsible for the preparation, presentation and integrity of the Funds financial statements, the Funds accounting and financial and reporting principles, and internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. The Audit Committee reviewed the audited financial statements in the Annual Report dated December 31, 2023 with management and discussed the quality of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee has considered and discussed the
above described December 31, 2023 audited financial statements with management and with Cohen. The Audit Committee has also discussed with Cohen the matters required to be discussed by the statement on Auditing Standards No. 1301, as
amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T, The Auditors Communication With Those Charged With Governance. The Audit
Committee reviewed with Cohen, who is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgment as to the quality, not just the acceptability, of the
Funds accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. Finally, the Audit Committee reviewed the written disclosures and the letters from Cohen
required by PCAOB Rule 3526, Communication with Audit Committees Concerning Independence, as currently in effect, has considered whether the provision of other non-audit services by Cohen to the Fund
are compatible with maintaining Cohens independence, and has discussed with Cohen its independence of the Fund.
The Audit Committee discussed with
Cohen the overall scope and plans for the audit. The Audit Committee met with Cohen to discuss the results of their audit, their evaluations of the Funds internal controls and the overall quality of the Funds financial reporting.
Based upon the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee
referred to in this proxy statement and in the Audit Committees Charter, the Funds Audit Committee recommended to the Funds Board (and the Funds Board has approved) that the Funds audited financial statements be
included in the Annual Report to Shareholders for the fiscal year ended December 31, 2023 and filed with the SEC.
Shareholders are reminded,
however, that the members of the Audit Committee are not professionally engaged in the practice of auditing or accounting. Members of the Audit Committee rely, without independent verification, on the information provided to them and on the
representations made by management and Cohen. Accordingly, the Audit Committees oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or
appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committees considerations and discussions, referred to above, do not assure that
the audit of the Funds financial statements has been carried out in accordance with the standards of the PCAOB, that the financial statements are presented in conformity with accounting principles generally accepted in the United States of
America or that the Funds independent registered public accounting firm is, in fact, independent.
Bryan A. Ward, Audit Committee Chair
Dr. Bob Froehlich, Audit Committee Member
Ethan
Powell, Audit Committee Member
Dorri McWhorter, Audit Committee Member
14
OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
The Trustees do not intend to present any other business at the Annual Meeting nor are they aware that any shareholder intends to do so. If, however, any other
matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy will vote thereon in accordance with their judgment.
ADDITIONAL INFORMATION
Shareholder
Proposals
Any proposals of shareholders intended to be presented at the Funds 2025 Annual Meeting of Shareholders must be received at the
Funds principal executive office no later than January 17, 2025 for inclusion in the Funds proxy statement and proxy card relating to the 2025 Annual Meeting of Shareholders and must comply with the requirements of Rule 14a-8 under the 1934 Act and all other legal requirements. Such proposals must also comply with the requirements as to form and substance established by the SEC if such proposals are to be included in the proxy
statement and form of proxy. The submission by a shareholder of a proposal for inclusion in the proxy materials does not guarantee that it will be included. Any proposals submitted after such date will not be included in the Funds proxy
statement and proxy card relating to the 2025 Annual Meeting of Shareholders. Proxies solicited by the Fund will confer discretionary voting authority with respect to these proposals if the proposals are not received by the Fund, in good order and
complying with all applicable legal requirements, by January 17, 2025, and may confer discretionary voting authority with respect to proposals received before such date, in each case subject to SEC rules governing the exercise of this
authority.
Delivery Requirements
The SEC has
adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more shareholders sharing the same address by delivering a single proxy statement or Notice of
Internet Availability of Proxy Materials (Notice) addressed to those shareholders or by sending separate Notices for each household account in a single envelope. This process, which is commonly referred to as householding,
potentially provides extra convenience for shareholders and cost savings for companies. The Fund and some brokers household proxy materials or Notices, delivering a single proxy statement or Notice to multiple shareholders sharing an address unless
contrary instructions have been received from the affected shareholders. Once a shareholder has received notice from a broker or the Fund that they will be householding materials to the shareholders address, householding will continue until
the shareholder is notified otherwise or until the shareholder revokes consent.
We will deliver promptly, upon request, a separate copy of any of these
documents to shareholders at a shared address to which a single copy of such document(s) was delivered. Shareholders who wish to receive a separate copy of any of these documents, or to receive a single copy of such documents if multiple copies were
delivered, now or in the future, should submit their request by writing to the Fund c/o NexPoint Asset Management, L.P., 300 Crescent Court, Suite 700, Dallas, Texas 75201 or calling the Fund at (800)
357-9167.
Communications with Trustees
Shareholders of the Fund who wish to communicate with Trustees (or to the Independent Trustees as a group) should send communications to the attention of the
Secretary of the Fund, c/o NexPoint Asset Management, L.P., 300 Crescent Court, Suite 700, Dallas, Texas 75201, and all communications will be directed to the Trustee or Trustees indicated in the communication or, if no Trustee or Trustees are
indicated, to all Trustees.
COPIES OF THE FUNDS ANNUAL REPORT DATED DECEMBER 31, 2023 AND THE FUNDS SEMI-ANNUAL REPORT DATED
JUNE 30, 2023 TO SHAREHOLDERS ARE AVAILABLE UPON REQUEST, WITHOUT CHARGE, BY WRITING THE FUND AT 6201 15TH AVENUE, BROOKLYN, NEW YORK 11219, OR BY CALLING TOLL-FREE (800) 357-9167.
15
It is important that proxies be returned promptly. You are urged to complete and sign the enclosed proxy card and
return it promptly in the enclosed stamped, self-addressed envelope.
Dallas, Texas
May 17, 2024
HFRO-PS-2024
16
PO Box 211230, Eagan, MN 55121-9984 VOTE ONLINE 1. Read the proxy statement and have the proxy card at hand. 2. Go to:
www.proxyvotenow.com/hfro 3. Follow the simple instructions. 1. VOTE BY PHONE 1. Read the proxy statement and have the proxy card at hand. 2. Call toll-free:
855-995-1705 3. Follow the simple instructions. VOTE BY MAIL 1. Read the proxy statement. 2. Check the appropriate box(es) on the reverse side of the proxy card. 3.
Sign, date and return the proxy card in the envelope provided. Please detach at perforation before mailing. HIGHLAND OPPORTUNITES AND INCOME FUND PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 26, 2024 THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF HIGHLAND OPPORTUNITIES AND INCOME FUND, a Massachusetts business trust (the Fund). The undersigned shareholder of Highland Opportunities and
Income Fund hereby appoints Lauren Fetty and Will Mabry and each of them, the attorneys and proxies of the undersigned, with full power of substitution, to vote, as indicated herein, all shares of the Fund standing in the name of the undersigned at
the close of business on May 10, 2024 (the Record Date), at the Annual Meeting of Shareholders to be held at 300 Crescent Court, Suite 700, Dallas, Texas 75201, on Wednesday, June 26, 2024 at 8:30 a.m., Central Time, and at any
adjournments or postponements thereof (the Annual Meeting), with all powers the undersigned would possess if then and there personally present (but without limiting the general authorization and power hereby given) to vote and act upon
the following matters, (as more fully described in the accompanying Proxy Statement) in respect of all shares of the Fund. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and of the accompanying Proxy
Statement, the terms of each which are incorporated by reference, and revokes any proxy heretofore given with respect to such meeting. /CONTROL NUMBER AUTHORIZED SIGNATURE(S) /This section must be completed for your vote to be counted. Signature(s)
and Title(s), if applicable Sign in the box above Date Note: Please sign exactly as your name(s) appear(s) on this proxy card. If signing for estates, trusts, or other fiduciaries, your title or capacity should be stated and where more than one name
appears, a majority must sign. If shares are held jointly, one or more joint owners should sign personally. If a corporation, the signature should be that of an authorized officer who should state his or her title.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on June 26, 2024. The
Proxy Statement for this Meeting is available at https://proxyvotinginfo.com/p/hfro2024 YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. PLEASE CAST YOUR VOTE TODAY! YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. IF YOU ARE NOT
VOTING BY PHONE OR INTERNET, PLEASE SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. This proxy is solicited on behalf of the Board of Trustees. It will be voted as specified. If no specification is
made, this proxy shall be voted FOR the proposal. If any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy will vote thereon in accordance with their judgement. THE BOARD OF TRUSTEES RECOMMENDS
A VOTE FOR THE PROPOSAL. TO VOTE, MARK BOX(ES) BELOW IN BLUE OR BLACK INK AS FOLLOWS: Please detach at perforation before mailing. To elect a Class III Trustee of the Fund to serve for a three-year term expiring at the 2027 Annual Meeting or
until his successor is duly elected and qualifies (holders of both the Common Shares and Preferred shares, Voting as a single class): FOR ALL WITHHOLD ALL FOR ALL EXCEPT* (01) John Honis *To withhold authority to vote FOR any individual
nominee, mark the FOR ALL EXCEPT box and write the nominee(s) number on the line below. To transact such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. PLEASE COMPLETE, SIGN,
DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE BY INTERNET OR PHONE. IF YOU VOTE BY INTERNET OR PHONE, YOU DO NOT NEED TO RETURN THIS CARD.
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