NPORT-EX 2 Highland_Funds_I_Sch_F.htm SCHEDULE F CORRESP
INVESTMENT PORTFOLIO (unaudited)  
As of September 30, 2021     Highland Healthcare Opportunities Fund  

 

Shares

         Value ($)  
 

Common Stocks — 95.6%

  
 

HEALTHCARE — 95.6%

  
 

    Biotechnology — 43.0%

  
  7,000    

AbbVie, Inc.

     755,090  
  578,276    

Abeona Therapeutics (a)(b)

     647,669  
  100,000    

Inovio Pharmaceuticals (b)

     716,000  
  5,000    

Intellia Therapeutics (b)

     670,750  
  400,000    

Minerva Neurosciences, Inc. (b)(c)

     696,000  
  7,000    

Natera (b)

     780,080  
  217,139    

NextCure (b)

     1,463,517  
  316,229    

OncoSec Medical (b)(c)

     673,568  
  100,000    

Sorrento Therapeutics (b)(c)

     763,000  
          23,311    

uniQure (b)

     746,185  
  4,441    

Vor BioPharma (b)

     69,635  
   

 

 

  
      7,981,494  
   

 

 

  
 

    Healthcare Equipment & Supplies — 6.7%

  
  38,135    

Ekso Bionics Holdings (b)

     176,184  
  300,000    

ReWalk Robotics (b)

     453,000  
  3,000    

STERIS

     612,840  
   

 

 

  
          1,242,024  
   

 

 

  
 

    Healthcare Providers & Services — 6.2%

  
  1,415    

Anthem, Inc.

     527,512  
  10,000    

Centene (a)(b)

     623,100  
   

 

 

  
          1,150,612  
   

 

 

  
 

    Healthcare Technology — 7.5%

  
  165,000    

Convey Holding Parent (b)

     1,386,000  
   

 

 

  
 

    Life Sciences Tools & Services — 24.5%

  
  5,000    

10X Genomics, Class A (b)

     727,900  
  82,000    

Berkeley Lights (b)(c)

     1,603,920  
  2,000    

Samsung Biologics (b)(d)

     1,467,585  
  67,954    

Singular Genomics Systems (b)

     760,405  
   

 

 

  
          4,559,810  
   

 

 

  
 

    Pharmaceuticals — 7.8%

  
  40,000    

Nektar Therapeutics, Class A (b)

     718,400  
  150,000    

Paratek Pharmaceuticals, Inc. (b)(c)

     729,000  
   

 

 

  
      1,447,400  
   

 

 

  
 

Total Common Stocks
(Cost $22,442,575)

     17,767,340  
   

 

 

  
 

Preferred Stock — 0.0%

  
 

HEALTHCARE — 0.0%

  
 

    Healthcare Technology — 0.0%

  
  608,695    

AMINO, Inc., Series C (b)(e)(f)(g)(h)

     —    
   

 

 

  
 

Total Preferred Stock
(Cost $3,499,996)

     —    
   

 

 

  

Units

           Value ($)  
 

Warrants — 0.0%

   
 

HEALTHCARE — 0.0%

   
 

    Biotechnology — 0.0%

   
            4,751     

Gemphire Therapeutics, Inc., Expires 03/15/2022(b)(e)(g)

      —    
     

 

 

  
  

Total Warrants
(Cost $–)

      —    
     

 

 

  

Principal Amount ($)

  
 

Repurchase Agreements(i)(j) — 6.1%

   
  261,514     

BofA Securities
0.050%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $261,514 (collateralized by U.S. Government obligations, ranging in par value $1,326 - $19,404, 1.500% - 5.000%, 09/01/2031 – 07/01/2060; with total market value $266,744)

      261,514  
  261,514     

Daiwa Capital Markets
0.050%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $261,514 (collateralized by U.S. Government obligations, ranging in par value $0 - $34,869, 0.000% - 8.000%, 11/15/2021 – 12/01/2051; with total market value $266,744)

      261,514  
  261,514     

HSBC Securities USA
0.050%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $261,514 (collateralized by U.S. Government obligations, ranging in par value $3,823 - $128,540, 2.500% - 4.000%, 05/20/2043 – 03/20/2051; with total market value $266,744)

      261,514  
  261,514     

RBC Dominion Securities
0.050%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $261,514 (collateralized by U.S. Government obligations, ranging in par value $0 - $32,091, 0.000% - 6.500%, 10/31/2021 – 05/01/2058; with total market value $266,744)

      261,514  
 

INVESTMENT PORTFOLIO (unaudited)(concluded)  
As of September 30, 2021     Highland Healthcare Opportunities Fund  

 

Principal Amount ($)

    Value ($)  
 

Repurchase Agreements(i)(j) (continued)

  
  77,526     

Citigroup Global Markets
0.060%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $77,526 (collateralized by U.S. Government obligations, ranging in par value $4,028 - $14,377, 0.125% - 2.750%, 06/30/2022 – 02/15/2028; with total market value $79,077)

      77,526  
     

 

 

  
  

Total Repurchase Agreements
(Cost $1,123,582)

      1,123,582  
  

 

 

  

Shares

       
 

Cash Equivalent — 4.6%

  
 

MONEY MARKET FUND(k) — 4.6%

  
  859,966     

Dreyfus Treasury Obligations Cash Management, Institutional Class 0.010%

      859,966  
     

 

 

  
  

Total Cash Equivalent
(Cost $859,966)

      859,966  
  

 

 

  
 

Total Investments - 106.3%

      19,750,888  
  

 

 

  
 

    (Cost $27,926,119)

   
 

Other Assets & Liabilities, Net - (6.3)%

      (1,169,521 ) 
  

 

 

  
 

Net Assets - 100.0%

      18,581,367  
     

 

 

  

 

(a)

All or part of this security is pledged as collateral for short sales. The fair value of the securities pledged as collateral was $1,183,100.

(b)

Non-income producing security.

(c)

Securities (or a portion of securities) on loan. As of September 30, 2021, the fair value of securities loaned was $1,202,331. The loaned securities were secured with cash and/or securities collateral of $1,249,312. Collateral is calculated based on prior day’s prices.

(d)

Securities exempt from registration under Rule 144A of the 1933 Act. These securities may only be resold in transactions exempt from registration to qualified institutional buyers. The Board has determined these investments to be liquid. At September 30, 2021, these securities amounted to $1,467,585 or 7.9% of net assets.

(e)

Securities with a total aggregate value of $0, or 0.0% of net assets, were classified as Level 3 within the three-tier fair value hierarchy. Please see Notes to Investment Portfolio for an explanation of this hierarchy, as well as a list of unobservable inputs used in the valuation of these instruments.

(f)

There is currently no rate available.

(g)

Represents fair value as determined by the Fund’s Board of Trustees (the “Board”), or its designee in good faith, pursuant to the policies and procedures approved by the Board. The Board 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 $0, or 0.0% of net assets, were fair valued under the Fund’s valuation procedures as of September 30, 2021. Please see Notes to Investment Portfolio.

(h)

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		  

AM INO, Inc.

    Preferred Stock      11/18/2016      $ 3,499,996      $ 0        0.0 % 

 

(i)

Tri-Party Repurchase Agreement.

(j)

These securities were purchased with cash collateral held from securities on loan. The total value of such securities as of September 30, 2021 was $1,123,582.

(k)

Rate shown is 7 day effective yield.

 

INVESTMENT PORTFOLIO (unaudited)  
As of September 30, 2021     NexPoint Merger Arbitrage Fund  

 

Shares

    Value ($)  
 

Common Stock — 98.6%

  
 

CONSUMER DISCRETIONARY — 12.2%

  
  14,565     

Lydall (a)

      904,341  
  349,694     

Select Interior Concepts,
Class A (a)(b)

      5,042,588  
  94,817     

Stamps.com (a)(b)

      31,269,698  
     

 

 

  
        37,216,627  
     

 

 

  
 

ENERGY — 2.4%

  
  12,559     

Bonanza Creek Energy

      601,576  
  77,056     

Cimarex Energy

      6,719,283  
  1,854     

Vine Energy, Class A (a)

      30,536  
     

 

 

  
        7,351,395  
     

 

 

  
 

FINANCIALS — 24.5%

  
  59,534     

1st Constitution Bancorp

      1,409,170  
  240,518     

Altabancorp

      10,621,275  
  28,076     

Amerant Bancorp (a)

      651,363  
  23,616     

Aquesta Financial Holdings

      500,659  
  166,392     

Arrow Global Group (a)

      688,766  
  135,273     

Athene Holding, Class A (a)

      9,316,252  
  71,587     

Atlantic Capital Bancshares (a)

      1,896,340  
  322,310     

Bank of Commerce Holdings

      4,889,443  
  41,193     

Century Bancorp, Class A (b)

      4,747,081  
  15,614     

Community Bankers Trust

      177,531  
  13,355     

Cortland Bancorp

      371,403  
  48,553     

County Bancorp (c)

      1,769,757  
  35,763     

First Midwest Bancorp (b)

      679,855  
  12,484     

FVCBankcorp (a)

      249,555  
  43,240     

Great Western Bancorp

      1,415,678  
  894     

Howard Bancorp (a)

      18,130  
  2,150     

MDH Acquisition, Class A (a)

      21,177  
  589,324     

Meridian Bancorp (b)

      12,234,366  
  9,624     

New York Community Bancorp (c)

      123,861  
  19,117     

Nicolet Bankshares (a)

      1,418,108  
  66,429     

Pacific Mercantile Bancorp (a)

      611,811  
  17,439     

Perpetual Federal Savings Bank of Urbana

      701,048  
  108,037     

Reliant Bancorp

      3,412,889  
  12,118     

Riverview Financial (a)

      159,715  
  194,248     

Select Bancorp (a)(b)

      3,350,778  
  302     

Shore Bancshares

      5,354  
  257,775     

State Auto Financial (b)

      13,133,636  
  1,711     

Webster Financial

      93,181  
     

 

 

  
        74,668,182  
     

 

 

  
 

HEALTHCARE — 18.5%

  
  27,000     

Diversicare Healthcare Services (a)

      261,360  
  301,797     

Inovalon Holdings, Class A (a)

      12,159,401  
  464,306     

Magellan Health (a)(b)

      43,900,132  
     

 

 

  
        56,320,893  
     

 

 

  
 

INDUSTRIALS — 6.1%

  
  15,123     

Akka Technologies (a)

      831,641  
  167,424     

CAI International

      9,360,676  
  145,579     

Echo Global Logistics (a)

      6,945,574  
  71,471     

GP Strategies (a)

      1,479,450  
     

 

 

  
        18,617,341  
     

 

 

  
 

INFORMATION TECHNOLOGY — 30.9%

  
  1,733,912     

Cloudera Inc (a)(b)

      27,690,575  

Shares

    Value ($)  
 

Common Stock (continued)

  
 

INFORMATION TECHNOLOGY (continued)

  
  348,435     

Cornerstone OnDemand, Inc. (a)

      19,951,388  
  62,882     

DSP Group (a)

      1,377,744  
  299     

Marvell Technology

      18,033  
  1,168,768     

Medallia (a)(b)

      39,586,172  
  63,408     

QAD, Class A

      5,541,225  
     

 

 

  
        94,165,137  
     

 

 

  
 

MATERIALS — 0.5%

  
  58,462     

Atotech (a)

      1,411,857  
     

 

 

  
 

REAL ESTATE — 3.5%

  
  381,000     

Columbia Property Trust, REIT

      7,246,620  
  220,593     

Landmark Infrastructure Partners

      3,606,695  
     

 

 

  
        10,853,315  
     

 

 

  
  

Total Common Stock
(Cost $297,611,072)

      300,604,747  
  

 

 

  
 

Special Purpose Acquisition Companies — 15.6%

  
  10,146     

7GC & Holdings, Class A (a)

      98,619  
  6,000     

ACE Convergence Acquisition, Class A (a)

      59,460  
  130,000     

Altimeter Growth 2, Class A (a)

      1,285,700  
  6,625     

Apollo Strategic Growth Capital II, Class A (a)

      64,726  
  100,000     

Argus Capital (a)

      1,010,000  
  10,152     

B Riley Principal 150 Merger,
Class A (a)

      98,982  
  52,078     

Banner Acquisition (a)(c)

      517,655  
  34,781     

Biotech Acquisition Co, Class A (a)

      338,767  
  100     

Blue Safari Group Acquisition, Class A (a)

      990  
  72,109     

Carney Technology Acquisition II, Class A (a)

      704,505  
  45,628     

CBRE Acquisition Holdings,
Class A (a)

      453,086  
  1,000     

CBRE Acquisition Holdings (a)

      10,300  
  116,900     

CC Neuberger Principal Holdings II, Class A (a)

      1,147,958  
  15,100     

CC Neuberger Principal Holdings III, Class A (a)

      147,527  
  1,000     

CC Neuberger Principal
Holdings III (a)

      9,950  
  32,010     

CF Acquisition IV, Class A (a)(c)

      311,457  
  24,700     

CF Acquisition VI (a)

      239,837  
  70,100     

Churchill Capital V, Class A (a)

      685,578  
  81,594     

Class Acceleration, Class A (a)

      793,094  
  140,020     

Cohn Robbins Holdings,
Class A (a)(b)

      1,374,996  
  1,000     

Compute Health Acquisition (a)

      10,010  
  15,000     

Compute Health Acquisition,
Class A (a)

      146,550  
  60,000     

Conx Corp, Class A (a)

      588,000  
  103,335     

Corner Growth Acquisition,
Class A (a)

      1,008,550  
  3,130     

Corner Growth Acquisition (a)

      31,269  
 

INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     NexPoint Merger Arbitrage Fund  

 

Shares

    Value ($)  
 

Special Purpose Acquisition Companies (continued)

  
  219,996     

Corner Growth Acquisition 2, Class A (a)

      2,169,161  
  69,220     

Data Knights Acquisition, Class A (a)

      695,661  
  148     

Deep Lake Capital Acquisition (a)

      1,442  
  12,100     

DPCM Capital (a)

      118,217  
  40,000     

Dragoneer Growth Opportunities II, Class A (a)

      398,000  
  50,000     

DTRT Health Acquisition (a)

      504,500  
  47,514     

ECP Environmental Growth Opportunities, Class A (a)

      469,438  
  54,979     

Environmental Impact Acquisition, Class A (a)

      543,742  
  26,162     

Epiphany Technology Acquisition, Class A (a)

      255,603  
  157,400     

FirstMark Horizon Acquisition, Class A (a)

      1,542,520  
  9,896     

Fortress Value Acquisition IV, Class A (a)

      96,387  
  288,578     

Forum Merger IV, Class A (a)(b)

      2,816,521  
  8,000     

FS Development II, Class A (a)

      79,600  
  75,400     

GigCapital5 (a)

      775,112  
  24,680     

Global Synergy Acquisition, Class A (a)

      241,864  
  23,200     

Gores Guggenheim, Class A (a)

      237,104  
  9,096     

Gores Holdings VII, Class A (a)

      88,959  
  27,878     

Gores Metropoulos II, Class A (a)(c)

      275,435  
  1,000     

Gores Technology Partners (a)

      9,990  
  7     

Gores Technology Partners II, Class A (a)

      68  
  4,000     

Gores Technology Partners II (a)

      39,840  
  1,760     

Hamilton Lane Alliance Holdings I, Class A (a)

      17,072  
  5,000     

Hamilton Lane Alliance
Holdings I (a)(c)

      50,000  
  39,079     

Haymaker Acquisition III (a)

      386,882  
  660     

Haymaker Acquisition III, Class A (a)

      6,428  
  288,800     

Health Assurance Acquisition,
Class A (a)(b)

      2,824,464  
  918     

Healthcare Capital, Class A (a)

      9,051  
  1,000     

Hudson Executive Investment III (a)

      9,850  
  2,439     

Ibere Pharmaceuticals (a)

      24,378  
  34,900     

IG Acquisition Corp, Class A (a)

      341,671  
  15,068     

InterPrivate III Financial Partners, Class A (a)

      149,249  
  12,792     

Jack Creek Investment, Class A (a)

      124,722  
  31,000     

Jatt Acquisition (a)

      303,180  
  2,164     

Jaws Mustang Acquisition (a)

      21,727  
  56     

Kensington Capital Acquisition V (a)

      571  
  1,486     

KludeIn I Acquisition, Class A (a)

      14,652  

Shares

    Value ($)  
 

Special Purpose Acquisition Companies (continued)

  
  52,000     

Lefteris Acquisition Corp, Class A (a)

      509,080  
  4,650     

Live Oak Mobility Acquisition,
Class A (a)(c)

      44,965  
  14,349     

Longview Acquisition II, Class A (a)(c)

      141,912  
  56,700     

Lux Health Tech Acquisition, Class A (a)

      556,227  
  100,172     

Mercury Ecommerce Acquisition (a)

      1,006,729  
  25,000     

Merida Merger I (a)

      249,750  
  12,734     

Monument Circle Acquisition, Class A (a)

      124,284  
  65,400     

Mudrick Capital Acquisition II, Class A (a)

      650,730  
  5,287     

North Mountain Merger, Class A (a)

      51,760  
  6,637     

Northern Genesis Acquisition II (a)(c)

      65,905  
  10,000     

Northern Star Investment II, Class A (a)

      99,300  
  90,000     

OceanTech Acquisitions I, Class A (a)

      889,200  
  507     

Orion Biotech Opportunities (a)

      5,019  
  296,653     

Parabellum Acquisition (a)

      2,957,630  
  20,428     

Periphas Capital Partnering, Class A (a)

      497,320  
  32,100     

Pershing Square Tontine Holdings, Class A (a)

      632,370  
  22,300     

Pine Island Acquisition Corp, Class A (a)

      217,648  
  5,887     

Pioneer Merger, Class A (a)

      58,458  
  14,302     

Pivotal Investment III, Class A (a)

      139,301  
  1,000     

Pivotal Investment III (a)

      9,880  
  41,155     

Priveterra Acquisition, Class A (a)

      401,261  
  88,144     

PropTech Investment II, Class A (a)

      863,811  
  19,800     

Prospector Capital, Class A (a)

      193,248  
  25,000     

Queen’s Gambit Growth Capital, Class A (a)

      246,750  
  9,835     

Reinvent Technology Partners Y (a)

      99,334  
  10,000     

Revolution Healthcare Acquisition (a)

      98,500  
  12,779     

RMG Acquisition III (a)

      126,257  
  100     

Rocket Lab USA, Class A (a)

      1,613  
  30,000     

Ross Acquisition II, Class A (a)

      290,700  
  5,009     

Science Strategic Acquisition Alpha, Class A (a)

      48,637  
  60,000     

Sierra Lake Acquisition (a)

      597,600  
  1,000     

Slam (a)

      9,910  
  297,000     

Social Capital Hedosophia
Holdings IV (a)(b)

      3,005,640  
  224,500     

Social Capital Hedosophia Holdings VI, Class A (a)

      2,278,675  
  42,600     

Social Leverage Acquisition I,
Class A (a)

      416,628  
 

INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     NexPoint Merger Arbitrage Fund  

 

Shares

    Value ($)  
 

Special Purpose Acquisition Companies (continued)

  
  859     

Sustainable Development
Acquisition I (a)

      8,667  
  45,900     

SVF Investment Corp, Class A (a)

      447,984  
  30,000     

Tastemaker Acquisition, Class A (a)

      295,800  
  5,000     

Thunder Bridge Capital Partners III, Class A (a)

      49,500  
  3,646     

TLG Acquisition One (a)

      36,187  
  65,420     

Trebia Acquisition Corp, Class A (a)

      648,312  
  5,900     

Tribe Capital Growth I, Class A (a)

      57,289  
  2,800     

VectoIQ Acquisition II, Class A (a)

      27,328  
  18,700     

Velo3D (a)

      156,519  
  142,400     

Vy Global Growth, Class A (a)

      1,396,944  
     

 

 

  
  

Total Special Purpose Acquisition Companies
(Cost $47,613,048)

      47,491,189  
  

 

 

  

Contracts

  
 

Purchased Call Options(a) — 0.1%

  
  

Total Purchased Call Options
(Cost $253,413)

      167,195  
  

 

 

  

Units

  
 

Warrants — 0.0%

  
  3,094     

7GC & Holdings, Expires 01/03/2027(a)

      1,702  
  15,000     

Aries I Acquisition, Expires 05/10/2023(a)

      8,265  
  3,841     

Biotech Acquisition, Expires 12/03/2027(a)

      2,534  
  3,333     

Carney Technology Acquisition II, Expires 12/03/2027(a)

      2,200  
  3,333     

Corner Growth Acquisition 2, Expires 03/04/2023(a)

      3,868  
  1,350     

ECP Environmental Growth Opportunities, Expires 02/14/2028(a)

      1,116  
  15,500     

Jatt Acquisition, Expires 06/18/2023(a)

      9,302  
  90,000     

OceanTech Acquisitions I, Expires 05/13/2026(a)

      39,600  
  13,333     

Priveterra Acquisition, Expires 01/03/2028(a)

      7,333  
  12,612     

PropTech Investment II, Expires 01/03/2028(a)

      10,720  
  1,132     

Tribe Capital Growth I, Expires 03/08/2026(a)

      1,030  
     

 

 

  
  

Total Warrants
(Cost $102,936)

      87,670  
  

 

 

  

Contracts

    Value ($)  
 

Purchased Put Option(a) — 0.0%

  
  

Total Purchased Put Option
(Cost $24,482)

      11,925  
  

 

 

  

Shares

  
 

Preferred Stock — 0.0%

  
 

HEALTHCARE — 0.0%

  
  434,783     

AMINO, Inc., Series C (a)(d)(e)(f)(g)

      —    
     

 

 

  
  

Total Preferred Stock
(Cost $2,500,002)

      —    
  

 

 

  

Number of Rights

  
 

Rights — 0.0%

  
 

INFORMATION TECHNOLOGY — 0.0%

  
  22,787     

Zagg Inc (a)(d)(f)

      2,051  
     

 

 

  
  

Total Rights
(Cost $–)

      2,051  
  

 

 

  

Principal Amount ($)

  
 

Repurchase Agreements(h)(i) — 0.3%

  
  249,000     

BofA Securities
0.050%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $249,000 (collateralized by U.S. Government obligations, ranging in par value $1,262 - $18,476, 1.500% - 5.000%, 09/01/2031 – 07/01/2060; with total market value $253,980)

      249,000  
  249,000     

Daiwa Capital Markets
0.050%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $249,000 (collateralized by U.S. Government obligations, ranging in par value $0 - $33,200, 0.000% - 8.000%, 12/02/2021 – 10/01/2051; with total market value $253,980)

      249,000  
  249,000     

RBC Dominion Securities
0.050%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $249,000 (collateralized by U.S. Government obligations, ranging in par value $0 - $30,556, 0.000% - 6.500%, 10/31/2021 – 05/01/2058; with total market value $253,980)

      249,000  
 

INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     NexPoint Merger Arbitrage Fund  

 

Principal Amount ($)

    Value ($)  
  235,819    

Citigroup Global Markets
0.060%, dated 09/30/2021 to be repurchased on 10/01/2021, repurchase price $235,819 (collateralized by U.S. Government obligations, ranging in par value $12,251 - $43,731, 0.125% - 2.750%, 06/30/2022 – 02/15/2028; with total market value $240,535)

      235,819  
    

 

 

  
 

Total Repurchase Agreements
(Cost $982,819)

      982,819  
  

 

 

  

Shares

  
 

Cash Equivalent — 3.1%

  
 

MONEY MARKET FUND(j) — 3.1%

  
  9,293,238    

Dreyfus Treasury Obligations Cash Management, Institutional Class 0.010%

      9,293,238  
    

 

 

  
 

Total Cash Equivalent
(Cost $9,293,238)

      9,293,238  
  

 

 

  
 

Total Investments - 117.7%

      358,640,834  
  

 

 

  
 

(Cost $358,381,010)

   
 

Securities Sold Short— (21.4)%

  
 

Exchange-Traded Funds — (0.5)%

  
  (5,267 )   

Invesco CurrencyShares British Pound Sterling Trust (k)

      (683,657 ) 
  (7,659 )   

Invesco CurrencyShares Euro Currency Trust (k)

      (826,942 ) 
    

 

 

  
 

Total Exchange-Traded Funds
(Proceeds $1,536,959)

      (1,510,599 ) 
    

 

 

  
 

Special Purpose Acquisition Company — 0.0%

  
  (100 )   

Rocket Lab USA, Class A (k)

      (1,613 ) 
    

 

 

  
 

Total Special Purpose Acquisition Company
(Proceeds $1,127)

      (1,613 ) 
    

 

 

  
 

Common Stock — (20.9)%

  
 

ENERGY — (2.4)%

  
  (461 )   

Chesapeake Energy

      (28,393 ) 
  (309,324 )   

Coterra Energy

      (6,730,890 ) 
  (10,724 )   

Extraction Oil & Gas (k)

      (605,370 ) 
    

 

 

  
       (7,364,653 ) 
    

 

 

  
 

FINANCIALS — (18.3)%

  
  (26,685 )   

Amerant Bancorp, Class A (k)

      (660,187 ) 
  (155,155 )   

Apollo Global Management, Class A

      (9,555,996 ) 
  (33,217 )   

Banc of California

      (614,182 ) 
  (14,262 )   

Blue Ridge Bankshares

      (250,869 ) 
  (128,924 )   

Columbia Banking System

      (4,897,823 ) 

Shares

    Value ($)  
 

FINANCIALS (continued)

  
  (11,947 )   

Farmers & Merchants Bancorp

      (267,613 ) 
  (17,532 )   

Farmers National Banc

      (275,428 ) 
  (79,260 )   

First Bancorp

      (3,408,973 ) 
  (36,635 )   

First Interstate BancSystem, Class A

      (1,474,925 ) 
  (2,398 )   

Flagstar Bancorp

      (121,770 ) 
  (1,610 )   

FNB

      (18,708 ) 
  (191,716 )   

Glacier Bancorp

      (10,611,481 ) 
  (162,066 )   

Independent Bank

      (12,341,326 ) 
  (80,829 )   

Lakeland Bancorp

      (1,425,015 ) 
  (5,857 )   

Mid Penn Bancorp

      (161,360 ) 
  (195 )   

Nicolet Bankshares (k)

      (14,465 ) 
  (37,566 )   

Nicolet Bankshares, Inc.

      (2,786,646 ) 
  (40,481 )   

Old National Bancorp

      (686,153 ) 
  (127 )   

People’s United Financial

      (2,219 ) 
  (485 )   

Severn Bancorp

      (6,072 ) 
  (25,772 )   

SouthState

      (1,924,395 ) 
  (3,695 )   

Sterling Bancorp

      (92,227 ) 
  (232 )   

SVB Financial Group (k)

      (150,076 ) 
  (4,954 )   

United Bankshares, Inc.

      (180,227 ) 
  (116,856 )   

United Community Banks

      (3,835,214 ) 
    

 

 

  
       (55,763,350 ) 
    

 

 

  
 

INFORMATION TECHNOLOGY — (0.2)%

  
  (299 )   

Marvell Technology

      (18,033 ) 
  (3,227 )   

MKS Instruments

      (486,986 ) 
    

 

 

  
       (505,019 ) 
    

 

 

  
 

REAL ESTATE — 0.0%

  
  (1 )   

Kite Realty Group Trust

      (20 ) 
    

 

 

  
 

Total Common Stock (Proceeds $61,546,755)

      (63,633,042 ) 
    

 

 

  
 

Total Securities Sold Short - (21.4)%
(Proceeds $63,084,841)

      (65,145,254 ) 
    

 

 

  
 

Other Assets & Liabilities, Net - 3.7%(l)

      11,228,177  
  

 

 

  
 

Net Assets - 100.0%

      304,723,757  
  

 

 

  

 

(a)

Non-income producing security.

(b)

All or part of this security is pledged as collateral for short sales. The fair value of the securities pledged as collateral was $120,350,253.

(c)

Securities (or a portion of securities) on loan. As of September 30, 2021, the fair value of securities loaned was $1,128,697. The loaned securities were secured with cash and/or securities collateral of $1,160,739. Collateral is calculated based on prior day’s prices.

(d)

Securities with a total aggregate value of $2,051, or 0.0% of net assets, were classified as Level 3 within the three-tier fair value hierarchy. Please see Notes to Investment Portfolio for an explanation of this hierarchy, as well as a list of unobservable inputs used in the valuation of these instruments.

(e)

There is currently no rate available.

 

INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     NexPoint Merger Arbitrage Fund  

 

(f)

Represents fair value as determined by the Fund’s Board of Trustees (the “Board”), or its designee in good faith, pursuant to the policies and procedures approved by the Board. The Board 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 $2,051, or 0.0% of net assets, were fair valued under the Fund’s valuation procedures as of September 30, 2021. Please see Notes to Investment Portfolio.

(g)

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		  

AM INO, Inc.

   Preferred Stock     11/18/2016     $ 2,500,002     $ 0       0.0 % 

 

(h)

Tri-Party Repurchase Agreement.

(i)

This security was purchased with cash collateral held from securities on loan. The total value of such securities as of September 30, 2021 was $982,819.

(j)

Rate shown is 7 day effective yield.

(k)

No dividend payable on security sold short.

(l)

As of September 30, 2021, $28,178,700 in cash was segregated or on deposit with the brokers to cover investments sold short and is included in “Other Assets & Liabilities, Net”.

 

INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     NexPoint Merger Arbitrage Fund  

 

Purchased options contracts outstanding as of September 30, 2021 were as follows:

 

Description

    Exercise price      Counterparty      Expiration Date      Number of
Contracts		      Notional Value      Premium      Value  

PURCHASED CALL OPTIONS:

                     

Diamondback Energy

    $ 85.00        Pershing        December 2021        40      $ 378,680      $ 27,642      $ 66,360  

Discovery

      47.50        Jefferies        January 2022        50        126,900        37,578        875  

Carnival

      32.50        Jefferies        January 2022        100        250,100        59,170        6,300  

Marvell Technology

      55.00        Jefferies        January 2023        36        217,116        40,677        48,870  

ViacomCBS

      42.50        Pershing        December 2021        51        201,501        21,474        8,415  

Carnival

      30.00        Jefferies        January 2023        75        187,575        37,733        26,250  

BP

      30.00        Jefferies        January 2022        125        341,625        29,139        10,125  
                 

 

 

     

 

 

  
                  $ 253,413      $ 167,195  
                 

 

 

     

 

 

  

 

Description

    Exercise price      Counterparty      Expiration Date      Number of
Contracts		      Notional Value      Premium      Value  

PURCHASED PUT OPTION:

                     

Cornerstone OneDemand Inc

    $ 55.00        Pershing        February 2022        265      $ 1,517,390      $ 24,482      $ 11,925  

Written options contracts outstanding as of September 30, 2021 were as follows:

 

Description

    Exercise price      Counterparty    Expiration Date    Number of
Contracts		     Notional Value      Premium     Value  

WRITTEN CALL OPTIONS:

          

Cohn Robbins Holding Corp

    $ 10.00      Pershing    October 2021      (8 )    $ 7,856      $ (32 )    $ (40 ) 

Vy Global Growth

      10.00      Pershing    December 2021      (924 )      906,444        (24,342 )      (13,860 ) 

Vy Global Growth

      10.00      Pershing    November 2021      (500 )      490,500        (6,903 )      (6,000 ) 

Compute Health Acquisition Corp

      10.00      Pershing    November 2021      (150 )      146,550        (3,893 )      (1,125 ) 

Gores Guggenheim Inc

      10.00      Pershing    October 2021      (53 )      54,166        (520 )      (1,590 ) 

Gores Guggenheim Inc

      10.00      Pershing    January 2022      (160 )      163,520        (5,480 )      (8,000 ) 

Gores Guggenheim Inc

      10.00      Pershing    November 2021      (19 )      19,418        (607 )      (570 ) 

SVF Investment Corp

      10.00      Pershing    November 2021      (159 )      155,184        (3,688 )      (1,193 ) 

SVF Investment Corp

      10.00      Pershing    October 2021      (300 )      292,800        (1,185 )      (1,200 ) 

IG Acquisition Corp

      10.00      Pershing    October 2021      (199 )      194,821        (3,726 )      (995 ) 

IG Acquisition Corp

      10.00      Pershing    January 2022      (150 )      146,850        (5,793 )      (2,625 ) 

Discovery

      57.50      Pershing    January 2022      (50 )      126,900        (24,228 )      (750 ) 

Cornerstone OneDemand Inc

      57.50      Pershing    November 2021      (167 )      956,242        (1,769 )      (1,670 ) 

Cohn Robbins Holding Corp

      10.00      Pershing    November 2021      (1,392 )      1,366,944        (8,835 )      (6,960 ) 

Merida Merger Corp

      10.00      Pershing    October 2021      (250 )      249,750        (2,641 )      (1,250 ) 

Ace Convergence Acquisition Corp

      10.00      Pershing    December 2021      (44 )      43,604        (384 )      (220 ) 

Ace Convergence Acquisition Corp

      10.00      Pershing    November 2021      (16 )      15,856        (143 )      (80 ) 

Lefteris Acquisition Corp

      10.00      Pershing    October 2021      (520 )      509,080        (6,734 )      (2,600 ) 

Lux Health Tech Acquisition

      10.00      Pershing    October 2021      (567 )      556,227        (12,987 )      (2,835 ) 

Mudrick Capital Acquisition Corp

      10.00      Pershing    October 2021      (154 )      153,230        (360 )      (616 ) 

Mudrick Capital Acquisition Corp

      10.00      Pershing    November 2021      (500 )      497,500        (3,533 )      (5,000 ) 

Churchhill Capital Corp

      10.00      Pershing    November 2021      (621 )      607,338        (2,858 )      (3,105 ) 

Churchhill Capital Corp

      10.00      Pershing    October 2021      (80 )      78,240        (316 )      (240 ) 

Echo Global Logistics Inc

      50.00      Pershing    October 2021      (89 )      424,619        (837 )      (445 ) 

Altimeter Growth Corp

      10.00      Pershing    October 2021      (600 )      593,400        (11,870 )      (3,000 ) 

Altimeter Growth Corp

      10.00      Pershing    January 2022      (700 )      692,300        (17,995 )      (10,500 ) 

Health Assurance Acquisition

      10.00      Pershing    October 2021      (682 )      666,996        (22,448 )      (3,410 ) 

Health Assurance Acquisition

      10.00      Pershing    January 2022      (500 )      489,000        (6,975 )      (7,500 ) 

Health Assurance Acquisition

      10.00      Pershing    December 2021      (200 )      195,600        (1,790 )      (2,000 ) 

Carnival

      37.50      Pershing    January 2022      (100 )      250,100        (44,429 )      (2,300 ) 

Pine Island Acquisition Corp

      10.00      Pershing    October 2021      (210 )      204,960        (3,139 )      (840 ) 

Pine Island Acquisition Corp

      10.00      Pershing    November 2021      (13 )      12,688        (51 )      (98 ) 

INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     NexPoint Merger Arbitrage Fund  

 

Description

    Exercise price      Counterparty      Expiration Date      Number of
Contracts		     Notional Value      Premium     Value  

FirstMark Horizon Acquisition

    $ 10.00        Pershing        October 2021        (231 )    $ 226,380      $ (5,169 )    $ (1,155 ) 

FirstMark Horizon Acquisition

      10.00        Pershing        December 2021        (696 )      682,080        (8,515 )      (6,960 ) 

FirstMark Horizon Acquisition

      10.00        Pershing        November 2021        (647 )      634,060        (11,510 )      (3,235 ) 

Marvell Technology

      65.00        Pershing        January 2023        (36 )      217,116        (30,387 )      (31,230 ) 

Social Capital Hedosophia Holdings

      10.00        Pershing        October 2021        (2,970 )      3,005,640        (71,025 )      (29,700 ) 

Pershing Square Tontine Holdings

      20.00        Pershing        October 2021        (150 )      295,500        (10,373 )      (450 ) 

Pershing Square Tontine Holdings

      20.00        Pershing        November 2021        (171 )      336,870        (1,530 )      (1,881 ) 

Carnival

      40.00        Pershing        January 2023        (75 )      187,575        (25,540 )      (12,225 ) 

CC Neuberger Principal Holdngs

      10.00        Pershing        November 2021        (919 )      902,458        (3,630 )      (3,676 ) 

BP

      35.00        Pershing        January 2022        (125 )      341,625        (14,473 )      (2,000 ) 

Social Capital Hedosophia Holdings

      10.00        Pershing        December 2021        (1,450 )      1,471,750        (62,818 )      (43,499 ) 

Social Capital Hedosophia Holdings

      10.00        Pershing        October 2021        (645 )      654,675        (21,035 )      (12,255 ) 

Social Capital Hedosophia Holdings

      10.00        Pershing        November 2021        (150 )      152,250        (7,133 )      (3,750 ) 

Conx Corp

      10.00        Pershing        October 2021        (200 )      196,000        (4,087 )      (2,000 ) 

Conx Corp

      10.00        Pershing        January 2022        (400 )      392,000        (8,049 )      (7,000 ) 

DPCM Cap Inc

      10.00        Pershing        January 2022        (39 )      38,103        (544 )      (585 ) 
                

 

 

    

 

 

  
                 $ (516,309 )    $ (254,218 ) 
                

 

 

    

 

 

  

 

Description

    Exercise price      Counterparty      Expiration Date      Number of
Contracts		     Notional Value        Premium         Value    

WRITTEN PUT OPTION:

                   

Cornerstone OneDemand Inc

    $ 47.50        Pershing        February 2022        (237 )    $ 1,357,062      $ (7,600 )    $ (3,555 ) 

The Fund had the following swap contracts, which did not require pledged collateral, open at September 30, 2021:

Swap contracts outstanding as of September 30, 2021 were as follows:

 

Underlying Instrument

   Financing
Rate		   Payment
Frequency		     Counterparty     Expiration
Date		     Currency     Notional
Amount
($)		     Fair
Value
($)		     Upfront
Premiums
Paid
(Received)
($)		     Mark to
Market
($)		     Unrealized
Appreciation/
(Depreciation)
($)		  

Long Equity TRS

                  

Arrow Global Group

   1 Month
GBP LIBOR
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    
 April 11,
2022		  
 		     GBP       3,197,284       3,226,505       780,000       809,221       29,221  

Bank Norwegian ASA

   1 Month
NOK-
NIBOR-BBA
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    
 September 12,
2022		  
 		     NOK       726,648       724,501       60,607       58,460       (2,147 ) 

Biotech Acquisition

   1 Month
USD LIBOR
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    

 June 24,

2022

  

 

     USD       8,697       8,766       900       969       69  

Charles Stanley Group

   1 Month
GBP
LIBOR-BBA
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    
 August 9,
2022		  
 		     GBP       389,840       391,041       56,628       57,829       1,201  

Cervus Equipment

   1 Month
CAD-
BA-CDOR
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    
 August 23,
2022		  
 		     CAD       64,007       64,396       4,200       4,589       389  

Cloudera

   1 Month
USD
LIBOR-BBA
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    

 July 26,

2022

  

 

     USD       15,298,949       15,308,938       958,606       968,595       9,989  

Century Bancorp

   1 Month
USD
LIBOR-BBA
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    
 September 29,
2022		  
 		     USD       2,991       3,001       26       36       10  

Columbia Property

   1 Month
USD
LIBOR-BBA
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    
 September 20,
2022		  
 		     USD       4,243,022       4,241,460       223,000       221,438       (1,562 ) 

Echo Global

   1 Month
USD
LIBOR-BBA
plus 0.50%		     Upon Maturity      
 Goldman
Sachs		  
 		    
 September 21,
2022		  
 		     USD       3,093,244       3,093,039       64,830       64,625       (205 ) 

INVESTMENT PORTFOLIO (unaudited)(concluded)  
As of September 30, 2021     NexPoint Merger Arbitrage Fund  

 

Underlying Instrument

   Financing
Rate		   Payment
Frequency		   Counterparty   Expiration
Date		   Currency   Notional
Amount
($)		     Fair
Value
($)		     Upfront
Premiums
Paid
(Received)
($)		     Mark to
Market
($)		     Unrealized
Appreciation/
(Depreciation)
($)		  

GP Strategies

   1 Month
USD
LIBOR-BBA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   July 18,

2022

   USD     1,667,302       1,709,902       82,604       125,204       42,600  

Gamesys Group PLC

   1 Month
GBP
LIBOR-BBA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   May 30,

2022

   GBP     5,283,185       5,290,528       210,990       218,333       7,343  

Inovalon Holdings

   1 Month
USD
LIBOR-BA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   September 22,
2022		   USD     7,771,171       7,754,617       192,470       175,916       (16,554 ) 

Japara Healthcare

   1 Month
AUD-
BBR-BBSW
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   August 12,
2022		   AUD     1,115,047       1,112,406       1,115,000       1,112,359       (2,641 ) 

Medallia

   1 Month
USD
LIBOR-BBA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   September 22,
2022		   USD     7,265,459       7,268,333       214,595       217,469       2,874  

Magellan Health

   1 Month
USD
LIBOR-BBA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   September 30,
2022		   USD     1,569,422       1,568,679       16,591       15,848       (743 ) 

Select Interior

   1 Month
USD
LIBOR-BBA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   September 20,
2022		   USD     967,797       969,024       67,200       68,427       1,227  

Sanne Group PLC

   1 Month
GBP
LIBOR-BBA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   September 7,
2022		   GBP     4,185,619       4,153,763       341,397       309,541       (31,856 ) 

Stamps.com

   1 Month
USD
LIBOR-BBA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   July 12,

2022

   USD     2,170,152       2,224,763       6,746       61,357       54,611  

Vectura Group PLC

   1 Month
GBP
LIBOR-BBA
plus 0.50%		   Upon
Maturity		   Goldman
Sachs		   September 12,
2022		   GBP     330,250       331,196       149,334       150,280       946  
             

 

 

    

 

 

    

 

 

    

 

 

  

Total Long Equity TRS

                 59,444,858       4,545,724       4,640,496       94,772  
             

 

 

    

 

 

    

 

 

    

 

 

  

 

Underlying Instrument

   Financing
Rate		   Payment
Frequency		     Counterparty     Expiration
Date		     Currency     Notional
Amount
($)		     Fair
Value
($)		     Upfront
Premiums
Paid
(Received)
($)		     Mark to
Market
($)		     Unrealized
Appreciation/
(Depreciation)
($)		  

Short Equity TRS

                  

Blue Prism Group

   1 Day GBP-
SONIA minus
0.50%		    
 Upon
Maturity		  
 		    
 Goldman
Sachs		  
 		    
 September 29,
2022		  
 		     GBP       (99,357 )      (99,773 )      (6,439 )      (6,855 )      (416 ) 
             

 

 

    

 

 

    

 

 

    

 

 

  

Total Short Equity TRS

                 (99,773 )      (6,439 )      (6,855 )      (416 ) 
             

 

 

    

 

 

    

 

 

    

 

 

  

Total Return Swaps - Net

                 59,345,085       4,539,285       4,633,641       94,356  
             

 

 

    

 

 

    

 

 

    

 

 

  

($) denotes USD.

NOTES TO INVESTMENT PORTFOLIO (unaudited)  
As of September 30, 2021     Highland Funds I  

 

Organization

Highland Funds I (the “Trust”) was organized as a Delaware statutory trust on February 28, 2006. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company with three portfolios that were offered as of September 30, 2021, each of which is non-diversified. This report includes information for the three months ended September 30, 2021 for Highland Healthcare Opportunities Fund (the “Healthcare Opportunities Fund”) and the NexPoint Merger Arbitrage Fund (the “Merger Arbitrage Fund”) (each a “Fund” and, collectively, the “Funds”). Highland/iBoxx Senior Loan ETF is reported separately.

Valuation of Investments

The Funds’ investments are recorded at fair value. In computing the Funds’ net assets attributable to shares, securities with readily available market quotations on the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotation (NASDAQ) or other nationally recognized exchange, use the closing quotations on the respective exchange for valuation of those securities. Securities for which there are no readily available market quotations will be valued pursuant to policies adopted by the Funds’ Board. Typically, such securities will be valued at the mean between the most recently quoted bid and ask prices provided by the principal market makers. If there is more than one such principal market maker, the value shall be the average of such means. Securities without a sale price or quotations from principal market makers on the valuation day may be priced by an independent pricing service. Generally, the Funds’ loan and bond positions are not traded on exchanges and consequently are valued based on a mean of the bid and ask price from the third-party pricing services or broker-dealer sources that the Investment Adviser has determined to have the capability to provide appropriate pricing services which have been approved by the Board.

Securities for which market quotations are not readily available, or for which the Funds have determined that the price received from a pricing service or broker-dealer is “stale” or otherwise does not represent fair value (such as when events materially affecting the value of securities occur between the time when market price is determined and calculation of the Funds’ net asset value (“NAV”), will be valued by the Funds at fair value, as determined by the Board or its designee in good faith in accordance with procedures approved by the Board, taking into account factors reasonably determined to be relevant, including, but not limited to: (i) the fundamental analytical data relating to the investment; (ii) the nature and duration of restrictions on disposition of the securities; and (iii) an evaluation of the forces that influence the market in which these securities are purchased and sold. In these cases, the Funds’ NAV will reflect the affected portfolio securities’ fair value as determined in the judgment of the Board or its designee instead of being determined by the market. Using a fair value pricing methodology to value securities may result in a value that is different from a security’s most recent sale price and from the prices used by other investment companies to calculate their NAVs. Determination of fair value is uncertain because it involves subjective judgments and estimates.

There can be no assurance that the Funds’ valuation of a security will not differ from the amount that it realizes upon the sale of such security. Those differences could have a material impact to the Funds. The NAV shown in the Funds’ financial statements may vary from the NAV published by each Fund as of its period end because portfolio securities transactions are accounted for on the trade date (rather than the day following the trade date) for financial statement purposes.

Fair Value Measurements

The Funds have performed an analysis of all existing investments and derivative instruments to determine the significance and character of inputs to their fair value determination. The levels of fair value inputs used to measure the Funds’ investments are characterized into a fair value hierarchy. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment’s valuation. The three levels of the fair value hierarchy are described below:

NOTES TO INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     Highland Funds I  

 

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.

The Investment Adviser has established policies and procedures, as described above and approved by the Board, to ensure that valuation methodologies for investments and financial instruments that are categorized within all levels of the fair value hierarchy are fair and consistent. A Pricing Committee has been established to provide oversight of the valuation policies, processes and procedures, and is comprised of personnel from the Investment Adviser and its affiliates. The Pricing Committee meets monthly to review the proposed valuations for investments and financial instruments and is responsible for evaluating the overall fairness and consistent application of established policies.

As of September 30, 2021, the Funds’ investments consisted of common stocks, preferred stocks, repurchase agreements, special purpose acquisition companies, exchange-traded funds cash equivalents, rights, warrants, securities sold short, equity swaps, and options.

The fair value of the Funds’ common stocks, preferred stocks, exchange-traded funds, rights, warrants and options that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable. Exchange-traded options are valued based on the last trade price on the primary exchange on which they trade. If an option does not trade, the mid-price, which is the mean of the bid and ask price, is utilized to value the option.

At the end of each calendar quarter, the Investment Adviser evaluates the Level 2 and 3 assets and liabilities for changes in liquidity, including but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and the existence of contemporaneous, observable trades in the market. Additionally, the Investment Adviser evaluates the Level 1 and 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Funds’ investments may fluctuate from period to period. Additionally, the fair value of investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values the Funds may ultimately realize. Further, such investments may be subject to legal and other restrictions on resale or otherwise less liquid than publicly traded securities.

NOTES TO INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     Highland Funds I  

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value each Fund’s assets as of September 30, 2021 is as follows:

 

    Total value at
September 30, 2021
($)		     Level 1 Quoted Price
($)		     Level 2 Significant
Observable Inputs
($)		     Level 3 Significant
Unobservable Inputs
($)		  

Highland Healthcare Opportunities Fund

        

Assets

        

Common Stocks(1)

     17,767,340       17,767,340       —         —    

Preferred Stock(1)

     —         —         —         —   (2) 

Warrants(1)

     —         —         —         —   (2) 

Repurchase Agreements

     1,123,582       1,123,582       —         —    

Cash Equivalent

     859,966       859,966       —         —    
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Assets

     19,750,888       19,750,888       —         —    
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     19,750,888       19,750,888       —         —    
 

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) 

See Investment Portfolio detail for industry breakout.

(2) 

This category includes securities with a value of zero.

For the three months ended September 30, 2021, there were no transfers in or out of Level 3.

 

    Total value at
September 30, 2021
($)		     Level 1 Quoted Price
($)		     Level 2 Significant
Observable Inputs
($)		     Level 3 Significant
Unobservable Inputs
($)		  

NexPoint Merger Arbitrage Fund

        

Assets

        

Common Stock(1)

     300,604,747       300,604,747       —         —    

Special Purpose Acquisition Companies

     47,491,189       47,491,189       —         —    

Purchased Call Options

     167,195       167,195       —         —    

Warrants

     87,670       —         87,670       —    

Purchased Put Option

     11,925       11,925       —         —    

Preferred Stock(1)

     —         —         —         —   (2) 

Rights(1)

     2,051       —         —         2,051  

Repurchase Agreements

     982,819       982,819       —         —    

Cash Equivalent

     9,293,238       9,293,238       —         —    

Other Financial Instruments

        

Total Return Swaps(3)

     94,356       —         94,356       —    
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Assets

     358,735,190       358,551,113       182,026       2,051  
 

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

        

Securities Sold Short

        

Exchange-Traded Funds

     (1,510,599 )      (1,510,599 )      —         —    

Special Purpose Acquisition Company

     (1,613 )      (1,613 )      —         —    

Common Stock(1)

     (63,633,042 )      (63,633,042 )      —         —    
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Liabilities

     (65,145,254 )      (65,145,254 )      —         —    
 

 

 

    

 

 

    

 

 

    

 

 

  

Other Financial Instruments

        

Written Call Options

     (254,218 )      (254,218 )      —         —    

Written Put Option

     (3,555 )      (3,555 )      —         —    
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Other Financial Instruments

     (257,773 )      (257,773 )      —         —    
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     293,332,163       293,148,086       182,026       2,051  
 

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) 

See Investment Portfolio detail for industry breakout.

(2) 

This category includes securities with a value of zero.

(3) 

Swaps are valued at the unrealized appreciation (depreciation) on the instrument.

Amounts designated as “—” are $0.

NOTES TO INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     Highland Funds I  

 

Investments designated as Level 3 may include assets valued using quotes or indications furnished by brokers which are based on models or estimates without observable inputs and may not be executable prices. In light of the developing market conditions, the Investment Adviser continues to search for observable data points and evaluate broker quotes and indications received for portfolio investments.

For the three months ended September 30, 2021, there was one rights position that transferred in to Level 3. Determination of fair value is uncertain because it involves subjective judgments and estimates that are unobservable.

Security Transactions

Security transactions are accounted for on the trade date. Realized gains/(losses) on investments sold are recorded on the basis of the specific identification method for both financial statement and U.S. federal income tax purposes taking into account any foreign taxes withheld.

Cash & Cash Equivalents

The Funds consider liquid assets deposited with a bank and certain short-term debt instruments of sufficient credit quality with original maturities of three months or less to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay Fund expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value. The value of cash equivalents denominated in foreign currencies is determined by converting to U.S. dollars on the date of this financial report.

Securities Sold Short

The Funds may sell securities short. A security sold short is a transaction in which the Fund sells a security it does not own in anticipation that the market price of that security will decline. When the Fund sells a security short, it must borrow the security sold short from a broker-dealer and deliver it to the buyer upon conclusion of the transaction. A Fund may have to pay a fee to borrow particular securities and is obligated to pay over any dividends or other payments received on such borrowed securities. In some circumstances, a Fund may be allowed by its prime broker to utilize proceeds from securities sold short to purchase additional investments, resulting in leverage. Securities and cash held as collateral for securities sold short are shown on the Investment Portfolios for the respective Funds.

Derivative Transactions

The Funds are subject to equity securities risk, interest rate risk and currency risk in the normal course of pursuing their investment objectives. The Funds enter into derivative transactions for the purpose of hedging against the effects of changes in the value of portfolio securities due to anticipated changes in market conditions, to gain market exposure for residual and accumulating cash positions and for managing the duration of fixed income investments.

Futures Contracts

A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. The Funds may invest in interest rate, financial and stock or bond index futures contracts subject to certain limitations. The Funds invest in futures contracts to manage their exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase a Fund’s exposure to the underlying instrument while selling futures tends to decrease a Fund’s exposure to the underlying instrument, or economically hedge other Fund investments. With futures contracts, there is minimal counterparty credit risk to the Funds since futures contracts are exchange-traded and the exchange’s clearinghouse, as counterparty to all traded futures, guarantees the futures against default. A Fund’s risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts’ terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade.

NOTES TO INVESTMENT PORTFOLIO (unaudited)(continued)  
As of September 30, 2021     Highland Funds I  

 

Upon entering into a financial futures contract, the Funds are required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margins, are made or can be received by the Funds each day, depending on the daily fluctuation in the fair value of the underlying security. The Funds record an unrealized gain/(loss) equal to the daily variation margin. Should market conditions move unexpectedly, the Funds may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Funds recognize a realized gain/(loss) on the expiration or closing of a futures contract.

At September 30, 2021, the Healthcare Opportunities Fund and Merger Arbitrage Fund did not invest in futures contracts.

Options

The Funds may utilize options on securities or indices to varying degrees as part of their principal investment strategy. An option on a security is a contract that gives the holder of the option, in return for a premium, the right to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option at a specified exercise or “strike” price. The writer of an option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security. The Funds may hold options, write option contracts, or both.

If an option written by a Fund expires unexercised, a Fund realizes on the expiration date a capital gain equal to the premium received by a Fund at the time the option was written. If an option purchased by a Fund expires unexercised, a Fund realizes a capital loss equal to the premium paid. Prior to the earlier of exercise or expiration, an exchange-traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, underlying security, exercise price and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be effected when a Fund desires. A Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option, or, if the cost of the closing option is more than the premium received from writing the option, a capital loss. A Fund will realize a capital gain from a closing sale transaction if the premium received from the sale is more than the original premium paid when the option position was opened, or a capital loss, if the premium received from a sale is less than the original premium paid.

Swap Contracts

The Funds may use swaps as part of its investment strategy or to manage its exposure to interest, commodity, and currency rates as well as adverse movements in the debt and equity markets. Swap agreements are privately negotiated in the over-the-counter (“OTC”) market or may be executed in a multilateral or other trade facility platform, such as a registered exchange (“centrally cleared swaps”).

Total return swaps are agreements to exchange the return generated by one instrument for the return generated by another instrument; for example, the agreement to pay interest in exchange for a market or commodity-linked return based on a notional amount. To the extent the total return of the market or commodity-linked index exceeds the offsetting interest obligation, the Fund will receive a payment from the counterparty. To the extent it is less, the Fund will make a payment to the counterparty. As of September 30, 2021, the Merger Arbitrage Fund was a party to open swap contracts having a net fair value of $94,356.

As of period ended September 30, 2021, the Healthcare Opportunities Fund did not invest in swap contracts.

Affiliated Issuers

Under Section 2(a)(3) of the Investment Company Act of 1940, as amended, a portfolio company is defined as “affiliated” if a fund owns five percent or more of its outstanding voting securities or if the portfolio company is under common control.

The Healthcare Opportunities Fund and Merger Arbitrage Fund did not have any affiliated issuers as of September 30, 2021.

NOTES TO INVESTMENT PORTFOLIO (unaudited)(concluded)  
As of September 30, 2021     Highland Funds I  

 

Subsequent Events

Effective October 15, 2021, the Highland Healthcare Opportunities Fund changed its name to the NexPoint Event Driven Fund.

For more information with regard to significant accounting policies, see the most recent annual report filed with the U.S. Securities and Exchange Commission.