NPORT-EX 2 NexPointStratOpp_Sch_F.htm SCHEDULE F HTML
INVESTMENT PORTFOLIO (unaudited)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

Shares

   Value ($)  
 

Common Stock — 64.3%

 
 

COMMUNICATION SERVICES8.7%

 
  13,722     

Loral Space & Communications, Inc. (a)

     222,983  
  309,137     

Metro-Goldwyn-Mayer, Inc. (a)(b)

     21,175,885  
  132,801     

TerreStar
Corporation (a)(b)(c)(d)(e)

     41,093,941  
     

 

 

 
        62,492,809  
     

 

 

 
 

ENERGY — 0.4%

 
  336     

California Resources (a)

     336  
  368,680     

Fieldwood Energy LLC (a)

     553,020  
  1,421,335     

NextDecade Corp. (a)

     2,672,110  
  40     

Transocean (a)

     46  
     

 

 

 
        3,225,512  
     

 

 

 
 

FINANCIAL — 8.0%

 
  47,996     

American Banknote Corp. (c)(d)

     153,107  
  1,443,334     

Creative Science Properties,
Inc. (a)(f)

     21,650,010  
  55,500     

Itau Unibanco Holding ADR

     249,195  
  39,541,752     

Specialty Financial Products,
Ltd. (c)(d)(e)

     35,579,668  
     

 

 

 
        57,631,980  
     

 

 

 
 

GAMING/LEISURE — 0.0%

 
  26,712     

LLV Holdco LLC - Series A, Membership Interest (a)(c)(d)(e)

     —    
  144     

LLV Holdco LLC - Series B, Membership Interest (a)(c)(d)(e)

     —    
     

 

 

 
        —    
     

 

 

 
 

HEALTHCARE — 2.2%

 
  354,400     

Aerie Pharmaceuticals, Inc. (a)

     4,784,400  
  497,291     

Heron Therapeutics, Inc. (a)

     5,838,196  
  50,000     

Paratek Pharmaceuticals, Inc. (a)

     157,500  
  694,994     

Portola Pharmaceuticals, Inc. (a)

     4,955,307  
     

 

 

 
        15,735,403  
     

 

 

 
 

HOUSING — 0.0%

 
  368,150     

Westgate Investments LLC (a)(c)(d)

      
     

 

 

 
 

INDUSTRIALS — 0.1%

 
  8     

Pendrell Corp. (a)

     580,000  
     

 

 

 
 

INFORMATION TECHNOLOGY — 0.0%

 
  1     

MagnaChip Semiconductor (a)

     11  
     

 

 

 
 

MATERIALS — 0.2%

 
  356,875     

MPM Holdings, Inc. (a)

     1,784,375  
  11,164     

Omnimax International,
Inc. (a)(c)(d)

     335  
     

 

 

 
        1,784,710  
     

 

 

 
 

METALS & MINERALS — 0.1%

 
  131,500     

Loma Negra Cia Industrial Argentina ADR (a)

     466,825  
     

 

 

 
 

REAL ESTATE — 6.7%

 
  640,008     

Allenby (a)(c)(d)(e)

     1  
  9,900     

Alpine Income Property Trust , REIT

     121,869  
  2,057,634     

Claymore (a)(c)(d)(e)

     2  
  293,449     

Cresud SACIF y A ADR (a)

     1,021,203  
  47,000     

Independence Realty Trust, Inc. , REIT

     420,180  
  439,183     

Jernigan Capital, Inc. , REIT

     4,813,446  
  13,571,131     

NexPoint Hospitality Trust

     29,720,777  
  11,389,726     

NexPoint Real Estate
Capital (c)(d)(e)

     6,465,947  
  81,229     

NexPoint Residential Trust ,
REIT(e)

     2,047,783  

Shares

   Value ($)  
 

Common Stock (continued)

 
 

REAL ESTATE (continued)

 
  204,917     

Postal Realty Trust, Class A , REIT

     3,241,787  
     

 

 

 
        47,852,995  
     

 

 

 
 

REAL ESTATE INVESTMENT TRUST — 37.7%

 
  146,485,131     

NexPoint Real Estate Opportunities, LLC ,
REIT(c)(d)(e)

     236,441,650  
  3,201,714     

NREF OP IV, L.P. , REIT(e)

     30,896,537  
  1,763,581     

United Development Funding IV , REIT(e)

     2,998,088  
     

 

 

 
        270,336,275  
     

 

 

 
 

UTILITIES — 0.2%

 
  327,750     

Central Puerto ADR

     737,438  
  26,220     

Entegra TC LLC (c)(d)

     —    
  63,700     

Vistra Energy Corp.

     1,016,652  
     

 

 

 
        1,754,090  
     

 

 

 
  

Total Common Stock (Cost $643,288,157)

     461,860,610  
     

 

 

 
 

Preferred Stock — 25.2%

 
 

FINANCIAL10.9%

 
  14,500     

Aberdeen Loan Funding, Ltd. (g)

     834,475  
  15,000     

Brentwood CLO, Ltd. (g)

     3,900,000  
  13,600     

Brentwood Investors ,
02/01/2022(g)

     3,536,000  
  34,500     

Eastland CLO, Ltd. (g)

     8,855,000  
  13,006     

Eastland Ltd. , 05/01/2022(a)(g)

     3,338,207  
  7,750     

Gleneagles CLO. Ltd. ,
12/30/2049(g)

     2,867,500  
  13,700     

Grayson Investors ,
11/01/2021(g)

     4,315,500  
  42,750     

Greenbriar CLO, Ltd. ,
11/01/2021(g)

     17,028,750  
  125,000     

Jasper CLO, Ltd. (g)

     4,073,750  
  10,000     

Liberty CLO, Ltd. , 11/01/2017(g)

     2,560,000  
  8,500     

Red River CLO, Ltd. ,
07/27/2018(g)

     2,500,178  
  4,871     

Rockwall CDO , 08/01/2024(g)

     2,484,210  
  10,500     

Rockwall CDO, Ltd. ,
08/01/2021(g)

     2,109,450  
  4,800     

Rockwall CDO, Ltd. (g)

     964,320  
  6,000     

Southfork CLO, Ltd. ,
05/01/2017(g)

     600  
  2,000     

Stratford CLO , 11/01/2021(g)

     1,050,000  
  41,500     

Stratford CLO, Ltd. ,
11/01/2021(g)

     7,055,000  
  35,507     

Westchester CLO, Ltd. , 08/01/2022(g)

     10,770,456  
     

 

 

 
        78,243,396  
     

 

 

 
 

REAL ESTATE — 3.0%

 
  18,508     

Texmark Timber Trust, REIT 10.25%(a)(c)(d)(f)

     21,933,997  
     

 

 

 
 


INVESTMENT PORTFOLIO (unaudited) (continued)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

Shares

   Value ($)  
 

Preferred Stock (continued)

 
 

REAL ESTATE INVESTMENT TRUST11.3%

 
  77,923     

Bluerock Residential Growth, Inc., REIT 7.63%(f)

     1,434,516  
  103,116     

Bluerock Residential Growth, Inc., REIT, Series D 7.13%(f)

     1,775,369  
  76,500     

Jernigan Capital, Inc., REIT 7.00%(a)(c)(d)(f)

     74,770,083  
  53,800     

RAIT Financial Trust, REIT 7.63%, 04/15/2024

     1,283,130  
  67,101     

RAIT Financial Trust, REIT 7.13%, 08/30/2019(f)

     1,627,199  
  86,294     

RAIT Financial Trust, REIT 8.88%(f)

     4,487  
     

 

 

 
        80,894,784  
     

 

 

 
  

Total Preferred Stock
(Cost $256,846,448)

     181,072,177  
     

 

 

 
 

Agency Collateralized Mortgage Obligations — 17.2%

 
  76,080,350     

FREMF Mortgage Trust, Series 2018-KC02, Class C 0.00%, 8/25/2025 (h)(i)

     44,887,406  
  96,460,500     

FREMF Mortgage Trust, Series 2018-K80, Class D 0.00%, 8/25/2028 (h)(i)

     40,995,713  
  55,096,698     

FREMF Mortgage Trust, Series 2019-K97, Class D 0.00%, 1/25/2030 (h)(i)

     18,732,877  
  598,612,663     

FREMF Mortgage Trust, Series 2019-K97, Class X2A 0.10%, 7/25/2029 (h)(j)

     4,800,874  
  135,904,199     

FREMF Mortgage Trust, Series 2019-K97, Class X2B 0.10%, 1/25/2030 (h)(j)

     1,065,489  
  45,871,176     

FREMF Trust, Series 2018-KW04, Class C 0.00%, 12/25/2032 (h)(i)

     12,728,333  
     

 

 

 
  

Total Agency Collateralized Mortgage Obligations
(Cost $131,774,669)

     123,210,692  
     

 

 

 
 

LLC Interest (c)(d)(e) — 5.9%

 
  397,240     

NREF OP I, L.P.

     3,833,363  
  40,322,605     

SFR WLIF I, LLC

     19,176,625  
  26,968,904     

SFR WLIF II, LLC

     12,903,272  
  7,708,491     

SFR WLIF III, LLC

     6,192,693  
     

 

 

 
  

Total LLC Interest
(Cost $82,944,794)

     42,105,953  
     

 

 

 
 

U.S. Senior Loans (k) — 4.9%

 
 

COMMUNICATION SERVICES3.2%

 
  437,154     

TerreStar Corporation Term Loan, 02/28/22 (c)(d)(e)

     434,094  
  22,339,560     

TerreStar Corporation, Term Loan A, cash/0% PIK
02/25/22 (c)(d)(e)

     22,183,183  

Shares

   Value ($)  
 

U.S. Senior Loans (continued)

 
 

COMMUNICATION SERVICES (continued)

 
  523,853     

TerreStar Corporation, Term Loan C, cash/0% PIK 02/25/30 (c)(d)(e)

     520,186  
     

 

 

 
        23,137,463  
     

 

 

 
 

GAMING/LEISURE — 1.3%

 
  3,860,733     

Ginn-LA CS Borrower LLC, Tranche A, 1st Lien, 05/30/20 (c)(d)

     —    
  8,274,215     

Ginn-LA CS Borrower LLC, Tranche B Term Loan, 1st Lien, 05/30/19 (c)(d)(l)

     —    
  11,736,674     

LLV Holdco, LLC, Revolving Exit Loan, 09/03/20 (c)(d)(e)

     9,389,339  
     

 

 

 
        9,389,339  
     

 

 

 
 

METALS & MINERALS — 0.4%

 
  7,341,224     

Omnimax International, Inc., Unsecured Term Loan, cash/0% PIK 02/06/21 (c)(d)

     2,745,618  
  

 

 

 
 

UTILITIES — 0.0%

 
  92,329,417     

Texas Competitive Electric Holdings Co., LLC, Extended Escrow
Loan, (m)

     60,014  
     

 

 

 
  

Total U.S. Senior Loans (Cost $52,817,863)

     35,332,434  
  

 

 

 
 

Collateralized Loan Obligations — 2.6%

 
  6,000,000     

Acis CLO, Ltd., Series 2014-3A, Class E VAR ICE LIBOR USD 3 Month+4.750%, 6.51%,
2/1/2026 (n)

     3,653,100  
  7,500,000     

Acis CLO, Ltd., Series 2015-6A, Class SUB 0.00%, 5/1/2027 (n)(o)

     1,200,000  
  5,000,000     

Acis CLO, Ltd., Series 2014-3A, Class F VAR ICE LIBOR USD 3 Month+5.600%, 7.51%,
2/1/2026 (n)

     2,031,250  
  14,000,000     

Acis CLO, Ltd., Series 2013-1A, Class SUB 0.00%,
4/18/2024 (n)(o)

     56,000  
  2,250,000     

ALM VII R-2, Series 2016-7R2A, Class SUBR 0.00%,
10/15/2116 (n)(o)

     462,150  
  5,462,500     

CIFC Funding 2013-II, Series 2013-2A, Class SUB 0.00%, 10/18/2030 (n)(o)

     1,420,250  
  2,500,000     

CIFC Funding 2014, Series 2014-1A, Class SUB 0.00%,
1/18/2031 (n)(o)

     1,000,000  
  3,214,500     

CIFC Funding 2014, Series 2014-4RA, Class SUB 0.00%, 10/17/2030 (n)(o)

     835,770  
 


INVESTMENT PORTFOLIO (unaudited) (continued)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

Shares

   Value ($)  
 

Collateralized Loan Obligations (continued)

 
  3,000,000     

CIFC Funding, Ltd., Series 2015-1A, Class SUB 0.00%, 1/22/2031 (n)(o)

     1,089,000  
  635,386     

Highland Loan Funding, Series 1A 4.84%, 8/1/2020 (c)(d)

     463,387  
  3,922,723     

Highland Park CDO I, Series 2006-1A, Class B VAR LIBOR USD 3 Month+0.550%, 3.20%, 11/25/2051 (n)

     1,333,726  
  6,000,000     

Jamestown CLO IX, Series 2019-9A, Class DR VAR ICE LIBOR USD 3 Month+6.940%, 8.76%, 10/20/2028 (n)

     3,878,513  
  5,955,627     

THL Credit Wind River 2014-2 CLO, Series 2014-2A, Class SUB 0.00%, 1/15/2031 (n)(o)

     774,231  
  1,500,000     

Valhalla CLO, Ltd., Series 2004-1A 0.00%, 8/1/2020

     225,000  
     

 

 

 
  

Total Collateralized Loan Obligations
(Cost $45,719,185)

     18,422,377  
     

 

 

 
 

Sovereign Bond — 1.6%

 
  36,835,000     

Argentine Republic Government International Bond, 3.75%, 12/31/38

     11,209,075  
     

 

 

 
  

Total Sovereign Bonds
(Cost $22,543,517)

     11,209,075  
  

 

 

 
 

Registered Investment Company — 0.3%

 
  246,769     

NexPoint Strategic Opportunities Fund (e)

     2,038,312  
     

 

 

 
  

Total Registered Investment Companies
(Cost $1,900,788)

     2,038,312  
     

 

 

 
 

Warrants — 0.2%

 
 

ENERGY0.0%

 
  4,071     

Arch Coal, Inc., Expires
10/08/2023(a)

     17,159  
  

 

 

 
 

INDUSTRIALS — 0.2%

 
  8,371,900     

American Airlines, Expires (a)

     1,172,066  
  346     

Omnimax Holdings, Inc., Expires 12/31/2049(a)(c)(d)

     11  
     

 

 

 
        1,172,077  
     

 

 

 
 

INFORMATION TECHNOLOGY — 0.0%

 
  179,322     

Avaya Holdings, Expires 12/18/2022(a)

     16,139  
     

 

 

 
  

Total Warrants
(Cost $251,697)

     1,205,375  
  

 

 

 

Shares

   Value ($)  
 

Corporate Bonds & Notes — 0.2%

 
 

COMMUNICATION SERVICES0.0%

 
  26,148     

iHeartCommunications, Inc. 6.38%, 05/01/26

     24,889  
  49,013     

8.38%, 05/01/27

     42,944  
     

 

 

 
        67,833  
     

 

 

 
 

ENERGY — 0.2%

 
  18,439,000     

Ocean Rig UDW, Inc. 7.25%, 04/01/19 (c)(d)(l)

     1,272,291  
  681     

Sable Permian Resources Land 7.38%, 11/01/21

     99  
     

 

 

 
        1,272,390  
     

 

 

 
 

REAL ESTATE — 0.0%

 
  2,000,000     

CBL & Associates 5.95%, 12/15/26

     383,935  
     

 

 

 
 

UTILITIES — 0.0%

 
  5,000,000     

Texas Competitive Electric Holdings Co., LLC 11.50%, 10/01/20 (l)(m)

     12,500  
     

 

 

 
  

Total Corporate Bonds & Notes
(Cost $17,419,316)

     1,736,658  
  

 

 

 

Units

      
 

Rights — 0.2%

 
 

Utilities0.2%

 
  1,618,542     

Texas Competitive Electric Holdings Co., LLC

     1,848,375  
     

 

 

 
  

Total Rights
(Cost $5,000,539)

     1,848,375  
  

 

 

 
 

Master Limited Partnership — 0.1%

 
 

ENERGY0.1%

 
  100,500     

Energy Transfer LP

     462,300  
     

 

 

 
  

Total Master Limited Partnerships
(Cost $1,292,731)

     462,300  
  

 

 

 
 

Foreign Corporate Bonds & Notes — 0.0%

 
 

NETHERLANDS0.0%

 
  

Celtic Pharma Phinco BV,

  
  93,180,354     

17.00%, (c)(d)(l)

     —    
     

 

 

 
  

Total Foreign Corporate Bonds & Notes
(Cost $62,254,526)

     —    
  

 

 

 
 

Convertible Bond — 0.0%

 
 

HEALTH CARE0.0%

 
  350,000     

Paratek Pharmaceuticals 4.75%, 05/01/24

     272,580  
     

 

 

 
  

Total Convertible Bonds
(Cost $257,178)

     272,580  
  

 

 

 
 

Total Investments - 122.7%

     880,776,918  
  

 

 

 
 

(Cost $1,324,311,408)

  
 


INVESTMENT PORTFOLIO (unaudited) (continued)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

Shares

   Value ($)  
 

Convertible Bond (continued)

 
 

HEALTH CARE (continued)

 
 

Securities Sold Shor (a) — 0.2%

 
 

Purchased Call Options — 0.2%

 
  

Total Purchased Call Options
(Proceeds $1,858,250)

     1,171,300  
     

 

 

 
 

Common Stock — –%

 
 

ENERGY–%

 
  (8,451)     

ESC Seventy Seven

     —    
     

 

 

 
  

Total Common Stock
(Proceeds $128,892)

     —    
     

 

 

 
  

Total Securities Sold Short - 0.2%
(Proceeds $1,729,358)

     1,171,300  
     

 

 

 
 

Other Assets & Liabilities,
Net - (22.7)%(p)

     (162,949,284
     

 

 

 
 

Net Assets - 100.0%

     717,827,634  
     

 

 

 

 

(a)

Non-income producing security.

(b)

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 procedures established by the Fund’s Board of Trustees. Additional Information regarding such securities follows:

(c)

Securities with a total aggregate value of $491,719,430, or 68.5% 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.

(d)

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 $491,719,430, or 68.5% of net assets, were fair valued under the Fund’s valuation procedures as of March 31, 2020. Please see Notes to Investment Portfolio.

(e)

Affiliated issuer. Assets with a total aggregate market value of $432,194,684, or 60.2% of net assets, were affiliated with the Fund as of March 31, 2020.

(f)

Perpetual security with no stated maturity date.

(g)

There is currently no rate available.

(h)

As of March 31, 2020, investments with a total aggregate value of $134,419,767 were fully or partially segregated with broker(s)/custodian as collateral for reverse repurchase agreements.

(i)

Principal only security (“PO”). These types of securities represent the right to receive the monthly principal payments on an underlying pool of mortgages. No payments of interest on the pool are passed through to the “principal only” holder.

(j)

Interest only security (“IO”). These types of securities represent the right to receive the monthly interest payments on an underlying pool of mortgages. Payments of principal on the pool reduce the value of the “interest only” holding.

(k)

Senior loans (also called bank loans, leveraged loans, or floating rate loans) in which the Fund invests generally pay interest at rates which are periodically determined by reference to a base lending rate plus a spread (unless otherwise identified, all senior loans carry a variable rate of interest). These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (“LIBOR”) or (iii) the Certificate of Deposit rate. As of March 31, 2020, the LIBOR USD 1 Month and LIBOR USD 3 Month rates were 2.49% and 2.60%, respectively. Senior loans, while exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”), contain certain restrictions on resale and cannot be sold publicly. Senior secured floating rate loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity maybe substantially less than the stated maturity shown.

(l)

The issuer is, or is in danger of being, in default of its payment obligation.

(m)

Represents value held in escrow pending future events. No interest is being accrued.

(n)

Variable or floating rate security. The base lending rates are generally the lending rate offered by one or more European banks such as the LIBOR. The interest rate shown reflects the rate in effect March 31, 2020. LIBOR, otherwise known as London Interbank Offered Rate, is the benchmark interest rate that banks charge each other for short-term loans. Current LIBOR rates include 1 month which is equal to 2.49% and 3 months equal to 2.60%.

(o)

Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets.

(p)

As of March 31, 2020, $162,949,284 in cash was segregated or on deposit with the brokers to cover investments sold short and is included in “Other Assets & Liabilities, Net”.

ADR — American Depositary Receipt

CDO — Collateralized Debt Obligation

Cl — Class

CLO — Collateralized Loan Obligation

IO — Interest Only - face amount represents notional amount

LLC — Limited Liability Company

L.P. — Limited Partnership

 


INVESTMENT PORTFOLIO (unaudited) (concluded)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

Ltd. — Limited

PIK — Payment-in-Kind

REIT — Real Estate Investment Trust

Ser — Series

USD — U.S. Dollar

Purchased Option contracts outstanding as of March 31, 2020 were as follows:

 

Description

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

PURCHASED CALL OPTIONS:

                    

USD/CNH Call

   $ 7.70        BNP       
October
2020
 
 
     200,000,000      $ —        $ 1,300,000      $ 1,089,800  

USK/HKD Call

     7.80        BNP       
June
2020
 
 
     125,000,000      $ —          558,250        81,500  
                 

 

 

    

 

 

 
                  $ 1,858,250      $ 1,171,300  
                 

 

 

    

 

 

 

Reverse Repurchase Agreements outstanding as of March 31, 2020 were as follows:

 

Counterparty

  

Collateral Pledged

   Interest
Rate
    Trade
Date
     Maturity
Date
     Repurchase
Amount
     Principal
Amount
     Value  

BNP

   Argentine Republic Government International Bond, 3.75%, 12/31/38      1.55     1/9/2020        4/8/2020      $ 2,536,973        36,835,000        2,536,875  

Mizuho

   FREMF Mortgage Trust, Series 2018-KC02, Class C, 0.00%, 8/25/2025      3.10     1/31/2020        4/30/2020      $ 38,392,975        76,080,350        38,390,000  

Mizuho

   FREMF Mortgage Trust, Series 2018-K80, Class D, 0.00%, 8/25/2028      3.10     1/31/2020        4/30/2020      $ 35,611,760        47,477,858        35,609,000  

Mizuho

   FREMF Mortgage Trust, Series 2019-K97, Class D, 0.00%, 1/25/2030      3.42     3/20/2020        4/20/2020      $ 16,682,339        55,096,698        16,681,000  

Mizuho

   FREMF Mortgage Trust, Series 2019-K97, Class X2A, 0.01%, 7/25/2029      3.42     3/20/2020        4/20/2020      $ 3,143,252        598,612,663        3,143,000  

Mizuho

   FREMF Mortgage Trust, Series 2019-K97, Class X2B, 0.01%, 1/25/2030      3.42     3/20/2020        4/20/2020      $ 684,055        135,904,199        684,000  

Mizuho

   FREMF Trust Series 2018-KW04, Class C, 0.00%, 12/25/2032      3.10     1/31/2020        4/30/2020      $ 9,581,743        45,871,176        9,581,000  
                

 

 

    

 

 

 

Total Reverse Repurchase Agreements

              $ 995,877,944        106,624,875  
             

 

 

    

 

 

 


NOTES TO INVESTMENT PORTFOLIO (unaudited)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

Organization

NexPoint Strategic Opportunities Fund (the “Fund”) is a Delaware statutory trust and is registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, closed-end management investment company. This report includes information for the year ended December 31, 2019. The Fund trades on the New York Stock Exchange (“NYSE”) under the ticker symbol NHF. The Fund may issue an unlimited number of common shares, par value $0.001 per share (“Common Shares”). The Fund commenced operations on June 29, 2006. NexPoint Advisors, L.P. (“NexPoint” or “the Investment Adviser”), an affiliate of Highland Capital Management Fund Advisors, L.P. (“HCMFA”), is the investment adviser and administrator to the Fund.

On October 25, 2019, the Board of the Fund authorized the repurchase of up to $25 million of the Fund’s shares over a six-month period. Under this program, the Fund repurchased 254,500 shares through December 2019. Upon retirement of the repurchased shares, the net asset value (“NAV”) was $13.5mm, or $21.22per share.

Valuation of Investments

In computing the Fund’s net assets attributable to its common shares, securities with readily available market quotations on the NYSE, National Association of Securities Dealers Automated Quotation (“NASDAQ”) or other nationally recognized exchange, use the closing quotations on the respective exchange for valuation of those securities. Securities for which there are no readily available market quotations will be valued pursuant to policies adopted by the Fund’s Board of Trustees (the “Board”). Typically, such securities will be valued at the mean between the most recently quoted bid and ask prices provided by the principal market makers. If there is more than one such principal market maker, the value shall be the average of such means. Securities without a sale price or quotations from principal market makers on the valuation day may be priced by an independent pricing service. Generally, the Fund’s 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 Fund has determined that the price received from a pricing service or broker-dealer is “stale” or otherwise does not represent fair value (such as when events materially affecting the value of securities occur between the time when market price is determined and calculation of the Fund’s NAV, will be valued by the Fund 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 Fund’s 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 Fund’s valuation of a security will not differ from the amount that it realizes upon the sale of such security. Those differences could have a material impact to the Fund. The NAV shown in the Fund’s financial statements may vary from the NAV published by the 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 Fund has performed an analysis of all existing investments and derivative instruments to determine the significance and character of inputs to their fair value determination. The levels of fair value inputs used to measure the Fund’s 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)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

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 March 31, 2020, the Fund’s investments consisted of senior loans, asset-backed securities, corporate bonds and notes, foreign bonds, sovereign bonds, common stocks, preferred stocks, exchange-traded funds, warrants, and securities sold short. The fair value of the Fund’s loans, bonds and asset-backed securities are generally based on quotes received from brokers or independent pricing services. Loans, bonds, and asset-backed securities with quotes that are based on actual trades with a sufficient level of activity on or near the measurement date are classified as Level 2 assets. Senior loans, bonds and asset-backed securities that are priced using quotes derived from implied values, indicative bids, or a limited number of actual trades are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable.

The fair value of the Fund’s common stocks, preferred stocks, exchange-traded funds, and warrants that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable. The Fund’s real estate investments include equity interests in limited liability companies and equity issued by Real Estate Investment Trusts (“REITs”) that invest in commercial real estate. The fair value of real estate investments that are not actively traded on national exchanges are based on internal models developed by the Investment Adviser. The significant inputs to the models include cash flow projections for the underlying properties, capitalization rates and appraisals performed by independent valuation firms. These inputs are not readily observable, and the Fund has classified the investments as Level 3 assets. 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.


NOTES TO INVESTMENT PORTFOLIO (unaudited)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

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 Fund’s investments may fluctuate from period to period. Additionally, the fair value of investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values the Fund may ultimately realize. Further, such investments may be subject to legal and other restrictions on resale or otherwise less liquid than publicly traded securities.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Transfers in and out of the levels are recognized at the value at the end of the period. A summary of the inputs used to value each Fund’s assets as of March 31, 2020 is as follows:

 

     Total value at
March 31, 2020
     Level 1
Quoted Price
     Level 2 Significant
Observable Inputs
     Level 3 Significant
Unobservable
Inputs
 

NexPoint Strategic Opportunities Fund

 

Assets

           

Common Stock

           

Communication Services

   $ 62,492,809      $ 222,983      $ 21,175,885      $ 41,093,941  

Energy

     3,225,512        2,672,492        553,020        —    

Financial

     57,631,980        249,195        21,650,010        35,732,775  

Gaming/Leisure

     —          —          —          —    

Healthcare

     15,735,403        15,735,403        —          —    

Housing

     —          —          —          —    

Industrials

     580,000        580,000        —          —    

Information Technology

     11        11        —          —    

Materials

     1,784,710        —          1,784,375        335  

Metals & Minerals

     466,825        466,825        —          —    

Real Estate

     47,852,995        41,387,045        —          6,465,950  

Real Estate Investment Trust

     270,336,275        33,894,625        —          236,441,650  

Utilities

     1,754,090        1,754,090        —          —    

Preferred Stock

           

Financial

     78,243,396        —          78,243,396        —    

Real Estate

     21,933,997        —          —          21,933,997  

Real Estate Investment Trust

     80,894,784        —          6,124,701        74,770,083  

Agency Collateralized Mortgage Obligations

     123,210,692        —          123,210,692        —    

LLC Interest

     42,105,953        3,833,363        —          38,272,590  

U.S. Senior Loans

           

Communication Services

     23,137,463        —          —          23,137,463  

Gaming/Leisure

     9,389,339        —          —          9,389,339  

Metals & Minerals

     2,745,618        —          —          2,745,618  

Utilities

     60,014        —          60,014        —    

Collateralized Loan Obligations

     18,422,377        —          17,958,990        463,387  

Sovereign Bonds

     11,209,075        —          11,209,075        —    

Registered Investment Companies

     2,038,312        2,038,312        —          —    

Warrants

           

Energy

     17,159        —          17,159        —    

Industrials

     1,172,077        —          1,172,066        11  

Information Technology

     16,139        —          16,139        —    

Corporate Bonds & Notes

           

Communication Services

     67,833        —          67,833        —    

Energy

     1,272,390        —          99        1,272,291  

Real Estate

     383,935        —          383,935        —    

Utilities

     12,500        —          12,500        —    

Rights

           


NOTES TO INVESTMENT PORTFOLIO (unaudited)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

     Total value at
March 31, 2020
     Level 1 Quoted
Price
     Level 2 Significant
Observable Inputs
     Level 3 Significant
Unobservable
Inputs
 

Utilities

     1,848,375        —          1,848,375        —    

Master Limited Partnerships

           

Energy

     462,300        462,300        —          —    

Foreign Corporate Bonds & Notes

           

Healthcare

     —          —          —          —    

Netherlands

     —          —          —          —    

Convertible Bonds

     272,580        —          272,580        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

     880,776,918        103,296,644        285,760,844        491,719,430  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Securities Sold Short

           

Common Stock

           

Energy

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 880,776,918      $ 103,296,644      $ 285,760,844      $ 491,719,430  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Security with zero value.

The table below sets forth a summary of changes in the Fund’s Level 3 assets (assets measured at fair value using significant unobservable inputs) for the period ended March 31, 2020.

 

     Balance as of
December 31,
2019
     Transfers
into
Level 3
     Transfers
Out of
Level 3
     Net
Amortization
(Accretion)
of Premium/
(Discount)
     Net
Realized
Gains/
(Losses)
    Net Unrealized
Gains/(Losses)
    Net Purchase      Net (Sales)     Balance as of
March 31, 2020
 

NexPoint Strategic Opportunities Fund

 

U.S. Senior Loan

   $ 38,197,179      $ —        $ —        $ —        $ —       $ (3,184,942   $ 260,183      $ —       $ 35,272,420  

Corporate Bonds & Notes

     1,272,291        —          —          —          —         —         —          —         1,272,291  

Warrant

     1,078        —          —          —          —         (1,067     —          —         11  

Preferred Stock

     130,708,695        —          —          —          (680,730     (3,124,351     2,309,816        (32,509,350     96,704,080  

Collateralized Loan Obligation

     504,179        —          —          —          —         (40,792     —          —         463,387  

Common Stock

     344,303,198        —          —          —          —         (45,148,032     20,579,485        —         319,734,651  

U.S. LLC Interest

     73,986,897        —          —          —          —         (35,714,307     —          —         38,272,590  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 588,973,517      $ —        $ —        $ —        $ (680,730   $ (87,213,491   $ 23,149,484      $ (32,509,350   $ 491,719,430  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Investments designated as Level 3 may include assets valued using quotes or indications furnished by brokers which are based on models or estimates 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.

The following is a summary of significant unobservable inputs used in the fair valuation of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category

     Market Value at
March 31, 2020
    

Valuation Technique

    

Unobservable Inputs

    

Input Value(s)

Common Stock

     $319,734,651      Multiples Analysis      Unadjusted Price/MHz-PoP      $0.12 - $0.95
               Risk Discount      55.2% - 59.8%
               Multiple of EBITDA      5.0x - 9.25x
               Liquidity Discount      10% - 25%
               Size Adjustment      10%


NOTES TO INVESTMENT PORTFOLIO (unaudited)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

Category

     Market Value at
March 31, 2020
    

Valuation Technique

    

Unobservable Inputs

    

Input Value(s)

          Discounted Cash Flow      Discount Rate      10.0% - 15.0%
               Terminal Multiple      7.0x
          Transaction Analysis      Multiple of EBITDA      8.5x - 9.0x
          Transaction Indication of Value      Enterprise Value ($mm)      $365.0 -$771.0
               Transaction Price per Share      $2.75
          Third-Party Valuation      Capitalization Rates      5.7% - 7.5%
               Indication of Value      $4.87
          Net Asset Value      N/A      N/A

Preferred Stock

     96,704,080      Discounted Cash Flow      Discount Rate      8.5%
               Internal Rate of Return      14.0%
          Net Asset Value      N/A      N/A

U.S. LLC Interest

     38,272,590      Discounted Cash Flow      Discount Rate      2.46% - 4.54%

U.S. Senior Loans

     35,272,420      Discounted Cash Flow      Discount Rate      11.1% - 17.75%
               Spread Adjustment      0.1% - 1.75%
          Adjusted Appraisal      Liquidity Discount      10%
               Asset Specific Adjustment      10%
          Debt-Loan Spread      Adjusted Yield      9.56% - 14.83%
               Swap Rate      1.50% - 1.64%

Corporate Bonds

     1,272,291      Liquidation Analysis      Claim Amount: Percent of Par      6.9%

Collateralized Loan Obligation

     463,387      Discounted Cash Flow      Discount Rate      9.1%

Warrants

     11      Discounted Cash Flow      Discount Rate      11.5% - 14.0%
               Terminal Multiple      7.0x
          Multiples Analysis      Multiple of EBITDA      7.50x - 9.25x
          Transaction Analysis      Multiple of EBITDA      8.5x - 9.0x
    

 

              

Total

     $491,719,430               

In addition to the unobservable inputs utilized for various valuation methodologies, the Fund frequently uses a combination of two or more valuation methodologies to determine fair value for a single holding. In such instances, the Fund assesses the methodologies and ascribes weightings to each methodology. The weightings ascribed to any individual methodology ranged from as low as 1.5% to as high as 59.8% as of March 31, 2020. The selection of weightings is an inherently subjective process, dependent on professional judgement. These selections may have a material impact to the concluded fair value for such holdings.

The significant unobservable inputs used in the fair value measurement of the Fund’s REIT assets are the discount rates and capitalization rates. Significant decreases (increases) in any of those inputs in isolation could result in a significantly higher (lower) fair value measurement. The significant unobservable input used in the fair value measurement of the Fund’s preferred stock asset is the discount rate. Significant decreases (increases) in any of those inputs in isolation could result in a significantly higher (lower) fair value measurement. The significant unobservable inputs used in the fair value measurement of the Fund’s bank loan securities are: liquidity discount,


NOTES TO INVESTMENT PORTFOLIO (unaudited)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

asset specific discount, discount rate, spread adjustment, adjusted yield and swap rate. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of the Fund’s common equity securities are: multiple of EBITDA, price/MHz-PoP multiple, risk discount, illiquidity discount, size adjustment, discount rate and terminal multiple. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the risk discount is accompanied by a directionally opposite change in the assumption for the price/MHz-PoP multiple.

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 Fund considers 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. The Fund also considers money market instruments that invest in cash equivalents 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 Fund 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. The Fund may have to pay a fee to borrow particular securities and is often obligated to pay over any dividends or other payments received on such borrowed securities. In some circumstances, the 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 Portfolio for the Fund.

When securities are sold short, the Fund intends to limit exposure to a possible market decline in the value of its portfolio securities through short sales of securities that the Investment Adviser believes possess volatility characteristics similar to those being hedged. In addition, the Fund may use short sales for non-hedging purposes to pursue its investment objective. Subject to the requirements of the 1940 Act and the Internal Revenue Code of 1986, as amended (the “Code”), the Fund will not make a short sale if, after giving effect to such sale, the market value of all securities sold short by the Fund exceeds 25% of the value of its total assets. The Fund may make short sales “against the box” without respect to such limitations.

Derivative Transactions

The Fund is subject to interest rate risk in the normal course of pursuing its investment objectives. The Fund enters 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.

Options

The Fund 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 Fund may hold options, write option contracts, or both.

If an option written by the Fund expires unexercised, the Fund realizes on the expiration date a capital gain equal to the premium received by the Fund at the time the option was written. If an option purchased by the Fund


NOTES TO INVESTMENT PORTFOLIO (unaudited)  
As of March 31, 2020     NexPoint Strategic Opportunities Fund  

 

expires unexercised, the 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 the Fund desires. The 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. The 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.

Reverse Repurchase Agreements

The Fund may engage in reverse repurchase agreement transactions with respect to instruments that are consistent with the Fund’s investment objective or policies.

Affiliated Issuers

Under Section 2 (a)(3) of the Investment Company Act of 1940, as amended, a portfolio company is defined as “affiliated” if a fund owns five percent or more of its outstanding voting securities or if the portfolio company is under common control. The table below shows affiliated issuers of the Fund as of March 31, 2020.

 

Issuer

   Shares at
December 31,
2019
     Beginning
Value as of
December 31,
2019
     Purchases
at Cost
     Proceeds
from Sales
    Net
Realized
Gain/
(Loss)
on Sales
of
Affiliated
Issuers
     Change
Unrealized
Appreciation/
Depreciation
    Ending
Value as of
March 31, 2020
     Shares at
March 31,
2020
     Affiliated
Income
 

Majority Owned, Not Consolidated

 

  

NexPoint Real Estate Opportunities, LLC, REIT (Common Stocks)

     146,055,529      $ 237,982,879      $ 687,905      $ —       $ —        $ (2,229,134   $ 236,441,650        146,485,130      $ 7,150,005  

NexPoint Real Estate Capital

     11,389,726        34,066,670        —          (21,814,619     —          (5,786,104     6,465,947        11,389,725        6,350,000  

Specialty Financial Products, Ltd. (Common Stocks)

     38,998,415        35,254,567        500,090        —         —          (174,989     35,579,668        39,541,751        —    

Other Affiliates

 

  

SFR WLIF I, LLC

     40,322,605        39,730,669        —          —         —          (20,554,044     19,176,625        40,322,605        454,885  

SFR WLIF II, LLC

     26,968,904        26,714,857        —          —         —          (13,811,585     12,903,272        26,968,903        283,205  

SFR WLIF III, LLC

     7,708,491        7,541,371        —          —         —          (1,348,678     6,192,693        7,708,490        77,744  

LLV Holdco LLC (U.S. Senior Loans, Common Stocks & Warrants)

     11,763,530        9,389,339        —          —         —          —         9,389,339        11,736,673        19,554  

NexPoint Residential Trust, Inc.

     81,229        3,655,305        —          (17,933     —          (1,589,589     2,047,783        81,229        7,499  

NexPoint Hospitality Trust

     13,370,573        66,719,159        1,002,793        —         —          (38,001,175     29,720,777        13,571,131        —    

TerreStar Corp. (U.S. Senior Loans & Common Stocks)

     22,797,318        59,427,642        636,045        —         —          4,167,715       64,231,403        23,433,366        641,876  

United Development Funding IV

     1,763,581        5,149,656        —          —         —          (2,151,568     2,998,088        1,763,581        —    

Euramax International (U.S. Senior Loans, Common Stocks, & Warrants)

     7,352,734        6,224,560        —          —         —          (3,478,597     2,745,963        7,352,732        329,825  

Other Controlled

 

               

Allenby (Common Stocks)

     631,135        1        8,874        —         —          (8,874     1        640,008        288  

Claymore (Common Stocks)

     2,019,369        2        38,265        —         —          (38,265     2        2,057,634        —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

     331,223,139      $ 531,856,677      $ 2,873,972      $ (21,832,552   $ —        $ (85,004,887   $ 427,893,211        333,052,958      $ 15,314,880  

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