The information contained herein does not constitute a distribution, an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction in which such distribution or offer is not authorized. In particular, the information herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any U.S. person (being residents of the U.S. or partnerships or corporations organized under the laws of the U.S.).
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
NexPoint Capital, Inc.
NexPoint Diversified Real Estate Trust
Before investing in the Company, you should carefully consider the Company’s investment objectives, risks, charges and expenses. For a copy of the Company’s most recent shareholder reports which contains this and other information, please visit our website at www.nexpoint.com or call 1-866-351-4440. Please read the Company’s shareholder reports and other filings with the SEC carefully before investing.
The photos in this brochure are of properties held within the portfolio.
The information herein has been prepared by the Investment Adviser, is based upon unaudited information, and has
not been independently audited or verified. This summary is for informational purposes only and is subject to change.
Past performance is no guarantee of future results. The rate of return will vary and the principal value of an investment will
fluctuate and shares, if sold, may be worth more or less than their original cost. Current performance may be lower or
higher than the performance data quoted. Returns are historical and include change in share price and reinvestment of all
distributions. Total investment return does not reflect broker sales charges or commissions. All performance information
is for common shares of the Trust. See the Company’s most recent shareholder reports and financial statements for more information before investing.
This Presentation Document contains forward-looking statements. These statements reflect the current views of management with respect to future events and financial performance. Forward-looking statements can be identified by words such as “anticipate”, “expect”, “could,” “may”, “potential”, “will”, “ability,” “targets,” “believe,” “likely,” “assumes,” “ensuring,” “available,” “optionality,” “viability,” “maintain,” “consistent,” “pace,” “should,” “emerging,” “driving,” “looking to,” and similar statements of a future or forward-looking nature. Forward-looking statements address matters that involve risks and uncertainties. Past performance does not guarantee future results. Performance during time periods shown is limited and may not reflect the performance in difference economic and market cycles. There can be no assurance that similar performance will be experienced.
Portfolio and industry composition may change with market conditions. The Company’s portfolio holdings are subject to change without notice. The mention of specific securities is not a recommendation or solicitation for any person to buy, sell or hold any particular security.
Shares of closed-end funds frequently trade at a discount to their net asset value. Because of this possibility and the
recognition that any such discount may not be in the interest of shareholders, the Board might consider from time to
time engaging in open-market repurchases tender offers for shares or other programs intended to reduce the discount.
No assurance can be given that the Company will achieve its investment objectives.
Closed-End Fund Risk. The Company is a closed-end investment company designed primarily for long-term investors and not as a trading vehicle. No assurance can be given that a shareholder will be able to sell his or her shares on the NYSE when he or she chooses to do so, and no assurance can be given as to the price at which any such sale may be effected. Credit Risk. Investments rated below investment grade are commonly referred to as high-yield, high risk or “junk debt.” They are regarded as predominantly speculative with respect to the issuing company’s continuing ability to meet principal and/or interest payments. Non-payment of scheduled interest and/or principal would result in a reduction of income to the Company, a reduction in the value of the asset experiencing non-payment and a potential decrease in NAV of the Company.
Deregistration Risk. While the Company has applied to the SEC for an order deregistering it as a closed-end investment company, the granting of that order is in the discretion of the SEC and could take four months to a year to obtain. Any determination by the SEC not to grant the Company’s deregistration application would materially change the Company’s plans for its business and investments. Interest Rate Risk. Interest rate risk is the risk that debt securities, and the Company’s net assets, may decline in value because of changes in interest rates. Generally, fixed rate debt securities will decrease in value when interest rates rise and increase in value when interest rates decline. Leverage Risk. The Company uses leverage through borrowings from a credit facility through the issuance of preferred shares. The use of leverage magnifies both the favorable and unfavorable effects of price movements in the investments made by the Company. Insofar as the Company employs leverage in its investment operations, the Company will be subject to substantial risks of loss. Industry Concentration Risk. The Company must invest at least 25% of the value of its total assets at the time of purchase in securities of issuers conducting their principal business activities in the real estate industry. The Company may be subject to greater market fluctuations than a fund that does not concentrate its investments in a particular industry. Financial, economic, business, and other developments affecting issuers in the real estate industry will have a greater effect on the Company, and if securities of the real estate industry fall out of favor, the Company could underperform, or its NAV may be more volatile than, funds that have greater industry diversification. Real Estate Risk. Real estate investments are subject to various risk factors. Generally, real estate investments could be adversely affected by a recession or general economic downturn where the properties are located. The full extent of the impact and effects of the recent outbreak of COVID-19 on the future financial performance of the Company, and specifically, on its investments and tenants to properties held by its REIT subsidiaries, are uncertain at this time. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Illiquidity of Investments Risk. The investments made by the Company may be illiquid, and consequently the Company may not be able to sell such investments at prices that reflect the Investment Adviser’s assessment of their value or the amount originally paid for such investments by the Company.
On August 28, 2020, shareholders approved the Company’s proposal to convert NHF to a diversified REIT. Following shareholder approval, the Company began transitioning its business and investments to those of a diversified REIT. The Company has since completed the initial repositioning of its investment portfolio sufficient to achieve REIT tax status and is operating during its 2021 taxable year so that it may qualify for taxation as a REIT.
Additionally, management has repositioned NHF’s portfolio such that it believes NHF is no longer an “investment company” under the Investment Company Act of 1940 (the “1940 Act”). This enabled the Company to file an amended application for an order from the Securities and Exchange Commission (“SEC”) declaring that the Company has ceased to be an investment company (the “Deregistration Order”) on September 13, 2021 that reflected NHF’s repositioned portfolio.
Effective November 8, 2021, NHF changed its name to NexPoint Diversified Real Estate Trust and is traded on the New York Stock Exchange under the ticker NXDT.
Following review of the amended application, the SEC may grant the Deregistration Order, which would represent the final step in NHF’s business plan to convert to a diversified REIT.
While NexPoint is committed to the REIT conversion, it is still contingent upon regulatory approval and the ability to reconfigure NXDT’s portfolio to attain REIT status and deregister as an investment company. The time required to reconfigure the Company’s portfolio could be impacted by, among other things, the COVID-19 pandemic and related market volatility, determinations to preserve capital, the Company’s ability to identify and execute on desirable investments, and applicable regulatory, lender and governance requirements. The conversion process could take up to 24 months; and there can be no assurance that conversion of NXDT to REIT status will improve its performance or reduce the discount to NAV. Further, the SEC may determine not to grant the Company’s request for the Deregistration Order, which would materially change the Company’s plans for its business and investments.
In addition, these actions may adversely affect the Company’s financial condition, yield on investment, results of operations, cash flow, per share trading price of its common shares, and ability to satisfy debt service obligations, if any, and to make cash distributions to shareholders. Whether the Company remains a registered investment company or converts to a REIT, its common shares, like an investment in any other public company, are subject to investment risk, including the possible loss of investment. For a discussion of certain other risks relating to the proposed conversion to a REIT, see “Implementation of the Business Change Proposal and Related Risks” in the proxy statement.
No assurance can be given that the Company will achieve its investment objectives.
DSTs are not suitable for all investors, and are speculative, illiquid, and involve a high degree of risk, including the possible complete loss of your investment.
A Delaware Statutory Trust (DST) is a legal entity created under Delaware law as a trust that holds title to 100% of the interest in real property.
Investors acquire a beneficial interest in the trust, with limited personal liability for the underlying assets. DSTs differ from Tenancy in Commons (TICs), another 1031 Exchange fractional ownership strategy, in that each investor does not own a fractional, undivided interest in a property as a co-owner. Therefore, DST investors are not required to share the associated costs of ownership or be considered “tenants in common.”
- There will be no public market for the interests, limited transferability and lack of liquidity
- There is no specified time that the investment will be liquidated.
- Delaware Statutory Trusts (DSTs) are a relatively new vehicle for real estate investment and are inflexible vehicles to own real property.
- Investors will have no voting rights and will have no control over management of the trust or the Property.
- There is no guarantee that investors will receive any return.
- Distributions are not guaranteed and may be sourced from non-income items and constitute a return of capital.
- DSTs will be subject to the risks generally associated with the acquisition, ownership and operation of real estate including, without limitation, environmental concerns, competition, occupancy, easements and restrictions and other real estate related risks.
- No assurance that the disposition of property will allow for the repayment of outstanding indebtedness;
- Payment of significant fees to the advisor, sponsor and its affiliates;
- Limited powers of the advisor with respect to the properties;
- Potential conflicts of interest;
- Risk that a prospective purchase may not be consummated;
- Risk typically associated with real estate and real-estate-related debt securities;
- Accredited investor use only.
- Risks related to retaining tenants and/or re-leasing properties;
- Risk that a program’s operating results will be adversely affected by economic and regulatory changes;
- Risk that program securities will not be treated as interests in real estate for federal income tax purposes;
- Risk that the closing of a purchase may be delayed and may not satisfy the timeliness requirements of Internal Revenue Code Section 1031; and
- These risks may impact a sponsored investment program’s financial condition, operating results, returns to its investors and ability to make distributions as stated in the applicable
- CAUTION: Although significant due diligence may be performed by Sponsors, Lenders, Third Party Consultants, Appraisers, Broker Dealers and Securities Professionals, it does not ensure that the investment will perform as projected. There may be issues that are not discovered through due diligence prior to a purchasers acquisition of an investment, or after such acquisition, which may cause the purchaser to incur losses up to, and including, the entire investment.
- We do not provide tax advice. Please consult your tax professional.
There can be no assurance that the investment objectives described herein will be achieved. Investment in securities is subject to substantial risks and may result in the loss of principal invested.
The views and opinions expressed are for informational purposes only as of the date of this material and are subject to change at any time. This material is not a recommendation, offer or solicitation to buy or sell any securities or engage in any particular investment strategy and should not be considered specific legal, investment or tax advice.
Accredited Investor – Defined in Rule 501 of Regulation D. While each state may have additional accreditation requirements, individuals are generally considered to be accredited if they have a net worth exceeding $1,000,000 (not including value of primary residence), or if their income exceeds $200,000 in each of the last two years. A joint income with a spouse exceeding $300,000 for those years with an expectation of the same income level in the current year.
Basis – The value of a property for tax purposes. Takes into consideration added value for capital improvements and decreased by the amount of depreciation taken.
Boot – The money or the fair market value of “other property” received by the taxpayer in an exchange. Subject to taxation to the extent there is a capital gain. Examples of boots can include: cash boot, mortgage boot, and personal property.
Exchange Period – The timeframe in which the exchanger must acquire the Replacement Property in the exchange. Starts on the date the Exchanger transfers the first Relinquished Property and ends when the exchange is completed or on the 180th day.
Exchanger – The property owner aiming to defer capital gain by utilizing a 1031 exchange.
Forward Exchange – Most common form of a 1031 exchange. Begins with the sale of the Relinquished Property and completes with the purchase of a Replacement Property.
Identification Period – The 45-day period in which the investor must identify up to three potential Replacement Properties for a like-kind exchange. The 45-day window begins with the transfer of the investor’s Relinquished Property.
Like-Kind Property – Any real property held for productive use in a trade or business or for investment can be considered “like-kind” property. Any real estate that is not held for personal use.
Private Placement Memorandum (PPM) – A legal, offering document that contains relevant objectives, disclosures, risks, and terms to aid investors in making informed investment decisions. May include financial statements, details of the company or entity issuing the securities offered, and the procedures for investing. Sometimes referred to as offering memorandum or offering document.
Qualified Intermediary – Third party entity that holds the exchanged funds and helps facilitate the exchange. Also referred to as QI, exchange facilitator, or exchange accommodator.
Realized Gain – Amount realized from sale of the property. Equal to the gross sale price minus the closing costs minus the adjusted basis. In a fully tax-deferred 1031 exchange, the realized gain is deferred.
Recognized Gain – Amount of the realized gain that is subject to tax. In a fully tax-deferred 1031 exchange, no gain is recognized.
Relinquished Property – The property the Exchanger is selling.
EDUCATIONAL USE ONLY
6 Reverse Exchange – A 1031 exchange in which the replacement property must be purchased before the Relinquished Property is sold. Can also take place when improvements must be made to the Replacement Property before it can be acquired by the Exchanger. Generally more complex than a forward 1031 exchange.
Sponsor – The company/party offering a property asset that is available for sale to investors. The Sponsor handles everything from purchasing the property, to building the financials, to handling of the property management. The Sponsor will sell fractionalized interests to individual investors.
Replacement Property – The property the Exchanger is acquiring (purchasing).
NexPoint Real Estate Strategies Fund
An interval fund is a type of investment company that is legally classified as a closed-end fund, but is different from traditional closed-end funds in that their shares typically do not trade on the secondary market and they are permitted to continuously offer their shares at a price based on the Fund’s net asset value.
An interval fund periodically offers to buy back, or “repurchase,” a stated portion of its shares from shareholders at a price based on net asset value, generally on a quarterly basis, as disclosed in the Fund’s prospectus and annual report. The interval fund will periodically notify its shareholders of the upcoming repurchase dates, and specify a date by which shareholders must accept the repurchase offer. Shareholders are not required to accept these offers and sell their shares back to the Fund. The actual repurchase will occur at a later, specified date.
Before investing in the Fund, you should carefully consider the Fund’s investment objectives, risks, charges and expenses. For a copy of a prospectus which contains this and other information, please visit our website at www.nexpointres.com or call 1-877-665-1287. Please read the fund prospectus carefully before investing.
Past performance and is no guarantee of future results. Investment returns and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For performance data current to the most recent month-end, please call 877-665-1287.
Investing in the Fund involves risks, including the risk that you may receive little or no return on your investment or that you may lose part or all of your investment. Consequently, you can lose money by investing in the Fund. No assurance can be given that the Fund will achieve its investment objective, and investment results may vary substantially over time and from period to period. An investment in the Fund is not appropriate for all investors. An investment in the Fund is suitable only for investors who can bear the risks associated with the limited liquidity of the shares and should be viewed as a long-term investment. Before making your investment decision, you should (i) consider the suitability of this investment with respect to your investment objectives and personal financial situation and (ii) consider factors such as your personal net worth, income, age, risk tolerance and liquidity needs. An investment in the Fund is not appropriate for all investors.
The Advisor has contractually agreed to waive its fees and to pay or absorb the ordinary annual operating expenses of the Fund (including organizational and offering expenses, but excluding distribution fees, interest, dividend expenses on short sales, brokerage commissions and other transaction costs, acquired fund fees and expenses, taxes, litigation expenses and extraordinary expenses), (the “Expense Limitation”). If the Fund incurs expenses excluded from the Expense Limitation Agreement, the Fund’s expense ratio would be higher and could exceed the Expense Limitation. The Expense Limitation Agreement may not be amended or terminated for one year from May 1, 2019, unless approved by the Board.
Debt Securities Risk. When the Fund invests in debt securities, the value of your investment in the Fund will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of debt securities.
Non-Payment Risk. Debt securities are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the security experiencing nonpayment and a potential decrease in the NAV of the Fund.
Distribution Policy Risk. The Fund’s distribution policy may, under certain circumstances, have certain adverse consequences to the Fund and its shareholders because it may result in a return of capital resulting in less of a shareholder’s assets being invested in the Fund and, over time, increase the Fund’s expense ratio. The distribution policy also may cause the Fund to sell a security at a time it would not otherwise do so in order to manage the distribution of income and gain. Pending the investment of the net proceeds in accordance with the investment objective and policies, all or a portion of the Fund’s distributions may consist of a return of capital (i.e. from your original investment). Please refer to the 19A Source of Distribution notices that provide estimated amounts and sources of the fund’s distributions, which should not be relied upon for tax reporting purposes.
No Minimum Amount of Proceeds Required. The Fund is not required to raise a minimum amount of proceeds from this offering in order to commence operations. In order for the Fund to have viable operations, the Adviser believes the Fund will need to raise approximately $5 million in proceeds from this offering. To the extent that the Fund is unable to raise such amount in a timely manner or at all, it would have a negative impact on the ability of the Fund to diversify its portfolio and meet the asset diversification requirements to qualify as a RIC under the Code.
Public and Private Investment Funds Risk. For investments in Public Investment Funds and Private Real Estate Investment Funds not managed by the Adviser or its affiliates, Fund shareholders will bear two layers of fees and expenses: asset-based fees and expenses at the Fund level, and asset-based fees, incentive allocations or fees and expenses at the Public Investment Fund or Private Real Estate Investment Fund level. The Fund’s performance depends, in part, upon the performance of the Public Investment Fund and Private Real Estate Investment Fund managers and their selected strategies, the adherence by such managers to such selected strategies, the instruments used by such managers, and the Adviser’s ability to select managers and strategies and effectively allocate Fund assets among them.
REIT Risk. REITs may be affected by changes in the real estate markets generally as well as changes in the values of the properties owned by the REIT or securing the mortgages owned by the REIT. REITs are dependent upon management skill and are not diversified.
Non-Traded REIT Risk. Non-Traded REITs are subject to significant commissions, expenses, and organizational and offering costs that reduce the value of an investor’s (including the Fund’s) investment. Non-Traded REITs are not liquid, and investments in Non-Traded REITs may not be accessible for an extended period of time. There is no guarantee of any specific return on the principal amount or the repayment of all or a portion of the principal amount invested in Non-Traded REITs. In addition, there is no guarantee that investors (including the Fund) will receive distributions. Distributions from Non-Traded REITs may be derived from sources other than cash flow from operations, including the proceeds of the offering, from borrowings, or from the sale of assets. Payments of distributions from sources other than cash flow from operations will decrease or diminish an investor’s interest.
Private REIT Risk. Private REITS are unlisted, making them more difficult to value and trade. Moreover, private REITs generally are exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and, as such, are not subject to the same disclosure requirements as Public REITs and Non-Traded REITs, which makes private REITs more difficult to evaluate from an investment perspective. In addition, Private REITs may not have audited financial statements.
Leverage Risk. The use of leverage, such as borrowing money to purchase securities, will cause the Fund or a Public Investment Fund or Private Real Estate Investment Fund in which the Fund has invested, to incur additional expenses and significantly magnify the Fund’s losses in the event of underperformance of the Fund’s (or Public Investment Fund’s or Private Real Estate Investment Fund’s) underlying investments. Interest payments and fees incurred in connection with such borrowings will reduce the amount of distributions available to the Fund’s shareholders.
Liquidity Risk. There is currently no secondary market for the shares and the Fund expects that no secondary market will develop. Limited liquidity is provided to shareholders only through the Fund’s quarterly repurchase offers for no less than 5% of the shares outstanding at NAV. There is no guarantee that shareholders will be able to sell all of the shares they desire in a quarterly repurchase offer.
Medium and Small Capitalization Company Risk. Compared to investment companies that focus only on large capitalization companies, the Fund’s NAV may be more volatile because it also invests in medium and small capitalization companies.
Concentration in Real Estate Securities Risk. The Fund will not invest in real estate directly, but, because the Fund will concentrate its investments in investment vehicles that invest principally in real estate and real estate related securities, its portfolio will be significantly impacted by the performance of the real estate market and may experience more volatility and be exposed to greater risk than a more diversified portfolio.
Repurchase Policy Risks. Quarterly repurchases by the Fund of its shares typically will be funded from available cash or sales of portfolio securities. However, payment for repurchased shares may require the Fund to liquidate portfolio holdings earlier than the Adviser otherwise would liquidate such holdings, potentially resulting in losses, and may increase the Fund’s portfolio turnover. The Adviser may take measures to attempt to avoid or minimize such potential losses and turnover, and instead of liquidating portfolio holdings, may borrow money to finance repurchases of shares. If the Fund borrows to finance repurchases, interest on any such borrowings will negatively affect shareholders who do not tender their shares in a repurchase offer by increasing the Fund’s expenses and reducing net investment income. The Fund’s quarterly repurchase offers are a shareholder’s only means of liquidity with respect to his or her shares.
Risks Relating to Fund’s Tax Status. To remain eligible for the special tax treatment accorded to RICs and their shareholders under the Internal Revenue Code of 1986, as amended (the “Code”), the Fund must meet certain source of income, asset diversification and annual distribution requirements. If the Fund were to fail to comply with the income, diversification or distribution requirements, all of its taxable income regardless of whether timely distributed to shareholders would be subject to corporate-level tax and all of its distributions from earnings and profits (including from net long-term capital gains) would be taxable to shareholders as ordinary income. In any such event, the resulting corporate taxes could substantially reduce the Fund’s net assets, the amount of income available for distribution and the amount of its distributions. Any such failure would have a material adverse effect on the Fund and its shareholders.
REIT Tax Risk for REIT Subsidiaries. We intend to form one or more subsidiaries that will elect to be taxed as REITs beginning with the first year in which they commence material operations. In order for each subsidiary to qualify and maintain its qualification as a REIT, it must satisfy certain requirements set forth in the Code and Treasury Regulations that depend on various factual matters and circumstances. The Fund and the Adviser intend to structure each REIT subsidiary and its activities in a manner designed to satisfy all of these requirements.
If a REIT subsidiary fails to qualify as a REIT for any taxable year and it does not qualify for certain statutory relief provisions, it will be subject to U.S. federal income tax on its taxable income at corporate rates. In addition, it will generally be disqualified from treatment as a REIT for the four taxable years following the year of losing its REIT status.
Substantial Conflicts of Interest. As a result of the Fund’s arrangements with the Adviser there may be times when the Adviser or their affiliates have interests that differ from those of the Fund’s shareholders, giving rise to a conflict of interest. The Fund’s officers serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Fund does, or of investment funds managed by the Adviser or its affiliates. Similarly, the Adviser or its affiliates may have other clients with similar, different or competing investment objectives. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the best interests of the Fund or its shareholders.
Mortgage-Backed Securities Risk. Mortgage-backed securities are bonds which evidence interests in, or are secured by, commercial or residential mortgage loans, as the case may be. Accordingly, mortgage-backed securities are subject to all of the risks of the underlying mortgage loans. In a rising interest rate environment, the value of mortgage-backed securities may be adversely affected when payments on underlying mortgages do not occur as anticipated. The value of mortgage-backed securities may also change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities markets as a whole. In addition, mortgage-backed securities are subject to the credit risk associated with the performance of the underlying commercial or residential mortgage properties. Mortgage-backed securities are also subject to several risks created through the securitization process.
Concentration in Real Estate Securities Risk. The Fund will not invest in real estate directly, but, because the Fund will concentrate its investments in investment vehicles that invest principally in real estate and real estate related securities, its portfolio will be significantly impacted by the performance of the real estate market and may experience more volatility and be exposed to greater risk than a more diversified portfolio. The values of companies engaged in the real estate industry are affected by: (i) changes in general economic and market conditions; (ii) changes in the value of real estate properties; (iii) risks related to local economic conditions, overbuilding and increased competition; (iv) increases in property taxes and operating expenses; (v) changes in zoning laws; (vi) casualty and condemnation losses; (vii) variations in rental income, neighborhood values or the appeal of property to tenants; (viii) the availability of financing and (ix) changes in interest rates and leverage.
AN INVESTMENT IN THE NEXPOINT REAL ESTATE STRATEGIES FUND INVOLVES RISK AND THERE CAN BE NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE MET. FOR A FULL LIST OF THE RISKS ASSOCIATED WITH INVESTING IN THE NEXPOINT REAL ESTATE STRATEGIES FUND, PLEASE READ THE FUND PROSPECTUS.
REITs are traded on the stock market, which means they have increased risks that would be typical of riskier equity investments. They are also adversely affected by weakness in real estate prices. You should carefully consider the following risks and other information in evaluating an investment in a REIT. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition, or results of operations, and could, in turn, impact the trading price of our common stock. The information is for informational purposes only and does not constitute an offer to sell or the solicitation of any offer to buy our securities.
Real Estate Risk. Real estate investments are subject to various risk factors. Generally, real estate investments could be adversely affected by a recession or general economic downturn where the properties are located. The full extent of the impact and effects of the recent outbreak of COVID-19 on the future financial performance of the Fund, and specifically, on its investments and tenants to properties held by its REIT subsidiaries, are uncertain at this time. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.
Unfavorable market and economic conditions in the United States and globally and in the specific markets or submarkets where our properties are located could adversely affect occupancy levels, rental rates, rent collections, operating expenses and the overall market value of our assets, and impair our ability to sell, recapitalize or refinance our assets.
We are subject to risks inherent in ownership of real estate. Real estate cash flows and values are affected by a number of factors, including competition from other available properties and the ability to provide adequate property maintenance and insurance and to control operating costs.
Our properties may be concentrated in certain geographic markets, which makes us more susceptible to adverse developments in those markets.
Competition could limit our ability to acquire attractive investment opportunities, which could adversely affect our profitability and impede our growth.
We may fail to consummate future property acquisitions, and we may not be able to find suitable alternative investment opportunities.
Acquisitions may not yield anticipated results, which could negatively affect our financial condition and results of operations.
Our environmental assessments may not identify all potential environmental liabilities and our remediation actions may be insufficient.
Compliance with various laws and regulations, including accessibility, building and health and safety laws and regulations, may be costly, may adversely affect our operations or expose us to liability.
The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and place additional demands on management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
We have a substantial amount of indebtedness, which may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs.
We pay substantial fees and expenses to our Adviser and its affiliates and to our property manager, which payments increase the risk that you will not earn a profit on your investment.
There are significant potential conflicts of interest that could affect our investment returns.
Our failure to qualify as a REIT for federal income tax purposes would reduce the amount of income we have available for distribution and limit our ability to make distributions to our stockholders.
To continue qualifying as a REIT, we must meet annual distribution requirements, which may force us to forgo otherwise attractive opportunities or borrow funds during unfavorable market conditions. This could delay or hinder our ability to meet our investment objectives and reduce your overall return.
New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify or remain qualified as a REIT.
The Adviser’s diligence process for investment opportunities may not reveal all facts that may be relevant for an investment, and if we incorrectly evaluate the risks of our investments, we may experience losses
Loans and other real estate related investments we will originate and acquire are subject to the ability of the property owner to generate net income from operating the property as well as the risks of delinquency and foreclosure.
A prolonged economic slowdown, a recession or declining real estate values could materially and adversely affect us.
Prepayment rates may adversely affect the value of certain of our investments which could negatively impact our ability to make or sustain distributions to our shareholders.
Our common stock is listed on the NYSE and broad market fluctuations could negatively affect the market price of our stock
We urge you to carefully consider the risks and review the additional disclosures we make in our filings with the SEC, including under the caption “Risk Factors” in our periodic reports, which are accessible in the “Investor Relations” section of this website and at the SEC’s website at www.sec.gov and which identify important factors that could cause our actual results to differ materially from those stated in or implied by our forward-looking statements. There may also be other factors that we are unable to predict at this time. We caution you that any forward-looking statements made on this website are not guarantees of future performance, events or results, and you should not place undue reliance on these forward-looking statements, which speak only as of their respective dates. Except as required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based.
Nothing contained on the website constitutes investment, legal, tax or other advice. If you would like such advice, you should consult with your own advisors with respect to your individual circumstances and needs.
* NOT FDIC INSURED * May Lose Value * No Bank Guarantee. * Past performance is not indicative of future results. *
Investment returns and principal value will fluctuate so that an investor’s shares when redeemed may be worth more or less than their original cost. An investment in the Fund involves a high degree of risk.
On August 13, 2020, the Board of Trustees of Highland Funds I, on behalf of the Fund, approved a change of the Fund’s name to the “NexPoint Merger Arbitrage Fund”. The Fund continues to be advised by Highland Capital Management Fund Advisors, L.P., an affiliate of NexPoint.
On May 12, 2016, the Predecessor Fund transferred its assets to the Fund in exchange for the Fund’s Class Z shares. The investment policies, objectives, guidelines and restrictions of the Fund are in all material respects equivalent to those of the Predecessor Fund. In addition, the Predecessor Fund’s portfolio manager is the current portfolio manager of the Fund. As a mutual fund registered under the 1940 Act, the Fund is subject to certain restrictions under the 1940 Act and the Internal Revenue Code of 1986, as amended (the “Code”) to which the Predecessor Fund was not subject. Had the Predecessor Fund been registered under the 1940 Act and been subject to the provisions of the 1940 Act and the Code, its investment performance could have been adversely affected, but these restrictions are not expected to have a material effect on the Fund’s investment program.
The Predecessor Fund did not have distribution policies. The Predecessor Fund was an unregistered Delaware limited partnership and did not qualify as a regulated investment company for federal income tax purposes.
Please consider the investment objectives, risks, charges and expenses of Highland Funds carefully before investing. A prospectus with this and other information about Highland’s mutual funds can be found on the Literature tab above. You may also obtain a prospectus for our mutual funds by calling 877-665-1287. Please read the prospectus carefully before investing.
Past performance and is no guarantee of future results. Investment returns and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For performance data current to the most recent month-end, please call 877-665-1287.
Equity Securities Risk. Equity securities, such as common stocks, are subject to market, economic and business risks that may cause their prices to fluctuate.
Short Sales Risk. Short sales that are not made “against-the-box” (as defined under “Description of Principal Investments”) theoretically involve unlimited loss potential since the market price of securities sold short may continuously increase.
Hedging Risk. Although intended to limit or reduce investment risk, hedging strategies may also limit or reduce the potential for profit. There is no assurance that hedging strategies will be successful.
Market Risk. The Fund’s share price will fluctuate with changes in the market value of its portfolio securities. Many factors can affect this value and you may lose money by investing in the Fund.
Portfolio Turnover Risk. High portfolio turnover will increase the Fund’s transaction costs and may result in increased realization of net short-term capital gains.
Derivatives Risk. Derivatives are subject to the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index. Derivatives also expose the Fund to the credit risk of the derivative counterparty.
Leverage Risk. Leverage may increase the risk of loss, cause fluctuations in the market value of the Fund’s portfolio to have disproportionately large effects or cause the net asset value (“NAV”) of the Fund generally to decline faster than it would otherwise.
Non-U.S. Securities Risk. Investments in securities of non-U.S. issuers, particularly securities of emerging market issuers, involve certain risks not involved in domestic investments (for example, expropriation or political or economic instability).
Micro, Small and Mid-Cap Securities Risk. Investments in securities of companies with micro, small or medium capitalizations involve certain risks that may differ from, or be greater than, those for larger companies, such as higher volatility, lower trading volume, fewer business lines and lack of public information.
Non-Diversification Risk. As a non-diversified fund, the Fund may invest a larger portion of its assets in the securities of one or a few issuers than a diversified fund. A non-diversified fund’s investment in fewer issuers may result in the fund’s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund.
Management Risk. The Fund relies on Highland’s ability to achieve its investment objective. Highland may be incorrect in its assessment of the intrinsic value of companies whose securities the Fund holds, which may result in a decline in the value of Fund shares.
Source: SEI Investments Global Funds Services
Highland Funds’ mutual funds are distributed by NexPoint Securities, Inc., Member FINRA/SIPC
Single-Family Rental (SFR)
Factors impacting the Single-Family Rental (SFR) market. The success of SFRs depends, in part, on conditions in the SFR market. Our investment strategy is premised on assumptions about occupancy levels, rental rates, interest rates and other factors, and if those assumptions prove to be inaccurate, our cash flows and profitability will be reduced. Recent strengthening of the U.S. economy and job growth, coupled with government programs designed to keep homeowners in their homes and/or other factors, may contribute to an increase in homeownership rather than renting. In addition, we expect that as investors like us increasingly seek to capitalize on opportunities to purchase housing assets at below replacement costs and convert them to productive uses, the supply of SFR properties will decrease, which may increase competition for residents, limit our strategic opportunities and increase the cost to acquire those properties. A softening of the rental market in our core areas would reduce our rental revenue and profitability.
General Real Estate Risks. The risks incident to the ownership and operation of real estate, including risks associated with the general economic climate, local real estate conditions (including the availability of excess supply of properties relative to demand), changes in the availability of debt financing, credit risk arising from the financial condition of tenants, buyers, and sellers of properties, geographic or market concentration, competition from other space, and various other risks. SFR investments will incur the burdens of ownership of real property, which include paying expenses and taxes, maintaining the investments, and ultimately disposing of the assets. The possibility of partial or total loss of capital will exist, and prospective Investors should not subscribe unless they can readily bear the consequences of such loss.
This material is intended to provide educational information regarding the features and mechanics of the products and is intended for use with the general public. It should not be considered, and does not constitute, personalized investment advice. The issuing insurance company is not an investment adviser nor registered as such with the SEC or any state securities regulatory authority. The issuing insurance company is not acting in any fiduciary capacity with respect to any contract and/or investment.
Annuities are issued by The Ohio State Life Insurance Company, Administrative Office PO BOX 25417 Salt Lake City, UT 84125 1405 West (“Ohio State Life”). Insurance and annuity products, optional features, and riders are not available in all states and may be subject to firm availability. Click here to see current product availability. Annuities contain features, exclusions and limitations that vary by state. Read the contract for complete details. Payment obligations and guarantees are subject to the financial strength and claims-paying ability of Ohio State Life.
ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY FDIC OR NCUA/NCUSIF. ANNUITIES MAY LOSE VALUE AND HAVE NO BANK/CREDIT UNION GUARANTEE. ANNUITIES ARE NOT A DEPOSIT AND ARE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. ANNUITIES MAY ONLY BE OFFERED BY A LICENSED INSURANCE PRODUCER/AGENT. This material should not be interpreted as a recommendation by NexAnnuity or Ohio State Life.
“NexAnnuity” and “Nex” are used as marketing names for NexAnnuity Holdings, Inc., its subsidiaries and some affiliates, including The Ohio State Life Insurance Company. Each subsidiary or affiliate is responsible for its own financial and contractual obligations. Certain subsidiaries, including The Ohio State Life Insurance Company, are not authorized to do business in New York.
NexPoint Merger Arbitrage Fund
Before investing in the Fund, you should carefully consider the Fund’s investment objectives, risks, charges and expense. For a copy of a prospectus or summary prospectus, which contains this and other information, please visit our website at nexpoint.com or call 1-833-697-7253. Please read the fund prospectus carefully before investing