Insider filing report for Changes in Beneficial Ownership
- Schedule 13G & 13D forms are used to report a party's ownership of stock which exceeds 5% of a company's total stock issue.
- Schedule 13G is a shorter version of Schedule 13D with fewer reporting requirements.
"Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise"
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- Peter Lynch
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SCHEDULE 13D
DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT
08/06/2021
1. NAME OF REPORTING PERSON
Phillip Goldstein
2. CHECK THE BOX IF MEMBER OF A GROUP a[]
b[]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) AND 2(e) []
6. CITIZENSHIP OR PLACE OF ORGANIZATION
USA
___________________________________________________________
7. SOLE VOTING POWER
Less than 5%
8. SHARED VOTING POWER
Less than 5%
9. SOLE DISPOSITIVE POWER
Less than 5%
_______________________________________________________
10. SHARED DISPOSITIVE POWER
Less than 5%
11. AGGREGATE AMOUNT OWNED BY EACH REPORTING PERSON
Less than 5%
12. CHECK IF THE AGGREGATE AMOUNT EXCLUDES CERTAIN SHARES
[]
___________________________________________________________
13. PERCENT OF CLASS REPRESENTED BY ROW 11
Less than 5%
14. TYPE OF REPORTING PERSON
IN
___________________________________________________________
Item 1. SECURITY AND ISSUER
This Schedule 13D relates to the shares of Common Stock
of Highland Income Fund ("HFRO" or the "Issuer").
The principal executive offices of HFRO are located at
2515 MCKINNEY AVENUE, SUITE 1100
Dallas, TX 75201
Item 2. IDENTITY AND BACKGROUND
(a) This statement is filed on behalf of Phillip Goldstein.
(b) The residence of the reporting person is
60 Heritage Drive
Pleasantville, NY 10570
(c) Mr. Goldstein is the principal of a resistered investment
adviser.
(d) n/a
(e) n/a
(f) Mr.Goldstein a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS AND OTHER CONSIDERATIONS
Personal funds were used to purchase those shares for which
Mr. Goldstein has sole discretion. A registered investment
company on whose Investment Committee Mr. Goldstein serves
owns those shares for which Mr. Goldstein has shared discretion.
ITEM 4. PURPOSE OF TRANSACTION
The filing person is sending the letter in exhibit A to stockholders
of the issuer.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) As per the N-CSR filed on 03/11/2021, there were 71,350,322 shares
of common stock outstanding as of 12/31/2020. The percentages set forth
herein were derived using such number.The Reporting Person is the
beneficial owner of less than 5% of the Issuer's shares.
(b)The Reporting Person is the beneficial owner of less than 5% of
the Issuer's shares.
c) During the past 60 days the following shares of HFRO were Bought.
Date Shares Price
6/23/2021 5,000 9.9300
6/25/2021 5,000 9.7300
7/20/2021 3,000 10.5100
8/03/2021 10,000 10.4463
d) A registered investment company on whose Investment Committee
Mr.Goldstein seves is entitled to receive any dividends or sales
proceeds related to the shares it holds.
e) N/A
ITEM 6. CONTRACTS,ARRANGEMENTS,UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
N/A
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: 8/10/21
By: /S/ Phillip Goldstein
Name: Phillip Goldstein
Exhibit A:
Phillip Goldstein, 250 Pehle Avenue, Suite 708, Saddle Brook, NJ 07663
(201) 881-7111 // Fax: (201) 556-0097 // This email address is being protected from spambots. You need JavaScript enabled to view it.
August 6, 2021
Dear Fellow Stockholder of Highland Income Fund (HFRO):
After the close of business on June 14, 2021, HFRO announced a plan to change
from a registered investment company to a diversified holding company. The
next day HFRO's stock price fell 7.65 % from $11.89 to $10.98 (even though
the net asset value (NAV) was only down a penny) and the discount to NAV
widened from 13.97% to 20.49%. On June 28 the stock price hit a low of $9.92
and the discount reached almost 28%. I think there are good reasons for
investors' pessimism and consequently good reasons to vote down this
ill-advised proposal at the stockholder meeting on August 20.
.. HFRO's current structure as a regulated investment company provides
important protections for stockholders. Among the many protections that
will be lost if the proposed conversion is implemented are:
(1) a prohibition on using excessive leverage, (2) a prohibition on
secondary offerings that dilute existing stockholders, (3) a
prohibition on self-dealing (joint) transactions, (4) the right of
stockholders to fire the investment advisor at any time with no penalty,
and (5) a requirement that at least 40% of the trustees must be
independent of management.
.. James Dondero is the "face" of both HFRO and NexPoint Strategic
Opportunities Fund (NHF), another closed-end fund. Moreover, all of
the trustees of HFRO are also trustees of NHF. One year ago, NHF's
trustees proposed deregistering that fund as an investment company,
a proposal they said was intended to increase stockholder value and
address NHF's trading discount. NHF's stockholders voted to approve
the proposal but the results have been very disappointing. NHF
currently trades at a discount of almost 40% to its NAV.
.. Mr. Dondero, the proposed President and CEO of HFRO post-conversion,
has a long history of contentious litigation. On October 16, 2019,
Highland Capital Management, L.P. ("HCMLP"), an investment advisor
controlled by Mr. Dondero, filed for Chapter 11 bankruptcy protection.
The judge in that case ordered him to stay away from HCMLP's business
during the bankruptcy. On June 7, 2021, the judge found Mr. Dondero in
contempt for knowingly violating that court order. The judge also
found that he improperly disposed of a company-issued cell phone that
may have contained evidence. And just a few days ago, the judge again
found Mr. Dondero in contempt of court, this time for violating an
order barring him from suing HCMLP's replacement CEO without the
court's permission.
Rather than voting for a radical change in HFRO's business which may
well result in a lower stock price, I believe there are actions that
can be taken that are more likely to enhance stockholder value including
the following:
1. I believe Mr. Dondero's association with HFRO is the primary reason
its shares trade at a large discount to NAV. While litigation is
sometimes unavoidable, Mr. Dondero's frequent and aggressive use of
litigation must be distracting. Therefore, HFRO's current investment
advisory agreement with his firm should be terminated and an advisor
that will focus on enhancing stockholder value should be hired.
2. Mr. Dondero has caused a significant percentage of HFRO's portfolio
to consist of illiquid hard-to-value assets. Investors tend to assign
a large discount to the "fair value" of such assets. Consequently,
the new investment advisor should actively seek to monetize HFRO's
illiquid investments and redeploy the capital into liquid income
producing securities.
3. Excess cash from asset sales should also be used to aggressively
repurchase HFRO's common stock when it trades at a wide discount
from its NAV.
As Shakespeare famously wrote in Julius Caesar, "The fault, dear
Brutus, is not in our stars / But in ourselves, that we are underlings."
In short, there is nothing wrong with HFRO that cannot be fixed by
getting rid of Mr. Dondero. If stockholders vote to convert HFRO to a
holding company led by Mr. Dondero, they will likely regret it just
like many stockholders of NHF probably regret voting to deregister
that fund. To send a message to the board that Mr. Dondero must go,
I urge you to vote against the proposal to convert HFRO from a
registered closed-end fund to a holding company.
IF YOU HAVE ALREADY RETURNED YOUR PROXY CARD AND VOTED FOR CONVERSION,
YOU CAN CHANGE YOUR VOTE AT ANY TIME BEFORE THE MEETING. IF YOU HAVE
ANY QUESTIONS ABOUT HOW TO VOTE YOUR PROXY, PLEASE CALL INVESTORCOM
AT 1-877-972-0090.
Very truly yours,
/S/ Phillip Goldstein
Phillip Goldstein