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Highland Socially Responsible Fund to be reorganized

edited January 2021 in Fund Discussions
https://www.sec.gov/Archives/edgar/data/891079/000119312521020228/d160564d497.htm

497 1 d160564d497.htm HIGHLAND FUNDS II
HIGHLAND FUNDS II

Highland Socially Responsible Equity Fund

Supplement dated January 31, 2021 to the Summary Prospectus, Prospectus and Statement

of Additional Information (“SAI”) each dated January 31, 2021, as supplemented from time to time

This Supplement provides new and additional information beyond that contained in the Summary Prospectuses, Prospectus and Statement of Additional Information and should be read in conjunction with the Summary Prospectuses, Prospectus and Statement of Additional Information.

IMPORTANT NOTICE

The following information supplements and supersedes any information to the contrary contained in the Summary Prospectus, Prospectus and/or Statement of Additional Information of Highland Socially Responsible Equity Fund, a series of Highland Funds II (the “Trust”), each dated and supplemented as noted above.

As previously disclosed, on October 28, 2020, the Board of Trustees (the “Board”) of Highland Funds I (the “HFI”) and Highland Funds II (the “HFII”) unanimously approved an Agreement and Plan of Reorganization (the “Plan”) for the reorganization of Highland Socially Responsible Fund (the “Acquired Fund”) into NexPoint Merger Arbitrage Fund (the “Acquiring Fund,” and together with the Acquired Fund, the “Funds”). Under the Plan, the Acquired Fund would be reorganized into the Acquiring Fund on or around February 26, 2021 (the “Closing Date”). Shareholders of record as of January 8, 2021, will be entitled to vote on the Plan.

At any time prior to the Reorganization, shareholders may redeem shares of the Acquired Fund. Such a redemption would likely result in the recognition of gain or loss by the shareholder for U.S. federal income tax purposes, which would be taxable to a shareholder that holds the shares in a taxable account. Additionally, Acquired Fund shareholders will not incur any sales load or similar transaction charges as part of the Reorganization. Please contact the Adviser at 1-877-665-1287 if you have questions about the Reorganization or your account.

A special meeting of shareholders during which shareholders of the Acquired Fund will be asked to consider and vote on the Plan has been scheduled to be held on February 26, 2021. If shareholders of the Acquired Fund approve the reorganization, the reorganization is expected to take effect on or about February 26, 2021.

Shareholders of record of the Acquired Fund will receive a prospectus/proxy statement that will include important information regarding the Reorganization. Those shareholders should read that prospectus/proxy statement carefully when it is available. The prospectus/proxy statement, and any other documents filed by the Funds with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov or the Funds’ Web site at www.highlandfunds.com/literature or www.nexpointgroup.com/nexpoint-merger-arbitrage-fund/. For more information regarding the Acquired or Acquiring Fund please call 1-877-665-1287 or visit the Funds’ Web site listed above.

INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE.

HFII-HPE-SUPP-0121

Comments

  • edited February 2021
    I have been looking at Highland Capital Management with respect to their NexPoint Merger Arbitrage fund (HMEZX). In the process, I came across an article in the Wall Street Journal from October 16, 2019 that indicated that the firm filed for bankruptcy.

    HMEZX has a very good record, but I was curious why the fund had only attracted $68 million in assets since it opened in September 2016. The answer may be found in this article:

    "Highland Capital Management LP, once a giant in high-yield debt markets, filed for bankruptcy protection Wednesday as investors and former employees seek more than $200 million from the firm for alleged improprieties.

    The Dallas-based firm founded by Jim Dondero helped pioneer trading of corporate loans rated below investment-grade and managed about $39 billion in 2007, but it took heavy losses during the financial crisis and has been embroiled in lawsuits ever since. The company had been trying in recent weeks to settle some of the litigation it faces, warning its adversaries that it would seek bankruptcy protection if they didn’t compromise, people familiar with the matter said.

    Highland entered chapter 11 in U.S. Bankruptcy Court in Wilmington, Del., listing as its largest debt a disputed $189 million claim from investors in Highland Crusader Fund, a hedge fund that has been in liquidation since the financial crisis. The second-largest creditor is Patrick Daugherty, a former Highland portfolio-manager who has been in personal and legal conflict with Mr. Dondero since 2012 and has an $11.7 million claim against Highland, according to its bankruptcy filing.

    A group of investors in Crusader sued Highland in 2016 in Delaware Chancery Court, demanding Highland be fired as manager for delaying the fund’s liquidation and claiming that Highland wrongfully paid itself $30 million. The group subsequently won an arbitration award that Highland has yet to pay, court documents show.

    In a statement, Highland said the bankruptcy filing was made “in consideration of its liquidity profile” and stems from a potential judgment in favor of a committee of Crusader Fund investors."


    I don't know the current status of of the bankruptcy filing, but, needless to say, I am no longer interested in HMEZX as a potential investment opportunity.

    If anybody has more up to date information on the fund advisor's bankruptcy status, I would appreciate hearing from you.

    But, buyer beware.

    Fred


  • msf
    edited February 2021
    fred495 said:


    "Highland Capital Management LP, once a giant in high-yield debt markets, filed for bankruptcy protection Wednesday as investors and former employees seek more than $200 million from the firm for alleged improprieties."
    ...
    If anybody has more up to date information on the fund advisor's bankruptcy status, I would appreciate hearing from you.

    The fund advisor is Highland Capital Management Fund Advisors LP. As the WSJ later wrote:
    Highland [Capital Management LP] is one of several investment platforms under the same ownership, including Highland Capital Management Fund Advisors LP and NexPoint Advisors LP, which didn’t file for bankruptcy.
    https://www.wsj.com/articles/highland-capital-management-lp-co-founder-out-under-deal-with-creditors-11577738959

  • +1 msf Good to know, since I use HMEAX to complement MERFX .
  • update:

    https://www.sec.gov/Archives/edgar/data/891079/000119312521065141/d128745d497.htm

    497 1 d128745d497.htm HIGHLAND FUNDS II
    HIGHLAND FUNDS II

    Highland Socially Responsible Equity Fund

    Supplement dated March 2, 2021 to the Summary Prospectus, Prospectus and Statement

    of Additional Information (“SAI”) each dated January 31, 2021, as supplemented from time to time

    This Supplement provides new and additional information beyond that contained in the Summary Prospectuses, Prospectus and Statement of Additional Information and should be read in conjunction with the Summary Prospectuses, Prospectus and Statement of Additional Information.

    IMPORTANT NOTICE

    The following information supplements and supersedes any information to the contrary contained in the Summary Prospectus, Prospectus and/or Statement of Additional Information of Highland Socially Responsible Equity Fund, a series of Highland Funds II (the “Trust”), each dated and supplemented as noted above.

    As previously disclosed on October 28, 2020, and as supplemented on January 31, 2021, the Board of Trustees (the “Board”) of Highland Funds I (the “HFI”) and Highland Funds II (the “HFII”) unanimously approved an Agreement and Plan of Reorganization (the “Plan”) for the reorganization of Highland Socially Responsible Fund (the “Acquired Fund”) into NexPoint Merger Arbitrage Fund (the “Acquiring Fund,” and together with the Acquired Fund, the “Funds”).

    The shareholders of the Acquired Fund approved the reorganization at a special meeting of shareholders held on February 26, 2021. The reorganization will take effect on March 2, 2021. Effective immediately, the Acquired Fund will be closed to new and existing investors.

    Please contact the Adviser at 1-877-665-1287 if you have questions about the Reorganization or your account.

    For more information regarding the Acquired or Acquiring Fund please call 1-877-665-1287 or visit the Funds’ Web site at https://www.highlandfundadvisors.com/.

    INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE SUMMARY PROSPECTUS,

    PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE.

    HFII-HPE-SUPP-0321
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