July 15, 2016
VIA EDGAR
U.S. Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, DC 20549
RE: | NexPoint Credit Strategies Fund |
File No. 811-21869 | ||
NexPoint Capital, Inc. |
File No. 814-01074 | |||
Highland Funds I |
File No. 811-21866 | |||
Highland Funds II |
File No. 811-07142 | |||
NexPoint Real Estate Strategies Fund |
File No. 811-23129 |
Ladies and Gentlemen:
On behalf of NexPoint Credit Strategies Fund, NexPoint Capital, Inc., Highland Funds I, Highland Funds II and NexPoint Real Estate Strategies Fund (each, a Fund and collectively, the Funds), enclosed for filing, pursuant to Rule 17g-1 of the Investment Company Act of 1940, as amended, are the following documents:
1. | a copy of Rider No. 9 (the Rider) to the Funds fidelity bond, bond number 04704115B (the Fidelity Bond). The Fidelity Bond was filed with the U.S. Securities and Exchange Commission on December 18, 2015 (Accession No.: 0001193125-15-407488); |
2. | an Officers Certificate certifying the resolutions adopted by the Board of Trustees and the Board of Directors (as the case may be) (the Board) of the Funds dated July 15, 2016, which a majority of the Board members who are not interested persons of the Funds, as defined by Section 2(a)(19) of the 1940 Act, approved the amount, type, form and coverage of the Fidelity Bond, including the addition of NexPoint Real Estate Strategies Fund, and the portion of the premium to be paid by the Funds; and |
3. | a copy of the Amended Agreement Among Insureds with respect to the Fidelity Bond, entered into on July 1, 2016 among the Funds and all other named insureds under the Fidelity Bond, pursuant to paragraph (f) of Rule 17g-1. |
The premium for the Fidelity Bond, as amended, for the period September 15, 2015 through September 15, 2016 has been paid. If the Funds had not been named as co-insureds under the Fidelity Bond, the Funds would have maintained a single insured fidelity bond in the amount of $1,000,000 for NexPoint Credit Strategies Fund, $225,000 for NexPoint Capital, Inc., $2,100,000 for Highland Funds I, $2,300,000 for Highland Funds II and $50,000 for NexPoint Real Estate Strategies Fund, as required under paragraph (d) of Rule 17g-1.
Please contact me at (617) 662-7193 if you have any questions.
Sincerely,
/s/ Karen Jacoppo-Wood
Karen Jacoppo-Wood
Enclosures
ICI MUTUAL INSURANCE COMPANY,
a Risk Retention Group
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 9
INSURED | BOND NUMBER | |
Highland Capital Management Fund Advisors L.P. | 04704115B |
EFFECTIVE DATE | BOND PERIOD | AUTHORIZED REPRESENTATIVE |
July 1, 2016 | September 15, 2015 to September 15, 2016 | /S/ Joseph Costello |
In consideration of the premium charged for this Bond, it is hereby understood and agreed that Item 1 of the Declarations, Name of Insured, shall include the following:
NexPoint Real Estate Strategies Fund
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of this Bond.
RN1.0-00 (1/02)
HIGHLAND FUNDS
OFFICERS CERTIFICATE
The undersigned, being duly elected Treasurer of NexPoint Credit Strategies Fund (NHF), NexPoint Capital, Inc. (BDC), Highland Funds I (HFI), Highland Funds II (HFII) and NexPoint Real Estate Strategies Fund (NRESF) (collectively, the Funds), hereby certifies that the following votes, in substantially the form below, were adopted by the Board of Trustees and Board of Directors, as the case may be (collectively, the Board) of the Funds (all Trustees/Directors voting) and separately by a majority of the Board members who are not interested persons, as such term is defined in the Investment Company Act of 1940, as amended (the 1940 Act) of the Funds (the Independent Board Members) on July 14, 2016, and that such votes remain in full force and effect as of the date hereof:
WHEREAS, on September 11, 2015, the full Board of Trustees or the Board of Directors (as the case may be) of each of HFI, HFII, NHF and BDC (each series of HFI and HFII and each of NHF and the BDC a Fund and, collectively, the Funds), approved the terms and provisions of the fidelity bond (the Fidelity Bond) issued by ICI Mutual Insurance Company (ICI Mutual) for the period commencing September 15, 2015 to September 15, 2016, with a limit of liability of $6,500,000, effective September 15, 2015; and
WHEREAS, the full Board, and by a separate vote of a majority of the Independent Board Members, previously authorized and directed the officers of the Funds to take such actions as may be necessary or appropriate in connection with the Fidelity Bond; and
WHEREAS, the Funds are required to maintain a minimum bond amount based upon the Funds gross assets, as of the most recent quarter ending, pursuant to Rule 17g-1 under the 1940 Act; and
WHEREAS, NRESF was declared effective by the U.S. Securities Exchange Commission (the SEC) on July 1, 2016; and
WHEREAS, the officers of the Funds have procured an amended fidelity bond (the Amended Bond) that includes coverage for the Funds and NRESF for a $6,500,000 limit of liability; and
WHEREAS, the officers of the Funds notified the Board that the premium for, and limit of liability of, the Amended Bond is unchanged from the Fidelity Bond and discussed the Amended Bond with the Board.
NOW, THEREFORE BE IT:
RESOLVED, that the form, terms and provisions of the Amended Bond issued by ICI Mutual, for the period commencing July 1, 2016 to September 15, 2016 with a limit of liability of $6,500,000 effective July 1, 2016, as discussed with the Board and participation by Highland Capital Management Fund Advisors, L.P., NexPoint Advisors, L.P., BDC, NHF, HFI, HFII and NRESF (collectively, the Insured Parties) in the Amended Bond, be, and it hereby is, ratified; and further
RESOLVED, that the amount of the Amended Bond with respect to the Insured Parties, as discussed with the Board, is hereby determined to be reasonable, giving due consideration to the value of the aggregate assets of the Insured Parties on behalf of each of its series to which
covered persons may be given access, the type and terms of the arrangements made for the custody and safekeeping of such assets, the nature of the securities in each Funds and NRESFs portfolio, the number of other insured parties, the amount of coverage which the Funds and NRESF named as an insured would have been required to provide and maintain individually, the total amount of coverage and the aggregate premiums under the Amended Bond, and the allocation of such premiums among the insured parties, by the Board, and by a separate vote of a majority of the Independent Board Members; and further
RESOLVED, that after having given due consideration to all relevant factors, including but not limited to (i) the number of other parties named as insureds, (ii) the nature of the business activities, (iii) the amount of the Amended Bond, (iv) the ratable allocation of the premium among the Insured Parties, and (v) the extent to which the share of the premium allocated to the Insured Parties is less than the premium each such party would have had to pay if it had provided and maintained a single insured bond, the Board of the Funds and NRESF, including all the Independent Board Members, hereby ratify the allocation of the premium for the Amended Bond in accordance with the provisions of the Amended Agreement Among Insureds; and further
RESOLVED, that the form, term and provisions of the Amended Agreement Among Insureds as discussed with the Board, be, and it hereby is, ratified; and further
RESOLVED, that the payment of the premium for the Amended Bond for the period July 1, 2016 through September 15, 2016, be, and it hereby is approved; and further
RESOLVED, that, after taking into consideration all relevant factors including, but not limited to, the number of the other parties named as insureds, the nature of the business activities of such other parties, the amount of the Amended Bond, and the amount of the premium for the Amended Bond, the ratable allocation of the premium among all parties named as insureds, as set forth in the Amended Agreement Among Insureds, be, and it is hereby is, ratified; and further
RESOLVED, that, pursuant to Rule 17g-1(h) under the 1940 Act, the Secretaries of the Funds and NRESF are hereby designated as the officer who is authorized and directed to make or cause the filings with the SEC and to give the notices required by Rule 17g-1(g) under the 1940 Act.
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of July, 2016.
/s/ Frank Waterhouse |
Frank Waterhouse |
Treasurer |
AMENDED AGREEMENT AMONG INSUREDS
with respect to the
JOINT INSURED FIDELITY BOND
ICI Mutual Insurance Company, File No. 04704115B (the Fidelity Bond)
AGREEMENT, made as of July 1, 2016 among the undersigned registered management investment companies (each an Insured and together, the Insureds) pursuant to paragraph (f) of Rule 17g-1 promulgated under the Investment Company Act of 1940 (the 1940 Act) relating to the Fidelity Bond.
Each of the Insureds hereby agrees that in the event recovery is received under the Fidelity Bond as a result of a loss sustained by one or more of the Insureds that is a registered management investment company, the registered management investment company shall receive an equitable and proportionate share of the recovery, but at least equal to the amount that it would have received had it provided and maintained a single insured bond with minimum coverage required by paragraph (d) of Rule 17g-1 promulgated under the 1940 Act (the Rule).
Fund |
Minimum Amount of Bond Required by Rule 17g-1 |
|||
NexPoint Credit Strategies Fund |
$ | 1,000,000 | ||
NexPoint Capital, Inc. |
$ | 225,000 | ||
Highland Funds I |
$ | 2,100,000 | ||
Highland Funds II |
$ | 2,300,000 | ||
NexPoint Real Estate Strategies Fund |
$ | 50,000 | ||
Total: |
$ | 5,675,000 |
The Fidelity Bond coverage is in the amount of $6,500,000, which represents adequate coverage as required under the Rule. The premium, in the amount of $29,000, is allocated as set forth below:
Fund |
Allocation of Premium | |||
NexPoint Credit Strategies Fund |
7.15% | |||
NexPoint Capital, Inc. |
0.32% | |||
Highland Funds I |
47.10% | |||
Highland Funds II |
35.43% | |||
Highland Capital Management Fund Advisors, L.P. |
8.0% | |||
NexPoint Advisors, L.P. |
2.0% | |||
NexPoint Real Estate Strategies Fund |
0.0% | |||
Total: |
100.00% |
By: |
/s/ Frank Waterhouse | |
Name: |
Frank Waterhouse | |
Title: |
Treasurer |