UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-21869
Highland Credit Strategies Fund
(Exact name of registrant as specified in charter)
NexBank Tower
13455 Noel Road, Suite 800
Dallas, Texas 75240
(Address of principal executive offices) (Zip code)
James D. Dondero
Highland Capital Management, L.P.
NexBank Tower
13455 Noel Road, Suite 800
Dallas, Texas 75240
(Name and address of agent for service)
Registrant's telephone number, including area code: (877) 665-1287
Date of fiscal year end: December 31
Date of reporting period: March 31, 2008
Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Schedule of Investments.
The Schedule(s) of Investments is attached herewith.
INVESTMENT PORTFOLIO (unaudited)
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As of March 31, 2008 |
Highland Credit Strategies Fund |
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Principal |
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Value ($) |
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Senior Loans (a) - 94.1% |
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AEROSPACE - AEROSPACE/DEFENSE - 1.5% |
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AWAS Capital, Inc. |
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Second Priority Term Loan, |
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1,927,717 |
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10.94%, 03/15/13 |
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1,667,475 |
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IAP Worldwide Services, Inc. |
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First Lien Term Loan, |
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2,962,121 |
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11.13%, 12/30/12 |
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2,410,426 |
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Second Lien Term Loan, |
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2,000,000 |
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17.00%, 06/30/13 |
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1,420,000 |
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Travelport LLC |
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Delayed Draw Term Loan, |
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2,992,462 |
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4.95%, 08/23/13 |
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2,610,923 |
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Synthetic Letter of Credit, |
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356,888 |
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4.95%, 08/23/13 |
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312,277 |
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Tranche B Dollar Term Loan, |
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1,778,654 |
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4.95%, 08/23/13 |
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1,548,176 |
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9,969,277 |
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AEROSPACE - AIRLINES - 2.9% |
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Delta Airlines, Inc. |
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Term Loan Equipment Notes, |
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7,947,601 |
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8.70%, 09/29/12 |
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7,669,435 |
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Northwest Airlines, Inc. |
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11,930,000 |
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Term Loan, 4.87%, 08/21/13 |
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9,789,997 |
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United Air Lines, Inc. |
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Tranche B Loan, 4.64%, |
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2,500,000 |
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02/03/14 |
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2,007,675 |
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19,467,107 |
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AUTOMOBILE - 1.8% |
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Ford Motor Co. |
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14,812,500 |
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Term Loan, 5.80%, 12/15/13 |
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12,195,131 |
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BROADCASTING - 3.8% |
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ComCorp Broadcasting, Inc. |
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Revolving Loan, |
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772,830 |
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9.13%, 10/02/12 (b) (c) |
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747,713 |
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Term Loan, |
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11,309,712 |
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8.75%, 04/02/13 (b) |
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10,942,146 |
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Millennium Digital Media Systems, LLC |
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First Lien Term Loan, |
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12,560,582 |
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7.11%, 06/30/11 (d) |
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12,036,115 |
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Revolver, |
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1,238,322 |
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7.47%, 06/30/11 (c) |
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1,172,159 |
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Revolver, |
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571,281 |
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9.80%, 03/06/14 (c) |
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571,281 |
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25,469,414 |
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CABLE - US CABLE - 0.3% |
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Charter Communications Operating, LLC |
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New Term Loan, 5.26%, |
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1,995,000 |
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03/06/14 |
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1,690,942 |
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CHEMICALS - COMMODITY & FERTILIZER - 0.9% |
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Ferro Corp. |
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1,673,264 |
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Term Loan, 7.03%, 06/06/12 |
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1,564,502 |
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Solutia, Inc. |
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4,987,500 |
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Loan, 8.50%, 02/28/14 |
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4,737,526 |
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6,302,028 |
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CONSUMER DURABLES - 0.3% |
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Rexair LLC |
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First Lien Term Loan, 8.73%, |
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2,469,710 |
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06/30/10 |
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2,333,876 |
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CONSUMER NON-DURABLES - 4.1% |
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Camelbak Products LLC |
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First Lien Term Loan, 6.64%, |
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1,391,780 |
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08/04/11 |
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1,215,497 |
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DS Waters of America, Inc. |
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1,975,000 |
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Term Loan, 30.16%, 10/27/12 |
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1,787,375 |
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Spectrum Brands, Inc. |
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Dollar Term B Loan, |
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8,812,536 |
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7.87%, 03/30/13 |
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7,912,953 |
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Synthetic Letter of Credit, |
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374,078 |
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2.97%, 03/30/13 |
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335,892 |
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Totes Isotoner Corp. |
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First Lien Term Loan, 7.33%, |
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4,974,874 |
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01/31/13 |
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4,353,015 |
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VNU Inc./Nielsen Finance LLC |
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Dollar Term Loan, 5.35%, |
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12,937,240 |
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08/09/13 |
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11,695,653 |
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27,300,385 |
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DIVERSIFIED MEDIA - 6.6% |
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Clarke American Corp. |
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Tranche B Term Loan, 7.33%, |
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1,985,000 |
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06/30/14 |
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1,611,979 |
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Endurance Business Media, Inc. |
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Second Lien Term Loan, |
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3,000,000 |
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9.96%, 01/26/14 |
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2,370,000 |
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Metro-Goldwyn-Mayer, Inc. |
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Tranche B Term Loan, |
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11,304,648 |
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8.11%, 04/08/12 |
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8,977,700 |
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Tranche B-1 Term Loan, |
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2,970,000 |
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8.11%, 04/08/12 |
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2,357,022 |
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Penton Media, Inc. |
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Second Lien Term Loan, |
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10,000,000 |
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7.70%, 02/01/14 (d) |
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7,650,000 |
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Tribune Co. |
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Initial Tranche B Advance, |
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11,910,000 |
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5.54%, 05/17/14 |
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8,054,137 |
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Tranche X Advance, |
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7,466,667 |
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7.99%, 05/17/09 |
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6,639,061 |
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Univision Communications, Inc. |
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Initial Term Loan, |
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966,443 |
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5.48%, 09/29/14 |
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765,307 |
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Second Lien Term Loan, |
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6,000,000 |
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5.20%, 02/12/09 |
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5,685,000 |
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44,110,206 |
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ENERGY - EXPLORATION & PRODUCTION - 3.0% |
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ATP Oil & Gas Corp. |
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First Lien Term Loan, 7.03%, |
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11,233,714 |
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04/14/10 |
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10,643,944 |
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Targa Resources, Inc. |
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Synthetic Letter of Credit Loan, |
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1,512,772 |
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6.83%, 10/31/12 |
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1,443,760 |
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Term Loan, |
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2,671,522 |
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6.90%, 10/31/12 |
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2,549,647 |
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Western Refining, Inc. |
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5,984,925 |
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Term Loan, 4.99%, 05/31/14 |
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5,229,328 |
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19,866,679 |
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1 |
INVESTMENT PORTFOLIO (unaudited) (continued)
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As of March 31, 2008 |
Highland Credit Strategies Fund |
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Principal |
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Value ($) |
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Senior Loans (continued) |
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ENERGY - OTHER ENERGY - 1.2% |
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218,333 |
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Alon USA Energy, Inc. |
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189,950 |
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1,746,667 |
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Paramount
Facility, |
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1,519,600 |
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7,500,000 |
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Venoco, Inc. |
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6,600,000 |
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8,309,550 |
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FOOD/TOBACCO - BEVERAGES & BOTTLING - 0.3% |
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1,885,600 |
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PBM Holdings, Inc. |
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1,687,612 |
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FOOD/TOBACCO - RESTAURANTS - 0.2% |
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1,970,000 |
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Restaurant Co., The |
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1,649,875 |
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FOREST PRODUCTS - PAPER - 1.4% |
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11,000,000 |
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Verso Paper Financial Holding LLC |
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9,020,000 |
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GAMING/LEISURE - GAMING - 3.2% |
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6,041,285 |
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Drake Hotel Acquisition |
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6,041,285 |
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1,333,333 |
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Fontainebleau Las Vegas LLC |
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1,104,453 |
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10,000,000 |
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Fontainebleau Florida Hotel LLC |
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8,150,000 |
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1,569,567 |
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Green Valley Ranch Gaming, LLC |
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1,255,654 |
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5,000,000 |
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Wimar Landco, LLC |
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4,600,000 |
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21,151,392 |
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GAMING/LEISURE - OTHER LEISURE - 5.0% |
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5,954,660 |
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Kuilima Resort Co. |
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5,408,796 |
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9,000,000 |
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Lake at Las Vegas Joint Venture |
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9,000,000 |
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4,500,000 |
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New
Term Loan, |
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4,500,000 |
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4,307,936 |
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Synthetic
Revolver, |
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1,476,593 |
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32,533,827 |
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Term
Loan, |
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11,159,103 |
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1,990,000 |
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Orbitz Worldwide, Inc. |
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1,681,550 |
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33,226,042 |
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HEALTHCARE - ACUTE CARE - 6.1% |
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8,435,311 |
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Alliance Imaging, Inc. |
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7,781,575 |
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2,968,009 |
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HCA, Inc. |
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2,708,724 |
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24,607,702 |
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Tranche B Term Loan, |
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22,687,809 |
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|
|
230,000 |
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National Mentor Holdings, Inc. |
|
204,700 |
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|
3,704,025 |
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Tranche B Term Loan, |
|
3,296,582 |
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|
|
4,500,000 |
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Triumph Healthcare Second
Holdings LLC |
|
4,027,500 |
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40,706,890 |
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HEALTHCARE - ALTERNATE SITE SERVICES - 0.4% |
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|||
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|
2,977,099 |
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LifeCare Holdings |
|
2,569,237 |
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HEALTHCARE - MEDICAL PRODUCTS - 4.3% |
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|||
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|
9,678,115 |
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CCS Medical, Inc. |
|
8,419,960 |
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|
|
3,136,934 |
|
Danish Holdco A/S |
|
1,803,737 |
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|
|
2,500,000 |
|
Second Lien Term Facility D, |
|
1,562,500 |
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|
|
4,000,000 |
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Golden Gate National Senior Care LLC |
|
3,700,000 |
|
|
|
2,938,472 |
|
HealthSouth Corp. |
|
2,721,760 |
|
|
|
6,982,500 |
|
Mylan, Inc. |
|
6,766,182 |
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Nyco Holdings 3 ApS |
|
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|
|
|
320,856 |
|
Facility A1, 12/29/13 (d) |
|
270,989 |
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|
|
1,298,963 |
|
Facility A2, 12/29/13 (d) |
|
1,097,079 |
|
|
|
51,667 |
|
Facility A3, 12/29/13 (d) |
|
43,637 |
|
|
|
32,912 |
|
Facility A4, 12/29/13 (d) |
|
27,797 |
|
|
|
232,716 |
|
Facility A5, 12/29/13 (d) |
|
196,547 |
|
|
|
1,678,333 |
|
Warner Chilcott Co., Inc. |
|
1,556,654 |
|
|
|
577,266 |
|
Warner Chilcott Corp. |
|
539,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,705,864 |
|
|
|
|
|
|
|
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|
|
HOUSING - BUILDING MATERIALS - 3.4% |
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|
|||
|
|
4,967,425 |
|
Custom Building Products, Inc. |
|
4,321,659 |
|
|
|
1,625,000 |
|
Second Lien Term Loan, |
|
1,316,250 |
|
|
|
|
|
|
2 |
|
|
|
|
INVESTMENT PORTFOLIO (unaudited) (continued) |
|
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
Value ($) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Senior Loans (continued) |
|
|
|
|||
|
|
|
|
|
|||
|
HOUSING - BUILDING MATERIALS (continued) |
|
|
|
|||
|
|
|
|
Realogy Corp. |
|
|
|
|
|
997,494 |
|
Delayed
Draw Term B Loan, |
|
801,027 |
|
|
|
|
|
Roofing Supply Group LLC |
|
|
|
|
|
3,907,568 |
|
First
Lien Term Loan, 9.71%, |
|
2,246,851 |
|
|
|
|
|
Spirit Finance Corp. |
|
|
|
|
|
3,000,000 |
|
Loan, 6.24%, 08/01/13 |
|
2,325,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
WAICCS Las Vegas 3 LLC |
|
|
|
|
|
6,000,000 |
|
First
Lien Term Loan, |
|
5,400,000 |
|
|
|
7,000,000 |
|
Second
Lien Term Loan, |
|
6,475,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,885,787 |
|
|
|
|
|
|
|
|
|
|
HOUSING - REAL ESTATE DEVELOPMENT - 7.3% |
|
|
|
|||
|
|
|
|
DESA LLC |
|
|
|
|
|
357,550 |
|
Term Loan, 12.75%, 11/26/11 |
|
309,281 |
|
|
|
|
|
Ginn LA Conduit Lender, Inc. |
|
|
|
|
|
|
|
First Lien Tranche A Credit-Linked Deposit, |
|
|
|
|
|
2,358,201 |
|
4.73%, 06/08/11 |
|
1,785,158 |
|
|
|
|
|
First Lien Tranche B Term Loan, |
|
|
|
|
|
5,055,125 |
|
8.33%, 06/08/11 |
|
3,826,730 |
|
|
|
|
|
LandSource Communities |
|
|
|
|
|
1,943,756 |
|
Development
LLC |
|
1,448,098 |
|
|
|
|
|
LNR Property Corp. |
|
|
|
|
|
8,800,000 |
|
Initial
Tranche B Term Loan, |
|
7,040,000 |
|
|
|
|
|
MPH Mezzanine II, LLC |
|
|
|
|
|
6,000,000 |
|
Mezzanine
2B, 7.48%, |
|
5,724,000 |
|
|
|
|
|
MPH Mezzanine III, LLC |
|
|
|
|
|
4,000,000 |
|
Mezzanine
3, 8.48%, |
|
3,800,000 |
|
|
|
|
|
November 2005 Land Investors, LLC |
|
|
|
|
|
2,500,000 |
|
Second
Lien Term Loan, |
|
750,000 |
|
|
|
|
|
Pacific Clarion, LLC, |
|
|
|
|
|
14,851,719 |
|
Term
Loan, 15.00%, 01/23/09 |
|
14,607,156 |
|
|
|
|
|
Westgate Investments LLC |
|
|
|
|
|
7,851,415 |
|
Senior
Secured Loan, PIK, |
|
7,929,929 |
|
|
|
1,740,500 |
|
Senior
Unsecured Loan, PIK, |
|
1,757,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,978,257 |
|
|
|
|
|
|
|
|
|
|
INFORMATION TECHNOLOGY - 4.6% |
|
|
|
|||
|
|
|
|
DTN, Inc. |
|
|
|
|
|
1,910,018 |
|
First
Lien Tranche C Term |
|
1,824,067 |
|
|
|
|
|
Infor Enterprise Solutions Holdings, Inc. |
|
|
|
|
|
2,701,714 |
|
Delayed
Draw Term Loan, |
|
2,397,771 |
|
|
|
|
|
Dollar Tranche B-1, Second Lien Term Loan, |
|
|
|
|
|
3,000,000 |
|
10.33%, 07/28/12 |
|
2,205,000 |
|
|
|
|
|
Initial US Term Facility, |
|
|
|
|
|
5,178,286 |
|
8.58%, 07/28/12 |
|
4,595,729 |
|
|
|
|
|
Second Lien Delayed Draw Term Loan, |
|
|
|
|
|
2,566,667 |
|
11.08%, 03/02/14 |
|
1,880,083 |
|
|
|
|
|
Second Lien Term Loan, |
|
|
|
|
|
4,433,333 |
|
11.08%, 03/02/14 |
|
3,247,417 |
|
|
|
|
|
Metrologic Instruments, Inc. |
|
|
|
|
|
2,000,000 |
|
Second
Lien Term Loan, |
|
1,880,000 |
|
|
|
|
|
Secure Computing Corp. |
|
|
|
|
|
1,222,222 |
|
Term Loan, 7.58%, 08/31/13 |
|
1,167,222 |
|
|
|
|
|
Serena Software, Inc. |
|
|
|
|
|
1,706,667 |
|
Term Loan, 7.18%, 03/11/13 |
|
1,518,933 |
|
|
|
|
|
SunGard Data Systems, Inc. |
|
|
|
|
|
4,987,374 |
|
New U.S. Term Loan, 5.16%, 02/28/14 |
|
4,649,330 |
|
|
|
|
|
Verint Systems, Inc. |
|
|
|
|
|
6,000,000 |
|
Term Loan, 5.99%, 05/27/14 |
|
5,130,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,495,552 |
|
|
|
|
|
|
|
|
|
|
MANUFACTURING - 3.0% |
|
|
|
|||
|
|
|
|
Acument Global Technologies, Inc. |
|
|
|
|
|
7,882,469 |
|
Term Loan, 8.33%, 08/11/13 |
|
7,330,696 |
|
|
|
|
|
Generac Acquisition Corp. |
|
|
|
|
|
1,666,667 |
|
Second
Lien Term Loan, |
|
1,183,333 |
|
|
|
|
|
Global Petroleum Inc. |
|
|
|
|
|
5,885,126 |
|
Term Loan, 9.14%, 09/18/13 |
|
5,708,572 |
|
|
|
|
|
Hunter Defense Technologies, Inc. |
|
|
|
|
|
1,000,000 |
|
First
Lien Term B Loan, 5.95%, |
|
870,000 |
|
|
|
|
|
Matinvest 2 SAS / Butterfly Wendal US, Inc. |
|
|
|
|
|
|
|
B-2 Facility, |
|
|
|
|
|
2,217,563 |
|
7.40%, 06/22/14 |
|
2,001,350 |
|
|
|
|
|
C-2 Facility, |
|
|
|
|
|
2,217,563 |
|
7.65%, 06/22/15 |
|
2,012,438 |
|
|
|
|
|
Matinvest 2 SAS / Deutsche Connector |
|
|
|
|
|
1,045,694 |
|
Mezz
A USD Facility, 12.43%, |
|
1,019,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,125,941 |
|
|
|
|
|
|
|
|
|
|
METALS/MINERALS - OTHER METALS/MINERALS - 1.6% |
|
|
|
|||
|
|
|
|
Euramax International Holdings B.V. |
|
|
|
|
|
1,326,316 |
|
Second
Lien European Loan, |
|
895,263 |
|
|
|
|
|
Euramax International, Inc. |
|
|
|
|
|
2,753,611 |
|
First
Lien Domestic Term Loan, |
|
2,294,694 |
|
|
|
|
|
Second Lien Domestic Term Loan, |
|
|
|
|
|
6,673,684 |
|
12.65%, 06/29/13 |
|
4,871,789 |
|
|
|
|
|
|
3 |
|
|
|
|
INVESTMENT PORTFOLIO (unaudited) (continued) |
|
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
Value ($) |
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
Senior Loans (continued) |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
METALS/MINERALS - OTHER METALS/MINERALS (continued) |
|
|
|
|
|||
|
|
|
|
United Central Industrial Supply Co., L.L.C. |
|
|
|
|
|
|
1,611,227 |
|
Term Loan, 7.74%, 03/31/12 |
|
|
1,506,497 |
|
|
|
|
|
Universal Buildings Products, Inc. |
|
|
|
|
|
|
1,451,481 |
|
Term Loan, 6.99%, 04/28/12 |
|
|
1,088,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,656,854 |
|
|
|
|
|
|
|
|
|
|
|
RETAIL - 4.0% |
|
|
|
|
|
||
|
|
|
|
Blockbuster, Inc. |
|
|
|
|
|
|
5,344,320 |
|
Tranche
B Term Loan, 9.21%, |
|
|
4,815,767 |
|
|
|
|
|
Burlington Coat Factory Warehouse Corp. |
|
|
|
|
|
|
11,680,028 |
|
Term Loan, 5.34%, 05/28/13 |
|
|
9,774,782 |
|
|
|
|
|
CSK Auto, Inc. |
|
|
|
|
|
|
2,955,280 |
|
Term Loan, 10.25%, 06/30/12 |
|
|
2,866,622 |
|
|
|
|
|
Home Interiors & Gifts, Inc. |
|
|
|
|
|
|
7,223,706 |
|
Initial
Term Loan, 10.36%, |
|
|
2,046,693 |
|
|
|
1,965,000 |
|
Sports Authority, Inc., The |
|
|
1,635,862 |
|
|
|
|
|
Toys “R” Us |
|
|
|
|
|
|
5,970,149 |
|
Tranche
B Term Loan, 9.16%, |
|
|
5,405,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,545,219 |
|
|
|
|
|
|
|
|
|
|
|
SERVICE - ENVIRONMENTAL SERVICES - 1.8% |
|
|
|
|
|||
|
|
|
|
Safety-Kleen Systems, Inc. |
|
|
|
|
|
|
1,627,119 |
|
Synthetic
Letter of Credit, |
|
|
1,582,373 |
|
|
|
6,159,322 |
|
Term
Loan B, |
|
|
6,036,136 |
|
|
|
|
|
Valleycrest Cos., LLC |
|
|
|
|
|
|
5,000,000 |
|
New
Term Loan, 5.08%, |
|
|
4,450,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,068,509 |
|
|
|
|
|
|
|
|
|
|
|
SERVICE - OTHER SERVICES - 5.1% |
|
|
|
|
|||
|
|
|
|
Allied Waste North America, Inc. |
|
|
|
|
|
|
1,697,604 |
|
New
Term Loan, |
|
|
1,616,051 |
|
|
|
802,396 |
|
New
Tranche A Credit Linked Deposit, |
|
|
762,878 |
|
|
|
|
|
Cydcor, Inc. |
|
|
|
|
|
|
10,000,000 |
|
First
Lien Tranche B Term Loan, |
|
|
9,400,000 |
|
|
|
3,000,000 |
|
Second
Lien Term Loan, |
|
|
2,820,000 |
|
|
|
|
|
Education Management LLC |
|
|
|
|
|
|
2,904,751 |
|
Tranche
C Term Loan, 4.50%, |
|
|
2,539,217 |
|
|
|
|
|
NES Rentals Holdings, Inc. |
|
|
|
|
|
|
7,765,705 |
|
Second
Lien Permanent Term |
|
|
6,387,292 |
|
|
|
|
|
Sabre, Inc. |
|
|
|
|
|
|
9,859,038 |
|
Initial
Term Loan, 6.96%, |
|
|
8,126,805 |
|
|
|
|
|
Survey Sampling International LLC |
|
|
|
|
|
|
762,227 |
|
Term Loan, 8.25%, 05/06/11 |
|
|
693,627 |
|
|
|
|
|
United Rentals, Inc. |
|
|
|
|
|
|
1,629,672 |
|
Initial
Term Loan, |
|
|
1,565,837 |
|
|
|
309,692 |
|
Tranche
B Credit-Linked Deposit, |
|
|
297,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,209,268 |
|
|
|
|
|
|
|
|
|
|
|
TELECOMMUNICATIONS - 1.9% |
|
|
|
|
|||
|
|
|
|
American Messaging Services, Inc. |
|
|
|
|
|
|
1,770,383 |
|
Senior
Secured Note, 10.85%, |
|
|
1,779,235 |
|
|
|
|
|
CSC Holdings, Inc. |
|
|
|
|
|
|
3,491,094 |
|
Incremental
Term Loan, |
|
|
3,258,622 |
|
|
|
|
|
PaeTec Communications, Inc. |
|
|
|
|
|
|
4,166,829 |
|
Initial
Term Loan, 5.23%, |
|
|
3,902,943 |
|
|
|
|
|
Sorenson Communications, Inc. |
|
|
|
|
|
|
1,766,699 |
|
Tranche
C Term Loan, 7.31%, |
|
|
1,652,958 |
|
|
|
|
|
Stratos Global Corp./Stratos Funding LP |
|
|
|
|
|
|
1,175,000 |
|
Term
B Facility, 7.58%, |
|
|
1,095,687 |
|
|
|
|
|
Time Warner Telecom Holdings Inc. |
|
|
|
|
|
|
987,500 |
|
Term Loan B, 4.71%, 01/07/13 |
|
|
918,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,607,820 |
|
|
|
|
|
|
|
|
|
|
|
TRANSPORTATION - AUTO - 3.1% |
|
|
|
|
|||
|
|
|
|
BST Safety Textiles Acquisition GMBH |
|
|
|
|
|
|
2,662,000 |
|
Second
Lien Facility, 10.03%, |
|
|
2,329,250 |
|
|
|
|
|
Delphi Corp. |
|
|
|
|
|
|
4,000,000 |
|
Term
Loan, |
|
|
3,680,000 |
|
|
|
5,000,000 |
|
Tranche
C Term Loan, |
|
|
4,937,500 |
|
|
|
|
|
Lear Corp. |
|
|
|
|
|
|
4,940,090 |
|
First
Lien Term Loan B, 6.83%, |
|
|
4,527,049 |
|
|
|
|
|
Motor Coach Industries International, Inc. |
|
|
|
|
|
|
5,790,662 |
|
Second
Lien Loan, PIK, |
|
|
5,124,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,598,535 |
|
|
|
|
|
|
|
|
|
|
|
TRANSPORTATION - LAND - 0.8% |
|
|
|
|
|||
|
|
|
|
New Century Transportation, Inc. |
|
|
|
|
|
|
1,968,849 |
|
Term Loan B, 7.96%, 08/14/12 |
|
|
1,476,637 |
|
|
|
|
|
SIRVA Worldwide, Inc. |
|
|
|
|
|
|
416,391 |
|
Revolver
Dip, |
|
|
416,391 |
|
|
|
|
|
|
4 |
|
|
|
|
INVESTMENT PORTFOLIO (unaudited) (continued) |
|
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
Value ($) |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Loans (continued) |
|
|
|
|
|||
|
|
|
|
|
|
|||
|
TRANSPORTATION - LAND (continued) |
|
|
|
|
|||
|
|
|
|
SIRVA Worldwide, Inc. (continued) |
|
|
|
|
|
|
600,000 |
|
Revolving
Credit Loan, |
|
|
290,004 |
|
|
|
360,000 |
|
Revolving
Credit Loan, |
|
|
174,002 |
|
|
|
1,040,979 |
|
Term
Loan Dip, |
|
|
494,465 |
|
|
|
6,008,774 |
|
Tranche
B Term Loan, |
|
|
2,809,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,660,601 |
|
|
|
|
|
|
|
|
|
|
|
UTILITIES - 7.5% |
|
|
|
|
|||
|
|
|
|
ANP Funding I, LLC |
|
|
|
|
|
|
4,888,889 |
|
Tranche
A Term Loan, 8.18%, |
|
|
4,810,667 |
|
|
|
|
|
Boston Generating, LLC |
|
|
|
|
|
|
6,982,323 |
|
First
Lien Term Loan, 4.95%, |
|
|
6,172,513 |
|
|
|
|
|
Coleto Creek Power, LP |
|
|
|
|
|
|
5,452,042 |
|
First
Lien Term Loan, |
|
|
4,775,989 |
|
|
|
4,912,500 |
|
Second
Lien Term Loan, |
|
|
3,979,125 |
|
|
|
382,166 |
|
Synthetic
Facility, |
|
|
357,325 |
|
|
|
|
|
Entegra TC LLC |
|
|
|
|
|
|
6,368,336 |
|
Third
Lien Term Loan, 10.83%, |
|
|
5,342,524 |
|
|
|
|
|
GBGH LLC (U S Energy) |
|
|
|
|
|
|
4,974,682 |
|
First
Lien Advance, |
|
|
4,875,189 |
|
|
|
5,478,811 |
|
Second
Lien Advance, PIK, |
|
|
5,369,235 |
|
|
|
|
|
Infrastrux Group, Inc. |
|
|
|
|
|
|
1,994,950 |
|
Closing
Date Term Loan, |
|
|
1,755,556 |
|
|
|
|
|
Mach Gen, LLC |
|
|
|
|
|
|
8,274,580 |
|
Term
C Loan, 10.60%, |
|
|
7,804,667 |
|
|
|
|
|
NRG Energy, Inc. |
|
|
|
|
|
|
4,818,625 |
|
Term
Loan, 6.58%, |
|
|
4,545,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,788,392 |
|
|
|
|
|
|
|
|
|
|
|
WIRELESS - CELLULAR/PCS - 1.4% |
|
|
|
|
|||
|
|
|
|
Cricket Communications, Inc. |
|
|
|
|
|
|
1,965,000 |
|
Term Loan B, 7.83%, 06/16/13 |
|
|
1,863,174 |
|
|
|
|
|
Insight Midwest Holdings, LLC |
|
|
|
|
|
|
5,400,000 |
|
Term Loan B, 6.73%, 04/07/14 |
|
|
4,932,036 |
|
|
|
|
|
Level 3 Financing, Inc. |
|
|
|
|
|
|
|
|
New Term Loan, 6.20%, |
|
|
|
|
|
|
3,000,000 |
|
03/13/14 |
|
|
2,598,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,393,960 |
|
|
|
|
|
|
|
|
|
|
|
WIRELESS COMMUNICATIONS - 1.3% |
|
|
|
|
|||
|
|
|
|
Clearwire Corp. |
|
|
|
|
|
|
9,950,000 |
|
Term Loan, 11.15%, 07/03/12 |
|
|
8,756,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Senior Loans |
|
|
|
|
|
|
|
|
(cost $714,947,138) |
|
|
628,502,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Principal |
|
|
|
Value ($) |
|
|
|||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
|
Foreign Denominated Senior Loans (a) - 8.8% |
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
AUSTRALIA - 2.9% |
|
|
|
|
|||||
|
AUD |
|
|
|
|
|||||
|
|
|
|
Seven Media Group |
|
|
|
|
||
|
|
22,940,476 |
|
Facility
A Term Loan, 9.52%, |
|
|
19,475,329 |
|
||
|
|
|
|
|
|
|
|
|
||
|
FRANCE - 2.6% |
|
|
|
|
|||||
|
EUR |
|
|
|
|
|||||
|
|
|
|
Ypso Holding SA |
|
|
|
|
||
|
|
2,012,048 |
|
Eur
B Acq 1 Facility, |
|
|
2,388,671 |
|
||
|
|
3,282,814 |
|
Eur
B Acq 2 Facility, |
|
|
3,897,305 |
|
||
|
|
5,213,674 |
|
Eur
B Recap 1 Facility, |
|
|
6,173,894 |
|
||
|
|
1,389,750 |
|
Eur
C Acq Facility, |
|
|
1,654,052 |
|
||
|
|
2,610,250 |
|
Eur
C Recap Facility, |
|
|
3,040,032 |
|
||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
17,153,954 |
|
||
|
|
|
|
|
|
|
|
|
||
|
NETHERLANDS - 1.4% |
|
|
|
|
|||||
|
EUR |
|
|
|
|
|||||
|
|
|
|
Amsterdamse Beheer- En Consultingmaatschappij B.V. Casema |
|
|
|
|
||
|
|
2,500,000 |
|
Kabelcom
B Term Loan, |
|
|
3,617,234 |
|
||
|
|
2,500,000 |
|
Kabelcom
C Term Loan, |
|
|
3,684,102 |
|
||
|
|
|
|
Kabelcom D Term Loan |
|
|
|
|
||
|
|
1,500,000 |
|
Second
Lien, |
|
|
2,064,880 |
|
||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
9,366,216 |
|
||
|
|
|
|
|
|
|
|
|
||
|
SWEDEN - 0.6% |
|
|
|
|
|||||
|
SEK |
|
|
|
|
|
|
|||
|
|
|
|
Nordic Cable Acquisition Co., Sub-Holding AB |
|
|
|
|
||
|
|
15,333,333 |
|
Facility B2, 7.03%, 01/31/14 |
|
|
2,184,954 |
|
||
|
|
14,666,667 |
|
Facility C2, 7.16%, 01/31/15 |
|
|
2,164,155 |
|
||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
4,349,109 |
|
||
|
|
|
|
|
|
|
|
|
||
|
UNITED KINGDOM - 1.3% |
|
|
|
|
|||||
|
GBP |
|
|
|
|
|||||
|
|
|
|
Mobileserv Ltd. |
|
|
|
|
||
|
|
2,764,925 |
|
Facility B, 8.57%, 09/22/14 |
|
|
4,042,152 |
|
||
|
|
3,250,000 |
|
Facility C, 8.60%, 09/22/15 |
|
|
4,787,151 |
|
||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
8,829,303 |
|
||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Total Foreign Denominated Senior Loans |
|
|
|
|
||
|
|
|
|
(cost $61,114,478) |
|
|
59,173,911 |
|
||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
5 |
|
|
|
|
INVESTMENT PORTFOLIO (unaudited) (continued) |
|
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
Value ($) |
|
|||
|
|
|
|
|
|
|||
|
|
|||||||
|
Asset-Backed Securities (g) - 5.6% |
|
|
|
|
|||
|
|
|||||||
|
|
|
|
AB CLO, Ltd. |
|
|
|
|
|
|
2,000,000 |
|
Series
2007-1A, Class C, |
|
|
1,512,000 |
|
|
|
|
|
ACA CLO, Ltd. |
|
|
|
|
|
|
2,000,000 |
|
Series
2007-1A, Class D, |
|
|
1,308,000 |
|
|
|
|
|
Babson CLO, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2007-2A, Class D, |
|
|
647,500 |
|
|
|
|
|
Bluemountain CLO, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2007-3A, Class D, |
|
|
661,300 |
|
|
|
|
|
Cent CDO, Ltd. |
|
|
|
|
|
|
2,000,000 |
|
Series
2007-15A, Class C, |
|
|
1,524,400 |
|
|
|
|
|
Columbus Nova CLO, Ltd. |
|
|
|
|
|
|
2,000,000 |
|
Series
2007- 1A, Class D, |
|
|
1,228,800 |
|
|
|
|
|
Commercial Industrial Finance Corp. |
|
|
|
|
|
|
1,000,000 |
|
Series
2006-1BA, Class B2L, |
|
|
479,531 |
|
|
|
1,000,000 |
|
Series
2006-2A, Class B2L, |
|
|
590,700 |
|
|
|
|
|
Conerstone CLO, Ltd. |
|
|
|
|
|
|
2,500,000 |
|
Series
2007-1A, Class C, |
|
|
2,005,500 |
|
|
|
|
|
Goldman Sachs Asset Management CLO PLC |
|
|
|
|
|
|
1,000,000 |
|
Series
2007-1A, Class D, |
|
|
746,000 |
|
|
|
1,000,000 |
|
Series
2007-1A, Class E, |
|
|
639,500 |
|
|
|
|
|
Greywolf CLO, Ltd |
|
|
|
|
|
|
1,000,000 |
|
Series
2007-1A, Class D, |
|
|
618,100 |
|
|
|
1,000,000 |
|
Series
2007-1A, Class E, |
|
|
595,000 |
|
|
|
|
|
GSC Partners CDO Fund, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2007-8A, Class C, |
|
|
560,500 |
|
|
|
|
|
Gulf Stream Sextant CLO, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2007-1A, Class D, |
|
|
783,000 |
|
|
|
|
|
Hillmark Funding |
|
|
|
|
|
|
2,000,000 |
|
Series
2006-1A, Class C, |
|
|
1,010,313 |
|
|
|
1,000,000 |
|
Series
2006-1A, Class D, |
|
|
574,800 |
|
|
|
|
|
Inwood Park CDO, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2006-1A, Class C, |
|
|
743,200 |
|
|
|
1,000,000 |
|
Series
2006-1A, Class D, |
|
|
715,900 |
|
|
|
|
|
Limerock CLO |
|
|
|
|
|
|
2,000,000 |
|
Series
2007-1A, Class D, |
|
|
1,173,000 |
|
|
|
|
|
Madison Park Funding Ltd. |
|
|
|
|
|
|
2,000,000 |
|
Series
2007-5A, Class C, |
|
|
1,221,000 |
|
|
|
1,500,000 |
|
Series
2007-5A, Class D, |
|
|
818,700 |
|
|
|
|
|
Marquette US/European CLO, PLC |
|
|
|
|
|
|
1,000,000 |
|
Series
2006-1A, Class D1, |
|
|
650,625 |
|
|
|
|
|
Navigator CDO, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2006-2A, Class D, |
|
|
665,100 |
|
|
|
|
|
Ocean Trails CLO |
|
|
|
|
|
|
1,000,000 |
|
Series
2006-1A, Class D, |
|
|
560,313 |
|
|
|
2,500,000 |
|
Series
2007-2A, Class C, |
|
|
1,923,750 |
|
|
|
|
|
PPM Grayhawk CLO, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2007-1A, Class C, |
|
|
562,187 |
|
|
|
1,150,000 |
|
Series
2007-1A, Class D, |
|
|
635,950 |
|
|
|
|
|
Primus CLO, Ltd. |
|
|
|
|
|
|
3,000,000 |
|
Series
2007-2A, Class D, |
|
|
2,087,100 |
|
|
|
2,000,000 |
|
Series
2007-2A, Class E, |
|
|
1,370,400 |
|
|
|
|
|
Rampart CLO, Ltd. |
|
|
|
|
|
|
2,000,000 |
|
Series
2006-1A, Class C, |
|
|
1,295,800 |
|
|
|
|
|
St. James River CLO, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2007-1A, Class E, |
|
|
671,400 |
|
|
|
|
|
Stanfield Daytona CLO, Ltd. |
|
|
|
|
|
|
1,200,000 |
|
Series
2007-1A, Class B1L, |
|
|
825,720 |
|
|
|
|
|
Stanfield McLaren CLO, Ltd. |
|
|
|
|
|
|
4,000,000 |
|
Series
2007-1A, Class B1L, |
|
|
3,104,000 |
|
|
|
|
|
Stone Tower CLO, Ltd. |
|
|
|
|
|
|
2,000,000 |
|
Series
2007-6A, Class C, |
|
|
1,296,000 |
|
|
|
|
|
Venture CDO, Ltd. |
|
|
|
|
|
|
2,000,000 |
|
Series
2007-9A, Class D, |
|
|
1,425,938 |
|
|
|
|
|
Westbrook CLO, Ltd. |
|
|
|
|
|
|
1,000,000 |
|
Series
2006-1A, Class D, |
|
|
585,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asset-Backed Securities |
|
|
37,816,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|||||||
|
Foreign Asset-Backed Securities (g) - 0.8% |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
EUR |
|
|
|
|
|
|
|
|
|
|
|
Static Loan Funding |
|
|
|
|
|
|
2,000,000 |
|
Series
2007-1X, Class D, |
|
|
2,785,340 |
|
|
|
2,000,000 |
|
Series
2007-1X, Class E, |
|
|
2,444,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Foreign Asset-Backed Securities |
|
|
5,229,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
INVESTMENT PORTFOLIO (unaudited) (continued)
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
Value ($) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Corporate Notes and Bonds - 25.0% |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
AEROSPACE - AIRLINES - 0.0% |
|
|
|
||||
|
|
5,000,000 |
|
Delta Airlines, Inc. |
|
175,000 |
|
|
|
|
|
|
|
||||
|
BROADCASTING - 0.7% |
|
|
|
||||
|
|
6,000,000 |
|
Univision Communications, Inc., PIK |
|
3,660,000 |
|
|
|
|
1,315,000 |
|
Young Broadcasting, Inc. |
|
831,738 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
4,491,738 |
|
|
|
|
|
|
|
||||
|
CABLE - US CABLE - 1.6% |
|
|
|
||||
|
|
1,250,000 |
|
CCH I Holdings LLC |
|
600,000 |
|
|
|
|
3,375,000 |
|
10.00%, 05/15/14 |
|
1,620,000 |
|
|
|
|
2,500,000 |
|
11.75%, 05/15/14 |
|
1,275,000 |
|
|
|
|
8,358,000 |
|
CCH I LLC |
|
5,850,600 |
|
|
|
|
2,634,000 |
|
Charter Communications, Inc., Convertible |
|
1,172,130 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
10,517,730 |
|
|
|
|
|
|
|
||||
|
CONSUMER NON-DURABLES - 1.9% |
|
|
|
||||
|
|
3,000,000 |
|
Ames True Temper, Inc. |
|
2,505,000 |
|
|
|
|
11,875,000 |
|
Solo Cup Co. |
|
10,093,750 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
12,598,750 |
|
|
|
|
|
|
|
||||
|
ENERGY - EXPLORATION & PRODUCTION - 0.1% |
|
|
|
||||
|
|
375,000 |
|
Opti Canada, Inc. |
|
373,125 |
|
|
|
|
|
|
|
||||
|
ENERGY - OTHER ENERGY - 1.1% |
|
|
|
||||
|
|
6,000,000 |
|
Energy XXI Gulf Coast, Inc. |
|
5,010,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000 |
|
Helix Energy Solutions |
|
2,010,000 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
7,020,000 |
|
|
|
|
|
|
|
||||
|
FINANCIAL - 2.2% |
|
|
|
||||
|
|
3,000,000 |
|
Compton Petroleum Finance Corp. |
|
2,887,500 |
|
|
|
|
14,200,000 |
|
HUB International Holdings, Inc. |
|
10,437,000 |
|
|
|
|
2,000,000 |
|
Penhall International, Corp. |
|
1,700,000 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
15,024,500 |
|
|
|
|
|
|
|
||||
|
FOOD AND DRUG - 0.1% |
|
|
|
||||
|
|
371,434 |
|
Cinacalcet Royalty Sub LLC |
|
380,720 |
|
|
|
|
|
|
|
||||
|
FOOD/TOBACCO - 1.0% |
|
|
|
||||
|
|
3,000,000 |
|
Chiquita Brands International, Inc. |
|
2,550,000 |
|
|
|
|
5,000,000 |
|
8.88%, 12/01/15 |
|
4,437,500 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
6,987,500 |
|
|
|
|
|
|
|
||||
|
GAMING/LEISURE - OTHER LEISURE - 1.2% |
|
|
|
|
|||
|
|
3,291,000 |
|
Six Flags, Inc. |
|
1,768,913 |
|
|
|
|
4,500,000 |
|
8.88%, 02/01/10 |
|
3,082,500 |
|
|
|
|
6,525,000 |
|
Tropicana Entertainment LLC |
|
3,417,469 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
8,268,882 |
|
|
|
|
|
|
|
||||
|
HEALTHCARE - ACUTE CARE - 5.5% |
|
|
|
|
|||
|
|
9,227,681 |
|
Argatroban Royalty Sub LLC |
|
9,273,819 |
|
|
|
|
10,000,000 |
|
Azithromicin Royalty Sub, LLC |
|
10,050,000 |
|
|
|
|
6,000,000 |
|
Celtic Pharma Phinco B.V |
|
6,030,000 |
|
|
|
|
10,000,000 |
|
HCA, Inc. |
|
8,950,000 |
|
|
|
|
3,000,000 |
|
8.36%, 04/15/24 |
|
2,505,243 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
36,809,062 |
|
|
|
|
|
|
|
||||
|
HEALTHCARE - ALTERNATE SITE SERVICES - 0.4% |
|
|
|
|
|||
|
|
5,000,000 |
|
LifeCare Holdings |
|
2,350,000 |
|
|
|
|
|
|
|
||||
|
HOUSING - BUILDING MATERIALS - 2.0% |
|
|
|
|
|||
|
|
4,000,000 |
|
Masonite Corp. |
|
2,780,000 |
|
|
|
|
8,000,000 |
|
Realogy Corp. |
|
5,420,000 |
|
|
|
|
4,000,000 |
|
12.38%, 04/15/15 |
|
1,800,000 |
|
|
|
|
5,500,000 |
|
11.00%, 04/15/14, PIK |
|
3,162,500 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
13,162,500 |
|
|
|
|
|
|
|
||||
|
INFORMATION TECHNOLOGY - 2.0% |
|
|
|
|
|||
|
|
3,800,000 |
|
Freescale Semiconductor, Inc. |
|
2,584,000 |
|
|
|
|
|
|
MagnaChip Semiconductor |
|
|
|
|
|
|
8,000,000 |
|
6.05%, 12/15/11 (g) |
|
5,800,000 |
|
|
|
|
2,000,000 |
|
NXP BV/NXP Funding LLC |
|
1,657,500 |
|
|
|
|
5,000,000 |
|
Spansion LLC |
|
3,075,000 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
13,116,500 |
|
|
|
|
|
|
|
||||
|
RETAIL - 2.3% |
|
|
|
|
|||
|
|
11,500,000 |
|
Blockbuster, Inc. |
|
9,430,000 |
|
|
|
|
2,000,000 |
|
Claire’s Stores, Inc. |
|
890,000 |
|
|
|
|
5,500,000 |
|
Dollar General Corp. |
|
5,335,000 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
15,655,000 |
|
|
|
|
|
|
|
||||
|
TELECOMMUNICATIONS - 1.5% |
|
|
|
|
|||
|
|
12,454,000 |
|
Digicel Group, Ltd., PIK |
|
10,305,685 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
7 |
INVESTMENT PORTFOLIO (unaudited) (continued)
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
Value ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Notes and Bonds (continued) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
TRANSPORTATION - 1.4% |
|
|
|
|||
|
|
|
|
American Tire Distributors Holdings, Inc. |
|
|
|
|
|
5,000,000 |
|
11.08%, 04/01/12 (g) |
|
4,500,000 |
|
|
|
|
|
Delphi Corp. |
|
|
|
|
|
3,933,000 |
|
6.55%, 06/15/06 (e) |
|
1,258,560 |
|
|
|
8,334,000 |
|
7.13%, 05/01/29 (e) |
|
2,666,880 |
|
|
|
3,367,000 |
|
6.50%, 05/01/09 (e) |
|
1,111,110 |
|
|
|
200,000 |
|
6.50%, 08/15/13 (e) |
|
64,000 |
|
|
|
|
|
Federal-Mogul Corp. |
|
|
|
|
|
1,000,000 |
|
7.75%, 07/01/06 (b) (e) |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,600,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Notes and Bonds |
|
166,837,242 |
|
|
|
|
|
|
|
|
|
|
Claims - 0.1% |
|
|
|
|||
|
AEROSPACE - AIRLINES - 0.1% |
|
|
|
|||
|
|
581,794 |
|
Delta Airlines, Inc. |
|
22,544 |
|
|
|
2,000,000 |
|
Northwest Airlines, Inc. |
|
66,240 |
|
|
|
3,551,000 |
|
Flight Attendant Claim, 08/21/13 |
|
117,609 |
|
|
|
2,107,500 |
|
IAM Trade Claim, 08/21/13 |
|
69,800 |
|
|
|
2,341,500 |
|
Retiree Claim, 08/21/13 |
|
77,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Claims |
|
353,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stocks - 4.0% |
|
|
|
|||
|
|
|
|
|
|||
|
AEROSPACE - AIRLINES - 0.2% |
|
|
|
|||
|
|
115,269 |
|
Northwest Airlines Corp. (i) |
|
1,036,268 |
|
|
|
|
|
|
|
|
|
|
BROADCASTING - 0.4% |
|
|
|
|||
|
|
357,343 |
|
Gray Television, Inc. |
|
2,033,282 |
|
|
|
121,072 |
|
Gray Television, Inc., Class A |
|
716,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,749,423 |
|
|
|
|
|
|
|
|
|
|
FOREST PRODUCTS - CONTAINERS - 0.4% |
|
|
|
|||
|
|
563,258 |
|
Graphic Packaging Corp. (i) |
|
1,644,713 |
|
|
|
81,516 |
|
Louisiana-Pacific Corp. |
|
748,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,393,030 |
|
|
|
|
|
|
|
|
|
|
HEALTHCARE - MEDICAL PRODUCTS - 0.8% |
|
|
|
|||
|
|
500,000 |
|
PDL BioPharma, Inc. (i) |
|
5,295,000 |
|
|
|
|
|
|
|
|
|
|
HOUSING - BUILDING MATERIALS - 0.4% |
|
|
|
|||
|
|
150,285 |
|
Owens Corning, Inc. (i) |
|
2,724,660 |
|
|
|
|
|
|
|
|
|
|
HOUSING - REAL ESTATE DEVELOPMENT - 0.0% |
|
|
|
|||
|
|
8 |
|
Westgate Investments LLC |
|
0 |
|
|
|
|
|
|
|
|
|
|
SERVICE - ENVIRONMENTAL SERVICES - 0.3% |
|
|
|
|||
|
|
136,990 |
|
Safety-Kleen Systems, Inc. (i) |
|
2,191,840 |
|
|
|
|
|
|
|
|
|
|
TELECOMMUNICATIONS - 0.7% |
|
|
|
|||
|
|
753,981 |
|
Communications Corp. of America (b) (i) |
|
4,810,399 |
|
|
|
|
|
|
|
|
|
|
TRANSPORTATION - 0.0% |
|
|
|
|||
|
|
1,544,148 |
|
Delphi Corp. (i) |
|
67,943 |
|
|
|
|
|
|
|
|
|
|
UTILITIES - 0.7% |
|
|
|
|||
|
|
81,194 |
|
Entegra TC LLC |
|
2,334,328 |
|
|
|
59,600 |
|
NRG Energy, Inc. (i) |
|
2,323,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,658,132 |
|
|
|
|
|
|
|
|
|
|
WIRELESS COMMUNICATIONS - 0.1% |
|
|
|
|||
|
|
225,000 |
|
ICO Global Communications Holding Ltd. (i) |
|
695,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common Stocks |
|
26,621,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant - 0.0% |
|
|
|
|
|||
|
|
|||||||
|
|
20,000 |
|
Clearwire Corp., expires 08/15/10 (i) |
|
|
4,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Warrant |
|
|
4,375 |
|
|
|
|
|
|
|
|
|
|
|
Total Investments - 138.4% |
|
|
924,539,127 |
|
|||
|
|
|
|
|
|
|||
|
Other Assets & Liabilities, Net - (38.4)% |
|
|
(256,550,242 |
) |
|||
|
|
|
|
|
|
|||
|
Net Assets applicable to Common Shareholders - 100.0% |
|
$ |
667,988,885 |
|
|||
|
|
|
|
|
|
|||
Investments sold short outstanding as of March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Par/Shares |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allied Waste North America, Inc. |
|
2,500,000 |
|
|
2,506,250 |
|
|
NRG Energy, Inc. |
|
2,500,000 |
|
|
2,475,000 |
|
|
|
|
|
|
|
|
|
|
Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Autonation, Inc. |
|
49,995 |
|
|
748,425 |
|
|
D.R. Horton, Inc. |
|
2,345 |
|
|
36,934 |
|
|
Harley Davidson, Inc. |
|
65,499 |
|
|
2,456,212 |
|
|
Huntington Bank |
|
132,000 |
|
|
1,419,000 |
|
|
M&T Bank Corp. |
|
10,175 |
|
|
818,884 |
|
|
Masco Corp. |
|
45,725 |
|
|
906,727 |
|
|
Mohawk Industries, Inc. |
|
37,110 |
|
|
2,657,447 |
|
|
Pacific Capital Corp. |
|
32,306 |
|
|
694,579 |
|
|
Regions Financial Corp. |
|
6,467 |
|
|
127,723 |
|
|
Royal Carribean Cruises, Ltd. |
|
111,002 |
|
|
3,651,966 |
|
|
SL Green Realty Corp. |
|
28,700 |
|
|
2,338,189 |
|
|
TCF Financial Corp. |
|
36,567 |
|
|
655,281 |
|
|
Union Bank San Francisco, CA |
|
29,000 |
|
|
1,423,320 |
|
|
Vornado Realty Trust |
|
28,500 |
|
|
2,456,985 |
|
|
Wachovia Corp. |
|
33,333 |
|
|
899,991 |
|
|
Washington Mutual, Inc. |
|
80,990 |
|
|
834,197 |
|
|
|
|
|
|
|
|
|
|
Total investments sold
short |
|
|
|
$ |
27,107,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
INVESTMENT PORTFOLIO (unaudited) (continued)
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
Forward foreign currency contracts outstanding as of March 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts |
|
Currency |
|
Principal |
|
Expiration |
|
Net |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Buy |
|
EUR |
|
|
1,000,000 |
|
|
05/29/08 |
|
$ |
111,868 |
|
|
Sell |
|
EUR |
|
|
4,900,000 |
|
|
05/29/08 |
|
|
(440,011 |
) |
|
Sell |
|
EUR |
|
|
5,100,000 |
|
|
05/30/08 |
|
|
(516,054 |
) |
|
Sell |
|
EUR |
|
|
10,500,000 |
|
|
08/01/08 |
|
|
(970,365 |
) |
|
Buy |
|
GBP |
|
|
68,182 |
|
|
05/29/08 |
|
|
(1,410 |
) |
|
Sell |
|
GBP |
|
|
500,000 |
|
|
05/29/08 |
|
|
39,569 |
|
|
Sell |
|
GBP |
|
|
500,000 |
|
|
05/30/08 |
|
|
36,525 |
|
|
Sell |
|
GBP |
|
|
3,200,000 |
|
|
08/07/08 |
|
|
(165,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,905,216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Senior loans in which Highland Credit Strategies Fund (the “Fund”), invests generally pay interest at rates which are periodically determined by reference to a base lending rate plus a premium. (Unless otherwise identified by footnote (f), all senior loans carry a variable rate 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. Rate shown represents the weighted average rate at March 31, 2008. Senior loans, while exempt from registration under the Security 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 may be substantially less than the stated maturity shown. |
|
|
|
|
(b) |
Represents fair value as determined by the Fund’s investment adviser, in good faith, pursuant to the policies and procedures approved by the Fund’s Board of Trustees, (the “Board”). Securities with a total aggregate market value of $36,831,414 or 5.5% of net assets, were valued under fair value as of March 31, 2008. |
|
|
|
|
(c) |
Senior Loan assets have additional unfunded loan commitments. As of March 31, 2008, the Fund had unfunded loan commitments of $10,900,175, which could be extended at the option of the Borrower, pursuant to the following loan agreements: |
|
|
|
|
|
|
|
Borrower |
|
Unfunded
Loan |
|
|
|
|
|
|
|
|
|
ComCorp Broadcasting, Inc. |
|
$ |
358,141 |
|
|
Fontainebleau Las Vegas, LLC |
|
|
666,667 |
|
|
Millennium Digital Media Systems, LLC |
|
|
1,356,922 |
|
|
Mobileserv Ltd. |
|
|
5,000,000 |
|
|
Sirva Worldwide, Inc. |
|
|
1,484,888 |
|
|
Sorenson Communications, Inc. |
|
|
2,000,000 |
|
|
Univision Communications, Inc. |
|
|
33,557 |
|
|
|
|
|
|
|
|
|
|
$ |
10,900,175 |
|
|
|
|
|
|
|
|
|
|
|
(d) |
All or a portion of this position has not settled. Contract rates do not take effect until settlement date. |
|
|
|
|
(e) |
The issuer is in default of certain debt covenants. Income is not being accrued. |
|
|
|
|
(f) |
Fixed rate senior loan. |
|
|
|
|
(g) |
Floating rate asset. The interest rate shown reflects the rate in effect at March 31, 2008. |
|
|
|
|
(h) |
Securities exempt from registration under Rule 144A of the 1933 Act. These securities may only be resold, in transactions exempt from registration, to qualified institutional buyers. At March 31, 2008, these securities amounted to $68,524,181 or 10.3% of net assets. |
|
|
|
|
(i) |
Non-income producing security. |
|
|
|
|
(j) |
Cost basis for U.S. federal income tax purposes is identical to book basis. Unrealized appreciation and depreciation on investments are as follows: |
|
|
|
|
|
|
|
Gross unrealized appreciation |
|
$ |
6,048,753 |
|
|
Gross unrealized depreciation |
|
|
(147,249,029 |
) |
|
|
|
|
|
|
|
Net unrealized depreciation |
|
$ |
(141,200,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
AUD |
|
Australia Dollar |
|
CDO |
|
Collateralized Debt Obligation |
|
CLO |
|
Collateralized Loan Obligation |
|
DIP |
|
Debtor-in-Possession |
|
EUR |
|
Euro |
|
GBP |
|
United Kingdom Pound |
|
PIK |
|
Payment-in-Kind |
|
SEK |
|
Sweden Kronor |
|
|
|
|
|
|
|
Foreign Denominated Senior Loans |
|
|
|
|
|
|
||||
|
Diversified Media |
|
|
2.9 |
% |
|
Cable – International Cable |
|
|
2.6 |
% |
|
Telecommunications |
|
|
2.0 |
% |
|
Retail |
|
|
1.3 |
% |
|
|
|
|
|
|
|
Total |
|
|
8.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
INVESTMENT PORTFOLIO (unaudited) |
|
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
Credit Default Swap Trades outstanding as of March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty |
|
Referenced |
|
Buy/Sell |
|
(Pay)/Receive |
|
Expiration |
|
Notional |
|
Unrealized |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Lehman Commercial |
|
NRG Energy, Inc., |
|
Buy (1) |
|
(1.85 |
%) |
12/20/2008 |
|
$ |
5,000,000 |
|
$ |
(1,854 |
) |
|
Goldman Sachs |
|
CDX.NA.HY.9 |
|
Sell (2) |
|
3.75 |
% |
12/20/2012 |
|
|
47,421,000 |
|
|
(1,074,526 |
) |
|
Lehman Commercial |
|
CDX.NA.HY.9 |
|
Sell (2) |
|
3.75 |
% |
12/20/2012 |
|
|
21,879,000 |
|
|
(492,055 |
) |
|
Lehman Commercial |
|
CDX.NA.HY.9 |
|
Sell (2) |
|
3.75 |
% |
03/20/2013 |
|
|
2,475,000 |
|
|
83,301 |
|
|
Lehman Commercial |
|
Fortune Brands, Inc., |
|
Sell (1) |
|
2.10 |
% |
06/20/2015 |
|
|
1,000,000 |
|
|
8,991 |
|
|
Lehman Commercial |
|
McClatchy Co., |
|
Sell (1) |
|
8.30 |
% |
03/20/2015 |
|
|
1,500,000 |
|
|
61,106 |
|
|
Lehman Commercial |
|
McClatchy Co., |
|
Sell (1) |
|
8.30 |
% |
03/20/2015 |
|
|
3,500,000 |
|
|
142,581 |
|
|
|
|
|
(1) |
If the Fund is the buyer/seller of protection and a credit default event occurs, as defined under the terms of that particular swap agreement, the Fund will receive/pay from/to the buyer/seller of the protection, an amount up to the notional value of the swap and in certain instances, receive/take delivery of the security. |
|
|
|
|
(2) |
If a credit event occurs as defined under the terms of the Credit Default Swap Index (“CDX”), the reference obligation that defaults drops out of the CDX and the CDX is quoted without the obligation until the next series of the CDX is issued. Unlike traditional credit default swap arrangements, the Fund, as a buyer of protection, will not receive the underlying reference obligation, upon default of the underlying. |
The amount of $43,642,861 in cash was segregated with the custodian to cover the following total return swap outstanding at March 31, 2008:
|
|
|
|
|
|
|
Expiration Date |
|
Notional Amount |
|
Unrealized |
|
|
|
|
|
|
|
05/24/2010 |
|
$162,489,022 |
|
$(20,077,419) |
Security Valuation:
In computing the Fund’s net assets attributable to Common Shares, securities with readily available market quotations use those quotations for valuation. When portfolio securities are traded on the relevant day of valuation, the valuation will be the last reported sale price on that day. If there are no such sales on that day, the security will be valued at the mean between the most recently quoted bid and asked 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 will be valued by an independent pricing service. If securities do not have readily available market quotations or pricing service prices, including circumstances under which such are determined not to be accurate or current (including when events materially affect the value of securities occurring between the time when market price is determined and calculation of the Fund’s net asset value), such securities are valued at their fair value, as determined by Highland Capital Management, L.P. (the “Investment Adviser”) in good faith in accordance with procedures approved by the Fund’s Board of Trustees. In these cases, the Fund’s net asset value will reflect the affected portfolio securities’ value as determined in the judgment of the Board of Trustees or its designee instead of being deter-mined 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 net asset values. 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. Short-term investments, that is, those with a remaining maturity of 60 days or less, are valued at amortized cost. Repurchase agreements are valued at cost plus accrued interest. Foreign price quotations are converted to U.S. dollar equivalents using the 4 PM London Time Spot Rate.
For more information with regard to significant accounting policies, see the most recent annual report filed with the Securities and Exchange Commission.
|
|
|
|
|
|
|
10 |
|
|
|
|
INVESTMENT PORTFOLIO (unaudited) (continued) |
|
|
|
|
|
As of March 31, 2008 |
Highland Credit Strategies Fund |
Adoption of Statement of Financial Accounting Standards No. 157 “Fair Value Measurement” (“FAS 157”):
In September 2006, the Financial Accounting Standards Board (“FASB”) issued FAS 157, “Fair Value Measurement,” which is effective for financial statements issued for fiscal years beginning after November 15, 2007. FAS 157 defines how fair value should be determined for financial reporting purposes, establishes a framework for measuring fair value under GAAP, and requires additional disclosures about the use of fair value measurements, but is not expected to result in any changes to the fair value measurements of the investments. FAS 157 requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on net assets for the reportable periods as contained in the Fund’s periodic filings.
The Fund has adopted FAS 157 as of January 1, 2008. The Fund has performed an analysis of all existing investments and derivative instruments to determine the significance and character of all inputs to their fair value determination. Based on this assessment, the adoption of FAS 157 did not have any material effect on the Fund’s net asset value. However, the adoption of FAS 157 does require the Fund to provide additional disclosures about the inputs used to develop the measurements and the effect of certain measurements The three levels of the fair value hierarchy established under FAS 157 are described below:
• 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; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers; and
• Level 3 — Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. 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 inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Fund’s assets as of March 31, 2008 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
in Securities |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Portfolio Investments |
|
$ |
924,539,127 |
|
$ |
17,285,378 |
|
$ |
837,403,133 |
|
$ |
69,850,616 |
|
|
Investments sold short |
|
|
(27,107,110 |
) |
|
(22,125,860 |
)* |
|
(4,981,250 |
)** |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
897,432,017 |
|
$ |
(4,840,482 |
) |
$ |
832,421,883 |
|
$ |
69,850,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Financial Instruments |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Forward Foreign Currency |
|
$ |
(1,905,216 |
) |
$ |
— |
|
$ |
(1,905,216 |
) |
$ |
— |
|
|
Credit Default Swap Trades |
|
|
(1,272,456 |
) |
|
— |
|
|
(1,272,456 |
) |
|
— |
|
|
Total Return Swap |
|
|
(20,077,419 |
) |
|
— |
|
|
(20,077,419 |
) |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(23,255,091 |
) |
$ |
— |
|
$ |
(23,255,091 |
) |
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Equity Investments sold short |
|
|
|
|
|
** |
|
Debt Investments sold short |
|
|
|
|
|
*** |
|
Other financial instruments are derivative instruments not reflected in the Investment Portfolio, such as, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the investment. |
The Fund did not have any liabilities that were measured at fair value on a recurring basis at March 31, 2008.
The following table presents our assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at December 31, 2007 and at March 31, 2008.
|
|
|
|
|
|
|
Assets at Fair Value using unobservable inputs (Level 3) |
|
Portfolio Investments |
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007 |
|
$ |
28,539,096 |
|
|
Transfers in/(out) of Level 3 |
|
|
— |
|
|
Net amortization/(accretion) of premium/(discount) |
|
|
20,223 |
|
|
Net realized gains/(losses) |
|
|
— |
|
|
Net unrealized gains/(losses) |
|
|
(1,256,174 |
) |
|
Net purchases and sales |
|
|
42,547,471 |
|
|
|
|
|
|
|
|
Balance as of March 31, 2008 |
|
$ |
69,850,616 |
|
|
|
|
|
|
|
The $1,256,174 of net unrealized losses presented in the table above relate to investments that are still held at March 31, 2008.
|
|
|
|
|
11 |
Item 2. Controls and Procedures.
|
|
(a) |
The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
|
|
(b) |
There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 3. Exhibits.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
(Registrant) |
Highland Credit Strategies Fund |
|
By (Signature and Title)* |
/s/ James D. Dondero |
| James D. Dondero, Chief Executive Officer and President | |
| (principal executive officer) |
|
Date |
May 23, 2008 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
By (Signature and Title)* |
/s/ James D. Dondero |
| James D. Dondero, Chief Executive Officer and President | |
| (principal executive officer) |
|
Date |
May 23, 2008 |
|
By (Signature and Title)* |
/s/ M. Jason Blackburn |
| M. Jason Blackburn, Chief Financial Officer, Treasurer and | |
| Secretary | |
| (principal financial officer) |
|
Date |
May 23, 2008 |
* Print the name and title of each signing officer under his or her signature.