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Highland Income Fund files definitive proxy statement for a proposal to convert the fund into a diversified holding company

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Special meeting of shareholders scheduled for August 20, 2021 The Board of Directors of the Fund and the independent trustees recommend that shareholders vote “FOR” the proposal

DALLAS, July 9, 2021 (GLOBE NEWSWIRE) – The Highland Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”), a closed-end fund managed by Highland Capital Management Fund Advisors, LP (the “Advisor” ), today announced that it has filed a definitive power of attorney with the Securities and Exchange Commission (the “SEC”) for a special meeting of shareholders (“Special Meeting”) in connection with its proposal to conceal the Fund. ‘a registered investment company. to a diversified holding company (the “Holding Company”). The special meeting will be held on August 20, 2021 at 8:30 a.m. CDT to consider the proposal.

The proposal to change the activity of the Fund from a registered investment company to a diversified holding company and to modify certain fundamental investment restrictions (the “Change of activity Proposal”) aims to increase the value for shareholders and to better position HFRO in the current and future market environment.

The holding company would primarily seek majority stakes – and to a lesser extent minority stakes – in companies and other assets in four priority sectors / areas in which the advisor has relevant expertise.1

At the Special Meeting, shareholders are asked to vote on the proposed change of business and, if approved, to approve the amendment and rewording of the Fund Agreement and Declaration of Trust (the “Change proposal” and, together with the company change proposal, the “Proposals”).

Further details on the proposals and voting information are available at www.hfroconversion.com.

The Board of Trustees of the Fund (the “Board”), the majority of whose members are not persons interested in the Fund (the “Independent Trustees”), has reviewed the proposals in detail and considers them to be in the best position. interest of shareholders. As such, the Board recommends that shareholders vote “FOR” the proposals at the Special Meeting.

Adopting the operational change proposal is expected to provide several benefits, including:

  • Potential to provide investors with a superior risk-adjusted return relative to distressed government equity, fixed income and debt markets2;

  • A better positioning of HFRO in the current and future environment, allowing HFRO to move away from credit assets, where high yield spreads are at their lowest, towards those with better growth potential and therefore better potential return for shareholders; and

  • Potential for HFRO to trade at a premium to book value, consistent with comparable diversified holding companies, which have historically traded at a premium, while closed-end funds have traditionally traded at a discount to net asset value (“NAV “).3

Additionally, the business change proposal would expand access to the advisor’s platform, enabling HFRO to seize opportunities where the advisor has unique expertise and resources they can apply to unlock potential value.

As part of the business change proposal, HFRO has committed to put in place a formula buyback program supplemented by additional share purchases from management to support the conversion process. HFRO ​​and management will only purchase shares under the buyback programs if the proposals are approved. The management purchase plan is only conditional on the approval of the proposals by the shareholders; however, the HFRO buyback program is subject to additional terms and conditions. Therefore, there can be no assurance that HFRO will purchase Shares under the Formula Buyback Program or with respect to the timing or size of such purchases, if any.4

HFRO ​​also intends to maintain the current dividend for the common shares until January 31, 2022.

Additional information on the potential benefits of the proposed change of business, as well as the associated risks, and the relevant capabilities of the advisor is available in the proxy circular.

Declaration of power of attorney

A copy of the definitive proxy circular is available free of charge at www.hfroconversion.com or on the SEC website, www.sec.gov. Shareholders should read the Management Proxy Circular carefully as it contains important information. Shareholders should not make any decision regarding the Proposals until they have read the definitive proxy circular sent to them.

HFRO ​​and its trustees and officers, the respective members, trustees, directors, shareholders, officers and employees of the advisor and its affiliates, Di Costa Partners LLC and others may be considered participants in the proxy solicitation concerning the proposals. Shareholders may obtain more detailed information regarding the direct and indirect interests of the above-mentioned persons by reading the definitive proxy circular filed with the SEC relating to the Proposals.

About Highland Income Fund

The Highland Income Fund (NYSE:HFRO) is a closed-end fund managed by Highland Capital Management Fund Advisors, LP For more information visit www.highlandfunds.com/revenu-fund/

About Highland Capital Management Fund Advisors, LP

Highland Capital Management Fund Advisors, LP is an SEC registered investment adviser. He is the advisor to a range of registered funds, including open-end mutual funds, closed-end funds and an exchange-traded fund. For more information visit www.highlandfunds.com.

Investors should carefully consider the investment objectives, risks, fees and expenses of the Highland Income Fund before investing. This and other information can be found in the Fund’s prospectus, which can be obtained by calling 1-800-357-9167 or by visiting www.highlandfunds.com. Please read the prospectus carefully before investing.

No guarantee can be given that the Fund will achieve its investment objectives.

This press release contains forward-looking statements. These statements reflect the current views of management with respect to future events and financial performance. Forward-looking statements may be identified by words such as “anticipate”, “expect”, “could”, “could”, “possible”, “will”, “capacity”, “targets”, “believe”, “” Assume “,” ensure “,” available “,” optionality “,” viability “,” maintain “,” consistent “,” pace “,” should “,” emerge “,” lead “,” aim at “, and similar statements of a future or prospective nature. Forward-looking statements deal with matters that involve risks and uncertainties. Past performance is no guarantee of future results. Performance during the periods shown is limited and may not reflect performance in different economic and market cycles. There can be no assurance that similar performance will be obtained.

The proposed conversion of HFRO to a diversified holding company is dependent on an affirmative shareholder vote, regulatory approval and the ability to reconfigure HFRO’s portfolio so that it is no longer a company. investment for the purposes of the Investment Company Act of 1940 (the “1940 Act”). The conversion process could take approximately 24 months; and there can be no assurance that the conversion of HFRO into a diversified holding company will be completed, will improve. the return of HFRO or reduce the discount of the Common Shares to the Net Asset Value (“NAV”).

In addition, the actions taken in connection with the proposed conversion may adversely affect the financial condition, return on investments, results of operations, cash flows, the share price of our securities, the ability to meet debt service obligations, if any, and make cash distributions to shareholders. Whether HFRO remains a registered investment company or transforms into a diversified holding company, an investment in the securities of HFRO, like an investment in any other public company, is subject to investment risk, including possible loss. of investment. For a discussion of certain other risks associated with our conversion to a holding company, see “Implementation of the proposed change of activity and associated risks” and “Appendix B: Risks associated with the proposed change of activity” in the information circular.

If the proposals are approved by shareholders, HFRO will apply to the SEC for a write-off order, but the timing of receipt of the write-off order is uncertain. Until the SEC issues a delisting order, HFRO will continue to be registered as an investment company and will continue to be regulated under the 1940 Act. Pending the SEC issuance of the ‘delisting order, the advisor intends to begin realigning HFRO’s portfolio in line with its new activities as a diversified holding company. The implementation period can last around two years, with full implementation not expected until mid-2023. The previous period is an estimate and may vary depending on the length of the SEC opt-out process. , tax considerations and the rate at which we will be able to transfer certain assets from the Company such that we will no longer be considered an investment company under the 1940 law. Any delay in receiving the delisting order beyond the planned implementation period of two years may delay HFRO’s ability to operate as a typical diversified holding company not subject to the 1940 law and would delay the ability to realize the benefits that the advisor expects to achieve by becoming a diversified holding company.

For other risks and disclosures, please visit www.hfroconversion.com/disclosures.

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Contacts

Shareholders: (800) 357-9167

Financial professionals: (833) 697-7253

Media: (214) 550-4572

1 The Holding would pursue minority interests compatible with maintaining the exclusion from the status of investment company.

2 Risk-adjusted return is a calculation of the potential profit of an investment that takes into account the degree of risk associated with that investment. Please see the “Questions and Answers” ​​section of this proxy statement for more information on how the risk-adjusted return is calculated.

3 Past performance is no guarantee of future results and there can be no assurance that the Fund

do not continue to trade at a discount to the net asset value after the conversion to a diversified holding company.

4 See the proxy circular for more information on the buyback program and additional share purchase commitments.