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A Significant Move by the Highland Opportunities and Income Fund

In a strategic initiative aimed at enhancing shareholder value, the Highland Opportunities and Income Fund (HFRO), traded on the NYSE, has declared plans for a tender offer to exchange common shares for Series B Preferred Shares. This offer could exchange up to $100 million worth of common shares at a notable valuation of $10.00 per share, significantly above its current trading price of around $5.21 per share as of late November 2024.

Understanding the Tender Offer

The tender offer is in accordance with Rule 13e-4 under the Securities Exchange Act of 1934, and it marks a key strategy by the Fund's Board of Trustees, as authorized on November 22, 2024. The offer is set to commence in January 2025, and it will allow shareholders the opportunity to obtain a premium for their shares while contributing to the reduction of the share price's current discount to its net asset value (NAV).

The Series B Preferred Shares being offered through the tender will mirror the existing 5.375% Series A Cumulative Preferred Shares in structure. Shareholders will not receive fractional shares, further simplifying the exchange process and enhancing its appeal.

Addressing Shareholder Concerns

This tender offer is a part of an ongoing effort by NexPoint Asset Management, L.P., which advises the Fund, to mitigate the challenges associated with HFRO's performance. Recent initiatives have included share buyback programs and heightened communication with shareholders, including quarterly calls and detailed reports regarding the Fund’s holdings and performance. Feedback from shareholders has informed the current tender offer initiative.

NexPoint and the Board of Trustees believe that facilitating this exchange will help bridge the ongoing discount to NAV, reinforcing their commitment to shareholder satisfaction. They expect that this tender offer could potentially enhance the NAV per share for shareholders choosing to retain their shares after the exchange.

Potential Benefits of the Tender Offer

Several key advantages have been identified for shareholders who participate in the tender offer:
1. Narrowing the NAV Discount: The planned tender offer is seen as a move to shrink the discount between the market price and the NAV of the Fund.
2. Premium Exchange Opportunity: Shareholders can benefit from an advantageous rate of $10.00 per share, considerably more than the prevalent market price, enabling them to realize gains that may not have been possible otherwise.
3. Fixed Dividend Rate: Those who opt for the new Series B Preferred Shares can expect a fixed 5.375% dividend, ensuring a stable income from their investment.

Details to Anticipate

While firm specifics will be confirmed in the offering documents expected to be filed in January 2025, here are preliminary terms:

• - Exchange Price per Common Share: $10.00
• - Maximum Purchase Price: $100 million
• - Coupon for Series B Preferred Shares: 5.375%
• - Liquidation Preference: $25.00 per share

Yet, these figures are provisional and contingent on filing with the SEC. Once the documents are made available, they will be accessible on the Fund’s website and through the SEC’s platform.

Upcoming Quarterly Investor Call

Moreover, HFRO plans to host its next quarterly investor call on December 11, 2024. This call aims to delve into the broader implications of the tender offer as well as the performance review of the Fund over the previous quarter. Shareholders and interested parties are encouraged to register in advance, ensuring they can engage actively with the updates being provided.

As a closed-end fund managed by NexPoint Asset Management, the Highland Opportunities and Income Fund exemplifies a refined strategy to navigate investor expectations while ensuring a robust approach towards asset management. For more encompassing details, check their official websites directly, where updates and offering documents will be released as they unfold.