Highland Opportunities & Income Fund SC TO-I, filed Feb 3, 2025

Highland Opportunities & Income Fund (HFRO)

SC TO-I 2025-02-03

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Added on October 24, 2026

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	☐	Third-party tender offer subject to Rule 14d-1.
	☒	Issuer tender offer subject to Rule 13e-4.
	☐	Going-private transaction subject to Rule 13e-3.
	☐	Amendment to Schedule 13D under Rule 13d-2.

	☐	Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
	☐	Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)

Exhibit No.		Document
(a)(1)(i)		Offer to Exchange dated February 3, 2025. (1)

(a)(1)(ii)		Letter of Transmittal. (1)

(a)(1)(iii)		Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (1)

(a)(1)(iv)		Letter to Clients. (1)

(a)(5)(1)		Press Release issued on February 3, 2025 (1)

(a)(5)(2)		HFRO Offer to Exchange FAQs dated February 2025. (1)

(b)		Not applicable.

(d)(1)		Amended and Restated Agreement and Declaration of Trust dated July 26, 2019. (2)

(d)(2)		First Amendment to the Third Amended and Restated Agreement and Declaration of Trust dated October 15, 2019. (2)

(d)(3)		Second Amendment to the Third Amended and Restated Agreement and Declaration of Trust dated August 13, 2020. (2)

(d)(4)		Third Amendment to the Third Amended and Restated Agreement and Declaration of Trust dated December 21, 2021. (2)

(d)(5)		Fourth Amendment to the Third Amended and Restated Agreement and Declaration of Trust dated May 15, 2023. (2)

(d)(6)		Third Amended and Restated By-Laws of the Registrant dated December 21, 2021. (2)

(d)(7)		Statement of Preferences for the 5.375% Series A Cumulative Preferred Shares dated July 29, 2019. (2)

(d)(8)		Form of Statement of Preferences of 5.375% Series B Preferred Shares dated [ ]. (1)

(d)(5)		Dividend Reinvestment Plan. (3)

(d)(6)		Amended and Restated Investment Advisory Agreement, dated June 29, 2006, between the Company and NexPoint Advisors, L.P. (4)

(d)(7)		Administration Services Agreement, dated June 29, 2006, between the Issuer and Highland Capital Management, L.P. (5)

(d)(8)		Amendment No. 1, dated June 6, 2008, to Administration Services Agreement, dated December 4, 2006, between the Issuer and Highland Capital Management, L.P.(5)

(d)(9)		Transfer Agency and Registrar Services Agreement, dated January 18, 2013, between the Issuer and American Stock Transfer & Trust Company, LLC.(5)

(d)(10)		Master Sub-Administration Agreement, dated July 23, 2018, between SEI investments Global Funds Services and NexPoint Advisors, L.P. (3)

(d)(11)		Master Custodian Agreement dated October 3, 2018 between Bank of New York Mellon (“BNY”) and NexPoint Real Estate Strategies Fund, NexPoint Healthcare Opportunities Fund, NexPoint Latin American Opportunities Fund, NexPoint Discount Strategies Fund, NexPoint Energy and Materials Opportunities Fund, NexPoint Strategic Income Fund and NexPoint Event Driven Fund (the “Interval Funds”) listed on Annex A thereto (as Annex A may be amended from time to time).(6)

(d)(12)		Amendment 1 to Master Custodian Agreement dated April 8, 2019 between BNY and the Issuer, the Interval Funds, the series of Highland Funds II, the series of Highland Funds I, the Issuer, Highland Income Fund, Highland Global Allocation Fund and Gambier Bay, LLC.(6)

(d)(13)		Amendment 2 to Master Custodian Agreement dated April 8, 2019 between BNY and the Issuer, the Interval Funds, the series of Highland Funds II, the series of Highland Funds I, the Issuer, Highland Income Fund, Highland Global Allocation Fund and Gambier Bay, LLC.(6)

(d)(14)		Form of Amendment to the Transfer Agency and Registrar Services Agreement, dated October 30, 2020, between the Issuer and American Stock Transfer & Trust Company, LLC. (7)

(g)		Not applicable.

(h)		Not applicable.

107		Filing Fees – Calculation of Filing Fee Table (1)

(1)	Filed herewith.
(2)	Incorporated by reference to Post-Effective Amendment adding exhibits to the Issuer’s Registration Statement on Form N-2 (File No. 333-219103), filed on January 2, 2025.
(3)	Incorporated by reference to the Issuer’s Registration Statement on Form N-2 (File No. 333-230078), filed on March 5, 2019.
(4)	Incorporated by reference to Post-Effective Amendment No. 2 to the Issuer’s Registration Statement on Form N-2 (File No. 333-173004), filed on August 22, 2013.
(5)	Incorporated by reference to Post-Effective Amendment No. 6 to the Issuer’s Registration Statement on Form N-2 (File No. 333-173004), filed on April 30, 2015.
(6)	Incorporated by reference to Post-Effective Amendment No. 1 to the Issuer’s Registration Statement on Form N-2 (File No. 333-230078), filed on August 27, 2019.
(7)	Incorporated by reference to the Issuer’s Tender Offer Statement on Schedule TO (File No. 005-83652), filed on October 30, 2020.

	Highland Opportunities and Income Fund

	By:	/s/ Frank Waterhouse
	Name:	Frank Waterhouse
	Title:	Treasurer, Principal Accounting Officer, Principal Financial Officer, and Principal Executive Officer

Exhibit Number		Description
(a)(1)(i)		Offer to Exchange dated February 3, 2025
(a)(1)(ii)		Letter of Transmittal
(a)(1)(iii)		Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
(a)(1)(iv)		Letter to Clients
(a)(5)(1)		Press Release issued on February 3, 2025
(a)(5)(2)		HFRO Offer to Exchange FAQs dated February 2025
(d)(8)		Form of Statement of Preferences of 5.375% Series B Preferred Shares dated February 3, 2025
107		Filing Fees – Calculation of Filing Fee Table

Notice to Investors		1
Summary Term Sheet		2
Questions and Answers About the Exchange Offer		7
Description of The Series B Preferred Shares		12
Summary of Fees and Expenses		13
Capitalization		15
Asset of Coverage Ratio		16
Special Characteristics and Risks of the Series B Preferred Shares		17
Certain Employee Benefit Plan and IRA Considerations		24
Market and Net Asset Value Information		26
Selected Historical Financial Data		27
The Exchange Offer		28
Investment Objectives and Policies		37
Risk Factors and Special Considerations		41
Net Asset Value		48
Description of the Securities		49
Certain Material Differences Between Our Common Shares and the Series B Preferred Shares		55
Anti-Takeover Provisions in the Governing Documents		56
Closed-End Fund Structure		57
Repurchase of Common Shares; Discount		57
Taxation		58
Custodian, Transfer Agent and Dividend Disbursing Agent		60
Agreements Involving the Company’s Securities		60
Indemnification		62
Proposals and Plans		64
Security Ownership of Certain Beneficial Owners and Management		65
Transactions in Common Shares		65
Incorporation by Reference		65
Certain Securities Laws Considerations		66
Additional Information		66
Appendix A		A-1
Appendix B		B-1

The Company	The Company is a non-diversified, closed-end management investment company. The Company commenced operations on June 28, 2017, following its listing. NexPoint Asset Management, L.P. (the “Investment Adviser”) is the investment adviser and administrator of the Company. Throughout this Offer to Exchange, we refer to Highland Opportunities and Income Fund as the “Company,” “Fund” or as “we.”

	The Company’s outstanding common shares of beneficial interest (“Common Shares”), par value $0.001 per share, are listed on the New York Stock Exchange (“NYSE”) under the symbol “HFRO.”

Securities Subject to the Exchange Offer	Common Shares of the Company

No Recommendation	Neither we, our Board of Trustees of the Company (the “Board”), the Investment Adviser, the Information Agent, the Depositary, nor any affiliate of any of the foregoing nor any other person is making any recommendation as to whether or not you should tender your Common Shares in the Exchange Offer. We have not authorized any person to make such a recommendation. You must make your own investment decision regarding the Exchange Offer based upon your own assessment of the value of the Common Shares and the Series B Preferred Shares, your liquidity needs, your investment objectives and any other factors you deem relevant.

	The Exchange Offer may not be suitable for all shareholders. You should consider carefully all of the information set forth and incorporated by reference in this Offer to Exchange and, in particular, you should evaluate the specific factors set forth under “Risk Factors and Special Considerations” before deciding whether to participate in the Exchange Offer.

Terms of the Exchange Offer	We are offering to exchange the Fund’s currently outstanding Common Shares at a per Common Share price of $10, less any applicable withholding taxes and without interest (the “Purchase Price”), for Common Shares validly tendered and not withdrawn in the Exchange Offer, taking into account the total number of Common Shares so tendered, in return for Series B Preferred Shares. We will pay the Common Share Purchase Price in Series B Preferred Shares. Such Series B Preferred Shares will be issued in exchange for full Common Shares properly tendered (and not validly withdrawn) prior to 5:00 p.m., New York City time, on March 4, 2025 (such time and date, as the same may be extended or earlier terminated) and accepted by us.

	Tendering shareholders will each receive Series B Preferred Shares (the “Exchange Consideration”) that are equal in value to the product of (A) the Purchase Price and (B) the number of Common Shares validly tendered and not withdrawn in the Exchange Offer. The Exchange Consideration will consist of Series B Preferred Shares, valued at the Exchange Consideration, which is a liquidation preference of $25.00 per share (the “Exchange Consideration”). No fractional Series B Preferred Shares will be issued. If the Exchange Consideration would otherwise include a fractional Series B Preferred Share, the Exchange Consideration will be rounded down

	to the nearest whole Series B Preferred Share. Based on the proposed $10.00 Purchase Price for Common Shares and $25.00 per share liquidation preference for Series B Preferred Shares, it is anticipated that in order to avoid the creation of fractional Series B Preferred Shares or fractional Common Shares, only lots of multiples of five (5) Common Shares or a number of whole Common Shares whose exchange will result in a whole number of Series B Preferred Shares, will be accepted in exchange for corresponding lots of two (2) Series B Preferred Shares at the Purchase Price. To the extent that tendering shareholders own fractional Common Shares, tendering shareholders should contact their broker or other securities intermediary to determine what, if any, accommodations may be made given that they must submit on behalf of shareholders only lots of multiples of five (5) Common Shares or a number of whole Common Shares whose exchange will result in a whole number of Series B Preferred Shares. See “The Exchange Offer—Terms of the Exchange Offer.”

	We expressly reserve the right, in our sole discretion, to change the per Common Share Purchase Price and to increase or decrease the aggregate Purchase Price of Common Shares sought in the Exchange Offer, subject to applicable law and the authorization of the Board. In accordance with the rules of the SEC, if more than $100,000,000 in aggregate Purchase Price of Common Shares is tendered in the Exchange Offer, subject to the authorization of our Board, we may increase the aggregate Purchase Price of Common Shares accepted for exchange in the Exchange Offer by no more than the mount needed to purchase an additional 2% of the outstanding Common Shares without extending the Expiration Date.

Withdrawal	You may withdraw previously tendered Common Shares at any time before the Expiration Time on the Expiration Date. In addition, you may withdraw any tendered Common Shares if we have not accepted them for exchange within 40 business days from the commencement of the Exchange Offer on February 3, 2025.

	To withdraw previously tendered Common Shares, you are required to submit a notice of withdrawal to the Depositary, in accordance with the procedures described herein and in the Letter of Transmittal. See “The Exchange Offer—Withdrawal of Tenders.”

Conditions to the Exchange Offer	The Exchange Offer is conditioned on, among other things, holders tendering (and not properly withdrawing) a minimum amount of five (5) Common Shares or a number of whole Common Shares whose exchange will result in a whole number of Series B Preferred Shares and the Exchange Offer is not conditioned on, among other things, Common Shares representing a certain aggregate Purchase Price at or prior to the Expiration Date. See “The Exchange Offer—Conditions to the Exchange Offer.” If any condition is not satisfied or waived, the Company may, in its sole discretion, terminate the Exchange Offer.

Expiration Date	The Exchange Offer will expire at 5:00 p.m., New York City time (the “Expiration Time”), on March 4, 2025, unless extended by us (such date, as the same may be extended, the “Expiration Date”). The Fund, with Board consent, may extend the Expiration Date for any purpose, including in order to permit the satisfaction or waiver of any or all conditions to the Exchange Offer. If we decide to extend the Expiration Date, we will announce any extension by press release or other public announcement no later than 9:00 a.m., Eastern time, on the first business day following the previously scheduled Expiration Date. See “The Exchange Offer—Expiration Date” and “—Extension, Termination or Amendment.”

Consideration Cap and Proration	The consideration offered to holders of Common Shares is limited to $100,000,000 in aggregate purchase price of Common Shares (the “Consideration Cap”). If more than $100,000,000 in aggregate purchase price of Common Shares are validly tendered and not properly withdrawn at or prior to the Expiration Date for the Exchange Offer, the Common Shares so tendered will be accepted on a pro rata basis, in lots of multiples of five (5) Common Shares or a number of whole Common Shares whose exchange will result in a whole number of Series B Preferred Shares, such that the aggregate Exchange Consideration equals the Consideration Cap. In particular, each valid tender of Common Shares would be multiplied by a proration factor equal to (A) the Consideration Cap divided by (B) the Exchange Consideration that would be due in respect of the Common Shares validly tendered and not withdrawn absent the Consideration Cap. Common Shares will be accepted in lots of multiples of five (5) Common Shares or a number of Common Shares resulting in a whole number of Series B Preferred Shares, regardless of whether the Exchange Offer is oversubscribed or undersubscribed.

	Common Shares accepted for exchange on a prorated basis will be determined by multiplying each holder’s tender by the applicable proration factor in lots of multiples of five (5) Common Shares or a number of whole Common Shares whose exchange will result in a whole number of Series B Preferred Shares. Common Shares tendered that are not accepted will be returned to the tendering holder promptly following the earlier of the Expiration Date or termination of the Exchange Offer.

	If tenders of Common Shares will be prorated, we will announce the results of proration by press release promptly after the Expiration Date. So long as the conditions to the Exchange Offer described herein are satisfied, and subject to the Consideration Cap and, as necessary, proration, we intend to accept for exchange all Common Shares validly tendered, in lots of multiples of five (5) Common Shares or a number of whole Common Shares whose exchange will result in a whole number of Series B Preferred Shares, at the Purchase Price and not properly withdrawn at or prior to the Expiration Date, and will only prorate tenders of Common Shares if necessary to ensure the Consideration Cap is not exceeded.

	Because of the proration provision described above and because of the requirement to purchase in lots of multiples of five (5) Common Shares or a number of whole Common Shares whose exchange will result in a whole number of Series B Preferred Shares, we may not purchase all of the Common Shares that you tender.

	See “The Exchange Offer—Proration.”

Settlement Date	The settlement date in respect of Common Shares validly surrendered and accepted for exchange in the Exchange Offer will occur at the closing of the Exchange Offer. We expect the closing to be as promptly as practicable after the Expiration Date but in no event greater than 5 business days.

How to Tender your Common Shares	Either: (i) You must properly complete and duly execute the Letter of Transmittal and deliver it with your share certificate(s) to the Depositary (as defined below) at the address appearing on the back cover page of this document; or (ii) The Depositary must receive a confirmation of receipt of your shares by book-entry transfer and a properly completed and duly executed Letter of Transmittal. See “The Exchange Offer—Procedure for Tendering.” If you have questions, please call the Information Agent at the toll-free number below.

Dividend Rate and Liquidation Preference of Series B Preferred Shares	Dividends and distributions on the Series B Preferred Shares are cumulative from their original issue date at the annual rate of 5.375% of the $25.00 per share liquidation preference on the Series B Preferred Shares.

Dividend Payment Date for the Series B Preferred Shares	Holders of Series B Preferred Shares will be entitled to receive, when, as and if authorized by, or under authority granted by, the Board and declared by the Company, out of funds legally available therefor, cumulative cash dividends and distributions at the rate on 5.375% per annum the $25.00 per share liquidation preference on the Series B Preferred Shares. Dividends and distributions will be paid quarterly on March 31, June 30, September 30 and December 31 in each year, commencing on March 31, 2025.

Redemption of Series B Preferred Shares	For so long as the Company remains registered as an investment company under the 1940 Act, the Company reserves the right, however, to redeem the Series B Preferred Shares at any time if it is necessary, in the judgment of the Board, to maintain its qualification for taxation as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) and/or to comply with the 1940 Act.

	To the extent permitted by Massachusetts law and, if applicable, the 1940 Act, the Company may at any time, upon notice of redemption, redeem the Series B Preferred Shares in whole or in part at the liquidation preference per share plus accumulated unpaid dividends through the date of redemption.

	See “—Special Note Regarding the Use of Dates in this Offer to Exchange.”

Stock Exchange Listing of Series B Preferred Shares	Application has been made to list the Series B Preferred Shares on the NYSE. Prior to this offering, there has been no public market for Series B Preferred Shares. If the application is approved, it is anticipated that trading on the NYSE will begin within thirty days from the date of the Expiration Date. Consequently, it is anticipated that, prior to the commencement of trading on the NYSE, an investment in Series B Preferred Shares will be illiquid.

Tax Treatment of Series B Preferred Shares	The Statement of Preferences requires that holders of the Series B Preferred Shares treat such shares as equity of the Company for all U.S. federal, local and other income tax purposes, unless another treatment is required by law.

Taxation	See “Taxation” for a discussion of certain U.S. federal income tax considerations with respect to the Exchange Offer.

ERISA	See “Certain Employee Benefit Plan and IRA Considerations.”

Information Agent	EQ Fund Solutions, LLC (55 Challenger Road, Suite 201, Ridgefield Park, New Jersey 07660; telephone (866) 416-0576) will serve as Information Agent for the Exchange Offer.

Depositary	Equiniti Trust Co. (Operations Center, Attn: Reorganization Department 55 Challenger Road, Suite 200, Ridgefield Park, New Jersey 07660; telephone (877) 248-6417 (toll free) or (718) 921-8317) will serve as Depositary for the Exchange Offer.

Custodian, Transfer Agent and Dividend Disbursing Agent	The custodian of the assets of the Company is Bank of New York Mellon (240 Greenwich Street, New York, New York 10286). The custodian performs custodial services for the Company.

	Equiniti Trust Co. (Operations Center, Attn: Reorganization Department 55 Challenger Road, Suite 200, Ridgefield Park, New Jersey 07660; telephone (877) 248-6417 (toll free) or (718) 921-8317) serves as the Company’s transfer agent with respect to its securities and will serve as transfer agent and dividend disbursing agent with respect to the Series B Preferred Shares.

Shareholder Transaction Expenses
Exchange Offer expenses borne by holders of Common Shares (as a percentage of minimum Purchase Price)	0.07%	⁽¹⁾
Dividend reinvestment and cash purchase plan fees	0.00%	⁽²⁾

	Percentage of Net Assets Attributable to Common Shares (Gives Effect to Leverage Through Borrowings⁽³⁾)
Annual Expenses
Management fees	1.13%	⁽⁴⁾
Other expenses	0.51%	⁽⁵⁾
Total annual expenses	1.64%
Dividends on Preferred Shares	1.78%	⁽⁶⁾
Total Annual Expenses and Dividends on Preferred Shares	3.42%

		1 Year		3 Years		5 Years		10 Years
Total expenses incurred		$35		$105		$178		$371

	Actual (unaudited)		As adjusted (unaudited)
Preferred Shares, $0.001 par value per share, 5,800,000 Series A Preferred Shares issued; 4,000,000 Series B Preferred Shares authorized	$	145,000,000	$	245,000,000

(The “Actual” columns reflect the Company’s outstanding capitalization of preferred shares as of December 31, 2024. The “As adjusted” column assumes the issuance of 4,000,000 Series B Preferred Shares, $25.00 liquidation preference per share.)

Shareholders’ equity applicable to Common Shares:

Common Shares, $0.001 par value per share; unlimited shares authorized		65,296,917		55,296,917

(The “Actual” column reflects the Company’s outstanding capitalization of Common Shares as of December 31, 2024. The “As adjusted” column assumes the cancellation of 10,000,000 Common Shares.)

Paid-in capital in excess of par		1,395,854,343		1,295,854,343

Total distributable earnings (loss)		(557,409,471)		(557,409,471)

Net assets applicable to Common Shares		838,444,872		738,444,872

Liquidation preference of preferred shares		145,000,000		245,000,000

Net assets, plus the liquidation preference of preferred shares		983,444,872		983,444,872

Assumed Return on Portfolio (Net of Expenses)	(10)%	(5)%	0%	5%	10%
Corresponding Return to Common Shareholder	(15.1)%	(8.5)%	(1.8)%	4.9%	11.5%

	Market Price		Net Asset Value per Share		Premium/(Discount) as a % of Net Asset Value
	High	Low	High	Low	High	Low
3rd Quarter 2017	$15.07	$14.97	$15.05	$14.95	0%	0%
4th Quarter 2017	$15.65	$15.01	$15.17	$14.94	4%	0%
1st Quarter 2018	$16.24	$15.30	$15.30	$15.11	7%	1%
2nd Quarter 2018	$16.12	$15.58	$15.27	$15.05	7%	3%
3rd Quarter 2018	$16.00	$15.42	$15.23	$15.07	6%	2%
4th Quarter 2018	$15.54	$12.20	$15.20	$14.41	2%	-15%
1st Quarter 2019	$14.10	$12.80	$14.68	$14.39	-2%	-11%
2nd Quarter 2019	$13.84	$13.29	$14.70	$14.38	-4%	-9%
3rd Quarter 2019	$13.92	$12.75	$14.47	$13.93	-3%	-10%
4th Quarter 2019	$13.35	$11.41	$14.00	$13.36	-4%	-15%
1st Quarter 2020	$12.72	$ 8.38	$14.25	$12.16	-8%	-32%
2nd Quarter 2020	$ 9.65	$ 7.13	$12.65	$11.67	-20%	-39%
3rd Quarter 2020	$ 9.05	$ 7.50	$12.78	$12.31	-28%	-41%
4th Quarter 2020	$10.28	$ 7.83	$13.13	$12.47	-20%	-38%
1st Quarter 2021	$11.13	$10.11	$13.71	$12.92	-17%	-25%
2nd Quarter 2021	$12.05	$ 9.92	$14.00	$13.30	-13%	-28%
3rd Quarter 2021	$11.07	$10.20	$14.05	$13.58	-20%	-25%
4th Quarter 2021	$11.44	$10.73	$14.04	$13.64	-18%	-23%
1st Quarter 2022	$11.94	$10.88	$15.20	$13.63	-19%	-24%
2nd Quarter 2022	$12.07	$10.75	$15.68	$14.93	-20%	-28%
3rd Quarter 2022	$12.01	$ 9.69	$15.77	$14.85	-24%	-35%
4th Quarter 2022	$11.54	$ 9.72	$14.95	$14.29	-22%	-35%
1st Quarter 2023	$10.74	$ 8.66	$14.73	$13.56	-26%	-37%
2nd Quarter 2023	$ 9.30	$ 7.78	$13.73	$13.27	-31%	-42%
3rd Quarter 2023	$ 9.09	$ 7.89	$13.68	$13.45	-33%	-41%
4th Quarter 2023	$ 8.83	$ 6.91	$13.53	$12.56	-31%	-48%
1st Quarter 2024	$ 7.98	$ 6.11	$12.90	$12.52	-37%	-52%
2nd Quarter 2024	$ 6.82	$ 5.97	$12.91	$12.80	-47%	-54%
3rd Quarter 2024	$ 6.44	$ 5.80	$13.09	$12.82	-50%	-55%
4th Quarter 2024	$ 6.21	$ 5.16	$12.99	$12.70	-52%	-60%
1st Quarter 2025	$ 5.74	$ 5.19	$12.90	$12.81	-55%	-60%

Title of Class	Amount Authorized	Amount Held by Fund or for its Account	Amount Outstanding Exclusive of Amount Held by Fund
Common Shares	Unlimited	None	65,296,917
Series A Preferred Shares	5,800,000	None	5,800,000
Series B Preferred Shares	4,000,000	None	None

Terms of the Securities	Common Shares	Series A Preferred Shares	Series B Preferred Shares
Dividends and Distributions	When and if declared by the Board in amounts determined by the Board, subject to payment of dividends on the Series A and B Preferred Shares	Quarterly at an annual rate of 5.375%, when and if declared by the Board	Quarterly at an annual rate of 5.375%, when and if declared by the Board
Priority of Ranking and Liquidation Rights	Junior to preferred shares, including the Series A and B Preferred Shares	Senior to our Common Shares and pari passu with any other preferred shares	Senior to our Common Shares and pari passu with the Series A Preferred Shares
Exchange Listing	Yes. Listed on the NYSE under the ticker “HFRO”	Yes. Listed on the NYSE under the ticker “HFRO PRA”	Yes. Expected to be listed on the NYSE
Voting Rights	Entitled to one vote per share on all matters submitted to common shareholders or common and preferred shareholders voting together as a single class	Entitled to one vote per share on all matters submitted to preferred shareholders or preferred and common shareholders voting together as a single class. Holders of Series A Preferred Shares are also entitled to vote separately as a class on matters affecting only the Series A Preferred Shares and have the right to elect two Trustees, voting together as a separate class, for so long as the Company remains registered as an investment company under the 1940 Act	Entitled to one vote per share on all matters submitted to preferred shareholders or preferred and common shareholders voting together as a single class. Holders of Series B Preferred Shares are also entitled to vote separately as a class on matters affecting only the Series B Preferred Shares and the holders of the outstanding preferred shares of the Company, including Series A Preferred Shares and Series B Preferred Shares, shall be entitled to elect two Trustees, voting together as a separate class, for so long as the Company remains registered as an investment company under the 1940 Act
Redeemable by the Company	No	Redeemable at the option of the Company at any time after December 15, 2023	Redeemable at the option of the Company
Liquidation Rights	Distributions may only be made to holders of Common Shares if liquidation preferences of preferred shares, including the Series A and B Preferred Shares, are satisfied	Entitled to receive out of the assets of the Company legally available for distribution to shareholders an amount equal to $25.00 per share, plus any accumulated and unpaid dividends thereon to the date of payment (whether or not declared) before any distribution of assets is made to holders of Common Shares and any other shares of equity securities of the Company that rank junior to the Series A Preferred Shares as to liquidation rights.	Entitled to receive out of the assets of the Company legally available for distribution to shareholders an amount equal to $25.00 per share, plus any accumulated and unpaid dividends thereon to the date of payment (whether or not declared) before any distribution of assets is made to holders of Common Shares and any other shares of equity securities of the Company that rank junior to the Series B Preferred Shares as to liquidation rights.

Title	Name and Address of Beneficial Owner¹	Amount and Nature of Beneficial Ownership	Percentage of Share Class
Independent Trustee	Ethan Powell**	3,443.53	*
Independent Trustee	Dr. Bob Froehlich**	4,323.88	*
Independent Trustee	Bryan A. Ward	1,341.88	*
Independent Trustee	Dorri McWhorter	1,257.26	*
Interested Trustee	John Honis	1,341.88	*
President and Treasurer	Frank Waterhouse	52,281.00	*
Executive Vice President	Dustin Norris	27,942.00	*
Chief Compliance Officer	Stephanie Vitiello	858.00	*
Assistant Treasurer	Will Mabry	2,184.00	*

*	Less than 1%
**	Trustee designated for election solely by the holders of the outstanding preferred shares of the Company, including Series A Preferred Shares and Series B Preferred Shares, voting as a separate class.
¹	Except as otherwise indicated, each person has sole voting and investment power over the indicated shares. The business address of each of person named in the above table is 300 Crescent Court, Suite 700, Dallas, Texas 75201.

By Mail:		By Hand, Express Mail, Courier or other expedited service:

Equiniti Trust Co. Operations Center Attn: Reorganization Department 55 Challenger Road, Suite 200, Ridgefield Park, New Jersey 07660		Equiniti Trust Company, LLC Operations Center Attn: Reorganization Department 55 Challenger Road, Suite 200, Ridgefield Park, New Jersey 07660

☐	The undersigned tender(s) all uncertificated shares held by Equiniti Trust Company, LLC in the name of the registered holders pursuant to the Fund’s Dividend Reinvestment Plan (including any additional shares that may in the future be purchased by the undersigned in such plan prior to the Expiration Date of the Offer).
☐	The undersigned tender(s) shares held by Equiniti Trust Company, LLC in the name of the registered holders pursuant to the Fund’s Dividend Reinvestment Plan.

DESCRIPTION OF SHARES TENDERED (See Instructions 3 and 4)
Name(s) and address(es) of Registered Holder(s) (Please fill in, if blank, exactly as name(s) appear(s) on certificate(s))		Shares Tendered Attach Additional Signed List if Necessary
		Certificate Number(s)*	Total Number of Shares Represented by Certificate(s)*	Number of Shares Tendered**









	Total Shares
	*	Need not be completed by shareholders tendering solely by book-entry transfer or holders of uncertificated shares held by the Depositary under the Fund’s Dividend Reinvestment Plan. See appropriate boxes below.
	**	Unless otherwise indicated, it will be assumed that all shares described above are being tendered. See Instruction 4.

SPECIAL PAYMENT INSTRUCTIONS (See Instructions 1, 6, 7 and 8)

To be completed ONLY if certificates for shares not tendered or not accepted for payment and/or the check/shares for payment of the purchase price of shares accepted for payment are to be issued in the name of someone other than the undersigned.

Issue:	☐ Check
	☐ Certificate(s) to:

Name:
	(Please Print)

Address:


(Include Zip Code)


(Employer Identification Number or Social Security Number)

SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 6, 7 and 8)

To be completed ONLY if certificates for shares not tendered or not accepted for payment and/or the check/shares for payment of the purchase price of shares accepted for payment are to be sent to someone other than the undersigned at an address other than that above.

Mail:	☐ Check
	☐ Certificate(s) to:

Name:
	(Please Print)

Address:


(Include Zip Code)


(Employer Identification Number or Social Security Number)

SIGN HERE
(Also Complete Form W-9)


(Signature(s) of Shareholder(s))

Dated: , 20

(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) for the Common Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 6.)

Name(s):
(Please Print)

Capacity (Full Title):

Address:
(Include Zip Code)

Daytime Area Code and Telephone Number:

Email Address:

Employer Identification or Social Security Number: (Complete Accompanying Form W-9)

GUARANTEE OF SIGNATURE(S)
(If Required—See Instructions 1 and 6)

Authorized Signature:

Name:
(Please Print)

Name of Firm:

Title:

Address:
(Include Zip Code)

Daytime Area Code and Telephone Number:

Dated:			, 20

	Signature(s)
	(Please Print)

	Name(s)
	(Please Print)

	Taxpayer Identification or Social Security No.:

	Address(es)
	(Include Zip Code)

	Phone Number (including Area Code)

	Date:		, 2025

Exchange Price per Common Share	$10.00
Maximum Aggregate Purchase Price	$100 million
Coupon of Series B Preferred Shares	5.375%
Liquidation Preference of Series B Preferred Shares	$25.00 per share
Rating	BBB+
Commencement Date	February 3, 2025
Expiration Date	March 4, 2025 (5 p.m. EST)