NexPoint Strategic Opportunities Fund Files Definitive Proxy Statement for Proposal to Convert Fund to Diversified REIT

Rhea-AI Summary

NexPoint Strategic Opportunities Fund (NYSE: NHF) announced a definitive proxy statement filed with the SEC to convert from a registered investment company to a diversified REIT. This transition aims to enhance shareholder value and includes a special meeting for shareholders on August 28, 2020, to vote on the proposal. The Board believes this change will provide benefits such as improved risk-adjusted returns, reduced discount to net asset value (NAV), and increased liquidity. The conversion is contingent on shareholder approval and may take up to 24 months.

Positive

• Potential for superior risk-adjusted returns through real estate investments.
• Expected reduction of the Fund's discount to NAV, as REITs typically trade more favorably.
• Increased liquidity for shareholders.
• Opportunity to leverage current market pricing disparities in commercial real estate.
• Potential for higher income generation in a low interest rate environment.

Negative

• Conversion process could take up to 24 months with no guarantee of performance improvement.
• Possible adverse effects on financial condition and yield due to conversion.
• Investment risks associated with real estate could lead to underperformance.

DALLAS, July 10, 2020 /PRNewswire/ -- NexPoint Strategic Opportunities Fund (NYSE: NHF) ("NHF" or the "Fund"), a closed-end fund managed by NexPoint Advisors, L.P. (the "Adviser"), today announced the filing of a definitive proxy statement with the Securities and Exchange Commission (the "SEC") in connection with its proposal to covert the Fund from a registered investment company to a diversified real estate investment trust ("REIT"). The filling also included a notice of a special meeting of shareholders (the "Special Meeting"), which will be held on August 28, 2020 at 8:30 a.m. CDT to consider the proposal.

The proposal to change the Fund's business from a registered investment company to a diversified REIT and to amend certain fundamental investment restrictions (the "Business Change Proposal") aims to increase shareholder value over time. The Adviser 19%2C+2020" rel="nofollow">announced the Business Change Proposal on June 19, 2020 in conjunction with a preliminary proxy filing.

At the Special Meeting, shareholders are being asked to vote upon the Business Change Proposal and, if approved, to approve the amendment and restatement of the Fund's Agreement and Declaration of Trust (the "Amendment Proposal" and, together with the Business Change Proposal, the "Proposals").

The Fund's Board of Trustees (the "Board"), which includes members who are not interested persons of the Fund (the "Independent Trustees"), reviewed the Proposals at length, and believes they are in the best interest of shareholders.

As such, NHF shareholders are urged to vote FOR the Proposals.

Adoption of the Business Change Proposal is expected to provide the following benefits to NHF shareholders:

• Potential to provide investors with a superior risk adjusted return compared to equity, fixed income, and distressed debt markets through real estate investments over the next decade¹;
• Potential to reduce the Fund's historic discount to net asset value ("NAV"), as REITs have, on average, traded more favorable relative to NAV than closed-end funds;
• Potential to provide greater liquidity for shareholders;
• Opportunity to take advantage of current pricing disparities in the commercial real estate markets;
• Potential to position the Fund's assets to earn greater income for the Fund in an historically low interest rate environment; and
• Ability to further leverage the real estate investment expertise of the Adviser and its affiliates (together, "NexPoint").

Additional information on the potential benefits of the Business Change Proposal, as well as the related risks, is available in the definitive proxy statement.

Proxy Statement

A copy of the definitive proxy statement is available free of charge on the SEC's website at www.sec.gov. Shareholders should read the definitive proxy statement, as it contains important information. Shareholders should make no decision about the Proposals until they have had an opportunity to review the definitive proxy statement sent to them.

NHF and its trustees and officers, NexPoint's members, trustees, directors, shareholders, officers and employees, Di Costa Partners LLC, and other persons may be deemed to be participants in the solicitation of proxies with respect to the Proposals. Shareholders may obtain more detailed information regarding the direct and indirect interests of the foregoing persons by reading the definitive proxy statement regarding the Proposals.

About the NexPoint Strategic Opportunities Fund (NHF)

The NexPoint Strategic Opportunities Fund (NYSE:NHF) is a closed-end fund managed by NexPoint Advisors, L.P. The fund invests primarily in below investment grade debt, equity securities, and real estate, and has the ability to hedge risk.

For more information visit www. www.nexpointgroup.com/nexpoint-strategic-opportunities-fund/

About NexPoint Advisors, L.P.

NexPoint Advisors, L.P. is an SEC-registered adviser on the NexPoint alternative investment platform. It serves as the adviser to a suite of funds and investment vehicles, including a closed-end fund, interval fund, business development company, and various real estate vehicles.

For more information visit www.nexpointgroup.com

While NexPoint is committed to the REIT conversion, it is still contingent upon an affirmative shareholder vote, regulatory approval, and the ability to reconfigure NHF's portfolio to attain REIT status and deregister as an investment company. The conversion process could take up to 24 months; and there can be no assurance that conversion of NHF to REIT status will improve its performance or reduce the discount to NAV.

In addition, these actions may adversely affect the Fund's financial condition, yield on investment, results of operations, cash flow, per share trading price of our common shares and ability to satisfy debt service obligations, if any, and to make cash distributions to shareholders. Whether the Fund remains a registered investment company or converts to a REIT, its common shares, like an investment in any other public company, are subject to investment risk, including the possible loss of investment. For a discussion of certain other risks relating to the proposed conversion to a REIT, see "Implementation of the Business Change Proposal and Related Risks" in the proxy statement.

Shares of closed-end investment companies frequently trade at a discount to net asset value. The price of the Fund's shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value. Past performance does not guarantee future results. 

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

Closed-End Fund Risk. The Fund is a closed-end investment company designed primarily for long-term investors and not as a trading vehicle. No assurance can be given that a shareholder will be able to sell his or her shares on the NYSE when he or she chooses to do so, and no assurance can be given as to the price at which any such sale may be effected.

Credit Risk. Investments rated below investment grade are commonly referred to as high-yield, high risk or "junk debt." They are regarded as predominantly speculative with respect to the issuing company's continuing ability to meet principal and/or interest payments. Non-payment of scheduled interest and/or principal would result in a reduction of income to the Fund, a reduction in the value of the asset experiencing non-payment and a potential decrease in NAV of the Fund.

Interest Rate Risk. Interest rate risk is the risk that debt securities, and the Fund's net assets, may decline in value because of changes in interest rates. Generally, fixed rate debt securities will decrease in value when interest rates rise and increase in value when interest rates decline.

Leverage Risk. The Fund uses leverage through borrowings from notes and a credit facility, and may also use leverage through the issuances of preferred shares. The use of leverage magnifies both the favorable and unfavorable effects of price movements in the investments made by the Fund. Insofar as the Fund employs leverage in its investment operations, the Fund will be subject to substantial risks of loss.

Industry Concentration Risk. The Fund must invest at least 25% of the value of its total assets at the time of purchase in securities of issuers conducting their principal business activities in the real estate industry. The Fund may be subject to greater market fluctuations than a fund that does not concentrate its investments in a particular industry. Financial, economic, business, and other developments affecting issuers in the real estate industry will have a greater effect on the Fund, and if securities of the real estate industry fall out of favor, the Fund could underperform, or its NAV may be more volatile than, funds that have greater industry diversification.

Real Estate Risk. Real estate investments are subject to various risk factors. Generally, real estate investments could be adversely affected by a recession or general economic downturn where the properties are located. The full extent of the impact and effects of the recent outbreak of COVID-19 on the future financial performance of the Fund, and specifically, on its investments and tenants to properties held by its REIT subsidiaries, are uncertain at this time. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.

Illiquidity of Investments Risk. The investments made by the Fund may be illiquid, and consequently the Fund may not be able to sell such investments at prices that reflect the Investment Adviser's assessment of their value or the amount originally paid for such investments by the Fund.

Media Contact

Lucy Bannon
mediarelations@nexpointadvisors.com 
1-972-419-6272

¹ Risk-adjusted return is a calculation of the potential profit from an investment that takes into account the degree of risk associated with such investment. One measure of risk-adjusted return is the Sharpe ratio, which is a measurement of return or profit per unit of risk. The Sharpe ratio measures the return or profit that exceeds the risk-free rate, per unit of risk as measured by the standard deviation. This is calculated by taking the return of the investment, subtracting the risk-free rate, and then dividing this by the investment's standard deviation.

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SOURCE NexPoint Advisors, L.P.

FAQ

What is the NHF Fund proposing?

NHF is proposing to convert from a registered investment company to a diversified real estate investment trust (REIT).

When is the NHF shareholder meeting?

The special meeting for NHF shareholders is scheduled for August 28, 2020, at 8:30 a.m. CDT.

What are the expected benefits of NHF's REIT conversion?

Expected benefits include improved risk-adjusted returns, reduced discount to NAV, increased liquidity, and opportunity for higher income.

What risks are associated with NHF's conversion to a REIT?

Risks include potential adverse effects on financial condition, investment performance, and the possibility of underperformance in real estate.

How long will the NHF conversion process take?

The conversion process could take up to 24 months.