HIGHLAND GLOBAL ALLOCATION FUND Form N-CSRS Filed 2023-06-09

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811‑23369

HIGHLAND GLOBAL ALLOCATION FUND

(Exact name of registrant as specified in charter)

300 Crescent Court

Suite 700 Dallas, Texas 75201

(Address of principal executive offices) (Zip code)

NexPoint Asset Management, L.P.

300 Crescent Court

Suite 700 Dallas, Texas 75201

(Name and Address of Agent for Service)

Registrant’s telephone number, including area code: (866) 745‑0264

Date of fiscal year end: September 30

Date of reporting period: March 31, 2023

Item 1.

Reports to Stockholders.

A copy of the Semi-Annual Report transmitted to shareholders pursuant to Rule 30e‑1 under the Investment Company Act of 1940, as amended (the “1940 Act”), is attached herewith.

Highland Global Allocation Fund

Semi-Annual Report

March 31, 2023

Highland Global Allocation Fund

TABLE OF CONTENTS


Fund Profile			1
Financial Statements			2
Investment Portfolio			3
Statement of Assets and Liabilities			9
Statement of Operations			10
Statements of Changes in Net Assets			11
Statement of Cash Flows			12
Financial Highlights			13
Notes to Financial Statements			14
Additional Information			33
Important Information About This Report			41

Economic and market conditions change frequently.

There is no assurance that the trends described in this report will continue or commence.

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•

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•

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•

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A prospectus must precede or accompany this report. Please read the prospectus carefully before you invest.

FUND PROFILE (unaudited)



		Highland Global Allocation Fund

Objective

Highland Global Allocation Fund seeks to provide long-term growth of capital and future income (future income means the ability to pay dividends in the future.)

Net Assets as of March 31, 2023

$264.4 million

Portfolio Data as of March 31, 2023

The information below provides a snapshot of Highland Global Allocation Fund at the end of the reporting period. Highland Global Allocation Fund is actively managed and the composition of its portfolio will change over time. Current and future holdings are subject to risk.



Industry Classifications as of 03/31/2023⁽¹⁾	%

U.S. Equity		51.6

U.S. Senior Loans		12.9

U.S. Master Limited Partnerships		9.4

Non-U.S. Equity		8.2

U.S. LLC Interest		7.5

U.S. Warrants		7.0

U.S. Registered Investment Companies		5.5

U.S. Preferred Stock		5.1

U.S. Asset-Backed Securities		4.5

U.S. Exchange-Traded Funds		3.8

U.S. Rights		3.7

Non-U.S. Sovereign Bonds		3.1

Non-U.S. Registered Investment Company		1.3

Other (each less than 1.0%)		1.2

Other Assets & Liabilities, Net		(24.8	)

		100.0



Top 10 Holdings as of 03/31/2023(%)⁽²⁾	%

TerreStar Corporation (U.S. Equity)		23.0

TerreStar Corporation, Term Loan A 11.00%, 2/25/2022 (U.S. Senior Loans)		8.0

Energy Transfer L.P. (U.S. Master Limited Partnerships)		6.6

GAF REIT (U.S. Equity)		5.8

NexPoint Real Estate Finance REIT (U.S. Equity)		5.3

Quarternorth Energy Holding Inc. Tranche 3 (U.S. Warrants)		4.2

NexPoint Event Driven Fund (U.S. Registered Investment Companies)		4.0

Texas Competitive Electric Holdings Co., LLC (U.S. Rights)		3.7

Targa Resources (Non-U.S. Equity)		3.6

GAF REIT Sub II, LLC (U.S. LLC Interest)		3.6

⁽¹⁾	Industry classifications are calculated as a percentage of total net assets and net of long and short positions.

⁽²⁾	Top 10 holdings are calculated as a percentage of total net assets.


Semi-Annual Report						1

FINANCIAL STATEMENTS (unaudited)



March 31, 2023		Highland Global Allocation Fund

A guide to understanding the Fund’s financial statements


Investment Portfolio		The Investment Portfolio details the Fund’s holdings and its market value as of the last day of the reporting period. Portfolio holdings are organized by type of asset and industry to demonstrate areas of concentration and diversification.

Statement of Assets and Liabilities		This statement details the Fund’s assets, liabilities, net assets and share price for each share class as of the last day of the reporting period. Net assets are calculated by subtracting all of the Fund’s liabilities (including any unpaid expenses) from the total of the Fund’s investment and non-investment assets. The net asset value per share for each class is calculated by dividing net assets allocated to that share class by the number of shares outstanding in that class as of the last day of the reporting period.

Statement of Operations		This statement reports income earned by the Fund and the expenses incurred by each Fund during the reporting period. The Statement of Operations also shows any net gain or loss the Fund realized on the sales of its holdings during the period as well as any unrealized gains or losses recognized over the period. The total of these results represents the Fund’s net increase or decrease in net assets from operations.

Statements of Changes in Net Assets		This statement details how the Fund’s net assets were affected by its operating results, distributions to shareholders and shareholder transactions (e.g., subscriptions, redemptions and distribution reinvestments) during the reporting period. The Statement of Changes in Net Assets also details changes in the number of shares outstanding.

Statement of Cash Flows		This statement reports net cash and foreign currency provided or used by operating, investing and financing activities and the net effect of those flows on cash and foreign currency during the period.

Financial Highlights		The Financial Highlights demonstrate how the Fund’s net asset value per share was affected by the Fund’s operating results. The Financial Highlights also disclose the classes’ performance and certain key ratios (e.g., net expenses and net investment income as a percentage of average net assets).

Notes to Financial Statements		These notes disclose the organizational background of the Fund, certain of their significant accounting policies (including those surrounding security valuation, income recognition and distributions to shareholders), federal tax information, fees and compensation paid to affiliates and significant risks and contingencies.


2						Semi-Annual Report

INVESTMENT PORTFOLIO (unaudited)



As of March 31, 2023		Highland Global Allocation Fund



Shares			Value ($)

	U.S. Equity ‑ 53.2%

	COMMUNICATION SERVICES ‑ 23.6%
	189,945	Telesat (a)(b)		1,633,527
	169,531	TerreStar Corporation (b)(c)(d)(e)(f)		60,785,340

				62,418,867


	HEALTHCARE ‑ 2.4%
	232,800	Heron Therapeutics, Inc. (a)(b)		351,528
	2,156,000	Paratek Pharmaceuticals, Inc. (b)		5,476,240
	17,200	Patterson (a)		460,444

				6,288,212


	MATERIALS ‑ 1.4%
	730,484	MPM Holdings, Inc. (b)(f)		3,652,420


	REAL ESTATE ‑ 25.8%
	56,000	Alexandria Real Estate Equities (a)		7,033,040
	8,055	City Office (a)		55,579
	77,700	Elme Communities (a)		1,387,722
	1,146,313	GAF REIT (b)(c)(d)(e)		15,466,107
	250,631	Healthcare Realty Trust, Class A (a)		4,844,697
	28,692	Independence Realty Trust, Inc. (a)		459,933
	549,863	NexPoint Diversified Real Estate Trust REIT (a)(e)		5,707,578
	901,385	NexPoint Real Estate Finance REIT (a)(e)		14,124,709
	172,028	NexPoint Residential Trust, Inc. (a)(e)		7,512,463
	417,500	Seritage Growth Properties (a)(b)(h)		3,285,725
	280,000	United Development Funding IV REIT, REIT (b)(c)(d)(e)		220,640
	875,255	Whitestone, Class B (a)		8,052,346

				68,150,539

		Total U.S. Equity (Cost $135,905,896)		140,510,038


Principal Amount ($)
	U.S. Senior Loans (i) ‑ 12.9%

	COMMUNICATION SERVICES ‑ 8.0%
	21,128,360	TerreStar Corporation, Term Loan A, 1st Lien, 11% PIK 02/27/28 (c)(d)(e)		21,070,257


	REAL ESTATE ‑ 4.9%
	5,000,000	NexPoint SFR Operating Partnership, L.P., 05/24/27 (c)(d)(e)		4,937,500
	8,500,000	NHT Operating Partnership LLC Secured Promissory Note, 02/22/27 (c)(d)(e)		8,130,250

				13,067,750

		Total U.S. Senior Loans (Cost $34,618,532)		34,138,007



Shares			Value ($)

	U.S. Master Limited Partnerships ‑ 9.4%

	ENERGY ‑ 9.4%
	1,402,440	Energy Transfer L.P. (a)		17,488,427
	278,100	Western Midstream Partners L.P. (a)		7,333,497

		Total U.S. Master Limited Partnerships (Cost $32,696,103)		24,821,924


	Non-U.S. Equity - 8.2%

	COMMUNICATION SERVICES - 0.0%
	77,866	Grupo Clarin, Class B (b)(g)		43,592


	CONSUMER DISCRETIONARY - 1.5%
	3,000	MercadoLibre, Inc. (a)(b)(g)		3,954,180
	718	Toys ‘R’ Us (b)(c)(d)(g)		6,878

				3,961,058


	ENERGY - 3.6%
	131,600	Targa Resources (a)(g)		9,600,220
	121	Transocean (b)(g)		770

				9,600,990


	FINANCIALS - 0.0%
	24,300	Grupo Supervielle SA ADR (a)(g)		54,675
	3,995	StoneCo, Class A (a)(b)(g)		38,112

				92,787


	HEALTHCARE - 0.0%
	10,445	HLS Therapeutics Inc. (g)		48,830


	INDUSTRIALS - 0.6%
	60,593	GL Events (g)		1,453,286


	INFORMATION TECHNOLOGY - 0.0%
	46,630	Avaya Holdings Corp. (a)(b)(g)		9


	UTILITIES - 2.5%
	202,250	Central Puerto ADR (a)(g)		1,094,172
	67,700	Pampa Energia ADR (a)(b)(g)		2,232,746
	133,000	Vistra Corp. (a)(g)		3,192,000

				6,518,918

		Total Non-U.S. Equity (Cost $21,341,880)		21,719,470


	U.S. LLC Interest - 7.5%

	REAL ESTATE - 7.5%
	349	GAF REIT Sub II, LLC (b)(c)(d)(e)		9,644,894
	100,000	GAF REIT Sub III, LLC (c)(d)(e)		6,597,070
	3,789,008	SFR WLIF III, LLC (c)(d)(e)		3,512,411

		Total U.S. LLC Interest (Cost $21,352,345)		19,754,375


See Glossary on page 8 for abbreviations along with accompanying Notes to Financial Statements.						3

INVESTMENT PORTFOLIO (unaudited) (continued)



As of March 31, 2023		Highland Global Allocation Fund



Units			Value ($)

	U.S. Warrants - 7.0%

	ENERGY - 7.0%
	28,562	Quarternorth Energy Holding Inc. (b)		4,034,382
	127,592	Quarternorth Energy Holding Inc. Tranche 1, Expires 08/27/2029 (b)		1,307,818
	245,732	Quarternorth Energy Holding Inc. Tranche 2, Expires 08/27/2029 (b)		2,088,722
	79,147	Quarternorth Energy Holding Inc. Tranche 3, Expires 08/27/2029 (b)		11,179,514

		Total U.S. Warrants (Cost $12,952,253)		18,610,436

Shares
	U.S. Preferred Stock - 5.1%

	FINANCIALS - 2.2%
	104,500	First Horizon (a)(j)		2,315,598
	398,000	First Republic Bank (a)(j)		2,348,210
	89,000	Western Alliance Bancorp (a)(j)		1,210,400

				5,874,208


	HEALTHCARE - 1.3%
	310,782	Apnimed (c)(d)(j)		3,449,991


	REAL ESTATE - 1.6%
	239,774	Braemar Hotels & Resorts, Inc. (a)(b)(j)		3,841,179
	13,831	NexPoint Diversified Real Estate Trust REIT (a)(e)(j)		219,498

				4,060,677

		Total U.S. Preferred Stock (Cost $13,663,536)		13,384,876


Principal Amount ($)
	U.S. Asset-Backed Securities - 4.5%
	250,000	CFCRE Commercial Mortgage Trust, Series 2017-C8, Class D 3.00%, 6/15/2050 (k)		174,725
	5,746,955	FREMF Mortgage Trust, Series 2018-KF44, Class C ICE LIBOR USD 1 Month + 8.500%, 13.17%, 2/25/2025 (k)		5,732,588
	5,932,622	FREMF Mortgage Trust, Series 2021- KF112, Class CS SOFR30A + 6.250%, 10.78%, 1/25/2031 (k)		5,947,453

		Total U.S. Asset-Backed Securities (Cost $11,902,992)		11,854,766



Units			Value ($)

	U.S. Rights - 3.7%

	UTILITIES - 3.7%
	7,905,143	Texas Competitive Electric Holdings Co., LLC (b)		9,782,614

		Total U.S. Rights (Cost $22,029,102)		9,782,614


Principal Amount ($)
	Non-U.S. Sovereign Bonds - 3.1%
	90,699	Argentine Republic Government International Bond 1.00%, 7/9/2029 (g)		25,646
	29,000,000	3.50%, 7/9/2041 (g)(l)		8,240,882

		Total Non-U.S. Sovereign Bonds (Cost $16,549,050)		8,266,528


Shares
	Non-U.S. Master Limited Partnership - 0.8%

	ENERGY - 0.8%
	78,631	Enterprise Products Partners (a)(g)		2,036,543

		Total Non-U.S. Master Limited Partnership (Cost $2,151,846)		2,036,543


Principal Amount ($)
	U.S. Corporate Bonds & Notes - 0.3%

	COMMUNICATION SERVICES - 0.3%
	320,615	iHeartCommunications, Inc. 6.38%, 05/01/26 (a)		283,242
	584,493	8.38%, 05/01/27 (a)		426,680

		Total U.S. Corporate Bonds & Notes (Cost $1,575,117)		709,922


Units
	Non-U.S. Warrants - 0.0%

	COMMUNICATION SERVICES - 0.0%
	1,109	iHeartCommunications, Inc., Expires 05/01/2039 (b)(g)		3,882


	INDUSTRIALS - 0.0%
	1,260,362	American Airlines Group, Inc. (b)(c)(d)(g)		—

		Total Non-U.S. Warrants (Cost $23,084)		3,882


4						See Glossary on page 8 for abbreviations along with accompanying Notes to Financial Statements.

INVESTMENT PORTFOLIO (unaudited) (continued)



As of March 31, 2023		Highland Global Allocation Fund



Principal Amount ($)			Value ($)

	Non-U.S. Asset-Backed Security - 0.0%
	246,196	Pamco Cayman, Ltd., Series 1997-1A, Class B 7.91%, 8/6/2013 (c)(d)(g)(k)		11

		Total Non-U.S. Asset-Backed Security (Cost $167,413)		11


Shares

	U.S. Exchange-Traded Funds - 3.8%
	36,065	Direxion Daily S&P 500 Bull 3X		2,639,237
	67,175	ProShares UltraPro QQQ (h)		1,898,365
	206,850	Teucrium Corn Fund (a)		5,218,826
	8,750	VelocityShares 3x Long Silver ETN linked to the S&P GSCI Silver Index		398,125

		Total U.S. Exchange-Traded Funds (Cost $10,658,767)		10,154,553


	Non-U.S. Registered Investment Company - 1.3%
	10,000	BB Votorantim Highland Infrastructure LLC (c)(d)(e)		3,396,866

		Total Non-U.S. Registered Investment Company
		(Cost $4,571,783)		3,396,866


	U.S. Registered Investment Companies - 5.5%
	334,005	Highland Income Fund (a)(e)		2,935,904
	706,236	NexPoint Event Driven Fund, Class Z (e)		10,544,110
	56,484	NexPoint Merger Arbitrage Fund, Class Z (e)		1,098,048

		Total U.S. Registered Investment Companies
		(Cost $15,584,656)		14,578,062


Principal Amount ($)

	U.S. Repurchase Agreement - 0.0%
	82,663	RBC Dominion Securities, Inc. 4.820%, dated 03/31/2023 to berepurchased on 04/03/2023, repurchaseprice $82,696 (collateralized by U.S. Government and Treasury obligations,ranging in par value $0 - $17,047, 0.000% - 6.375%, 04/06/2023 – 01/20/2053; with total market value $84,316)(m)(n)		82,663

		Total U.S. Repurchase Agreement (Cost $82,663)		82,663



Shares			Value ($)

	U.S. Cash Equivalent - 0.1%

	MONEY MARKET FUND(O) - 0.1%
	255,466	Dreyfus Treasury Obligations Cash Management, Institutional Class 4.690%		255,466

		Total U.S. Cash Equivalent (Cost $255,466)		255,466

	Total Investments - 126.4%			334,061,002

	(Cost $358,082,484)

	Securities Sold Short - (1.6)%

	U.S. Equity - (1.6)%

	COMMUNICATION SERVICES - (1.3)%
	(9,952)	Netflix, Inc. (p)		(3,438,217	)


	CONSUMER STAPLES - (0.3)%
	(4,000)	WD-40 Co.		(712,200	)

		Total U.S. Equity (Proceeds $1,665,944)		(4,150,417	)

		Total Securities Sold Short - (1.6)% (Proceeds $1,665,944)		(4,150,417	)

	Other Assets & Liabilities, Net - (24.8)%(q)			(65,514,824	)

	Net Assets - 100.0%			264,395,761

(a)	All or part of this security is pledged as collateral for short sales. The fair value of the securities pledged as collateral was $108,371,504.

(b)	Non-income producing security.

(c)

Securities with a total aggregate value of $137,218,215, or 51.9% of net assets, were classified as Level 3 within the three-tier fair value hierarchy. Please see Notes to Financial Statements for an explanation of this hierarchy, as well as a list of unobservable inputs used in the valuation of these instruments.

(d)

Represents fair value as determined by the Adviser as designated by the Fund’s Board of Trustees (the “Board”), as the Fund’s valuation designee to perform the fair valuation determination for securities and other assets held by the Fund. The Adviser considers fair valued securities to be securities for which market quotations are not readily available and these securities may be valued using a combination of observable and unobservable inputs. Securities with a total aggregate value of $137,218,215, or 51.9% of net assets, were fair valued under the Fund’s valuation procedures as of March 31, 2023. Please see Notes to Financial Statements.


See Glossary on page 8 for abbreviations along with accompanying Notes to Financial Statements.						5

INVESTMENT PORTFOLIO (unaudited) (continued)



As of March 31, 2023		Highland Global Allocation Fund

(e)	Affiliated issuer. Assets with a total aggregate fair value of $175,903,645, or 66.5% of net assets, were affiliated with the Fund as of March 31, 2023.

(f)

Restricted Securities. These securities are not registered and may not be sold to the public. There are legal and/or contractual restrictions on resale. The Fund does not have the right to demand that such securities be registered. The values of these securities are determined by valuations provided by pricing services, brokers, dealers, market makers, or in good faith under the policies and procedures established by the Board. Additional Information regarding such securities follows:

Restricted Security

Security
Type

Acquisition
Date

Cost of
Security
($)

For Value at
Period End
($)

Percent
of Net
Assets
%

TerreStar Corporation

U.S.
Equity

11/14/2014

48,015,562

60,785,340

23.0

MPM Holdings, Inc.

U.S.
Equity

5/15/2019

3,652,420

1.4

(g)

As described in the Fund’s prospectus, a company is considered to be a non-U.S. issuer if the company’s securities principally trade on a market outside of the United States, the company derives a majority of its revenues or profits outside of the United States, the company is not organized in the United States, or the company is significantly exposed to the economic fortunes and risks of regions outside the United States.

(h)	Securities (or a portion of securities) on loan. As of March 31, 2023, the fair value of securities loaned was $289,261. The loaned securities were secured with cash and/or securities collateral of $295,578. Collateral is calculated based on prior day’s prices.

(i)	Senior loans (also called bank loans, leveraged loans, or floating rate loans) in which the Fund invests generally pay interest at rates which are periodically determined by reference to a base lending rate plus a spread (unless

otherwise identified, all senior loans carry a variable rate of 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. As of March 31, 2023, the LIBOR USD 1 Month rate was 4.86%. Senior loans, while exempt from registration under the Securities 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 maybe substantially less than the stated maturity shown.

(j)	Perpetual security with no stated maturity date.

(k)

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. The Board has determined these investments to be liquid. At March 31, 2023, these securities amounted to $11,854,777 or 4.5% of net assets.

(l)	Step Coupon Security. Coupon rate will either increase (step-up bond) or decrease (step-down bond) at regular intervals until maturity. Interest rate shown reflects the rate currently in effect.

(m)	Tri-Party Repurchase Agreement.

(n)	This security was purchased with cash collateral held from securities on loan. The total value of such securities as of March 31, 2023 was $82,663.

(o)	Rate reported is 7 day effective yield.

(p)	No dividend payable on security sold short.

(q)	As of March 31, 2023, $4,069,495 in cash was segregated or on deposit with the brokers to cover investments sold short and is included in “Other Assets & Liabilities, Net”.


6						See Glossary on page 8 for abbreviations along with accompanying Notes to Financial Statements.

INVESTMENT PORTFOLIO (unaudited) (concluded)



As of March 31, 2023		Highland Global Allocation Fund

Reverse Repurchase Agreement outstanding as of March 31, 2023 was as follows:


Counterparty	Collateral Pledged	Interest Rate %		Trade Date		Repurchase Amount			Principal Amount			Value
Mizuho	FREMF Mortgage Trust, Series 2018-KF44,
Securities	Class C, 02/01/2023		6.56		03/22/2023	$	(3,563,000	)	$	(3,563,000	)	$	(3,563,000	)

Total Reverse Repurchase Agreement									$	(3,563,000	)	$	(3,563,000	)


See Glossary on page 8 for abbreviations along with accompanying Notes to Financial Statements.						7

GLOSSARY: (abbreviations that may be used in the preceding statements)


Other Abbreviations:
ADR		American Depositary Receipt
LLC		Limited Liability Company
L.P.		Limited Partnership
Ltd.		Limited
PIK		Payment-in-Kind
REIT		Real Estate Investment Trust


8						Semi-Annual Report

STATEMENT OF ASSETS AND LIABILITIES (unaudited)



As of March 31, 2023		Highland Global Allocation Fund


	($)
Assets
Investments, at value^†		157,819,228
Affiliated investments, at value (Note 9)		175,903,645

Total Investments, at value		333,722,873
Cash equivalent (Note 2)		255,466
Repurchase agreement, at value		82,663
Cash		327,756
Restricted Cash — Securities Sold Short (Note 2)		4,069,495
Foreign currency, at value (Note 2)		27,794
Foreign tax reclaim receivable		13,798
Receivable for:
Dividends and interest		2,205,947
Reinvested distributions		233,051
Prepaid expenses and other assets		42,406

Total assets		340,981,249


Liabilities:
Securities sold short, at value (Proceeds from securities sold short $1,665,944 (Notes 2 and 7)		4,150,417
Reverse repurchase agreement		3,563,000
Due to broker for short sale proceeds		68,198,475

Payable for:
Investments purchased		71,554
Collateral from securities loaned (Note 4)		82,663
Investment advisory and administration fees (Note 6)		63,424
Accounting services fees		25,290
Interest expense and commitment fee payable		6,492
Transfer agent fees		45,330
Legal fees		269,105
Audit and tax compliance fees		82,772
Other payables		12,945
Accrued expenses and other liabilities		14,021

Total liabilities		76,585,488

Net Assets		264,395,761


Net Assets Consist of:
Paid-in capital		713,886,475
Total accumulated loss		(449,490,714	)

Net Assets		264,395,761

Investments, at cost		191,272,111
Affiliated investments, at cost (Note 9)		166,472,244
Cash equivalents, at cost (Note 2)		255,466
Repurchase agreements, at cost		82,663
Foreign currency, at cost (Note 2)		93,266
† Includes market value of securities on loan		289,261

Common Shares
Shares outstanding ($0.001 par value; unlimited shares authorized)		22,484,086
Net asset value, offering and redemption price per share		11.76


See accompanying Notes to Financial Statements.						9

STATEMENT OF OPERATIONS (unaudited)



For the Six Months Ended March 31, 2023		Highland Global Allocation Fund


	($)
Investment Income:
Income:
Dividends from unaffiliated issuers		2,291,626
Dividends from affiliated issuers (Note 9)		1,893,980
Less: Foreign taxes withheld		(121	)
Securities lending income (Note 4)		10,108
Interest from unaffiliated issuers		1,130,263
Interest from affiliated issuers (Note 9)		1,574,555

Total income		6,900,411


Expenses:
Investment advisory (Note 6)		537,005
Accounting services fees		100,920
Transfer agent fees		71,857
Legal fees		256,791
Registration fees		1,496
Audit and tax compliance fees		82,773
Interest expense and commitment fees		1,439,037
Insurance		28,021
Trustees fees (Note 6)		40,624
Reports to shareholders		38,079
Custodian/wire agent fees		15,323
Dividends and fees on securities sold short (Note 2)		6,440
Other		27,577

Total expenses before waiver and reimbursement		2,645,943
Less: Expenses waived or borne by the adviser and administrator		(161,656	)

Net expenses		2,484,287

Net investment income		4,416,124


Net Realized and Unrealized Gain (Loss) on Investments

Net realized gain (loss) on:
Investments from unaffiliated issuers		1,506,713
Investments from affiliated issuers (Note 9)		576,775
Foreign currency related transactions (Note 2)		(30	)

Net realized gain		2,083,458


Change in unrealized appreciation (depreciation) on:
Investments in unaffiliated issuers		14,228,353
Investments in affiliated issuers (Note 9)		(2,241,262	)
Securities sold short (Note 2)		(1,104,358	)
Foreign currency related translations (Note 2)		(5,156	)

Net change in unrealized appreciation (depreciation)		10,877,577

Net realized and unrealized gain (loss)		12,961,035

Total increase in net assets resulting from operations		17,377,159


10						See accompanying Notes to Financial Statements.

STATEMENTS OF CHANGES IN NET ASSETS



		Highland Global Allocation Fund



	Six Months Ended March 31, 2023 (unaudited) ($)			Year Ended September 30, 2022 ($)
Increase (Decrease) in Net Assets Resulting from
Operations:
Net investment income		4,416,124			6,377,421
Net realized gain (loss)		2,083,458			(20,998,745	)
Net change in unrealized appreciation (depreciation)		10,877,577			30,145,285

Net increase in net assets resulting from operations		17,377,159			15,523,961

Distributions		(11,093,940	)		(7,285,771	)
Return of capital		—			(13,622,562	)

Decrease resulting from distributions		(11,093,940	)		(20,908,333	)

Increase (decrease) in net assets from operations and distributions		6,283,219			(5,384,372	)

Share transactions:
Value of distributions reinvested
Shares of closed-end fund		1,364,924			2,660,047

Net increase from shares transactions		1,364,924			2,660,047

Total increase (decrease) in net assets		7,648,143			(2,724,325	)

Net Assets
Beginning of period		256,747,618			259,471,943

End of period		264,395,761			256,747,618

Capital Stock Activity - Shares

Shares of closed-end fund:
Issued for distribution reinvested		140,800			274,221

Net increase in fund shares		140,800			274,221


See accompanying Notes to Financial Statements.						11

STATEMENT OF CASH FLOWS (unaudited)



For the Six Months Ended March 31, 2023		Highland Global Allocation Fund


	($)
Cash Flows Used in Operating Activities:
Net increase in net assets resulting from operations		17,377,159

Adjustments to Reconcile Net Increase in Net Assets to Net Cash Used in Operating Activities:
Purchases of investment securities from unaffiliated issuers		(23,092,550	)
Purchases of investment securities from affiliated issuers		(9,711,027	)
Proceeds from disposition of investment securities from unaffiliated issuers		15,150,542
Proceeds from disposition of investment securities from affiliated issuers		8,187,526
Proceeds from return of capital of investment securities from unaffiliated issuers		109,384
Proceeds from return of capital of investment securities from affiliated issuers		136,872
Amortization of premiums from unaffiliated issuers		(29,105	)
Amortization of premiums from affiliated issuers		(703	)
Net realized (gain) loss on investments from unaffiliated issuers		(1,506,713	)
Net realized (gain) loss on investments from affiliated issuers		(576,775	)
Net realized (gain) loss on securities sold short, written option contracts, and foreign currency related transactions		30
Net change in unrealized (appreciation)/depreciation on investments, securities sold short, and translation on assets and liabilities denominated in foreign currency		(10,877,577	)
(Increase) Decrease in receivable for dividends and interest		(155,991	)
(Increase) Decrease in foreign tax reclaims receivable		(1,429	)
(Increase) Decrease in due from broker		12
(Increase) Decrease in prepaid expenses and other assets		(25,108	)
Increase (Decrease) in due to broker for short sale proceeds		2,380,944
Increase (Decrease) in payable from collateral from securities on loan		(13,454	)
Increase (Decrease) in payable for investments purchased		7,969
Increase (Decrease) in payable for investment advisory and administration fees		7,004
Increase (Decrease) in payable for trustees fees		(132	)
Increase (Decrease) in payable for reports to shareholders		(10,898	)
Increase (Decrease) in payable for transfer agent fees		33,330
Increase (Decrease) in payable for legal fees and audit fees		207,157
Increase (Decrease) in payable for other		12,945
Increase (Decrease) in payable for interest expense and commitment fees		6,492
Increase (Decrease) in payable for custody fees		(13,702	)
Increase (Decrease) in accrued expenses and other liabilities		(38,967	)

Net cash flow used in operating activities		(2,436,765	)


Cash Flows Used In Financing Activities:
Repurchase agreements		13,454
Reverse repurchase agreements		3,563,000
Distributions paid in cash		(9,729,016	)
Increase (Decrease) in receivable for reinvested distributions		(13,403	)

Net cash flow used in financing activities		(6,165,965	)

Effect of exchange rate changes on cash		(5,186	)

Net decrease in cash		(8,607,916	)


Cash, Cash Equivalents, Restricted Cash, and Foreign Currency:
Beginning of period		13,288,427

End of period		4,680,511


End of Period Cash Balances:
Cash equivalents		255,466
Cash		327,756
Restricted Cash		4,069,495
Foreign currency		27,794

End of period		4,680,511


Supplemental disclosure of cash flow information:
Reinvestment of distributions		1,364,924

Paid in-kind interest income		1,574,555

Cash paid during the period for interest expense and commitment fees		1,432,545


12						See accompanying Notes to Financial Statements.

FINANCIAL HIGHLIGHTS



		Highland Global Allocation Fund

Selected data for a share outstanding throughout each period/year is as follows:


	For the Six Months Ended March 31, 2023 (unaudited)			For the Years Ended September 30,
	For the Six Months Ended March 31, 2023 (unaudited)			2022			2021			2020			2019*‡			2018*‡

Net Asset Value, Beginning of Period	$	11.49		$	11.76		$	9.45		$	13.09		$	14.63		$	14.16

Income from Investment Operations:

Net investment income^(a)		0.20			0.29			0.38			0.43			0.30			0.54

Net realized and unrealized gain (loss)		0.57			0.38			2.82			(3.00	)		(1.10	)		0.56


Total from Investment Operations		0.77			0.67			3.20			(2.57	)		(0.80	)		1.10

Less Distributions Declared to shareholders:

From net investment income		(0.50	)		(0.33	)		(0.28	)		(0.61	)		(0.20	)		(0.43	)

From return of capital		—			(0.61	)		(0.61	)		(0.46	)		(0.54	)		(0.20	)


Total distributions declared to shareholders		(0.50	)		(0.94	)		(0.89	)		(1.07	)		(0.74	)		(0.63	)

Net Asset Value, End of Period^(b)	$	11.76		$	11.49		$	11.76		$	9.45		$	13.09		$	14.63

Total Return^(b)(c)		7.80	%		5.31	%		35.13	%		(19.92	)%		(4.40	)%		7.95	%

Ratios to Average Net Assets:^(d)

Net Assets, End of Period (000’s)	$	264,396		$	256,748		$	259,472		$	205,462		$	296,164		$	128,353

Gross expenses^(e)(f)		1.97	%		1.16	%		1.01	%		1.92	%		2.54	%		2.38	%

Net investment income		3.29	%		2.34	%		3.48	%		4.06	%		2.11	%		3.73	%

Portfolio turnover rate		7	%		31	%		17	%		18	%		28	%		51	%

‡	Reflects the financial highlights of Class Z of the open-end fund prior to the conversion.

*	Per share data prior to February 15, 2019 has been adjusted to give effect to an approximately 1 to 1.4217 reverse stock split as part of the conversion to a closed-end fund. (Note 1)

(a)	Per share data was calculated using average shares outstanding during the period.

(b)

The Net Asset Value per share and total return have been calculated based on net assets which include adjustments made in accordance with U.S. Generally Accepted Accounting Principles required at period end for financial reporting purposes. These figures do not necessarily reflect the Net Asset Value per share or total return experienced by the shareholder at period end.

(c)

Total return is based on fair value per share for periods after February 15, 2019. Distributions are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund’s Dividend Reinvestment Plan. Prior to February 15, 2019, total return is at net asset value assuming all distributions are reinvested. For periods with waivers/reimbursements, had the Fund’s Investment Adviser not waived or reimbursed a portion of expenses, total return would have been lower.

(d)	All ratios for the period have been annualized, unless otherwise indicated.

(e)	Supplemental expense ratios are shown below.

(f)	Includes dividends and fees on securities sold short.

Supplemental Expense Ratios:


	For the Six Months Ended March 31, 2023 (unaudited)			For the Years Ended June 30,
	For the Six Months Ended March 31, 2023 (unaudited)			2022			2021			2020			2019			2018

Net expenses (net of waiver/reimbursement, if applicable, but gross of all other expenses)^(g)		1.85	%		1.01	%		0.88	%		1.81	%		2.45	%		2.38	%

Interest expense and commitment fees		1.07	%		0.28	%		0.15	%		0.82	%		1.60	%		1.02	%

Dividends and fees on securities sold short		0.00	%^(h)		0.01	%		0.01	%		0.07	%		0.11	%		0.16	%

(g)	This includes the voluntary elected waiver by the Investment Adviser during the period, which resulted in a 0.12% impact to the net expenses ratio.

(h)	Less than 0.005%.


See accompanying Notes to Financial Statements.						13

NOTES TO FINANCIAL STATEMENTS (unaudited)



March 31, 2023		Highland Global Allocation Fund

Note 1. Organization

Highland Global Allocation Fund (the “Fund”) is organized as an unincorporated business trust under the laws of The Commonwealth of Massachusetts. The Fund is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company. This report covers information for the six months ended March 31, 2023.

On November 8, 2018, shareholders of the Fund approved a proposal authorizing the Board of Trustees (the “Board”) of the Fund to convert the Fund from an open-end fund to a closed-end fund at a special meeting of shareholders. The Board took action to convert the Fund to a closed-end fund effective shortly after 4:00 p.m. Eastern Time on February 14, 2019 (the “Conversion Date”). The Fund also effected an approximately 1-for-1.4217 reverse stock split of the Fund’s issued and outstanding shares on February 14, 2019, thereby reducing the number of shares outstanding. Shareholders were paid cash for any fractional shares resulting from the reverse stock split. The Fund began listing its shares for trading on the New York Stock Exchange (the “NYSE”) on February 19, 2019 under the ticker symbol “HGLB”. The Fund may issue an unlimited number of common shares, par value $0.001 per share (“Common Shares”). Prior to the Conversion Date, the Fund issued Class A, Class C, and Class Y shares.

Note 2. Significant Accounting Policies

The following summarizes the significant accounting policies consistently followed by the Fund in the preparation of its financial statements.

Use of Estimates

The Fund is an investment company that follows the investment company accounting and reporting guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial Services—Investment Companies applicable to investment companies. The Fund’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require NexPoint Asset Management, L.P. (formerly Highland Capital Management Fund Advisors, L.P.) (“NexPoint” or the “Investment Adviser”) to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases or decreases in net assets from operations during the reporting period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially.

Valuation of Investments

Pursuant to Rule 2a-5 under the 1940 Act, the Board has designated NexPoint as the Fund’s valuation designee to perform the fair valuation determination for securities and other assets held by the Fund. NexPoint acting through its Valuation Committee, is responsible for determining the fair value of investments for which market quotations are not readily available. The Valuation Committee is comprised of officers of NexPoint and certain of NexPoint’s affiliated companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is subject to Board oversight and certain reporting and other requirements intended to provide the Board the information it needs to oversee NexPoint’s fair value determinations.

The Fund’s investments are recorded at fair value. In computing the Fund’s net assets attributable to shares, securities with readily available market quotations on the NYSE, National Association of Securities Dealers Automated Quotation (“NASDAQ”) or other nationally recognized exchange, use the closing quotations on the respective exchange for valuation of those securities. Securities for which there are no readily available market quotations will be valued pursuant to policies adopted by NexPoint and approved by the Fund’s Board. Typically, such securities will be valued at the mean between the most recently quoted bid and ask 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 may be priced by an independent pricing service. Generally, the Fund’s loan and bond positions are not traded on exchanges and consequently are valued based on a mean of the bid and ask price from the third-party pricing services or broker-dealer sources that the Investment Adviser has determined to have the capability to provide appropriate pricing services.

Securities for which market quotations are not readily avail- able, or for which the Fund has determined that the price received from a pricing service or broker-dealer is “stale” or otherwise does not represent fair value (such as when events materially affecting the value of securities occur between the time when market price is determined and calculation of the Fund’s net asset value (“NAV”), will be valued by the Fund at fair value, as determined by the Valuation Committee in good faith in accordance with procedures established by NexPoint and approved by the Board, taking into account factors reasonably determined to be relevant, including, but not limited to: (i) the fundamental analytical data relating to the investment; (ii) the nature and duration of restrictions on disposition of the securities; and (iii) an evaluation of the forces that influence the market in which these securities are purchased and sold. In these


14						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

cases, the Fund’s NAV will reflect the affected portfolio securities’ fair value as determined in the judgment of the Valuation Committee instead of being determined 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 NAVs. Determination of fair value is uncertain because it involves subjective judgments and estimates.

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. Those differences could have a material impact to the Fund. The NAV shown in the Fund’s financial statements may vary from the NAV published by the Fund as of its period end because portfolio securities transactions are accounted for on the trade date (rather than the day following the trade date) for financial statement purposes.

Fair Value Measurements

The Fund has performed an analysis of all existing investments and derivative instruments to determine the significance and character of inputs to their fair value determination. The levels of fair value inputs used to measure the Fund’s investments are characterized into a fair value hierarchy. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment’s valuation. The three levels of the fair value hierarchy 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, but are valued based on executed trades; broker quotations that constitute an executable price; and alternative pricing sources supported by observable inputs are classified within Level 2. Level 2 inputs are either directly or indirectly observable for the asset in connection with market data at the measurement date; and

Level 3 —

Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. In certain cases, investments classified within Level 3 may include securities for which the Fund has obtained indicative quotes from broker-dealers that do not necessarily represent prices the broker may be willing to trade on, as such quotes can be subject to

material management judgment. 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 Investment Adviser has established policies and procedures, as described above and approved by the Board, to ensure that valuation methodologies for investments and financial instruments that are categorized within all levels of the fair value hierarchy are fair and consistent. A Pricing Committee has been established to provide oversight of the valuation policies, processes and procedures, and is comprised of personnel from the Investment Adviser and its affiliates. The Pricing Committee meets monthly to review the proposed valuations for investments and financial instruments and is responsible for evaluating the overall fairness and consistent application of established policies.

As of March 31, 2023, the Fund’s investments consisted of senior loans, asset-backed securities, bonds and notes, common stocks, preferred stocks, LLC interests, master limited partnerships, registered investment companies, cash equivalents, repurchase agreements, exchange-traded funds, rights, warrants, and securities sold short. The fair value of the Fund’s loans, bonds and asset-backed securities are generally based on quotes received from brokers or independent pricing services. Loans, bonds and asset-backed securities with quotes that are based on actual trades with a sufficient level of activity on or near the measurement date are classified as Level 2 assets. Senior loans, bonds and asset-backed securities that are priced using quotes derived from implied values, indicative bids, or a limited number of actual trades are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable.

The fair value of the Fund’s common stocks, registered investment companies, rights and warrants that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable. Exchange-traded options are valued based on the last trade price on the primary exchange on which they trade. If an option does not trade, the mid-price, which is the mean of the bid and ask price, is utilized to value the option. At the end of each calendar quarter, the Investment Adviser evaluates the Level 2 and 3 assets and liabilities for changes in liquidity, including but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and the existence of contemporaneous, observable trades in the market.


Semi-Annual Report						15

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

Additionally, the Investment Adviser evaluates the Level 1 and 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Fund’s investments may fluctuate from period to period. Additionally, the fair value of investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values the Fund may ultimately realize. Further, such investments may be subject to legal and other restrictions on resale or otherwise be less liquid than publicly traded securities.


16						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

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 and liabilities as of March 31, 2023, is as follows:


	Total value at March 31, 2023 ($)		Level 1 Quoted Price ($)		Level 2 Significant Observable Inputs ($)		Level 3 Significant Unobservable Inputs ($)
Highland Global Allocation Fund
Assets
U.S. Equity
Communication Services		62,418,867		1,633,527		—		60,785,340
Healthcare		6,288,212		6,288,212		—		—
Materials		3,652,420		—		3,652,420		—
Real Estate		68,150,539		52,463,792		—		15,686,747
U.S. Senior Loans
Communication Services		21,070,257		—		—		21,070,257
Real Estate		13,067,750		—		—		13,067,750
U.S. Master Limited Partnerships
Energy		24,821,924		24,821,924		—		—
Non-U.S. Equity
Communication Services		43,592		43,592		—		—
Consumer Discretionary		3,961,058		3,954,180		—		6,878
Energy		9,600,990		9,600,990		—		—
Financials		92,787		92,787		—		—
Healthcare		48,830		48,830		—		—
Industrials		1,453,286		1,453,286		—		—
Information Technology		9		9		—		—
Utilities		6,518,918		6,518,918		—		—
U.S. LLC Interest		19,754,375		—		—		19,754,375
U.S. Warrants
Energy		18,610,436		—		18,610,436		—
U.S. Preferred Stock
Financials		5,874,208		—		5,874,208		—
Healthcare		3,449,991		—		—		3,449,991
Real Estate		4,060,677		3,841,179		219,498		—
U.S. Asset-Backed Securities		11,854,766		—		11,854,766		—
U.S. Rights
Utilities		9,782,614		—		9,782,614		—
Non-U.S. Sovereign Bonds		8,266,528		—		8,266,528		—
Non-U.S. Master Limited Partnerships
Energy		2,036,543		2,036,543		—		—
U.S. Corporate Bonds & Notes
Communication Services		709,922		—		709,922		—
Non-U.S. Warrants
Communication Services		3,882		—		3,882		—
Industrials		—		—		—		–	⁽¹⁾
Non-U.S. Asset-Backed Security		11		—		—		11
U.S. Exchange-Traded Funds		10,154,553		10,154,553		—		—
Non-U.S. Registered Investment Company		3,396,866		—		—		3,396,866
U.S. Registered Investment Companies		14,578,062		14,578,062		—		—
U.S. Repurchase Agreement		82,663		82,663		—		—
U.S. Cash Equivalent		255,466		255,466		—		—

Total Assets		334,061,002		137,868,513		58,974,274		137,218,215


Semi-Annual Report						17

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund


	Total value at March 31, 2023 ($)			Level 1 Quoted Price ($)			Level 2 Significant Observable Inputs ($)			Level 3 Significant Unobservable Inputs ($)
Highland Global Allocation Fund
Liabilities
Securities Sold Short
Common Stocks
Communication Services		(3,438,217	)		(3,438,217	)		—			—
Consumer Staples		(712,200	)		(712,200	)		—			—
Reverse Repurchase Agreement		(3,563,000	)		—			(3,563,000	)		—

Total Liabilities		(7,713,417	)		(4,150,417	)		(3,563,000	)		—

Total		326,347,585			133,718,096			55,411,274			137,218,215

⁽¹⁾	This category includes securities with a value of zero.

The table below sets forth a summary of changes in the Fund’s assets measured at fair value using significant unobservable inputs (Level 3) for the six months ended March 31, 2023.


	Balance as of September 30, 2022 $		Transfers Into Level 3 $		Transfers Out of Level 3 $		Accrued Discounts (Premiums) $		Distribution to Return Capital $		Realized Gain (Loss) $		Net Change in Unrealized Appreciation (Depreciation) $			Purchases $		Sales $		Balance as of March 31, 2023 $		Change in Unrealized Appreciation (Depreciation) from Investments held at March 31, 2023 $
U.S. Equity
Communication Services		61,209,167		—		—		—		—		—		(423,827	)		—		—		60,785,340		(423,827	)
Real Estate		16,289,296		—		—		—		—		—		(602,549	)		—		—		15,686,747		(602,549	)
U.S. Senior Loans
Communication Services		19,854,675		—		—		703		—		—		83,171			1,131,708		—		21,070,257		83,171
Real Estate		12,871,000		—		—		—		—		—		196,750			—		—		13,067,750		196,750
Non-U.S. Equity
Consumer Discretionary		16,293		—		—		—		—		—		(9,415	)		—		—		6,878		(9,415	)
U.S. LLC Interest		13,280,450		—		—		—		—		—		(1,713,601	)		8,187,526		—		19,754,375		(1,713,601	)
U.S. Preferred Stock
Healthcare		2,191,014		—		—		—		—		—		58,981			1,199,996		—		3,449,991		58,981
Non-U.S. Asset-Backed Security		19,005		—		—		—		—		—		(18,994	)		—		—		11		(18,994	)
Non-U.S. Registered Investment Company		3,395,347		—		—		—		—		—		1,519			—		—		3,396,866		1,519

Total		129,126,247		—		—		703		—		—		(2,427,965	)		10,519,230		—		137,218,215		(2,427,965	)


18						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

Investments designated as Level 3 may include assets valued using quotes or indications furnished by brokers which are based on models or estimates without observable inputs and may not be executable prices. In light of the developing market conditions, the Investment Adviser continues to search for observable data points and evaluate broker quotes and indications received for portfolio investments.

For the six months ended March 31, 2023, there no transfers in or out of Level 3. Determination of fair value is uncertain because it involves subjective judgments and estimates that are unobservable. The cost price methodology was updated for one investment to more relevant methodology given the passage of time since the original acquisition date. Additionally, the Option price methodology for another investment was updated to account for a recent transaction that occurred.

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

Category

Fair Value at
3/31/2023

Valuation Technique

Unobservable Inputs

Input Value(s)
(Arithmetic Mean)

U.S. Equity/Non-U.S. Equity

76,478,965

Multiples Analysis

Unadjusted Price/MHz-PoP

$0.09 ‑ $0.95 ($0.515)

Discounted Cash Flow

Discount Rate

11.0% - 13.0% (12.0%)

Transaction Indication of Value

Enterprise Value ($mm)

$841

Offer Price per Share

$1.10

Net Asset Value

N/A

Direct Capitalization Method

Capitalization Rates

5.38%

Liquidation Analysis

Recovery Rate

40.0% ‑ 100.0% (70.0%)

U.S. Senior Loans

34,138,007

Discounted Cash Flow

Discount Rate

7.0% - 11.3% (8.7%)

Option Pricing Model

Volatilty

25.0% - 60.0% (42.5%)

U.S. LLC Interest

19,754,375

Discounted Cash Flow

Discount Rate

4.98% - 9.18% (7.08%)

Direct Capitalization Method

Capitalization Rates

5.38%

Transaction Indication of Value

Bid/Ask

Various

Net Asset Value

N/A

U.S. Preferred Stock

3,449,991

Transaction Indication of Value

Offer Price per Share

$11.10

Non-U.S. Asset-Backed Security

Net Asset Value

N/A

Non-U.S. Registered Investment Company

3,396,866

Net Asset Value

NAV

N/A

137,218,215

The significant unobservable inputs used in the fair value measurement of the Fund’s bank loan and asset-backed securities are the discount rate and broker quote indication of value. A Significant increase (decrease) in in these inputs in isolation could result in a significantly lower (higher) fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Fund’s common equity securities are: unadjusted price/MHz-PoP multiple, discount rate, enterprise value, tender offer per share, capitalization rate, and recovery rate. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement.

The significant unobservable input used in the fair value measurement of the Company’s Preferred Stock is the tender offer per share. Significant decreases increases (decreases) in this input in isolation could result in a significantly higher (lower) fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company’s U.S. Senior Loans are the discount rate and volatility. Significant increases (decreases) in any of those inputs in isolation could result in a significantly higher (lower) fair value measurement.

In addition to the unobservable inputs utilized for various valuation methodologies, the Investment Adviser frequently uses a combination of two or more valuation methodologies to determine fair value for a single holding. In such instances, the Investment Adviser assesses the methodologies and ascribes weightings to each methodology. The weightings ascribed to any individual methodology ranged from as low as 25% to as high as 100% as of March 31, 2023. The selection of weightings is an inherently subjective process, dependent on professional judgement. These selections may have a material impact to the concluded fair value for such holdings.


Semi-Annual Report						19

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

Certain Illiquid Positions Classified as Level 3

As of March 31, 2023, the Fund held an investment in the common shares of TerreStar Corporation (“TerreStar”) valued at $60,785,340, or 23.0% of net assets, and U.S. Senior Loans valued at $21,070,257 or 8.0% of net assets. TerreStar does not currently generate revenue and primarily derives its value from holding licenses of two wireless spectrum assets. The license with respect to one such spectrum asset was previously terminated by the FCC and subsequently restored on April 30, 2020 on a limited conditional basis. The restoration of such license, in current form, requires TerreStar to meet certain deployment milestones for wireless medical telemetry service (“WMTS”) during a 39-month period. Upon satisfaction of the deployment milestones, TerreStar, as it stands today, will be able use such spectrum for other services besides WMTS as long as those services do not interfere with WMTS and TerreStar continues to provide WMTS.

As of now, if TerreStar is unsuccessful in satisfying such deployment milestones, or if other services cannot be implemented in a manner that does not interfere with WMTS, the value of the TerreStar equity would likely be materially negatively impacted. In determining the fair value of TerreStar, the Investment Adviser has assigned a high probability of success on both conditions based on consultation with the company and its consultants.

The Fund may hold other illiquid positions that are classified as Level 3 that are not described here. Please see Note 8 for additional disclosure of risks from investments in illiquid securities.

Security Transactions

Security transactions are accounted for on the trade date. Realized gains (losses) on investments sold are recorded on the basis of the specific identification method for both financial statement and U.S. federal income tax purposes taking into account any foreign taxes withheld.

Income Recognition

Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available and is verified. Interest income is recorded on the accrual basis.

Accretion of discount on taxable bonds and loans is computed to the maturity date, while amortization of premium on taxable bonds and loans is computed to the earliest call date, both using the effective yield method. Withholding taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates.

Return of Capital Reclassification

Adjustment to income associated with return of capital from income received in prior period. Information related to these adjustments was not received until after the finalization of the prior period financial statements.

U.S. Federal Income Tax Status

The Fund is treated as a separate taxpayer for U.S. federal income tax purposes. The Fund intends to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended, and will distribute substantially all of their taxable income and gains, if any, for the tax year, and as such will not be subject to U.S. federal income taxes. In addition, the Fund intends to distribute, in each calendar year, all of their net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to U.S. federal excise tax. Therefore, no U.S. federal income or excise tax provisions are recorded. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations.

The Investment Adviser has analyzed the Fund’s tax positions taken on U.S. federal income tax returns for all open tax years (current and prior three tax years), and has concluded that no provision for U.S. federal income tax is required in the Fund’s financial statements. The Fund’s U.S. federal and state income and U.S. federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue. Furthermore, the Investment Adviser of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.

Distributions to Shareholders

The Fund declares and pays investment income distributions quarterly. The Fund typically declares and pays distributions from net realized capital gains in excess of capital loss carryforwards annually.

Statement of Cash Flows

Information on financial transactions which have been settled through the receipt or disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is the amount included within the Fund’s Statement of Assets and Liabilities and includes cash on hand at its custodian bank and/or sub-custodian bank(s), cash equivalents, foreign currency and restricted cash held at broker(s).


20						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

Cash & Cash Equivalents

The Fund considers liquid assets deposited with a bank and certain short-term debt instruments of sufficient credit quality with original maturities of three months or less to be cash equivalents. The Fund also considers money market instruments that invest in cash equivalents to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay Fund expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates fair value. The value of cash equivalents denominated in foreign currencies is determined by converting to U.S. dollars on the date of this financial report. These balances may exceed the federally insured limits under the Federal Deposit Insurance Corporation (“FDIC”).

Foreign Currency

Accounting records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates using the current 4:00 PM London Time Spot Rate. Fluctuations in the value of the foreign currencies and other assets and liabilities resulting from changes in exchange rates, between trade and settlement dates on securities transactions and between the accrual and payment dates on dividends, interest income and foreign withholding taxes, are recorded as unrealized foreign currency gains (losses). Realized gains (losses) and unrealized appreciation (depreciation) on investment securities and income and expenses are translated on the respective dates of such transactions. The effects of changes in foreign currency exchange rates on investments in securities are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on investment securities.

Securities Sold Short

The Fund may sell securities short. A security sold short is a transaction in which the Fund sells a security it does not own in anticipation that the market price of that security will decline. When the Fund sells a security short, it must borrow the security sold short from a broker-dealer and deliver it to the buyer upon conclusion of the transaction. A Fund may have to pay a fee to borrow particular securities and is often obligated to pay over any dividends or other payments received on such borrowed securities. In some circumstances, a Fund may be allowed by its prime broker to utilize proceeds from securities sold short to purchase additional investments, resulting in leverage. Securities and cash held as collateral for securities sold short are shown on the Investment Portfolio. Cash held as collateral for securities sold short is classified as restricted cash on the Statement of

Assets and Liabilities, as applicable. Restricted cash in the amount of $4,069,495 was held with the broker for the Fund. Additionally, securities valued at $108,371,504 were posted in the Fund’s segregated account for collateral for short sales. The Fund’s loss on a short sale could be unlimited in cases where the Fund is unable, for whatever reason, to close out its short position.

Other Fee Income

Fee income may consist of origination/closing fees, amendment fees, administrative agent fees, transaction breakup fees and other miscellaneous fees. Origination fees, amendment fees, and other similar fees are nonrecurring fee sources. Such fees are received on a transaction by transaction basis and do not constitute a regular stream of income and are recognized when incurred.

Note 3. Derivative Transactions

The Fund is subject to equity securities risk, interest rate risk and currency risk in the normal course of pursuing its investment objective. The Fund enters into derivative transactions for the purpose of hedging against the effects of changes in the value of portfolio securities due to anticipated changes in market conditions, to gain market exposure for residual and accumulating cash positions and for managing the duration of fixed income investments.

Options

The Fund may utilize options on securities or indices to varying degrees as part of its principal investment strategy. An option on a security is a contract that gives the holder of the option, in return for a premium, the right to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option at a specified exercise or “strike” price. The writer of an option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security. The Fund may hold options, write option contracts, or both.

If an option written by a Fund expires unexercised, a Fund realizes on the expiration date a capital gain equal to the premium received by a Fund at the time the option was written. If an option purchased by a Fund expires unexercised, a Fund realizes a capital loss equal to the premium paid. Prior to the earlier of exercise or expiration, an exchange-traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, underlying security, exercise price and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be effected when a Fund desires. A Fund will realize a capital gain from a closing purchase transaction if the cost of the


Semi-Annual Report						21

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

closing option is less than the premium received from writing the option, or, if the cost of the closing option is more than the premium received from writing the option, a capital loss. A Fund will realize a capital gain from a closing sale transaction if the premium received from the sale is more than the original premium paid when the option position was opened, or a capital loss, if the premium received from a sale is less than the original premium paid.

During the six months ended March 31, 2023, the Fund did not enter into options transactions. The Fund may invest in written options to provide leveraged short exposure, and purchased options to provide leveraged long exposure, to the underlying equity, which is consistent with the investment strategies of the Fund.

Reverse Repurchase Agreements

The Fund may engage in reverse repurchase agreement transactions with respect to instruments that are consistent with the Fund’s investment objective or policies. This creates leverage for the Fund because the cash received can be used to purchase other securities.

A reverse repurchase transaction is a repurchase transaction in which the Fund is the seller of securities or other assets and agrees to repurchase them at a date certain or on demand. Pursuant to the Repurchase Agreement, the Fund may agree to sell securities or other assets to Mizuho Securities for an agreed upon price (the “Purchase Price”), with a simultaneous agreement to repurchase such securities or other assets from Mizuho Securities for the Purchase Price plus a price differential that is economically similar to interest. The price differential is negotiated for each transaction. This creates leverage for the Fund because the cash received can be used to purchase other securities.

At March, 31, 2023, the Fund had investments in a reverse repurchase agreement with a gross value of $3,563,000, which is reflected as reverse repurchase agreements on the consolidated statement of assets and liabilities. The value of the related collateral exceeded the value of the reverse repurchase agreements at March 31, 2023. The collateral pledged for the reverse repurchase agreements includes Agency Collateralized Mortgage Obligations and cash, both of which are reflected on the consolidated statement of assets and liabilities. The Fund’s average daily balance was $3,557,004 at a weighted average interest rate of 6.41% for the days outstanding.

Additional Derivative Information

The Fund is required to disclose; a) how and why an entity uses derivative instruments; b) how derivative instruments and related hedged items are accounted for; c) how derivative instruments and related hedged items affect an

entity’s financial position, financial performance and cash flows; and d) how the netting of derivatives subject to master netting arrangements (if applicable) affects the net exposure of the Fund related to the derivatives.

To reduce counterparty credit risk with respect to over-the-counter (“OTC”) transactions, the Fund has entered into master netting arrangements, established within the Fund’s International Swap and Derivatives Association, Inc. (“ISDA”) master agreements, which allows the Fund to make (or to have an entitlement to receive) a single net payment in the event of default (close-out netting) for outstanding payables and receivables with respect to certain OTC derivative positions in forward currency exchange contracts for each individual counterparty. In addition, the Fund may require that certain counterparties post cash and/or securities in collateral accounts to cover its net payment obligations for those derivative contracts subject to ISDA master agreements. If the counterparty fails to perform under these contracts and agreements, the cash and/or securities will be made available to the Fund.

Certain ISDA master agreements include credit related contingent features which allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA master agreements, which would cause the Fund to accelerate payment of any net liability owed to the counterparty.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.

Collateral terms are contract specific for OTC derivatives. For derivatives traded under an ISDA master agreement, the collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that to the value of any collateral currently pledged by the Fund or the counterparty.

For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund, if any, is reported in restricted cash on the Statement of Assets and Liabilities. Generally, the amount of collateral due from or to a party must exceed a minimum transfer amount threshold before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.


22						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

There were no derivative instruments held as of March 31, 2023.

Note 4. Securities Lending

The Fund has a securities lending agreement with The Bank of New York Mellon (“BNY” or the “Lending Agent”).

Securities lending transactions are entered into by the Fund under the Securities Lending Agreement, (“SLA”) which permits the Fund, under certain circumstances such as an event of default, to offset amounts payable by the Fund to the same counterparty against amounts receivable from the counterparty to create a net payment due to or from the Fund.

The following is a summary of securities lending agreements held by the Fund, with cash collateral of overnight maturities and non-cash collateral which would be subject to offset as of March 31, 2023:


Gross Amount of Recognized Assets (Value of Securities on Loan)	Value of Cash Collateral Received⁽¹⁾		Value of Non-Cash Collateral Received⁽¹⁾		Net Amount
$ 289,261		$ 82,663		$ 206,598	$	—

⁽¹⁾	Collateral received in excess of fair value of securities on loan is not presented in this table. The total cash collateral received by the Fund is disclosed in the Statement of Assets and Liabilities.

The value of loaned securities and related collateral outstanding at March 31, 2023 are shown in the Investment Portfolio. The value of the collateral held may be temporarily less than that required under the lending contract. As of March 31, 2023, the cash collateral was invested in repurchase agreements and the non-cash collateral consisted of U.S. Treasury Bills, Notes, Bonds and U.S. Treasury Inflation Indexed Bonds with the following maturities:

Remaining Contractual Maturity of the Underlying Collateral, as of March 31, 2023


	Overnight and Continuous		<30 Days		Between 30 & 90 Days		>90 Days		Total
Repurchase Agreement	$	82,663	$	—	$	—	$	—	$	82,663
U.S. Government Securities		—		—		—		212,915		212,915

Total	$	82,663	$	—	$	—	$	212,915	$	295,578

The Fund could seek additional income by making secured loans of its portfolio securities through its custodian. Such loans would be in an amount not greater than one-third of the value of the Fund’s total assets. BNY would charge a fund fees based on a percentage of the securities lending income.

The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral is returned by the Fund, on the next business day.

The Fund would receive collateral consisting of cash (U.S. and foreign currency), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, sovereign debt, convertible bonds, irrevocable bank letters of credit or such other collateral as may be agreed on by the parties to a securities lending arrangement, initially with a value of 102% or 105% of the market value of the loaned securities and thereafter maintained at a value of 100% of the market value of the loaned securities. If the collateral consists of non-cash collateral, the borrower would pay the Fund a loan premium fee. If the collateral consists of cash, BNY would reinvest the cash. Although voting rights, or rights to consent, with respect to the loaned securities pass to the borrower, the Fund would recall the loaned securities upon reasonable notice in order that the securities could be voted

by the Fund if the holders of such securities are asked to vote upon or consent to matters materially affecting the investment. The Fund also could call such loans in order to sell the securities involved.

Securities lending transactions were entered into pursuant to SLAs, which would provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaulted, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an SLA counterparty’s bankruptcy or insolvency. Under the SLA, the Fund can reinvest cash collateral, or, upon an event of default, resell or repledge the collateral, and the borrower can resell or repledge the loaned securities. The risks of securities lending also include the risk that the borrower may not provide additional collateral when required or may not return the securities when due.


Semi-Annual Report						23

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

To mitigate this risk, each Fund benefits from a borrower default indemnity provided by BNY. BNY’s indemnity generally provides for replacement of securities lent or the approximate value thereof.

Note 5. U.S. Federal Income Tax Information

The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from GAAP. These differences include (but are not limited to) investments organized as partnerships for tax purposes, foreign taxes, investments in futures, losses deferred to off-setting positions, tax treatment of organizational start-up costs, losses deferred due to wash sale transactions, tax treatment of net investment loss and distributions in excess of net investment income, dividends deemed paid upon shareholder redemption of Fund shares and tax attributes from Fund reorganizations. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or NAV of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments.

As of September 30, 2022, the most recent tax year-end, permanent differences chiefly resulting from non-deductible expenses from partnerships and return of capital were identified and reclassified among the components of the Fund’s net assets as follows:


Distributable Earnings (Accumulated Loss)	Paid‑in‑Capital
$(2,530,674)	$	2,530,674

At September 30, 2022, the most recent tax year-end, components of distributable earnings on a tax basis is as follows:


Undistributed Income	Undistributed Long-Term Capital Gains		Other Temporary Differences			Accumulated Capital and Other Losses			Net Tax Appreciation (Depreciation)
$ —	$	—	$	(2	)	$	(412,689,554	)	$	(43,084,377	)

As of September 30, 2022, the Fund has capital loss carryovers as indicated below. The capital loss carryovers are available to offset future realized capital gains.


No Expiration Short- Term	No Expiration Long- Term		Total
$122,955,636	$	289,733,918	$	412,689,554

The tax character of distributions paid during the years ended September 30, 2022 and September 30, 2021 were as follows:


	Distributions Paid From:
	Ordinary Income⁽¹⁾		Long‑Term Capital Gains		Return of Capital⁽²⁾
2022	$	7,285,771	$	—	$	13,622,562
2021		6,169,443		—		13,376,686

⁽¹⁾	For tax purposes, short-term capital gains distributions, if any, are considered ordinary income distributions.

⁽²⁾	Additional Information will be distributed on Form 1099 at the end of the calendar year.

The Federal tax cost and gross unrealized appreciation and depreciation on investments (including foreign currency and derivatives, if applicable) held by the Fund at March 31, 2023 were as follows:


Gross Appreciation	Gross Depreciation			Net Appreciation/ (Depreciation)			Federal Tax Cost
$42,249,590	$	(66,271,072	)	$	(24,021,482	)	$	358,082,484

For Federal income tax purposes, the cost of investments owned at March 31, 2023 were different from amounts reported for financial reporting purposes primarily due to investments in partnerships, defaulted bonds, other securities and deferred wash sale losses.

Note 6. Advisory, Administration, Service and Distribution, Trustee, and Other Fees

Investment Advisory Fees and Administration Fees

For its investment advisory services, the Fund pays the Investment Adviser a monthly fee, computed and accrued daily, based on an annual rate of the Fund’s Average Daily Managed Assets. Average Daily Managed Assets of the Fund means the average daily value of the total assets of the Fund less all accrued liabilities of a Fund (other than the aggregate amount of any outstanding borrowings constituting financial leverage). The Fund’s contractual advisory fee with NexPoint for the six months ended March 31, 2023 was 0.40%.

The Fund has entered into an administration agreement with SEI Investments Global Funds Services (“SEI”), a wholly owned subsidiary of SEI Investments Company, and pays SEI a fee for administration services. The Investment Adviser generally assists in all aspects of the Fund’s administration and operations and furnishes offices, necessary facilities, equipment and personnel.


24						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

Additionally, the Fund may invest in securities issued by other investment companies, including investment companies that are advised by the Investment Adviser or its affiliates, to the extent permitted by applicable law and/or pursuant to exemptive relief from the SEC, and exchange-traded funds (“ETFs”). Fees and expenses of such investments will be borne by shareholders of the investing Fund, and the Investment Adviser voluntarily waives the higher of the two fees for the portion of the Fund’s investment advisory fee attributable to its investment in the affiliated investment company. Voluntary amounts waived are reflected in the statement of operations.

Fees Paid to Officers and Trustees

Each Trustee, who oversees all of the funds in the NexPoint Fund Complex, receives an annual retainer of $150,000 payable in quarterly installments and allocated among each portfolio in the NexPoint Fund Complex based on relative net assets. The annual retainer for a Trustee who does not oversee all of the funds in the NexPoint Fund Complex is prorated based on the portion of the $150,000 annual retainer allocable to the funds overseen by such Trustee. The Chairman of the Audit Committee and the Chairman of the Board each receive an additional annual payment of $10,000 payable in quarterly installments and allocated among each portfolio in the NexPoint Fund Complex based on relative net assets. Trustees are reimbursed for actual out-of-pocket expenses relating to attendance at meetings. The “NexPoint Fund Complex” consists of all of the registered investment companies advised by the Investment Adviser or its affiliated advisers as of the date of this report and NexPoint Capital, Inc., a closed-end management investment company that has elected to be treated as a business development company under the 1940 Act.

The Fund pays no compensation to its officers, all of whom are employees of the Investment Adviser or one of its affiliates.

The Trustees do not receive any separate compensation in connection with service on Committees or for attending Board or Committee Meetings. The Trustees do not have any pension or retirement plan.

Other Matters

NexPoint has entered into a Services Agreement (the “Services Agreement”) with Skyview Group (“Skyview”), effective February 25, 2021, pursuant to which NexPoint will receive administrative and operational support services to enable it to provide the required advisory services to the Fund. The Investment Adviser, and not the Fund, will compensate all Investment Adviser and Skyview personnel who provide services to the Fund.

Effective July 12, 2022, certain Skyview personnel became dual-employees of NexPoint Services, Inc., a wholly-owned subsidiary of the Investment Adviser. The same services are being performed by the dual-employees. The Investment Adviser, and not the Fund, will compensate all Investment Adviser, Skyview, and dual-employee personnel who provide services to the Fund.

Note 7. Disclosure of Significant Risks and Contingencies

The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.

Asset-Backed Securities Risk

The risk of investing in asset-backed securities, and includes interest rate risk, prepayment risk and the risk that the Fund could lose money if there are defaults on the loans underlying these securities. Investments in asset-backed securities may also be subject to valuation risk.

Credit Risk

The value of debt securities owned by the Fund may be affected by the ability of issuers to make principal and interest payments and by the issuer’s or counterparty’s credit quality. If an issuer cannot meet its payment obligations or if its credit rating is lowered, the value of its debt securities may decline. Lower quality bonds are generally more sensitive to these changes than higher quality bonds. Nonpayment would result in a reduction of income to the Fund, a reduction in the value of the obligation experiencing nonpayment and a potential decrease in the Fund’s net asset value and the market price of the Fund’s shares.

Derivatives Risk

Derivatives Risk is a combination of several risks, including the risks that: (1) an investment in a derivative instrument may not correlate well with the performance of the securities or asset class to which the Fund seeks exposure, (2) derivative contracts, including options, may expire worthless and the use of derivatives may result in losses to the Fund, (3) a derivative instrument entailing leverage may result in a loss greater than the principal amount invested, (4) derivatives not traded on an exchange may be subject to credit risk, for example, if the counterparty does not meet its obligations (see also “Counterparty Risk”), and (5) derivatives not traded on an exchange may be subject to liquidity risk and the related risk that the instrument is difficult or impossible to value accurately.


Semi-Annual Report						25

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

Effective August 19, 2022 (the “Compliance Date”), Rule 18f-4 under the 1940 Act (the “Derivatives Rule”) replaced the asset segregation regime of Investment Company Act Release No. 10666 (Release 10666) with a new framework for the use of derivatives by registered funds. As of the Compliance Date, the SEC rescinded Release 10666 and withdrew no-action letters and similar guidance addressing a fund’s use of derivatives and began requiring funds to satisfy the requirements of the Derivatives Rule. As a result, on or after the Compliance Date, the Fund will no longer engage in “segregation” or “coverage” techniques with respect to derivatives transactions and will instead comply with the applicable requirements of the Derivatives Rule.

The Derivatives Rule mandates that a fund adopt and/or implement: (i) value-at-risk limitations (VaR); (ii) a written derivatives risk management program; (iii) new Board oversight responsibilities; and (iv) new reporting and recordkeeping requirements. In the event that a fund’s derivative exposure is 10% or less of its net assets, excluding certain currency and interest rate hedging transactions, it can elect to be classified as a limited derivatives user (Limited Derivatives User) under the Derivatives Rule, in which case the fund is not subject to the full requirements of the Derivatives Rule. Limited Derivatives Users are excepted from VaR testing, implementing a derivatives risk management program, and certain Board oversight and reporting requirements mandated by the Derivatives Rule. However, a Limited Derivatives User is still required to implement written compliance policies and procedures reasonably designed to manage its derivatives risks.

Equity Securities Risk

The risk that stock prices will fall over short or long periods of time. In addition, common stocks represent a share of ownership in a company, and rank after bonds and preferred stock in their claim on the company’s assets in the event of bankruptcy. In addition to these risks, preferred stock and convertible securities are also subject to the risk that issuers will not make payments on securities held by the Fund, which could result in losses to the Fund. The credit quality of preferred stock and convertible securities held by the Fund may be lowered if an issuer’s financial condition changes, leading to greater volatility in the price of the security.

High Yield Debt Securities Risk

The risk that below investment grade securities or unrated securities of similar credit quality (commonly known as “high yield securities” or “junk securities”) are more likely to default than higher rated securities. The Fund’s ability to invest in high-yield debt securities generally subjects the Fund to greater risk than securities with higher ratings. Such securities are regarded by the rating organizations as pre-

dominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. The market value of these securities is generally more sensitive to corporate developments and economic conditions and can be volatile. Market conditions can diminish liquidity and make accurate valuations difficult to obtain.

Illiquid and Restricted Securities 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. Illiquidity may result from the absence of an established market for the investments as well as legal, contractual or other restrictions on their resale and other factors. Furthermore, the nature of the Fund’s investments, especially those in financially distressed companies, may require a long holding period prior to profitability. Restricted securities (i.e., securities acquired in private placement transactions) and illiquid securities may offer higher yields than comparable publicly traded securities. The Fund, however, may not be able to sell these securities when the Investment Adviser considers it desirable to do so or, to the extent they are sold privately, may have to sell them at less than the price of otherwise comparable securities. Restricted securities are subject to limitations on resale which can have an adverse effect on the price obtainable for such securities. Also, if in order to permit resale the securities are registered under the Securities Act at the Fund’s expense, the Fund’s expenses would be increased.

Industry Focus Risk

As the Fund may invest a significant portion of its assets in particular sectors or industries, the performance of the Fund may be closely tied to the performance of companies in a limited number of sectors or industries. Currently, the Fund focuses its investments in the energy, telecommunications and utilities sectors and, in certain instances, in a limited number of issuers within each of those sectors. Companies in a single sector often share common characteristics, are faced with the same obstacles, issues and regulatory burdens and their securities may react similarly to adverse market conditions. To the extent a Fund focuses its investments in particular issuers, countries, geographic regions, industries or sectors, the Fund may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of issuers, countries, geographic regions, industries, sectors or investments. The price movements of investments in a particular sector or industry may be more volatile than the price movements of more broadly diversified investments.


26						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

Interest Rate Risk

The risk that fixed income securities will decline in value because of changes in interest rates. When interest rates decline, the value of fixed rate securities already held by the Fund can be expected to rise. Conversely, when interest rates rise, the value of existing fixed rate portfolio securities can be expected to decline. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration.

On July 27, 2017, the head of the United Kingdom’s Financial Conduct Authority announced that it will stop encouraging banks to provide the quotations needed to sustain LIBOR. The ICE Benchmark Administration Limited, the administrator of LIBOR, ceased publishing certain LIBOR maturities, including some US LIBOR maturities, on December 31, 2021, and is expected to cease publishing the remaining and most liquid US LIBOR maturities on June 30, 2023. It is expected that market participants will transition to the use of alternative reference or benchmark rates prior to the applicable LIBOR cessation date. Additionally, although regulators have encouraged the development and adoption of alternative rates, such as the Secured Overnight Financing Rate (“SOFR”), the future utilization of LIBOR or of any particular replacement rate remains uncertain.

Although the transition process away from LIBOR has become increasingly well-defined in advance of the anticipated discontinuation dates, the impact on certain debt securities, derivatives and other financial instruments remains uncertain. It is expected that market participants will adopt alternative rates such as SOFR or otherwise amend financial instruments referencing LIBOR to include fallback provisions and other measures that contemplate the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the transition process nor the viability of such measures is known. Further, uncertainty and risk remain regarding the willingness and ability of issuers and lenders to include alternative rates and revised provisions in new and existing contracts or instruments. To facilitate the transition of legacy derivatives contracts referencing LIBOR, the International Swaps and Derivatives Association, Inc. launched a protocol to incorporate fallback provisions. While the transition process away from LIBOR has become increasingly well-defined in advance of the expected LIBOR cessation dates, there are obstacles to converting certain longer term securities and transactions to a new benchmark or benchmarks and the effectiveness of one alternative reference rate versus multiple alternative reference rates in new or existing financial instruments and products has not been determined. Furthermore, the risks associated with the cessation of LIBOR and transition to

replacement rates may be exacerbated if an orderly transition to alternative reference rates is not completed in a timely manner. Certain proposed replacement rates to LIBOR, such as SOFR, which is a broad measure of secured overnight US Treasury repo rates, are materially different from LIBOR, and changes in the applicable spread for financial instruments transitioning away from LIBOR will need to be made to accommodate the differences. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition to replacement rates may be exacerbated if an orderly transition to an alternative reference rate is not completed in a timely manner. As market participants transition away from LIBOR, LIBOR’s usefulness may deteriorate and these effects could be experienced until the permanent cessation of the majority of U.S. LIBOR rates in 2023. The transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. LIBOR’s deterioration may adversely affect the liquidity and/or market value of securities that use LIBOR as a benchmark interest rate.

Alteration of the terms of a debt instrument or a modification of the terms of other types of contracts to replace LIBOR or another interbank offered rate (“IBOR”) with a new reference rate could result in a taxable exchange and the realization of income and gain/loss for U.S. federal income tax purposes. The Internal Revenue Service (“IRS”) has issued final regulations regarding the tax consequences of the transition from IBOR to a new reference rate in debt instruments and non-debt contracts. Under the final regulations, alteration or modification of the terms of a debt instrument to replace an operative rate that uses a discontinued IBOR with a qualified rate (as defined in the final regulations) including true up payments equalizing the fair market value of contracts before and after such IBOR transition, to add a qualified rate as a fallback rate to a contract whose operative rate uses a discontinued IBOR or to replace a fallback rate that uses a discontinued IBOR with a qualified rate would not be taxable. The IRS may provide additional guidance, with potential retroactive effect.

Leverage Risk

The Fund may use leverage in its investment program, including the use of borrowed funds and investments in certain types of options, such as puts, calls and warrants, which may be purchased for a fraction of the price of the underlying securities. While such strategies and techniques increase the opportunity to achieve higher returns on the amounts invested, they also increase the risk of loss. To the extent the Fund purchases securities with borrowed funds, its net assets will tend to increase or decrease at a greater rate than if borrowed funds are not used. If the interest expense on borrowings were to exceed the net return on the portfolio


Semi-Annual Report						27

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

securities purchased with borrowed funds, the Fund’s use of leverage would result in a lower rate of return than if the Fund was not leveraged.

Management Risk

The risk associated with the fact that the Fund relies on the Investment Adviser’s ability to achieve its investment objective. The Investment Adviser may be incorrect in its assessment of the intrinsic value of the companies whose securities the Fund holds, which may result in a decline in the value of fund shares and failure to achieve its investment objective.

Mid-Cap Company Risk

The risk that investing in securities of mid-cap companies may entail greater risks than investments in larger, more established companies. Mid-cap companies tend to have more narrow product lines, more limited financial resources and a more limited trading market for their stocks, as compared with larger companies. As a result, their stock prices may decline significantly as market conditions change.

MLP Risk

The risk that the MLPs in which the Fund invests will fail to be treated as partnerships for U.S. federal income tax purposes. If an MLP does not meet current legal requirements to maintain its partnership status, or if it is unable to do so because of tax or other law changes, it would be treated as a corporation for U.S. federal income tax purposes. The classification of an MLP as a corporation for U.S. federal income tax purposes could have the effect of reducing the amount of cash available for distribution by the MLP and the value of the Fund’s investment in any such MLP. As a result, the value of the Fund’s shares and the cash available for distribution to Fund shareholders could be materially reduced.

MLP Tax Risk

The risk that the MLPs in which the Fund invests will fail to be treated as partnerships for U.S. federal income tax purposes. If an MLP does not meet current legal requirements to maintain its partnership status, or if it is unable to do so because of tax or other law changes, it would be treated as a corporation for U.S. federal income tax purposes. In that case, the MLP would be obligated to pay U.S. federal income tax (as well as state and local taxes) at the entity level on its taxable income and distributions received by the Fund would be characterized as dividend income to the extent of the MLP’s current and accumulated earnings and profits for federal tax purposes. The classification of an MLP as a corporation for U.S. federal income tax purposes could have the effect of reducing the amount of cash available for distribution by the MLP and the value of the Fund’s investment in any such MLP. As a result, the value of the Fund’s shares

and the cash available for distribution to Fund shareholders could be reduced.

Non-U.S. Securities Risk

The risk associated with investing in non-U.S. issuers. Investments in securities of non-U.S. issuers involve certain risks not involved in domestic investments (for example, fluctuations in foreign exchange rates (for non-U.S. securities not denominated in U.S. dollars); future foreign economic, financial, political and social developments; nationalization; exploration or confiscatory taxation; smaller markets; different trading and settlement practices; less governmental supervision; and different accounting, auditing and financial recordkeeping standards and requirements) that may result in the Fund experiencing more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies. These risks are magnified for investments in issuers tied economically to emerging markets, the economies of which tend to be more volatile than the economies of developed markets. In addition, certain investments in non-U.S. securities may be subject to foreign withholding and other taxes on interest, dividends, capital gains or other income or proceeds. Those taxes will reduce the Fund’s yield on any such securities.

Non-Payment Risk

Debt instruments are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the security experiencing non-payment and a potential decrease in the NAV of the Fund. There can be no assurance that the liquidation of any collateral would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal payments, or that such collateral could be readily liquidated. Moreover, as a practical matter, most borrowers cannot satisfy their debts by selling their assets. Borrowers pay their debts from the cash flow they generate.

Pandemics and Associated Economic Disruption

An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in late 2019 and subsequently spread globally (“COVID-19”). This coronavirus has resulted in and may continue to result in the closing of borders, enhanced health screenings, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general anxiety and economic uncertainty. Health crises caused by outbreaks of disease, such as the coronavirus, may exacerbate other preexisting political, social and economic risks. The impact of this outbreak, and other epidemics and pandemics that may arise in the future, could continue to negatively affect the global economy, as well as the econo-


28						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

mies of individual countries, individual companies and the market in general in significant and unforeseen ways. For example, a widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, and impact the Fund’s ability to complete repurchase requests. Any such impact could adversely affect the Fund’s performance, the performance of the securities in which the Fund invests, lines of credit available to the Fund and may lead to losses on your investment in the Fund. In addition, the increasing interconnectedness of markets around the world may result in many markets being affected by events or conditions in a single country or region or events affecting a single or small number of issuers.

The United States responded to the COVID-19 pandemic and resulting economic distress with fiscal and monetary stimulus packages, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) passed in late March 2020. The CARES Act provides for over $2.2 trillion in resources to small businesses, state and local governments, and individuals adversely impacted by the COVID-19 pandemic. In late December 2020, the government also passed a spending bill that included $900 billion in stimulus relief for the COVID-19 pandemic. Further, in March 2021, the government passed the American Rescue Plan Act of 2021, a $1.9 trillion stimulus bill to accelerate the United States’ recovery from the economic and health effects of the COVID-19 pandemic. In addition, in mid-March 2020, the U.S. Federal Reserve (the “Fed”) cut interest rates to historically low levels and announced a new round of quantitative easing, including purchases of corporate and municipal government bonds. The Fed also enacted various programs to support liquidity operations and funding in the financial markets, including expanding its reverse repurchase agreement operations, which added $1.5 trillion of liquidity to the banking system; establishing swap lines with other major central banks to provide dollar funding; establishing a program to support money market funds; easing various bank capital buffers; providing funding backstops for businesses to provide bridging loans for up to four years; and providing funding to help credit flow in asset-backed securities markets. In addition, the Fed extended credit to small- and medium-sized businesses. As the Fed “tapers” or reduces the amount of securities it purchases pursuant to quantitative easing, and/or if the Fed raises the federal funds rate, there is a risk that interest rates will rise, which could expose fixed-income and related markets to heightened volatility and could cause the value of a fund’s investments, and the fund’s NAV, to decline, potentially suddenly and significantly. As a result, the fund may experience high redemptions and, as a result, increased portfolio turnover, which could increase the costs that the Fund incurs and may negatively

impact the Fund’s performance. There is no assurance that the U.S. government’s support in response to COVID-19 economic distress will offset the adverse impact to securities in which the Fund may invest and future governmental support is not guaranteed.

Real Estate Securities Risk

The securities of issuers that own, construct, manage or sell residential, commercial or industrial real estate are subject to risks in addition to those of other issuers. Such risks include: changes in real estate values and property taxes, overbuilding, variations in rental income, interest rates and changes in tax and regulatory requirements, such as those relating to the environment. Performance of a particular real estate security depends on the structure, cash flow and management skill of the particular company.

Regulatory Risk

The risk that to the extent that legislation or state or federal regulators impose additional requirements or restrictions with respect to the ability of financial institutions to make loans in connection with highly leveraged transactions, the availability of loan interests for investment by the Fund may be adversely affected.

REIT-Specific Risk

Equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skill and are not diversified. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to qualify for special tax treatment under Subchapter M of the Code and to maintain an exemption under the 1940 Act. Any rental income or income from the disposition of such real estate could adversely affect its ability to retain its tax status, which would have adverse tax consequences on its shareholders. Finally, certain REITs may be self-liquidating at the end of a specified term, and run the risk of liquidating at an economically inopportune time.

REIT Tax Risk for REIT Subsidiaries

In addition to the REIT Subsidiary, the Fund may form one or more subsidiaries that will elect to be taxed as REITs beginning with the first year in which they commence material operations. In order for each subsidiary to qualify and maintain its qualification as a REIT, it must satisfy certain requirements set forth in the Code and Treasury Regulations that depend on various factual matters and circumstances. The Fund and the Investment Adviser intend to structure each REIT subsidiary and its activities in a manner designed to satisfy all of these requirements. However, the application


Semi-Annual Report						29

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

of such requirements is not entirely clear, and it is possible that the IRS may interpret or apply those requirements in a manner that jeopardizes the ability of such REIT subsidiary to satisfy all of the requirements for qualification as a REIT.

Restrictions on Resale Risk

Senior Loans may not be readily marketable and may be subject to restrictions on resale. Interests in Senior Loans generally are not listed on any national securities exchange or automated quotation system and no active market may exist for many of the Senior Loans in which the Fund may invest. To the extent that a secondary market may exist for certain of the Senior Loans in which the Fund invests, such market may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.

Securities Lending Risk

The Fund will continue to receive interest on any securities loaned while simultaneously earning interest on the investment of the cash collateral in short-term money market instruments. However, the Fund will normally pay lending fees to broker-dealers and related expenses from the interest earned on such invested collateral. Any decline in the value of a portfolio security that occurs while the security is out on loan is borne by the Fund, and will adversely affect performance. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities, loss of rights in the collateral should the borrower of the securities fail financially and possible investment losses in the investment of collateral. Any loan may be terminated by either party upon reasonable notice to the other party.

Senior Loans Risk

The risk that the issuer of a senior may fail to pay interest or principal when due, and changes in market interest rates may reduce the value of the senior loan or reduce the Fund’s returns. The risks associated with senior loans are similar to the risks of high yield debt securities. Senior loans and other debt securities are also subject to the risk of price declines and to increases in interest rates, particularly long-term rates. Senior loans are also subject to the risk that, as interest rates rise, the cost of borrowing increases, which may increase the risk of default. In addition, the interest rates of floating rate loans typically only adjust to changes in short-term interest rates; long- term interest rates can vary dramatically from short-term interest rates. Therefore, senior loans may not mitigate price declines in a long-term interest rate environment. The Fund’s investments in senior loans are typically below investment grade and are considered speculative because of the credit risk of their issuers.

Short Sales Risk

The risk of loss associated with any appreciation on the price of a security borrowed in connection with a short sale. The Fund may engage in short sales that are not made “against-the-box,” which means that the Fund may sell short securities even when they are not actually owned or otherwise covered at all times during the period the short position is open. Short sales that are not made “against-the-box” involve unlimited loss potential since the market price of securities sold short may continuously increase.

Small-Cap Company Risk

The risk that investing in the securities of small-cap companies either directly or indirectly through investments in ETFs, closed-end funds or mutual funds (“Underlying Funds”) may pose greater market and liquidity risks than larger, more established companies, because of limited product lines and/or operating history, limited financial resources, limited trading markets, and the potential lack of management depth. In addition, the securities of such companies are typically more volatile than securities of larger capitalization companies.

Underlying Funds Risk

The risk associated with investing in Underlying Funds. The Fund may invest in Underlying Funds subject to the limitations set forth in the 1940 Act. Underlying Funds typically incur fees that are separate from those fees incurred directly by the Fund; therefore, the Fund’s purchase of Underlying Funds’ securities results in the layering of expenses. The Fund’s shareholders indirectly bear a proportionate share of the operating expenses of Underlying Funds (including advisory fees) in addition to bearing the Fund’s expenses.

Value Investing Risk

The risk of investing in undervalued stocks that may not realize their perceived value for extended periods of time or may never realize their perceived value. Value stocks may respond differently to market and other developments than other types of stocks. Value-oriented funds will typically underperform when growth investing is in favor.

Note 8. Investment Transactions

Purchases & Sales of Securities

The cost of purchases and the proceeds from sales of investments, other than short-term securities and short-term options, for the six months ended March 31, 2023, were as follows:


U.S. Government Securities⁽¹⁾			Other Securities
Purchases	Sales		Purchases		Sales
$—	$	—	$	32,718,277	$	23,553,118

⁽¹⁾	The Fund did not have any purchases or sales of U.S. Government Securities for the six months ended March 31, 2023.


30						Semi-Annual Report

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

Note 9. Affiliated Issuers

Under Section 2 (a)(3) of the 1940 Act, as amended, a portfolio company is defined as “affiliated” if a fund owns five percent or more of its outstanding voting securities or if the portfolio company is under common control. The table below shows affiliated issuers of the Fund as of March 31, 2023:


Issuer	Shares/ Principal Amount ($) at September 30, 2022		Beginning Value as of September 30, 2022 $		Purchases at Cost $		Proceeds from Sales $			Distribution to Return of Capital $			Net Amortization (Accretion) of Premium/ (Discount) $		Net Realized Gain (Loss) on Sales of Affiliated Issuers $		Change in Unrealized Appreciation (Depreciation) $			Ending Value as of March 31, 2023 $		Shares/ Principal Amount ($) March 31, 2023		Affiliated Income $		Cap Gain Distributions $
Majority Owned, Not Consolidated
None
Other Affiliates
Terrestar Corporation (U.S. Equity)		169,531		61,209,167		—		—			—			—		—		(423,827	)		60,785,340		169,531		—		—
GAF REIT (U.S. Equity)		1,146,313		16,028,896		—		—			—			—		—		(562,789	)		15,466,107		1,146,313		—		—
NexPoint Diversified Real Estate Trust (U.S. Equity)		549,863		6,900,781		—		—			—			—		—		(1,193,203	)		5,707,578		549,863		164,959		—
NexPoint Real Estate Finance (U.S. Equity)		1,322,385		19,809,333		—		(8,187,526	)		—			—		576,775		1,926,127			14,124,709		901,385		1,278,642		—
NexPoint Residential Trust, Inc. (U.S. Equity)		168,760		7,798,400		143,745		—			(118,672	)		—		—		(311,010	)		7,512,463		172,028		19,551		—
United Development Funding IV (U.S. Equity)		280,000		260,400		—		—			(18,200	)		—		—		(21,560	)		220,640		280,000		16,786		—
Terrestar Corporation (U.S. Senior Loan)		19,996,652		19,854,675		1,131,708		—			—			703		—		83,171			21,070,257		21,128,360		1,148,551		—
NexPoint SFR Operating Partnership, LP (U.S. Senior Loan)		5,000,000		5,000,000		—		—			—			—		—		(62,500	)		4,937,500		5,000,000		187,500		—
NHT Operating Partnership LLC Secured Promissory Note (U.S. Senior Loan)		8,500,000		7,871,000		—		—			—			—		—		259,250			8,130,250		8,500,000		233,750		—
GAF REIT Sub II, LLC (U.S. LLC Interest)		349		9,715,224		—		—			—			—		—		(70,330	)		9,644,894		349		—		—
GAF REIT Sub III, LLC (U.S. LLC Interest)		—		—		8,187,526		—			—			—		—		(1,590,456	)		6,597,070		100,000		—		—
SFR WLIF III, LLC (U.S. LLC Interest)		3,789,008		3,565,226		—		—			—			—		—		(52,815	)		3,512,411		3,789,008		232,079		—
NexPoint Diversified Real Estate Trust (U.S. Preferred Stock)		—		—		220,395		—			—			—		—		(897	)		219,498		13,831		4,754		—
BB Votorantim Highland Infrastructure LLC (Non-U.S. Registered Investment Company)		10,000		3,395,347		—		—			—			—		—		1,519			3,396,866		10,000		—		—
Highland Income Fund (U.S. Registered Investment Company)		334,005		3,246,529		—		—			—			—		—		(310,625	)		2,935,904		334,005		154,310		—
NexPoint Event Driven Fund (U.S. Registered Investment Company)		706,236		10,445,237		—		—			—			—		—		98,873			10,544,110		706,236		—		—
NexPoint Merger Arbitrage Fund (U.S. Registered Investment Company)		54,992		1,080,585		27,653		—			—			—		—		(10,190	)		1,098,048		56,484		27,653		—
Other Controlled
None

Total		42,028,094		176,180,800		9,711,027		(8,187,526	)		(136,872	)		703		576,775		(2,241,262	)		175,903,645		42,857,393		3,468,535		—


Semi‑Annual Report						31

NOTES TO FINANCIAL STATEMENTS (unaudited) (concluded)



March 31, 2023		Highland Global Allocation Fund

Note 10. Legal Matters

The Fund received a shareholder demand letter dated March 1, 2018, from an individual purporting to be a shareholder of the Fund (the “Demand Letter”). The Demand Letter alleged that the current and former Board breached their fiduciary duties, and the Investment Adviser breached its advisory agreement, in relation to the Fund’s investment in shares of an affiliated mutual fund, the Highland Energy MLP Fund (previously a series of the Trust). The Fund held $15.5 million (or 61.5%) of the Highland Energy MLP Fund, which has now been liquidated. Upon receipt of the Demand Letter, the Board formed a Demand Review Committee (“DRC”) comprised entirely of independent trustees to investigate these claims and to make a recommendation to the Board regarding whether pursuit of these claims is in the best interests of the Fund. Aided by independent counsel to the committee, the DRC engaged in a thorough and detailed review of the allegations contained in the Demand Letter. Upon completion of its evaluation, the DRC recommended that the Fund’s independent trustees, who represent a majority of the Board, reject the demand specified in the shareholder Demand Letter.

After considering the report of the DRC, the independent trustees unanimously agreed and rejected the demand, noting that the Demand Letter contained material factual errors and incorrect assumptions, and the proposed suit was meritless and should not be pursued. A copy of the report was provided to the purported shareholder and her counsel.

Notwithstanding the foregoing, the purported shareholder (the“Plaintiff”) filed a shareholder derivative and class action lawsuit against certain members of the Board and the Investment Adviser on September 5, 2018 (the “Shareholder Litigation”). The Fund is a nominal defendant in the litigation, which is brought on behalf of the Fund. On May 26, 2020, the Court granted a motion to dismiss for all defendants on all claims. The Court concluded that the contract and fiduciary duty claims are barred by the Board’s independent and good-faith investigation of those claims, and that the purported class action claims can only be filed derivatively. The case is Lanotte v. Highland Global Allocation Fund et al, 3:18-cv-02360 (N.D. Tex.). The shareholder appealed the dismissal to the United States Court of Appeals for the Fifth Circuit. Oral argument was heard on March 2, 2021. On March 28, 2023, the United States Court of Appeals for the Fifth Circuit affirmed the decision to dismiss the Plaintiff’s case.

Note 11. Asset Coverage

The Fund is required to maintain 300% asset coverage with respect to amounts outstanding (excluding short-term borrowings). Asset coverage is calculated by subtracting the Fund’s total liabilities, not including any amount representing

bank loans and senior securities, from the Fund’s total assets and dividing the result by the principal amount of the borrowings outstanding. As of the dates indicated below, the Fund’s debt outstanding and asset coverage was as follows:


Date	Total Amount Outstanding ($)		% of Asset Coverage of Indebtedness
3/31/2023		3,563,000		7,522.5
9/30/2022		—		—
9/30/2021		—		—
9/30/2020		—		—
9/30/2019		120,295,348		346.2
9/30/2018		138,725,439		395.2
9/30/2017		—		—
9/30/2016		40,000,000		2,414.9
9/30/2015		—		—
9/30/2014		—		—
9/30/2013		—		—

Note 12. Indemnification

Under the Fund’s organizational documents, the officers and Trustees have been granted certain indemnification rights against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated.

Note 13. Subsequent Events

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there were no subsequent events to report which have not already been recorded or disclosed in these financial statements and accompanying notes.


32						Semi-Annual Report

ADDITIONAL INFORMATION (unaudited)



March 31, 2023		Highland Global Allocation Fund

Investment Objective and Strategy Overview

The Fund’s investment objective is to seek long-term growth of capital and future income (future income means the ability to pay dividends in the future). Please refer to Note 8 for a discussion of the Fund’s current investment risks.

The Fund seeks to achieve its investment objectives by investing in a portfolio of U.S. and foreign equity, debt and money market securities. Under normal market conditions, the Fund intends to invest at least 50% of its net assets in equity securities and at least 40% (plus any borrowings for investment purposes) of its net assets in securities of non-U.S. issuers. The Fund intends to invest approximately 40% or more of its net assets in securities of non-U.S. issuers at all times, however, in the event of unfavorable market conditions the Fund may invest less than 40% (but not less than 30%) of its assets in securities of non-U.S. issuers. For purposes of determining whether securities held by the Fund are securities of a non-U.S. issuer, a company is considered to be a non-U.S. issuer if the company’s securities principally trade on a market outside of the United States, the company derives a majority of its revenues or profits outside of the United States, the company is not organized in the United States, or the company is significantly exposed to the economic fortunes and risks of regions outside the United States.

Equity securities in which the Fund may invest include common stock, preferred stock, securities convertible into common stock, rights and warrants or securities or other instruments whose price is linked to the value of common stock. The equity securities in which the Fund invests may be of any capitalization, may be denominated in any currency and may be located in emerging markets.

The Fund may also invest in debt securities of any kind, including debt securities of varying maturities, debt securities paying a fixed or fluctuating rate of interest, inflation-indexed bonds, structured notes, loan assignments, loan participations, asset-backed securities, debt securities convertible into equity securities, and securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, by foreign governments or international agencies or supranational entities or by domestic or foreign private issuers. The Fund may invest in debt securities of any credit quality, including below investment grade securities (also known as “high yield securities” or “junk securities”). Such securities are rated below investment grade by a nationally recognized statistical rating organization (“NRSRO”) or are unrated but deemed by the Investment Adviser to be of comparable quality. The Fund may invest without limitation in below investment grade or unrated securities, including in insolvent borrowers or borrowers in default.

The Fund may also invest in senior loans to domestic or foreign corporations, partnerships and other entities that operate in a variety of industries and geographic regions (“Borrowers”) (“Senior Loans”). Senior Loans are business loans that have a right to payment senior to most other debts of the Borrower.

The Fund invests primarily in companies that the portfolio manager believes have solid growth prospectus and/or attractive valuations. The portfolio manager’s value management style employs a relative approach to identify companies across all economic sectors and geographic regions that are undervalued relative to the market, their peers, their historical valuation or their growth rate. In addition, the Fund’s portfolio manager may employ event-driven investment strategies that analyze transactions in order to predict a likely outcome and invest the Fund’s assets in a way that seeks to benefit from that outcome.

When choosing investment markets, Fund management considers various factors, including economic and political conditions, potential for economic growth and possible changes in currency exchange rates. In addition to investing in securities of non-U.S. issuers, the Fund actively manages its exposure to foreign currencies through the use of forward currency contracts and other currency derivatives. The Fund may own foreign cash equivalents or foreign bank deposits as part of the Fund’s investment strategy. The Fund may also invest in non-U.S. currencies for hedging and speculative purposes.

The Fund’s portfolio may include pooled investment vehicles, including exchange-traded funds (“ETFs”), that provide exposure to foreign equity securities and that invest in both developed and emerging markets, including ETFs that seek to track the performance of securities of a single country. The Fund may invest up to 5% of its net assets in warrants and may also use derivatives, primarily swaps (including equity, variance and volatility swaps), options and futures contracts on securities, interest rates, commodities and/or currencies, as substitutes for direct investments the Fund can make and, to the extent permitted by the 1940 Act, to hedge various investments for risk management and speculative purposes.

The Fund will limit its investments in pooled investment vehicles that are excluded from the definition of “investment company” under the 1940 Act by Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, such as private equity funds and hedge funds, to no more than 15% of its net assets. This limitation does not apply to any collateralized loan obligations, collateralized debt obligations and/or collateralized mortgage obligations, certain of which may rely on Section 3(c)(1) or 3(c)(7) of the 1940 Act.


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ADDITIONAL INFORMATION (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

The Fund seeks to provide exposure to the investment returns of real assets that trade in the commodity markets, including through investment in certain commodity-linked instruments and pooled investment vehicles, such as master limited partnership (“MLP”) investments that are principally engaged in one or more aspects of the exploration, production, processing, transmission, marketing, storage or delivery of energy-related commodities, such as natural gas, natural gas liquids, coal, crude oil or refined petroleum products, in addition to exchange-traded notes and ETFs that generate returns tied to a particular commodity or commodity market index.

Except as otherwise expressly noted in the Statement of Additional Information (“SAI”), all percentage limitations and ratings criteria apply at the time of purchase of securities, except that the limit on borrowing described herein is applied on a continual basis.

The Fund may borrow an amount up to 33 1/3% of its total assets (including the amount borrowed). The Fund may borrow for investment purposes and for temporary, extraordinary or emergency purposes. To the extent the Fund borrows more money than it has cash or short-term cash equivalents and invests the proceeds, the Fund will create financial leverage. The use of borrowing for investment purposes increases both investment opportunity and investment risk.

The Fund’s portfolio manager may sell a security for a variety of reasons, such as to invest in a company offering or superior investment opportunities.

The portfolio manager may sell short securities of a company that it believes: (i) is overvalued relative to normalized business and industry fundamentals or to the expected growth that the portfolio manager believes the company will achieve; (ii) has a weak competitive position relative to peers; (iii) engages in questionable accounting practices; (iv) shows declining cash flow and/or liquidity; (v) has distribution estimates that the portfolio manager believes are too high; (vi) has weak competitive barriers to entry; (vii) suffers from deteriorating industry and/or business fundamentals; (viii) has a weak management team; (ix) will see multiple contraction; (x) is not adapting to changes in technological, regulatory or competitive environments; or (xi) provides a hedge against the Fund’s long exposure, such as a broad based market ETF. Technical analysis may be used to help in the decision making process. The Fund may engage in short sales that are not made “against-the-box,” which means that the Fund may sell short securities even when they are not actually owned or offset at all times during the period the short position is open and could result in unlimited loss.

Additional Portfolio Information

The Investment Adviser and its affiliates manage other accounts, including registered and private funds and individual accounts. Although investment decisions for the Fund are made independently from those of such other accounts, the Investment Adviser may, consistent with applicable law, make investment recommendations to other clients or accounts that may be the same or different from those made to the Fund, including investments in different levels of the capital structure of a company, such as equity versus senior loans, or that involve taking contradictory positions in multiple levels of the capital structure. The Investment Adviser has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, this may create situations where a client could be disadvantaged because of the investment activities conducted by the Investment Adviser for other client accounts. When the Fund and one or more of such other accounts is prepared to invest in, or desire to dispose of, the same security, available investments or opportunities for each will be allocated in a manner believed by the Investment Adviser to be equitable to the Fund and such other accounts. The Investment Adviser also may aggregate orders to purchase and sell securities for the Fund and such other accounts. Although the Investment Adviser believes that, over time, the potential benefits of participating in volume transactions and negotiating lower transaction costs should benefit all accounts including the Fund, in some cases these activities may adversely affect the price paid or received by the Fund or the size of the position obtained or disposed of by the Fund.

Disclosure of Fund Expenses

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases and redemption fees; and (2) ongoing costs, including management fees; distribution (12b-1) and service fees; and other Fund expenses. This example is intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period October 1, 2022 through March 31, 2023, unless otherwise indicated. This table illustrates your Fund’s costs in two ways:

Actual Expenses: The first part of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value


34						Semi-Annual Report

ADDITIONAL INFORMATION (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes: The second part of the table provides information about hypothetical account values and hypothetical expenses based on your Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund’s actual return. The actual expense ratio includes voluntary fee waivers or expense reimbursements by the Fund’s investment adviser. The expense ratio would be higher had the fee waivers or expense reimbursements not been in effect. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees. Therefore, the second part of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.


	Beginning Account Value 10/1/22 ($)		Ending Account Value 03/31/23 ($)		Annualized Expense Ratios			Expenses Paid During Period⁽¹⁾ ($)
Actual Fund Return
		1,000.00		1,078.90		1.85	%		9.58
Hypothetical 5% Return (before expenses)
		1,000.00		1,015.71		1.85	%		9.30

(1)	Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, divided by the number of days in the full fiscal year (182/365).

Approval of Investment Advisory Agreement

The Fund has retained NexPoint Asset Management, L.P. (the “Investment Adviser”) to manage the assets of the Fund pursuant to an investment advisory agreement between the Investment Adviser and the Fund (the “Agreement”). The Agreement has been approved by the Fund’s Board of Trustees, including a majority of the Independent Trustees. The Agreement continues in effect from year-to-year, provided that such continuance is specifically approved at least annually by the vote of holders of at least a majority of the outstanding shares of the Fund or by the Board of Trustees and,

in either event, by a majority of the Independent Trustees of the Fund casting votes in person at a meeting called for such purpose.

During a meeting with the Investment Adviser held on August 19, 2022, and separately with independent counsel on September 1, 2022, the Board of Trustees considered information bearing on the continuation of the Agreement for an additional one-year period. The Board of Trustees further discussed and considered information with respect to the continuation of the Agreement at Board meetings held on September 15-16, 2022 and September 28, 2022.

Following review and discussion of the Agreement and information provided by the Adviser discussed below, at a meeting held on October 21, 2022†, the Board of Trustees, including the Independent Trustees, approved the continuance of the Agreement for a one-year period commencing on November 1, 2022. As part of its review process, the Board of Trustees requested, through Fund counsel and independent legal counsel, and received from the Investment Adviser, various information and written materials, including: (1) information regarding the financial soundness of the Investment Adviser and the profitability of the Agreement to the Investment Adviser; (2) information on the advisory, legal and compliance personnel of the Investment Adviser, including ongoing updates regarding the Highland Capital Management L.P. (“HCMLP”) bankruptcy; (3) information regarding the role of Skyview Group (“Skyview”) as a service provider to the Investment Adviser pursuant to the services agreement between Skyview and the Investment Adviser (the “Skyview Services Agreement”) to assist the Investment Adviser in providing certain services to the Fund pursuant to the Agreement, as well as information regarding the Investment Adviser’s oversight role over Skyview; (4) information on the internal compliance procedures of each of the Investment Adviser, including policies and procedures for personal securities transactions, conflicts of interest and with respect to cybersecurity, business continuity and disaster recovery; (5) comparative information showing how the Fund’s fees and operating expenses compare to those of other accounts of the Investment Adviser, if any, with investment strategies similar to those of the Fund; (6) information on the investment performance of the Fund, including comparisons of the Fund’s performance against that of other registered investment companies and comparable funds managed by the Investment Adviser that follow investment strategies similar to those of the Fund; (7) information regarding brokerage and portfolio transactions; and (8) information on any legal proceedings or regulatory audits or investigations affecting the Investment Adviser, including potential claims in the HCMLP bankruptcy. After the August 2022 meeting and throughout the annual contract renewal process, including at


Semi-Annual Report						35

ADDITIONAL INFORMATION (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

the September 15-16, 2022 and September 28, 2022 Board meetings, the Board of Trustees requested that the Investment Adviser provide additional information and responses regarding various matters in connection with the Board of Trustee’s review and consideration of the Agreement. It was further noted that throughout the process, the Board of Trustees, including separately the Independent Trustees, had also met in executive sessions to further discuss the materials and information provided.

In addition, the Board of Trustees received an independent report from FUSE Research Network (“FUSE”), an independent third-party provider of investment company data, relating to the Fund’s performance and expenses compared to the performance and expenses of a group of funds deemed by FUSE to be comparable to the Fund (the “peer group”), and to a larger group of comparable funds (the “peer universe”). The Board of Trustees also received data relating to the Fund’s leverage and distribution rates as compared to its peer group.

The Board of Trustees discussed the materials and information provided by the Investment Adviser in detail over the course of multiple meetings, including the Investment Adviser’s responses to the Board of Trustees’ specific written questions, comparative fee and performance information and information concerning the Investment Adviser’s business and financial condition. The factors considered and the determinations made by the Board of Trustees in connection with the approval of the renewal of the Agreement with the Investment Adviser are set forth below but are not exhaustive of all matters that were discussed by the Board of Trustees.

The Board of Trustees’ evaluation process with respect to the Investment Adviser is an ongoing one. In this regard, the Board of Trustees also took into account discussions with management and information provided to the Board of Trustees at meetings of the Board of Trustees over the course of the year and in past years with respect to the services provided by the Investment Adviser to the Fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Investment Adviser with respect to the Fund. The information received and considered by the Board of Trustees in connection with the Board’s determination to approve the continuance of the Agreement was both written and oral.

The Board of Trustees reviewed various factors that were discussed in a legal memorandum provided by independent counsel regarding trustee responsibilities in considering the Agreement, the detailed information provided by the Investment Adviser and other relevant information. The Board of Trustees also considered other factors (including conditions and trends prevailing generally in the economy,

the securities markets, and the effect of the COVID-19 pandemic on the Fund and the industry). Some of the factors that figured particularly in the Board of Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. In addition, the Board of Trustees’ conclusions may be based in part on its consideration of the advisory arrangements in prior years and on the Board of Trustees’ ongoing regular review of fund performance and operations throughout the year. The Board of Trustees’ conclusions as to the approval of the Agreement were based on a comprehensive consideration of all information provided to the Board of Trustees without any single factor being dispositive in and of itself.

Throughout the process, the Board of Trustees had the opportunity to ask questions of and request additional information from the Investment Adviser. The Board of Trustees was assisted by legal counsel for the Trust and the Independent Trustees were also separately assisted by independent legal counsel throughout the process. The Board of Trustees also met separately without representatives of the Investment Adviser present. The Independent Trustees were advised by and met in executive sessions with their independent legal counsel at which no representatives of management were present to discuss the proposed continuation of the Agreement.

The nature, extent, and quality of the services to be provided by the Investment Adviser.

The Board of Trustees considered the Investment Adviser’s services as investment manager to the Fund.

The Board of Trustees considered the portfolio management services to be provided by the Investment Adviser under the Agreement and the activities related to portfolio management, including use of technology, research capabilities and investment management staff. The Board of Trustees also considered the relevant experience and qualifications of the personnel providing advisory services, including the background and experience of the members of the Fund’s portfolio management team. The Board of Trustees reviewed the management structure, assets under management and investment philosophies and processes of the Investment Adviser, including with respect to liquidity management. The Board of Trustees also reviewed and discussed information regarding the Investment Adviser’s compliance policies, procedures and personnel, including compensation arrangements, and with respect to valuation, cybersecurity, business continuity and disaster recovery. The Board of Trustees also considered the Investment Adviser’s risk management and monitoring processes. The Board of Trustees took into account the terms of the Agreement and considered that, the Investment Adviser, subject to the direction of the Board of Trustees, is responsible for providing advice and guidance with


36						Semi-Annual Report

ADDITIONAL INFORMATION (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

respect to the Fund and for managing the investment of the assets of the Fund. The Board of Trustees also took into account that the scope of services provided to the Fund and the undertakings required of the Investment Adviser in connection with those services, including with respect to its own and the Fund’s compliance programs, had expanded over time as a result of regulatory, market and other developments. The Board of Trustees also considered operational, staffing and organizational changes with respect to the Investment Adviser over the prior year, including in connection with the transitions of certain shared services arrangements, and the fact that there were no material operational or compliance issues with respect to the Fund or decrease in the level and quality of services provided to the Fund as a result. The Board of Trustees also considered the Investment Adviser’s legal and regulatory history. The Board of Trustees also considered the Investment Adviser’s current litigation matters related to the HCMLP bankruptcy and took into account the Investment Adviser’s representation that such matters would not impact the quality and level of services the Investment Adviser will provide to the Fund under the Agreement.

The Investment Adviser’s services in coordinating and overseeing the activities of the Fund’s other service providers, as well of the services provided by Skyview to the Investment Adviser under the Skyview Services Agreement, were also considered. The Board of Trustees also evaluated the expertise and performance of the personnel of the Investment Adviser who performed services for the Fund throughout the year. They also considered the quality of the Investment Adviser’s compliance oversight program with respect to the Fund’s service providers. The Board of Trustees also considered both the investment advisory services and the nature, quality and extent of any administrative and other non-advisory services, including shareholder servicing, that are provided to the Fund and its shareholders by the Investment Adviser and its affiliates, as well as considered the services provided by Skyview to the Investment Adviser under the Skyview Services Agreement. The Board of Trustees noted that the level and quality of services to the Fund by the Investment Adviser and its affiliates had not been materially impacted by the HCMLP bankruptcy and took into account the Investment Adviser’s representations that the level and quality of the services provided by the Investment Adviser and their affiliates, as well as of those services provided by Skyview to the Investment Adviser under the Skyview Services Agreement, would continue to be provided to the Fund at the same or higher level and quality.

The Board of Trustees also considered the significant risks assumed by the Investment Adviser in connection with the services provided to the Fund, including entrepreneurial risk and ongoing risks including investment, operational, enterprise, litigation, regulatory and compliance risks with respect

to the Fund. The Board of Trustees also noted various cost savings initiatives that had been implemented by the Investment Adviser with respect to the Fund and the other funds in the Highland complex over the years. The Board of Trustees considered the Investment Adviser’s financial condition and financial wherewithal. The Board of Trustees also considered the financial condition and operations of the Investment Adviser during the COVID-19 pandemic and noted that there had been no material disruption of the Investment Adviser’s services to the Fund and that the Investment Adviser had continued to provide the same level, quality and extent of services to the Fund.

The Board of Trustees also noted that on a regular basis it receives and reviews information from the Fund’s Chief Compliance Officer (CCO) regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board of Trustees also took into account the CCO’s ongoing reports concerning the CCO’s oversight of the risk assessment processes.

In considering the nature, extent, and quality of the services provided by the Investment Adviser, the Board of Trustees also took into account its knowledge of the Investment Adviser’s management and the quality of the performance of its duties, through discussions and reports and interactions during the preceding year and in past years.

The Board of Trustees concluded that the Investment Adviser had the quality and depth of personnel and investment methods essential to performing its duties under the Agreement, and that the nature and the quality of such advisory services supported the approval of the Agreement.

The Investment Adviser’s historical performance.

In considering the Fund’s performance, the Board of Trustees noted that it reviews at its regularly scheduled meetings information about the Fund’s performance results. The Board of Trustees considered the performance of the Fund as described in the quarterly and other reports provided by management over the course of the year. The Board of Trustees noted that the Investment Adviser reviewed with the Board of Trustees on at least a quarterly basis detailed information about the Fund’s performance results, portfolio composition and investment strategies. The Board of Trustees reviewed the historical performance of the Fund over various time periods and reflected on previous discussions regarding matters bearing on the Investment Adviser’s performance at its meetings throughout the year. The Board of Trustees discussed the historical performance of the Fund and considered the relative performance of the Fund and its portfolio management team as compared to that of the Fund’s peer group as selected by FUSE, as well as comparable indices.


Semi-Annual Report						37

ADDITIONAL INFORMATION (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

The Board of Trustees also reviewed and considered the FUSE report, which provided a statistical analysis comparing the Fund’s investment performance, expenses and fees to those of comparable funds for various periods ended June 30, 2022 and management’s discussion of the same, including the effect of current market conditions on the Fund’s more-recent performance. The Board of Trustees also received a review of the data contained in the FUSE report from representatives of FUSE. The Board of Trustees noted that while it found the data provided by FUSE, the independent third-party data provider, generally useful, it recognized its limitations, including in particular that the data may vary depending on the end date selected and the results of the performance comparisons may vary depending on the selection of the peer group. The Board of Trustees also took into account management’s discussion of the category in which the Fund was placed for comparative purposes, including any differences between the Fund’s investment strategy and the strategy of the funds in the Fund’s respective category, as well as compared to the peer group selected by FUSE. The Board of Trustees also took into account its discussions with management over the course of the year regarding factors that contributed to the performance of the Fund, including presentations with the Fund’s portfolio managers.

Among other data relating specifically to the Fund’s performance, the Board of Trustees considered that the Fund outperformed its benchmark, the FTSE All World Index, for the one-year period ended June 30, 2002, but underperformed its benchmark for the three-, five-, and ten-year periods ended June 30, 2022. The Board then considered that the Fund had outperformed its peer group median for the one- and three-year periods ended June 30, 2022, but underperformed its peer group median for the five- and 10-year periods ended June 30, 2022. The Board of Trustees also took into account the unique mandate of the Fund as compared to the other funds in its peer group. The Board also took into account management’s discussion of the Fund’s performance, including a discussion of certain of the Fund’s holdings and plans to potentially address the Fund’s discount.

The Board of Trustees concluded that the Fund’s overall performance and other relevant factors supported the continuation of the Agreement with respect to the Fund for an additional one-year period.

The cost of the services to be provided by the Investment Adviser and the profits to be realized by the Investment Adviser and its affiliates from relationship with the Fund.

The Board of Trustees also gave consideration to the fees payable under the Agreement, the expenses the Investment Adviser incur in providing advisory services and the

profitability to the Investment Adviser from managing the Fund, including: (1) information regarding the financial condition of the Investment Adviser and regarding profitability from the relationship with the Fund; (2) information regarding the total fees and payments received by the Investment Adviser for its services and, with respect to the Investment Adviser, whether such fees are appropriate given economies of scale and other considerations; (3) comparative information showing (a) the fees payable under the Agreement versus the investment advisory fees of certain registered investment companies and comparable funds that follow investment strategies similar to those of the Fund and (b) the expense ratios of the Fund versus the expense ratios of certain registered investment companies and comparable funds that follow investment strategies similar to those of the Fund; and (4) information regarding the total fees and payments received and the related amounts waived and/or reimbursed by the Investment Adviser and whether such fees are appropriate.

The Board of Trustees considered that the Fund’s total net expenses were in line with its peer group and that its advisory fees were lower than its peer group. The Board took into account management’s discussion of the Fund’s expenses and the amounts waived and/or reimbursed by the Investment Adviser.

The Board of Trustees also considered the so-called “fallout benefits” to the Investment Adviser with respect to the Fund, such as the reputational value of serving as Investment Adviser to the Fund, potential fees paid to the Investment Adviser’s affiliates by the Fund or portfolio companies for services provided, the benefits of scale from investment by the Fund in affiliated funds, and the benefits of research made available to the Investment Adviser by reason of brokerage commissions (if any) generated by the Fund’s securities transactions. The Board of Trustees concluded that the benefits received by the Investment Adviser and its affiliates were reasonable in the context of the relationship between the Investment Adviser and the Fund.

After such review, the Board of Trustees determined that the profitability to the Investment Adviser and its affiliates from their relationship with the Fund was not excessive.

The extent to which the economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of shareholders.

The Board of Trustees also considered the effect of the Fund’s growth in assets under management on its fees. The Board of Trustees noted that the Fund does not currently contain breakpoints in its advisory fee schedule. The Board of Trustees took into account the Adviser’s discussion of the fee structure, including that the Fund benefits from a waiver


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ADDITIONAL INFORMATION (unaudited) (continued)



March 31, 2023		Highland Global Allocation Fund

of a portion of its advisory fees, which the Investment Adviser believes can be more effective than breakpoints at controlling overall costs borne by shareholders. The Board also noted the FUSE report, which compared fees among peers, and included the Fund’s contractual fee schedule at different asset levels. The Board noted that the Fund’s contractual advisory fee, with the exception of one fund, is lower than its peer group at all asset levels. The Board of Trustees noted that, if the Fund’s assets increase over time, the Fund may realize other economies of scale if assets increase proportionally more than certain other fixed expenses. The Board of Trustees concluded that the fee structure is reasonable, and with respect to the Investment Adviser, should result in a sharing of economies of scale in view of the information provided. The Board of Trustees determined to continue to review the ways and extent to which economies of scale might be shared between the Investment Adviser, on the one hand, and shareholders of the Fund, on the other, as the assets in the Fund grow.

Conclusion.

Following a further discussion of the factors above, it was noted that in considering the approval of the Agreement, no single factor was determinative to the decision of the Board of Trustees. Rather, after weighing all factors and considerations, including those discussed above, the Board of Trustees, including separately, the Independent Trustees, unanimously agreed that the Agreement, including the advisory fee to be paid to the Investment Adviser, is fair and reasonable to the Fund in light of the services that the Investment Adviser provides, the expenses that it incurs and the reasonably foreseeable asset levels of the Fund.

†

On March 25, 2020, as a result of health and safety measures put in place to combat the global COVID-19 pandemic, the Securities and Exchange Commission issued an exemptive order (the “Order”) pursuant to Sections 6(c) and 38(a) of the Investment Company Act of 1940, as amended (the “1940 Act”), that temporarily exempts registered investment management companies from the in-person voting requirements under the 1940 Act, subject to certain requirements, including that votes taken pursuant to the Order are ratified at the next in-person meeting. The Board’s approval of the continuance of the Agreement occurred at a virtual meeting in reliance on the Order.

Dividend Reinvestment Plan

Unless the registered owner of Common Shares elects to receive cash by contacting Global Shares (“Global Shares” or the “Plan Agent”), as agent for shareholders in administering the Plan, a registered owner will receive newly issued Common Shares for all dividends declared for Common Shares of the Fund. If a registered owner of Common Share selects not to participate in the Plan, they will receive all dividends in cash paid by check mailed directly to them (or, if the shares are held in street or other nominee name, then to such nominee) by Global Shares, as dividend disbursing agent. Shareholders may elect not to participate in the Plan

and to receive all dividends in cash by sending written instructions or by contacting Global Shares, as dividend disbursing agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by contacting the Plan Agent before the dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend. Some brokers may automatically elect to receive cash on the shareholders’ behalf and may reinvest that cash in additional Common Shares of the Fund for them. The Plan Agent will open an account for each shareholder under the Plan in the same name in which such shareholder’s Common Shares are registered. Whenever the Fund declares a dividend payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Agent through receipt of additional unissued but authorized Common Shares from the Fund (“newly issued Common Shares”). The number of newly issued Common Shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the lesser of (i) the net asset value per Common Share determined on the Declaration Date and (ii) the market price per Common Share as of the close of regular trading on the New York Stock Exchange (the “NYSE”) on the Declaration Date. The Plan Agent maintains all shareholders’ accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions of the participants. In the case of shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder’s name and held for the account of beneficial owners who participate in the Plan. There will be no brokerage charges with respect to Common Shares issued directly by the Fund. The automatic reinvestment of dividends will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends. Accordingly, any taxable dividend received by a participant that is reinvested in additional Common Shares will be subject to federal (and possibly state and local) income tax even though such participant will not receive a corresponding amount of cash with which to pay such taxes. Participants who request a sale of shares through the Plan Agent are subject to a $2.50 sales


Semi-Annual Report						39

ADDITIONAL INFORMATION (unaudited) (concluded)



March 31, 2023		Highland Global Allocation Fund

fee and pay a brokerage commission of $0.05 per share sold. The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants. All correspondence concerning the Plan should be directed to the Plan Agent.

Control Persons and Principal Shareholders

As of March 31, 2023, the Trustees and officers of the Fund as a group owned less than 1% of the then outstanding shares of each class of shares of the Fund.

Control persons are presumed to control a Fund for purposes of voting on matters submitted to a vote of shareholders due to their beneficial ownership of 25% or more of a Fund’s outstanding voting securities.

Unless otherwise noted, as of March 31, 2023, no persons known by the Fund owned 25% or more of Fund’s outstanding shares.

A person who beneficially owns, either directly or indirectly, more than 25% of the voting securities of the Fund or acknowledges the existence of such control may be presumed to control the Fund. A control person could potentially control the outcome of any proposal submitted to the shareholders for approval, including changes to the Fund’s fundamental policies or terms of the investment advisory agreement with the Investment Adviser.


40						Semi-Annual Report

IMPORTANT INFORMATION ABOUT THIS REPORT

Investment Adviser

NexPoint Asset Management, L.P.

300 Crescent Court, Suite 700

Dallas, TX 75201

Transfer Agent

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Underwriter

NexPoint Securities, Inc.

200 Crescent Court, Suite 700

Dallas, TX 75201

Custodian

Bank of New York Mellon

240 Greenwich Street

New York, NY 10286

Independent Registered Public Accounting Firm

Cohen & Company, Ltd.

1350 Euclid Ave., Suite 800

Cleveland, OH 44115

Fund Counsel

K&L Gates LLP

1 Lincoln Street

Boston, MA 02111

This report has been prepared for shareholders of Highland Global Allocation Fund (the “Fund”). As of January 1, 2021, paper copies of the Fund’s shareholder reports will no longer be sent by mail. Instead, the reports will be made available on https://www.nexpointassetmgmt.com/resources/#forms, and you will be notified and provided with a link each time a report is posted to the website. You may request to receive paper reports from the Fund or from your financial intermediary free of charge at any time. For additional information regarding how to access the Fund’s shareholder reports, or to request paper copies by mail, please call shareholder services at 1‑877‑665‑1287.

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to their portfolio securities, and the Fund’s proxy voting records for the most recent 12-month period ended June 30, are available (i) without charge, upon request, by calling 1-877-665-1287 and (ii) on the Securities and Exchange Commission’s website at http://www.sec.gov.

The Fund files its complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its report on Form N-PORT within sixty days after the end of the period. The Fund’s Form N-PORT are available on the Commission’s website at http://www.sec.gov and also may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the Public Reference Room may be obtained by calling 1-800-SEC-0330. Shareholders may also obtain the Form N-PORT by visiting the Fund’s website at www.nexpointassetmgmt.com.

The Statement of Additional Information includes additional information about the Fund’s Trustees and are available upon request without charge by calling 1-877-665-1287.


Semi-Annual Report						41

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219


Highland Global Allocation Fund		Semi-Annual Report, March 31, 2023


www.nexpointassetmgmt.com		GAF-SAR-03/23

(a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the Semi-Annual Report to Shareholders filed under Item 1 of this form.

No such purchases were made by or on behalf of the Registrant or any “affiliated purchaser” during the period covered by this report.

There have been no material changes to the procedures by which the shareholders may recommend nominees to the Registrant’s Board of Trustees.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Certification Pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act

I, Frank Waterhouse, Treasurer, Principal Accounting Officer, Principal Financial Officer, and Principal Executive Officer of Highland Global Allocation Fund (the “Registrant”), certify that:

N-2 - USD ($)

12 Months Ended

Mar. 31, 2023

Sep. 30, 2022

Sep. 30, 2021

Sep. 30, 2020

Sep. 30, 2019

Sep. 30, 2018

Sep. 30, 2017

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2013

Cover [Abstract]

Entity Central Index Key

0001622148

Amendment Flag

false

Document Type

N-CSRS

Entity Registrant Name

HIGHLAND GLOBAL ALLOCATION FUND

Financial Highlights [Abstract]

Senior Securities [Table Text Block]


Date	Total Amount Outstanding ($)		% of Asset Coverage of Indebtedness
3/31/2023		3,563,000		7,522.5
9/30/2022		—		—
9/30/2021		—		—
9/30/2020		—		—
9/30/2019		120,295,348		346.2
9/30/2018		138,725,439		395.2
9/30/2017		—		—
9/30/2016		40,000,000		2,414.9
9/30/2015		—		—
9/30/2014		—		—
9/30/2013		—		—

Senior Securities Amount

$ 3,563,000

$ 120,295,348

$ 138,725,439

$ 40,000,000

Senior Securities Coverage per Unit

$ 7,522.5

$ 346.2

$ 395.2

$ 2,414.9

Senior Securities, Note [Text Block]


Date	Total Amount Outstanding ($)		% of Asset Coverage of Indebtedness
3/31/2023		3,563,000		7,522.5
9/30/2022		—		—
9/30/2021		—		—
9/30/2020		—		—
9/30/2019		120,295,348		346.2
9/30/2018		138,725,439		395.2
9/30/2017		—		—
9/30/2016		40,000,000		2,414.9
9/30/2015		—		—
9/30/2014		—		—
9/30/2013		—		—

General Description of Registrant [Abstract]

Investment Objectives and Practices [Text Block]

Investment Objective and Strategy Overview

The Fund’s portfolio manager may sell a security for a variety of reasons, such as to invest in a company offering or superior investment opportunities.

Risk Factors [Table Text Block]

Asset-Backed Securities Risk

Credit Risk

Derivatives Risk

Equity Securities Risk

High Yield Debt Securities Risk

Illiquid and Restricted Securities Risk

Industry Focus Risk

Interest Rate Risk

Leverage Risk

securities purchased with borrowed funds, the Fund’s use of leverage would result in a lower rate of return than if the Fund was not leveraged.

Management Risk

Mid-Cap Company Risk

MLP Risk

MLP Tax Risk

The risk that the MLPs in which the Fund invests will fail to be treated as partnerships for U.S. federal income tax purposes. If an MLP does not meet current legal requirements to maintain its partnership status, or if it is unable to do so because of tax or other law changes, it would be treated as a corporation for U.S. federal income tax purposes. In that case, the MLP would be obligated to pay U.S. federal income tax (as well as state and local taxes) at the entity level on its taxable income and distributions received by the Fund would be characterized as dividend income to the extent of the MLP’s current and accumulated earnings and profits for federal tax purposes. The classification of an MLP as a corporation for U.S. federal income tax purposes could have the effect of reducing the amount of cash available for distribution by the MLP and the value of the Fund’s investment in any such MLP. As a result, the value of the Fund’s shares

and the cash available for distribution to Fund shareholders could be reduced.

Non-U.S. Securities Risk

Non-Payment Risk

Pandemics and Associated Economic Disruption

Real Estate Securities Risk

Regulatory Risk

REIT-Specific Risk

REIT Tax Risk for REIT Subsidiaries

Restrictions on Resale Risk

Securities Lending Risk

Senior Loans Risk

Short Sales Risk

Small-Cap Company Risk

Underlying Funds Risk

Value Investing Risk

Asset Backed Securities Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Asset-Backed Securities Risk

Credit Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Credit Risk

Derivatives Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Derivatives Risk

Equity Securities Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Equity Securities Risk

High Yield Debt Securities Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

High Yield Debt Securities Risk

Illiquid and Restricted Securities Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Illiquid and Restricted Securities Risk

Industry Focus Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Industry Focus Risk

Interest Rate Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Interest Rate Risk

Leverage Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Leverage Risk

securities purchased with borrowed funds, the Fund’s use of leverage would result in a lower rate of return than if the Fund was not leveraged.

Management Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Management Risk

Mid Cap Company Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Mid-Cap Company Risk

MLP Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

MLP Risk

MLP Tax Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

MLP Tax Risk

The risk that the MLPs in which the Fund invests will fail to be treated as partnerships for U.S. federal income tax purposes. If an MLP does not meet current legal requirements to maintain its partnership status, or if it is unable to do so because of tax or other law changes, it would be treated as a corporation for U.S. federal income tax purposes. In that case, the MLP would be obligated to pay U.S. federal income tax (as well as state and local taxes) at the entity level on its taxable income and distributions received by the Fund would be characterized as dividend income to the extent of the MLP’s current and accumulated earnings and profits for federal tax purposes. The classification of an MLP as a corporation for U.S. federal income tax purposes could have the effect of reducing the amount of cash available for distribution by the MLP and the value of the Fund’s investment in any such MLP. As a result, the value of the Fund’s shares

and the cash available for distribution to Fund shareholders could be reduced.

Non US Securities Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Non-U.S. Securities Risk

Non Payment Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Non-Payment Risk

Pandemics and Associated Economic Disruption [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Pandemics and Associated Economic Disruption

Real Estate Securities Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Real Estate Securities Risk

Regulatory Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Regulatory Risk

REIT Specific Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

REIT-Specific Risk

REIT Tax Risk for REIT Subsidiaries [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

REIT Tax Risk for REIT Subsidiaries

Restrictions on Resale Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Restrictions on Resale Risk

Securities Lending Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Securities Lending Risk

Senior Loans Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Senior Loans Risk

Short Sales Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Short Sales Risk

Small Cap Company Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Small-Cap Company Risk

Underlying Funds Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Underlying Funds Risk

Value Investing Risk [Member]

General Description of Registrant [Abstract]

Risk [Text Block]

Value Investing Risk

Common Shares [Member]

Capital Stock, Long-Term Debt, and Other Securities [Abstract]

Outstanding Security, Title [Text Block]

Common Shares

Outstanding Security, Held [Shares]

22,484,086


(a)(1)		Not applicable.

(a)(2)		Certification pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto.

(a)(3)		Not applicable.

(a)(4)(i)		Not applicable.

(b)		Certification pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto.


By (Signature and Title):		/s/ Frank Waterhouse
		Frank Waterhouse
		Treasurer, Principal Accounting Officer, Principal Financial Officer, and Principal Executive Officer