Highland Funds I - Highland Income Fund (HFRO) NPORT-P/A Highland Income Fund (Sep 2019 report)

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Principal Amount ($)			Value ($)
	U.S. Senior Loans (a) — 57.4%
	Commercial Services — 3.2%
		American Traffic Solutions, Inc.,
	10,102,055	VAR LIBOR USD 3 Month+3.750%, 02/21/25		10,156,758
		EmployBridge LLC, 2018 Refinancing Term Loan,
	13,485,547	VAR LIBOR USD 3 Month+4.500%, 04/18/25		13,485,547
		Fort Dearborn Holding Company, Inc., Initial Term Loan,
	8,542,701	VAR LIBOR USD 3 Month+4.000%, 10/19/23		8,435,918
				32,078,223
	Communication Services — 2.0%
	8,000,000	Clear Channel Outdoor Holdings, Inc. Term Loan B, 08/21/26		8,033,560
	6,410,409	iHeartCommunications Inc.,		6,459,576
	5,954,396	TerreStar Corporation, Term Loan D, 11.000% PIK 02/27/20 (c)(d)		5,954,396
				20,447,532
	Consumer Discretionary — 2.9%
		Truck Hero, Inc., Initial Term Loan, 1st Lien,
	13,580,484	VAR LIBOR USD 3 Month+3.750%, 04/22/24		12,743,043
		Truck Hero, Inc., Initial Term Loan, 2nd Lien,
	4,076,667	VAR LIBOR USD 3 Month+8.250%, 04/21/25		3,811,683
		USS Ultimate Holdings, Inc., Initial Term Loan, 1st Lien,
	11,875,878	VAR LIBOR USD 3 Month+3.750%, 08/09/24		11,904,083
				28,458,809
	Consumer Products — 1.7%
		Dayco Products, LLC, Term Loan B,
	3,342,662	VAR LIBOR USD 3 Month+4.250%, 05/08/23		3,033,466
		KIK Custom Products, Inc., Initial Term Loan,
	14,068,966	VAR LIBOR USD 3 Month+4.000%, 05/15/23		13,383,103
				16,416,569
	Energy — 2.7%
		Fieldwood Energy LLC, Closing Date Loan, 2nd Lien,
	15,904,030	VAR LIBOR USD 3 Month+7.250%, 04/11/23		12,016,370

Principal Amount ($)			Value ($)
	U.S. Senior Loans (continued)
	Energy (continued)
		Traverse Midstream Partners LLC, Term Loan,
	17,061,177	VAR LIBOR USD 3 Month+4.000%, 09/27/24		15,141,795
				27,158,165
	Financial — 2.4%
		BCP Renaissance Parent LLC, Term Loan B,
	9,900,000	VAR LIBOR USD 3 Month+3.500%, 10/31/24		9,479,299
		Edelman Financial Center (The), Initial Term Loan,
	5,955,000	VAR LIBOR USD 3 Month+3.250%, 07/21/25		5,971,466
		Edelman Financial Group (The), Term Loan, 2nd Lien,
	9,447,348	VAR LIBOR USD 3 Month+6.750%, 06/26/26		9,465,062
				24,915,827
	Gaming/Leisure — 1.1%
	22,925,890	Ginn-LA CS Borrower LLC, Tranche A Term Loan Credit-Linked Deposit, 1st Lien, (b)(c)(d)		—
	49,138,954	Ginn-LA CS Borrower LLC, Tranche B Term Loan, 1st Lien, (b)(c)(d)		—
	13,677,126	LLV Holdco, LLC, Revolving Exit Loan, 09/03/20 (b)(c)(d)(e)		10,941,700
				10,941,700
	Healthcare — 7.7%
		American Renal Holdings Inc., Term Loan B,
	2,701,633	VAR LIBOR USD 3 Month+3.250%, 06/21/24		2,636,632
		BW NHHC Holdco Inc., Initial Term Loan, 1st Lien,
	13,715,278	VAR LIBOR USD 3 Month+5.000%, 05/15/25		11,520,833
	55,260,321	CCS Medical, Inc., Term Loan, 05/31/20 (c)(d)(e)		34,316,660
		Envision Healthcare Corporation, Initial Term Loan, 1st Lien,
	7,905,088	VAR LIBOR USD 3 Month+3.750%, 10/10/25		6,474,741
		First Eagle Holdings, Inc. (fka Arnhold and S. Bleichroeder Holdings, Inc.), Refinancing Term Loan,
	248,125	VAR LIBOR USD 3 Month+2.750%, 12/02/24		248,642

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Principal Amount ($)			Value ($)
	U.S. Senior Loans (continued)
	Healthcare (continued)
		Radnet Management, Inc., Term Loan B-1, 1st Lien,
	10,062,357	VAR LIBOR USD 3 Month+3.750%, 06/30/23		10,112,668
		Sound Inpatient Physicians Holdings LLC, 2nd Lien,
	1,777,778	VAR LIBOR USD 3 Month+6.750%, 06/19/26		1,778,222
		Surgery Center Holdings, Inc. Term Loan B,
	10,267,077	VAR LIBOR USD 3 Month+3.250%, 09/02/24		10,059,169
				77,147,567
	Housing — 1.2%
		84 Lumber Company, Term Loan B-1,
	11,879,062	VAR LIBOR USD 3 Month+5.250%, 10/25/23		11,945,941
	Industrials — 3.4%
		Hayward Industries, Inc., Initial Term Loan, 1st Lien,
	14,847,393	VAR LIBOR USD 3 Month+3.500%, 08/05/24		14,383,412
		Omnimax International, Inc., Unsecured Term Loan,
	8,975,420	14.000% PIK 02/06/21 (c)(d)		8,742,059
		PSC Industrial Holdings Corp., Initial Term Loan, 2nd Lien,
	4,000,000	VAR LIBOR USD 3 Month+8.500%, 10/11/25		3,850,000
		PSC Industrial Holdings Corp., Term Loan, 1st Lien,
	6,943,463	VAR LIBOR USD 3 Month+3.750%, 10/11/24		6,929,021
				33,904,492
	Information Technology — 11.3%
		Avaya Inc., Tranche B Term Loan,
	15,152,641	VAR LIBOR USD 3 Month+4.250%, 12/15/24		14,437,664
		EDS Legacy Partners,
	57,000,000	VAR LIBOR USD 3 Month+2.750%, 12/14/23 (c)(d)(e)		58,425,000
		Intermedia Holdings, Inc., New Term Loan, 1st Lien,
	9,925,000	VAR LIBOR USD 3 Month+6.000%, 07/21/25		9,941,128
		Kronos Incorporated, Initial Term Loan, 2nd Lien,
	4,800,000	VAR LIBOR USD 3 Month+8.250%, 10/18/24		4,891,992

Principal Amount ($)			Value ($)
	U.S. Senior Loans (continued)
	Information Technology (continued)
		Neustar, Inc., Term Loan B4,
	11,410,322	VAR LIBOR USD 3 Month+3.500%, 08/08/24		11,045,192
		Procera Networks, Inc., Initial Term Loan,
	14,831,937	VAR LIBOR USD 3 Month+4.500%, 10/30/25		14,813,397
				113,554,373
	Manufacturing — 0.7%
		VC GB Holdings, Inc., Refinancing Term Loan, 1st Lien,
	6,561,283	VAR LIBOR USD 3 Month+3.250%, 02/28/24		6,479,267
	Oil & Gas — 0.9%
	9,262,500	Lower Cadence Holdings LLC, Initial Term Loan, 1st Lien, 05/08/26		9,051,222
	Real Estate — 2.1%
		Forest City Enterprises, L.P., Initial Term Loan,
	9,161,538	VAR LIBOR USD 3 Month+4.000%, 12/08/25		9,240,282
		Specialty Building Products Holdings, LLC, Initial Term Loan,
	11,940,000	VAR LIBOR USD 3 Month+5.750%, 09/25/25		11,969,910
				21,210,192
	Retail — 5.0%
		Academy, Ltd., Initial Term Loan,
	18,610,635	VAR LIBOR USD 3 Month+4.000%, 07/01/22		13,093,885
		Dealer Tire, LLC, Initial Term Loan,
	15,619,921	VAR LIBOR USD 3 Month+5.500%, 12/04/25		15,688,336
		General Nutrition Centers, Inc., FILO Term Loan,
	1,178,368	VAR LIBOR USD 3 Month+7.000%, 12/31/22		1,185,102
		General Nutrition Centers, Inc., Tranche B-2 Term Loan, 1st Lien,
	9,900,316	VAR LIBOR USD 3 Month+8.750%, 03/04/21		9,488,860
		Jo-Ann Stores, LLC, Initial Loan, 1st Lien,
	10,155,080	VAR LIBOR USD 3 Month+5.000%, 10/20/23		7,036,607
		Jo-Ann Stores, LLC, Initial Loan, 2nd Lien,
	9,554,955	VAR LIBOR USD 3 Month+9.250%, 05/21/24		3,172,245
				49,665,035

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Principal Amount ($)			Value ($)
	U.S. Senior Loans (continued)
	Service — 5.2%
		Advantage Sales & Marketing Inc., Initial Term Loan, 1st Lien,
	6,668,045	VAR LIBOR USD 3 Month+3.250%, 07/23/21		6,243,891
		Advantage Sales & Marketing Inc., Term Loan B2, 1st Lien,
	2,177,895	VAR LIBOR USD 3 Month+3.250%, 07/23/21		2,026,804
		Advantage Sales & Marketing Inc., Term Loan, 2nd Lien,
	13,710,000	VAR LIBOR USD 3 Month+6.500%, 07/25/22		11,920,091
		CSC SW Holdco, Inc. (fka CSC Serviceworks, Inc.), Term Loan B-1, 1st Lien,
	10,041,374	VAR LIBOR USD 3 Month+3.250%, 11/14/22		9,890,753
		EnergySolutions, LLC (aka Envirocare of Utah, LLC), Initial Term Loan, 1st Lien,
	5,975,209	VAR LIBOR USD 3 Month+3.750%, 05/09/25		5,601,758
		Parexel International, Term Loan B, 1st Lien,
	9,505,322	VAR LIBOR USD 3 Month+2.750%, 09/27/24		9,048,734
		USI, Inc. (fka Compass Investors Inc.), 2017 New Term Loan, 1st Lien,
	7,542,785	VAR LIBOR USD 3 Month+3.000%, 05/16/24		7,428,097
				52,160,128
	Transportation — 1.4%
		Capital Automotive LP, Term Loan, 2nd Lien,
	1,676,175	VAR LIBOR USD 3 Month+6.000%, 03/21/25		1,688,754
		Gruden Acquisition, Inc., Incremental Term Loan, 1st Lien,
	11,699,754	VAR LIBOR USD 3 Month+5.500%, 08/18/22		11,670,505
				13,359,259
	Utilities — 2.5%
		Eastern Power, LLC (Eastern Covert Midco, LLC), Term Loan,
	11,397,995	VAR LIBOR USD 3 Month+3.750%, 10/02/23		11,450,995
		Granite Acquisition, Inc., Term Loan B, 2nd Lien,
	2,319,304	VAR LIBOR USD 3 Month+7.250%, 12/19/22		2,324,232
		Lightstone Holdco LLC, Refinancing Term Loan B,
	11,780,034	VAR LIBOR USD 3 Month+3.750%, 01/30/24		11,327,209

Principal Amount ($)			Value ($)
	U.S. Senior Loans (continued)
	Utilities (continued)
		Lightstone Holdco LLC, Refinancing Term Loan C,
	664,412	VAR LIBOR USD 3 Month+3.750%, 01/30/24		638,872
	59,127,210	Texas Competitive Electric Holdings Co., LLC, Extended Escrow Loan, (f)		59,127
				25,800,435
		Total U.S. Senior Loans (Cost $710,161,771)		574,694,736
Shares
	Preferred Stock (g) — 29.2%
	Energy — 1.7%
	1,790,983	Crestwood Equity Partners LP 9.25%		16,539,728
	Financial — 3.4%
	3,980	Eastland CLO, Ltd. 1.00%, 05/01/2022		1,795,975
	997,315	Federal Home Loan Mortgage 5.30%		18,192,609
	545,289	Federal National Mortgage Association 8.25%		13,230,347
				33,218,931
	Real Estate — 24.1%
	645,161	Braemar Hotels & Resorts, Inc., REIT 5.50% (h)		13,458,058
	180,008	Creek Pine Holdings, LLC, REIT 10.25% (c)(d)(h)		202,856,791
	23,649	Jernigan Capital, Inc., REIT 7.00% (c)(d)		24,971,599
	57,262	Wheeler Real Estate Investment Trust, REIT 9.00% (g)		743,432
				242,029,880
		Total Preferred Stock (Cost $264,095,606)		291,788,539
	Collateralized Loan Obligations — 21.6%
		Acis CLO, Ltd., Series 2014-3A, Class E
	4,000,000	VAR ICE LIBOR USD 3 Month+4.750%, 7.00%, 2/1/2026 (i)(j)(k)		3,000,000
		Acis CLO, Ltd., Series 2014-4A, Class E
	14,750,000	VAR ICE LIBOR USD 3 Month+4.800%, 7.05%, 5/1/2026 (i)(j)(k)		11,062,500
		Acis CLO, Ltd., Series 2015-6A, Class D
	1,000,000	VAR ICE LIBOR USD 3 Month+3.770%, 6.02%, 5/1/2027 (i)(j)(k)		973,125
		Acis CLO, Ltd., Series 2014-4A, Class D
	750,000	VAR ICE LIBOR USD 3 Month+3.100%, 5.35%, 5/1/2026 (j)(k)		722,897
		Acis CLO, Ltd., Series 2015-6A, Class E
	7,500,000	VAR ICE LIBOR USD 3 Month+5.490%, 7.74%, 5/1/2027 (i)(j)(k)		6,531,250

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Principal Amount ($)			Value ($)
	Collateralized Loan Obligations (continued)
		Acis CLO, Ltd., Series 2014-5A, Class D
	7,000,000	VAR ICE LIBOR USD 3 Month+4.340%, 6.59%, 11/1/2026 (i)(j)(k)		6,790,000
		Apidos CLO XXII, Series 2015-22A, Class D
	3,000,000	VAR ICE LIBOR USD 3 Month+6.000%, 8.28%, 10/20/2027 (j)(k)		2,991,096
		Atrium IX, Series 2017-9A, Class ER
	2,300,000	VAR ICE LIBOR USD 3 Month+6.450%, 8.59%, 5/28/2030 (j)(k)		2,205,953
		BlueMountain CLO, Ltd., Series 2018-1A, Class E
	3,000,000	VAR ICE LIBOR USD 3 Month+5.950%, 8.22%, 7/30/2030 (j)(k)		2,731,830
		BlueMountain CLO, Ltd., Series 2015-3A, Class ER
	6,500,000	VAR ICE LIBOR USD 3 Month+8.080%, 10.36%, 4/20/2031 (i)(j)(k)		5,625,750
		Bristol Park CLO, Series 2016-1A, Class E
	1,500,000	VAR ICE LIBOR USD 3 Month+7.250%, 9.55%, 4/15/2029 (j)(k)		1,398,750
		California Street CLO IX, Series 2019-9A, Class FR2
	3,500,000	VAR ICE LIBOR USD 3 Month+8.520%, 10.80%, 7/16/2032 (j)(k)		3,290,000
		Carlyle Global Market Strategies CLO, Series 2018-1A, Class ER
	5,375,000	VAR ICE LIBOR USD 3 Month+5.400%, 7.70%, 4/17/2031 (j)(k)		4,415,025
		Carlyle Global Market Strategies CLO, Series 2019-1A, Class ER
	5,382,500	VAR ICE LIBOR USD 3 Month+6.940%, 9.22%, 7/20/2031 (j)(k)		5,095,074
		Catamaran CLO, Ltd., Series 2014-2A, Class D
	3,000,000	VAR ICE LIBOR USD 3 Month+4.850%, 7.15%, 10/18/2026 (i)(j)(k)		2,946,000
		Catamaran CLO, Ltd., Series 2015-1A, Class E
	2,250,000	VAR ICE LIBOR USD 3 Month+5.150%, 7.43%, 4/22/2027 (j)(k)		2,075,625
		Cathedral Lake CLO, Ltd., Series 2013-1A, Class DR
	1,250,000	9.85%, 10/15/2029 (k)		1,157,500
		VAR 3-month LIBOR+7.250%, 10.06%, 10/15/2029 (j)(k)		1,125
		CIFC Funding, Ltd., Series 2014-1A, Class ER2
	1,000,000	VAR ICE LIBOR USD 3 Month+5.850%, 8.15%, 1/18/2031 (j)(k)		905,000
		CIFC Funding, Ltd., Series 2017-3A, Class D
	1,225,000	VAR ICE LIBOR USD 3 Month+6.000%, 8.28%, 7/20/2030 (j)(k)		1,139,862

Principal Amount ($)			Value ($)
	Collateralized Loan Obligations (continued)
		CIFC Funding, Ltd., Series 2017-4A, Class D
	3,000,000	VAR ICE LIBOR USD 3 Month+6.100%, 8.38%, 10/24/2030 (j)(k)		2,850,000
		CIFC Funding, Ltd., Series 2014-3A, Class FR2
	5,000,000	VAR ICE LIBOR USD 3 Month+8.250%, 10.53%, 10/22/2031 (i)(j)(k)		3,825,000
		Covenant Credit Partners CLO III, Series 2017-1A, Class F
	4,000,000	VAR ICE LIBOR USD 3 Month+7.950%, 10.25%, 10/15/2029 (j)(k)		3,370,000
		Denali Capital CLO XI, Series 2015-1A, Class ER
	4,600,000	VAR ICE LIBOR USD 3 Month+8.250%, 10.53%, 10/20/2028 (i)(j)(k)		4,201,778
		Dryden 36 Senior Loan Fund, Series 2019-36A, Class ER2
	2,050,000	VAR ICE LIBOR USD 3 Month+6.880%, 9.18%, 4/15/2029 (j)(k)		1,994,958
		Dryden 42 Senior Loan Fund, Series 2018-42A, Class FR
	1,000,000	VAR ICE LIBOR USD 3 Month+7.200%, 9.50%, 7/15/2030 (j)(k)		815,000
		Dryden 64 CLO, Series 2018-64A, Class F
	3,500,000	VAR ICE LIBOR USD 3 Month+7.150%, 9.45%, 4/18/2031 (i)(j)(k)		2,835,000
		Eaton Vance CLO, Series 2019-1A, Class F
	8,000,000	VAR ICE LIBOR USD 3 Month+8.250%, 10.75%, 4/15/2031 (j)(k)		7,520,000
		Eaton Vance CLO, Series 2013-1A, Class DRR
	2,000,000	VAR ICE LIBOR USD 3 Month+7.100%, 9.32%, 1/15/2028 (j)(k)		1,990,000
		ECP CLO, Ltd., Series 2018-7A, Class DR
	6,000,000	VAR ICE LIBOR USD 3 Month+5.900%, 8.18%, 4/22/2030 (j)(k)		4,740,000
		Galaxy XXVI CLO, Ltd., Series 2018-26A, Class F
	5,450,000	VAR ICE LIBOR USD 3 Month+8.000%, 10.15%, 11/22/2031 (j)(k)		4,687,000
		Goldentree Loan Management US CLO 3, Series 2018-3A, Class F
	3,000,000	VAR ICE LIBOR USD 3 Month+6.500%, 8.78%, 4/20/2030 (j)(k)		2,558,370
		Goldentree Loan Management US CLO 4, Series 2019-4A, Class F
	3,500,000	VAR ICE LIBOR USD 3 Month+6.400%, 8.68%, 4/24/2031 (j)(k)		2,730,000

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Principal Amount ($)			Value ($)
	Collateralized Loan Obligations (continued)
		GoldenTree Loan Opportunities IX, Ltd., Series 2018-9A, Class FR2
	3,500,000	VAR ICE LIBOR USD 3 Month+7.640%, 9.90%, 10/29/2029 (i)(j)(k)		3,045,000
		Jamestown CLO IX, Series 2019-9A, Class DR
	5,500,000	VAR ICE LIBOR USD 3 Month+6.940%, 9.22%, 10/20/2028 (i)(j)(k)		5,467,364
		Jay Park CLO, Ltd., Series 2018-1A, Class ER
	6,000,000	VAR ICE LIBOR USD 3 Month+7.350%, 9.63%, 10/20/2027 (i)(j)(k)		5,220,000
		JFIN CLO, Ltd., Series 2013-1I, Class E
	3,000,000	VAR ICE LIBOR USD 3 Month+6.000%, 8.28%, 1/20/2025 (j)		2,280,000
		KKR CLO 21, Series 2018-21, Class F
	1,500,000	VAR ICE LIBOR USD 3 Month+7.250%, 9.55%, 4/15/2031 (j)(k)		1,230,000
		LCM XIII, Ltd., Series 2016-13A, Class ER
	3,000,000	VAR ICE LIBOR USD 3 Month+7.300%, 9.60%, 7/19/2027 (i)(j)(k)		2,895,000
		LCM XIV, Ltd., Series 2018-14A, Class FR
	3,000,000	VAR ICE LIBOR USD 3 Month+7.610%, 9.89%, 7/20/2031 (j)(k)		2,520,000
		LCM XXIII, Ltd., Series 2016-23A, Class D
	1,000,000	VAR ICE LIBOR USD 3 Month+7.050%, 9.33%, 10/20/2029 (i)(j)(k)		885,000
		Madison Park Funding XXIV, Series 2019-24A, Class ER
	5,000,000	VAR ICE LIBOR USD 3 Month+7.200%, 9.38%, 10/20/2029 (j)(k)		5,000,000
		Madison Park Funding XXX, Series 2018-30A, Class F
	1,000,000	VAR ICE LIBOR USD 3 Month+6.850%, 9.15%, 4/15/2029 (j)(k)		900,000
		Magnetite VII, Ltd., Series 2018-7A, Class ER2
	490,000	VAR ICE LIBOR USD 3 Month+6.500%, 8.80%, 1/15/2028 (j)(k)		441,000
		Mountain View Clo XIV, Series 2019-1A, Class F
	500,000	VAR ICE LIBOR USD 3 Month+8.700%, 11.32%, 4/15/2029 (j)(k)		463,650
		MP CLO VII, Series 2018-1A, Class FRR
	5,800,000	VAR ICE LIBOR USD 3 Month+7.910%, 10.21%, 10/18/2028 (j)(k)		5,142,473
		Nassau, Ltd., Series 2017-IA, Class D
	1,575,000	VAR ICE LIBOR USD 3 Month+6.180%, 8.48%, 10/15/2029 (j)(k)		1,449,000
		Neuberger Berman CLO XX, Ltd., Series 2017-20A, Class FR
	3,000,000	VAR ICE LIBOR USD 3 Month+7.450%, 9.75%, 1/15/2028 (i)(j)(k)		2,759,800

Principal Amount ($)			Value ($)
	Collateralized Loan Obligations (continued)
		Northwoods Capital XII-B, Ltd., Series 2018-12BA, Class F
	4,000,000	VAR ICE LIBOR USD 3 Month+8.170%, 10.29%, 6/15/2031 (j)(k)		3,300,000
		OZLM Funding III, Ltd., Series 2016-3A, Class DR
	1,000,000	VAR ICE LIBOR USD 3 Month+7.770%, 10.05%, 1/22/2029 (j)(k)		985,000
		OZLM XXII, Ltd., Series 2018-22A, Class E
	3,110,000	VAR ICE LIBOR USD 3 Month+7.390%, 9.69%, 1/17/2031 (j)(k)		2,581,300
		Palmer Square CLO, Ltd., Series 2019-1A, Class DR2
	3,750,000	VAR ICE LIBOR USD 3 Month+6.250%, 8.40%, 5/21/2029 (i)(j)(k)		3,535,875
		Saranac CLO III, Ltd., Series 2018-3A, Class ER
	3,150,000	VAR ICE LIBOR USD 3 Month+7.500%, 9.66%, 6/22/2030 (j)(k)		2,956,905
		Saranac CLO VI, Ltd., Series 2018-6A, Class E
	5,000,000	VAR ICE LIBOR USD 3 Month+6.400%, 8.53%, 8/13/2031 (j)(k)		4,379,000
		Shackleton CLO IX, Ltd., Series 2016-9A, Class E
	1,500,000	VAR ICE LIBOR USD 3 Month+6.760%, 9.04%, 10/20/2028 (i)(j)(k)		1,323,900
		Steele Creek CLO, Series 2018-1A, Class FR
	500,000	VAR ICE LIBOR USD 3 Month+6.900%, 9.02%, 6/15/2031 (j)(k)		412,500
		Symphony CLO XXI, Series 2019-21A, Class E
	1,500,000	VAR ICE LIBOR USD 3 Month+6.750%, 9.11%, 7/15/2032 (j)(k)		1,449,300
		TCW CLO, Series 2019-1A, Class F
	1,000,000	VAR ICE LIBOR USD 3 Month+8.670%, 10.83%, 2/15/2029 (j)(k)		945,000
		TICP CLO I-2, Series 2018-IA, Class E
	2,200,000	VAR ICE LIBOR USD 3 Month+8.000%, 10.27%, 4/26/2028 (j)(k)		1,933,250
		TICP CLO III-2, Ltd., Series 2018-3R, Class F
	4,150,000	VAR ICE LIBOR USD 3 Month+7.980%, 10.26%, 4/20/2028 (j)(k)		3,587,053
		Trinitas CLO III, Ltd., Series 2015-3A, Class E
	2,000,000	VAR ICE LIBOR USD 3 Month+5.250%, 7.55%, 7/15/2027 (j)(k)		1,540,000
		Trinitas CLO X, Series 2019-10A, Class F
	9,000,000	VAR ICE LIBOR USD 3 Month+7.785%, 10.09%, 4/15/2032 (j)(k)		8,010,000

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Principal Amount ($)			Value ($)
	Collateralized Loan Obligations (continued)
		Venture XIII CLO, Ltd., Series 2017-13A, Class ER
	575,000	VAR ICE LIBOR USD 3 Month+6.750%, 8.88%, 9/10/2029 (j)(k)		541,420
		Voya CLO, Ltd., Series 2018-4A, Class ER
	3,200,000	VAR ICE LIBOR USD 3 Month+9.050%, 11.35%, 7/14/2031 (j)(k)		3,104,000
		Voya CLO, Ltd., Series 2019-2A, Class DR
	7,580,000	VAR ICE LIBOR USD 3 Month+7.110%, 9.29%, 7/19/2028 (j)(k)		7,390,500
		Voya, Ltd., Series 2016-4A, Class DR
	3,650,000	VAR ICE LIBOR USD 3 Month+7.650%, 9.95%, 10/15/2028 (j)(k)		3,607,218
		Wellfleet CLO, Ltd., Series 2018-2A, Class DR
	3,950,000	VAR ICE LIBOR USD 3 Month+5.500%, 7.78%, 10/20/2028 (j)(k)		3,708,063
		Z Capital Credit Partners CLO, Ltd., Series 2015-1A, Class E
	7,250,000	VAR ICE LIBOR USD 3 Month+5.970%, 8.29%, 7/16/2027 (i)(j)(k)		6,159,600
		Zais CLO 3, Ltd., Series 2018-3A, Class DR
	3,000,000	VAR ICE LIBOR USD 3 Month+6.910%, 9.21%, 7/15/2031 (j)(k)		2,542,500
		Zais CLO 7, Ltd., Series 2017-2A, Class E
	1,250,000	VAR ICE LIBOR USD 3 Month+7.150%, 9.45%, 4/15/2030 (j)(k)		1,107,083
		Zais CLO 8, Ltd., Series 2018-1A, Class E
	3,300,000	VAR ICE LIBOR USD 3 Month+5.250%, 7.55%, 4/15/2029 (j)(k)		2,541,000
		Total Collateralized Loan Obligations (Cost $235,976,541)		216,514,222
Shares
	Common Stocks — 13.0%
	Communication Services — 4.7%
	714,204	Clear Channel Outdoor Holdings, Inc., Class A (h)		1,799,794
	339,558	iHeartMedia, Inc. (h)		5,093,370
	49,600	Loral Space & Communications, Inc. (h)		2,053,440
	502,161	Metro-Goldwyn-Mayer, Inc. (l)		30,380,741
	27,134	TerreStar Corporation (c)(d)(l)		7,544,066
				46,871,411
	Consumer Discretionary (h) — 0.8%
	1,450	Toys ‘R’ Us		382,497
	1,450	Tru Kids, Inc.		7,267,324
				7,649,821
	Energy — 0.9%
	167,419	Fieldwood Energy LLC (h)		4,457,531
	39,000	Pioneer Natural Resources		4,905,030

Principal Amount ($)			Value ($)
	Common Stocks (continued)
Shares
	Energy — continued
	1,118,286	Value Creation, Inc. (c)(d)		1
				9,362,562
	Gaming/Leisure (c)(d)(e) — 0.0%
	34,512	LLV Holdco LLC — Series A, Membership Interest		—
	436	LLV Holdco LLC — Series B, Membership Interest		—
				—
	Healthcare — 0.0%
	207,031	CCS Medical Inc. (c)(d)(e)		—
	18,750	Portola Pharmaceuticals, Inc. (h)		502,875
				502,875
	Housing (c)(d) — 0.0%
	1,648,350	Westgate Investments LLC		—
	Industrials (h) — 0.1%
	250,627	Remington Outdoor Co., Inc.		563,911
	Information Technology (h) — 0.2%
	190,617	Avaya Holdings Corp.		1,950,012
	Materials (h) — 0.2%
	299,032	MPM Holdings, Inc.		1,495,160
	14,621	Omnimax International, Inc. (c)(d)		713,200
				2,208,360
	Real Estate — 6.1%
	1,393,678	Allenby (c)(d)(e)		1
	9,370,190	Claymore (c)(d)(e)		9
	31,232	Jernigan Capital, Inc., REIT		601,216
	2,918,931	NFRO REIT SUB, LLC (c)(d)(e)		60,702,826
				61,304,052
		Total Common Stocks (Cost $425,814,420)		130,413,004
	LLC Interest — (c)(d) 9.1%
	11,854,987	SFR WLIF I, LLC		12,108,683
	52,666,031	SFR WLIF II, LLC		53,851,017
	25,478,982	SFR WLIF III, LLC		25,229,288
		Total LLC Interest (Cost $90,000,000)		91,188,988
	Agency Collateralized Mortgage Obligations (k) — 9.0%
		FREMF Mortgage Trust, Series 2019-KF60, Class C
	60,630,654	VAR LIBOR USD 1 Month+6.000%, 8.09%, 2/25/2026 (i)		60,479,078
	54,160,055	FREMF Mortgage Trust, Series 2019-K97, Class D 0.00%, 1/25/2030		24,089,201
	588,534,388	FREMF Mortgage Trust, Series 2019-K97, Class X2A 0.10%, 7/25/2029		4,722,524

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Principal Amount ($)			Value ($)
	Agency Collateralized Mortgage Obligations — continued
	133,593,827	FREMF Mortgage Trust, Series 2019-K97, Class X2B 0.10%, 1/25/2030		819,451
		Total Agency Collateralized Mortgage Obligations (Cost $90,384,917)		90,110,254
	Corporate Bonds & Notes — 4.0%
	Energy (b) — 0.1%
	15,600,000	Ocean Rig UDW, Inc. 7.25%, 04/01/19 (c)(d)(k)		1,076,400
	5,000,000	Rex Energy Corp. 8.00%, 10/03/19		25,000
				1,101,400
	Industrials (b) — 0.0%
	7,500,000	American Airlines		189,000
	Information Technology (b) — 0.0%
	4,571,000	Avaya, Inc., (c)(d)		—
	Real Estate — 0.1%
	2,000,000	CBL & Associates 5.95%, 12/15/26		1,415,000
	Utilities (b) — 3.8%
	13,753,863	Bruce Mansfield Unit 1 2007 Pass-Through Trust 6.85%,		10,812,009
		Pacific Gas & Electric
	1,500,000	5.80%, 03/01/37		1,696,875
	12,000,000	6.05%, 03/01/34		13,680,000
	4,000,000	6.25%, 03/01/39		4,640,000
	5,000,000	6.35%, 02/15/38		5,850,000
	20,000,000	Texas Competitive Electric Holdings Co., LLC (f)		101,000
	8,000,000	Texas Competitive Electric Holdings Co., LLC		36,000
				36,815,884
		Total Corporate Bonds & Notes (Cost $49,778,658)		39,521,284
	Foreign Denominated or Domiciled Senior Loans (a) — 2.3%
	Canada — 0.8%
		Bausch Health Companies Inc. (fka Valeant Pharmaceuticals International, Inc.), Initial Term Loan,
	8,263,910	VAR LIBOR USD 3 Month+3.000%, 06/02/25		8,306,965
	Luxembourg — 1.5%
		Intelsat Jackson Holdings S.A., Tranche B-3 Term Loan,
	15,000,000	VAR LIBOR USD 3 Month+3.750%, 11/27/23		15,063,300
		Total Foreign Denominated or Domiciled Senior Loans (Cost $23,193,950)		23,370,265

Principal Amount ($)			Value ($)
Shares
	Registered Investment Company (e) — 1.8%
	989,143	NexPoint Strategic Opportunities Fund		17,735,334
		Total Registered Investment Company (Cost $19,336,833)		17,735,334
Contracts
	Purchased Options (h) — 0.6%
		Total Purchased Call Options (Cost $9,463,643)		6,135,499
	Non-U.S. Government Bond — 0.2%
		Argentine Republic Government International Bond,
	2,000,000	6.88%, 04/22/21		992,520
	2,000,000	8.00%, 10/08/20		846,851
		Total Non-U.S. Government Bond (Cost $2,597,931)		1,839,371
Units
	Rights — 0.1%
	Utilities (h) — 0.1%
	1,117,866	Texas Competitive Electric Holdings Co., LLC		989,311
		Total Rights (Cost $3,882,778)		989,311
	Warrants (h) — 0.0%
	Energy — 0.0%
	5,801	Arch Coal, Inc., Expires 10/08/2023		174,030
	Industrials — 0.0%
	453	Omnimax Holdings, Inc., Expires 12/31/2049 (c)(d)		22,076
	178,140	Remington Outdoor Co., Inc.		—
				22,076
		Total Warrants (Cost $264,794)		196,106
	Claims (b)(c)(d)(h)(m) — 0.0%
	Communication Services — 0.0%
	3,791,858	Lehman Brothers Commercial Paper LCPI Claim Facility	$	52,138
		Total Claims (Cost $1,814,883)		52,138

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Principal Amount ($)				Value ($)
	Cash Equivalents — 0.0%
	Money Market Fund(n) — 0.0%
	73,970		State Street Institutional U.S. Government Money Market Fund, Premier Class 2.390%		73,970
			Total Cash Equivalents (Cost $73,970)		73,970
	Total Investments — 148.3%				1,484,623,021
	(Cost $1,926,840,695)
	Securities Sold Short — (1.1)%
	Common Stock — (1.1)%
	Information Technology — (1.1)%
	(83,500	)	Texas Instruments, Inc.		(10,791,540	)
			Total Common Stocks (Proceeds $10,000,190)		(10,791,540	)
			Total Securities Sold Short- (1.1)% (Proceeds $10,000,190)		(10,791,540	)
	Other Assets & Liabilities, Net - (47.2)%				(472,595,001	)
	Net Assets — 100.0%				1,001,236,480

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

(a)   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 September 30, 2019, the LIBOR USD 1 Month and LIBOR USD 3 Month rates were 2.02% and 2.09%, respectively. 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.

(b)   The issuer is, or is in danger of being, in default of its payment obligation.

(c)   Securities with a total aggregate value of $507,507,910, or 50.7% of net assets, were classified as Level 3 within the three-tier fair value hierarchy. Please see Notes to Investment Portfolio 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 Fund’s Board of Trustees (the “Board”), or its designee in good faith, pursuant to the policies and procedures approved by the Board. The Board 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 $507,507,910, or 50.7% of net assets, were fair valued under the Fund’s valuation procedures as of September 30, 2019. Please see Notes to Investment Portfolio.

(e)   Affiliated issuer. Assets with a total aggregate market value of $182,121,530, or 18.2% of net assets, were affiliated with the Fund as of September 30, 2019.

(f)   Represents value held in escrow pending future events. No interest is being accrued.

(g)   Perpetual security with no stated maturity date.

(h)   Non-income producing security.

(i) As of September 30, 2019, investments with a total aggregate value of $139,561,019 were fully or partially segregated with broker(s)/custodian as collateral for reverse repurchase agreements.

(j) Variable or floating rate security. The base lending rates are generally the lending rate offered by one or more European banks such as the LIBOR. The interest rate shown reflects the rate in effect September 30, 2019. LIBOR, otherwise known as London Interbank Offered Rate, is the benchmark interest rate that banks charge each other for short-term loans. Current LIBOR rates include 1 month which is equal to 2.02% and 3 months equal to 2.09%.

(k)   Securities exempt from registration under Rule 144A of the 1933 Act. These securities may only be resold in transaction exempt from registration to qualified institutional buyers. At September 30, 2019, these securities amounted to $305,420,876 or 30.5% of net assets.

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

(l) 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 procedures established by the Fund’s Board of Trustees. Additional Information regarding such securities follows:

Restricted Security	Security Type		Acquisition Date		Cost of Security		Market Value at Period End		Percent of Net Assets
Metro-Goldwyn- Mayer, Inc.		Common Stocks		12/20/2010	$	21,845,688	$	30,380,741		3.0	%
TerreStar Corporation		Common Stocks		3/16/2018	$	3,093,276	$	7,544,066		0.8	%

(m) These positions represent claims that have been filed with the United States Bankruptcy Court Southern District of New York against Lehman Commercial Paper, Inc. UK Branch.

(n) Rate shown is 7 day effective yield.

Foreign Domiciled Senior Loans Industry Concentration Table: (% of Net Assets)
Healthcare	0.8	%
Information Technology	1.5	%
	2.3	%

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Purchased options contracts outstanding as of September 30, 2019 were as follows:

Description	Exercise price		Counterparty	Expiration Date		Number of Contracts		Notional Value		Premium		Value
PURCHASED CALL OPTIONS:
October 2019 Calls on VIX	$	19.00			October 2019		10,000	$	16,240,000	$	1,642,881	$	1,070,000
October 2019 Calls on VIX		22.00			October 2019		10,000		16,240,000		892,881		700,000
November 2019 Calls on VIX		18.00			November 2019		10,000		16,240,000		2,727,881		2,500,000
USD Call/HKD Put		7.85			May 2020		143,000,000		1,121,005,600		1,000,000		525,655
USD Call/HKD Put		7.85			May 2020		65,750,000		515,427,400		500,000		248,752
USD Call/HKD Put		7.85			June 2020		91,000,000		713,367,200		600,000		355,819
USD Call/HKD Put		7.85			November 2019		300,000,000		2,351,760,000		1,000,000		287,136
USD Call/HKD Put		7.85			November 2019		138,500,000		1,085,729,200		500,000		159,642
USD Call/HKD Put		7.85			December 2019		225,000,000		1,763,820,000		600,000		288,495
										$	9,463,643	$	6,135,499

Written options contracts outstanding as of September 30, 2019 were as follows:

Description	Exercise price		Counterparty	Expiration Date		Number of Contracts			Notional Value		Premium			Value
WRITTEN CALL OPTIONS:
October 19 Calls on VIX	$	23.00			October 2019		(10,000	)	$	16,240,000	$	(747,119	)	$	(520,000	)
November 19 Calls on VIX		28.00			November 2019		(10,000)			16,240,000		(832,369)			(790,000)
											$	(1,579,488	)	$	(1,310,000	)

Futures contracts outstanding as of September 30, 2019 were as follows:

Description	Expiration Date		Number of Contracts			Notional Value			Value			Unrealized Appreciation
Long Futures:
Russell 2000 Index E-MINI		December 2019		(1,350	)	$	(106,727,410	)	$	(102,937,500	)	$	3,789,910

The average amount of borrowing by the Fund on reverse repurchase agreements outstanding during the period ended September 30, 2019 was $82,034,479 at a weighted average interest rate of 3.85%.

Reverse Repurchase Agreements outstanding as of September 30, 2019 were as follows:

Counterparty	Collateral Pledged	Interest Rate		Trade Date		Maturity Date		Repurchase Amount			Principal Amount			Value
	Acis CLO, Ltd., Series 2014-3A, Class E, VAR ICE LIBOR USD 3 Month+4.750%, 02/01/26		3.733		7/23/2019		10/23/2019	$	(2,302,962	)	$	(4,000,000	)	$	(2,281,200	)
	Acis CLO, Ltd., Series 2014-4A, Class E, VAR ICE LIBOR USD 3 Month+4.800%, 05/01/26		3.733		7/23/2019		10/23/2019		(9,996,136	)		(14,750,000	)		(9,901,675	)
	Acis CLO, Ltd., Series 2014-5A, Class D, VAR ICE LIBOR USD 3 Month+4.340%, 11/01/26		3.283		7/23/2019		10/23/2019		(5,694,983	)		(7,000,000	)		(5,647,600	)

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Counterparty	Collateral Pledged	Interest Rate		Trade Date		Maturity Date		Repurchase Amount			Principal Amount			Value
	Acis CLO, Ltd., Series 2015-6A, Class E, VAR ICE LIBOR USD 3 Month+5.490%, 05/01/27		3.733		7/23/2019		10/23/2019	$	(5,212,254	)	$	(7,500,000	)	$	(5,163,000	)
	Acis CLO, Ltd., Series 2015-6A, Class D, VAR ICE LIBOR USD 3 Month+3.770%, 05/01/27		3.283		7/23/2019		10/23/2019		(804,090	)		(1,000,000	)		(797,400	)
	BlueMountain CLO, Ltd., Series 2015-3A, Class ER, VAR ICE LIBOR USD 3 Month+8.080%, 04/20/31		4.038		7/9/2019		10/7/2019		(3,962,350	)		(6,500,000	)		(3,922,750	)
	Catamaran CLO, Ltd., Series 2014-2A, Class D, VAR ICE LIBOR USD 3 Month+4.850%, 10/18/26		3.750		7/19/2019		10/15/2019		(2,176,773	)		(3,000,000	)		(2,157,000	)
	CIFC Funding, Ltd., Series 2014-3A, Class FR2, VAR ICE LIBOR USD 3 Month+8.250%, 10/22/31		4.038		7/9/2019		10/7/2019		(3,081,800	)		(5,000,000	)		(3,051,000	)
	Denali Capital CLO XI, Series 2015-1A, Class ER, VAR ICE LIBOR USD 3 Month+8.250%, 10/20/28		4.038		7/9/2019		10/7/2019		(3,076,871	)		(4,600,000	)		(3,046,120	)
	Dryden 64 CLO, Series 2018-64A, Class F, VAR ICE LIBOR USD 3 Month+7.150%, 04/18/31		4.038		7/9/2019		10/7/2019		(2,039,533	)		(3,500,000	)		(2,019,150	)
	FREMF Mortgage Trust, Series 2019-KF60, Class C, VAR LIBOR USD 1 Month+6.000%, 02/25/26		3.530		7/30/2019		10/30/2019		(45,819,528	)		(60,669,313	)		(45,409,880	)
	GoldenTree Loan Opportunities IX, Ltd., Series 2018-9A, Class FR2, VAR ICE LIBOR USD 3 Month+7.640%, 10/29/29		4.020		9/30/2019		12/27/2019		(2,087,059	)		(3,500,000	)		(2,066,750	)
	Jamestown CLO IX, Series 2019-9A, Class DR, VAR ICE LIBOR USD 3 Month+6.940%, 10/20/28		3.606		8/2/2019		10/31/2019		(4,099,754	)		(5,500,000	)		(4,063,125	)
	Jay Park CLO, Ltd., Series 2018-1A, Class ER, VAR ICE LIBOR USD 3 Month+7.350%, 10/20/27		4.020		9/30/2019		12/27/2019		(3,585,693	)		(6,000,000	)		(3,550,800	)
	LCM XIII, Ltd., Series 2016-13A, Class ER, VAR ICE LIBOR USD 3 Month+7.300%, 07/19/27		3.770		9/30/2019		12/27/2019		(2,261,047	)		(3,000,000	)		(2,240,400	)
	LCM XXIII, Ltd., Series 2016-23A, Class D, VAR ICE LIBOR USD 3 Month+7.050%, 10/20/29		3.770		9/30/2019		12/27/2019		(741,673	)		(1,000,000	)		(734,900	)
	Neuberger Berman CLO XX, Ltd., Series 2017-20A, Class FR, VAR ICE LIBOR USD 3 Month+7.450%, 01/15/28		4.020		9/30/2019		12/27/2019		(1,783,455	)		(3,000,000	)		(1,766,100	)
	Palmer Square CLO, Ltd., Series 2019-1A, Class DR2, VAR ICE LIBOR USD 3 Month+6.250%, 05/21/29		3.770		9/30/2019		12/27/2019		(2,753,645	)		(3,750,000	)		(2,728,500	)
	Shackleton CLO IX, Ltd., Series 2016-9A, Class E, VAR ICE LIBOR USD 3 Month+6.760%, 10/20/28		3.788		7/9/2019		10/7/2019		(1,139,136	)		(1,500,000	)		(1,128,450	)
	Z Capital Credit Partners CLO, Ltd., Series 2015-1A, Class E, VAR ICE LIBOR USD 3 Month+5.970%, 07/16/27		3.733		7/23/2019		10/23/2019		(2,880,015	)		(4,000,000	)		(2,852,800	)
	Z Capital Credit Partners CLO, Ltd., Series 2015-1A, Class E, VAR ICE LIBOR USD 3 Month+5.970%, 8.29%, 07/16/27		3.770		9/30/2019		12/27/2019		(2,209,703	)		(3,250,000	)		(2,189,525	)
Total Reverse Repurchase Agreements											$	(152,019,313	)	$	(106,718,125	)

INVESTMENT PORTFOLIO (unaudited)

As of September 30, 2019 Highland Income Fund

Organization

Highland Floating Rate Opportunities Fund (the “Fund”) is organized as an unincorporated business trust under the laws of The

Commonwealth of Massachusetts. The Fund is registered with the U.S. Securities and Exchange Commission (the “SEC”) under the

Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, closed-end management investment company.

On September 25, 2017, the Fund acquired the assets of Highland Floating Rate Opportunities Fund (the “Predecessor Fund”), a series of Highland Funds I, a Delaware statutory trust. The Fund is the successor to the accounting and performance information of the Predecessor Fund. This report includes information for the nine months ended September 30, 2019.

On November 3, 2017, 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 November 3, 2017 (the “Conversion Date”). The Fund also effected an approximately 1-for-2 reverse stock split of the Fund’s issued and outstanding shares on November 3, 2017, 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 November 6, 2017 under the ticker symbol “HFRO”. 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 Z shares. On May 20, 2019, the Fund changed its name to Highland Income Fund.

Basis of Consolidation

The Fund consolidates HFRO Sub, LLC (“HFRO Sub”), a Delaware wholly owned subsidiary, for financial reporting, and the holdings of HFRO Sub, LLC are included within the Consolidated Investment Portfolio for the Fund. HFRO Sub is a bankruptcy remote financing vehicle used to obtain leverage with the portfolio of bank loans serving as collateral. All inter-company accounts and transactions have been eliminated in the consolidation.

Valuation of Investments

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 the Fund’s Board of Trustees (the “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 Highland Capital Management Fund Advisors, L.P. (“the Investment Adviser”) has determined to have the capability to provide appropriate pricing services which have been approved by the Board.

Securities for which market quotations are not readily available, 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 Board or its designee in good faith in accordance with procedures 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 cases, the Fund’s NAV will reflect the affected portfolio securities’ fair value as determined in the judgment of the Board or its designee 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.

INVESTMENT PORTFOLIO (unaudited)(continued)

As of September 30, 2019 Highland Income Fund

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 September 30, 2019, the Fund’s investments consisted of senior loans, foreign denominated or domiciled senior loans,

collateralized loan obligations, corporate bonds and notes, U.S. asset-backed securities, non-U.S. asset-backed securities, claims,

common stocks, registered investment companies, cash equivalents, rights and warrants. The fair value of the Fund’s senior loans and bonds 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. Loans and bonds 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. 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 less liquid than publicly traded securities.

INVESTMENT PORTFOLIO (unaudited)(continued)

As of September 30, 2019 Highland Income Fund

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those

securities. Transfers in and out of the levels are recognized at the value at the end of the period. A summary of the inputs used to value the Fund’s assets as of September 30, 2019 is as follows:

	Total value at September 30, 2019			Level 1 Quoted Price		Level 2 Significant Observable Inputs		Level 3 Significant Unobservable Inputs
Highland Income Fund
Assets
U.S. Senior Loans
Commercial Services	$	32,078,223		$	—	$	32,078,223	$	—
Communication Services		20,447,532			—		14,493,136		5,954,396
Consumer Discretionary		28,458,809			—		28,458,809		—
Consumer Products		16,416,569			—		16,416,569		—
Energy		27,158,165			—		27,158,165		—
Financial		24,915,827			—		24,915,827		—
Gaming/Leisure		10,941,700			—		—		10,941,700
Healthcare		77,147,567			—		42,830,907		34,316,660
Housing		11,945,941			—		11,945,941		—
Industrials		33,904,492			—		25,162,433		8,742,059
Information Technology		113,554,373			—		55,129,373		58,425,000
Manufacturing		6,479,267			—		6,479,267		—
Oil & Gas		9,051,222			—		9,051,222		—
Real Estate		21,210,192			—		21,210,192		—
Retail		49,665,035			—		49,665,035		—
Service		52,160,128			—		52,160,128		—
Transportation		13,359,259			—		13,359,259		—
Utilities		25,800,435			—		25,800,435		—
Preferred Stock
Energy		16,539,728			—		16,539,728		—
Financial		33,218,931			—		33,218,931		—
Real Estate		242,029,880			—		14,201,490		227,828,390
Collateralized Loan Obligations		216,514,222			—		216,514,222		—
Common Stocks
Communication Services		46,871,411			8,946,604		30,380,741		7,544,066
Consumer Discretionary		7,649,821			—		7,649,821		—
Energy		9,362,562			4,905,030		4,457,531		1
Gaming/Leisure		—	(1)		—		—		—	(1)
Healthcare		502,875			502,875		—		—
Housing		—	(1)		—		—		—	(1)
Industrials		563,911			—		563,911		—
Information Technology		1,950,012			1,950,012		—		—
Materials		2,208,360			—		1,495,160		713,200
Real Estate		61,304,052			601,216		—		60,702,836
LLC Interest		91,188,988			—		—		91,188,988
Agency Collateralized Mortgage Obligations		90,110,254			—		90,110,254		—
Corporate Bonds & Notes
Energy		1,101,400			—		25,000		1,076,400
Industrials		189,000			—		189,000		—
Information Technology		—	(1)		—		—		—	(1)
Real Estate		1,415,000			—		1,415,000		—
Utilities		36,815,884			—		36,815,884		—
Foreign Denominated or Domiciled Senior Loans
Canada		8,306,965			—		8,306,965		—
Luxembourg		15,063,300			—		15,063,300		—
Registered Investment Companies		17,735,334			17,735,334		—		—
Purchased Call Options		6,135,499			6,135,499		—		—
Non-U.S. Government Bonds

INVESTMENT PORTFOLIO (unaudited)(continued)

As of September 30, 2019 Highland Income Fund

Sovereign		1,839,371			—			1,839,371		—
Rights
Utilities		989,311			—			989,311		—
Warrants
Energy		174,030			—			174,030		—
Industrials		22,076			—			—		22,076
Claims		52,138			—			—		52,138
Cash Equivalents		73,970			73,970			—		—
Total Assets		1,484,623,021			40,850,540		$	936,264,571		507,507,910
Liabilities
Securities Sold Short
Common Stocks
Information Technology		(10,791,540	)		(10,791,540	)		—		—
Total Liabilities		(10,791,540	)		(10,791,540	)		—		—
Total	$	1,473,831,481		$	30,059,000		$	936,264,571	$	507,507,910

(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 period ended September 30, 2019.

	Balance as of December 31, 2018		Transfers into Level 3		Transfers Out of Level 3			Net Amortization (Accretion) of Premium/ (Discount)			Net Realized Gains/ (Losses)		Net Unrealized Gains/ (Losses)			Net Purchase		Net (Sales)			Balance as of September 30, 2019		Change in Unrealized Appreciation (Depreciation) from Investments at September 30, 2019
U.S. Senior Loans
Communication Services	$	5,472,828	$	—	$	—		$	—		$	—	$	16,859		$	464,709	$	—		$	5,954,396	$	16,859
Gaming/Leisure		10,002,768		—		—			—			—		—			938,932		—			10,941,700		—
Healthcare		24,398,513		—		—			—			—		3,571,185			6,346,962		—			34,316,660		3,571,185
Industrials		8,269,728		—		—			397,939			—		(218,861	)		293,253		—			8,742,059		(218,861	)
Information Technology		57,000,000		—		—			—			—		1,425,000			—		—			58,425,000		1,425,000
Real Estate		1,228,016		—		—			(6,343	)		—		42,159			—		(1,263,832	)		—		42,159
Preferred Stock
Real Estate		214,305,563		—		—			—			—		12,373,827			1,149,000		—			227,828,390		12,373,827
Common Stocks
Communication Services		7,566,587		—		—			—			—		(22,521	)		—		—			7,544,066		(22,521	)
Energy		1		—		—			—			—		—			—		—			1		—
Materials		2,844,759		—		—			—			—		(2,131,559	)		—		—			713,200		(2,131,559	)
Media		1,258,086		—		—			—			—		6,598,465			—		(7,856,551	)		—		6,598,465
Real Estate		17,207,035		—		—			—			—		158,985			43,336,816		—			60,702,836		158,985
LLC Interest		—		—		—			—			—		—			91,188,988		—			91,188,988		—
Corporate Bonds & Notes
Energy		1,076,400		—		—			—			—		—			—		—			1,076,400		—
Warrants
Industrials		88,054		—		—			—			—		(65,978	)		—		—			22,076		(65,978	)
Information Technology		51,729		—		(18,641	)		—			—		(33,088	)		—		—			—		(33,088	)
Claims		52,138		—		—			—			—		—			—		—			52,138		—
Total	$	350,822,205	$	—	$	(18,641	)	$	391,596		$	—	$	21,714,473		$	143,718,660	$	(9,120,383	)	$	507,507,910	$	21,714,473

INVESTMENT PORTFOLIO (unaudited)(continued)

As of September 30, 2019 Highland Income Fund

Investments designated as Level 3 may include assets valued using quotes or indications furnished by brokers which are based on models or estimates 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 period ended September 30, 2019, there were no transfers between Levels.

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	Market Value at 9/30/2019		Valuation Technique		Unobservable Inputs		Input Value(s)
Preferred Stock	$	227,828,390		Net Asset Value		N/A		N/A
				Discounted Cash Flow		Discount Rate		8.5%
						Internal Rate of Return		14.0%
U.S. Senior Loans		118,379,815		Adjusted Appraisal		Liquidity Discount		10%
						Asset Specific Discount		10%
				Multiples Analysis		Multiple of EBITDA less CAPEX		6.00x - 11.75x
				Transaction Analysis		Multiple of EBITDA less CAPEX		10.0x - 12.0x
				Transaction Indication of Value		% of Par		30.0% - 35.0%
				Black-Scholes Model		Volatility Assumption		25%
				Discounted Cash Flow		Discount Rate		8.9% - 17.75%
						Spread Adjustment		0.1% - 1.75%
Common Stocks		68,960,103		Multiples Analysis		Multiple of EBITDA less CAPEX		6.00x - 11.75x
						Multiple of EBITDA		7.50x - 9.25x
						Unadjusted Price/MHz-PoP	$	0.12 - $0.95
						Risk Discount		55.2% - 59.8%
				Discounted Cash Flow		Discount Rate		11.5 - 15.0%
						Terminal Multiple		7.0x
				Transaction Analysis		Multiple of EBITDA		3.5x - 9.0x
						Multiple of EBITDA less CAPEX		10.0x - 12.0x
				Transaction Indication of Value		% of Par		30.0% - 35.0%
				Black-Scholes Model		Volatility Assumption		25%
				Net Asset Value		N/A		N/A
LLC Interest		91,188,988		Discounted Cash Flow		Discount Rate		2.46% - 4.54%
Corporate Bonds		1,076,400		Liquidation Analysis		Claim Amount: Percent of Par		6.9%
Claims		52,138		N/A		N/A		N/A
Warrants		22,076		Discounted Cash Flow		Discount Rate		11.5% - 14.0%
						Terminal Multiple		7.0x
				Multiples Analysis		Multiple of EBITDA		7.50x - 9.25x
				Transaction Analysis		Multiple of EBITDA		8.5x - 9.0x
Total	$	507,507,910

INVESTMENT PORTFOLIO (unaudited)(continued)

As of September 30, 2019 Highland Income Fund

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 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.

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.

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. 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 market 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.

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. The 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, the 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 Investments Portfolio for the Fund.

Derivative Transactions

The Fund is subject to equity securities risk, interest rate risk and currency risk in the normal course of pursuing its investment objectives. 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.

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.

INVESTMENT PORTFOLIO (unaudited)(continued)

As of September 30, 2019 Highland Income Fund

Affiliated Issuers

Under Section 2 (a)(3) of the Investment Company Act of 1940, 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 for the period ended September 30, 2019:

Issuer	Shares at December 31, 2018		Beginning Value as of December 31, 2018		Purchases at Cost		Proceeds from Sales			Net Realized Gain/(Loss) on Sales of Affiliated Issuers		Change in Unrealized Appreciation/ Depreciation			Ending Value as of September 30, 2019		Shares at September 30, 2019		Affiliated Income
Majority Owned, Not Consolidated
Allenby (Common Stocks)		1,291,881	$	1	$	101,797	$	—		$	—	$	(101,797	)		1		1,393,678	$	19,896
Claymore (Common Stocks)		8,698,220		9		671,970		—			—		(671,970	)		9		9,370,190		5,082,401
Other Affiliates
CCS Medical, Inc. (U.S. Senior Loans & Common Stocks)		52,229,448		24,398,513		6,633,831		—			—		3,284,316			34,316,660		55,260,321		—
EDS Legacy Partners (U.S. Senior Loans)		57,000,000		57,000,000		—		—			—		1,425,000			58,425,000		57,000,000		3,579,125
Gambier Bay LLC (Common Stocks)		10,939,879		1,258,086		—		(7,856,551	)		—		6,598,465			—		—		—
LLV Holdco LLC (U.S. Senior Loans, Common Stocks and Warrants)		12,552,393		10,002,768		938,932		—			—		—			10,941,700		13,677,126		27,382
Nevada Land Group (U.S. Senior Loans)		1,743,503		—		—		—			1,743,503		(1,743,503	)		—		—		49,304
NexPoint Strategic Opportunities Fund (Registered Investment Company)		427,345		8,516,986		9,983,151		(338,560	)		—		(426,243	)		17,735,334		989,143		880,100
NFRO REIT SUB, LLC (Common Stocks)		802,563		17,207,025		49,780,000		—			—		(6,284,199	)		60,702,826		2,918,931		—
Total	$	145,685,232	$	118,383,388	$	68,109,681	$	(8,195,111	)	$	1,743,503	$	2,080,069		$	182,121,530	$	140,609,389	$	9,638,208