UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number: 811-21869
NEXPOINT CREDIT STRATEGIES FUND
(Exact name of registrant as specified in charter)
200 Crescent Court
Suite 700
Dallas, Texas 75201
(Address of principal executive offices)(Zip code)
NexPoint Advisors, L.P.
200 Crescent Court
Suite 700
Dallas, Texas 75201
(Name and Address of Agent for Service)
Registrant’s telephone number, including area code: (866) 351-4440
Date of fiscal year end: December 31
Date of reporting period: September 30, 2013
Item 1: Schedule of Investments
The Schedule of Investments are attached herewith.
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
NOTES TO CONSOLIDATED INVESTMENT PORTFOLIO (unaudited)
| As of September 30, 2013 | NexPoint Credit Strategies Fund |
Valuation of Investments
In computing the NexPoint Credit Strategies Fund’s (the “Fund”) net assets attributable to common shares, securities with readily available market quotations on the New York Stock Exchange, 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 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 NexPoint Advisors, L.P. (the “Investment Advisor”) has determined to generally have the capability to provide appropriate pricing services and have been approved by the Trustees.
Securities for which market quotations are not readily available, for which the Fund has determined 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), 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: (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 NAV. 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. Short-term debt investments, that is, those with a remaining maturity of 60 days or less, are valued at cost adjusted for amortization of premiums and accretion of discounts. Repurchase agreements are valued at cost plus accrued interest. Foreign price quotations are converted to U.S. dollar equivalents using the 4:00 PM London Time Spot Rate.
Fair Value Measurements
The Fund has performed an analysis of all existing investments and derivative instruments to determine the significance and character of all 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.
| NOTES TO CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
The Investment Adviser has established policies, 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. 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 those policies.
As of September 30, 2013, the Fund’s investments consisted of senior loans, corporate notes and bonds, asset-backed securities, common stocks, preferred stocks, exchange-traded funds and warrants. 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. 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, preferred stocks 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.
At the end of each calendar quarter, management 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, management 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.
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, 2013 is as follows:
| Total value at September 30, 2013 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||
| NexPoint Credit Strategies Fund |
||||||||||||||||
| Assets |
||||||||||||||||
| U.S. Senior Loans(1) |
$ | 146,185,516 | $ | — | $ | 104,493,058 | $ | 41,692,458 | (2) | |||||||
| Foreign Denominated or Domiciled Senior Loans(1) |
382,581 | — | 228,333 | 154,248 | ||||||||||||
| Asset-Backed Securities |
162,021,015 | — | 147,028,019 | 14,992,996 | ||||||||||||
| Corporate Bonds & Notes(1) |
96,829,164 | — | 92,016,615 | 4,812,549 | (2) | |||||||||||
| Foreign Corporate Bonds & Notes(1) |
36,386,989 | — | 36,386,989 | — | ||||||||||||
| Common Stocks |
||||||||||||||||
| Broadcasting |
73,485,461 | — | 59,250,300 | 14,235,161 | ||||||||||||
| Consumer Discretionary |
59,148,840 | 59,148,840 | — | — | ||||||||||||
| Consumer Staples |
676,193 | 676,193 | — | — | ||||||||||||
| Energy |
3,786,928 | 3,786,928 | — | — | ||||||||||||
| Financial |
7,950,496 | 7,505,922 | — | 444,574 | ||||||||||||
| Gaming & Leisure |
— | — | — | — | (2) | |||||||||||
| Healthcare |
39,214,614 | 23,264,214 | — | 15,950,400 | ||||||||||||
| Housing |
1,093,406 | — | — | 1,093,406 | ||||||||||||
| Information Technology |
3,399,421 | 3,399,421 | — | — | ||||||||||||
| Media & Telecommunications |
17,473,558 | 469,989 | 17,003,569 | — | (2) | |||||||||||
| Metals & Minerals |
2,367,812 | 2,367,812 | — | — | ||||||||||||
| Real Estate Investment Trust |
45,955,734 | 45,955,734 | — | — | (2) | |||||||||||
| Telecommunications |
431,355 | 431,355 | — | — | ||||||||||||
| Transportation |
38,518,509 | 38,518,509 | — | — | ||||||||||||
| Utility |
127,297 | — | 127,297 | — | ||||||||||||
| Wireless Communications |
4,385,426 | 4,385,426 | — | — | ||||||||||||
| Preferred Stocks |
||||||||||||||||
| Consumer Discretionary |
— | — | — | — | (2) | |||||||||||
| Financial |
38,194,510 | — | 22,425,000 | 15,769,510 | (2) | |||||||||||
| Exchange-Traded Funds |
38,088,313 | 38,088,313 | — | — | ||||||||||||
| Real Estate |
17,250,656 | — | — | 17,250,656 | ||||||||||||
| Warrants(1) |
||||||||||||||||
| Equity Contracts |
3,617,700 | — | 3,617,700 | — | (2) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Assets |
836,971,494 | 227,998,656 | 482,576,880 | 126,395,958 | ||||||||||||
|
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|
|||||||||
| Liabilities |
||||||||||||||||
| Securities Sold Short(1) |
(36,996,046 | ) | (36,996,046 | ) | ||||||||||||
| Other Financial Instruments |
||||||||||||||||
| Equity Contracts – Written Put Option |
(71,250 | ) | (71,250 | ) | — | — | ||||||||||
| Foreign Currency Contracts – Foreign Currency Exchange Contracts |
(130,372 | ) | (130,372 | ) | — | — | ||||||||||
|
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|||||||||
| Total Liabilities |
(37,197,668 | ) | (37,197,668 | ) | — | — | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Total |
$ | 799,773,826 | $ | 190,800,988 | $ | 482,576,880 | $ | 126,395,958 | ||||||||
|
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| (1) | See Investment Portfolio detail for industry breakout. |
| (2) | This category includes securities with a value of zero. |
The table below sets forth a summary of changes in the Fund’s Level 3 assets (assets measured at fair value using significant unobservable inputs) for the nine months ended September 30, 2013.
| Balance as
of December 31, 2012 |
Transfers into Level 3 |
Transfers Out of Level 3 |
Net Amortization (Accretion) of Premium/ (Discount) |
Net Realized Gains/ (Losses) |
Net Unrealized Gains/ (Losses) |
Net Purchases(1) |
Net (Sales)(1) | Balance as of September 30, 2013 |
Change in Unrealized Gain/(Loss) on Level 3 securities still held at period end |
|||||||||||||||||||||||||||||||
| NexPoint Credit Strategies Fund |
||||||||||||||||||||||||||||||||||||||||
| U.S. Senior Loans |
$ | 42,087,789 | $ | — | $ | — | $ | 811,573 | $ | 24,987 | $ | (1,557,941 | ) | $ | 809,367 | $ | (483,317 | ) | 41,692,458 | $ | (1,557,941 | ) | ||||||||||||||||||
| Foreign Denominated or Domiciled Senior Loans |
187,531 | 342 | 221,712 | 1,437 | (256,774 | ) | 154,248 | 221,712 | ||||||||||||||||||||||||||||||||
| Asset-Backed Securities |
1,700,238 | 12,310,780 | 527,668 | (10,240 | ) | (223,828 | ) | 733,720 | (45,342 | ) | 14,992,996 | (223,828 | ) | |||||||||||||||||||||||||||
| Corporate Bonds & Notes |
8,435,914 | 2,444,847 | (480,510 | ) | — | — | (5,230,013 | ) | — | (357,689 | ) | 4,812,549 | (5,230,013 | ) | ||||||||||||||||||||||||||
| Claims |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Common Stocks |
||||||||||||||||||||||||||||||||||||||||
| Broadcasting |
24,671,202 | — | (59,250,300 | ) | — | 701,679 | 48,814,259 | — | (701,679 | ) | 14,235,161 | 13,614,484 | ||||||||||||||||||||||||||||
| Financial(2) |
428,263 | — | — | — | — | 39,611 | — | (23,300 | ) | 444,574 | 39,611 | |||||||||||||||||||||||||||||
| Gaming & Leisure |
— | — | — | — | — | 4,558,190 | 95,809 | (4,653,999 | ) | — | 4,558,190 | |||||||||||||||||||||||||||||
| Healthcare |
40,320,000 | — | — | — | — | (369,600 | ) | — | (24,000,000 | ) | 15,950,400 | (369,600 | ) | |||||||||||||||||||||||||||
| Housing |
839,382 | — | — | — | — | 254,024 | — | — | 1,093,406 | 254,024 | ||||||||||||||||||||||||||||||
| Media & Telecommunications(2) |
71,278 | — | — | — | — | (71,278 | ) | — | — | — | (71,278 | ) | ||||||||||||||||||||||||||||
| Utility |
18,269 | — | (127,298 | ) | — | — | (224,669 | ) | 333,698 | — | — | — | ||||||||||||||||||||||||||||
| Preferred Stocks |
||||||||||||||||||||||||||||||||||||||||
| Consumer Discretionary |
— | — | — | — | — | (26,157 | ) | 26,157 | — | — | (26,157 | ) | ||||||||||||||||||||||||||||
| Financial |
— | — | — | — | — | (2,068,301 | ) | 17,837,811 | — | 15,769,510 | (2,068,301 | ) | ||||||||||||||||||||||||||||
| Real Estate |
— | — | — | — | — | (200,141 | ) | 17,450,797 | — | 17,250,656 | (200,141 | ) | ||||||||||||||||||||||||||||
| Warrants |
||||||||||||||||||||||||||||||||||||||||
| Equity Contracts |
1,468,475 | — | (3,617,700 | ) | — | 66,254 | 2,149,225 | — | (66,254 | ) | — | — | ||||||||||||||||||||||||||||
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| Total |
$ | 120,228,341 | $ | 14,755,627 | $ | (63,475,808 | ) | $ | 1,339,241 | $ | 783,022 | $ | 46,065,093 | $ | 37,288,796 | $ | (30,588,354 | ) | $ | 126,395,958 | $ | 8,940,762 | ||||||||||||||||||
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| (1) | Includes any applicable borrowings and/or paydowns made on revolving credit facilities held in the Fund’s Investment Portfolio. |
| (2) | Balance as of December 31, 2012 reflects a industry reclassification for American Banknote Corp. from Media & Telecommunications to Financial. |
For the nine months ended September 30, 2013, total change in unrealized gain/(loss) on Level 3 securities still held at
period end and included in the change in net assets was $8,940,762.
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. As a result, for the nine months ended September 30, 2013, a net amount of $48,720,181 of the Fund’s portfolio investments were transferred between Level 2 and Level 3. Determination of fair values is uncertain because it involves subjective judgments and estimates that are unobservable. Transfers between Level 2 and Level 3 were due to management’s assessment of observable and unobservable inputs for valuing the assets.
| NOTES TO CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
For the nine months ended September 30, 2013, a net amount of $19,123,522 of the Fund’s portfolio investments were transferred between Level 1 and Level 2. Transfers between Level 1 and Level 2 were due to management’s assessment of quoted prices for assets in active markets.
The following table summarizes the valuation techniques used and unobservable inputs developed to determine the fair value of material Level 3 investments:
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:
| Fund and Category |
Ending Balance at 9/30/2013 |
Valuation Technique |
Unobservable Inputs |
Input Value(s) | ||||||
| NexPoint Credit Strategies Fund |
||||||||||
| Debt |
$ | 61,652,251 | Third-Party Pricing Vendor |
N/A |
N/A | |||||
| Liquidation Analysis |
Discount Rate |
15% - 25% | ||||||||
| Liquidity Discount |
30% | |||||||||
| Asset Specific Discount |
99 - 100% | |||||||||
| Debt - Loan Spread |
Weighting of Comparables |
Equal Weights | ||||||||
| Weighted Avg DM |
5% | |||||||||
| Liquidity Discount |
20% | |||||||||
| Multiple Discount |
10% | |||||||||
| Scenario Probabilities |
Various | |||||||||
| Preferred Stock |
15,769,510 | |||||||||
| Common Stocks |
31,723,541 | Multiples Analysis |
Discount Rate |
20% - 40% | ||||||
| Liquidity Discount |
25% | |||||||||
| Minority Discount |
20% | |||||||||
| Scenario Probabilities |
Various | |||||||||
| Fair Valuation - Multiple Scenarios |
Discount Rate |
24% | ||||||||
| Scenario Probabilities |
Various | |||||||||
| Real Estate Investment Trust |
17,250,656 | Cost |
N/A |
N/A | ||||||
|
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|
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| Total |
$ | 126,395,958 | ||||||||
The significant unobservable inputs used in the fair value measurement of the Fund’s debt investments are discount rates and accounts receivable recovery assumption. Significant increases or decreases in either of those inputs in isolation would result in a significantly lower or higher fair value measurement.
The significant unobservable inputs used in the fair value measurement of the reporting entity’s common stock investments are discount rates and scenario probabilities. Significant changes in either of those inputs in isolation would result in a significantly lower or higher fair value measurement.
Derivative Transactions
The Fund entered 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.
Forward Foreign Currency Exchange Contracts
In order to minimize the movement in NAV resulting from a decline or appreciation in the value of a particular foreign currency against the U.S. dollar or another foreign currency or for other reasons, the Fund is authorized to enter into forward currency exchange contracts. These contracts involve an obligation to purchase or sell a specified currency at a future date at a price set at the time of the contract. Forward currency contracts do not eliminate fluctuations in the values of portfolio securities but rather allow the Fund to establish a rate of exchange for a future point in time. Forwards involve counterparty credit risk to the Fund because the forwards are not exchange traded, and there is no clearinghouse to guarantee forwards against default. As of September 30, 2013, the open notional value of the Fund’s forward currency exchange contracts were EUR 4,615,000 and during the nine months ended September 30, 2013, the closed notional value was EUR 4,615,000.
Options
The Fund may utilize options on securities or indexes to varying degrees as part of their 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 the Fund expires unexercised, the Fund realizes on the expiration date a capital gain equal to the premium received by the Fund at the time the option was written. If an option purchased by a Fund expires unexercised, the 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 the Fund desires. The Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option, or, if it is more, the Fund will realize a capital loss.
During the nine months ended September 30, 2013, the Fund had covered written options to hedge against equity price movement of the related securities, which is consistent with the investment strategy of the fund. Transactions in written options for the nine months ended September 30, 2013 were as follows:
| NOTES TO CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
| Number of Contracts |
Premium | |||||||
| Outstanding, December 31, 2012 |
11,934 | $ | 2,951,678 | |||||
| Call Options Written |
4,675 | 533,599 | ||||||
| Put Options Written |
7,834 | 1,014,836 | ||||||
| Call Options Exercised |
(3,900 | ) | (483,448 | ) | ||||
| Put Options Expired |
(11,934 | ) | (1,416,025 | ) | ||||
| Call Options Expired |
(775 | ) | (50,151 | ) | ||||
| Put Options Closed |
(7,334 | ) | (2,466,773 | ) | ||||
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| Outstanding, September 30, 2013 |
500 | $ | 83,716 | |||||
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Affiliated Issuers
Under Section 2(a)(3) of the 1940 Act, a portfolio company is defined as “affiliated” if a Fund owns five percent or more of its outstanding voting securities. The Fund held at least five percent of the outstanding voting securities of the following companies as of September 30, 2013:
| Issuer |
Par Value
at September 30, 2013 |
Shares
at September 30, 2013 |
Market
Value December 31, 2012 |
Market
Value September 30, 2013 |
Affiliated Income | Purchases | Sales | |||||||||||||||||||||
| ComCorp Broadcasting, Inc. (Senior Loans)(1)(2) |
$ | 35,950,043 | — | $ | 34,829,552 | $ | 35,644,467 | $ | 1,666,197 | $ | — | $ | — | |||||||||||||||
| Communications Corp of America (Common Stocks) |
— | 2,010,616 | 620,677 | 14,235,161 | — | — | — | |||||||||||||||||||||
| Endurance Business Media, Inc., Class A (Common Stocks) |
— | 6,480 | 71,278 | — | — | — | — | |||||||||||||||||||||
| Endurance Business Media, Inc. (Senior Loans) |
3,383,284 | — | 682,339 | 676,657 | 854,962 | — | 18,942 | |||||||||||||||||||||
| Freedom LHV, LLC (Real Estate) |
— | 540,000 | — | 8,100,000 | — | 8,100,000 | — | |||||||||||||||||||||
| Freedom Lubbock, LLC (Real Estate) |
— | 335,363 | — | 5,030,000 | — | 5,030,000 | — | |||||||||||||||||||||
| Freedom Sarasota, LLC (Real Estate) |
— | 263,014 | — | 3,945,206 | — | 3,945,206 | — | |||||||||||||||||||||
| Freedom BBY, LLC (Real Estate) |
— | 10,000 | — | 150,000 | — | 150,000 | — | |||||||||||||||||||||
| Freedom Miramar Apartments, LLC (Real Estate) |
— | 1,667 | — | 25,000 | — | 25,000 | — | |||||||||||||||||||||
| Genesys Ventures IA, L.P. (Common Stocks) |
— | 24,000,000 | 40,320,000 | 15,950,400 | — | — | 24,000,000 | |||||||||||||||||||||
| LLV Holdco, LLC (Senior Loans) |
7,780,108 | — | 5,234,227 | 4,451,778 | 190,058 | 315,209 | — | |||||||||||||||||||||
| LLV Holdco, LLC (Common Stocks) |
— | 26,869 | — | — | — | 95,808 | 4,647,280 | |||||||||||||||||||||
| LLV Holdco, LLC (Warrants) |
— | 4,958 | — | — | — | — | — | |||||||||||||||||||||
| ProShares Ultra Silver, ETF (Exchange-Traded Funds) |
— | 1,494,740 | — | 29,969,537 | — | 48,055,435 | 3,000,198 | |||||||||||||||||||||
| Young Broadcasting Holding Co., Inc., Class A (Common Stocks) |
— | 6,371 | 24,050,525 | 59,250,300 | — | — | 2,140,000 | |||||||||||||||||||||
| Young Broadcasting Holding Co., Inc., (Warrants) |
— | 389 | 1,468,475 | 3,617,700 | — | — | 132,000 | |||||||||||||||||||||
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| $ | 47,113,435 | 28,700,467 | $ | 107,277,073 | $ | 181,046,206 | $ | 2,711,217 | $ | 65,716,658 | $ | 33,938,420 | ||||||||||||||||
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| (1) | Company is a wholly owned subsidiary of Communications Corp. of America. |
| (2) | No longer an affiliate as of September 30, 2013. |
| NOTES TO CONSOLIDATED INVESTMENT PORTFOLIO (unaudited) (continued) | ||
| As of September 30, 2013 | NexPoint Credit Strategies Fund | |
U.S. Federal Income Tax Information
Unrealized appreciation and depreciation at September 30, 2013, based on cost of investments for U.S. federal income tax purposes was:
| Gross Appreciation |
Gross Depreciation |
Net Appreciation/ (Depreciation) |
Cost | |||||||||
| $109,118,609 |
$ | 274,291,758 | $ | (165,173,149 | ) | $ | 965,148,597 | |||||
For more information with regard to significant accounting policies, see the most recent annual report filed with the Securities and Exchange Commission.
Item 2. Controls and Procedures.
(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s last fiscal quarter that have materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 3. Exhibits.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEXPOINT CREDIT STRATEGIES FUND
| By: | /s/ Ethan Powell | |
| Ethan Powell | ||
| Executive Vice President and Secretary (principal executive officer) | ||
| Date: | November 29, 2013 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Ethan Powell | |
| Ethan Powell | ||
| Executive Vice President and Secretary (principal executive officer) | ||
| Date: | November 29, 2013 | |
| By: | /s/ Brian Mitts | |
| Brian Mitts | ||
| Treasurer (principal financial officer) | ||
| Date: | November 29, 2013 | |