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Table of Contents

As filed with the Securities and Exchange Commission on
June 20, 2006

Securities Act Registration
No. 333-132436

Investment Company Act Registration No. 811-21869

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-2

    Registration Statement

    under the Securities Act of 1933

    þ

    Pre-Effective Amendment No. 5

    þ

    Post-Effective Amendment No.

    o

    and/or

    Registration Statement

    under the Investment Company Act of 1940

    þ

    Amendment No. 5

    þ

Highland Credit Strategies Fund

(Exact Name of Registrant as Specified in Declaration of
Trust)

Two Galleria Tower

13455 Noel Road, Suite 800

Dallas, Texas 75240

(Address of Principal Executive Offices)

(877) 665-1287

(Registrant’s telephone number, including area code)

James D. Dondero, President

Highland Credit Strategies Fund

Two Galleria Tower

13455 Noel Road, Suite 800

Dallas, Texas 75240

(Name and Address of Agent for Service)

Copies to:

    Philip Harris, Esq.

    Skadden, Arps, Slate, Meagher & Flom LLP

    Four Times Square

    New York, New York 10036

    Nora M. Jordan, Esq.

    Davis Polk & Wardwell

    450 Lexington Avenue

    New York, New York 10017

Approximate date of proposed public offering:

As soon as practicable after the effective date of this
Registration Statement.

If any securities being registered on this form will be offered
on a delayed or continuous basis in reliance on Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
check the following
box     o

It is proposed that this filing will become effective (check
appropriate box):

     o
     when declared effective
pursuant to section 8(c)

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF
1933

    Proposed Maximum

    Proposed Maximum

    Amount of

    Amount Being

    Offering Price

    Aggregate

    Registration

    Title of Securities Being Registered

    Registered

    per Unit

    Offering Price

    Fee

    Common Shares, $0.001 par value

            shares(1)

    $20.00

    $          (2)

    $          (3)

    (1)

    Includes shares that may be offered to the underwriters pursuant
    to an option to cover over-allotments.

    (2)

    Estimated solely for the purpose of calculating the registration
    fee.

    (3)

    A registration fee of $214.00 was previously paid in connection
    with the initial filing of this registration statement on
    March 15, 2006. An additional registration fee of
    $                  is
    paid with this filing.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATES AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.

Table of Contents

HIGHLAND CREDIT STRATEGIES FUND

CROSS REFERENCE SHEET

Part A — Prospectus

    Items in Part A of Form N-2

    Location in Prospectus

    Item 1.

    Outside Front Cover

    Cover Page

    Item 2.

    Inside Front and Outside Back Cover

    Cover Page

    Item 3.

    Fee Table and Synopsis

    Prospectus Summary; Summary of Trust Expenses

    Item 4.

    Financial Highlights

    Not Applicable

    Item 5.

    Plan of Distribution

    Cover Page; Prospectus Summary; Underwriters

    Item 6.

    Selling Shareholders

    Not Applicable

    Item 7.

    Use of Proceeds

    Use of Proceeds; Prospectus Summary; The Trust’s Investments

    Item 8.

    General Description of the Registrant

    The Trust; The Trust’s Investments; Risks; Description of
    Capital Structure; Anti- Takeover Provisions in the Agreement
    and Declaration of Trust; Closed-End Trust Structure;

    Item 9.

    Management

    Management of the Trust; Custodian and Transfer Agent; Trust
    Expenses

    Item 10.

    Capital Stock, Long-Term Debt, and Other Securities

    Description of Capital Structure; Distributions; Dividend
    Reinvestment Plan; Anti-Takeover Provisions in the Agreement and
    Declaration of Trust; Tax Matters

    Item 11.

    Defaults and Arrears on Senior Securities

    Not Applicable

    Item 12.

    Legal Proceedings

    Not Applicable

    Item 13.

    Table of Contents of the Statement of Additional Information

    Table of Contents for the Statement of Additional Information

    Part B — Statement of Additional Information

    Item 14.

    Cover Page

    Cover Page

    Item 15.

    Table of Contents

    Cover Page

    Item 16.

    General Information and History

    Not Applicable

    Item 17.

    Investment Objective and Policies

    Investment Objectives and Restrictions; Investment Policies and
    Techniques; Other Investment Policies and Techniques; Portfolio
    Transactions

    Item 18.

    Management

    Management of the Trust; Portfolio Transactions and Brokerage

    Item 19.

    Control Persons and Principal Holders of Securities

    Not Applicable

    Item 20.

    Investment Advisory and Other Services

    Management of the Trust for the Prospectus and Statement of
    Additional Information; Experts

    Item 21.

    Portfolio Managers

    Management of the Trust

    Item 22.

    Brokerage Allocation and Other Practices

    Portfolio Transactions and Brokerage

    Item 23.

    Tax Status

    Tax Matters; Distributions

    Item 24.

    Financial Statements

    Financial Statements; Independent Auditors’ Report

    Part C — Other Information

    Items 25-34 have been answered in part C of this
    Registration Statement

Table of Contents

The information in this prospectus is
not complete and may be changed. We may not sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted.

PRELIMINARY PROSPECTUS (SUBJECT TO
COMPLETION)

ISSUED JUNE 20, 2006

Shares

Highland Credit Strategies Fund

COMMON SHARES

Highland Credit Strategies Fund (the “Trust”) is
offering                 common
shares of beneficial interest. This is the initial public
offering of the Trust’s common shares, and no public market
exists for its common shares.

Investment Objectives. Highland Credit Strategies Fund is
a newly organized, non-diversified, closed-end management
investment company. The Trust’s investment objectives are
to provide both current income and capital appreciation. The
Trust will pursue its objectives by investing primarily in the
following categories of securities and instruments of
corporations and other business entities: (i) secured and
unsecured floating and fixed rate loans; (ii) bonds and
other debt obligations; (iii) debt obligations of stressed,
distressed and bankrupt issuers; (iv) structured products,
including but not limited to, mortgage-backed and other
asset-backed securities and collateralized debt obligations; and
(v) equities. Additionally, within the categories of
obligations and securities in which the Trust may invest,
Highland Capital Management, L.P., the Trust’s investment
adviser (“Highland” or the “Investment
Adviser”), may employ various trading strategies, including
but not limited to, capital structure arbitrage, pair trades and
shorting. The Trust may also invest in these categories of
obligations and securities through the use of derivatives.
Highland will seek to achieve its capital appreciation objective
by investing in category (iii) and (v) obligations and
securities, and to a lesser extent, in category (i), (ii), and
(iv) obligations. Under normal market conditions, at least
80% of the Trust’s assets will be invested in one or more
of these principal investment categories. Subject only to this
general guideline, Highland has broad discretion to allocate the
Trust’s assets among these investment categories and to
change allocations as conditions warrant. The Investment Adviser
has full discretion regarding the capital markets from which it
can access investment opportunities in accordance with the
investment limitations set forth in this prospectus. A
significant portion of the Trust’s assets may be invested
in securities rated below investment grade, which are commonly
referred to as “junk securities.” The Investment
Adviser does not anticipate a high correlation between the
performance of the Trust’s portfolio and the performance of
the corporate bond and equity markets. There can be no assurance
that the Trust’s investment objectives will be
achieved.

(continued on top of next page)

No Prior History. Because the Trust is newly organized,
the Trust’s shares have no history of public trading.
Shares of closed-end investment companies frequently trade at a
discount from their net asset value, which may increase
investors’ risk of loss. This risk may be greater for
investors expecting to sell their shares in a relatively short
period after completion of the public offering. The Trust
anticipates that its common shares will be listed on the New
York Stock Exchange under the symbol “HCF.”

Before buying any common shares, you should read the
discussion of the material risks of investing in the Trust in
“Principal Risks of the Trust” beginning on
page 40 of this prospectus. Certain of the risks are
summarized in “Prospectus Summary— Principal Risks of
the Trust” beginning on page 5.

PRICE $20.00
A SHARE

    Estimated

    Price to

    Sales

    Offering

    Proceeds

    Public

    Load(2)

    Expenses(3),(4)

    to Trust(5)

    Per Share

    $
    20.00

    $
    0.90

    $
    0.12

    $
    18.98

    Total(1)

    $

    $

    $

    $

    (1)

    The Trust has granted the underwriters an option to purchase
    up
    to               additional
    common shares at the price to public, less the sales load,
    within 45 days of the date of this prospectus solely to
    cover over-allotments, if any. If such option is exercised in
    full, the total price to public, sales load, estimated offering
    expenses and proceeds to the Trust will be
    $       ,
    $       ,
    $       and
    $       , respectively. See
    “Underwriters.”

    (2)

    Highland Capital Management, L.P. will pay a marketing and
    structuring fee to Morgan Stanley & Co. Incorporated
    calculated at 1.25% of the aggregate price to public of the
    common shares sold by Morgan Stanley & Co.
    Incorporated, including over-allotted shares. This fee is not
    included in this column. See “Underwriters —
    Additional Compensation to Be Paid by Investment
    Adviser.”

    (3)

    Estimated offering expenses in this column include all of the
    estimated expenses (including underwriting discounts,
    commissions and legal expenses) of the Preferred Share offering
    which is expected to occur soon after the completion of this
    offering, as described under “Prospectus
    Summary — Preferred Shares and Borrowings.” Such
    Preferred Share offering expenses are estimated to be
    approximately $1.2 million in total, or $0.08 per common
    share sold by the Trust in this offering, assuming approximately
    $81.7 million liquidation value of Preferred Shares are issued
    in the Preferred Share offering and 15,000,000 common shares are
    issued in this offering. Estimated offering expenses in this
    column also include reimbursement to Highland by the Trust for
    expenses incurred by Highland in connection with this offering.
    The marketing and structuring fee referred to in footnote 2
    is not reimbursable to Highland, and therefore estimated
    offering expenses do not include this fee. Estimated offering
    expenses do not include the costs and expenses, if any, of
    borrowings from a credit facility. See
    “Underwriters.”

    (4)

    Offering expenses paid by the Trust (other than the sales
    load and the Preferred Share offering expenses referred to in
    footnote 3), including expenses reimbursed by the Trust to
    Highland, will not exceed $0.04 per common share sold by
    the Trust in this offering. If the offering expenses referred to
    in the preceding sentence exceed this amount, Highland will pay
    the excess. The aggregate offering expenses (excluding the sales
    load, and excluding any Preferred Share offering expenses, but
    including expenses reimbursed to Highland) to be incurred by the
    Trust are estimated to be $600,000 in total, or $0.04 per
    common share sold by the Trust in this offering, assuming
    15,000,000 common shares are issued in this offering. See
    “Underwriters.”

    (5)

    Proceeds to the Trust are calculated after total of other
    expenses of issuance and distribution.

The Securities and Exchange Commission and state securities
regulators have not approved or disapproved of these securities
or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

The underwriters expect to deliver the common shares to
purchasers on or
about                ,
2006.

MORGAN STANLEY

    E*TRADE FINANCIAL
    OPPENHEIMER & CO., INC.
    ROBERT W. BAIRD & CO.

    STEPHENS INC.
    WELLS FARGO SECURITIES

                  ,
2006

Table of Contents

(continued from top of previous page)

Investment Policies and Strategies. Under normal market
conditions, the Investment Adviser will employ, on behalf of the
Trust, investment strategies across various markets in which the
Investment Adviser holds significant investment experience:
primarily the leveraged loan, high yield, structured product and
stressed and distressed markets. The Investment Adviser has full
discretion regarding the capital markets from which it can
access investment opportunities in accordance with the
investment limitations set forth in this prospectus.

The Investment Adviser looks to implement selected trading
strategies to exploit pricing inefficiencies across the credit
markets, or debt markets, and within an individual issuer’s
capital structure. The Trust seeks to vary its investments by
strategy, industry, security type and credit market, but
reserves the right to re-position its portfolio among these
criteria depending on market dynamics. The Investment Adviser
manages interest rate, default, currency and systemic risks
through a variety of trading methods and market tools, including
derivative hedging instruments, as it deems appropriate.

The multi-strategy investment program to be implemented by
the Trust will allow the Investment Adviser to assess what it
considers to be the best opportunities across multiple markets
and to adjust quickly the Trust’s trading strategies and
market focus to changing conditions. The Investment Adviser
intends to focus primarily on the U.S. marketplace, but may
pursue opportunities in the
non-U.S. credit or
securities markets by investing up to 20% of the Trust’s
assets in
non-U.S. credit or
securities market investments.

Within the categories of obligations and securities in
which the Trust may invest, Highland may employ various trading
strategies, including but not limited to, capital structure
arbitrage, pair trades and shorting. “Capital structure
arbitrage” typically involves establishing long and short
positions in securities (or their derivatives) at different
tiers within an issuer’s capital structure in ratios
designed to maintain a generally neutral overall exposure to the
issuer while exploiting a pricing inefficiency. Some issuers may
also have more than one class of shares or an equival