SecProbe.io

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 NEXPOINT DIVERSIFIED REAL ESTATE TRUST

 300 Crescent Court, Suite 700

 Dallas, TX 75201

 September 9, 2025

 BY EDGAR

 Division of Corporation Finance

 U.S. Securities and Exchange Commission

 100 F Street, N.E.

 Washington, D.C. 20549

 Re:

 NexPoint Diversified Real Estate Trust

 Registration Statement on Form S-3

 Filed August 22, 2025

 File No. 333-289799

 Ladies and Gentlemen:

 Pursuant to Rule 461 of the rules and regulations promulgated under the Securities Act of 1933, NexPoint Diversified Real Estate Trust respectfully requests that the effective date of the above-referenced Registration Statement be accelerated so as to permit it to become effective at 5:00 p.m. Washington D.C. time on September 11, 2025, or as soon thereafter as practicable.

 Please call Justin Reinus of Winston & Strawn LLP at (214) 453-6566 to provide notice of the effectiveness of the Registration Statement.

 [ Signature Page Follows ]

 Very truly yours,

 NexPoint Diversified Real Estate Trust

 By: /s/ Paul Richards

 Name: Paul Richards

 Title: Chief Financial Officer, Executive VP-Finance, Treasurer and Assistant Secretary

 cc:

 Justin Reinus, Winston & Strawn LLP

 Charlie Haag, Winston & Strawn LLP

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 NEXPOINT DIVERSIFIED REAL ESTATE TRUST

 300 Crescent Court, Suite 700

 Dallas, Texas 75201

 September 4, 2025

 BY EDGAR

 Pearlyne Paulemon

 Office of Real Estate & Construction

 Division of Corporation Finance

 U.S. Securities and Exchange Commission

 100 F Street, NE

 Washington, D.C. 20549

 Re:

 NexPoint Diversified Real Estate Trust

 Registration Statement on Form S-3

 Filed August 22, 2025

 File No. 333-289799

 Ladies and Gentlemen:

 This letter is in response to the letter dated September 2, 2025 from the staff of the Division of Corporation Finance (the “ Staff ”) of the Securities and Exchange Commission addressed to NexPoint Diversified Real Estate Trust (the “ Company ”). For ease of reference, the text of the Staff’s comment is included below in bold-faced type, followed by the Company’s response.

 Registration Statement on Form S-3 filed August 22, 2025

 General

 1.

 With reference to the shares held by NexPoint Real Estate Advisors X, L.P., we note that the selling shareholder is identified as a wholly owned subsidiary of NexPoint. Given this relationship, you are not permitted to rely on Securities Act Rule 415(a)(1)(i) to register the shares because the rule excludes securities offered by “ a person of which the registrant is a subsidiary. ” Accordingly, please amend your registration statement to disclose that this is a primary offering and identify the selling stockholder as an underwriter. For additional guidance, refer to Securities Act Rules Compliance and Disclosure Interpretations, Question 212.15.

 Response : The Company acknowledges the Staff’s comment and respectfully advises the Staff that NexPoint Real Estate Advisors X, L.P. (the “ Selling Stockholder ”) is not a subsidiary of the Company, nor is the Company a subsidiary of the Selling Stockholder. The Registration Statement on Form S-3 (the “ Registration Statement ”) includes that “NexPoint Real Estate Advisors X, L.P. is a wholly owned subsidiary of NexPoint.” The term “NexPoint” is defined in the Registration Statement to mean NexPoint Advisors, L.P. NexPoint Advisors, L.P. provides external management and advisory services, among other services, to a number of clients through its various subsidiaries, one of which is the Selling Stockholder, the Company’s external advisor.

 If you have any questions, please feel free to contact me at 214-276-6300 or our counsel, Justin Reinus of Winston & Strawn LLP, at 214-453-6566.

 Very truly yours,

 /s/ Paul Richards

 Paul Richards

 Chief Financial Officer, Executive

 VP-Finance, Treasurer and Assistant Secretar

 cc:

 Justin S. Reinus, Partner, Winston & Strawn LLP

 Charles T. Haag, Partner, Winston & Strawn LLP

<DOCUMENT>
<TYPE>TEXT-EXTRACT
<SEQUENCE>2
<FILENAME>filename2.txt
<TEXT>
 September 2, 2025

Paul Richards
Chief Financial Officer
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, TX 75201

 Re: NexPoint Diversified Real Estate Trust
 Registration Statement on Form S-3
 Filed August 22, 2025
 File No. 333-289799
Dear Paul Richards:

 We have conducted a limited review of your registration statement and
have the
following comment.

 Please respond to this letter by amending your registration statement
and providing
the requested information. If you do not believe the comment applies to your
facts and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.

 After reviewing any amendment to your registration statement and the
information
you provide in response to this letter, we may have additional comments.

Registration Statement on Form S-3 filed August 22, 2025
General

1. With reference to the shares held by NexPoint Real Estate Advisors X,
L.P., we note
 that the selling shareholder is identified as a wholly owned subsidiary
of
 NexPoint. Given this relationship, you are not permitted to rely on
Securities
 Act Rule 415(a)(1)(i) to register the shares because the rule excludes
securities offered
 by a person of which the registrant is a subsidiary. Accordingly,
please amend your
 registration statement to disclose that this is a primary offering and
identify the selling
 stockholder as an underwriter. For additional guidance, refer to
Securities Act Rules
 Compliance and Disclosure Interpretations, Question 212.15.
 September 2, 2025
Page 2

 We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence
of action by the staff.

 Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.

 Please contact Pearlyne Paulemon at 202-551-8714 or Pam Howell at
202-551-3357
with any questions.

 Sincerely,

 Division of
Corporation Finance
 Office of Real
Estate & Construction
cc: Charlie Haag
</TEXT>
</DOCUMENT>

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 NexPoint Diversified Real Estate Trust

 300 Crescent Court, Suite 700

 Dallas, TX 75201

 April 23, 2025

 BY EDGAR

 U.S. Securities and Exchange Commission

 Division of Corporation Finance

 100 F Street, N.E.

 Washington, D.C. 20549

 Re:

 NexPoint Diversified Real Estate Trust

 Registration Statement on Form S-4

 Filed April 11, 2025

 File No. 333-286498

 Ladies and Gentlemen:

 Pursuant to Rule 461 of the rules and regulations promulgated under the Securities Act of 1933, NexPoint Diversified Real Estate Trust respectfully requests that the effective date of the above-referenced Registration Statement on Form S-4 (File No. 333-286498), as amended, be accelerated so as to permit it to become effective at 5:00 p.m. Washington D.C. time on April 25, 2025, or as soon thereafter as practicable.

 Please call Charlie Haag of Winston & Strawn LLP at (214) 453-6494 to provide notice of the effectiveness of the Registration Statement.

 [ Signature Page Follows ]

 Very truly yours,

 NexPoint Diversified Real Estate Trust

 By:

 /s/ D.C. Sauter

 Name: D.C. Sauter

 Title: General Counsel and Secretary

 cc:

 Charlie Haag, Winston & Strawn LLP

 Justin Reinus, Winston & Strawn LLP

 [ Signature Page to Acceleration Request ]

<DOCUMENT>
<TYPE>TEXT-EXTRACT
<SEQUENCE>2
<FILENAME>filename2.txt
<TEXT>
 April 17, 2025

Paul Richards
Principal Financial Officer
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, TX 75201

 Re: NexPoint Diversified Real Estate Trust
 Registration Statement on Form S-4
 Filed April 11, 2025
 File No. 333-286498
Dear Paul Richards:

 This is to advise you that we have not reviewed and will not review your
registration
statement.

 Please refer to Rules 460 and 461 regarding requests for acceleration.
We remind you
that the company and its management are responsible for the accuracy and
adequacy of their
disclosures, notwithstanding any review, comments, action or absence of action
by the staff.

 Please contact Pearlyne Paulemon at 202-551-8714 with any questions.

 Sincerely,

 Division of
Corporation Finance
 Office of Real
Estate & Construction
cc: Charlie Haag
</TEXT>
</DOCUMENT>

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NexPoint Diversified Real Estate Trust

300 Crescent Court, Suite 700

Dallas, TX 75201

January 13, 2025

BY EDGAR

U.S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

			Re:

			NexPoint Diversified Real Estate Trust

			Registration Statement on Form S-4

			Filed December 31, 2024

			File No. 333-284099

Ladies and Gentlemen:

Pursuant to Rule 461 of the rules and regulations promulgated under the Securities Act of 1933, NexPoint Diversified Real Estate Trust respectfully requests that the effective date of the above-referenced Registration Statement on Form S-4 (File No. 333-284099) be accelerated so as to permit it to become effective at 4:00 p.m. Washington D.C. time on January 15, 2025, or as soon thereafter as practicable.

Please call Charlie Haag of Winston & Strawn LLP at (214) 453-6494 to provide notice of the effectiveness of the Registration Statement.

[Signature Page Follows]

			Very truly yours,

			NexPoint Diversified Real Estate Trust

			By:
			/s/ D.C Sauter

			Name: D.C. Sauter

			Title: General Counsel and Secretary

			cc:

			Charlie Haag, Winston & Strawn LLP

			JustinReinus, Winston & Strawn LLP

[Signature Page to Acceleration Request]

January 10, 2025
Jim Dondero
President
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, TX 75201
Re:NexPoint Diversified Real Estate Trust
Registration Statement on Form S-4
Filed December 31, 2024
File No. 333-284099
Dear Jim Dondero:
            This is to advise you that we have not reviewed and will not review your registration
statement.
            Please refer to Rules 460 and 461 regarding requests for acceleration. We remind you
that the company and its management are responsible for the accuracy and adequacy of their
disclosures, notwithstanding any review, comments, action or absence of action by the staff.
            Please contact Isabel Rivera at 202-551-3518 with any questions.
Sincerely,
Division of Corporation Finance
Office of Real Estate & Construction
cc:Charles T. Haag

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NexPoint Diversified Real Estate Trust

300 Crescent Court, Suite 700

Dallas, TX 75201

July 30, 2024

BY EDGAR

U.S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

			Re:

			NexPoint Diversified Real Estate Trust

			Registration Statement on Form S-3

			Filed July 23, 2024

			File No. 333-280953

Ladies and Gentlemen:

Pursuant to Rule 461 of the rules and regulations promulgated under the Securities Act of 1933, NexPoint Diversified Real Estate Trust respectfully requests that the effective date of the above-referenced Registration Statement be accelerated so as to permit it to become effective at 5:00 p.m. Washington D.C. time on August 1, 2024, or as soon thereafter as practicable.

Please call Charlie Haag of Winston & Strawn LLP at (214) 453-6494 to provide notice of the effectiveness of the Registration Statement.

[Signature Page Follows]

			Very truly yours,

			NexPoint Diversified Real Estate Trust

			By:

			/s/ Brian Mitts

			Name: Brian Mitts

			Title: Chief Financial Officer, Executive VP-

			Finance, Treasurer and Assistant Secretary

			cc:

			Charlie Haag, Winston & Strawn LLP

			Justin Reinus, Winston & Strawn LLP

[Signature Page to Acceleration Request]

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NexPoint Diversified Real Estate Trust

300 Crescent Court, Suite 700

Dallas, TX 75201

July 30, 2024

BY EDGAR

U.S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

			Re:

			NexPoint Diversified Real Estate Trust

			Registration Statement on Form S-3

			Filed July 23, 2024

			File No. 333-280954

Ladies and Gentlemen:

Pursuant to Rule 461 of the rules and regulations promulgated under the Securities Act of 1933, NexPoint Diversified Real Estate Trust respectfully requests that the effective date of the above-referenced Registration Statement be accelerated so as to permit it to become effective at 5:00 p.m. Washington D.C. time on August 1, 2024, or as soon thereafter as practicable.

Please call Charlie Haag of Winston & Strawn LLP at (214) 453-6494 to provide notice of the effectiveness of the Registration Statement.

[Signature Page Follows]

			Very truly yours,

			NexPoint Diversified Real Estate Trust

			By:

			/s/ Brian Mitts

			Name: Brian Mitts

			Title: Chief Financial Officer, Executive VP-

			Finance, Treasurer and Assistant Secretary

			cc:

			Charlie Haag, Winston & Strawn LLP

			Justin Reinus, Winston & Strawn LLP

July 26, 2024
Brian Mitts
Chief Financial Officer
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, TX 75201
Re:NexPoint Diversified Real Estate Trust
Registration Statement on Form S-3
Filed July 23, 2024
File No. 333-280953
Dear Brian Mitts:
            This is to advise you that we have not reviewed and will not review your registration
statement.
            Please refer to Rules 460 and 461 regarding requests for acceleration. We remind you that
the company and its management are responsible for the accuracy and adequacy of their
disclosures, notwithstanding any review, comments, action or absence of action by the staff.
            Please contact Ronald (Ron) E. Alper at 202-551-3329 with any questions.
Sincerely,
Division of Corporation Finance
Office of Real Estate & Construction
cc:Justin S. Reinus

July 18, 2024
Brian Mitts
Chief Financial Officer, Executive VP - Finance and Treasurer
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, TX 75201
Re:NexPoint Diversified Real Estate Trust
Form 10-K for the Fiscal Year Ended December 31, 2023
File No. 001-32921
Dear Brian Mitts:
            We have completed our review of your filing. We remind you that the company and its
management are responsible for the accuracy and adequacy of their disclosures, notwithstanding
any review, comments, action or absence of action by the staff.
Sincerely,
Division of Corporation Finance
Office of Real Estate & Construction
cc:Justin Reinus

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NEXPOINT DIVERSIFIED REAL ESTATE TRUST

300 Crescent Court, Suite 700

Dallas, Texas 75201

July 16, 2024

BY EDGAR

Frank Knapp and Jennifer Monick

Office of Real Estate & Construction

Division of Corporation Finance

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

			Re:

			NexPoint Diversified Real Estate Trust

			Form 10-K for the Fiscal Year Ended December 31, 2023

			Response dated May 30, 2024

			File No. 001-32921

Ladies and Gentlemen:

This letter is in response to the letter dated July 2, 2024 from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission addressed to NexPoint Diversified Real Estate Trust (the “Company”). For ease of reference, the text of the Staff’s comments is included below in bold-faced type, followed by the Company’s response.

Form 10-K for the Fiscal Year Ended December 31, 2023

Notes to Consolidated Financial Statements

Note 8. Equity Method Investments, page 112

			1.

			We note your response to our prior comment 1 and your significance tests in exhibit A. Please address the following:

			●

			Please revise the investment carrying/fair value column for consistency with your financial statements and footnotes (e.g., NexPoint Real Estate Finance Operating Partnership, L.P. appears to have a value of $76,688,000 based on your disclosure on page 113.)

			●

			Please revise the numerator for your income test to be the change in the fair value reflected in your income statement for your investments that would have been accounted for under the equity method had the fair value option not been elected.

			●

			It appears that the combination of your investees exceeds 20% based on your significance tests as currently provided. As such, please tell us how you determined it was unnecessary to provide summarized financial data for all investees for each period presented.

Response: The Company acknowledges the Staff’s comment and respectfully advises the Staff of the following:

			●

			The Company regretfully had an internal formula error that resulted in a different amount presented in our prior response relating to NexPoint Real Estate Finance Operating Partnership, L.P. The corrected amount is reflected in Exhibit A below, which presents this investment now reflects 7% and 9% of the Company’s total Assets and Equity, respectively. The Company respectfully adds the summarized financial information as it relates to NexPoint Real Estate Operating Partnership, L.P. was included as part of the “NREF” investment that was properly disclosed in our Form 10-K.

			●

			As requested, the Company has revised the numerator in our income test to be the change in fair value reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss). The updates were specifically made for those investments that were elected to be measured using the fair value option in accordance with ASC 825-10, Financial Instruments – Overall. The Staff’s requested revision appears to be in consideration of the guidance from the Division of Corporation Finance’s Financial Reporting Manual, which provides in Section 2435.2 ASC 825 Fair Value Option – Presumptive Disclosure Thresholds for Summarized Financial Information and Separate Financial Statements of Investees: “In applying the S-X 3-09 and S-X 4-08(g) disclosure thresholds to investments that would have been accounted for under the equity method had the fair value option not been elected by the registrant, the staff believes that the income test should be computed using as the numerator the change in the fair value reflected in the registrant’s statement of comprehensive income rather than the registrant’s equity in the earnings of the investee computed as if the equity method had been applied.” The Company respectfully advises the Staff that the Company qualified as a Smaller Reporting Company with respect to our Form 10-K. And in the interpretative application of Section 2435.2, the explicit direction as it relates to S-X Rule 8-03(b)(3) appeared noticeably silent. However, the Company will apply the numerator consistent with Section 2435.2 going forward.

			●

			As a Smaller Reporting Company and in the Company’s interpretation of the codified rules, the Regulation S-X Rule 8-03(b)(3) appeared silent on the matter of assessing significance on both an individual and aggregate basis. The Company acknowledges Section 2420.9 of the Financial Reporting Manual Smaller Reporting Companies – Annual and Interim Financial Statements [S-X 8-03] provides the significance threshold is determined on “any individual or any combination of investee(s)…”. The Company acknowledges the Staff’s interpretation and will apply the relevant significance thresholds to our investees on an individual and aggregate basis going forward.

			2.

			We note your response to our prior comment 2. We are unclear from your response if your intent is to remove all references to “unaudited” with respect to your presentation of investee summarized information in future annual periodic reports. Please clarify your intent for us.

Response: The Company acknowledges the Staff’s comment and respectfully advises the Staff that the Company will remove all references to “unaudited” with respect to its presentation of investee summarized information in future annual periodic reports.

If you have any questions, please feel free to contact me at 214-276-6300 or our counsel, Justin Reinus of Winston & Strawn LLP, at 214-453-6566.

			Very truly yours,

			/s/ Brian Mitts

			Brian Mitts

			Chief Financial Officer, Executive VP-Finance, Treasurer and Assistant Secretary

			cc:

			Justin S. Reinus, Partner, Winston & Strawn LLP

			Charles T. Haag, Partner, Winston & Strawn LLP

Exhibit A

Asset Test

			Investment Carrying/Fair value

			% of Company’s Total Assets

			Allenby, LLC

			-

			0%

			Haygood, LLC

			-

			0%

			Claymore Holdings, LLC

			-

			0%

			NexPoint Storage Partners, Inc.

			68,187,000

			6%

			NexPoint Storage Partners Operating Company, LLC

			37,157,000

			3%

			LLV Holdco, LLC

			2,242,000

			0%

			NexPoint Real Estate Finance, Inc.

			33,075,000

			3%

			NexPoint Real Estate Finance Operating Partnership, L.P.

			76,688,000

			7%

			Las Vegas Land Owner, LLC

			12,312,000

			1%

			Sandstone Pasadena Apartments, LLC

			11,458,000

			1%

			AM Uptown Hotel, LLC

			23,158,000

			2%

			NexPoint Hospitality Trust

			4,886,000

			0%

			NexPoint SFR Operating Partnership, L.P.*

			49,383,000

			4%

			Perilune Aero Equity Holdings One, LLC

			12,256,000

			1%

			SFR WLIF III, LLC

			7,079,000

			1%

			VineBrook Homes Operating Partnership, L.P.*

			146,516,000

			13%

			Company Assets

			1,098,336,000

Equity Test

			Investment Carrying/Fair value

			% of Company’s Total Equity

			Allenby, LLC

			-

			0%

			Haygood, LLC

			-

			0%

			Claymore Holdings, LLC

			-

			0%

			NexPoint Storage Partners, Inc.

			68,187,000

			8%

			NexPoint Storage Partners Operating Company, LLC

			37,157,000

			4%

			LLV Holdco, LLC

			2,242,000

			0%

			NexPoint Real Estate Finance, Inc.

			33,075,000

			4%

			NexPoint Real Estate Finance Operating Partnership, L.P.

			76,688,000

			9%

			Las Vegas Land Owner, LLC

			12,312,000

			1%

			Sandstone Pasadena Apartments, LLC

			11,458,000

			1%

			AM Uptown Hotel, LLC

			23,158,000

			3%

			NexPoint Hospitality Trust

			4,886,000

			1%

			NexPoint SFR Operating Partnership, L.P.*

			49,383,000

			6%

			Perilune Aero Equity Holdings One, LLC

			12,256,000

			1%

			SFR WLIF III, LLC

			7,079,000

			1%

			VineBrook Homes Operating Partnership, L.P.*

			146,516,000

			17%

			Company Equity

			885,074,000

Income Test

			Investment income

			% of Company's Total Loss from continuing operations

			Allenby, LLC

			(303,000)

			0%

			Haygood, LLC

			(31,000)

			0%

			Claymore Holdings, LLC

			-

			0%

			NexPoint Storage Partners, Inc.

			(35,507,000)

			31%

			NexPoint Storage Partners Operating Company, LLC

			(19,349,000)

			17%

			LLV Holdco, LLC

			(2,089,000)

			2%

			NexPoint Real Estate Finance, Inc.

			(294,000)

			0%

			NexPoint Real Estate Finance Operating Partnership, L.P.

			(682,000)

			1%

			Las Vegas Land Owner, LLC

			-

			0%

			Sandstone Pasadena Apartments, LLC

			-

			0%

			AM Uptown Hotel, LLC

			-

			0%

			NexPoint Hospitality Trust

			(22,800,000)

			20%

			NexPoint SFR Operating Partnership, L.P.*

			(5,308,000)

			5%

			Perilune Aero Equity Holdings One, LLC

			-

			0%

			SFR WLIF III, LLC

			-

			0%

			VineBrook Homes Operating Partnership, L.P.*

			(27,463,000)

			24%

			Company Loss from continuing operations

			(114,510,000)

*These two operating companies are separate reportable segments of VineBrook and conjunctly presented as VineBrook’s summarized financial information.

July 2, 2024
Brian Mitts
Chief Financial Officer, Executive VP - Finance and Treasurer
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, TX 75201
Re:NexPoint Diversified Real Estate Trust
Form 10-K for the Fiscal Year Ended December 31, 2023
Response dated May 30, 2024
File No. 001-32921
Dear Brian Mitts:
            We have reviewed your May 30, 2024 response to our comment letter and have the
following comments.
            Please respond to this letter within ten business days by providing the requested
information or advise us as soon as possible when you will respond. If you do not believe a
comment applies to your facts and circumstances, please tell us why in your response.
            After reviewing your response to this letter, we may have additional comments. Unless we
note otherwise, any references to prior comments are to comments in our May 16, 2024 letter.
Form 10-K for the Fiscal Year Ended December 31, 2023
Notes to Consolidated Financial Statements
Note 8. Equity Method Investments, page 112
We note your response to our prior comment 1 and your significance tests in exhibit A.
Please address the following:
•Please revise the investment carrying/fair value column for consistency with your
financial statements and footnotes (e.g., NexPoint Real Estate Finance Operating
Partnership, L.P. appears to have a value of $76,688,000 based on your disclosure on
page 113.)
•Please revise the numerator for your income test to be the change in the fair value
reflected in your income statement for your investments that would have been
accounted for under the equity method had the fair value option not been elected.
It appears that the combination of your investees exceeds 20% based on your
significance tests as currently provided. As such, please tell us how you determined it •1.

July 2, 2024
Page 2
was unnecessary to provide summarized financial data for all investees for each
period presented.
2.We note your response to our prior comment 2. We are unclear from your response if
your intent is to remove all references to "unaudited" with respect to your presentation of
investee summarized financial information in future annual periodic reports. Please clarify
your intent for us.
            Please contact Frank Knapp at 202-551-3805 or Jennifer Monick at 202-551-3295 if you
have questions regarding comments on the financial statements and related matters.
Sincerely,
Division of Corporation Finance
Office of Real Estate & Construction
cc:Justin Reinus

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NEXPOINT DIVERSIFIED REAL ESTATE TRUST

300 Crescent Court, Suite 700

Dallas, Texas 75201

May 30, 2024

BY EDGAR

Frank Knapp and Jennifer Monick

Office of Real Estate & Construction

Division of Corporation Finance

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

			Re:

			NexPoint Diversified Real Estate Trust

			Form 10-K for the Fiscal Year Ended December 31, 2023

			File No. 001-32921

Ladies and Gentlemen:

This letter is in response to the letter dated May 16, 2024 from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission addressed to NexPoint Diversified Real Estate Trust (the “Company”). For ease of reference, the text of the Staff’s comments is included below in bold-faced type, followed by the Company’s response.

Form 10-K for the Fiscal Year Ended December 31, 2023

Notes to Consolidated Financial Statements

Note 8. Equity Method Investments, page 112

			1.

			We note your presentation of NREF and VineBrook's summarized financial information. Please tell us how you considered Regulation S-X Rule 8-03(b)(3) in your determination to not provide summarized financial information for any additional individual investee that is significant or for any combination of investees that is significant. Within your response, please provide us with your applicable significance tests for individual and/or aggregated investees.

Response: The Company acknowledges the Staff’s comment and respectfully advises the Staff that with respect to our Form 10-K for the Fiscal Year Ended December 31, 2023, the Company qualified as a Smaller Reporting Company and therefore, considered the informal and non-authoritative interpretation of the Division of Corporation Finance’s Financial Reporting Manual, which provides in Section 2420.9 Smaller Reporting Companies – Annual and Interim Financial Statements [S-X 8-03] (Last updated: 6/30/2010), Note 1 Source of Requirement: “The smaller reporting company requirement for summarized financial information is located within the S-X 8-03 requirements for interim financial statements. Notwithstanding the location of this requirement, the Staff applies the S-X 8-03 requirement for summarized financial information to both annual and interim financial statements.”

The Company acknowledges Regulation S-X Rule 8-03(b)(3), which provides: “Sales, gross profit, net income (loss) from continuing operations, net income, and net income attributable to the investee must be disclosed for equity investees that constitute 20 percent or more of a registrant’s consolidated assets, equity or income from continuing operations attributable to the registrant.” In applying Rule 8-03(b)(3), there is no explicit requirement nor guidance to assess the equity investees on an individual or aggregate basis.

Absent any other categorical instruction as it applies under Rule 8-03(b)(3), the Company assessed its equity method investees on an individual basis according to the investment’s value and income, consistent with its historical practice in its prior filings as a Smaller Reporting Company. No individual investment met the 20% threshold. However, the Company determined that the summarized financial information for NREF and VineBrook, as the only two public reporting companies and two of the largest of the Company’s investments based on the significance tests, should be disclosed.

The Company acknowledges that historically the NSP investee’s summarized financial information was also provided. However, NSP is not a publicly traded entity whose financial statements were subject to the SEC filing timeline and its annual audit had not yet been initiated at the time of the Company’s assessment. Furthermore, the fair value basis of the NSP investment had significantly diminished since the prior reporting period.

The applicable significance tests for our individual investees are detailed in Exhibit A.

The Company will reassess its eligibility to be qualified as a Smaller Reporting Company in accordance with Item 10(f)(1) of Regulation S-K and will reassess the significance test pursuant to the applicable rules in its future annual filings.

			2.

			We note your presentation of NREF and VineBrook’s summarized financial information. Please tell us how you determined it was appropriate to label such data as unaudited.

Response: The Company acknowledges the Staff’s comment and respectfully advises the Staff that as of the date of NXDT’s filing, NREF and VineBrook had not yet completed their audits or filed their respective 10-Ks for the year ended December 31, 2023, and as such the Company elected to report their summarized financial on a quarter lag. The third quarter financial information presented for NREF and VineBrook were unaudited and labeled as such. The Company acknowledges our presentation also included summarized financial information for the year ended December 31, 2022. Section 2420.9 of the informal and non-authoritative Financial Reporting Manual, referenced in the Response above, provides: “Summarized annual financial data should not be labeled ‘unaudited’”. The Company will remove the “unaudited” label as it refers to any summarized annual financial information in future filings.

If you have any questions, please feel free to contact me at 214-276-6300 or our counsel, Justin Reinus of Winston & Strawn LLP, at 214-453-6566.

			Very truly yours,

			/s/ Brian Mitts________________________

			Brian Mitts

			Chief Financial Officer, Executive VP-Finance, Treasurer and Assistant Secretary

cc:          Justin S. Reinus, Partner, Winston & Strawn LLP

Charles T. Haag, Partner, Winston & Strawn LLP

Exhibit A

Asset Test

Equity Test

Income Test

*These two operating companies are separate reportable segments of VineBrook and conjunctly presented as VineBrook’s summarized financial information.

United States securities and exchange commission logo
May 16, 2024
Brian Mitts
Chief Financial Officer, Executive VP - Finance and Treasurer
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, TX 75201
Re:NexPoint Diversified Real Estate Trust
Form 10-K for the Fiscal Year Ended December 31, 2023
File No. 001-32921
Dear Brian Mitts:
            We have limited our review of your filing to the financial statements and related
disclosures and have the following comments.
            Please respond to this letter within ten business days by providing the requested
information or advise us as soon as possible when you will respond. If you do not believe a
comment applies to your facts and circumstances, please tell us why in your response.
            After reviewing your response to this letter, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2023
Notes to Consolidated Financial Statements
Note 8. Equity Method Investments, page 112
1.We note your presentation of NREF and VineBrook's summarized financial information.
Please tell us how you considered Regulation S-X Rule 8-03(b)(3) in your determination
to not provide summarized financial information for any additional individual investee
that is significant or for any combination of investees that is significant. Within your
response, please provide us with your applicable significance tests for individual and/or
aggregated investees.
2.We note your presentation of NREF and VineBrook's summarized financial information.
Please tell us how you determined it was appropriate to label such data as unaudited.

 FirstName LastNameBrian Mitts
 Comapany NameNexPoint Diversified Real Estate Trust
 May 16, 2024 Page 2
 FirstName LastName
Brian Mitts
NexPoint Diversified Real Estate Trust
May 16, 2024
Page 2
            In closing, we remind you that the company and its management are responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or
absence of action by the staff.
            Please contact Frank Knapp at 202-551-3805 or Jennifer Monick at 202-551-3295 with
any questions.
Sincerely,
Division of Corporation Finance
Office of Real Estate & Construction

CORRESP
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CORRESP

 November 3, 2021

VIA EDGAR AND EMAIL

 U.S. Securities and Exchange
Commission

 Division of Investment Management

 100 F Street,
N.E.

 Washington, D.C. 20549

 Attention: Ms. Christina
DiAngelo Fettig

 Re: Highland Funds I (File No. 811-21866), Highland Income Fund (File No. 811-23268), NexPoint Real Estate Strategies Fund (File No. 811-23129), and NexPoint Strategic Opportunities Fund (File
No. 811-21869)

 Ms. Fettig:

This letter responds to comments given by you to K&L Gates LLP, fund counsel to Highland Funds I, Highland Income Fund, NexPoint Real Estate Strategies
Fund, and NexPoint Strategic Opportunities Fund (the “Registrants”) in a telephone conversation on October 5, 2021. The SEC staff (“Staff”) comment provided below relates to the annual report of Highland Funds I on Form N-CSR and semi-annual reports of Highland Income Fund, NexPoint Real Estate Strategies Fund and NexPoint Strategic Opportunities Fund filed on Form N-CSR/S as of
September 9, 2021 (collectively, the “Reports”). SEI provides the Registrants with administrative and accounting services and submits this response on behalf of the Registrants.

We have reproduced the substance of your comment below, followed by the Registrants’ response.

SEC Comment: The Staff notes that the Registrants’ Form N-CSR or Form N-CSR/S filings, as applicable, were made after September 8, 2021, the 70th day following the end of the June 30, 2021 fiscal period. The Staff requests that the Registrants file a correspondence that
(i) acknowledges the filings were late, (ii) confirms the reports were transmitted within the 60 day period required by Rule 30e-1 under the Investment Company Act of 1940, as amended, and
(iii) acknowledges that the Registrants will timely file all future reports.

 Response:

i.
 The Registrants acknowledge that the Registrants’ Form N-CSR and
Form N-CSR/S filings, as applicable, were made after the 70th day following the end of the June 30, 2021 fiscal period.

ii.
 The Registrants confirm the Reports were transmitted within the 60 day period after the end of the fiscal
period required by Rule 30e-1 under the Investment Company Act of 1940, as amended.

iii.
 The Registrants undertake to timely file all reports going forward.

Please contact Jon-Luc Dupuy at (617) 261-3146 if you have any questions or
comments.

Very truly yours,

 /s/ Eric C. Griffith

 cc: Stephanie Vitiello, Esq.

 1

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NexPoint Strategic Opportunities Fund

 October 6, 2020

VIA EDGAR AND EMAIL

 U.S. Securities and Exchange
Commission

 Division of Investment Management

 Office of
Disclosure and Review

 3 World Financial Center

 New York,
N.Y. 10281

 Attention: Ms. Lauren Hamilton

Re:
 Highland Income Fund (File No. 811-23268)

NexPoint Real Estate Strategies Fund (File No. 811-23129)

NexPoint Strategic Opportunities Fund (File No. 811-21869)

Ms. Hamilton:

 This letter responds to comments given by
you to K&L Gates LLP, fund counsel to Highland Income Fund (“HFRO”), NexPoint Real Estate Strategies Fund (“NRESF”), and NexPoint Strategic Opportunities Fund (“NHF”, and together with HFRO and NRESF, each, a
“Trust” and, collectively, the “Trusts”), and to SEI Investments Global Funds Services (“SEI”), the administrator to the Trusts, in telephone conversations on June 26, 2020 and July 1, 2020. The SEC staff
(“Staff”) comments provided relate to the December 31, 2019 Annual Report filed for each Trust on Form N-CSR (each, a “Report”) and related filings of each Trust. SEI provides the
Trusts with administrative and accounting services and submits these responses on behalf of the Trusts.

 We have reproduced the substance of your comments
below, followed by the responses by the applicable Trust.

 HIGHLAND INCOME FUND (“HFRO”)

SEC Comment 1

 We noted that the response under
Item B.18 (Report on Internal Controls) of HFRO’s Form N-CEN filed on April 15, 2020 indicated that there were no material weaknesses noted on the independent public accountant’s report on
internal controls, which is inconsistent with the language within the independent public accountant’s report filed as an attachment to the Form N-CEN stating that: “[c]ontrols over the application of
fair value accounting with respect to the validation of fair value methodologies were not sufficiently designed to ensure the appropriateness of the fair value determinations reached for Level 3 real estate-related holdings.”

Further, in accordance with Item G.1, Instruction 3, of Form N-CEN, attachments to Form
N-CEN that include an independent public accountant’s report that discloses a material weakness should include an indication by the Registrant of any corrective action taken or proposed. Please describe
the root cause of the material

 1

weakness and what remediation occurred or is planned to ensure the internal controls are effective and also include a description of the quantitative and qualitative impact to the financial
statements, if any. Please refile the Form N-CEN.

 HFRO’s Response to Comment 1

The Form N-CEN will be updated with the below language to mirror the material weakness language reflected in the Form N-CSR filing. Also, Item B.18 on the Form N-CEN will be updated to reflect “Yes”. An additional control has been implemented in the review process and this has also
been discussed further with the Trust’s administrator.

 Within 90 days prior to the filing date of the Shareholder Report on Form N-CSR, Management carried out an evaluation of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures as of December 31, 2019. Based on such evaluation, the
principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures were not effective due to a material weakness relating to controls over the application of fair value accounting with
respect to the validation of fair value methodologies. The controls were not sufficiently designed to ensure the appropriateness of the fair value determinations reached for Level 3 real estate-related holdings. A material weakness (as defined
in Rule 12b-2 under the Exchange Act) is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of
the Registrant’s annual or interim financial statements will not be prevented or detected on a timely basis. While this material weakness did not result in a misstatement, it could result in a misstatement to the investment balances or
disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

Management has developed a plan to remediate the material weakness described above. Management utilizes one or more independent valuation
experts as part of its existing valuation process for Level 3 real estate-related holdings. Management will undertake additional review procedures by designating a member of the Valuation Committee of the Advisor to monitor and report to the
Valuation Committee to ensure that for significant real estate-related holdings, fair values for such holdings are validated through one or more other valuation techniques that are acceptable under ASC 820.

SEC Comment 2

 We noted that the audit opinion
filed with HFRO’s Report on April 10, 2020 did not include the signature of the audit firm. Please refile this Report in order to include this information. In addition, please explain if HFRO has controls in place to prevent proofing
errors with respect to the content and completeness of its audit reports.

 HFRO’s Response to Comment 2

The annual report will be refiled with the audit firm signature added back. The Trust has controls in place to prevent proofing errors with respect to the
content and completeness of its annual reports. These controls have now been enhanced and discussed further with the Trust’s printer.

 SEC
Comment 3

 We noted that the Creek Pine Holdings, LLC (“Creek Pine”) position represents approximately 24% of HFRO in the latest Form N-PORT filing. Please supplementally explain how the Creek Pine position is valued, if fund management is on the board or is part of the governance structure of this entity, and if this entity is deemed to be a
controlled entity. Also, please explain why this position is marked as Level 3 in the Form N-PORT for December 31, 2019 and is marked as Level 2 in the Form
N-PORT for March 31, 2020.

 2

 HFRO’s Response to Comment 3

The Creek Pine position is marked as a Level 3 asset as of December 31, 2019 and March 31, 2020. Note the March 31, 2020 Schedule F
(Schedule of Investments) filed within the Form N-PORT filing correctly labeled Creek Pine as a Level 3 asset (see Texmark Timber Trust, REIT aka Creek Pine – tickmark c). The March 31, 2020
Form N-PORT will be updated to mirror the Schedule F leveling. Additional controls have been implemented to ensure the leveling is presented consistently between the Schedule F and Form N-PORT going forward. This has also been discussed further with the Trust’s administrator.

 Going forward this
process has been updated to reconcile the leveling data and investigate any discrepancies in order to conform leveling within Form N-PORT.

Creek Pine is currently valued using a discounted cash flow analysis based on projected future cash flows to the holding discounted to present value.

Fund management serves on the board of directors of Creek Pine (the “Board”). HFRO, NexPoint Strategic Opportunities Fund and NexPoint Real Estate
Strategies Fund (the “Highland Partners”) are collectively entitled to appoint one director (the “Highland Director”) to the Board, which comprises seven directors. The current Highland Director is Mr. James Dondero.

Creek Pine is not deemed a controlled entity of HFRO. The Highland Partners are minority partners in a consortium of investors that own preferred equity in
Creek Pine. The voting securities of Creek Pine are held by the common equity partner, which controls Creek Pine. HFRO is presumed not to control Creek Pine as it “does not own more than 25 per centum of the voting securities of [Creek
Pine].” (See Section 2(a)(9) of the Investment Company Act of 1940, as amended (the “1940 Act”)). With respect to matters brought before the Board, in most instances, the Highland Director is entitled to one (1) out of nine
(9) potential votes and, in certain limited circumstances, the Highland Director is entitled to one (1) out of five (5) potential votes. Thus, in addition to owning less than 25% of the voting securities, HFRO lacks the general power
to exercise a controlling influence over the management or policies of Creek Pine.

 SEC Comment 4

With respect to the TerreStar Corporation (“TerreStar”) position, we noted that the position is marked as Level 1 in the Form N-PORT for period September 30, 2019, Level 3 in the Form N-PORT for period ended December 31, 2019, and Level 1 in the Form
N-PORT for period ended March 31, 2020. Please ensure the correct information is reflected in the Form N-PORTs and refile as appropriate.

HFRO’s Response to Comment 4

 The TerreStar
position is a Level 3 asset as of September 30, 2019, December 31, 2019 and March 31, 2020. The September 30, 2019 and March 31, 2020 Schedule F (Schedule of Investments) attachment filed within the Form N-PORT filing correctly labelled Terrestar as a Level 3 asset (see tickmark b and c). The September 30, 2019 and March 31, 2020 Form N-PORTs will be updated to
mirror the Schedule F leveling. Additional controls have been implemented to ensure the leveling is presented consistently between the Schedule F and Form N-PORT. This has also been discussed further with the
Trust’s administrator.

 Going forward this process has been updated to reconcile the leveling data and investigate any discrepancies in order to
conform leveling within Form N-PORT.

 SEC Comment 5

Please tailor the “Senior Loan Risk” disclosure in the Notes to Financial Statements in HFRO’s Report to reflect how the expected
discontinuation of LIBOR could affect HFRO’s specific investments, including how the transition to any successor rate could impact the liquidity and value for the investments that reference LIBOR. (See Staff Statement on LIBOR Transition,
July 12, 2019)

 3

 HFRO’s Response to Comment 5

The following new risk disclosure will be added into Senior Loan Risk or as a standalone risk going forward.

The London Interbank Offered Rate (“LIBOR”) is the average offered rate for various maturities of short-term loans between major
international banks who are members of the British Bankers Association. LIBOR is the most common benchmark interest rate index used to make adjustments to variable-rate loans. It is used throughout global banking and financial industries to
determine interest rates for a variety of financial instruments (such as debt instruments and derivatives) and borrowing arrangements.

 Due
to manipulation allegations in 2012 and reduced activity in the financial markets that it measures, in July 2017, the Financial Conduct Authority (the “FCA”), the United Kingdom financial regulatory body, announced a desire to phase out
the use of LIBOR by the end of 2021.

 Although the period from the FCA announcement until the end of 2021 is generally expected to be
enough time for market participants to transition to the use of a different benchmark for new securities and transactions, there remains uncertainty regarding the future utilization of LIBOR and the specific replacement rate or rates. As such, the
potential effect of a transition away from LIBOR on the Trust or the financial instruments utilized by the Trust cannot yet be determined. The transition process may involve, among other things, increased volatility or illiquidity in markets for
instruments that currently rely on LIBOR. The transition may also result in a change in (i) the value of certain instruments held by the Trust, (ii) the cost of temporary borrowing for the Trust, or (iii) the effectiveness of related
Trust transactions such as hedges, as applicable. When LIBOR is discontinued, the LIBOR replacement rate may be lower than market expectations, which could have an adverse impact on the value of preferred and debt-securities with floating or fixed-to-floating rate coupons. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the Trust. Since the
usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.

 SEC Comment
6

 We noted that HFRO had significant loan investments. Please confirm whether any of the loans are covenant-lite loans, the extent of such
covenant-lite loans, and if the relevant risks are adequately described in the prospectus.

 HFRO’s Response to Comment 6

HFRO invests in covenant-lite loans. Going forward the Trust will add the following sentence to the Credit Risk section of Note 8 of the annual report and will
add comparable disclosure to the prospectus:

 Loans in which the Fund invests include covenant-lite loans, which carry more risk to the
lender than traditional loans as they may contain fewer or less restrictive covenants on the borrower than traditionally included in loan documentation or may contain other borrower-friendly characteristics. The Fund may experience relatively
greater difficulty or delays in enforcing its rights on its holdings of certain covenant-lite loans and debt securities than its holdings of loans or securities with the usual covenants.

SEC Comment 7

 We noted that the “variable or
floating rate security” footnote in HFRO’s Report states that “[c]urrent LIBOR rates include 3 months equal to 1.91%.” Since some HFRO positions have reference rates other than this LIBOR rate, please include such other reference
rates going forward in future Form N-CSR reports.

 4

 HFRO’s Response to Comment 7

As requested, HFRO will include the specific LIBOR or alternative rate used in the “variable or floating rate security” footnote in future Form N-CSR reports.

 SEC Comment 8

The footnote reference for “Investments from unaffiliated issuers, at value” in the Consolidated Statement of Assets and Liabilities of HFRO’s
Report is not defined. Please define it.

 HFRO’s Response to Comment 8

As requested, HFRO will define the footnote reference for “Investments from unaffiliated issuers, at value” in future Form N-CSR reports.

 SEC Comment 9

We noted that the Preliminary Prospectus Supplement filed on July 29, 2019 relating to the offering of HFRO’s Preferred Shares did not include
“dividends on preferred shares” expense information in the fee table. We further noted that the Prospectus Supplement filed on July 30, 2019 did not include an updated fee table to reflect the addition of these expenses. Please
explain why the fee table was not updated to reflect the “dividends on preferred shares” expenses.

 HFRO’s Response to Comment 9

 At the time the Prospectus Supplement was filed, the final overallotment option was not known. The Trust will update the fee table to reflect the
preferred dividend rate.

 SEC Comment 10

Please explain why the affiliates table included in HFRO’s Report has not been categorized by majority-owned subsidiaries, other controlled companies and
other affiliates. (See Reg. S-X Section 12-14, footnote 1(a)) Please also confirm in your response whether HFRO has any other controlled affiliates.

HFRO’s Response to Comment 10

 The affiliates
table has been categorized by majority owned subsidiaries, other controlled companies, and other affiliates under Regulation S-X Section 12-14, FN 1(a). In the
December 31, 2019 annual report’s affiliates table, the first sub-header of the table under the “Issuer” column states “Majority Owned, Not Consolidated” (see bold reference), and
the second sub-header states “Other Affiliates” (see bold reference). As of December 31, 2019 no affiliates were categorized as “Other Controlled Companies.”

SEC Comment 11

 We noted that Omnimax
International, Inc. (“Omnimax”), Unsecured Term Loan is marked as an affiliated issuer in HFRO’s Report. However, it is not included in the affiliated issuers table. Please confirm compliance with Reg.
S-X Section 12-14.

CORRESP
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NexPoint Strategic Opportunities Fund

 Skadden, Arps, Slate, Meagher & Flom
LLP

 500 BOYLSTON STREET

BOSTON, MASSACHUSETTS    02116

 FIRM/AFFILIATE

OFFICES

 CHICAGO

HOUSTON

 LOS ANGELES

NEW YORK

 PALO ALTO

WASHINGTON, D.C.

 WILMINGTON

TEL: (617)
573-4800

FAX: (617)
573-4822

www.skadden.com

 DIRECT DIAL

 617-573-4814

 DIRECT FAX

617-305-4814

EMAIL ADDRESS

 Thomas.Decapo@SKADDEN.COM

 July 10,
2020

 BEIJING

BRUSSELS

 FRANKFURT

HONG KONG

 LONDON

MOSCOW

 MUNICH

PARIS

 SÃO PAULO

SEOUL

 SHANGHAI

SINGAPORE

 TOKYO

TORONTO

 VIA EDGAR

Christopher Bellacicco

Division of Investment Management

U.S. Securities and Exchange Commission

100 F Street N.E.

Washington, DC 20549

RE:
 NexPoint Strategic Opportunities Fund (File
No. 811-21869)

 Dear Mr. Bellacicco:

Thank you for your oral comments on July 1, 2020 regarding the Preliminary Proxy Statement on Schedule 14A filed by NexPoint Strategic
Opportunities Fund (the “Fund”) on June 22, 2020 (the “Preliminary Proxy Statement”) with the U.S. Securities and Exchange Commission (the “Commission,” and the staff thereof, the
“Staff”). We have considered your comments to the Preliminary Proxy Statement and, on behalf of the Fund, responses to those comments are set forth below. Changes are reflected in a Definitive Proxy Statement on Schedule 14A, filed
on the date hereof (the “Definitive Proxy Statement”).

 Your comments are summarized in bold to the best of our
understanding, followed by the Fund’s responses. Capitalized terms not otherwise defined have the meanings ascribed to them in the Definitive Proxy Statement.

***

 Christopher Bellacicco

July 10, 2020

  Page
 2

 Comments and Responses

1.
 Please confirm that the Fund will file as correspondence on Form CORRESP the letter addressed to the Staff
dated June 23, 2020.

 The Fund has filed the referenced letter as requested.

2.
 Please provide additional disclosure in the introductory paragraph of the letter to shareholders regarding
the rationale for the Business Change Proposal.

 The Fund has added the following disclosure to the introductory
paragraph of the letter to shareholders, as requested:

 The Board, including the members of the Board who are not
interested persons (as defined in the Investment Company Act of 1940 (the “1940 Act”)) of the Fund (the “Independent Trustees”), believes that the Business Change Proposal is in the best interest of shareholders because it
believes it is the best path for the Fund to increase shareholder value over time. The Business Change Proposal is expected to have the potential to increase shareholder value for the following reasons:

3.
 Please explain supplementally what is meant by “risk adjusted return” in the first bullet point in
the letter to shareholders.

 The Fund has added the underlined disclosure to the first bullet point and additional
disclosure regarding the calculation of such returns to the Questions & Answers section of the Proxy Statement:

 Shareholder
letter:

 Potential to provide investors with a superior risk adjusted return compared to equity, fixed income, and
distressed debt markets through real estate investments over the next decade. Risk-adjusted return is a calculation of the potential profit from an investment that takes into account the degree of risk associated with such investment. Please
refer to the “Questions & Answers” section of this Proxy Statement for more information on how risk adjusted return is calculated.

Questions and Answers:

Potential to provide investors with a superior risk adjusted return compared to equity, fixed income, and distressed debt
markets through real estate investments over the next decade. Risk adjusted return is a calculation of the potential profit from an investment that takes into account the degree of risk associated with such investment. One measure of risk
adjusted return is the Sharpe ratio, which is a measurement of return or profit per unit of risk. The Sharpe ratio measures the return or profit that exceeds the risk-free rate, per unit of risk as measured by the standard deviation. This is
calculated by taking the return of the investment, subtracting the risk-free rate, and then dividing this by the investment’s standard deviation.

 Christopher Bellacicco

July 10, 2020

  Page
 3

4.
 Please note that preliminary proxy materials should be marked as such pursuant to Rule 14a-6(e) under the Exchange Act.

 The Fund notes the Staff’s comment.

5.
 Under the heading “Why is the Board Recommending the Business Change Proposal?” on page 8 of the
Preliminary Proxy Statement, please provide additional disclosure about the potential drawbacks of the Business Change Proposal. The Staff notes that the information presented in the Questions and Answers section should be fair and balanced.

 The Fund has added the underlined disclosure under the referenced heading in the Questions and Answers section:

 Please refer to Appendix A for additional information regarding these statements. In connection with
the Board’s approval of the Business Change Proposal, the Board also considered potential risks associated with the Fund’s conversion to a REIT (the “Conversion”), including (i) the complexity and unique nature
of the transaction; (ii) risks related to current market conditions, including market volatility related to COVID-19; (iii) potential delays in receiving the Deregistration Order or in
implementing the Fund’s investment strategy as a REIT; (iv) the requirement to qualify as a REIT for tax purposes by March 31, 2021 (discussed below); (v) inherent risks in increasing the Fund’s
exposure to real estate; (vi) the risk that the Fund’s exemption from the 1940 Act through a decrease in assets that qualify as “securities” under the 1940 Act is not viewed favorably by the SEC Staff; and
(vii) conflicts of interest as noted in the Fund’s offering documents. For a detailed discussion of the principal considerations taken into account by the Board and a discussion of the potential risks in implementing the
Business Change Proposal, see “Business Change Proposal—Reasons for the Proposed Change” and Appendix B.

6.
 The fourth paragraph under the heading “Does our Adviser Have Experience Managing REIT? Will There Be
any Changes to the Fund’s Investment Advisory Agreement in Connection with the Business Change Proposal?” on page 11 contains the following disclosure:

Management fee expenses, as well as other operating expenses, are expected to increase as the Business Change Proposal becomes fully
implemented following receipt of the Deregistration Order due to increased costs associated with an increase in the Fund’s gross assets; however, these expenses are projected to be offset by higher projected income attributable to increased
cash flows from leveraged real estate assets, resulting in higher projected net income per common share (thus supporting a potentially higher distribution rate in the long term) than without the implementation of the Business Change Proposal.

 Please make this disclosure more prominent.

 Christopher Bellacicco

July 10, 2020

  Page
 4

 The Fund has made this disclosure more prominent by placing the disclosure in a separate
paragraph and adding introductory language (underlined below) indicating to shareholders that they should take special note of this disclosure. The disclosure now reads as follows:

It is important for shareholders to be aware that management fee expenses, as well as other operating expenses, are expected to
increase as the Business Change Proposal becomes fully implemented following receipt of the Deregistration Order due to increased costs associated with an increase in the Fund’s gross assets; however, these expenses are projected to be offset
by higher projected income attributable to increased cash flows from leveraged real estate assets, resulting in higher projected net income per common share (thus supporting a potentially higher distribution rate in the long term) than without the
implementation of the Business Change Proposal.

7.
 Please clarify what is meant by the term “NHF” on page 11.

The Fund has made the requested change.

8.
 Please clarify what is meant by the term “Highland complex” in the first bullet point on page 15.

 The Fund has updated the disclosure to delineate between (i) the “Funds Complex”,
which is comprised of investment companies registered under the 1940 Act, advised by NexPoint Advisors, L.P. or Highland Capital Management Fund Advisors, L.P., and overseen by the Fund’s Board of Trustees; and (ii) the “REIT
Complex”, as defined on page 10 of the Definitive Proxy Statement, which is comprised of real estate investment trusts advised by subsidiaries of NexPoint Advisors, L.P., and which are overseen by separate boards of directors than the
Fund’s Board of Trustees. The referenced disclosure has been revised as follows:

 The Board considered pro forma fees
and expenses associated with implementing the Business Change Proposal and associated with operating as a diversified REIT, including expense information relating to other REITs in the Highland complexREIT Complex.

9.
 We note the disclosure describing the proposed changes to the Fund’s fundamental investment
restrictions regarding investments in real estate and originating loans. For each of these proposed changes, please provide an analysis explaining why the Fund is not presenting each change as a separate proposal to its shareholders; for example,
and without limitation, we note that the Business Change Proposal would (i) convert the Fund into a REIT; (ii)

 Christopher Bellacicco

July 10, 2020

  Page
 5

permit the Fund to purchase and sell real estate; and (iii) permit the Fund to originate loans. The Staff makes reference to IM Guidance Update
2014-02.

 The Fund is aware of the Staff guidance regarding the requirements
to unbundle certain proposals. As you know, that guidance states that “[m]ultiple matters that are so ‘inextricably intertwined’ as to effectively constitute a single matter need not be unbundled.” The elements of the Business
Change Proposal comprise a unitary matter on which shareholders are being asked to vote because the sole reason for the Fund to make any of the component changes is to effectuate and obtain the benefits of the Business Change Proposal as a whole. As
stated in the Preliminary and Definitive Proxy Statements, the change in the Fund’s business from a registered investment company that makes equity investments in real estate related securities to a diversified REIT that invests in various
commercial real estate property types and the amendment to the Fund’s fundamental investment restrictions to allow the Fund to invest directly in real estate and to make loans, are all part of the plan to allow the Fund to engage in its new
business. Each of these component steps is necessary in order to implement to Business Change Proposal as contemplated by the Fund’s Board of Trustees and as described in the Preliminary and Definitive Proxy Statements. Each of these component
steps is therefore inextricably intertwined. Including separate proposals to approve each component or a group of components is impractical because it could lead to inconsistent voting results that would thwart the overall purpose of the Business
Change Proposal. If Fund shareholders do not support the steps that the Fund will take to change its business, they can vote against the Business Change Proposal as a whole. The Fund believes this option satisfies the SEC intent, when it adopted the
unbundling rule, to give shareholders the opportunity to communicate their views to the board of directors on particular matters. (Exchange Act Release No. 31326, October 16, 1992, Section II.H.). The Fund also notes that in prior
instances of a registered investment company converting into a REIT (see e.g., RMR Real Estate Income Fund and Global Self Storage), the conversion involved, among other changes, amendments to the fund’s fundamental investment
restrictions and such changes to the fund’s fundamental investment restrictions were not presented as a separate proposals to the fund’s shareholders. The Fund, therefore, respectfully submits the Business Change Proposal should be
submitted to shareholders as a single proposal.

10.
 Please disclose any anticipated changes to the structure of the Fund’s board committees following
deregistration.

 The Fund has added the following disclosure under the heading “Trustees of the Fund” on
page 29:

 The structure of the Fund’s committees may be changed in the future in order to comply with the applicable
corporate governance requirements of the NYSE or other national securities exchange on which the Fund’s shares are listed.

 Christopher Bellacicco

July 10, 2020

  Page
 6

11.
 The heading on page 42 states “Directors and Officers of the Adviser,” however neither the table
under this heading nor the introductory paragraph thereto contains disclosure regarding directors of the Adviser. Please reconcile this discrepancy.

The Fund does not believe that the disclosure regarding the directors and executive officers of the Adviser is required to be included in the
Definitive Proxy Statement. Accordingly, the Fund has removed the section captioned “Directors and Officers of the Adviser” in the Definitive Proxy Statement.

12.
 Please provide a proxy card and note that the Staff may have additional comments on reviewing the proxy
card.

 The Fund has included a proxy card in the Definitive Proxy Statement.

* * * * * * *

 Should you have
any additional comments or concerns, please do not hesitate to contact me at (617) 573-4814.

Best regards,

/s/ Thomas A. DeCapo

Thomas A. DeCapo

CORRESP
1
filename1.htm

NexPoint Strategic Opportunities Fund

 SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP

 500 BOYLSTON STREET

    BOSTON, MASSACHUSETTS 02116

   TEL: (617)
573-4800

   FAX: (617) 573-4822

   www.skadden.com

DIRECT DIAL

 617-573-4814

 DIRECT FAX

617-305-4814

EMAIL ADDRESS

 Thomas.Decapo@SKADDEN.COM

 June 23,
2020

 FIRM/AFFILIATE

OFFICES

 CHICAGO

HOUSTON

 LOS ANGELES

NEW YORK

 PALO ALTO

WASHINGTON, D.C.

 WILMINGTON

 BEIJING

BRUSSELS

 FRANKFURT

HONG KONG

 LONDON

MOSCOW

 MUNICH

PARIS

 SÃO PAULO

SEOUL

 SHANGHAI

SINGAPORE

 TOKYO

TORONTO

 Christopher Bellacicco

Securities and Exchange Commission

 100 F Street N.E.

Washington, DC 20549

                      RE:

NexPoint Strategic Opportunities Fund

Commission File Number: 811-21869

 Preliminary Proxy Materials Relating to Special Meeting of Shareholders

 Mr. Bellacicco:

Thank you for speaking with us on June 18, 2020, regarding the Preliminary Proxy Statement on Schedule 14A (the “Proxy
Materials”) filed by NexPoint Strategic Opportunities Fund (the “Fund”) with the U.S. Securities and Exchange Commission (the “Commission”) on June 22, 2020, relating to a special meeting of the
Fund’s shareholders (the “Special Meeting”).

 The purpose of the Special Meeting is for the Fund’s shareholders
(i) to consider a proposal to change the Fund’s business from an investment company registered under the Investment Company Act of 1940 (the “1940 Act”) to a diversified real estate investment trust (a
“REIT”), which includes amending certain of the Fund’s fundamental investment restrictions (collectively, the “Business Change Proposal”) and (ii), if the Business Change Proposal is approved, to consider a
proposal to amend and restate the Fund’s Agreement and Declaration of Trust (the “Declaration of Trust”) in order to (a) make certain changes necessary to implement the Business Change Proposal and operate as a REIT,
(b) provide the Fund’s trustees with greater flexibility and authority consistent with the Delaware Statutory Trust Act and (c) implement other updates and clarifications (collectively, the “Amendment Proposal” and,
together with the Business Change Proposal, the “Proposals”). The Fund’s shareholders are being asked to vote upon each proposal separately; however, the effectiveness of each of the Business Change Proposal and the Amendment
Proposal is conditioned and dependent upon the approval of both Proposals. Accordingly, the Business

 Christopher Bellacicco

Securities and Exchange Commission

 June 23, 2020

 Page
 2

Change Proposal, if approved, will only be effective if the Amendment Proposal is also approved, and the Amendment Proposal, if approved, will only be effective if the Business Change Proposal is
also approved.

 If the Proposals are approved, the Fund will begin to transition its business and investments to those of a diversified
REIT. At some point during this transition, the Fund will no longer qualify as an “investment company” and the Fund will apply to the Commission for an order under the 1940 Act declaring that it has ceased to be an investment company (the
“Deregistration Order”). Pending the Commission’s issuance of the Deregistration Order, the Fund intends to begin realigning its portfolio consistent with its new business as a diversified REIT. The Fund anticipates that the
implementation period may last up to two years, in which case full implementation will not occur until approximately the middle of 2022.

The analysis below provides further clarifications on the nature and timing of the proposed transaction.

Overview and Deregistration Timeline

•

 The timeline for the steps necessary to fully implement the Business Change Proposal are summarized below:

o
 July 2020: File definitive proxy statement for shareholders to consider the Proposals.

o
 September 2020: Hold special shareholder meeting to obtain approval for the Proposals.

o
 September 2020: Upon receipt of shareholder approval –

◾
 Begin realigning the Fund’s portfolio by selling existing positions in the securities portfolio and using
the proceeds to invest in real estate and real estate related securities.

◾
 After it has implemented its new investment policies, the Fund will no longer hold itself out as being engaged
primarily in the business of investing, reinvesting or trading in securities.

◾
 Thereafter, file an application to deregister under the 1940 Act. The Fund will remain registered as an
investment company during pendency of application and comment/response process with Division of Investment Management.

 Christopher Bellacicco

Securities and Exchange Commission

 June 23, 2020

 Page
 3

o
 March 2021 elect to be taxed as a REIT.1

•

 The Fund’s common shares are expected to continue to trade on the New York Stock Exchange.

•

 No new book entry or physical security certificates will be issued as a result of the transactions on which the
Fund’s shareholders are being asked to vote, and the Fund’s CUSIP will remain the same.

 Shareholder Approvals

The change in the Fund’s fundamental investment restrictions contemplated by the Business Change Proposal requires shareholder approval
under Sections 13(a)(1)-(3) of the 1940 Act and the Fund’s application for the Deregistration Order requires shareholder approval under Section 13(a)(4) of the 1940 Act. The Amendment Proposal requires shareholder approval under the
Fund’s organizational documents.

 Reasons for the Proposals

As discussed in further detail in the Proxy Materials, the Business Change Proposal is expected to have the potential to increase shareholder
value for a number of reasons and is a natural continuation of the Fund’s current business model. A significant portion of the Fund’s net assets are already comprised of real estate and real estate related securities. In addition, the
Fund’s shareholders recently approved a change to the Fund’s fundamental policy of not investing 25% or more of the value of its total assets in any single industry or group of industries to require that the Fund invest at least 25%
of the value of its total assets at the time of purchase in the securities of issuers conducting their principal business activities in the real estate industry. Accordingly, the Business Change Proposal is intended to allow the Fund to expand on
its current business model and invest further in real estate.

 Similar Transactions

The Fund also notes that transactions such as the Business Change Proposal are not without precedent. In the most recent of these types of
transactions, RMR Real Estate Income Fund (“RIF”) sought shareholder approval of a proposal to convert its business from a closed-end investment management company under the 1940 Act to
mortgage REIT focused on originating and investing in mortgage loans secured by middle market and transitional commercial real estate. RIF received shareholder approval of its conversion plan at a special meeting of its shareholder on April 16,
2020, and filed an application for a

1
 An entity seeking to qualify as a REIT for tax purposes must make this election by March 31 of the year in
which it seeks to so qualify. Although the Fund intends to elect REIT tax status for the 2021 tax year, it is possible that the Fund may not be able to realign its portfolio in order to qualify as a REIT for the 2021 tax year. In the event that the
Fund is unable to elect REIT tax status for the 2021 tax year, the Fund will continue to be taxed as a regulated investment company (a “RIC”) for the 2021 tax year and will elect REIT tax status in March 2022.

 Christopher Bellacicco

Securities and Exchange Commission

 June 23, 2020

 Page
 4

deregistration order on May 27, 2020. The Fund also notes the example of Global Self Storage, Inc., which completed a similar conversion and has operated as a self-storage REIT since
receiving a deregistration order from the Commission in 2016.

 Securities Act Rule 145(a)

The Fund notes the Commission’s question concerning Rule 145(a) under the Securities Act of 1933 (the “Securities Act”).
The Fund respectfully directs the Commission’s attention to the Preliminary Note to Rule 145, which makes clear that an “offer to sell” or “sale” within the meaning of Section 2(a)(3) will occur when security holders
are presented with a vote on a transaction pursuant to which such security holders are to make a “new investment decision . . . whether to accept a new or different security in exchange for their existing security” (emphasis added).2 The Fund’s shareholders are not being asked to accept a new or different security. They are being asked to approve a new business plan for the Fund, which is in reality little more than an
expansion of the Fund’s current business plan. This is vastly different from other situations, where shareholders are asked to accept a different security: the Business Change Proposal would not change the fundamental characteristics of the
Fund’s common shares or involve any reclassification of the Fund’s securities, and the Fund’s shares are expected to continue to trade on the NYSE. Further, the Amendment Proposal is a separate proposal requiring the approval called
for under the Fund’s organizational documents and which could be adopted in the ordinary course without regard to the Business Change Proposal. Because shareholders will be asked to separately approve the Amendment Proposal we believe it stands
alone from the Business Change Proposal for purposes of Rule 145. Nor do we believe that the changes effected by the Amendment Proposal involve a new investment decision on whether to accept a new or different security in exchange for an existing
security. Accordingly, the Fund does not believe that the Proposals implicate Rule 145.3

We hope that this letter has been helpful in communicating the Fund’s intent to the Commission. Please do not hesitate to contact me with
any questions or concerns.

Best regards,

/s/ Thomas A. DeCapo

Thomas A. DeCapo

cc:

NexPoint Strategic Opportunities Fund

    Ms. Lauren Thedford

Skadden, Arps, Slate, Meagher & Flom LLP

    Mr. Benjamin Niehaus

2
 17 C.F.R. § 230.145(a).

3
 Id.

CORRESP
1
filename1.htm

SEC Response Letter

Stradley Ronon Stevens & Young, LLP

1250 Connecticut Avenue, N.W., Suite 500

Washington, DC 20036

Telephone 202.822.9611

Fax 202.822.0140

www.stradley.com

 Christopher J. Zimmerman

czimmerman@stradley.com

 (202) 419-8402

 April 13, 2018

VIA EDGAR

 Dominic Minore, Esq., and Lauren
Hamilton

 Division of Investment Management

 Securities and
Exchange Commission

 100 F Street, NE

 Washington, DC 20549

Re:
NexPoint Strategic Opportunities Fund

 Post-Effective Amendment No. 2 to the
Registration Statement on Form N-2

 File Nos.
333-219983 and 811-21869

 Dear Mr. Minore and Ms. Hamilton:

 On behalf of the NexPoint Strategic Opportunities Fund (formerly, NexPoint Credit Strategies Fund) (the “Trust”),
please find transmitted herewith for filing Post-Effective Amendment No. 2 (“Amendment 2”) to the Trust’s Registration Statement on Form N-2 (the “Registration
Statement”) filed with the Securities and Exchange Commission (the “Commission”), in accordance with the Securities Act of 1933, as amended, and pursuant to Rule 101(a) of Regulation S-T promulgated thereunder.

 The Amendment 2 is being filed in response to the oral comments of the
Commission’s staff (the “Staff”) provided on March 29, 2018 from Mr. Minore and on April 3, 2018 from Ms. Hamilton to Christopher J. Zimmerman and Kevin Ercoline of Stradley Ronon Stevens &
Young, LLP with regards to the Post-Effective Amendment No. 1 filed on March 23, 2018.

 On behalf of the Trust, we respond to
the specific comments of the Staff as follows:

 Comments from Mr. Minore

1.
On the cover page of the Prospectus Supplement, please include a statement indicating that the Trust cannot state precisely the dilutive effect on the net asset value (“NAV”) of the Trust as a result of the
rights offering. Please also add a statement explaining what the dilutive effect would be on the NAV of each share of common stock as both a percentage and monetary value if the full subscription, including both primary and secondary subscriptions,
were to be utilized.

 April 13, 2018

 Page
 2

 Response: The Trust has added the following to the cover page of the
Prospectus Supplement immediately prior to the table explaining the estimated subscription price and estimated proceeds:

 The Trust cannot
state precisely the extent of any dilutive effect if you do not exercise your Rights because the Trust does not know what the net asset value per share of common shares will be when the offer expires, or what proportion of the Rights will be
exercised. Assuming the full primary subscription and over-allotment option of secondary subscription shares (as discussed below in the “Over-Subscription Privilege” section on page 3 of the Prospectus Supplement) are exercised, the
Trust’s net asset value per share of common share would be reduced by approximately $0.92 (3.53%) per share of common shares. Actual amounts may vary due to rounding.

2.
On the cover page of the Prospectus Supplement, add the following to the second sentence of the paragraph in all caps after “AS A RESULT OF THE OFFERING”: “YOU WILL EXPERIENCE A PROPORTIONATE DECREASE
IN YOUR RELATIVE VOTING POWER AND”.

 Response: The requested comment has been implemented.

3.
On page 4 of the Prospectus Supplement, in the section entitled “Use of Proceeds,” and anywhere else in the Prospectus Supplement, Prospectus, or Statement of Additional Information that discusses “use
of proceeds,” please state the approximate dollar amount to be used to pay down the Bridge Facility.

Response: On pages 4 and 15 of the Prospectus Supplement, page 57 of the Prospectus, and page 1 of the Statement of
Additional Information, the Trust has stated that approximately $20 million will be used from the rights offering to pay down the Bridge Facility.

4.
On page 5 of the Prospectus Supplement, in the section entitled “Purpose of the Offer,” please add a statement that the Investment Adviser could expect an additional $2.1 million in investment
management fees as a result of the increase of assets due to the offering. In addition, cross-reference the “Benefits to the Investment Adviser” section.

Response: The Trust has added the following after the last sentence in the “Purpose of the Offer” section:

 April 13, 2018

 Page
 3

 However, assuming (i) all Rights are exercised, (ii) the Trust’s average
weekly net asset value during the twelve-month period beginning June 1, 2018 is $26.03 per common share (the net asset value per common share on March 14, 2018) (iii) the Subscription Price is $22.95 per Share (95% of the last
reported sale price of the Trust’s common shares on March 14, 2018), and (iv) for purposes of this example, the Trust increases the amount of leverage outstanding while maintaining approximately the same percentage of total assets
attributable to leverage, and after giving effect to Information and Subscription Agent fees and other estimated offering expenses, the Investment Adviser would receive additional investment management fees of approximately $2,100,000 for the
twelve-month period beginning June 1, 2018, and would continue to receive additional investment management fees as a result of the Offer based on the average weekly value of the Trust’s Managed Assets attributable to the Shares issued in
the Offer and related additional leverage, thereafter. See “Benefits to the Investment Adviser.”

5.
On page 13 of the Prospectus Supplement, in the section entitled “Investment Considerations and Dilution,” please present the dilution information in a tabular format that gives full effect, in per dollar
and per percentage amount, of the primary and secondary subscriptions.

 Response: The Trust has
added the following after the first paragraph of the “Investment Considerations and Dilution” section:

 The dilution effect
utilizing the above stated assumptions is presented below in tabular form.

 Example (assumes that NAV per share is above Subscription
Price per share)1

 NAV2

$
26.03

 Subscription Price

$
22.95

 Primary Subscription ONLY - Reduction in NAV ($)3

$
0.78

 Primary Subscription ONLY - Reduction in NAV (%)3

3.01
%

 Primary Subscription and Secondary Subscription Shares - Reduction in NAV ($)4,5

$
0.92

 Primary Subscription and Secondary Subscription Shares - Reduction in NAV (%)4

3.53
%

(1)
This example assumes that the full primary subscription is exercised. Actual amounts may vary due to rounding.

(2)
 This example assumes that the Trust’s NAV on the Expiration Date is $26.03 per share of common shares (the
net asset value per common share on March 14, 2018) and

 April 13, 2018

 Page
 4

that the Trust’s market price is greater than the NAV on that date. The Subscription Price used in this example was determined based on a formula equal to 95% of the last reported sale price
of the Trust’s common shares on the NYSE on March 14, 2018.

(3)
Assumes $250,000 in estimated offering expenses.

(4)
Assumes the full primary subscription and the over-allotment option of secondary subscription shares are exercised. Actual amounts may vary due to rounding.

(5)
Assumes $20,000 in estimated additional offering expenses.

6.
On page 19 of the Prospectus Supplement, in the section entitled “Plan of Distribution,” please add the following to the end of the second sentence: “such that the exercise of all rights in any
transferable subscription rights offering will not cumulatively result in more than 33  1⁄3% increase in the Trust’s common shares outstanding.”
Please make the same revision to the “Plan of Distribution” section of the Prospectus as well.

 Response:
The requested change has been incorporated.

7.
On page 1 of the Prospectus, the sentence stating “[t]he Trust may also invest in other securities and instruments[,]” please elaborate on what “other securities” the Trust may invest in.

 Response: The Trust has clarified the specified sentence to read as follows:

The Trust may also invest in derivative instruments that have economic characteristics similar to instruments in investment categories
(i)-(vii).

8.
Rule 35d-1 under the Investment Company Act of 1940 (the “1940 Act”) prohibits, in pertinent part, an investment company from having a name suggesting that the
investment company focuses its investments in a particular type of investment or investments, unless:

 (A) the
investment company has adopted a policy to invest, under normal circumstances, at least 80% of the value of fund assets in the particular type of investments suggested by the fund’s name (the “80% Policy”); and

(B) the 80% Policy is a fundamental policy under section 8(b)(3) of the 1940 Act, or the investment company has adopted a policy to provide
the Fund’s shareholders with at least 60 days prior notice of any change in the 80% Policy.

 April 13, 2018

 Page
 5

 The Staff notes its view that the Trust’s former name, the “NexPoint Credit
Strategies Fund” is a name that indicates a focus on a particular type of investment (i.e., “Credit”), rather than an investment strategy, and the inclusion of the word “Strategies” in the name does not affect this fact. The
Staff notes that the Trust previously had a policy pursuant to which it would invest at least 80% of its assets in: (i) secured and unsecured floating and fixed rate loans; (ii) bonds and other debt obligations; (iii) debt obligations
of stressed, distressed and bankrupt issuers; and (iv) structured products, including but not limited to, mortgage-backed and other asset- backed securities and collateralized debt obligations. But, the Trust did not include either the
fundamental policy or the non-fundamental policy to provide sixty days advanced notice as required by Rule 35d-1. The Staff notes that on March 14, 2018, the Trust
announced via publicly available press release its intent to change its name to the NexPoint Strategic Opportunities Fund and to simultaneously change its investment policy to eliminate the 80% requirement, although it would continue to invest in
the instruments previously subject to the 80% requirement. The Staff notes that the elimination of the 80% policy was effective on March 19, 2018 which is inconsistent with Rule 35d-1’s advance
notification requirements.

 Response: The Trust acknowledges receipt of the Staff’s comment. For the reasons
set forth below, however, the Trust respectfully asserts that its former name was not subject to the provisions of Rule 35d-1 because the name describes an investment strategy, not a particular type of
investment. Although the Trust is not subject to Rule 35d-1, it did adopt an 80% policy governing its investments (which was similar to that required by Rule 35d-1) in
accordance with guidance from the Securities and Exchange Commission (the “Commission” or “SEC”) that indicates that even if a Trust is not subject to the provisions of Rule 35d-1,
additional steps might be necessary to ensure its name is not misleading. Because the Trust is not subject to Rule 35d-1, the Trust was not subject to the advance notice provisions, and consequently changed
its investment policy and name in a manner consistent with its obligations to shareholders.

 Section 35(d) of the 1940 Act makes it
unlawful for “any registered investment company to adopt as a part of the name or title of such company, or of any securities of which it is the issuer, any word or words that the Commission finds are materially deceptive or misleading.”
The Section authorizes the Commission to define any names or titles as being materially deceptive or misleading under that section by rule, regulation, or order. The Commission adopted Rule 35d-1 under the
authority of this section. Rule 35d-1(a)(2) makes any name of a fund “materially deceptive and misleading” if a fund has a name “suggesting that the [f]und focuses its investments in a
particular type of investment or investments” unless a) an 80% investment policy is adopted and b) such policy is either fundamental or cannot be changed without 60 day written shareholder notice in advance of the change. The Adopting Release
on Rule 35d-1, Investment Company Act Release No. 24828 (January 17, 2001), stated clearly that “the rule does

 April 13, 2018

 Page
 6

not apply to fund names that incorporate terms . . . that connote types of investment strategies as opposed to types of investments.” In a Staff FAQ, Frequently Asked Questions about Rule 35d-1 (Investment Company Names) (December 4, 2001) (“Names Rule FAQ”), the Staff echoed this point noting that Rule 35d-1 would not apply to a term that suggests an
investment objective or strategy rather than a type of investment. In the Names Rule FAQ, the Staff acknowledged that the usage and positioning of a term could cause its meaning to change, depending on its use. For example, use of the word
“income” could be part of an investment strategy, or could indicate a focus on a particular security, depending on its usage.

The Trust believes that its former name, “NexPoint Credit Strategies Fund,” unambiguously reflects the Trust’s focus on
investment strategies involving a variety of instruments. This view is supported by disclosure contained in the Trust’s most recent registration statement that was declared effective on January 22, 2018, which notes that the Trust will
utilize various specialized trading strategies in achieving its investment objective:

 Within the categories of obligations and securities
in which the [Trust] invests, the Investment Adviser employs various trading strategies, including capital structure arbitrage, pair trades and shorting. Capital structure arbitrage is a strategy in which the [Trust] seeks opportunities created by
mispricing in different markets of various instruments issued by one corporation. Pair trades involve matching a long position with a short position in two stocks of different issuers in the same sector, betting that the “spread” between
the two will eventually converge. Short selling (also known as shorting or going short) is a strategy in which the [Trust] sells a security it does not own in anticipation that the market price of that security will decline.

We are unaware of any formal interpretive statement by the Staff or the Commission relating to the appropriate treatment pursuant to Rule 35d-1 of the phrase “credit strategies” or a similar formulation using “credit” as a modifying adjective. We have also reviewed a number of public SEC response letters, and found a number of
instances in which funds that use “credit” in their name have no 80% policy and have not adopted the notification requirements of Rule 35d-1, or which have adopted a
non-fundamental 80% policy but have not adopted the Rule’s advance notification requirement. We found other instances in which funds have adopted both an 80% policy and the
non-fundamental advance notification policy.

 In light of the existing guidance and the fact that
the Trust’s former name used “credit” as an adjective modifying “strategy,” the Trust respectfully asserts that it is not subject to Rule 35d-1.

 April 13, 2018

 Page
 7

 Even though Rule 35d-1 is inapplicable to fund names
that refer to strategies, other provisions of the law such as
Section 35(d) and the anti-fraud provisions may guide such funds to take steps to ensure that their names are not confusing or misleading to shareholders. The Commission has been
very clear that funds may be required to take steps outside of Rule 35d-1 to ensure a name was not misleading to investors. It has stated:

[T]he rule does not apply to fund names that incorporate terms…that connote types of investment strategies as opposed to types of
investments. The Division will continue to scrutinize investment company names not covered by the proposed rule. In determining whether a particular name is misleading, the Division will consider whether the name would lead a reasonable investor to
conclude that the company invests in a manner that is inconsist

CORRESP
1
filename1.htm

Acceleration Request

 NEXPOINT CREDIT STRATEGIES FUND

200 Crescent Court, Suite 700

Dallas, Texas 75201

 January 19, 2018

VIA EDGAR

 Securities and Exchange Commission

 Division of Investment Management

 100 F Street, N.E.

Washington, DC 20549

 Attn: Dominic Minore

Re:
NexPoint Credit Strategies Fund

 Registration Statement on Form
N-2

 (File Nos. 811-21869 and 333-219983)

 Dear Mr. Minore:

Pursuant to Rule 461 under the Securities Act of 1933, as amended (the “Securities Act”), NexPoint Credit Strategies Fund (the
“Trust”) respectfully requests that the effectiveness of the above-referenced registration statement (the “Registration Statement”) on Form N-2 (File
No. 333-219983) be accelerated to 5:00 p.m. EST, Friday, January 19, 2018, or as soon thereafter as practicable.

The Trust acknowledges that (i) should the Securities and Exchange Commission (the “Commission”) or its staff (the
“Staff”), acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any actions with respect to the filing, (ii) the action of the Commission or the Staff, acting pursuant
to delegated authority, in declaring the filing effective, does not relieve the Trust from its full responsibility for the adequacy and accuracy of the disclosure in the filing, and (iii) the Trust may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the federal securities laws of the United States.

 We would appreciate if you would kindly contact Kathleen Nichols of Ropes & Gray LLP at
(617) 854-2418 as soon as the Registration Statement has been declared effective.

 Very truly yours,

NexPoint Credit Strategies Fund

By:

 /s/ Frank Waterhouse

Name:

Frank Waterhouse

Title:

Treasurer; Principal Accounting Officer and Principal Financial Officer

 - 2 -

CORRESP
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SEC Response Letter

 ROPES & GRAY LLP

 PRUDENTIAL TOWER

800 BOYLSTON STREET

 BOSTON, MA 02199-3600

WWW.ROPESGRAY.COM

 Kathleen M. Nichols

 617-854-2418

 Kathleen.Nichols@ropesgray.com

 January 17, 2018

 BY
EDGAR AND E-MAIL

 United States Securities & Exchange Commission

Division of Investment Management

 100 F Street, NE

Washington, DC 20549

 Attention: Dominic Minore and Lauren
Hamilton

Re:
NexPoint Credit Strategies Fund

Registration Statement on Form N-2

(File Nos. 811-21869 and 333-219983)

Dear Mr. Minore and Ms. Hamilton:

 On behalf of
NexPoint Credit Strategies Fund (the “Trust”), a Delaware statutory trust, please find below the Trust’s responses to the comments provided orally via telephone call on January 11, 2018 (each a “Comment” and,
collectively, the “Comments”) relating to the Trust’s Registration Statement on Form N-2 filed with the U.S. Securities and Exchange Commission (the “Commission”) on December 19,
2017 (accession no. 0001193125-17-373645) (the “Registration Statement”).

For the convenience of the staff of the Commission (the “Staff”), the Comments have been summarized below. The Trust’s response follows each
Comment. Capitalized terms used but not defined herein have the meanings assigned to them in the Registration Statement.

1.
Staff Comment: Please provide an undertaking on behalf of the Trust to file an unqualified legality opinion and consent of counsel with respect to the securities offered by the Trust in each post-effective
amendment related to an offering of securities registered under the Registration Statement, and that such legality opinion and consent of counsel will conform to the views as set forth in Staff Legal Bulletin No. 19 (CF) (October 14, 2011).

 Response: The Trust undertakes to file an unqualified legality opinion and consent of counsel with respect to the
securities offered by the Trust in each post-effective amendment related to an offering of securities registered under the Registration Statement, and that such legality opinion and consent of counsel will conform to the views as set forth in Staff
Legal Bulletin No. 19 (CF) (October 14, 2011).

2.
Staff Comment: Please confirm that the legal opinion filed as exhibit (L) to the Registration Statement was the final form of the opinion.

Response: The Trust confirms that the legal opinion filed as exhibit (L) to the Registration Statement was the final form of the
opinion.

3.
Staff Comment: Please explain the purpose and functionality of the master repurchase agreement under “Prospectus Summary – Use of Leverage.”

Response: In response to the Staff’s comment, the Trust will modify the third paragraph of the section “Prospectus Summary
– Use of Leverage” in the next amendment to the Registration Statement as follows:

 The Trust, as of June 30, 2017, was
leveraged through borrowings from a secured credit facility in the amount of $85,650,000 (which expired on December 15, 2017) and from a committed facility with BNP Paribas Prime Brokerage, Inc. (“BNP”) with a total commitment of
$75,000,000. As of June 30, 2017, the Trust had drawn $12,296,536 on the committed facility. In addition, the Trust intends to leverage its portfolio throughentered into a master repurchase agreement with BNP Paribas
Securities Corp. (“BNP Securities”) on November 16, 2017 that allows the Trust to enter into reverse repurchase transactions from time to time pursuant to the terms of the master repurchase agreement. The Trust’s asset
coverage ratio as of June 30, 2017 was 672%. See “Principal Risks of the Trust — Leverage Risk” for a brief description of the Trust’s committed facility and master repurchase agreement.

4.
Staff Comment: Footnote 4 to the Trust’s fee table assumes leverage in the amount of 25% of the Trust’s total assets. Please explain supplementally how that assumption agrees to the Trust’s
June 30, 2017 financial highlights, which show a leverage ratio of 14.88% of total assets.

 Response: The Trust
notes that, during the six-month period ended June 30, 2017, its leverage ratio was generally higher than the 14.88% ratio reported in the June 30, 2017 financial highlights. This was primarily due
to the Trust conducting a rights offering during the second quarter of 2017, which increased the Trust’s total assets but did not similarly increase leverage. Accordingly, the June 30, 2017 financial statements reflect the total assets
that resulted from the rights offering and corresponding lower leverage ratio as of that date. However, the Trust’s average leverage ratio during the six-month period ended June 30, 2017 was
approximately 25%.

 - 2 -

 *    *    *

Should members of the Staff have any questions or comments, they should contact the undersigned by telephone at (617)
854-2418 or Brian McCabe at (617) 951-7801.

 Very truly yours,

/s/ Kathleen Nichols

Kathleen Nichols

 Enclosures

cc:
Dustin Norris

 Brian McCabe, Esq.

 - 3 -

CORRESP
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Acceleration Request

 NEXPOINT CREDIT STRATEGIES FUND

200 Crescent Court, Suite 700

Dallas, Texas 75201

 HIGHLAND CAPITAL FUNDS

DISTRIBUTOR, INC.

 200
Crescent Court, Suite 700

 Dallas, Texas 75201

 April 19, 2017

 VIA
EDGAR

 Securities and Exchange Commission

 Division
of Investment Management

 100 F Street, N.E.

 Washington, DC
20549

 Attn: Valerie Lithotomos

Re:
NexPoint Credit Strategies Fund

Registration Statement on Form N-2

(File Nos. 811-21869 and 333-215796)

 Dear Ms. Lithotomos:

Pursuant to Rule 461 under the Securities Act of 1933, as amended (the “Securities Act”), NexPoint Credit Strategies Fund (the
“Trust”) respectfully requests that the effectiveness of the above-referenced registration statement (the “Registration Statement”) on Form N-2 (File No. 333-215796) be
accelerated to 5:00 p.m. EST, Wednesday, April 19, 2017, or as soon thereafter as practicable.

 The Trust acknowledges that
(i) should the Securities and Exchange Commission (the “Commission”) or its staff (the “Staff”), acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any
actions with respect to the filing, (ii) the action of the Commission or the Staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the Trust from its full responsibility for the adequacy and accuracy
of the disclosure in the filing, and (iii) the Trust may not assert this action as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

 - 2 -

 We would appreciate if you would kindly contact Kathleen Nichols of Ropes & Gray LLP at
(617) 854-2418 as soon as the Registration Statement has been declared effective.

 Very truly yours,

 NexPoint Credit Strategies Fund

 Highland Capital Funds Distributor, Inc.

as Marketing Support Agent

 By:

 /s/ Brian Mitts

By:

 /s/ Brian Mitts

 Name:

Brian Mitts

Name:

Brian Mitts

 Title:

 Executive Vice President, Principal

 Financial
Officer and Principal

 Accounting Officer

Title:

Chief Operating Officer

CORRESP
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SEC Response Letter

 ROPES & GRAY LLP

PRUDENTIAL TOWER

 800 BOYLSTON STREET

BOSTON, MA 02199-3600

WWW.ROPESGRAY.COM

 Jessica L. Reece

 T +1 617 235 4636

F +1 617 235 9688

 Jessica.reece@ropesgray.com

 October 28, 2016

 BY
EDGAR AND E-MAIL

 United States Securities & Exchange Commission

Division of Investment Management

 100 F Street, NE

Washington, DC 20549

 Attention: Lauren Hamilton

Re:
NexPoint Credit Strategies Fund (the “Trust”)

 Certified Shareholder Report on Form
N-CSR Filed on March 3, 2016, Pursuant to Rule 30b2-1 under the Investment Company Act of 1940, as Amended (the “1940 Act”) (the “Shareholder Report”)

1940 Act File No. 811-21869

 Dear
Ms. Hamilton:

 This letter provides the Trust’s responses to the comments with respect to the Shareholder Report that the Commission Staff (the
“Staff”) provided orally via conference call on September 14, 2016. For the convenience of the Staff, the comments have been summarized below. The Trust’s response follows each comment. Capitalized terms used but not
defined herein have the meanings assigned to them in the Shareholder Report.

 Comments Applicable to Shareholder Report

1.
Staff Comment: Please discuss supplementally the applicability of Rules 3-09 and 4-08(g) of Regulation S-X to the Trust’s controlled investments. In addition, please confirm supplementally whether NexPoint
Real Estate Capital LLC is a controlled investment of the Trust.

 Response: In accordance with Regulation S-X and the
AICPA Audit and Accounting Guide for Investment Companies and Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810—Consolidation, the Trust generally does not consolidate its interest
in any company other than (i) investment company subsidiaries and (ii) controlled operating companies substantially all of whose business consists of

providing services to the Trust. The Trust has reviewed the October 2014 IM Guidance Update, “Investment Company Consolidation,” and FASB ASC 946-10-15, Assessment of Investment Company
Status, and has determined that the Trust’s investment in NexPoint Real Estate Capital LLC does not meet either of these criteria. NexPoint Real Estate Capital LLC meets the requirements of Section 3(c)(5)(C) of the 1940 Act as an owner of
real property and real estate-related investments and, accordingly, is not an investment company under the 1940 Act. NexPoint Real Estate Capital LLC is excluded as well from the definition of investment company under FASB ASC 946-10-15 because its
business purpose and activity includes making investments for strategic operating purposes and excludes making multiple substantive investments and investing with an exit strategy. Additionally, NexPoint Real Estate Capital LLC does not and will not
provide any substantive services to the Trust. The Trust notes that this position is consistent with the practices of other investment companies that hold ownership interests in one or more wholly owned subsidiaries, including REITs that have
similar characteristics to NexPoint Real Estate Capital LLC, that are not consolidated based on the above guidance. Additionally, the Trust confirms that NexPoint Real Estate Capital LLC is a controlled investment of the Trust.

2.
Staff Comment: Please confirm supplementally that all wholly owned and all substantially wholly owned subsidiaries have been consolidated within the financial statements of the Trust. In particular, please
describe the Trust’s assessment with respect to the consolidation of the financial statements of NexPoint Real Estate Opportunities, LLC (formerly, “Freedom REIT”) with the Trust’s financial statements.

Response: As noted above, the Trust generally does not consolidate its interest in any company other than (i) investment company
subsidiaries and (ii) controlled operating companies substantially all of whose business consists of providing services to the Trust. Additionally, the Trust confirms that NexPoint Real Estate Opportunities, LLC is not and will not be an
investment company because it meets the requirements of Section 3(c)(5)(C) of the 1940 Act as an owner of real property and real estate-related investments and, accordingly, is not an investment company under the 1940 Act. NexPoint Real Estate
Opportunities, LLC is or will be excluded as well from the definition of investment company under FASB ASC 946-10-15 because its business purposes and activities include making investments for strategic operating purposes and exclude making multiple
substantive investments and investing with an exit strategy. Additionally, NexPoint Real Estate Opportunities, LLC does not and will not provide any substantive services to the Trust. As a result, the Trust does not consolidate NexPoint Real Estate
Opportunities, LLC’s financial statements, or the financial statements of other controlled companies other than (i) investment company subsidiaries and (ii) controlled operating companies substantially all of whose business consists
of providing services to the Trust, with those of the Trust.

 - 2 -

3.
Staff Comment: Please include a line item for commitments and contingencies and a cross-reference to the Notes to Financial Statements, as appropriate, in a footnote in the Statement of Assets and Liabilities.

 Response: The Trust confirms that there were no commitments or contingencies during the reporting period, and
confirms that it intends to include the noted line item and cross-reference in future shareholder reports, as appropriate.

4.
Staff Comment: Please confirm that the category of each specific holding of the Trust described in the Investment Portfolio section of the Shareholder Report is properly identified, in particular with respect to
investments in collateralized loan obligation (“CLO”) preferred shares. Additionally, please include the maturity and interest rate, as applicable, of each of the Trust’s holdings, and discuss supplementally why certain of the
loans held by the Trust do not include a stated rate and maturity.

 Response: The Trust confirms that the category of
each specific holding of the Trust is properly identified and confirms that the Trust will include the maturity and interest rate, as applicable, of each of the Trust’s interest-bearing holdings in future shareholder reports. The Trust notes
that certain of its loan holdings did not include a stated interest rate and maturity date because the loans were past their respective maturity dates or were defaulted. For loans that are not defaulted or past their respective maturities, the Trust
confirms that it will include, as applicable, a stated rate and maturity.

5.
Staff Comment: In the Investment Portfolio section of the Shareholder Report, please identify the estimated rate with respect to each of the Trust’s CLO equity investments and ensure that such rates are
identified as estimates.

 Response: The Trust’s CLO equity investments are expected to generate distributions at
variable rates over time, and the Trust believes that it does not have a basis for providing an estimated rate that is sufficiently reliable that it would enhance investor understanding. The Trust respectfully declines to make the requested change.

6.
Staff Comment: In the Statement of Changes in Net Assets, a portion of the Trust’s distributions appears to be a tax return of capital. Please identify any tax return of capital on the Statement of
Changes in Net Assets as well as the Financial Highlights. Additionally, please confirm supplementally that the Trust complies with Rule 19a-1 under the 1940 Act.

Response: The Trust confirms that it intends to identify tax returns of capital in the Statement of Changes in Net Assets and Financial
Highlights sections in future shareholder reports. The Trust confirms that it complies with Rule 19a-1 with respect to its shareholder notices regarding the source of distribution payments.

 - 3 -

7.
Staff Comment: With respect to Note 11 in the Notes to Financials, Footnote 1 to Rule 12-14 of Regulation S-X provides that each issue must be identified separately and the Trust must group its investments into
the following categories: (1) investments in majority-owned subsidiaries, segregating subsidiaries consolidated, (2) other controlled companies, and (3) other affiliates. Please ensure going forward that the Trust presents its
investments in accordance with Footnote 1 to Rule 12-14 under Regulation S-X.

 Response: The Trust confirms that
it will present its investments in accordance with Footnote 1 to Rule 12-14 under Regulation S-X in future shareholder reports.

8.
Staff Comment: In the Investment Portfolio section, the Staff notes that the Trust held variable rate securities as of the period end. Please include a description of the reference rate and spread for each
such variable rate security and either disclose the end of period interest rate or disclose the end of period reference rate for each reference rate described in the Investment Portfolio in a footnote. Please note that this comment applies to any
N-2 filings that the Trust may make going forward.

 Response: The Trust confirms that it intends to describe the
reference rate and spread for each variable rate security in future shareholder reports and in future N-2 filings as requested by the Staff, and respectfully directs the Staff’s attention to footnotes (a) and (g) to the Portfolio of
Investments, which include the referenced disclosure.

9.
Staff Comment: Please disclose the information related to restricted securities required by Footnote 6 of Rule 12-12 of Regulation S-X.

Response: The Trust confirms that it intends to include the information required by Footnote 6 of Rule 12-12 in footnotes to the table
of investments in securities of unaffiliated issuers in future shareholder reports.

10.
Staff Comment: With respect to the Statement of Operations, please confirm the Trust’s compliance with Item 2(b) of Rule 6-07 of Regulation S-X, as the Trust’s total “Other” expenses
exceeded 5% of the Trust’s Total Operating Expenses for the period.

 Response: The Trust confirms that it
complies with Item 2(b) of Rule 6-07 of Regulation S-X, as each individual expense item in the category “Other” did not exceed 5% of the Trust’s Total Operating Expenses for the period.

11.
Staff Comment: In the Notes to Financial Statements, please include the reporting entity’s policy for determining when transfers between valuation levels are deemed to have occurred. As stated in the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10-50-2(c), the policy regarding the timing of recognizing transfers shall be the same for transfers into levels as for transfers out of
levels.

 - 4 -

 Response: The Trust respectfully submits that Form N-2 and Form N-CSR do not require the
referenced disclosure. Nonetheless, the Trust will consider the Staff’s comment in preparing its future shareholder reports.

12.
Staff Comment: The Staff notes the following disclosure in Note 7 of the Notes to Financial Statements in the Shareholder Report:

The Fund closes its net asset value daily, and using asset prices available at the time of the December 31, 2015 NAV close, the Fund
calculated asset coverage of greater than 300%. The Fund received updated prices for certain instruments in January that were used for financial reporting purposes as part of this report. These updated prices pushed the percentage of asset coverage
down to 296.2%. As of February 4, 2016, the date that the Fund declared the February monthly dividend, the percentage of asset coverage was over 300%.

Please explain supplementally how the referenced updated prices were discovered and describe supplementally any changes made to the control
environment for the Trust to ensure that prices are representative of fair value for future reporting periods.

 Response: On
December 31, 2015, the Trust used all available information to price the Trust’s assets for purposes of determining its NAV. Subsequent to this date, broker quotes for certain CLO assets were received that were not available as of
December 31, 2015, and this new information resulted in updated prices that were included in the Trust’s December 31, 2015 financial reports audited by PricewaterhouseCoopers, LLP, the Trust’s independent registered public
accounting firm.

 The Trust’s CLO valuation process maximizes the use of observable inputs and is supported by processes to assess the
relevance and reliability of those inputs, in accordance with applicable accounting guidance. The Trust utilizes a monthly dealer (broker) quote process to price CLO instruments absent information to indicate that a quote is unreliable. During the
normal course of this process, updated broker quotes representative of fair value as of December 31, 2015 were received and utilized for financial reporting purposes.

13.
Staff Comment: Please include the disclosure required by Instruction 6(b), (c), and (d) to Item 24 of Form N-2 regarding quarterly portfolio holdings information and proxy voting information.
Additionally, please disclose information regarding the availability of the Trust’s Statement of Additional Information (“SAI”) in accordance with Instruction 4(f) to Item 24 of Form N-2.

Response: The Trust confirms that it will add the disclosure contemplated by the noted Instructions in future shareholder reports.

 - 5 -

 Comments Applicable to the Trust’s Website

14.
Please update the Trust’s gross expense ratio to be consistent with the fee tables provided in the Trust’s current prospectus. Additionally, in the “Portfolio Characteristics” section of the
Trust’s Fact Sheet, please remove any references to distribution yields if the Trust has a return of capital for the applicable period and include disclosure regarding the impact of the NexPoint Residential Trust, Inc. spin-off.

 Response: The gross expense ratio posted on the Trust’s website is consistent with the gross expense ratio
provided in the Trust’s annual shareholder report, which provides more recent disclosure than the Trust’s current prospectus. Accordingly, the Trust respectfully declines to make the requested change.

The Trust confirms that it will remove references to distribution yields if the Trust has a return of capital for the applicable period, and
will include the following footnote to the “NAV/Price” graph in the Fund’s fact sheet regarding the impact of the NexPoint Residential Trust, Inc. spin-off on NAV and market price:

“The above chart has been adjusted for the NexPoint Residential Trust, Inc. spin-off that occurred on April 1, 2015 and the 1-for-4
reverse stock split of the Trust’s issued and outstanding shares on October 6, 2015.”

*        *        *

Should members of the Staff have any questions or comments, they should contact the undersigned at (617) 235-4636 or jessica.reece@ropesgray.com.

 Very truly yours,

 /s/ Jessica L. Reece

Jessica L. Reece

cc:
Brian Mitts, Executive Vice President, Principal Financial Officer and Principal Accounting Officer

Brian D. McCabe, Ropes & Gray LLP

 - 6 -

CORRESP
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Annual Report SEC Response Letter

 ROPES & GRAY LLP

1211 AVENUE OF THE AMERICAS

 NEW YORK, NY
10036-8704

 WWW.ROPESGRAY.COM

August 14, 2013

 Lindsey Coffey

 T +1 212 596
9821

 F +1 646 728 2573

lindsey.coffey@ropesgray.com

 VIA EDGAR

 Securities and Exchange Commission

 Division of Investment Management

100 F Street, N.E.

 Washington, DC 20549

 Attention: Cindy Rose

Re:
NexPoint Credit Strategies Fund (the “Fund”)

Responses to Comments on December 31, 2012 Annual Report

File Nos. 333-173004 and 811-21869

 Ladies and
Gentlemen:

 On June 14, 2013, Cindy Rose of the staff (the “Staff”) of the Securities and Exchange Commission (the
“SEC”) provided oral comments to Reid Adams and Heena Virani of Ropes & Gray LLP, counsel to the Fund, regarding the Fund’s annual report on Form N-CSR for the twelve-month period ending December 31, 2012 (the
“Annual Report”). Summaries of the Staff’s comments and the Fund’s responses are set forth below.

 Statements of
Operations

1.
Comment: On page 12 of the Annual Report, please move the line item labeled “dividends and expenses on securities sold short” above the line so that
it is included within the “Total operating expenses” category. Similarly, on page 15, please remove “Dividend expense from short positions” as a line item in your expense ratio disclosure.

Response: The requested change will be made in the Fund’s next filing on Form N-CSR.

Financial Highlights

2.
Comment: Please explain the calculation methodology for the “managed net” expense ratio of 2.26% and the “average net” expense ratio of
3.14% on page 15 of the Annual Report. In addition, please confirm that the “average net” expense ratio uses the same methodology as the “total” expense ratio contained in the Fund’s most recent amendment to its registration
statement on Form N-2, which was filed on May 6, 2013 (the “Amendment”). For future filings on Form N-CSR, please display only one expense ratio.

Securities and Exchange Commission

-2-

August 14, 2013

 Response:

The Fund calculated the “managed net” expense ratio of 2.26% in the Annual Report as a percentage of gross assets. The Fund
calculated both the “average net” expense ratio of 3.14% in the Annual Report and the “total” expense ratio of 3.14% in the Amendment as a percentage of net assets attributable to common shares.

Because the Fund’s management and administrative fees are based on the Fund’s gross assets, when the Trust uses leverage, the
management and administrative fees are higher when shown as a percentage of net assets attributable to common shares. As a result, the “average net” expense ratio is greater than the “managed net” expense ratio in the Annual
Report.

 For future filings on Form N-CSR, the Fund will add a financial note to explain the different calculation methods. In
addition, the Fund will change the line item for the “managed net” expense ratio to read as follows: “Ratios based on the Trust’s managed net assets of common shares.” The Fund
believes that it is helpful to investors to display both gross and net expense ratios. Accordingly, the Fund respectfully declines to display only the “average net” expense ratio for future filings on Form N-CSR.

Website

3.
Comment: Please revise the expense information disclosed on the Fund’s website so that it is consistent with the Fund’s Annual Report, registration
statement and any amendments thereto. For example, according to the Fund’s website, the Fund’s gross expense ratio is “N/A.”

 Response: The requested change has been made.

*  *  *  *  *

 As instructed by the Staff, the Registrant is also submitting the following:

 The
Fund acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in the Annual Report, (ii) Staff comments or changes to disclosure in response to Staff comments in the Annual Report reviewed by the Staff do not
foreclose the SEC from taking any action with respect to the Annual Report, and (iii) the Registrant may not assert Staff comments with respect to the Annual Report as a defense in any proceeding initiated by the SEC or any person under the
federal securities laws of the United States.

Securities and Exchange Commission

-3-

August 14, 2013

 Please direct any questions concerning this letter to the undersigned at (212) 596-9821.

 Sincerely,

 /s/ Lindsey Coffey

 Lindsey Coffey

cc:
Brian Mitts, Highland Capital Management Fund Advisors, L.P.

Rajib Chanda, Esq.

CORRESP
1
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corresp

Highland Credit Strategies Fund

NexBank Tower

13455 Noel Road, Suite 800

Dallas, Texas 75240

(877) 665-1287

September 2, 2011

VIA EDGAR AND E-MAIL

Securities and Exchange Commission

Division of Investment Management

100 F Street, N.E.

Washington, D.C. 20549

    Attention:

    Dominic Minore, Esq.

Richard Pfordte, Esq.

       Re:

    Highland Credit Strategies Fund

Registration Statement on Form N-2 (File Nos. 333-173004 and 811-21869)

Dear Mr. Minore:

          Pursuant to Rule 461 under the Securities Act of 1933, as amended (the “Act”),
Highland Credit Strategies Fund, a Delaware statutory trust (the “Trust”), hereby requests
that the effective date for the Registration Statement referred to above (the “Registration
Statement”) be accelerated so that it will be declared
effective at 2:30 p.m., Washington, D.C.
time on September 2, 2011 or as soon as practicable thereafter.

          The Trust acknowledges its responsibilities under the Act and the Securities Exchange Act of
1934, as amended, as they relate to the offering of the securities specified in the Registration
Statement. In addition, in connection with the Trust’s request for acceleration, the Trust
acknowledges the position of the staff (the “Staff”) of the Securities and Exchange
Commission (the “Commission”) that:

    •

    the action of the Commission or the Staff, acting pursuant to delegated authority, in
declaring the Registration Statement effective, does not foreclose the Commission from
taking any action with respect to the Registration Statement;

    •

    the action of the Commission or the Staff, acting pursuant to delegated authority, in
declaring the Registration Statement effective, does not relieve the Trust from its full
responsibility for the adequacy and accuracy of the disclosure in the Registration
Statement; and

    •

    the Trust may not assert Staff comments and the declaration of effectiveness as a
defense in any proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

          Please call Lauren D. Macioce of Ropes & Gray LLP at (212) 596-9883 as soon as the
Registration Statement has been declared effective.

    Sincerely,

HIGHLAND CREDIT STRATEGIES FUND

    By:
    /s/ Brian Mitts

    Brian Mitts

    Treasurer

CORRESP
1
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corresp

Highland Credit Strategies Fund

NexBank Tower

13455 Noel Road, Suite 800

Dallas, Texas 75240

(877) 665-1287

September 1, 2011

VIA EDGAR AND E-MAIL

Securities and Exchange Commission

Division of Investment Management

100 F Street, N.E.

Washington, D.C. 20549

    Attention:

    Dominic Minore, Esq.

Richard Pfordte, Esq.

       Re:

    Highland Credit Strategies Fund

Registration Statement on Form N-2 (File Nos. 333-173004 and 811-21869)

Dear Mr. Minore:

          Pursuant to Rule 461 under the Securities Act of 1933, as amended (the “Act”),
Highland Credit Strategies Fund, a Delaware statutory trust (the “Trust”), hereby requests
that the effective date for the Registration Statement referred to above (the “Registration
Statement”) be accelerated so that it will be declared effective at 1:00 p.m., Washington, D.C.
time on September 6, 2011 or as soon as practicable thereafter.

          The Trust acknowledges its responsibilities under the Act and the Securities Exchange Act of
1934, as amended, as they relate to the offering of the securities specified in the Registration
Statement. In addition, in connection with the Trust’s request for acceleration, the Trust
acknowledges the position of the staff (the “Staff”) of the Securities and Exchange
Commission (the “Commission”) that:

    •

    the action of the Commission or the Staff, acting pursuant to delegated authority, in
declaring the Registration Statement effective, does not foreclose the Commission from
taking any action with respect to the Registration Statement;

    •

    the action of the Commission or the Staff, acting pursuant to delegated authority, in
declaring the Registration Statement effective, does not relieve the Trust from its full
responsibility for the adequacy and accuracy of the disclosure in the Registration
Statement; and

    •

    the Trust may not assert Staff comments and the declaration of effectiveness as a
defense in any proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

          Please call Lauren D. Macioce of Ropes & Gray LLP at (212) 596-9883 as soon as the
Registration Statement has been declared effective.

    Sincerely,

HIGHLAND CREDIT STRATEGIES FUND

    By:
    /s/ Brian Mitts

    Brian Mitts

    Treasurer

CORRESP
1
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corresp

August 26, 2011

VIA EDGAR AND E-MAIL

Securities and Exchange Commission

Division of Investment Management

100 F Street, NE

Washington, DC 20549

    Attention:

    Dominic Minore, Esq.

Richard Pfordte, Esq.

    Re:

    Highland Credit Strategies Fund (the “Trust”)

Pre-Effective Amendment No. 3 to Registration Statement on Form N-2

File Nos. 333-173004 and 811-21869

Dear Mr. Minore:

On August 24, 2011, you provided to me, via telephone, comments of the staff (the “Staff”)
of the Securities and Exchange Commission (the “Commission”) relating to the Trust’s
Pre-Effective Amendment No. 3 to Registration Statement on Form N-2 filed with the Securities and
Exchange Commission (the “Commission”) on July 29, 2011 (File Nos. 333-173004 and
811-21869) (the “Registration Statement”).

Please find below the Trust’s responses to the Staff’s comments. For reference purposes, the
comments provided during the August 24, 2011 telephone conversation are reproduced in bold in
numerical sequence in this letter, and the corresponding responses of the Trust are shown below
such comments.

Prospectus

    1.

    Description of Capital Structure — The disclosure on page 82 of the Registration
Statement describes that “pursuant to Section 3.8 of the Trust’s Agreement and Declaration of
Trust, the Board of Trustees of the Trust has the power to cause each holder of common or
preferred shares of the Trust to pay directly, in advance or arrears, for charges of
distribution, of the custodian or transfer, shareholder servicing or similar agent, a pro
rata amount as determined from time to time by the Board of Trustees of the Trust, by setting
off such charges due from such shareholder from declared but unpaid dividends or
distributions owed such shareholder and/or by

    reducing the number of shares in the account of such shareholder by that number of
full and/or fractional shares which represents the outstanding amount of such charges
due from such shareholder.” Please supplementally confirm to the Staff that the Trust
will include in any prospectus filed pursuant to Rule 497 a statement to the effect
that the Trust will not invoke such a power without first informing the Staff and
obtaining prior Staff approval.

    RESPONSE TO COMMENT 1

    The Trust supplementally confirms to the Staff that it will include in any
prospectus filed pursuant to Rule 497 under the Securities Act of 1933, as amended
(the “Securities Act”), a statement to the effect that the Trust will not invoke
such a power without first informing the Staff and obtaining prior Staff approval.

Exhibits

    2.

    Please clarify that Exhibit (d)(2) (Form of Subscription Certificate), Exhibit
(h)(1) (Form of Underwriting Agreement), Exhibit (h)(2) (Form of Dealer Manager
Agreement) and Exhibit (k)(7) (Form of Subscription Agent Agreement) will be filed by
means of an automatically effective post-effective amendment to the Registration
Statement pursuant to Rule 462(d) under the Securities Act.

    RESPONSE TO COMMENT 2

    The Trust supplementally confirms to the Staff that it will file with the Commission
the final forms of the applicable documents corresponding to these exhibits at the
time of a takedown under the Registration Statement by means of an automatically
effective post-effective amendment to the Registration Statement pursuant to Rule
462(d) under the Securities Act.

    3.

    Exhibit (l): Opinion and Consent of Special Delaware Counsel to the Trust
—Please supplementally confirm that when the Trust files a firm opinion and consent of
counsel with respect to an offering pursuant to the Registration Statement, it will do
so by means of an automatically effective post-effective amendment to the Registration
Statement pursuant to Rule 462(d) under the Securities Act, and that such opinion will
not assume any facts that are known at that time, in addition to excluding all of the
assumptions in the current opinion that will no longer be necessary. As an example,
please see the opinion filed in connection with Fifth Street Finance Corp.’s
registration statement filed on June 23, 2001 (File No. 333-166012) or the opinion
filed in connection with Highland Funds I’s registration statement filed on March 4,
2011 (File No. 333-172618).

- 2 -

    RESPONSE TO COMMENT 3

    The Trust supplementally confirms that it will file an updated Opinion and Consent
of Counsel prior to the closing of each offering pursuant to the Registration
Statement by means of an automatically effective post-effective amendment to the
Registration Statement pursuant to Rule 462(d) under the Securities Act. Such
Opinion and Consent of Counsel will exclude all of the assumptions in the current
opinion that will no longer be necessary and not assume any facts that are known at
that time.

* * *

- 3 -

     The Trust has authorized us to acknowledge on its behalf that (i) it is responsible for the
adequacy and accuracy of the disclosure in the filing; (ii) Staff comments or changes to disclosure
in response to Staff comments do not foreclose the Commission from taking any action with respect
to the filing; (iii) the action of the Commission or the Staff, acting pursuant to delegated
authority, in declaring the filing effective, does not relieve the Trust from its full
responsibility for the adequacy and accuracy of the disclosure in the filing; and (iv) it is the
Staff’s view that the Trust may not assert Staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.

     I hope that the foregoing has been responsive to your comments. If you should have any
questions about this letter or require any further information, please call me at 212-596-9883.
Thank you for your assistance.

Very truly yours,

      /s/ Lauren D. Macioce

    Lauren D. Macioce

    cc:

    Gregory D. Sheehan

    Michael G. Doherty

    Brian Mitts

CORRESP
1
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August 18, 2011

VIA EDGAR AND E-MAIL

Securities and Exchange Commission

Division of Investment Management

100 F Street, NE

Washington, DC 20549

    Attention:

    Dominic Minore, Esq.

Richard Pfordte, Esq.

    Re:

    Highland Credit Strategies Fund (the “Trust”)

Pre-Effective Amendment No. 3 to Registration Statement on Form N-2

File Nos. 333-173004 and 811-21869

Dear Mr. Minore:

On August 11, 2011, you provided to my colleague, Laurel Neale, via telephone, comments of the
staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”)
relating to the Trust’s Pre-Effective Amendment No. 3 to Registration Statement on Form N-2 filed
with the Securities and Exchange Commission (the “Commission”) on July 29, 2011 (File Nos.
333-173004 and 811-21869) (the “Registration Statement”). As you indicated during your
telephone conversation, the Staff has agreed to accept the Trust’s responses and
requested additional exhibits as a Correspondence filing on EDGAR, in order to save the Trust from
the expense of filing another pre-effective amendment.

Please find below the Trust’s responses to the Staff’s comments. For reference purposes, the
comments provided during the August 11, 2011 telephone conversation are reproduced in bold in
numerical sequence in this letter, and the corresponding responses of the Trust are shown below
such comments.

Prospectus

    1.

    Description of Capital Structure — The disclosure on page 82 of the
Registration Statement describes that “pursuant to Section 3.8 of the Trust’s Agreement
and Declaration of Trust, the Board of Trustees of the Trust has the power to cause
each holder of common or preferred shares of the Trust to pay directly, in advance or
arrears, for charges of distribution, of the custodian or transfer, shareholder
servicing or similar agent, a pro rata

    amount as determined from time to time by the Board of Trustees of the Trust, by
setting off such charges due from such shareholder from declared but unpaid
dividends or distributions owed such shareholder and/or by reducing the number of
shares in the account of such shareholder by that number of full and/or fractional
shares which represents the outstanding amount of such charges due from such
shareholder.” Please supplementally confirm to the Staff that the Trust will not
invoke such a power without first informing the Staff and obtaining Staff approval.

    RESPONSE TO COMMENT 1

    The Trust supplementally confirms that it will inform the Staff and obtain its
approval prior to any exercise of power pursuant to Section 3.8 of the Trust’s
Agreement and Declaration of Trust, as described on page 82 of the Registration
Statement. We understand that the Staff desires this prior
notification so that the Staff can discuss with the Trust the accounting treatment for any such action.

Exhibits

    2.

    Please provide the following exhibits:

    (d)(2) — Form of Subscription Certificate

    (h)(1) — Form of Underwriting Agreement

    (h)(2) — Form of Dealer Manager Agreement

    (k)(7) — Form of Subscription Agent Agreement

    On this particular occasion, the Trust may provide these exhibits as a
Correspondence filing, rather than in connection with a Pre-Effective Amendment.
Please file the final forms of these exhibits at the time of any offering pursuant
to the Registration Statement.

    RESPONSE TO COMMENT 2

    The exhibits are attached as Exhibits A, B, C and D,
respectively, to this letter. The Trust supplementally confirms to the Staff that
it will file with the Commission the final forms of the applicable documents
corresponding to these exhibits at the time of a takedown under the Registration
Statement, either as part of a Rule 497 prospectus or by means of an automatically
effective post-effective amendment to the Registration Statement pursuant to Rule
462(d) under the Securities Act of 1933, as amended.

    3.

    Exhibit (l): Opinion and Consent of Special Delaware Counsel to the Trust
—Please supplementally confirm that when the Trust files a firm opinion and consent of
counsel with respect to an offering pursuant to the Registration Statement, such
opinion will exclude all of the assumptions in the current opinion that will no longer
be necessary at that time, in addition to the

- 2 -

    assumption relating to due authorization of the securities. As an example, please
see the opinion filed in connection with Fifth Street Finance Corp.’s registration
statement filed on June 4, 2010 (File No. 333-166012).

    RESPONSE TO COMMENT 3

    The Trust supplementally confirms that it will file an updated Opinion and Consent
of Counsel prior to the closing of each offering pursuant to the Registration
Statement. Such Opinion and Consent of Counsel will exclude all of the assumptions
in the current opinion that will no longer be necessary at that time.

*    *    *

- 3 -

          The Trust has authorized us to acknowledge on its behalf that (i) it is responsible for the
adequacy and accuracy of the disclosure in the filing; (ii) Staff comments or changes to disclosure
in response to Staff comments do not foreclose the Commission from taking any action with respect
to the filing; (iii) the action of the Commission or the Staff, acting pursuant to delegated
authority, in declaring the filing effective, does not relieve the Trust from its full
responsibility for the adequacy and accuracy of the disclosure in the filing; and (iv) it is the
Staff’s view that the Trust may not assert Staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.

          I hope that the foregoing has been responsive to your comments. If you should have any
questions about this letter or require any further information, please call me at 212-596-9883.
Thank you for your assistance.

    Very truly yours,

Lauren D. Macioce

    cc:

    Gregory D. Sheehan

Michael G. Doherty

Brian Mitts

- 4 -

Exhibit A

Exhibit (d)(2) to the Registration Statement — Form of Subscription Certificate

    Control No.

    Maximum Primary Subscription Shares Available:

Number of Rights Issued:

SUBSCRIPTION CERTIFICATE

THE OFFER EXPIRES AT [          ], EASTERN TIME ON [          ] (unless extended)

HIGHLAND CREDIT STRATEGIES FUND

SUBSCRIPTION RIGHTS FOR COMMON SHARES OF BENEFICIAL INTEREST

IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST COMPLETE THIS CARD AND RETURN IT TO THE SUBSCRIPTION
AGENT.

Dear Shareholder:

You are entitled to exercise the Rights issued to you as of [          ], the Record Date for the
Offer, to subscribe for the number of common shares of beneficial interest of Highland Credit
Strategies Fund (the “Trust”) shown on this Subscription Certificate pursuant to the primary
subscription upon the terms and conditions specified in the Trust’s prospectus supplement dated [
] (the “Prospectus”). The terms and conditions of the Offer set forth in the Prospectus
are incorporated by reference herein. Capitalized terms not defined herein have the meanings
attributed to them in the Prospectus. As a Rights holder, you are entitled to purchase [    ] common
share[s] for each [    ] Right[s] you exercise. If you hold fewer than [    ] Rights, you are
entitled to subscribe for one common share. In accordance with the over-subscription privilege, as
a Rights holder, you also are entitled to subscribe for additional common shares, subject to
certain limitations and subject to allotment, if common shares remaining after the exercise of
Rights pursuant to the primary subscription are available and you have fully exercised all Rights
issued to you. To the extent that sufficient common shares are not available to honor all
over-subscription requests, unsubscribed common shares will be allocated pro-rata among those
Record Date Shareholders who over-subscribe based on the number of shares of the Trust’s common
shares they owned on the Record Date. The Trust will not offer or sell any common shares that are
not subscribed for pursuant to the primary subscription or the over-subscription privilege.

In order to exercise your Rights, you must present to [the subscription agent], by [    ],
Eastern time, on [          ] (unless extended, the “Expiration Date”), either (1) a properly
completed and executed subscription certificate and a money order or check drawn on a bank located
in the United States of America and payable to Highland Credit Strategies Fund for an amount equal
to the number of Shares subscribed for under the primary subscription and over-subscription (if
applicable) multiplied by the estimated Subscription Price of [], or (2) a Notice of Guaranteed
Delivery guaranteeing delivery of (i) a properly completed and executed subscription certificate
and (ii) a money order or check drawn on a bank located in the United States of America and payable
to Highland Credit Strategies Fund for an amount equal to the number of common shares subscribed
for under the primary subscription and over-subscription (if applicable) multiplied by the
estimated Subscription Price of $[ ].

If a Notice of Guaranteed Delivery is used, a properly completed subscription certificate, together
with payment in full, as described above, must be received by [the subscription agent] no later
than [          ], unless the Offer is extended. See “Summary of the Terms of the Rights
Offering” in the Prospectus.

No later than [          ], [the subscription agent] will send you a confirmation (or, if you
own your shares through a depository or nominee, to such depository or nominee), showing (i) the
number of common shares acquired pursuant to the primary subscription, (ii) the number of common
shares, if any, acquired pursuant to the over-subscription privilege, (iii) the per share and total
purchase price for the common shares, and (iv) any additional amount payable by you or any excess
to be refunded to you. Any excess payment to be refunded will be mailed as promptly as practicable.

A-1

Participants in the Trust’s dividend reinvestment plan (the “Plan”) will have any common shares
acquired pursuant to the primary subscription or over-subscription privilege credited to their
shareholder dividend reinvestment accounts in the Plan. Shareholders whose common shares are held
of record by Cede & Co. or by any other depository or nominee on their behalf or their
broker-dealers’ behalf will have any common shares acquired during the subscription period credited
to the account of Cede & Co. or other depository or nominee. Common shares acquired pursuant to the
over-subscription privilege will be certificated and share certificates representing these common
shares will be sent directly to Cede & Co. or other depository or nominee. With respect to all
other shareholders, share certificates for all common shares acquired pursuant to the primary
subscription or over-subscription privilege will be mailed promptly after payment for the common
shares subscribed for has cleared.

SAMPLE CALCULATION:

To subscribe for your primary subscription shares please complete line “A” on the card below.

[ ] Shares = [ ] Rights. [ ] Rights divided by [ ] = [ ] primary subscription shares. The
maximum number of primary subscription shares would be [ ]. Fractional shares will be dropped. If
you hold less than [ ] Rights in total, you can subscribe for one common share.

    A.

    [ ]

    /[ ] =

    [ ]

    X

    $[ ]

    =

    $[ ]

    (No. of Rights)

    (No. of shares)

    (Estimated

subscription price)

    (Payment to be
remitted)

Please note that $[ ] is an estimated Subscription Price only. The Subscription Price will be
determined on [ ], the Expiration Date (unless extended) and could be higher or
lower than the estimated Subscription Price depending on changes in the net asset value and the
price of a common share.

To subscribe for any common shares pursuant to the over-subscription privilege please complete line
“B” below.

Please Note: Only Record Date Shareholders who have exercised their primary subscription in full
may apply for common shares pursuant to the over-subscription privilege.

METHOD OF EXERCISE OF RIGHTS:

    By First Class Mail:

    By Express Mail or Overnight

    By Hand:

    Courier:

    [Subscription Agent]

[Address]

[Address]

[Address]

    [Subscription Agent]

[Address]

[Address]

[Address]

    [Subscription Agent]

[Address]

[Address]

[Address]

Confirm by Telephone: [ ]-[  ]-[  ]-[   ]. Delivery to an address other than one of the
addresses listed above will not constitute valid delivery.

These Subscription Rights Are Transferable

Expiration Date ([       ] unless extended)

A-2

PLEASE FILL IN ALL APPLICABLE INFORMATION

    A.

    Primary
Subscription

([ ] Right[s] = [ ]
Share[s])

    (Rights

Exercised)

    ÷

    [ ]

    =

    (No. of
Shares
requested
rounded
down to
nearest
whole
shares)

    x

    $

    (Estimated

Subscription
Price)

    =

    $

    B.

    Over-
Subscription
Privilege

    (No. of
Shares)

    x

    $

    (Estimated

Subscription
Price)

    =

    $

    C.

    Amount of Check
Enclosed (A + B)
(or amount in
Notice of
Guaranteed
Delivery)

    =

    $

    D.

    The following
broker-dealer is
being designated as
having been
instrumental in the
exercise of this
Subscription Right:

    [          ]

Representative Name

_________

    E.

    Sell any remaining

Rights o

    F.

    Sell all of my

Rights o

SECTION 1. TO SUBSCRIBE: I hereby irrevocably subscribe for the number of common shares indicated
as the total of A and B hereon upon the terms and conditions specified in the Prospectus relating
thereto, receipt of which is acknowledged. I hereby agree that if I fail to pay for the common
shares for which I have subscribed (or are deemed to have subscribed for as set forth above), the
Fund may exercise any of the remedies set forth in the Prospectus.

TO SELL: If I have checked either the box on line E or line F, I authorize the sale of Rights by
the Subscription Agent according to the procedures described in the Prospectus.

A-3

Signature(s) of Subscriber(s)/Seller(s)

Address for delivery of shares if other than shown on front

If permanent change of address, check here [    ]

Please give your telephone number:                (       )

Please give your e-mail address:

SECTION 2. TO TRANSFER RIGHTS (except pursuant to E or F above): For value received, ___of the
Rights represented by this Subscription Certificate are assigned to:

    (Print Full Name of Assignee)

    Social Security Number

(Print Full Address)

(Print Full Address)

Signature(s) of Assignor(s)

IMPORTANT: The signature(s) must correspond in every particular, without alteration, with the
name(s) as printed on your Subscription Certificate.

Your Signature must be guaranteed by an Eligible Guarantor Institution as that term is defined
under Rule 17Ad-15 of the Securities Exchange Act of 1934, which may include:

a) a commercial bank or trust company, or

b) a member firm of a domestic stock exchange, or

c) a savings bank or credit union.

Signature

Guaranteed

    By

    (name of Bank or Firm)

    (Signature of Officer and Title)

A-4

Exhibit B

Exhibit (h)(1) to the Registration Statement — Form of Underwriting Agreement

_______________ Shares

HIGHLAND CREDIT STRATEGIES FUND

COMMON SHARES OF BENEFICIAL INTEREST

(Par Value $0.001 Per Share)

UNDERWRITING AGREEMENT

     ____________, ____

[       ]

Ladies and Gentlemen:

     Highland Credit Strategies Fund, a statutory trust organized under the laws of Delaware (the
“Fund”), is a non-diversified closed-end management investment company registered under the
Investment Company Act of 1940, as amended (the “Investment Company Act”). The Fund proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the “Underwriters”)
___________of its common shares of

CORRESP
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July 29, 2011

VIA EDGAR AND E-MAIL

Securities and Exchange Commission

Division of Investment Management

100 F Street, NE

Washington, DC 20549

    Attention:

    Dominic Minore, Esq.

    Richard Pfordte, Esq.

    Re:

     Highland Credit Strategies Fund (the “Trust”)

Pre-Effective Amendment No. 3 to Registration Statement on Form N-2

File Nos. 333-173004 and 811-21869

Dear Mr. Minore:

On July 26, 2011, you provided, via telephone, comments of the staff (the “Staff”) of the
Securities and Exchange Commission (the “Commission”) relating to the Trust’s Pre-Effective
Amendment No. 2 to Registration Statement on Form N-2 filed with the Securities and Exchange
Commission (the “Commission”) on July 15, 2011 (File Nos. 333-173004 and 811-21869) (the
“Registration Statement”).

Please find below the Trust’s responses to the Staff’s comments. For your convenience and in order
to expedite the Staff’s review of the Trust’s responses to the Staff’s comments, the Trust is
supplementally providing to the Staff a copy of relevant portions of the Registration Statement,
which have been marked to indicate the changes from Pre-Effective Amendment No. 2 to the
Registration Statement as filed on July 15, 2011. We have set forth our responses below, and are
filing Pre-Effective Amendment No. 3 to the Registration Statement (“Amendment No. 3”),
which reflects these comments (as applicable), simultaneously with this letter.

For reference purposes, the comments provided during our July 26, 2011 telephone conversation are
reproduced in bold in numerical sequence in this letter, and the corresponding responses of the
Trust are shown below such comments. References to page numbers are to the page numbers of
Amendment No. 3.

Prospectus

    1.

    Outside Front Cover Page — Please clarify that the Trust’s 80% test does not
include investments in equity securities.

    RESPONSE TO COMMENT 1

    Please see pages 2, 9, and 40 of Amendment No. 3.

    2.

    Outside Front Cover Page — In the third to last sentence of the second
paragraph on page 2, please provide information detailing the breakdown of the Trust’s
securities holdings, as of a more recent date than February 28, 2011.

    RESPONSE TO COMMENT 2

    Please see pages 2, 9, and 41 of Amendment No. 3.

    3.

    Summary of Trust Fees and Expenses — In the column heading to the Annual
Expenses table, please revise the parenthetical to state “Includes Leverage Through
Borrowings” or similar language to avoid the implication that the Trust does not use
leverage.

    RESPONSE TO COMMENT 3

    Please see page 37 of Amendment No. 3.

    4.

    Summary of Trust Fees and Expenses — In footnote 5 to the Annual Expenses
table, please update the parenthetical describing the leverage computation to reflect
the correct level of leverage, and also correct the base management fee amount to
reflect the contractual management fee rate.

    RESPONSE TO COMMENT 4

    Please see page 37 of Amendment No. 3.

    5.

    Certain Legal Proceedings — In the disclosure regarding the WaveDivision
Holdings, LLC litigation relating to the Trust’s investment in Broadstripe LLC, please
clarify in the penultimate sentence why the Investment Adviser believes that the Trust
would not be responsible for any share of potential liability in the case, and confirm
whether the Investment Adviser is entitled to indemnification or contribution from the
Trust in the event of any such liability.

    RESPONSE TO COMMENT 5

- 2 -

    Please see page 77 of Amendment No. 3.

    6.

    Certain Legal Proceedings —In the last sentence of the paragraph describing
the bankruptcy-related litigation relating to the Trust’s investment in Broadstripe
LLC, disclose the total amount of the Trust’s investment in Millennium.

    RESPONSE TO COMMENT 6

    Please see page 77 of Amendment No. 3.

    7.

    Anti-Takeover Provisions in the Agreement and Declaration of Trust — In the
last sentence of the last paragraph of this section, clarify whether the material
provisions of the Trust’s Agreement and Declaration of Trust are summarized in the
Prospectus or the Statement of Additional Information. If necessary, expand the
disclosure to ensure that all material provisions are, in fact, summarized therein.

    RESPONSE TO COMMENT 7

    Please see page 87 of Amendment No. 3.

    8.

    Forms of Prospectus Supplement — In the “Summary of Trust Fees and Expenses”
section of each form of prospectus supplement, please remove the word “Trust” from the
second line in the Shareholder Transaction Expenses table to clarify that such fees and
expenses are ultimately borne by the holders of common shares.

    RESPONSE TO COMMENT 8

    Please see pages S-5 and R-6 of Amendment No. 3.

    9.

    Forms of Prospectus Supplement — In the “Use of Proceeds” section of each form
of prospectus supplement, please clarify that the Trust does not plan to increase the
amount of leverage outstanding by issuing debt securities or preferred shares in the
twelve months following an offering. Alternatively, if the Trust does plan to increase
its leverage in this way in the twelve months following an offering, please add a line
item to the fee table to account for such expenses.

    RESPONSE TO COMMENT 9

    Please see pages S-7 and R-8 of Amendment No. 3.

    10.

    Form of Prospectus Supplement — In the “Special Characteristics and Risks of
the Rights Offering” section of the form of prospectus supplement relating

- 3 -

    to a rights
offering, under the “Leverage” heading, please clarify that the expected decrease in
the Trust’s leverage following the completion of an offering may only be a temporary
reduction.

    RESPONSE TO COMMENT 10

    Please see page R-9 of Amendment No. 3.

    11.

    Form of Prospectus Supplement — In the “Special Characteristics and Risks of
the Rights Offering” section of the form of prospectus supplement relating to a rights
offering, please disclose that all expenses relating to a rights offering will be borne
by existing Trust shareholders, whether or not such shareholders participate in the
rights offering.

    RESPONSE TO COMMENT 11

    Please see page R-9 of Amendment No. 3.

Part C: Other Information

    12.

    Item 34 Undertakings — Please add a new undertaking that the Trust will file a
post-effective amendment under Section 8(c) of the Securities Act of 1933 in connection
with any one or more offerings of the Registrant’s common shares (including rights to
purchase the common shares) below net asset value that will result in greater than 15%
dilution, in the aggregate, to existing net asset value per share.

    RESPONSE TO COMMENT 12

    Please see page 6 of Part C of Amendment No. 3.

Exhibit (l): Opinion and Consent of Special Delaware Counsel to the Trust

    13.

    Exhibit (l) —Please supplementally confirm that the Trust will file a firm
opinion and consent of counsel with respect to each take-down offering, and that such
opinion will remove the assumptions relating to due authorization of the securities.

    RESPONSE TO COMMENT 13

    The Trust supplementally confirms that it will undertake to file an updated Opinion
and Consent of Counsel prior to the closing of each offering pursuant to the
Registration Statement. Such Opinion and Consent of Counsel will remove the
assumptions regarding due authorization of the securities, and will be filed via
EDGAR as an automatically effective post-effective amendment prior to the time

- 4 -

    at which investors would be obligated to make a final decision to proceed with a
purchase under the offering.

    14.

    Exhibit (l) — Opinion and Consent of Special Delaware Counsel to the Trust
—On page three of the opinion, please clarify that, in addition to law of the state of
Delaware, the opinion is also made with regard to reported judicial decisions
interpreting the law of the state of Delaware.

    RESPONSE TO COMMENT 14

    Please see page 3 of Exhibit (l) to Amendment No. 3.

    15.

    Exhibit (l) — Opinion and Consent of Special Delaware Counsel to the Trust
—In the “Description of Capital Structure” section of the Prospectus, please include
the disclosure regarding Section 3.8 of the Trust’s Agreement and Declaration of Trust
that currently appears in the paragraph numbered one on page four of the Opinion of
Counsel. Please also consider describing any tax consequences that may result from the
Trustees’ exercise of power pursuant to this provision in the Agreement and Declaration
of Trust.

    RESPONSE TO COMMENT 15

    Please see page 82 of Amendment No. 3.

*       *       *

- 5 -

     The Trust has authorized us to acknowledge on its behalf that (i) it is responsible for the
adequacy and accuracy of the disclosure in the filing; (ii) staff comments or changes to disclosure
in response to staff comments do not foreclose the Commission from taking any action with respect
to the filing; (iii) the action of the Commission or the staff, acting pursuant to delegated
authority, in declaring the filing effective, does not relieve the Trust from its full
responsibility for the adequacy and accuracy of the disclosure in the filing; and (iv) it is the
staff’s view that the Trust may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.

     I hope that the foregoing has been responsive to your comments. If you should have any
questions about this letter or require any further information, please call me at 617-951-7166.
Thank you for your assistance.

    Very truly yours,

    /s/ Laurel C. Neale

    Laurel C. Neale

    cc:

     Gregory D. Sheehan

Michael G. Doherty

Brian Mitts

-  6 -

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July 15, 2011

VIA EDGAR AND E-MAIL

Securities and Exchange Commission

Division of Investment Management

100 F Street, NE

Washington, DC 20549

Attention: Dominic Minore, Esq.

    Re:

    Highland Credit Strategies Fund (the “Trust”)

Pre-Effective Amendment No. 2 to Registration Statement on Form N-2

File Nos. 333-173004 and 811-21869

Dear Mr. Minore:

On June 28, 2011 and July 5, 2011, you provided, via telephone, comments of the staff (the
“Staff”) of the Securities and Exchange Commission (the “Commission”) relating to
the Trust’s Pre-Effective Amendment No. 1 to Registration Statement on Form N-2 filed with the
Securities and Exchange Commission (the “Commission”) on June 10, 2011 (File Nos.
333-173004 and 811-21869) (the “Registration Statement”).

Please find below the Trust’s responses to the Staff’s comments. For your convenience and in order
to expedite the Staff’s review of the Trust’s responses to the Staff’s comments, the Trust is
supplementally providing to the Staff a copy of relevant portions of the Registration Statement,
which have been marked to indicate the changes from Pre-Effective Amendment No. 1 to the
Registration Statement as filed on June 10, 2011. We have set forth our responses below, and are
filing Pre-Effective Amendment No. 2 to the Registration Statement (“Amendment No. 2”),
which reflects these comments (as applicable), simultaneously with this letter.

For reference purposes, the comments provided during our June 28, 2011 and July 5, 2011 telephone
conversations are reproduced in bold in numerical sequence in this letter, and the corresponding
responses of the Trust are shown below such comments. References to page numbers are to the page
numbers of Amendment No. 2.

Prospectus

    1.

    Outside Front Cover Page — Clarify how investing in equities is consistent
with a credit strategy. In particular, please clarify how investments in equities
comply with the Trust’s 80% test.

    RESPONSE TO COMMENT 1

    The Trust has revised the Registration Statement to clarify that its 80% test does
not include investments in equity securities. Please see page 51 of Amendment No.
2. In addition, the Trust supplementally confirms that during the ordinary course of
pursuing its credit-related investment strategy, there are a number of instances in
which the Trust may hold equity securities. An essential part of the Trust’s
investment strategy includes making investments in the securities of distressed
issuers, and such securities will often convert into or be exchanged for equity
securities. In addition, an important component of the Trust’s investment strategy
involves making investments in what the portfolio management team considers to be
the fulcrum security of an issuer (i.e., the security that is most likely to receive
equity in the issuer post-reorganization), in order to gain maximum leverage in the
event of the issuer’s bankruptcy or work-out. In certain instances, the portfolio
management team will determine that the fulcrum security is an equity security, and
in such cases, it may be most advantageous for the Trust to purchase the equity
security of a particular issuer.

    2.

    Outside Front Cover Page — Please consider expanding your definition of the
terms “capital structure arbitrage, pair trades and shorting” to provide even further
clarification for investors.

    RESPONSE TO COMMENT 2

    Please see page 2 of Amendment No. 2.

    3.

    Outside Front Cover Page — File forms of each “related prospectus supplement”
that the Trust intends to deliver with “this prospectus.” Please note that the forms of
prospectus supplement may omit certain information pursuant to Rule 430A under the
Securities Act of 1933, as amended. Please see the form of prospectus supplement filed
by Fifth Street Finance Corp. on June 4, 2010 (File No. 333-166012).

    RESPONSE TO COMMENT 3

    Please see pages S-1 through R-10 of Amendment No. 2.

    4.

    Outside Front Cover Page — The fifth paragraph states that the Trust may offer
its common shares directly to one or more purchasers. Since you have indicated that
the Trust has no current intention to engage in self-

 - 2 -

    underwritten offerings or at-the-market offerings, please describe how such common
shares would be offered directly to one or more purchasers.

    RESPONSE TO COMMENT 4

    While the Trust does not currently intend to engage in self-underwritten offerings
or at-the-market offerings, it may, subject to market and other conditions,
effectuate one or more registered direct private placements, whereby it would sell
registered securities to one or more investors. The Trust has not identified any
particular investor candidates at this time, but would like to preserve the
opportunity to engage in such transactions in the future.

    5.

    Outside Front Cover Page — Please confirm that the text appearing on the
outside front cover page of the prospectus will appear in at least 10-point font.

    RESPONSE TO COMMENT 5

    The Trust supplementally confirms to the Staff that the information appearing on the
outside front cover page of the prospectus will appear in at least 10-point font.

    6.

    Table of Contents — Please re-order the last two sentences of the paragraph
appearing immediately after the table of contents.

    RESPONSE TO COMMENT 6

    Please see page 4 of Amendment No. 2.

    7.

    Summary of Trust Fees and Expenses — Expand footnote (4) to indicate what level
of leverage, as a percentage of net assets, is assumed for purposes of the expense
table. Please also state the current amount of leverage employed by the Trust.

    RESPONSE TO COMMENT 7

    Please see page 37 of Amendment No. 2.

    8.

    Summary of Trust Fees and Expenses — Expand footnote (5) to include the amount
of base management fees as a percentage of net assets, and indicate that the reason the
base management fee will increase when the Trust uses leverage is that the Trust’s
common shareholders bear all of the fees and expenses of the Trust.

    RESPONSE TO COMMENT 8

    Please see page 37 of Amendment No. 2.

 - 3 -

    9.

    Credit Default Swaps — Please confirm that you have considered the derivatives
disclosure issues discussed in the Letter from Barry D. Miller, Associate Director,
Division of Investment Management, SEC to Karrie McMillan, General Counsel, ICI (July
30, 2010), and that your discussion reflects the concerns highlighted therein.

    RESPONSE TO COMMENT 9

    Please see pages 48 and 69 of Amendment No. 2. The Trust supplementally confirms to the
Staff that it has considered the derivatives-related disclosure issues discussed in
the above-referenced letter and the discussion of the Trust’s use of derivatives
reflects the concerns highlighted therein.

    10.

    Credit Default Swaps — We note that the disclosure in the “Derivatives Risk”
Section on page 70 of the Prospectus indicates that the Trust is not limited to the
derivatives transactions described therein. Accordingly, please remove the clause
“Except as described above in ‘Derivatives Risk’” from the beginning of the first
sentence of the second full paragraph on page 49.

    RESPONSE TO COMMENT 10

    Please see page 49 of Amendment No. 2.

    11.

    Credit Default Swaps — Please include on the prospectus cover page the
information in the second full paragraph on page 49.

    RESPONSE TO COMMENT 11

    Please see page 2 of Amendment No. 2.

    12.

    Risks of Investing in Structured Finance Securities — The penultimate sentence
of this paragraph states that “the complex structure of the security may not be fully
understood at the time of investment and may produce unexpected investment results.”
Please clarify whether it is the case that the Investment Adviser may not fully
understand the complex structure of the securities it is selecting for the Trust. If
so, please add a section to the risk disclosure discussing such a risk.

    RESPONSE TO COMMENT 12

    Please see page 72 of Amendment No. 2.

 - 4 -

    13.

    Other Investment Companies — Please expand your disclosure to clarify that the
Trust does not consider investments in other investment companies for purposes of
satisfying the Trust’s 80% asset test.

    RESPONSE TO COMMENT 13

    Please see page 51 of Amendment No. 2.

    14.

    Certain Legal Proceedings — Please clarify the extent of the Trust’s liability
relating to the Broadstripe LLC litigation. In addition, if the Investment Adviser is
subject to liability relating to this matter, please disclose whether the Trust would
be required to indemnify the Investment Adviser for any losses.

    RESPONSE TO COMMENT 14

    Please see page 77 of Amendment No. 2.

    15.

    Description of Capital Structure — In the second paragraph of this section,
please clarify whether the units that may be publicly offered by the Trust will consist
of both common shares and rights. Please revise the final sentence to make clear that
each of the underlying securities within a unit will be registered under the Securities
Act of 1933.

    RESPONSE TO COMMENT 15

    Please see page 81 of Amendment No. 2.

    16.

    Previous Rights Offerings — We note that the Trust previously offered
subscription rights in 2007. Please summarize the Trust’s rights offering history in
the Prospectus, including the following information: (1) dates of previous rights
offerings, (2) dollar amounts of previous rights offerings, (3) how the Trust invested
the proceeds from previous rights offerings, and (4) how long it took the Trust to
invest the proceeds from previous rights offerings.

    RESPONSE TO COMMENT 16

    Please see page 85 of Amendment No. 2.

    17.

    Anti-Takeover Provisions in the Agreement and Declaration of Trust — In the
last sentence of the last paragraph, clarify that the material provisions of the
Trust’s Agreement and Declaration of Trust are nonetheless summarized in the Statement
of Additional Information. If necessary, expand the disclosure to ensure that all
material provisions are, in fact, summarized therein.

 - 5 -

    RESPONSE TO COMMENT 17

    Please see page 87 of Amendment No. 2.

Part C: Other Information

    18.

    Undertakings — Under Item 34, please provide the following two additional
undertakings with regard to rights offerings:

    (1) the registrant undertakes to file a post-effective amendment under Section 8(c)
of the Securities Act of 1933 if it intends to issue rights priced below the shares’
net asset value; and

    (2) if the securities being registered are to be offered to existing shareholders
pursuant to rights, and any securities not taken by shareholders are to be reoffered
to the public, the registrant undertakes to supplement the prospectus, after the
expiration of the subscription period, to set forth the results of the subscription
offer, the transactions by underwriters during the subscription period, the amount
of unsubscribed securities to be purchased by underwriters, and the terms of any
subsequent reoffering thereof. If any public offering by the underwriters of the
securities being registered is to be made on terms differing from those set forth on
the cover page of the prospectus, the registrant further undertakes to file a
post-effective amendment to set forth the terms of such offering.

    Please see Pre-Effective Amendment No. 2 to the Registration Statement filed on June
30, 2011 by Gabelli Equity Trust Inc. (File No.: 333-173819).

    RESPONSE TO COMMENT 18

    Please see page 5 of Part C of Amendment No. 2.

    19.

    Undertakings — Under Item 34, please make an additional undertaking to file a
post-effective amendment to the registration statement, and to suspend any offers or
sales pursuant to the registration statement until such post-effective amendment has
been declared effective under the 1933 Act, in the event the shares of the registrant
are trading below their net asset value and either (i) the registrant receives, or has
been advised by its independent registered accounting firm that it will receive, an
audit report reflecting substantial doubt regarding the registrant’s ability to
continue as a going concern; or (ii) the registrant has concluded that a material
adverse change has occurred in its financial position or results of operations that has
caused the financial statements and other disclosures on the basis of which the
offering would be made to be materially misleading. Please see the Registration
Statement filed on June 27, 2011 by Triangle Capital Corporation (File No.:
333-175160).

 - 6 -

    RESPONSE TO COMMENT 19

    Please see page 5 of Part C of Amendment No. 2.

*     *     *

 - 7 -

     The Trust has authorized us to acknowledge on its behalf that (i) it is responsible for the
adequacy and accuracy of the disclosure in the filing; (ii) staff comments or changes to disclosure
in response to staff comments do not foreclose the Commission from taking any action with respect
to the filing; (iii) the action of the Commission or the staff, acting pursuant to delegated
authority, in declaring the filing effective, does not relieve the Trust from its full
responsibility for the adequacy and accuracy of the disclosure in the filing; and (iv) it is the
staff’s view that the Trust may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.

     I hope that the foregoing has been responsive to your comments. If you should have any
questions about this letter or require any further information, please call me at 617-951-7166.
Thank you for your assistance.

    Very truly yours,

    /s/ Laurel C. Neale

    Laurel C. Neale

    cc:

    Gregory D. Sheehan

Michael G. Doherty

Brian Mitts

 - 8 -

CORRESP
1
filename1.htm

corresp

June 10, 2011

VIA EDGAR AND FACSIMILE

Securities and Exchange Commission

Division of Investment Management

100 F Street, NE

Washington, DC 20549

Attention:Domenic Minore, Esq.

    Re:

    Comment Letter Dated May 4, 2011

Highland Credit Strategies Fund

Registration Statement on Form N-2

File Nos. 333-173004 and 811-21869

Dear Mr. Minore:

On behalf of Highland Credit Strategies Fund (the “Trust”), a Delaware statutory trust,
please find below the Trust’s responses to the comments provided in your letter dated May 4, 2011
(the “Comment Letter”) relating to the Trust’s Registration Statement on Form N-2 filed
with the Securities and Exchange Commission (the “Commission”) on March 23, 2011 (File Nos.
333-173004 and 811-21869) (the “Registration Statement”).

For your convenience and in order to expedite the staff’s review of the Trust’s responses to the
Comment Letter, the Trust is supplementally providing to the staff a copy of relevant portions of
the Registration Statement, which have been marked to indicate the changes from the Registration
Statement as originally filed on March 23, 2011. We have set forth our responses below, and are
filing Pre-Effective Amendment No. 1 to the Registration Statement (“Amendment No. 1”),
which reflects these comments (as applicable), simultaneously with this letter.

For reference purposes, the comments set out in the Comment Letter are reproduced in bold in
numerical sequence in this letter, and the corresponding responses of the Trust are shown below
such comments. References to page numbers are to the page numbers of Amendment No. 1.

Prospectus

    1.

    Outside Front Cover Page — Clarify how investing in equities is consistent
with a credit strategy.

    RESPONSE TO COMMENT 1

    The Trust supplementally advises the staff that, although its primary investment
strategy involves investments in debt securities, the Trust may also take equity
positions in situations where opportunities may develop. The Registration Statement
makes this strategy clear in the Prospectus Summary under “Investment Strategies”
and in the “Investment Strategies” section of the prospectus beginning on page 41.
In addition, the Trust discloses the relevant risks related to investments in equity
securities in the “Principal Risks of the Trust” section of the prospectus beginning
on page 58.

    2.

    Outside Front Cover Page — Provide a plain English version of the phrase
“capital structure arbitrage, pair trades and shorting.”

    RESPONSE TO COMMENT 2

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 2.

    3.

    Outside Front Cover Page — Clarify that, as of February 28, 2011,
approximately 78% of the Trust’s investment portfolio consisted of “junk” securities.

    RESPONSE TO COMMENT 3

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 2.

    4.

    Outside Front Cover Page — If possible, disclose the per share net asset value
of the Trust’s common shares as of a date more current than March 21, 2011.

    RESPONSE TO COMMENT 4

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 2.

    5.

    Outside Front Cover Page — File forms of each “related prospectus supplement”
that the Trust intends to deliver with “this prospectus.” In this regard, expand the
disclosure to make clear that the “related prospectus supplement” and “this prospectus”
will together constitute the prospectus for an offering of the Trust’s securities.

    RESPONSE TO COMMENT 5

    The Trust advises the staff that no offering is presently contemplated, and
therefore no form of prospectus supplement has been prepared at this time. The

- 2 -

    Registration Statement has been revised to make clear that the “related prospectus
supplement” and “this prospectus” will together constitute the prospectus for an
offering of the Trust’s securities, as shown in Annex A. See page 3.

    6.

    Outside Front Cover Page — The fifth paragraph states that the Trust may offer
its common shares directly to one or more purchasers. In your response letter,
describe the Trust’s plans to engage in self-underwritten offerings or at-the-market
offerings.

    RESPONSE TO COMMENT 6

    The Trust supplementally advises the staff that it currently does not have any plans
to engage in self-underwritten offerings or at-the-market offerings.

    7.

    Outside Front Cover Page — In your response letter, confirm that the
information contained in the seventh and eighth paragraphs will appear on the outside
front cover page of the prospectus.

    RESPONSE TO COMMENT 7

    The Trust supplementally confirms to the staff that the information contained in the
seventh and eighth paragraphs will appear on the outside front cover page of the
prospectus.

    8.

    Table of Contents — Delete the last sentence of the paragraph appearing
immediately after the table of contents because it is inconsistent with an obligation
to deliver a current prospectus in connection with sales of securities being registered
by the Trust. As an alternative, disclose that the Trust will amend the prospectus to
disclose any material changes.

    RESPONSE TO COMMENT 8

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 4.

    9.

    About This Prospectus — Clarify that all of the material terms of “any exhibits
and the additional information described under the heading ‘Where You Can Find
Additional Information’” will nonetheless be summarized in the prospectus or applicable
prospectus supplement.

    RESPONSE TO COMMENT 9

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 6.

- 3 -

    10.

    Prospectus Summary — Offerings — Clarify that any offering of securities by a
closed-end investment company that requires shareholder approval must occur, if at all,
within one year after receiving such shareholder approval.

    RESPONSE TO COMMENT 10

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 7.

    11.

    Prospectus Summary — Principal Risks of the Trust — It appears that risk
disclosure should be added to highlight the matters discussed on pages 78 & 79 under
the heading “Certain Legal Proceedings.” Also, in your response letter, please inform
us how the Trust satisfied the filing requirements of section 33 of the Investment
Company Act of 1940.

    RESPONSE TO COMMENT 11

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 18.

    The Trust supplementally advises the staff that the matters described on pages 78
and 79 under the heading “Certain Legal Proceedings” do not fall within the
categories of civil actions requiring filings under Section 33 of the Investment
Company Act of 1940 because neither matter is a civil action brought by a registered
investment company or shareholder thereof, and respectfully directs the staff to SEC
No-Action Letter to Investment Company Institute, released on September 11, 1985.

    12.

    Prospectus Summary — Risks of Investing in High-Yield Securities — Add the
phrase “also known as junk securities” at the end of the risk factor caption.

    RESPONSE TO COMMENT 12

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 12.

    13.

    Prospectus Summary — Risks of Investing in Structured Finance Securities —
Highlight the categories of receivables and other financial assets that will back the
structured finance securities in which the Trust may invest.

    RESPONSE TO COMMENT 13

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 31.

- 4 -

    14.

    Prospectus Summary — Risks of Non-Diversification and Other Focused Strategies
- We note from the penultimate sentence that the “focus of the portfolio in any one
industry or group of industries would subject the Trust to a greater degree of risk
with respect to economic downturns relating to such industry or industries.” It appears
from the Trust’s annual report for the period ended December 31, 2010, that
approximately 24.8% of its portfolio is invested in the securities of issuers that are
part of the healthcare industry. Expand the disclosure to highlight the material risks
of such an investment “focus.” In this regard, discuss in your response letter how the
Board of Trustees will monitor to ensure that the Trust does not violate its
fundamental policy not to invest 25% or more of the value of its total assets in any
single industry or group of industries.

    RESPONSE TO COMMENT 14

    The Trust supplementally advises that staff that, as disclosed on page 5 of the
Trust’s Annual Report to Shareholders for the period ended December 31, 2010, as of
December 31, 2010, approximately 20.4% of the Trust’s portfolio was invested in
securities issued by companies in healthcare industry. In response to this comment,
we have added disclosure to the “Risks of Non-Diversification and Other Focused
Strategies” heading in the “Principal Risks of the Trust” section of the
Registration Statement, as shown in Annex A. See page 33.

    15.

    Offerings — The information appearing on pages 35 & 36, under the “Offerings”
caption, should instead be integrated with the information included in the “Prospectus
Summary” beginning on page 7.

    RESPONSE TO COMMENT 15

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See pages 7 and 35.

    16.

    Summary of Trust Fees and Expenses — Please note that any prospectus supplement
used with any offering from this shelf registration statement should include a fee
table and example that is updated with the most current information known to the Trust.

    RESPONSE TO COMMENT 16

    The Trust acknowledges this comment and confirms that it will comply with this
requirement in any prospectus supplement.

    17.

    Summary of Trust Fees and Expenses — Delete the first paragraph and instead
provide only the information, and in the location, prescribed by General Instruction 1
of Item 3 to Form N-2.

- 5 -

    RESPONSE TO COMMENT 17

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 37.

    18.

    Summary of Trust Fees and Expenses — Delete the “Percentage of Subscription
Price” column heading from the “Shareholder Transaction Expenses” section of the fee
table.

    RESPONSE TO COMMENT 18

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 37.

    19.

    Summary of Trust Fees and Expenses — Delete the phrase “by the Trust/” from the
second line item appearing under the “Shareholder Transaction Expenses” section of the
fee table.

    RESPONSE TO COMMENT 19

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 37.

    20.

    Summary of Trust Fees and Expenses — We note the absence of the Acquired Fund
Fees & Expenses line item from the Trust’s fee table. Please explain in your response
letter the reason for its absence.

    RESPONSE TO COMMENT 20

    The Trust supplementally notes that “Acquired Fund Fees & Expenses” accounts for
less than 0.01% of average net assets. Accordingly, it has added a footnote to
“Other Expenses” disclosing this information, as shown in Annex A. See page
37.

    21.

    Summary of Trust Fees and Expenses — The footnotes should be presented in
non-italic regular type.

    RESPONSE TO COMMENT 21

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See pages 37 and 38.

    22.

    Summary of Trust Fees and Expenses — Expand footnote (5) to disclose that,
because the base management fee is based on the Trust’s gross assets, when the Trust
uses leverage, the base management fee as a percentage of net assets attributable to
common stock will increase.

- 6 -

    RESPONSE TO COMMENT 22

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 37.

    23.

    Summary of Trust Fees and Expenses — The interest, dividends and other costs of
short selling should be presented as a separate line item in the “Annual Expenses”
section of the fee table whenever such costs are expected to exceed five basis points.

    RESPONSE TO COMMENT 23

    The Trust supplementally notes that the interest, dividends and other costs of short
selling account for less than 0.05% of average net assets.

    24.

    Financial Highlights — In the second sentence, replace the phrase “is derived
from the Trust’s financial statements that were” with the phrase “in the table was.”
See General Instruction 8. to Item 4.1 of Form N-2.

    RESPONSE TO COMMENT 24

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 38.

    25.

    Financial Highlights — Disclose that the Trust’s performance has been enhanced
by the existence of the voluntary waiver of fees and expenses which may not continue
into the future.

    RESPONSE TO COMMENT 25

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 38.

    26.

    Plan of Distribution — Expand the disclosure to indicate the extent to which
the Trust’s common shareholders will indirectly bear all of the various expenses
incurred in connection with all of the distribution activities described therein.

    RESPONSE TO COMMENT 26

    The Registration Statement has been revised in response to this comment, as shown in
Annex A. See page 40.

    27.

    Plan of Distribution — Please confirm to the staff in your response letter that
the Trust will submit any underwritten offering to the NASD for its prior approval of
the underwriting terms.

- 7 -

    RESPONSE TO COMMENT 27

    The Trust supplementally confirms that it or a principal underwriter will submit any
underwritten offering to FINRA for its prior approval of the underwriting terms.

    28.

    Credit Default Swaps — Expand the discussion to highlight the risks of selling
credit default swaps. Disclose whether the Trust will establish a segregated account to
cover each credit default swap and whether the Trust’s credit default swap activities
could expose it to potentially unlimited losses. Identify the maximum percentage of
Fund assets that may be allocated to credit default swaps and all other derivatives and
indicate whether the Fund may use derivatives for speculative purposes. See generally
Letter from Barry D. Miller, Associate Director, Division of Investment Management, SEC
to Karrie McMillan, General Counsel, ICI (July 30, 2010).

    RESPONSE TO COMMENT 28

    The Registration Statement has been revised
in response to this comment, as shown in Annex A. See page 49.

    29.

    Other Investment Companies — Clarify whether investing in other investment
companies, including ETFs, is a principal investment strategy of the Trust.

    RESPONSE TO COMMENT 29

    The Registration Statement has been revised
in response to this comment, as shown in Annex A. See page 51.

    30.

    Other Investment Companies — Clarify that, for purposes of satisfying the
Trust’s 80% asset test, each investment company in which the Trust invests will have a
policy to invest at least 80% of its assets in credit obligations.

    RESPONSE TO COMMENT 30

    The Trust respectfully advises the staff that the Trust’s 80% test does not require
that each investment company in which the Trust invests will have a policy to invest
at least 80% of its assets in credit obligations, and accordingly, the proposed
disclosure would not be accurate as it pertains to the Tr

May  4, 2011

Laurie A. Churchill , Esq.
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA  02199- 3600

Re: Highland Credit Strategies Fund (the “Trust”)
 Registration Statement on Form N -2
 File Numbers 333 -173004; 811- 21869

Dear M s. Churchill :

We have reviewed the registration statement referenced above and have the following comments.
Prospectus
 Outside Front Cover Page
Clarify how investing in equities is consistent with a credit strategy.
 Provide a plain English version of the phrase “capital structure arbitrage, pair trades and shorting.”
 Clarify that, as of February 28, 2011, approximately 78% of the Trust’s investment portfolio consisted of “junk” securities.
 If possible, disclose the per share net a sset value of the Trust’s common shares as of a
date more current than March 21, 2011.
 File forms of each “related prospectus supplement ” that the Trust intends to deliver with
“this  prospectus .”  In this regard, expand the disclosure to make clear that the “related
prospectus supplement” and “this prospectus” will together constitute the prospectus for an offering of the Trust’s securities.

Laurie A. Churchill, Esq.
Page  2
 The fifth paragraph states that the Trust may offer its  common shares directly to one or
more purchasers.  In your response letter, describe the Trust’s plans to engage in self -
underwritten offerings or at -the-market offerings.
 In your response letter, confirm that the information contained in the seventh and eighth paragraphs will appear on the outside front cover page of the prospectus .

Table of Contents
Delete the last sentence of the paragraph appearing immediately after the table of
contents because it is inconsistent with an  obligation to deliver a cur rent prospectus  in
connection with sales of securities being registered by the Trust .  As an alternative,
disclose that the Trust will amend the prospectus t o disclose any material changes.

About This Prospectus
Clarify that all of the material terms of “any exhibits and the additional information
described under the heading…’Where You Can Find Additional Information’ ” will
nonetheless be summarized in the prospectus or applicable prospectus supplement .

 Prospectus Summary
 Offerings
Clarify that any offering of securities by a closed -end investment company that requires
shareholder approval must occur, if at all, within one year after receiving such
shareholder approval.
 Princip al Risks of the Trust
It appears that risk disclo sure should be added to highlight the matters discussed on pages
78 &  79 under the heading “Certain Legal Proceeding s.”  Also, in your response letter,
please inform us how the Trust satisfied the filing requirements of section 33 of the
Investment Company Act of 1940.
 Risks of Investing in High- Yield Securities
Add the phrase “also known as junk securities” at the end of the risk factor caption.

 Risks of Investing in Structured Finance Securities
Highlight the categories of receivables and other financial assets that will back the
structured finance securities in which the Trust may invest.

Laurie A. Churchill, Esq.
Page  3

 Risks of Non- Diversification and Other Focused Strategies
We note from the penultimate sentence that the “focus of the portfolio in any one
industry or group of industries would subj ect the Trust to a greater degree of risk with
respect to economic downturns relating to such industry or industries.”  It appears from
the Trust’s annual report for the period ended December 31, 2010, that approximately 24.8% of its portfolio is invested in the securities of issuers that are part of the healthcare industry.  Expand the disclos ure to highlight the material risks of such an investment
“focus.”  In this regard, discuss in your response letter how the Board of Trustees will monitor to ensure t hat the Trust does not violate its fundamental policy not to invest 25%
or more of the value of its total assets in any single industry or group of industries.

Offerings
The information appearing on pages 35 & 36, unde r the “Offerings” caption , should
instead be integrated with the information included in the “Prospectus Summary”
beginning on page 7.

Summary of Trust Fees and Expenses
Please note that any prospectus supplement used with any offering from this shelf
registration statement should include a fee table and example that is updated with the most current information known to the Trust.    Delete the first paragraph and instead provide only the information, and in the location, prescribed by General Instruction 1 of Item 3 to Form N -2.
 Delete the “Percentage of Subscription Price” column heading from the “Shareholder Transaction Expenses” section of the fee table.
 Delete the p hrase “by the Trust/” from the second line item appearing under the
“Shareholder Transaction Expenses” section of the fee table.
 We note the absence of the Acquired Fund Fees & Expenses line item from the Trust’s fee table.  Please explain in your respons e letter the reason for its absence.
 The footnotes should be presented in non- italic regular type.
 Expand footnote (5) to disclose that, because the base management fee is based on the  Trust’s gross assets, when the Trust uses leverage, the base manage ment fee as a
percentage of net assets attributable to common stock will increase
 The interest, dividends and other costs of short selling should be presented as a separ ate
line item in the “Annual Expenses” section of the fee table whenever  such costs ar e
expected to exceed five basis points.

Laurie A. Churchill, Esq.
Page  4

 Financial Highlights
In the second sentence, replace the phrase “is derived from the Trust’s financial
statements that were” with the phrase “in the table was.”  See  General Instruction 8. to
Item 4.1 of Form N -2.
 Disclose that the Trust’s performance has been enhanced by the existence of the voluntary waiver of fees and expenses which may not continue into the future.

Plan of Distribution
Expand the disclosure to indicate the extent to which the Trust’s common shareholders
will indirectly bear all of the various expenses incurred in connection with all of the
distribution activities described therein.

Please confirm to the staff in your response letter that the Trust will submit any
underwritten offering to the NASD for its prior approval of the underwriting terms .

 Credit Default Swaps
Expand the disc ussion to highlight the risks of selling credit default swaps.  Disclose
whether the Trust will establish a segregated account to cove r each credit default swap
and whether the Trust ’s credit default swap activities could expose  it to potentially
unlimited losses. Identify the maximum percentage of Fund assets that may be allocated
to credit default swaps and all other derivatives and in dicate whether the Fund may use
derivatives for speculative purposes.  See generally Letter from Barry D. Miller,
Associate Director, Division of Investment Management, SEC to Karrie McMillan,
General Counsel, ICI (July 30, 2010).

 Other Investment Companies
Clarify whether investing in other investment companies, including ETFs, is a principal
investment strategy of the Trust.    Clarify that, for purposes of satisfying the Trust’s 80% asset test, each investment company in which the Trust invests will h ave a policy to invest at least 80% of its assets
in credit obligations.

Valuations
Specify in which bullet valuation category swaps and other derivatives fall.

Laurie A. Churchill, Esq.
Page  5
 Description of Capital Structure
Clarify whether units, as well as their constituent securities, and preferred shares will be publicly offered by the Trust.  If they will be publicly offered by the Trust, also disclose when they will be registered under the Securities Act of 1933.

Subsc ription Rights
In your response letter, confirm that each subscription rights offering will satisfy the
requirements of section 23(b) of the Investment Company Act of 1940.
 Include risk disclos ure about the potential negative consequences of the possibility  of
multiple rights offerings  including, among other things, the dilutive impact to NAV and
voting  and the potential impact of market overhang on the price of the Trust’s common
stock  See generally Investment Company Act Release No. 9932 (Sept. 15, 1977) .
 In your response letter, confirm that the subscription rights offerings will entitle the Trust’s record date shareholders at the time of any transferable subscription rights
offering to purchase one new share for every three rights held.

Disclose, if true,  that the Trust’s common shareholders will indirectly bear all of the
expenses of the subscription rights offer ings, regardless of whether the Trust’s common
stockholders exercise any subscription rights .

Statement of Additional Information
 Anti-Takeover Provisions in the Agreement and Declaration of Trust
In the last sentence of the last paragraph clarify that the material provisions of the Trust’s
Agreement and Declaration of Trust are nonetheless summarized in the Statement of Additi onal Information.  If necessary, expand the disclosure to ensure that all material
provisions are, in fact, summarized therein.

Financial Statements
Our accounting staff will contact you directly and provide you with their financial
statement and other accounting -related comments.
 In your response letter, discuss the Trust’s plans to update the  financial statements
incorporated by reference into the SAI during the shelf registration o ffering period.

 Exhibits
Please file as an exhibit the legality of shares opinion, and related consent of counsel,
with your next pre -effective amendment.   In this regard, it appears that it may be
necessary for the Trust to undertake to file an unqualified legality of shares opinion, and

Laurie A. Churchill, Esq.
Page  6
related consent of counsel, in a post -effective amendment with each takedown from this
shelf registration statement.

 Closing
We note that portions of the filing are incomplete.  We may have additional comments on
such portions when you complete them in a pre -effective amen dment, on disclosures
made in response to this letter, on information supplied supplementally, or on exhibits added in any pre -effective amendments.
 Whenever a comment is made in one location, it is considered applicable to all similar disclosure appearing elsewhere in the registration statement.
 Response to this letter should be in the form of a pre -effective amendment filed pursuant
to Rule 472 under the Securities Act.  The pre- effective amendment filing should be
accompanied by a supplemental letter that includes your responses to each of these comments.  Where no change will be made in the filing in response to a comment, please
indicate this fact in a supplemental letter and briefly state the basis for your position.
 Please advise us if you  have submitted or expect to submit an exemptive application or
no-action request in connection with your registration statement.
 You should review and comply with all applicable requirements of the federal securities laws in connection with the preparati on and distribution of a preliminary prospectus.
 We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that they have provided all information investors require for an informed decision.  Since the Trust and its management are in possession of all facts relating to the Trust’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
 In the event the Trust requests acceleration of t he effective date of the pending
registration statement, it should furnish a letter, at the time of such request, acknowledging that

• the Trust is responsible for the adequacy and accuracy of the disclosure in
the filing;
• should the Commission or the sta ff, acting pursuant to delegated authority,
declare the filing effective, it does not foreclose the Commission from
taking any action with respect to the filing;
• the action of the Commission or the staff, acting pursuant to delegated
authority, in declarin g the filing effective, does not relieve the Trust from
its full responsibility for the adequacy and accuracy of the disclosure in
the filing; and

Laurie A. Churchill, Esq.
Page  7
• the Trust may not assert this action as a defense in any proceeding
initiated by the Commission or any person  under the federal securities
laws of the United States.

In addition, please be advised that the Division of Enforcement has access to all information you provide to the staff of the Division of Investment Management in connection with our review of your filing or in response to our comments on your filing.
 We will consider a written request for acceleration of the effective date of the registration statement as confirmation of the fact that those requesting acceleration are aware of their respective resp onsibilities.
 Should you have any questions regarding this letter, please contact me at (202) 551- 6964.
       Sincerely,
        Dominic Minore
      Senior Counsel

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HIGHLAND CREDIT STRATEGIES FUND

NexBank Tower

13455 Noel Road, Suite 800

Dallas, Texas 75240

VIA EDGAR

March 3, 2009

Securities and Exchange Commission

Division of Investment Management

100 F Street, NE

Washington, D.C. 20549

    Re:

    Highland Credit Strategies Fund (the “Fund”) (File Nos. 333-147121 and 811-21869)

Registration Statement on Form N-14 of the Fund (filed December 24, 2008, as amended

March 2, 2009 and March 3, 2009) (File No. 333-156464)

Ladies and Gentlemen:

     Pursuant to Rule 461 under the Securities Act of 1933, as amended, the undersigned hereby
requests that the effective date for its Registration Statement on Form N-14 referenced above be
accelerated so that it will become effective by 4:00 p.m. Washington, D.C. time on March 3, 2009 or
as soon as practicable thereafter.

     We acknowledge the following on behalf of the Fund: (i) the Fund is responsible for the
adequacy and accuracy of the disclosure in the filing; (ii) Staff comments or changes to disclosure
in response to such comments in the filings reviewed by the Staff do not foreclose the SEC from
taking any action with respect to the filing; and (iii) the Fund may not assert Staff comments as a
defense in any proceeding initiated by the SEC or any person under the federal securities laws of
the United States. As indicated in the SEC’s June 24, 2004 release regarding the public release of
comment letters and responses, you are requesting such acknowledgements from all companies whose
filings are being reviewed and this request and these acknowledgements should not be construed as
suggesting that there is an inquiry or investigation or other matter involving the Fund.

     Please direct any questions concerning this request for accelerated effectiveness to Alexandra
Oprescu of Ropes & Gray LLP at (415) 315-2334.

    Very truly yours,

    HIGHLAND CREDIT STRATEGIES FUND

    By:

Name:

    /s/ M. Jason Blackburn

M. Jason Blackburn

    Title:

    Secretary

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    ROPES & GRAY LLP

ONE EMBARCADERO CENTER, SUITE 2200

SAN FRANCISCO, CA 94111-3711

WWW.ROPESGRAY.COM

Alexandra Oprescu

415-315-2334

415-315-4870 fax

alexandra.oprescu@ropesgray.com

February
25, 2009

U.S. Securities and Exchange Commission

Division of Investment Management

100 F Street, N.E.

Washington, D.C. 20549

Attention: Mr. Kevin Rupert

                 Mr. Dominic Minore

VIA EDGAR

    Re:

    Registrant:

    Highland Credit Strategies Fund

    File Nos.:

    333-156464

    Filing Type:

    N-14

Dear Mr. Rupert and Mr. Minore:

     Per your request, please find below our responses on behalf of Highland Credit Strategies Fund
(the “Acquiring Fund”) to the Securities and Exchange Commission (the “SEC”) staff’s (the “Staff”)
comments on the January 30, 2009 correspondence filing relating to the Fund’s Registration
Statement on Form N-14, which was filed on December 24, 2008. The Registration Statement was filed
in connection with the merger of Highland Distressed Opportunities, Inc. (the “Acquired Fund”, and
together with the Acquiring Fund, the “Funds”) into Acquiring Fund. Messrs. Rupert and Minore
provided their comments in phone conversations on Thursday
February 19, 2009 and Mr. Minore provided additional comments in
a phone conversations on Monday, February 23, 2009 and Tuesday,
February 24, 2009. Each one of your
comments is repeated below, followed by the Acquiring Fund’s response. References to page numbers
are to the N-14, unless otherwise indicated.

General

    1.

    Comment. Acknowledge in your response letter that the Staff has not approved or
disapproved the Funds’ fair value policies and its disclosure in relation to FAS 157.

    Response. The Funds hereby acknowledge that the Staff has not approved or
disapproved the Funds’ fair value policies and its disclosure in relation to FAS
157.

    2.

    Comment. Confirm in your response letter that all material contracts have been
disclosed in the Registration Statement and acknowledge that the Acquiring Fund may
have to file a post-effective amendment should the Acquiring Fund enter into another
material contract before the vote is obtained.

    Response. The Acquiring Fund hereby confirms that all material contracts have been
disclosed in the Registration Statement and acknowledges that the Acquiring Fund may
have to file a post-effective amendment should the Acquiring Fund enter into another
material contract before the vote is obtained.

    3.

    Comment. In connection with your response to Comment 10 in the prior comments,
acknowledge that in the event of a resolicitation of proxies the Acquiring Fund will
file a post-effective amendment.

    Response. The Acquiring Fund acknowledges that it will file a post-effective
amendment in connection with a resolicitation of proxies, should one become
necessary.

Questions & Answers – Approval of Registration of the Acquired Fund

    4.

    Comment. In the first sentence of the second paragraph under the answer to the
first question, the references to the Acquired and Acquiring Funds are inverted, please
correct. Include a sentence addressing that the Acquiring Fund does not expect any
material change in its portfolio holdings after the merger is consummated other than in
ordinary course of portfolio management.

    Response. The requested changes have been made.

Prospectus/Proxy Statement

    5.

    Comment. On page 2,1 update the amount of undistributed
income as of a more recent date.

    Response.       The requested change has been made.

    6.

    Comment. On page 14, repeat the disclosure that the Acquiring Fund
expects to obtain consent from The Bank of Nova Scotia.

    Response. The requested change has been made.

    7.

    Comment. On page 19, indicate the Acquiring Fund may enter into repurchase
agreements up to a maximum of 33 1/3% of its total assets.

    Response. The requested change has been made.

    8.

    Comment. On page 19, indicate there is no percentage limitation on the
Acquiring Fund’s investments in credit default swaps.

    Response. The requested change has been made.

    1

    Page numbers refer to the pages of the prospectus/proxy
statement.

2

    9.

    Comment. On page 22, include a statement that management expects that the
values of Acquired Fund assets that are fair valued will not change as a result of the
application of the Acquiring Fund’s fair valuation procedures. Also include a
statement that the Acquiring Fund’s Board is not required to consider valuation
provided by independent valuation firm.

    Response. The requested changes have been made.

    10.

    Comment. On page 26, clarify that any amounts waived or reimbursed are not
subject to recoupment in the footnote to the fee table.

    Response. The requested change has been made.

    11.

    Comment. On page 27, in the Example indicate that it is the percentage of the
Acquiring Fund’s assets represented by leverage that is assumed to remain constant.

    Response. The requested change has been made.

    12.

    Comment. On page 42, update the Acquiring Fund’s outstanding borrowings as of a
more recent date.

    Response. The requested change has been made.

    13.

    Comment. On pages 42-43, in the description of the Acquiring Fund’s credit
facility, disclose whether the Acquiring Fund will have 300% asset coverage immediately
following the Reorganization.

    Response. The requested change has been made.

    14.

    Comment. On page 53, add Selected Financial Data for the Acquiring Fund.

    Response. The requested changes have been made.

    15.

    Comment. On page 65, update the information provided as of a more recent date.

    Response. The requested change has been made.

    16.

    Comment. On page 71, clarify that the same entity is the adviser for both
Funds.

    Response. The requested change has been made.

    17.

    Comment. Add the table required by Item 4.3 of Form N-2 to both Funds.

    Response. The requested change has been made.

    18.

    Comment. Confirm in the response letter that current
yield for the Funds does not represent return of capital.

    Response. The Funds hereby confirm that current yield
does not represent return of capital.

3

Appendix A – Agreement and Plan of Merger:

    19.

    Comment. On Page A-11-12 remove the sentences indicating that the receipt of a
tax opinion cannot be waived.

    Response. The requested changes have been made.

    20.

    Comment. On page A-16, revise the “Waiver” provision to indicate that the Board
of each Fund in consultation with counsel must determine that each condition waived is
not material under the circumstances.

    Response. The provision has been revised to indicate that the Board will have
determined, in consultation with counsel, that the waiver will not have made the
prospectus/proxy statement, as supplemented, materially misleading.

Statement of Additional Information (“SAI”)

    21.

    Comment. On page 44, please change the last sentence in the first paragraph
under “Pro Forma Financial Statements” to reflect that information is provided for a
twelve month period.

    Response. The requested change has been made.

    22.

    Comment. In the Pro Forma Statement of Operations please rewrite the footnote
for Professional fees to reflect what, aside from duplicative expenses, the adjustment
reflects.

    Response. The requested changes have been made.

Exhibit 11 – Legality of Shares Opinion

    23.

    Comment. Please define the term “Shareholder” in the opinion.

    Response. The requested change has been made.

    24.

    Comment. On page 2, in the carryover paragraph in (ii), counsel cannot make the
assumptions in the parenthetical “(including, without limitation, the due adoption of
the Plan and the Authorizing Resolutions by the Trustees prior to the execution of the
Plan and the first issuance of Shares pursuant thereto)” because counsel must opine on
the issuance of shares. Revise the opinion accordingly.

    Response. The requested change has been made.

    25.

    Comment. On page 2, revise the fourth-to-last sentence beginning “We have not
reviewed any documents other than those identified above in connection with this
opinion, and we have . . .” to make clear that counsel has reviewed all documents it
deems necessary to render the legal opinion.

    Response. The requested change has been made.

    26.

    Comment. Include in the prospectus/proxy statement a statement regarding
Section 3.8 and its effect on the non-assessability of shares appearing on page 3 of
the legal opinion or confirm such a statement is already included.

    Response. The Acquiring Fund hereby confirms that a summary of the provision appears
on page 40 of the prospectus/proxy statement.

     We acknowledge the following on behalf of the Acquiring Fund: (i) the Acquiring Fund is
responsible for the adequacy and accuracy of the disclosure in the filing; (ii) Staff comments or
changes to disclosure in response to such comments in the filings reviewed by the Staff do not
foreclose the SEC from taking any action with respect to the filing; and (iii) the Acquiring Fund
may not assert Staff comments as a defense in any proceeding initiated by the SEC or any person
under the federal securities laws of the United States. As indicated in the SEC’s June 24, 2004
release regarding the public release of comment letters and responses, you are requesting such
acknowledgements from all companies whose filings are being reviewed and this request and these
acknowledgements should not be construed as suggesting that there is an inquiry or investigation or
other matter involving the Acquiring Fund.

          If you have any questions or require any clarification concerning the foregoing, please call
me at 415-315-2334.

     Very truly yours,

/s/Alexandra Oprescu

Alexandra Oprescu

         cc:

    M. Jason Blackburn

Michael Doherty, Esq.

Michael Szkodzinski, Esq.

4

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    ROPES & GRAY LLP

ONE EMBARCADERO CENTER, SUITE 2200

SAN FRANCISCO, CA 94111-3711

WWW.ROPESGRAY.COM

    Alexandra Oprescu

415-315-2334

415-315-4870 fax

alexandra.oprescu@ropesgray.com

January 30, 2009

U.S. Securities and Exchange Commission

Division of Investment Management

901 E Street, N.W.

Washington, D.C. 20549-0504

Attention: Mr. Kevin Rupert

 Mr. Dominic Minore

VIA EDGAR

    Re:

    Registrant:
File Nos.:
Filing Type:

    Highland Credit Strategies Fund
333-156464
N-14

Dear Mr. Rupert and Mr. Minore:

     Per your request, please find below our responses on behalf of Highland Credit Strategies Fund
(the “Acquiring Fund”) to the Securities and Exchange Commission (the “SEC”) staff’s (the “Staff”)
comments on the Fund’s Registration Statement on Form N-14 filed on December 24, 2008. The
Registration Statement was filed in connection with the merger of Highland Distressed
Opportunities, Inc. (the “Acquired Fund”) into Acquiring Fund. Mr. Rupert provided his comments in
phone conversations on Thursday, January 22, 2009 and Wednesday, January 28, 2009. Mr. Minore
provided his comments in phone conversations on Friday, January 23, 2009 and Wednesday, January 28,
2009. Each one of your comments is repeated below, followed by the Acquiring Fund’s response.
References to page numbers are to the N-14, unless otherwise indicated.

General

    1.

    Comment. Explain in your response letter why the merger sub is not included as
a co-registrant, why it will not be registered as an investment company and how the
triangular merger structure is consistent with Section 12(d)(1) of the Investment
Company Act of 1940, as amended (the “1940 Act”).

    Response. The merger sub is not a co-registrant because it will be formed only to
effectuate the merger shortly before the merger and will be liquidated shortly after
the merger. The merger sub will hold no other securities nor engage in any other
activities. In addition, no securities of the merger sub, which will be a shell
until the time of the reorganization, are being offered in the reorganization.

    We note that although the merger sub will not be registered as an investment
company, subject to further discussions with the Staff on this topic, merger sub
proposes to file an election to be regulated as a business development company
(“BDC”), which is discussed in more detail below in response to Comment 5. We also
note that a registration statement on Form N-14 for a recent similarly structured
merger was declared effective by the SEC and in that reorganization the merger sub
did not register as an investment company or register its shares as a co-registrant.
See Seligman Municipal Fund Series, Inc.; SEC Accession No.
0001193125-08-217602.1

    Lastly, we believe that the triangular merger structure is consistent to Section
12(d)(1) of the 1940 Act. First, the Acquiring Fund and the merger sub should be
permitted to rely on Section 12(d)(1)(D)’s exemption from Section 12(d)(1)(A)’s
percentage investment limitations because the Acquiring Fund would acquire its
interest in the merger sub pursuant to a plan of reorganization that is not intended
to evade the restrictions of Section 12(d)(1). As discussed above, the only purpose
of the merger sub’s short existence is to effectuate the merger. Second, Section
12(d)(1)(A)(i) by its terms prohibits the acquisition of certain securities,
not the holding of the securities. In this case the Acquiring Fund would
acquire the shares of the merger sub before it elected to be regulated as a BDC and
before it would acquire the holdings of the Acquired Fund. By analogy, if a
registered investment company’s interest in another investment company increased
from less than 3% to above 3% because of redemptions by other shareholders, Section
12(d)(1)(A)(i) would not be violated in the absence of further
acquisitions.2 We note also that two of the main concerns underlying the
prohibitions of Section 12(d)(1)(A)(i) — the possibility of pooled investment
vehicles unduly influencing investment companies through the threat of large
redemptions and the layering and duplication of costs to investors — are not
present in the Acquired Fund’s case. Because the merger sub will be liquidated
within a short time after the merger, neither the threat of large redemptions nor
concerns about layering and duplication of fees would be present.

    1

    Although it is currently contemplated that merger sub
will elect to be regulated as a BDC, it is not clear to us that given the
transitory nature of merger sub and the economic realities of the transaction
that merger sub should be required to register as an investment company or
elect to be regulated as a BDC. For example, in the Seligman transaction
described above, the transitory merger sub did not register as an investment
company. We would appreciate the opportunity to further discuss this issue with
the Staff.

    2

    In connection with the initial public,
offering of another registrant we discussed with a member of the Staff our view
that by its terms Section 12(d)(1)(A) prohibits the “acquisition,” but not the
“holding,” of securities of other investment companies, and in that context the
Staff agreed with our position.

2

    2.

    Comment. Explain in your response letter whether use of the merger sub affects
the tax-free nature of the reorganization, especially if the merger sub is not
registered as an investment company.

    Response. The reorganization, as currently described in the prospectus/proxy
statement, is expected to be tax-free for U.S. federal income tax purposes under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”).
The merger sub will be a single member unincorporated entity (in this case a
Delaware limited liability company) and will not “check the box” under Treasury
Regulation § 301.7701-3 to be classified as an association that is taxed as a
corporation for U.S. federal income tax purposes. Thus, by default under Treasury
Regulation § 301.7701-3(b)(1)(ii), the merger sub will be disregarded as an entity
separate from its sole owner (the Acquiring Fund) for U.S. federal income tax
purposes (a “disregarded entity”). The fact that the merger sub will not be
registered as an investment company under the 1940 Act does not impact this tax
classification.

    Because the merger sub is a disregarded entity, upon the closing of the merger with
the Acquired Fund, for U.S. federal income tax purposes, the Acquired Fund will
effectively be treated as having transferred its assets and liabilities directly to
the Acquiring Fund in exchange for shares of Acquiring Fund, and the Acquiring Fund
will be treated as the direct tax owner of the Acquired Fund’s transferred assets
and liabilities. Hence, the liquidation of the merger sub into its parent, the
Acquiring Fund, immediately following the statutory merger will be disregarded for
U.S. federal income tax purposes because it will not change the deemed tax owner of
the Acquired Fund’s former assets and liabilities (namely, the Acquiring Fund).
Based on the foregoing, we expect the Reorganization to qualify as a tax-free
reorganization as a statutory merger under Section 368(a)(1)(A) of the Code (and
related Treas. Reg. § 1.368-2(b)(1)(ii) (defining statutory merger)) and/or as an
asset acquisition under Section 368(a)(1)(C) of the Code.

    3.

    Comment. Explain in your response letter whether the findings required by Rule
17a-8 under the 1940 Act should be made with respect to the merger sub. If the
Acquiring Fund believes it should not, provide an explanation in your response letter.
If the Acquiring Fund believes it should, include the findings in the Registration
Statement.

    Response. The Acquiring Fund does not believe that the findings required by Rule
17a-8 under the 1940 Act should be made with respect to the merger sub. As
discussed above, the merger sub will have a short existence and no assets until the
effective time of the merger. Furthermore, the sole member of the merger sub, which
will be formed as a Delaware limited liability company, will be the Acquiring Fund,
and arguably, indirectly the Acquiring Fund’s shareholders. The 17a-8 findings have
already been made with respect to the Acquiring Fund’s shareholders and therefore no
separate findings are necessary for the merger sub.

3

    4.

    Comment. Provide more disclosure in the Registration Statement that merger sub
will elect to be regulated as a BDC. Explain in your response letter how merger sub
expects to meet the applicable BDC requirements, including the requirement that a BDC
register its shares under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Include a discussion of the forms necessary to accomplish this.

    Response. Disclosure has been added on the first page of the prospectus/proxy
statement and pages 6 and 23, although, as noted above, we would like to further
discuss the need for registration with the Staff. In order to elect to be treated
as a BDC, the merger sub would first register its limited liability company
interests with the SEC under the Exchange Act on Form 10-12G (Initial general form
for registration of a class of securities pursuant to section 12(g)). Subsequently,
the merger sub would file Form N-54A (Notification of election by business
development companies) to elect to be regulated as a BDC. In addition, we have been
informed by Highland Capital Management, L.P., the Acquired Fund’s investment
adviser, that the acquisition by the merger sub of Acquired Fund’s assets will
comply with the requirements of Section 55 of the 1940 Act.

    5.

    Comment. Explain in your response letter how the merger sub intends to withdraw
its election to be a BDC upon liquidation and obtain the requisite shareholder
approval, including the forms it will need to file.

    Response. The sole member of the merger sub will be the Acquiring Fund, which will,
by written consent, approve the withdrawal of the merger sub’s election to be
regulated as a BDC. After the merger sub’s liquidation pursuant to the Agreement
and Plan of Merger and Liquidation, the merger sub would file a Form N-54C
(Notification of withdrawal by business development companies) and a Form 15-12G
(Notice of termination of registration of a class of securities under Section
12(g)).

Shareholder Letter to Prospectus/Proxy Statement

    6.

    Comment. In the second paragraph of the Shareholder Letter, revise the language
to indicate that merger sub will not survive for more than a day or state if it will so
survive.

    Response. The requested change has been made.

Questions & Answers — Approval of Registration of the Acquired Fund

    7.

    Comment. In response to the first question, include a brief explanation that
the Acquiring Fund is not a BDC and highlight the differences between a closed-end
investment company and a BDC, such as that operations will be more limited in scope.

    Response. The requested change has been made.

4

    8.

    Comment. In response to the third question, update the portfolio composition
information as of 12/31/2008.

    Response. The requested change has been made.

    9.

    Comment. In response to the sixth question, include a statement that there is
no assurance that the yield for the Acquiring Fund will continue to be higher in future
periods.

    Response. The comment has been addressed by stating that there is no guarantee that
the Acquiring Fund’s yield will continue at its current levels, and may decline.

    10.

    Comment. In response to the seventh question, provide more definitive language
that the transaction will be a tax-free reorganization and that it is a condition to
the merger that it be so qualified. Also add a statement that receiving a tax opinion
is a non-waivable condition of the merger.

    Response. We do not believe that a more definitive
statement can be made at this time. In addition, we note that this is standard disclosure regarding the tax-free nature of
the reorganization and disclosure like this has been reviewed by the Staff for other
fund reorganizations without objection. In addition, we did not add a statement that
receiving a tax opinion is a non-waivable condition to the merger, because the form
of Agreement and Plan of Merger and Liquidation, attached as Appendix A to the
prospectus/proxy statement, no longer contains this requirement. However, we note
that the Acquiring Fund does not intend to consummate the merger without such an
opinion and should the Board determine to consummate the reorganization even if the
reorganization would not be a tax free reorganization, the Acquired
Fund will inform stockholders
and re-solicit proxies. Disclosure regarding possible re-solicitation has been
added to the relevant response and on page 8.

    11.

    Comment. In response to the eighth question, disclose that it is a condition to
the merger that there have been no stockholder demands for appraisal. Explain in your
response why this is a condition to the closing of the merger and how this is
consistent with the Acquired Fund’s Board of Directors’ fiduciary obligations. In
addition, explain what criteria the Board will use to determine whether it will waive
the condition.

    Response. We note that the third, fourth and fifth sentences in the response to the
eighth question disclose the existence of the merger condition. We have made
non-substantive changes to these sentences. Although stockholders of the Acquired
Fund have appraisal rights under Delaware law, the Board intends to exercise its
fiduciary obligations in the best interests of all stockholders, not just those
making demands for appraisal. The number of stockholders that may elect to make
demands for appraisal is uncertain; however, should a sufficiently large number of
stockholders make such demands, the value of the merger to the non-demanding
stockholders or to shareholders of the Acquiring Fund may decrease.

5

    Furthermore, because it is uncertain what value a court would place on the
requesting shareholders’ shares or the timing of any such court proceeding, or
market conditions at such time, the exercise of appraisal rights could require the
Acquired Fund to sell its portfolio holdings at times or prices that are
disadvantageous to stockholders or to shareholders of the Acquiring Fund.
Therefore, the Board believes it is acting pursuant to its fiduciary obligations to
each Fund’s stockholders/shareholders by adding this condition to the merger. The
factors to be considered by the Board would likely include, but would not be limited
to, the number of shares subject to demands for appraisals, the estimated range of
value within which those stockholders’ shares could be appraised, when such court
appraisal would occur, any court-related expenses the Acquired Fund may have to
incur and the current economic and market conditions.

Notice of Special Meeting of Stockholders

    12.

    Comment. In the Notice of Special Meeting of Stockholders, revise the
description of Proposal 1 to indicate that a vote for the merger is also a vote to
allow the Acquired Fund to withdraw its election to be a BDC.

    Response. The requested change has been made.

Prospectus/Proxy Statement

    13.

    Comment. Include in the prospectus/proxy statement an explanation as to why the
funds are using the triangular merger structure.

    Response. The requested disclosure has been added in the response to the first
question under “Questions & Answers — Approval of Registration of the Acquired
Fund.” The proposed reorganization is structured as a triangular merger to address
the requirements of provisions in the Acquired Fund’s organizational
documents which are intended to deter “hostile” takeovers or other transactions
which the Board may determine would disadvantage stockholders. Furthermore,
structuring t

Rupert, Kevin C.
From:  Gonzalez, Jennifer R. [Jenni fer.Gonzalez@klgates.com]
Sent:  Wednesday, April 16, 2008 5:45 PM
To: Rupert, Kevin C.
Cc: Gonzalez, Jennifer R.
Subject:  N-14 Excerpts
Attachments:  HCF N-14 Excerpts.pdf; HCF N-14 Excerpts Redline.pdfPage 1 of 1 N-14 Excer pts
4/18/2008Kevin,
Attached are clean a nd blackline versions of excerpts from  the N-14 registration statement for
Highland Credit St rategies Fund.  We  will file the registration statement after we get the
consents from the auditors.  Please note that the blackline also reflects changes due to
comments from Dominic.   Please let me know if you have any questions or would like to
discuss the comments.  Thanks.
Jennifer
<<HCF N-14 Excerpts.p df>> <<HCF N-14 Excerpts Redline.pdf>>
Jennifer Gonzalez
K&L Gates
1601 K Street, NW
Washington DC 20006
202-778-9286
202-778-9100 (fax)
jennifer.gonzalez@klgates.com
www.klgates.com
To ensure compliance with requirements imposed by the IR S, we inform you that an y U.S. federal tax advice
contained in this communication (including any attachments) is not intended or written to be used, and cannot be
used, for the purpose of (i) avoiding penalties under the In ternal Revenue Code or (ii)  promoting, marketing or
recommending to another party any transac tion or matter addressed within.
This electronic message contains informa tion from the law firm of Kirkpatrick & Lockhart Preston Gates Ellis LLP.
The contents may be privileged and confi dential and are intended for the use of  the intended addressee(s) only. If
you are not an intended addressee, note that any disclosure,  copying, distribution, or use of the contents of this
message is prohibited. If you have received th is e-mail in error, please contact me at
Jennifer.Gonzalez@klgates.com.

Shares of the Acquiring Fund have not been approved or disapproved by the Securities and Exchange
Commission (the SEC).  The SEC has not passed upon the accuracy or adequacy of this Proxy
Statement/Prospectus.  Any representation to the contrary is a criminal offense.    PROXY STATEMENT of
Prospect Street High Income Portfolio Inc. (High Income Portfolio)
Prospect Street I ncome Shares Inc. (Income Shares)
(each, an Acquired Fund)
And
PROSPECTUS for
Common Shares of
Highland Credit Strategies Fund
(Credit Strategies Fund or the Acquiring Fund)
The address of the Acquired Funds and the Acquiring Fund (each, a Fund) is Two Galleria Tower, 13455 Noel
Road, Suite 800, Dallas, Texas 75240 and the telephone number of each Fund is 1 -877-665-1287.
* * * * * *
This Proxy Statement and Prospectus (Proxy Statement/Prospectus) contains the information stockholders of each
Acquired Fund should know before voting on the proposed reorganizations (each a Reorganization and, together,
the Reorganizations) and election of the nominees for director for each Acquired Fund (Directors).  Please read
it carefully and retain it for future reference.  For ease of reading, shares and shareholders has been used in
certain places in the Proxy Statement/Prospectus to describe, respectively, the stock of each Acquired Fund and
holders of stock of each Acquired Fund.
How the Reor ganizations Will Work
Each Acquired Fund will redeem its preferred shares prior to its Reorganization.  A Reorganization will not
be completed unless, before the final shareholder vote thereon, the participating Acquired Fund
commences, and irrevocably commits to complete as expeditiously as possible, the process for redeeming
its preferred shares.  Pursuant to each Reorganization, an Acquired Fund will transfer all of its assets to the
Acquiring Fund, which will assume each Acquired Funds liabilities.
If each Reorganization is approved by its respective shareholders, the Acquiring Fund will issue newly
issued common shares of beneficial interest, with $0.001 par value (Acquiring Fund Common Shares),
and cash (in lieu of certain fractional shares) in an aggregate amount equal to the value of each Acquired
Funds net assets attributable to its common shares.  These shares will be distributed to each Acquired
Funds common shareholders in proportion to their holdings immediately prior to the Reorganization.
Each Acquired Fund will be dissolved and its shareholders will become shareholders of the Acquiring
Fund.
The Reorganization of an Acquired Fund is conditioned upon the approval of its shareholders.  However,
the Reorganizations are not contingent upon each other and the Reorganization of one Acquired Fund will
proceed, if approved by its shareholders, even if the Reorganization for the other Acquired Fund is not
approved.  If a Reorganization  is not approved by an Acquired Fund, that Fund will continue to exist and its
Board of Directors will consider what additional action, if any, to take.
Each Reorganization is intended to result in no income or recognized gain or loss for federal income tax
purposes to the Acquiring Fund, the Acquired Fund or the shareholders of the Funds, except for
distributions of net realized capital gains, if any, resulting from the sale of an Acquired Funds assets in
connection with its Reorganization. In addition, shareholders of the Acquired Funds may recognize gain or
loss with respect to cash such holders receive pursuant to the Reorganization in lieu of fractional shares.

- ii - Rationale for the Reorganizations
The Board of Directors of each Acquired Fund and the Board of Trustees of the Acquiring Fund (each a Board)
believes that reorganizing each Acquired Fund into the Acquiring Fund, a fund with a similar investment objective
and having a combined portfolio with greater assets, offers you potential benefits.  These potential benefits and
Board considerations include:
Exchange of Common Shares at Net Asset Value (NAV).  On its closing date, a Reorganization will
result in the Acquired Fund shareholders receiving shares of the Acquiring Fund and cash (in lieu of certain
fractional shares) based on the Acquired Funds NAV (i.e., the Acquired Fund will get its NAVs worth of
common shares of the Acquiring Fund and cash (in lieu of certain fractional shares)).  It should be noted,
however, that shares of the Acquiring Fund received in a Reorganization will likely trade at a market
discount from NAV following the Reorganization , so that an Acquired Fund common shareholder may not
be able to sell these shares for their NAV.  It should also be noted that since inception shares of the
Acquiring Fund generally have traded at a smaller discount or wider premium from NAV than shares of
either Acquired Fund.  However, since late December until the Board approved the Reorganization in
February 2008, Acquiring Fund shares have frequently traded at a larger discount from NAV than shares of
either Acquired Fund.  The Acquiring Fund commenced a rights offering in late December and completed
the rights offering on January 28, 2008.  Historically, rights offerings have increased the discount from
NAV for a fund.
Increased Use of Capital Losses.  Each Acquired Fund has sustained substantial capital losses in recent
years, which are available as capital loss carryovers (CLCs) in the current and future taxable years
(through their respective taxable years ending in 2013), but is not expected to be able to generate enough
capital gains to be offset by those CLCs before they expire.  See Further Information on the
Reorganizations - Federal Income Tax Consequences of the Reorganizations.

Because of its larger size
and investment policies and strategies, the Acquiring Fund is expected to be better able to use those CLCs
to offset post-Reorganization gains of the combined Fund, although there can be no assurance that this will
be the case.  The Acquiring Funds use of such CLCs, however, will be significantly limited due to the
application of loss limitation rules under the federal tax law.
Enhanced Common Share Liquidity.  Following the Reorganization s, the substantially larger trading
market in the common shares of the Acquiring Fund, as compared to that of each Acquired Fund prior to
the Reorganization s, may provide Acquired Fund shareholders with enhanced market liquidity.  Trading
discounts can result from many different factors, however, and there is no assurance that a larger trading
market for Acquiring Funds common shares will have the effect of reducing or maintaining trading
discounts.
Increased Asset Size.  The Acquiring Fund will obtain additional assets without incurring the commission
expenses and generally greater other expenses associated with offering new shares. In addition, the
Acquiring Fund is obtaining the additional portfolio securities of the Acquired Funds without the
commensurate brokerage costs, dealer spreads or other trading expenses.  It is also obtaining these
securities in a manner that is likely to minimize the market impact of such acquisition on the short-term
prices of these securities.  However, the increase in Acquiring Fund shares as a result of the
Reorganization(s) may also cause Acquiring Fund shares to trade at a larger discount from NAV.
Economies of Scale in Certain Expenses.  A combined Fund offers economies of scale that may lead to a
reduction in certain expenses.  With these reduced expenses and the contractual fee waivers offered by the
Funds adviser, as described below, the annual operating expenses of the combined Fund may be lower
than the current annual operating expenses of Income Shares, although they are expected to be higher than
High Income Portfolios current annual operating expenses. In addition, after the waivers expire, the annual
operating expenses of the combined Fund are expected to be higher than either Acquired Funds current
annual operating expenses.  Each Fund incurs New York Stock Exchange (NYSE) listing fees, costs for
legal, auditing, and custodial services, and miscellaneous fees.  Many of these expenses overlap and there

- iii - may be an opportunity to reduce them over time if the Funds are combined.  However, it is not expected
that these economies of scale will be substantial.
Portfolio Management Efficiencies.  Each Reorganization would permit Acquired Fund shareholders to
pursue similar investment goals in a larger Fund.  The greater asset size of the combined Fund may allow it,
relative to each Acquired Fund, to obtain better net prices on securities trades and achieve greater
diversification of portfolio holdings.
Shareholders Ability to Margin.  Currently, stocks that trade below $5.00 are not marginable.  The
Reorganization would permit shareholders of High Income Portfolio and Income Shares (if their shares
continue to trade below $5.00) to receive shares that they could margin.  Additionally, marginable
securities may be more liquid that those that are not marginable as many institutional/large investors are
believed to avoid stoc ks that are not marginable.
Each Board also considered that if shareholders approve a Reorganization, Highland Capital Management, L.P.
(Adviser or Highland) would contractually agree to waive a portion of Credit Strategies Funds advisory fee and
administration fee for two years so that Highland would receive no additional benefit from the Reorganization for
two years.  The waivers are intended to offset the additional revenue Highland would receive on each Acquired
Funds assets (calculated as of the date of its Reorganization and including the value of its preferred shares that
historically have been outstanding) due to the difference between the advisory fee rates of each Acquired Fund and
Credit Strategies Fund and the fact that the Acquired Funds d o not pay an administration fee to Highland.  However,
even with the contractual fee waivers, the annual operating expenses of the combined Fund are expected to be higher
than High Income Portfolios current annual operating expenses and, after the waivers expire, the annual operating
expenses of the combined Fund are expected to be higher than either Acquired Funds current annual operating
expenses.  As of each Funds last fiscal year, the total annual operating expenses, as a percentage of average net
assets, of High Income Portfolio, Income Shares and Credit Strategies Fund were 3.34%, 3.99% and 4.06%,
respectively.  Assuming each Reorganization is approved, the estimated total annual operating expenses of the
combined Fund would be 4.03% of average net assets and, with the contractual fee waivers described above, the
estimated net annual operating expenses of the combined Fund would be 3.88% of average net assets.
The Board of each Acquired Fund unanimously recommends that you vote FOR the Reorganization of your Fund
into Credit Strategies Fund.  For further information, please see the individual description of the proposal affecting
your Fund contained in the Proxy Statement/Prospectus.
Who Bears the Expenses Associated with the Proxy Statement/Prospectu s
The costs associated with the Reorganizations will be borne by each of the Acquired Funds and the Acquiring Fund
in proportion to their respective net assets determined at the close of regular trading on the NYSE on the date of the
Reorganization s closing, provided that if they close at different times, that determination will be made as of the date
that the first Reorganization closes.  The costs associated with the election of Directors will be borne by each of the
Acquired Funds.
Who is Eligible to Vo te
Shareholders of record on April 14, 2008 are entitled to attend and vote at the meeting or any adjourned meeting.
Each share is entitled to one vote.  Shares represented by properly executed proxy cards, unless revoked before or at
the meeting, will be voted according to shareholders instructions.  If you sign a proxy card but do not fill in a vote,
your shares will be voted for the Reorganization and for the election of the nominees for Director.  If any other
business comes before the meeting, your s hares will be voted at the discretion of the persons named as proxies.
The common shares of the Acquiring Fund are listed on the NYSE under the ticker symbol HCF and will continue
to be so listed subsequent to the Reorganizations.  The common shares of H igh Income Portfolio and Income Shares
are listed on the NYSE under the ticker symbols PHY and CNN, respectively.

- iv - Shares of the Acquiring Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank or other
depository institution.  These shares are not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency.
Where to Get More Information
Credit Strategies Funds annual report to shareholders
dated December 31, 2007
High Income Portfolios annual report to shareholders
dated October 31, 2007
Income Shares annual report to shareholders dated
December 31, 2007 Previously sent to the shareholders of each respective
Fund and on file with the SEC or available at no charge
by calling our toll free number: 877 -665-1287.
A Statement of Additional Information dated April
[__], 2008, which relates to this Proxy
Statement/Prospectus and the Reorganizations, has
been filed with the SEC and contains additional
information about the Acquired Funds and the
Acquiring Fund   On file with the SEC or available at no charge by calling
our toll free number: 877-665-1287.  The statement of
additional information is incorporated by reference into
(and therefore legally part of) this Proxy
Statement/Prospectus.
To ask questions about this Proxy
Statement/Prospectus Call our toll -free telephone number: 877 -665-1287.
The date of this Proxy Statement/Prospectus is April [__], 2008.

- 44 - FEE, EXPENSE AND DIS TRIBUTIONS ON PRE FERRED SHARES TABLE FOR COMMON
SHAREHOLDERS OF THE FUNDS
Summary of Expense Comparison
As the tables below indicate, with the contractual fee waivers offered by Highland and the proceeds of a rights
offering completed by Credit Strategies Fund on January 28, 2008, the pro forma annual operating expenses of
Credit Strategies

CORRESP
1
filename1.htm

K&L | GATES

Kirkpatrick & Lockhart Preston Gates Ellis LLP

1601 K Street, NW

Washington, D.C. 20006-1600

T 202.778.9000      www.klgates.com

April 17, 2008

FILED VIA EDGAR

Dominic Minore

Office of Investment Company Regulation

Division of Investment Management

United States Securities and Exchange Commission

100 F Street, NE

Washington, D.C.  20549

Re:

Registration Statement on Form N-14 for Highland Credit Strategies Fund

- File Nos. 333-149424; 811-21869

Dear Mr. Minore:

This letter responds to your comments from our telephone conversions as well as to the accounting comments regarding the review of the registration statement on Form N-14 (“N-14”) for Highland Credit Strategies Fund (“Acquiring Fund”) related to proposed reorganization (each, a “Reorganization” and, together, the “Reorganizations”) of Prospect Street High Income Portfolio Inc. (“High Income Portfolio”) or Prospect Street Income Shares Inc. (“Income Shares”), as applicable (each, an “Acquired Fund,” and together with the Acquiring Fund, the “Funds”), into the Acquiring Fund, which was filed with the Securities and Exchange Commission (“Commission”) on February 28, 2008.  We have the following responses.

COMMENT 1: Please disclose whether the Acquiring Fund has a greater focus on capital appreciation and whether this should be noted as a difference in the investment objectives of each Acquired Fund from the Acquiring Fund in the “Questions & Answers” section and the proxy statement/prospectus.

RESPONSE:  We understand from the adviser that the Acquiring Fund does have a greater focus on capital appreciation than each Acquired Fund.  Accordingly, the N-14 has been revised to indicate that the Acquiring Fund has a greater focus on capital appreciation in each place the investment objectives of the Funds are compared.

Dominic Minore

Office of Disclosure and Review

Securities and Exchange Commission

April 17, 2008

Page 2 of 14

COMMENT 2:  In the second answer of the “Questions & Answers” section, please add disclosure stating that: (1) the total annual operating expenses of High Income Portfolio will be higher than the Acquiring Fund both during and after the expiration of the waiver period; (2) the total annual operating expenses of Income Shares will be higher than the Acquiring Fund after the expiration of the waiver period; and (3) the advisory and administration fees of the Acquiring Fund are higher than that of each Acquired Fund.

RESPONSE:  Disclosure has been added to the second answer of the “Questions & Answers” section that reads:

However, even with the contractual fee waivers, the annual operating expenses of the combined Fund are expected to be higher than High Income Portfolio’s current annual operating expenses and, after the waivers expire, the annual operating expenses of the combined Fund are expected to be higher than each Acquired Fund’s current annual operating expenses.  This is primarily due to the Acquiring Fund’s higher advisory and administration fees. As of each Fund’s last fiscal year, the total annual operating expenses, as a percentage of average net assets, of High Income Portfolio, Income Shares and Credit Strategies Fund were 3.34%, 3.99% and 4.06%, respectively.  Assuming each Reorganization is approved, the estimated total annual operating expenses of the combined Fund would be 4.03% of average net assets and, with the contractual fee waivers described above, t
he estimated net annual operating expenses of the combined Fund would be 3.88% of average net assets.

COMMENT 3:  On the third answer of the “Questions & Answers” section, please add disclosure noting which Funds are diversified and which Funds are non-diversified.

RESPONSE:  Disclosure has been added to the first sentence of each paragraph in the third answer of the “Questions & Answers” section that reads:

The Acquiring Fund is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”).

* * *

Dominic Minore

Office of Disclosure and Review

Securities and Exchange Commission

April 17, 2008

Page 3 of 14

High Income Portfolio is registered as a diversified, closed-end management investment company under the 1940 Act.

* * *

Income Shares is registered as a diversified, closed-end management investment company under the 1940 Act.

COMMENT 4:  Please confirm in your response letter that each Fund’s valuation policies are the same.

RESPONSE:  We understand from the adviser that each Fund’s valuation policies are the same.  In addition, on page 2 of the proxy statement/prospectus in the section entitled “Summary of Fund Comparisons – Investment Objectives and Policies,” disclosure has been added as indicated below:

Highland is the investment adviser to each Fund and each Fund’s valuation policies are the same.

COMMENT 5:  In the third answer of the “Questions & Answers” section, please add disclosure noting that the Acquiring Fund can invest in a wider and more risky basket of securities than each Acquired Fund.

RESPONSE:  Disclosure has been added to the third answer of the “Questions & Answers” section that reads:

The Acquiring Fund’s broader investment mandate allows it to invest in more types and potentially more risky securities than either Acquired Fund.  See “Risk Factors and Special Considerations” for more information.

COMMENT 6:  Please confirm in the response letter how bank loans in which each Fund invests are treated for purposes of industry concentration.

RESPONSE:  We understand from the adviser that the Funds would look through to the borrower to determine the industry classification of the bank loan for purposes of industry concentration.  The bank loans in which the Funds invest do not provide for recourse back to the bank if the borrower defaults.  There are some loan participations which might create some counterparty risk but the Funds historically have not invested a significant amount of their assets in these types of loan participations and do not intend to make significant levels of such

Dominic Minore

Office of Disclosure and Review

Securities and Exchange Commission

April 17, 2008

Page 4 of 14

investments in the future.  As of December 31, 2007, each Fund had not invested any of its assets in loan participations.

COMMENT 7:  In the fourth answer of the “Questions & Answers” section, please revise the disclosure to clarify the stock exchange where Acquiring Fund shares received by shareholders of each Acquired Fund would be traded.

RESPONSE:  The fourth answer in the “Question & Answers” section has been revised as indicated below:

The Acquiring Fund common shares received by Acquired Fund common stockholders will

likely

trade on

the

New York Stock Exchange

 and will likely trade

 at a discount from net asset value, which might be greater or less than the trading discount of common stock of an Acquired Fund

’s common stock

 at the time of the closing of its Reorganization.

COMMENT 8:  On the sixth answer of the “Questions & Answers” section, please confirm in the response letter whether it is generally true historically that the yield for the Acquiring Fund has been higher than either Acquired Fund.

RESPONSE:  We understand from the adviser that the Acquiring Fund has generally had a higher yield on a net asset value basis than either Acquired Fund since the Acquiring Fund’s inception.

COMMENT 9:  Please provide in the response letter what the current discount profile is for each Acquired Fund and how it compares to that for the Acquiring Fund.  Depending on the answer, please consider whether any disclosure is necessary in the sixth answer of the “Questions & Answers” section regarding the current discount profile of each Fund and how this might affect the current yield.

RESPONSE:  We understand from the adviser that the Acquiring Fund has had a lower discount to net asset value than either Acquired Fund since inception until mid-December 2007 and from the end of February 2008 until the current date.  The Acquiring Fund commenced a rights offering in late December and completed the rights offering on January 28, 2008.

Dominic Minore

Office of Disclosure and Review

Securities and Exchange Commission

April 17, 2008

Page 5 of 14

COMMENT 10:  Please confirm in the response letter that the redemption of preferred stock prior to the Reorganization of each Acquired Fund is not expected to result in any gain or loss being recognized by the holders of that stock.  Depending on the response, additional disclosure may be required in the proxy statement/prospectus.

RESPONSE:  We understand from the adviser that the redemption of preferred stock prior to each Reorganization is not expected to result in any preferred stockholder’s recognizing any gain or loss for federal tax purposes.  The preferred stock will be redeemed at its liquidation preference and, as a result, preferred stockholders will receive redemption proceeds equal to their basis in the redeemed stock.

COMMENT 11:  Please disclose in the response letter whether the redemption of the preferred stock of each Acquired Fund before the respective Reorganization is expected to generate any capital gains that will need to be distributed to the common stockholders of the Acquired Fund.

RESPONSE:  We understand from the adviser that each Acquired Fund has significant capital loss carryforwards, and that accordingly, there is not expected to be any capital gain distributions to the common stockholders of either Acquired Fund in connection with the redemption of the preferred stock.

COMMENT 12:  On page ii of the proxy statement/prospectus, under the bullet “Increased Use of Capital Losses,” please add disclosure stating that there is no assurance that the Acquiring Fund would be able to make better use of the capital loss carryforwards of the Acquired Funds following the Reorganizations.

RESPONSE:  The bullet “Increased Use of Capital Losses” on page ii and elsewhere as appropriate in the proxy statement/prospectus has been revised as indicated below:

Because of its larger size and investment policies and strategies, the Acquiring Fund is expected to be better able to use those CLCs to offset post-Reorganization gains of the combined Fund

, although there can be no assurance that this will be the case

.

COMMENT 13:  Please disclose in the response letter whether the leverage for the Acquiring Fund would increase following the Reorganizations.  Depending on the response, additional disclosure may be required in the proxy statement/prospectus on page ii under the bullet “Increased Asset Size.”

Dominic Minore

Office of Disclosure and Review

Securities and Exchange Commission

April 17, 2008

Page 6 of 14

RESPONSE:  We understand from the adviser that following the Reorganizations, the leverage from the credit facility for the Acquiring Fund will be lower than the current leverage provided by the preferred shares for each Acquired Fund.

COMMENT 14:  On page ii of the proxy statement/prospectus, under the bullet “Economies of Scale in Certain Expenses,” please add disclosure stating that the Acquiring Fund’s total annual operating expenses after the expiration of the waiver period will be higher than the current total annual operating expenses of either Acquired Fund.

RESPONSE:  Disclosure has been added to the bullet “Economies of Scale in Certain Expenses” on page ii and elsewhere as appropriate in the proxy statement/prospectus that reads:

In addition, after the waivers expire, the annual operating expenses of the combined Fund are expected to be higher than either Acquired Fund’s current annual operating expenses.

In addition, specific disclosure regarding the expenses of each Fund has been added in the paragraph following the bullets as indicated in comment 32.

COMMENT 15:  On page iii of the proxy statement/prospectus, in the second to last paragraph in the section entitled “Rationale for the Reorganization,” please delete the sentences describing the calculation of the amount of the waiver.

RESPONSE:  On page iii and elsewhere as appropriate in the proxy statement/prospectus, in the second to last paragraph in the section entitled “Rationale for the Reorganization,” the following sentences have been deleted:

If Income Shares’ shareholders approve its Reorganization, such combined waivers would be at an annual rate of 0.70% of the sum of Income Shares’ net assets attributable to common shares as of the closing date of its Reorganization plus $30 million (representing the value of its preferred shares that historically have been outstanding). If High Income Portfolio’s shareholders approve its Reorganization, such combined waivers would be at an annual rate of 0.55% of the sum of High Income Portfolio’s net assets attributable to common shares as of the closing date of its Reorganization plus $40 million (representing the value of its preferred shares that historically have been outstanding).

Dominic Minore

Office of Disclosure and Review

Securities and Exchange Commission

April 17, 2008

Page 7 of 14

COMMENT 16:  Please confirm in the response letter that the third paragraph on page iii after the heading entitled “Who is Eligible to Vote,” will appear on the front cover page of the proxy statement/prospectus.

RESPONSE:  We confirm that the following paragraph will appear on the front cover page of the typeset version of the proxy statement/prospectus:

Shares of the Acquiring Fund have not been approved or disapproved by the Securities and Exchange Commission (the “SEC”).  The SEC has not passed upon the accuracy or adequacy of this Proxy Statement/Prospectus.  Any representation to the contrary is a criminal offense.

COMMENT 17:  On page 1 of the proxy statement/prospectus, in the section entitled “Summary of Fund Comparisons,” please add disclosure indicating that the Acquiring Fund has a limited operating history.

RESPONSE:  Disclosure has been added to page 3 of the proxy statement/prospectus, in the section entitled “Summary of Fund Comparisons” that reads:

Each Acquired Fund has been in existence for more than ten years.  The Acquiring Fund commenced investment operations in June 2006 and has a limited operating history and history of public trading.

COMMENT 18:  Please add disclosure to the proxy statement/prospectus that notes that voting on the Reorganization does not preclude common stockholders of an Acquired Fund from selling their shares.

RESPONSE:  Disclosure has been added to page 80 of the proxy statement/prospectus, in the section entitled “Voting Information and Required Vote” that reads:

Voting on a proposal does not limit the transferability of common shares and common shareholders can sell their shares at any time before the Meeting or before a Reorganization.

COMMENT 19:  Please state in the proxy statement/prospectus whether the Acquiring Fund has any registration statement outstanding for preferred shares and indicate whether the Acquiring Fund intends to issue preferred shares within the next twelve months.

Dominic Minore

Office of Disclosure and Review

Securities and Exchange Commission

April 17, 2008

Page 8 of 14

RESPONSE:  Disclosure has been added to page 60 to the proxy statement/prospectus, in the section entitled “Description of Capital Structure – Credit Strategies Fund – Preferred Shares” that reads:

While Credit Strategies Fund has filed a registration statement to permit it to offer preferred shares, this registration statement has not been declared effective and Credit Strategies Fund has no present intention of offering any preferred shares in the next twelve months.

COMMENT 20:  On page 6 of the proxy statement/prospectus, in the first paragraph in the section entitled “Risk Factors and Special Considerations,” please add a cross reference to the section entitled “Comparison of the Funds: Investment Objectives and Pol

Mail Stop 0505             April 21, 2006

Philip Harris, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York  10036

Re: Highland Credit Strategies Fund (the “Trust”)
 Registration Statement on Form N-2
 File Numbers 333-132436; 811-21869

Dear Mr. Harris:

We have reviewed the registration statemen t referenced above and have the following
comments.

Registration Statement Cover Page

Provide a footnote to clarify th at the amount of shares bei ng registered includes shares
that could be issued pursuant to the underwriters’ over-allotment option.

Prospectus
Outside Front Cover Page
Expand the description of the Tr ust’s primary investment objectiv e to clarify the type of
returns its seeks to deliver to its investors;  for example, income or total return.  If the
Trust intends to deliver total return, then briefly explain how  it intends to realize capital
appreciation from its proposed investments.

Clarify to what “credit makets” the second sentence is referring; for example, debt
markets.

Philip Harris, Esq.
Page  2

Clarify whether the Trust’s primary and othe r investment objectives are fundamental or
whether they can be changed without shareholder approval.

Delineate the Trust’s secondary or other investment objectives.

Revise to provide a plain English version of th e phrase “directional, relative value, capital
structure arbitrage and event dr iven investment strategies.”

No Prior History

Present in a prominent fashion th e lack of a history of public trading in the Trust’s shares.
See Item 1.1.i. of Form N-2.

Expand the paragraph to disclose  specifically the risk of loss that trading at a discount
from net asset value creates for investors purchas ing shares in the initi al public offering.
See Item 1.1.i. of Form N-2.

Present the risk factor cross -references in bold face type.  See Item 1.1i.of Form N-2.

Pricing Table

In your response letter, confirm to the staff that the pricing table and f ootnotes thereto
will appear on the outside front cover page of the prospectus.

The amounts included under th e “Estimated Offering Expenses” column should also
include the estimated offering expenses of the Preferred Share offering that is expected to
occur soon after the completion of this o ffering, since that Preferred Share offering
expenses will be borne by the holders of the Trust’s Common Shares.

Expand footnote (2) to specify the amount that Highland, the Trust’s investment
manager, may pay certain underwriters as a sa les incentive fee, structuring fee and as
additional compensation in connection with th e offering, provided that certain specified
sales targets are met.

Refer to the second sentence of footnote (2).  Advise us in your letter whether all persons
receiving commissions will be registered broker/dealers.

Footnote (3) indicates that th e Trust may reimburse Highland for expenses incurred in
connection with this offering.  The pricing table should include as a sales load any
amounts borrowed to pay offering costs that are re quired to be paid in less than one year.
See Instruction 3 to Item 1.g. of Form N-2

Philip Harris, Esq.
Page  3
Investment Policies and Strategies

In the penultimate sentence of the first paragraph, specify the type of low correlation that
the Investment Manager will attempt to maintain on behalf of the Trust.

Specify the “other alternative investment st rategies” mentioned in the first paragraph on
page ii.

The disclosure indicates that an objective of the Trust is to provid e “high risk-adjusted
returns on capital.”   Explain what this means in the context of the hi gh risk nature of the
Trust’s proposed investments.   Will retu rns be lower when the Trust attempts to
minimize the risk of its portfolio  or are the returns expected to  be higher in relative to its
portfolio’s level of risk?

Since the Trust is a non-diversified invest ment company, the reference in the second
paragraph to “diversification”  is inappropriate.   Please make conforming deletions as
appropriate.

The SAI states that as a fundamental policy th e Trust will not concentrate its investments
in any single industry.  Accordingly, delete  the reference in th e second paragraph, and
elsewhere as applicable, to the possibility  of concentrating th e Trust’s portfolio by
industry.

Expand the last sentence of the third paragr aph to specify the maximum amount of Trust
assets that may devoted to opportunities in the non-U.S. credit markets.

Table of Contents

Delete the last sentence of the paragraph appearing imme diately after the table of
contents because it is incons istent with your obligation to deliver a current prospectus.
As an alternative, disclose that the Trust will amend the prospectus to disclose any
material changes.

Prospectus Summary

Investment Objectives

Revise the first three sentences to provide a plain English version of  the disclosure.  In
this regard, clarify whether the first part of the third sentence  refers to a market neutral
investment strategy.

Investment Policies and Strategy

Explain what is meant by the phrase “the In vestment Manager looks to leverage its
investment platform of approximately sixt y (60) credit invest ment professionals.”

Philip Harris, Esq.
Page  4
Briefly define the word “credits.”

Clarify whether the Investment  Manager believes that the credit investing it will provide
on behalf of the Trust is the type described in last sentence of the second paragraph.

Disclose in the last paragraph whether the In vestment Manager anticipates that the Trust
will experience a high portfolio turnover.

Investment Strategy

Specify the number of years that the Investment Manage r has primarily engaged in
“leveraged loan, high yield, structured pr oducts, and distressed markets” investing.

Indicate whether the Investment Manager will  use quantitative analysis when determining
which investments to purchase a nd sell on behalf of the Trust.

Specify the maximum percentage amount of the Trust’s assets that can be invested “in securities traded in foreign countries a nd denominated in foreign currencies.”  If
appropriate, add risk factor disclosure.

Briefly highlight whether the Trust could be deemed to be a statutory underwriter when
reselling any securities that it receives in connection with any of the transaction described
in the fourth paragraph.  If it could, then also highlight any as sociated risks, as applicable.

State the maximum amount of the Trust’s a ssets that may be invested in illiquid
securities.

In the last sentence of the last paragraph, clarify whet her the Investment Manager will
also pursue a defensive position during peri ods of uncertain economic or business
conditions.

Investment Manager

Provide a precise definition of “leverage” that will be used in the context of determining
the “total assets” that are subj ect to the Management Fee.  Th is should also be made clear
in the advisory contract between th e Trust and the Investment Manager.

In your response letter, describe what the Board of Trus tees considered when approving
administrative services compensation based on tota l assets, rather than net assets, for  the
administrative services that Highl and provides to the Trust.

Borrowings and Preferred Shares

Disclose the expected amount of the reduction in net asset value per common share that
will result from the anticipated offering of Preferred Shares.

Philip Harris, Esq.
Page  5
Distributions

Indicate whether distributions co uld also be made in the form of a return of shareholders’
capital.  Also confirm to the staff in your  letter that the Trust’s distribution policy
complies with the requirements of secti on 19 of the Investment Company Act.

It appears that the Trust’s di stribution policy contemplates the distribution of long-term
capital gains more frequently than what is permitted by section 19(b) of the Investment Company Act.  Please revise or advise th e staff in your response letter why you believe
that the Trust’s distribution policy comp lies with the statutory requirements.

Clarify that distributions made in additiona l shares of common stock of the Trust are
taxable to the shareholder recipient.  Also  note that the shareholder recipient will be
required to pay income taxes on the distri bution without a corres ponding receipt of cash
with which to pay such taxes.

State that each participant in the dividend rein vestment plan will pay a pro rata share of
brokerage commissions incurred in connec tion with open-market purchases, and that
participants requesting a sale of shares through the Plan Agen t are subject to a sales fee
and a brokerage commission.

Market Price of Shares

Reconcile the statement “investment companies like the Trust that invest primarily in
equity securities” with the Tr ust’s stated principal invest ment objective a nd strategies.

Principal Risks of the Trust

Concentration of the Trust’s Portfolio

Refrain form using the word “concentration” to describe the Trust’s portfolio since the
Trust has a fundamental policy no t to concentrate by industry.

Illiquidity of Investment

Disclose the maximum percentage of the Trust’ s portfolio that can be invested in illiquid
securities.  If there is none, so state.  If a ppropriate, also disclose the risks of investing
substantial amounts of the Trust’s portfolio in illiquid securities.

Bank Loans

Revise this and other risk f actor captions to convey and encap sulate the risk described in
the respective narrative risk factor disclosure.

Philip Harris, Esq.
Page  6
Distressed Debt

Specify the maximum amount of Trust assets th at can be invested in  the securities and
other obligations of distressed and bankrupt is suers.   If there is no maximum amount, so
state.

Indicate whether the Trust will ever invest for purposes of control.

High-Yield Securities

Clarify that “high-yield s ecurities” are commonly referred to as “junk securities.”

Leverage

Expand the disclosure to provide  a plain English discussion of leverage; for example, that
the Trust will borrow money to buy more investments; that with the us e of leverage there
is the risk that the interest rates paid by the Trust on the amount that it borrows will be
higher than the return on the Trust’s investments; etc.

Clarify that the fees and expens es attributed to leverage wi ll be dispropor tionately borne
by holders of the Trust’s common shares, a nd that the holders of the Trust’s common
shares will bear all offering expenses pertaining to leverage including, among other things, higher effective advisory fees.

Provide a separate summary risk factor high lighting the potentially differing interests of
holders of preferred shares versus holder s of common shares a nd the disproportionate
influence over the Trust’s affairs that could be accorded holders of preferred shares; for
example, whether holders of preferred shares could vote as a separate class and therefore
block proposals passed by the holders of co mmon shares, including a proposal to convert
the Trust to an open-end mutual fund.

If the Trust anticipates  issuing preferred securities with a minimum credit rating, disclose
the various restrictions that a credit rati ng agency may impose on the Trust’s portfolio
characteristics (such as liquidity, credit quality, etc.)

Small and Mid-Cap Stock Risk

If investing in companies with small or medium capitalizations is a principal investment strategy of the Trust, it shoul d be added to the Investme nt Strategy section of the
Prospectus Summary.

Emerging Markets Risk

If investing in securities of  the issuers based in underdeveloped emerging markets is a
principal investment strategy of the Trust, it should be added to the Investment Strategy
section of the Prospectus Summary.

Philip Harris, Esq.
Page  7

Securities Lending Risk

State that the Trust may lend its portfolio securi ties to a maximum of one-third of its total
assets.

Interest Rate Risk

Indicate whether the Trust may invest in invers e floaters and, if so, highlight the risk of
such an investment.

Prepayment Risk

If investing in mortgage-backed securities is a principal investment strategy of the Trust,
it should be added to the I nvestment Strategy section of the Prospectus Summary.

Strategic Transactions Risk

Change the heading of this se ction to “Derivatives Risk.”

Clarify that the Trust may invest in derivatives for speculative purposes.

Synthetic Securities

Disclose any maximum amount of F und assets that may be invested  in derivatives.  In the
alternative, disclose that there is no such  maximum and add heightened risk factor
disclosure, as appropriate.

Short Sales

If short selling is a principal investment strategy of the Trust,  then it should be added to
the Investment Strategy secti on of the Prospectus Summary.

Confirm to the staff in your letter that all cost s of short selling are included in the “Other
Expenses” line item of the fee table.

Summary of Trust Expenses

In the introductory paragraph a nd in the fee table, delete th e respective references to “or
employed some other from of leverage” and “or other leverage is used.”  Make a
conforming deletion to footnote (5).

Add a “Total annual expenses pl us cost of servicing Prefer red Shares” line item after the
“Total annual expenses” line item in the fee table presentation.  Th e cost of servicing
Preferred Shares component should include all of the costs of servicing and issuing

Philip Harris, Esq.
Page  8
Preferred Shares as a percentage of net assets  attributable to Comm on Shares.  Revise the
disclosure contained in f ootnote (4) as appropriate.

Expand footnote (2) to indicate that each participant will also pay a pro rata share of
brokerage commissions incurred in open-market purchases when the dividend reinvestment occurs at a time that the net asset value per common sh are is greater than
the market value per common share.

Delete footnote (3) and instead include as  part of the “Management fee” the amount
payable to Highland for the provision of administrative services to the Trust.

In your response letter, describe the “non-advisory servi ces provided to the Trust by the
employees of Highland” that is referred to in footnote (4).

Clarify in footnote (4) whethe r the Trust currently anticipat es incurring any indebtedness
or paying any interest during the next twelve months.

Reduce the size of the table presented in footnot e (5) so that it is given less prominence
than the primary fee table presentation.  Als o, change the parenthetical in the column
heading to “(assumes Preferred Shares are no t issued or no other leverage is used).”

The Example should immediately follow the f ee table presentation and not be preceded
by any footnotes.  Please revise  the presentation accordingly.

Confirm to the staff in your response letter that the lead-in para graph of the Example
includes all items called for by General Instructio n 10.c. to Item 3.1 of Form N-2.   In this
regard, change “(1) total net a nnual expenses of      % of  net assets attributable to
common shares” to “(1) total annual expenses  plus cost of servicing Preferred Shares
of     % of net assets attributable to common shares.”

Revise to present in a prominent fashion the in formation contained in the first sentence of
footnote (1) to the Example.  See  Instruction 10.d. to Item 3.1.of Form N-2.

Use of Proceeds

Specify the amount of proceeds that will be used to reimburse th e underwriters and any
affiliates of the Trust.

Portfolio Composition

The information contained in the first two se ntences of the second paragraph should also
be included on the cover page of the prospectus.  In this regard, expand the first sentence
of the second paragraph to identify the Trus t’s “principal investment categories.” Also
change the word “Fund’s” to "Trust’s.”

Philip Harris, Esq.
Page  9

Senior Loans

Briefly highlight the consequen ces and risks of structural su bordination in the conte

CORRESP
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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