Income Fund announces regular monthly distribution

DALLAS, March 2, 2021 – Highland Income Fund (NYSE: HFRO) (“ HFRO ” or the “ Fund ”) today announced its regular monthly distribution on its common shares of $ 0.0770 per share. The distribution will be payable on March 31, 2021 to shareholders of record at the close of business on March 24, 2021.

The Fund is a closed-end fund managed by Highland Capital Management Fund Advisors, LP (the “Manager”). The Fund will pursue its investment objective by investing primarily in the following categories of securities and instruments: (i) variable rate loans and other securities deemed to be variable rate investments; (ii) investments in securities or other instruments guaranteed directly or indirectly by real estate (including real estate investment trusts (“REITs”), preferred stocks, securities convertible into equity securities and mezzanine debt ); and (iii) other instruments, including, but not limited to, secured and unsecured fixed rate loans and corporate bonds, distressed securities, mezzanine securities, structured products (including , but not limited to mortgage-backed securities, secured loan bonds and asset-backed securities), convertible and preferred securities, equities (public and private), futures and options. The Fund’s investment objective is to provide a high level of current income consistent with preservation of capital in a registered fund format. The Fund declares and pays distributions of investment income on a monthly basis.

About the Highland Income Fund (HFRO)

The Highland Income Fund (“ HFRO ”) (NYSE:HFRO) is a closed-end fund managed by Highland Capital Management Fund Advisors, LP, an advisor on the Highland Capital Management alternative investment platform. Launched in 2000, HFRO aims to provide a high level of current income, compatible with the preservation of capital. For more information visit www.highlandfunds.com/income-fund.

About Highland Capital Management Fund Advisors, LP (HCMFA)

Highland Capital Management Fund Advisors, LP (“HCMFA”) is an investment advisor on Highland Capital Management (“Highland”) multi-billion dollar global alternative investment platform. HCMFA advises a range of registered funds, including open-end mutual funds, closed-end funds and an exchange-traded fund (“ETF”). Covering a range of asset classes and strategies, the funds leverage Highland’s investment capabilities, which include high yield credit, government stocks, real estate, private equity and special situations. , structured credit and vertical sectors specific to a sector and a region.

Investors should carefully consider the investment objectives, risks, fees and expenses of the Highland Income Fund before investing. This and other information can be found in the Fund’s prospectus, which you can obtain by calling 1-800-357-9167 or by visiting www.highlandfunds.com. Please read the prospectus carefully before investing.

On May 20, 2019, the Fund changed its name to Highland Income Fund and broadened its investment strategy by removing the Fund’s policy of, under normal market circumstances, investing at least 80% of its net assets in loans variable rate instruments and other securities deemed to be variable rate instruments. See the press release of March 20, 2019 for more details on the Fund’s name change and the broader investment strategy: ‘Highland Floating Rate Opportunities Fund announces name change to Highland Income Fund

As of the close of business on November 3, 2017, the Highland Floating Rate Fund changed from an open fund to a closed fund and began trading on the New York Stock Exchange under the symbol HFRO on November 6, 2017. The The performance data presented above for the periods prior to November 3, 2017 reflects that of the Class Z shares of the Fund when it was a variable capital fund, HFRZX. The closed-end fund pursues the same objective and the same investment strategy as before its conversion. The expense ratio is that of the Class Z shares of the Fund prior to its conversion.

The distribution may include a return of capital. Please see Distribution Source Notice 19 (a) -1 on the Highland Funds website for notices in Section 19 which provide estimates of the amounts and sources of the Fund’s distributions, which should not be used for tax reporting purposes.

There can be no assurance that the Fund will achieve its investment objectives.

The shares of closed-end investment companies frequently trade at a discount to the net asset value. The price of shares in the Fund is determined by a number of factors, many of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value. Past performance is no guarantee of future results.

Risk associated with closed funds. The Fund is a closed-end investment company designed primarily for long-term investors and not as a trading vehicle. No assurance can be given that a shareholder will be able to sell their shares on the New York Stock Exchange when they choose to do so, and no assurance can be given as to the price at which such a sale may be made.

Credit risk. The Sub-Fund may invest all or substantially all of its assets in senior loans or other securities rated below investment grade and unrated senior loans deemed by Highland to be of comparable quality. Securities rated below the investment grade are commonly referred to as “high yield securities” or “rotten securities”. They are considered primarily speculative with respect to the continued ability of the issuing company to repay principal and interest. Failure to pay expected interest and / or principal would result in a reduction in the income of the Fund, a reduction in the value of the Senior Loan in the event of non-payment and a potential decrease in the net asset value of the Fund. Investments in senior high yield loans and other securities may cause the net asset value to fluctuate more than if the Fund did not make such investments.

Senior Loan Risk. The London Interbank Offered Rate (“LIBOR”) is the average rate offered for various maturities of short-term loans between the major international banks that are members of the British Bankers Association. LIBOR is the benchmark interest rate index most commonly used to adjust variable rate loans. It is used in all global banking and financial industries to determine the interest rates of various financial instruments (such as debt instruments and derivatives) and loan agreements. Due to allegations of manipulation in 2012 and reduced activity in financial markets it measures, in July 2017, the Financial Conduct Authority (the “ FCA ”), the UK’s financial regulator Uni, has announced its desire to phase out the use of LIBOR by the end of 2021. Although the period from FCA’s announcement to the end of 2021 is generally long enough to allow market participants to pass When using another benchmark for new securities and transactions, uncertainty remains as to the future use of LIBOR and the specific replacement rate (s). Therefore, the potential effect of a transition from LIBOR on the Trust or the financial instruments used by the Trust cannot yet be determined. The transition process may involve, among other things, increased volatility or illiquidity in the markets for instruments that currently depend on LIBOR. The transition may also result in a change (i) in the value of certain instruments held by the Trust, (ii) in the cost of temporary borrowing to the Trust, or (iii) in the efficiency of operations related to the Trust such as blankets, as applicable. . When LIBOR is interrupted, the replacement rate for LIBOR may be lower than market expectations, which could negatively impact the value of preferred securities and variable rate or fixed to variable rate coupon debt securities. Such effects of the LIBOR transition, as well as other unanticipated effects, could result in losses to the Trust. Since the usefulness of LIBOR as a benchmark may deteriorate during the transition period, these effects may occur before the end of 2021.

Risk related to the real estate sector: Issuers primarily active in the real estate industry, including real estate investment trusts, may be exposed to risks similar to the risks associated with direct ownership of real estate, including: (i) changes in the terms and conditions of the economy and market; (ii) changes in the value of real estate; (iii) risks associated with local economic conditions, excessive construction and increased competition; (iv) increase in property taxes and operating costs; (v) changes in zoning laws; (vi) accident and conviction losses; (vii) variations in rental income, neighborhood values ​​or the attractiveness of the property to tenants; (viii) the availability of financing and (ix) the evolution of interest rates and financial leverage.

Risk of illiquidity of investments. Investments made by the Fund may be illiquid and therefore the Fund may not be able to sell such investments at prices which reflect the Investment Adviser’s assessment of their value or the amount initially paid for such investments. by the Fund.

Risk of continuous monitoring. On behalf of more than one lender, the agent will generally be responsible for administering and managing senior loans and, with respect to senior secured loans, servicing or monitoring the collateral.The financial difficulties of agents may present a risk to the Fund.

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