Prospect Street
®
High Income Portfolio Inc.
P.O. Box 9840
Providence, RI 02940
May 2, 2008
VIA EDGAR
U.S. Securities and Exchange Commission
Office of Registration and Reports
100 F Street, N.E.
Washington, D.C. 20549
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Re:
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Prospect Street
®
High Income Portfolio Inc. (the Fund)
File No.: 811-05557
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Ladies and Gentlemen:
On behalf of the Fund, enclosed for filing, pursuant to Rule 17g-1 (the Rule) of the Investment
Company Act of 1940, as amended (the 1940 Act), are the following documents:
1)
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a copy of Fidelity Bond No. 04704107B, including Riders 9, 10 and 11 (the Fidelity Bond)
that reflect (i) an increase in the limit of liability to $7,525,000 for the period March 10,
2008 through July 31, 2008; (ii) a change in the name of a joint insured; and (iii) the
removal of certain insureds;
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2)
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a copy of the resolutions adopted at a meeting of the Board of Trustees of the Fund held on
March 7, 2008, at which a majority of the Trustees who are not interested persons of the
Fund as defined by Section 2(a)(19) of the 1940 Act, approved the amount, type, form and
coverage of the Fidelity Bond; and
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3)
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a copy of the Agreement Among Insureds with respect to the Joint Insured Fidelity Bond,
entered into on March 10, 2008, pursuant to paragraph (f) of the Rule.
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Premiums (including the additional premium) under the Fidelity Bond have been paid through July 31,
2008. If the Fund had not been named as a co-insured under the Fidelity Bond, the Fund would have
maintained a single insured fidelity bond in the amount of $525,000, as required under paragraph
(d) of the Rule.
Please contact me at (972) 628-4100 if you have any questions.
Sincerely,
/s/ M. Jason Blackburn
M. Jason Blackburn
Secretary and Treasurer
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cc:
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Michael Szkodzinski, Highland Capital Management, L.P.
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Michael Doherty, Ropes & Gray LLP
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Elizabeth Reza, Ropes & Gray LLP
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David C. Lebisky, PFPC Inc.
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ICI MUTUAL INSURANCE COMPANY
P.O. Box 730
Burlington, Vermont 05402-0730
INVESTMENT COMPANY BLANKET BOND
ICI MUTUAL INSURANCE COMPANY
P.O. Box 730
Burlington, Vermont 05402-0730
DECLARATIONS
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Item 1.
Name of Insured (the Insured)
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Bond Number
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Highland Floating Rate Fund, LLC
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04704107B
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Principal Address:
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c/o Highland Capital Management
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13455 Noel Road, Suite 1300
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Dallas, TX 75240
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Item 2.
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Bond Period: from 12:01 a.m. on
May 2, 2007 ,
to 12:01 a.m. on
July 31, 2008 ,
or
the earlier effective date of the termination of this Bond, standard time at the Principal
Address as to each of said dates.
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Item 3.
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Limit of Liability
Subject to Sections 9, 10, and 12 hereof:
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LIMIT OF
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DEDUCTIBLE
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LIABILITY
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AMOUNT
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Insuring Agreement A FIDELITY
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$
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3,000,000
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N/A
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Insuring Agreement B AUDIT EXPENSE
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$
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50,000
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$
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10,000
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Insuring Agreement C ON PREMISES
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$
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3,000,000
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$
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50,000
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Insuring Agreement D IN TRANSIT
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$
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3,000,000
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$
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50,000
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Insuring Agreement E FORGERY OR ALTERATION
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$
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3,000,000
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$
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50,000
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Insuring Agreement F SECURITIES
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$
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3,000,000
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$
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50,000
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Insuring Agreement G COUNTERFEIT CURRENCY
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$
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3,000,000
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$
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50,000
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Insuring Agreement H UNCOLLECTIBLE ITEMS OF DEPOSIT
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$
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25,000
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$
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5,000
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Insuring Agreement I PHONE/ELECTRONIC TRANSACTIONS
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Not Covered
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Not Covered
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If Not Covered is inserted opposite any Insuring Agreement above, such Insuring agreement
and any reference thereto shall be deemed to be deleted from this Bond.
OPTIONAL INSURING AGREEMENTS ADDED BY RIDER:
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Insuring Agreement J COMPUTER SECURITY
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$
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3,000,000
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$
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50,000
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Item 4.
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Offices or Premises CoveredAll the Insureds offices or other premises in existence at
the time this Bond becomes effective are covered under this Bond, except the offices or other
premises excluded by Rider. Offices or other premises acquired or established after the
effective date of this Bond are covered subject to the terms of General Agreement A.
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Item 5.
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The liability of ICI Mutual Insurance Company (the Underwriter) is subject to the terms
of the following Riders attached hereto:
Riders: 1-2-3-4-5-6-7
and of all Riders applicable to this Bond issued during the Bond Period.
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By:
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/s/ Maggie Sullivan
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Authorized Representative
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Bond
(12/03)
INVESTMENT COMPANY BLANKET BOND
ICI Mutual Insurance Company (the Underwriter), in consideration of an agreed premium, and in
reliance upon the Application and all other information furnished to the Underwriter by the
Insured, and subject to and in accordance with the Declarations, General Agreements, Provisions,
Conditions and Limitations and other terms of this bond (including all riders hereto) (Bond), to
the extent of the Limit of Liability and subject to the Deductible Amount, agrees to indemnify the
Insured for the loss, as described in the Insuring Agreements, sustained by the Insured at any time
but discovered during the Bond Period.
INSURING AGREEMENTS
A. FIDELITY
Loss (including loss of Property) caused by any Dishonest or Fraudulent Act or Theft committed
by an Employee anywhere, alone or in collusion with other persons (whether or not Employees),
during the time such Employee has the status of an Employee as defined herein, and even if such
loss is not discovered until after he or she ceases to be an Employee, EXCLUDING loss covered
under Insuring Agreement B.
B. AUDIT EXPENSE
Expense incurred by the Insured for that part of audits or examinations required by any
governmental regulatory authority or Self Regulatory Organization to be conducted by such
authority or Organization or by an independent accountant or other person, by reason of the
discovery of loss sustained by the Insured and covered by this Bond.
C. ON PREMISES
Loss of Property (including damage thereto or destruction thereof) located or reasonably
believed by the Insured to be located within the Insureds offices or premises, caused by Theft
or by any Dishonest or Fraudulent Act or through Mysterious Disappearance, EXCLUDING loss
covered under Insuring Agreement A.
D. IN TRANSIT
Loss of Property (including damage thereto or destruction thereof) while the Property is in
transit in the custody of any person authorized by an Insured to act as a messenger, except
while in the mail or with a carrier for hire (other than a Security Company), EXCLUDING loss
covered under Insuring Agreement A. Property is in transit beginning immediately upon receipt
of such Property by the transporting person and ending immediately upon delivery at the
specified destination.
E. FORGERY OR ALTERATION
Loss caused by the Forgery or Alteration of or on (1) any bills of exchange, checks, drafts, or
other written orders or directions to pay certain sums in money, acceptances, certificates of
deposit, due bills, money orders, or letters of credit; or (2) other written instructions,
requests or applications to the Insured, authorizing or acknowledging the transfer, payment,
redemption, delivery or receipt of Property, or giving notice of any bank account, which
instructions or requests or applications purport to have been signed or endorsed by (a) any
customer of the Insured, or (b) any shareholder of or subscriber to shares issued by any Investment Company, or (c) any financial or banking institution or
stockbroker;
or (3) withdrawal orders or receipts for the withdrawal of Property, or receipts or
certificates of deposit for Property and bearing the name of the Insured as issuer or of another
Investment Company for which the Insured acts as agent.
This Insuring Agreement E does not cover loss caused by Forgery or Alteration of Securities or
loss covered under Insuring Agreement A.
F. SECURITIES
Loss resulting from the Insured, in good faith, in the ordinary course of business, and in any
capacity whatsoever, whether for its own account or for the account of others, having acquired,
accepted or received, or sold or delivered, or given any value, extended any credit or assumed
any liability on the faith of any Securities, where such loss results from the fact that such
Securities (1) were Counterfeit, or (2) were lost or stolen, or (3) contain a Forgery or
Alteration, and notwithstanding whether or not the act of the Insured causing such loss violated
the constitution, by-laws, rules or regulations of any Self Regulatory Organization, whether or
not the Insured was a member thereof, EXCLUDING loss covered under Insuring Agreement A.
G. COUNTERFEIT CURRENCY
Loss caused by the Insured in good faith having received or accepted (1) any money orders which
prove to be Counterfeit or to contain an Alteration or (2) paper currencies or coin of the
United States of America or Canada which prove to be Counterfeit.
This Insuring Agreement G does not cover loss covered under Insuring Agreement A.
H. UNCOLLECTIBLE ITEMS OF DEPOSIT
Loss resulting from the payment of dividends, issuance of Fund shares or redemptions or
exchanges permitted from an account with the Fund as a consequence of
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(1)
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uncollectible Items of Deposit of a Funds customer, shareholder or subscriber credited
by the Insured or its agent to such persons Fund account, or
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(2)
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any Item of Deposit processed through an automated clearing house which is reversed by
a Funds customer, shareholder or subscriber and is deemed uncollectible by the Insured;
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PROVIDED, that (a) Items of Deposit shall not be deemed uncollectible until the Insureds
collection procedures have failed, (b) exchanges of shares between Funds with exchange
privileges shall be covered hereunder only if all such Funds are insured by the Underwriter for
uncollectible Items of Deposit, and (c) the Insured Fund shall have implemented and maintained a
policy to hold Items of Deposit for the minimum number of days stated in its Application (as
amended from time to time) before paying any dividend or permitting any withdrawal with respect
to such Items of Deposit (other than exchanges between Funds). Regardless of the number of
transactions between Funds in an exchange program, the minimum number of days an Item of Deposit
must be held shall begin from the date the Item of Deposit was first credited to any Insured
Fund.
This Insuring Agreement H does not cover loss covered under Insuring Agreement A.
I. PHONE/ELECTRONIC TRANSACTIONS
Loss caused by a Phone/Electronic Transaction, where the request for such Phone/Electronic
Transaction:
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(1)
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is transmitted to the Insured or its agents by voice over the telephone or by
Electronic Transmission; and
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(2)
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is made by an individual purporting to be a Fund shareholder or subscriber or an
authorized agent of a Fund shareholder or subscriber; and
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(3)
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is unauthorized or fraudulent and is made with the manifest intent to deceive;
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PROVIDED, that the entity receiving such request generally maintains and follows during the Bond
Period all Phone/Electronic Transaction Security Procedures with respect to all Phone/Electronic
Transactions; and
EXCLUDING loss resulting from:
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(1)
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the failure to pay for shares attempted to be purchased; or
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(2)
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any redemption of Investment Company shares which had been improperly credited to a
shareholders account where such shareholder (a) did not cause, directly or indirectly,
such shares to be credited to such account, and (b) directly or indirectly received any
proceeds or other benefit from such redemption; or
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(3)
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any redemption of shares issued by an Investment Company where the proceeds of such
redemption were requested to be paid or made payable to other than (a) the Shareholder of
Record, or (b) any other person or bank account designated to receive redemption proceeds
(i) in the initial account application, or (ii) in writing (not to include Electronic
Transmission) accompanied by a signature guarantee; or
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(4)
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any redemption of shares issued by an Investment Company where the proceeds of such
redemption were requested to be sent to other than any address for such account which was
designated (a) in the initial account application, or (b) in writing (not to include
Electronic Transmission), where such writing is received at least one (1) day prior to such
redemption request, or (c) by voice over the telephone or by Electronic Transmission at
least fifteen (15) days prior to such redemption; or
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(5)
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the intentional failure to adhere to one or more Phone/Electronic Transaction Security
Procedures; or
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(6)
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a Phone/Electronic Transaction request transmitted by electronic mail or transmitted by
any method not subject to the Phone/Electronic Transaction Security Procedures; or
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(7)
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the failure or circumvention of any physical or electronic protection device,
including any firewall, that imposes restrictions on the flow of electronic traffic in or
out of any Computer System.
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This Insuring Agreement I does not cover loss covered under Insuring Agreement A, Fidelity or
Insuring Agreement J, Computer Security.
GENERAL AGREEMENTS
A. ADDITIONAL OFFICES OR EMPLOYEESCONSOLIDATION OR MERGERNOTICE
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1.
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Except as provided in paragraph 2 below, this Bond shall apply to any additional
office(s) established by the Insured during the Bond Period and to all Employees during the
Bond Period, without the need to give notice thereof or pay additional premiums to the
Underwriter for the Bond Period.
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2.
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If during the Bond Period an Insured Investment Company shall merge or consolidate with
an institution in which such Insured is the surviving entity, or purchase substantially all
the assets or capital stock of another institution, or acquire or create a separate
investment portfolio, and shall within sixty (60) days notify the Underwriter thereof, then
this Bond shall automatically apply to the Property and Employees resulting from such
merger, consolidation, acquisition or creation from the date thereof; provided, that the
Underwriter may make such coverage contingent upon the payment of an additional premium.
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B. WARRANTY
No statement made by or on behalf of the Insured, whether contained in the Application or
otherwise, shall be deemed to be an absolute warranty, but only a warranty that such statement
is true to the best of the knowledge of the person responsible for such statement.
C. COURT COSTS AND ATTORNEYS FEES
The Underwriter will indemnify the Insured against court costs and reasonable attorneys fees
incurred and paid by the Insured in defense of any legal proceeding brought against the Insured
claiming that the Insured is liable for any loss, claim or damage which, if established against
the Insured, would constitute a loss sustained by the Insured covered under the terms of this
Bond; provided, however, that with respect to Insuring Agreement A this indemnity shall apply
only in the event that
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1.
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an Employee admits to having committed or is adjudicated to have committed a Dishonest
or Fraudulent Act or Theft which caused the loss; or
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2.
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in the absence of such an admission or adjudication, an arbitrator or arbitrators
acceptable to the Insured and the Underwriter concludes, after a review of an agreed
statement of facts, that an Employee has committed a Dishonest or Fraudulent Act or Theft
which caused the loss.
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The Insured shall promptly give notice to the Underwriter of any such legal proceeding and upon
request shall furnish the Underwriter with copies of all pleadings and other papers therein. At
the Underwriters election the Insured shall permit the Underwriter to conduct the defense of
such legal proceeding in the Insureds name, through attorneys of the Underwriters selection.
In such event, the Insured shall give all reasonable information and assistance which the
Underwriter shall deem necessary to the proper defense of such legal proceeding.
If the amount of the Insureds liability or alleged liability in any such legal proceeding is
greater than the amount which the Insured would be entitled to recover under this Bond (other
than pursuant to this General Agreement C), or if a Deductible Amount is applicable, or both,
the indemnity liability of the Underwriter under this General Agreement C is limited to the
proportion of court costs and attorneys fees incurred and paid by the Insured or by the
Underwriter that the amount which the Insured would be
entitled to recover under this Bond (other than pursuant to this General Agreement C) bears to
the sum
of such amount plus the amount which the Insured is not entitled to recover. Such
indemnity shall be in addition to the Limit of Liability for the applicable Insuring Agreement.
THIS BOND, INCLUDING THE FOREGOING INSURING AGREEMENTS
AND GENERAL AGREEMENTS, IS SUBJECT TO THE FOLLOWING
PROVISIONS, CONDITIONS AND LIMITATIONS:
SECTION 1. DEFINITIONS
The following terms used in this Bond shall have the meanings stated in this Section:
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A.
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Alteration
means the marking, changing or altering in a material way of the terms,
meaning or legal effect of a document with the intent to deceive.
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B.
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Application
means the Insureds application (and any attachments and materials
submitted in connection therewith) furnished to the Underwriter for this Bond.
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C.
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Computer System
means (1) computers with related peripheral components, including
storage components, (2) systems and applications software, (3) terminal devices, (4)
related communications networks or customer communication systems, and (5) related
electronic funds transfer systems; by which data or monies are electronically collected,
transmitted, processed, stored or retrieved.
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D.
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Counterfeit
means, with respect to any item, one which is false but is intended to
deceive and to be taken for the original authentic item.
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E.
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Deductible Amount
means, with respect to any Insuring Agreement, the amount set
forth under the heading Deductible Amount in Item 3 of the Declarations or in any Rider
for such Insuring Agreement, applicable to each Single Loss covered by such Insuring
Agreement.
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F.
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Depository
means any securities depository (other than any foreign securities
depository) in which an Investment Company may deposit its Securities in accordance with
Rule 17f-4 under the Investment Company Act of 1940.
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G.
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Dishonest or Fraudulent Act
means any dishonest or fraudulent act, including larceny
and embezzlement as defined in Section 37 of the Investment Company Act of 1940, committed
with the conscious manifest intent (1) to cause the Insured to sustain a loss and (2) to
obtain financial benefit for the perpetrator or any other person (other than salaries,
commissions, fees, bonuses, awards, profit sharing, pensions or other employee benefits). A
Dishonest or Fraudulent Act does not mean or include a reckless act, a negligent act, or a
grossly negligent act.
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H.
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Electronic Transmission
means any transmission effected by electronic means,
including but not limited to a transmission effected by telephone tones, Telefacsimile,
wireless device, or over the Internet.
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I.
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Employee
means:
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(1)
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each officer, director, trustee, partner or employee of the Insured, and
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(2)
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each officer, director, trustee, partner or employee of any predecessor of the
Insured whose principal assets are acquired by the Insured by consolidation or
merger with, or purchase of assets or capital stock of, such predecessor, and
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(3)
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each attorney performing legal services for the Insured and each employee of
such attorney or of the law firm of such attorney while performing services for the
Insured, and
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(4)
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each student who is an authorized intern of the Insured, while in any of the
Insureds offices, and
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(5)
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each officer, director, trustee, partner or employee of
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(a)
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an investment adviser,
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(b)
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an underwriter (distributor),
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(c)
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a transfer agent or shareholder accounting recordkeeper, or
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(d)
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an administrator authorized by written agreement to keep financial
and/or other required records,
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for an Investment Company named as an Insured, but only while (i) such officer, partner
or employee is performing acts coming within the scope of the usual duties of an officer
or employee of an Insured, or (ii) such officer, director, trustee, partner or employee
is acting as a member of any committee duly elected or appointed to examine or audit or
have custody of or access to the Property of the Insured, or (iii) such director or
trustee (or anyone acting in a similar capacity) is acting outside the scope of the
usual duties of a director or trustee; provided, that the term Employee shall not
include any officer, director, trustee, partner or employee of a transfer agent,
shareholder accounting recordkeeper or administrator (x) which is not an affiliated
person (as defined in Section 2(a) of the Investment Company Act of 1940) of an
Investment Company named as Insured or of the adviser or underwriter of such Investment
Company, or (y) which is a Bank (as defined in Section 2(a) of the Investment Company
Act of 1940), and
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(6)
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each individual assigned, by contract or by any agency furnishing temporary
personnel, in either case on a contingent or part-time basis, to perform the usual
duties of an employee in any office of the Insured, and
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(7)
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each individual assigned to perform the usual duties of an employee or officer
of any entity authorized by written agreement with the Insured to perform services as
electronic data processor of checks or other accounting records of the Insured, but
excluding a processor which acts as transfer agent or in any other agency capacity for
the Insured in issuing checks, drafts or securities, unless included under subsection
(5) hereof, and
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(8)
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each officer, partner or employee of
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(a)
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any Depository or Exchange,
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(b)
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any nominee in whose name is registered any Security included in the
systems for the central handling of securities established and maintained by any
Depository, and
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(c)
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any recognized service company which provides clerks or other personnel
to any Depository or Exchange on a contract basis,
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while such officer, partner or employee is performing services for any Depository in the
operation of systems for the central handling of securities, and
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(9)
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in the case of an Insured which is an employee benefit plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974 (ERISA)) for
officers, directors or employees of another Insured (In-House Plan), any fiduciary
or other plan official (within the meaning of Section 412 of ERISA) of such In-House
Plan, provided that such fiduciary or other plan official is a director, partner,
officer, trustee or employee of an Insured (other than an In-House Plan).
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Each employer of temporary personnel and each entity referred to in subsections (6) and (7) and
their respective partners, officers and employees shall collectively be deemed to be one person
for all the purposes of this Bond.
Brokers, agents, independent contractors, or representatives of the same general character shall
not be considered Employees, except as provided in subsections (3), (6), and (7).
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J.
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Exchange
means any national securities exchange registered under the Securities
Exchange Act of 1934.
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K.
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Forgery
means the physical signing on a document of the name of another person
(whether real or fictitious) with the intent to deceive. A Forgery may be by means of
mechanically reproduced facsimile signatures as well as handwritten signatures. Forgery
does not include the signing of an individuals own name, regardless of such individuals
authority, capacity or purpose.
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L.
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Items of Deposit
means one or more checks or drafts.
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M.
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Investment Company
or
Fund
means an investment company registered under the
Investment Company Act of 1940.
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N.
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Limit of Liability
means, with respect to any Insuring Agreement, the limit of
liability of the Underwriter for any Single Loss covered by such Insuring Agreement as set
forth under the heading Limit of Liability in Item 3 of the Declarations or in any Rider
for such Insuring Agreement.
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O.
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Mysterious Disappearance
means any disappearance of Property which, after a
reasonable investigation has been conducted, cannot be explained.
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P.
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Non-Fund
means any corporation, business trust, partnership, trust or other entity
which is not an Investment Company.
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Q.
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Phone/Electronic Transaction Security Procedures
means security procedures for
Phone/Electronic Transactions as provided in writing to the Underwriter.
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R.
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Phone/Electronic Transaction
means any (1) redemption of shares issued by an
Investment Company, (2) election concerning dividend options available to Fund
shareholders, (3) exchange of shares in a registered account of one Fund into shares in an
identically registered account of another Fund in the same complex pursuant to exchange
privileges of the two Funds, or (4) purchase of shares issued by an Investment Company,
which redemption, election, exchange or purchase is requested by voice over the telephone
or through an Electronic Transmission.
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S.
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Property
means the following tangible items: money, postage and revenue stamps,
precious metals, Securities, bills of exchange, acceptances, checks, drafts, or other
written orders or directions to pay sums certain in money, certificates of deposit, due
bills, money orders, letters of credit, financial futures contracts, conditional sales
contracts, abstracts of title, insurance policies, deeds, mortgages, and assignments of any
of the foregoing, and other valuable papers, including books of account and other records
used by the Insured in the conduct of its business, and all other instruments similar to or
in the nature of the foregoing (but excluding all data processing records), in which the
Insured has an interest or in which the Insured acquired or should have acquired an
interest by reason of a predecessors declared financial condition at the time of the
Insureds consolidation or merger with, or purchase of the principal assets of, such
predecessor or which are held by the Insured for any purpose or in any capacity.
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T.
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Securities
means original negotiable or non-negotiable agreements or instruments
which represent an equitable or legal interest, ownership or debt (including stock
certificates, bonds, promissory notes, and assignments thereof), which are in the ordinary
course of business and transferable by physical delivery with appropriate endorsement or
assignment. Securities does not include bills of exchange, acceptances, certificates of
deposit, checks, drafts, or other written orders or directions to pay sums certain in
money, due bills, money orders, or letters of credit.
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U.
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Security Company
means an entity which provides or purports to provide the transport
of Property by secure means, including, without limitation, by use of armored vehicles or
guards.
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V.
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Self Regulatory Organization
means any association of investment advisers or
securities dealers registered under the federal securities laws, or any Exchange.
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W.
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Shareholder of Record
means the record owner of shares issued by an Investment
Company or, in the case of joint ownership of such shares, all record owners, as designated
(1) in the initial account application, or (2) in writing accompanied by a signature
guarantee, or (3) pursuant to procedures as set forth in the Application.
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X.
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Single Loss
means:
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(1)
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all loss resulting from any one actual or attempted Theft committed by one
person, or
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(2)
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all loss caused by any one act (other than a Theft or a Dishonest or
Fraudulent Act) committed by one person, or
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(3)
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all loss caused by Dishonest or Fraudulent Acts committed by one person, or
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(4)
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all expenses incurred with respect to any one audit or examination, or
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(5)
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all loss caused by any one occurrence or event other than those specified in
subsections (1) through (4) above.
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All acts or omissions of one or more persons which directly or indirectly aid or, by failure
to report or otherwise, permit the continuation of an act referred to in subsections (1)
through (3) above of any other person shall be deemed to be the acts of such other person for
purposes of this subsection.
All acts or occurrences or events which have as a common nexus any fact, circumstance,
situation, transaction or series of facts, circumstances, situations, or transactions shall
be deemed to be one act, one occurrence, or one event.
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Y.
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Telefacsimile
means a system of transmitting and reproducing fixed graphic material
(as, for example, printing) by means of signals transmitted over telephone lines or over
the Internet.
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Z.
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Theft
means robbery, burglary or hold-up, occurring with or without violence or the
threat of violence.
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SECTION 2. EXCLUSIONS
THIS BOND DOES NOT COVER:
A.
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Loss resulting from (1) riot or civil commotion outside the United States of America
and Canada, or (2) war, revolution, insurrection, action by armed forces, or usurped power,
wherever occurring; except if such loss occurs in transit, is otherwise covered under
Insuring Agreement D, and when such transit was initiated, the Insured or any person
initiating such transit on the Insureds behalf had no knowledge of such riot, civil
commotion, war, revolution, insurrection, action by armed forces, or usurped power.
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B.
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Loss in time of peace or war resulting from nuclear fission or fusion or radioactivity,
or biological or chemical agents or hazards, or fire, smoke, or explosion, or the effects
of any of the foregoing.
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C.
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Loss resulting from any Dishonest or Fraudulent Act committed by any person while
acting in the capacity of a member of the Board of Directors or any equivalent body of the
Insured or of any other entity.
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D.
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Loss resulting from any nonpayment or other default of any loan or similar transaction
made by the Insured or any of its partners, directors, officers or employees, whether or
not authorized and whether procured in good faith or through a Dishonest or Fraudulent Act,
unless such loss is otherwise covered under Insuring Agreement A, E or F.
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E.
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Loss resulting from any violation by the Insured or by any Employee of any law, or any
rule or regulation pursuant thereto or adopted by a Self Regulatory Organization,
regulating the issuance, purchase or sale of securities, securities transactions upon
security exchanges or over the counter markets, Investment Companies, or investment
advisers, unless such loss, in the absence of such law, rule or regulation, would be
covered under Insuring Agreement A, E or F.
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F.
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Loss of Property while in the custody of any Security Company, unless such loss is
covered under this Bond and is in excess of the amount recovered or received by the Insured
under (1) the Insureds contract with such Security Company, and (2) insurance or indemnity
of any kind carried by such Security Company for the benefit of, or otherwise available to,
users of its service, in which case this Bond shall cover only such excess, subject to the
applicable Limit of Liability and Deductible Amount.
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G.
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Potential income, including but not limited to interest and dividends, not realized by
the Insured because of a loss covered under this Bond, except when covered under Insuring
Agreement H.
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H.
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Loss in the form of (1) damages of any type for which the Insured is legally liable,
except direct compensatory damages, or (2) taxes, fines, or penalties, including without
limitation two-thirds of treble damage awards pursuant to judgments under any statute or
regulation.
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I.
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Loss resulting from the surrender of Property away from an office of the Insured as a
result of a threat
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(1)
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to do bodily harm to any person, except loss of Property in transit in the
custody of any person acting as messenger as a result of a threat to do bodily harm to
such person, if the Insured had no knowledge of such threat at the time such transit was
initiated, or
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(2)
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to do damage to the premises or Property of the Insured, unless such loss is
otherwise covered under Insuring Agreement A.
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J.
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All costs, fees and other expenses incurred by the Insured in establishing the
existence of or amount of loss covered under this Bond, except to the extent certain audit
expenses are covered under Insuring Agreement B.
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K.
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Loss resulting from payments made to or withdrawals from any account, involving funds
erroneously credited to such account, unless such loss is otherwise covered under Insuring
Agreement A.
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L.
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Loss resulting from uncollectible Items of Deposit which are drawn upon a financial
institution outside the United States of America, its territories and possessions, or
Canada.
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M.
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Loss resulting from the Dishonest or Fraudulent Acts, Theft, or other acts or omissions
of an Employee primarily engaged in the sale of shares issued by an Investment Company to
persons other than (1) a person registered as a broker under the Securities Exchange Act of
1934 or (2) an accredited investor as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, which is not an individual.
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N.
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Loss resulting from the use of credit, debit, charge, access, convenience,
identification, cash management or other cards, whether such cards were issued or purport
to have been issued by the Insured or by anyone else, unless such loss is otherwise covered
under Insuring Agreement A.
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O.
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Loss resulting from any purchase, redemption or exchange of securities issued by an
Investment Company or other Insured, or any other instruction, request, acknowledgement,
notice or transaction involving securities issued by an Investment Company or other Insured
or the dividends in respect thereof, when any of the foregoing is requested, authorized or
directed or purported to be requested, authorized or directed by voice over the telephone
or by Electronic Transmission, unless such loss is otherwise covered under Insuring
Agreement A or Insuring Agreement I.
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P.
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Loss resulting from any Dishonest or Fraudulent Act or Theft committed by an Employee
as defined in Section 1.I(2), unless such loss (1) could not have been reasonably
discovered by the due diligence of the Insured at or prior to the time of acquisition by
the Insured of the assets acquired from a predecessor, and (2) arose out of a lawsuit or
valid claim brought against the Insured by a person unaffiliated with the Insured or with
any person affiliated with the Insured.
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Q.
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Loss resulting from the unauthorized entry of data into, or the deletion or destruction
of data in, or the change of data elements or programs within, any Computer System, unless
such loss is otherwise covered under Insuring Agreement A.
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SECTION 3. ASSIGNMENT OF RIGHTS
Upon payment to the Insured hereunder for any loss, the Underwriter shall be subrogated to the
extent of such payment to all of the Insureds rights and claims in connection with such loss;
provided, however,
that the Underwriter shall not be subrogated to any such rights or claims one
named Insured under this Bond may have against another named Insured under this Bond. At the
request of the Underwriter, the Insured shall execute all assignments or other documents and
take such action as the Underwriter may deem necessary or desirable to secure and perfect such
rights and claims, including the execution of documents necessary to enable the Underwriter to
bring suit in the name of the Insured.
Assignment of any rights or claims under this Bond shall not bind the Underwriter without the
Underwriters written consent.
SECTION 4. LOSSNOTICEPROOFLEGAL PROCEEDINGS
This Bond is for the use and benefit only of the Insured and the Underwriter shall not be liable
hereunder for loss sustained by anyone other than the Insured, except that if the Insured
includes such other loss in the Insureds proof of
loss, the Underwriter shall consider its liability therefor. As soon as practicable and not
more than sixty (60) days after discovery of any loss covered hereunder, the Insured shall give
the Underwriter written notice thereof and, as soon as practicable and within one year after
such discovery, shall also furnish to the Underwriter affirmative proof of loss with full
particulars. The Underwriter may extend the sixty day notice period or the one year proof of
loss period if the Insured requests an extension and shows good cause therefor.
See also General Agreement C (Court Costs and Attorneys Fees).
The Underwriter shall not be liable hereunder for loss of Securities unless each of the
Securities is identified in such proof of loss by a certificate or bond number or by such
identification means as the Underwriter may require. The Underwriter shall have a reasonable
period after receipt of a proper affirmative proof of loss within which to investigate the
claim, but where the loss is of Securities and is clear and undisputed, settlement shall be made
within forty-eight (48) hours even if the loss involves Securities of which duplicates may be
obtained.
The Insured shall not bring legal proceedings against the Underwriter to recover any loss
hereunder prior to sixty (60) days after filing such proof of loss or subsequent to twenty-four
(24) months after the discovery of such loss or, in the case of a legal proceeding to recover
hereunder on account of any judgment against the Insured in or settlement of any suit mentioned
in General Agreement C or to recover court costs or attorneys fees paid in any such suit,
twenty-four (24) months after the date of the final judgment in or settlement of such suit. If
any limitation in this Bond is prohibited by any applicable law, such limitation shall be deemed
to be amended to be equal to the minimum period of limitation permitted by such law.
Notice hereunder shall be given to Manager, Professional Liability Claims, ICI Mutual Insurance
Company, P.O. Box 730, Burlington, Vermont 05402-0730.
SECTION 5. DISCOVERY
For all purposes under this Bond, a loss is discovered, and discovery of a loss occurs, when the
Insured
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(1)
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becomes aware of facts, or
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(2)
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receives notice of an actual or potential claim by a third party which alleges that
the Insured is liable under circumstances,
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which would cause a reasonable person to assume that loss covered by this Bond has been or is
likely to be incurred even though the exact amount or details of loss may not be known.
SECTION 6. VALUATION OF PROPERTY
For the purpose of determining the amount of any loss hereunder, the value of any Property shall
be the market value of such Property at the close of business on the first business day before
the discovery of such loss; except that
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(1)
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the value of any Property replaced by the Insured prior to the payment of a claim
therefor shall be the actual market value of such Property at the time of replacement, but
not in excess of the market value of such Property on the first business day before the
discovery of the loss of such Property;
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(2)
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the value of Securities which must be produced to exercise subscription, conversion,
redemption or deposit privileges shall be the market value of such privileges immediately
preceding the expiration thereof if the loss of such Securities is not discovered until
after such expiration, but if there is no quoted or other ascertainable market
price for such Property or privileges referred to in clauses (1) and (2), their value shall
be fixed by agreement between the parties or by arbitration before an arbitrator or
arbitrators acceptable to the parties; and
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(3)
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the value of books of accounts or other records used by the Insured in the conduct of
its business shall be limited to the actual cost of blank books, blank pages or other
materials if the books or records are reproduced plus the cost of labor for the
transcription or copying of data furnished by the Insured for reproduction.
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SECTION 7. LOST SECURITIES
The maximum liability of the Underwriter hereunder for lost Securities shall be the payment for,
or replacement of, such Securities having an aggregate value not to exceed the applicable Limit
of Liability. If the Underwriter shall make payment to the Insured for any loss of securities,
the Insured shall assign to the Underwriter all of the Insureds right, title and interest in
and to such Securities. In lieu of such payment, the Underwriter may, at its option, replace
such lost Securities, and in such case the Insured shall cooperate to effect such replacement.
To effect the replacement of lost Securities, the Underwriter may issue or arrange for the
issuance of a lost instrument bond. If the value of such Securities does not exceed the
applicable Deductible Amount (at the time of the discovery of the loss), the Insured will pay
the usual premium charged for the lost instrument bond and will indemnify the issuer of such
bond against all loss and expense that it may sustain because of the issuance of such bond.
If the value of such Securities exceeds the applicable Deductible Amount (at the time of
discovery of the loss), the Insured will pay a proportion of the usual premium charged for the
lost instrument bond, equal to the percentage that the applicable Deductible Amount bears to the
value of such Securities upon discovery of the loss, and will indemnify the issuer of such bond
against all loss and expense that
is not recovered from the Underwriter under the terms and conditions of this Bond, subject to
the applicable Limit of Liability.
SECTION 8. SALVAGE
If any recovery is made, whether by the Insured or the Underwriter, on account of any loss
within the applicable Limit of Liability hereunder, the Underwriter shall be entitled to the
full amount of such
recovery to reimburse the Underwriter for all amounts paid hereunder with
respect to such loss. If any recovery is made, whether by the Insured or the Underwriter, on
account of any loss in excess of the applicable Limit of Liability hereunder plus the Deductible
Amount applicable to such loss from any source other than suretyship, insurance, reinsurance,
security or indemnity taken by or for the benefit of the Underwriter, the amount of such
recovery, net of the actual costs and expenses of recovery, shall be applied to reimburse the
Insured in full for the portion of such loss in excess of such Limit of Liability, and the
remainder, if any, shall be paid first to reimburse the Underwriter for all amounts paid
hereunder with respect to such loss and then to the Insured to the extent of the portion of such
loss within the Deductible Amount. The Insured shall execute all documents which the
Underwriter deems necessary or desirable to secure to the Underwriter the rights provided for
herein.
SECTION 9. NON-REDUCTION AND NON-ACCUMULATION OF LIABILITY AND TOTAL LIABILITY
Prior to its termination, this Bond shall continue in force up to the Limit of Liability for
each Insuring Agreement for each Single Loss, notwithstanding any previous loss (other than such
Single Loss) for which the Underwriter may have paid or be liable to pay hereunder; PROVIDED,
however, that regardless of the number of years this Bond shall continue in force and the number
of premiums which shall be payable or paid, the liability of the Underwriter under this Bond
with respect to any Single Loss shall be limited to the applicable Limit of Liability
irrespective of the total amount of such Single Loss and shall not be cumulative in amounts from
year to year or from period to period.
SECTION 10. MAXIMUM LIABILITY OF UNDERWRITER; OTHER BONDS OR POLICIES
The maximum liability of the Underwriter for any Single Loss covered by any Insuring Agreement
under this Bond shall be the Limit of Liability applicable to such Insuring Agreement, subject
to the applicable Deductible Amount and the other provisions of this Bond. Recovery for any
Single Loss may not be made under more than one Insuring Agreement. If any Single Loss covered
under this Bond is recoverable or recovered in whole or in part because of an unexpired
discovery period under any other bonds or policies issued by the Underwriter to the Insured or
to any predecessor in interest of the Insured, the maximum liability of the Underwriter shall be
the greater of either (1) the applicable Limit of Liability under this Bond, or (2) the maximum
liability of the Underwriter under such other bonds or policies.
SECTION 11. OTHER INSURANCE
Notwithstanding anything to the contrary herein, if any loss covered by this Bond shall also be
covered by other insurance or suretyship for the benefit of the Insured, the Underwriter shall
be liable hereunder only for the portion of such loss in excess of the amount recoverable under
such other insurance or suretyship, but not exceeding the applicable Limit of Liability of this
Bond.
SECTION 12. DEDUCTIBLE AMOUNT
The Underwriter shall not be liable under any Insuring Agreement unless the amount of the loss
covered thereunder, after deducting the net amount of all reimbursement and/or recovery received
by the Insured with respect to such loss (other than from any other bond, suretyship or
insurance policy or as an advance by the Underwriter hereunder) shall exceed the applicable
Deductible Amount; in such case the
Underwriter shall be liable only for such excess, subject to
the applicable Limit of Liability and the other terms of this Bond.
No Deductible Amount shall apply to any loss covered under Insuring Agreement A sustained by any
Investment Company named as an Insured.
SECTION 13. TERMINATION
The Underwriter may terminate this Bond as to any Insured or all Insureds only by written notice
to such Insured or Insureds and, if this Bond is terminated as to any Investment Company, to
each such Investment Company terminated thereby and to the Securities and Exchange Commission,
Washington, D.C., in all cases not less than sixty (60) days prior to the effective date of
termination specified in such notice.
The Insured may terminate this Bond only by written notice to the Underwriter not less than
sixty (60) days prior to the effective date of the termination specified in such notice.
Notwithstanding the foregoing, when the Insured terminates this Bond as to any Investment
Company, the effective date of termination shall be not less than sixty (60) days from the date
the Underwriter provides written notice of the termination to each such Investment Company
terminated thereby and to the Securities and Exchange Commission, Washington, D.C.
This Bond will terminate as to any Insured that is a Non-Fund immediately and without notice
upon (1) the takeover of such Insureds business by any State or Federal official or agency, or
by any receiver or liquidator, or (2) the filing of a petition under any State or Federal
statute relative to bankruptcy or reorganization of the Insured, or assignment for the benefit
of creditors of the Insured.
Premiums are earned until the effective date of termination. The Underwriter shall refund the
unearned premium computed at short rates in accordance with the Underwriters standard short
rate cancellation tables if this Bond is terminated by the Insured or pro rata if this Bond is
terminated by the Underwriter.
Upon the detection by any Insured that an Employee has committed any Dishonest or Fraudulent
Act(s) or Theft, the Insured shall immediately remove such Employee from a position that may
enable such Employee to cause the Insured to suffer a loss by any subsequent Dishonest or
Fraudulent Act(s) or Theft. The Insured, within two (2) business days of such detection, shall
notify the Underwriter with full and complete particulars of the detected Dishonest or
Fraudulent Act(s) or Theft.
For purposes of this section, detection occurs when any partner, officer, or supervisory
employee of any Insured, who is not in collusion with such Employee, becomes aware that the
Employee has committed any Dishonest or Fraudulent Act(s) or Theft.
This Bond shall terminate as to any Employee by written notice from the Underwriter to each
Insured and, if such Employee is an Employee of an Insured Investment Company, to the Securities
and Exchange Commission, in all cases not less than sixty (60) days prior to the effective date
of termination specified in such notice.
SECTION 14. RIGHTS AFTER TERMINATION
At any time prior to the effective date of termination of this Bond as to any Insured, such
Insured may, by written notice to the Underwriter, elect to purchase the right under this Bond
to an additional period
of twelve (12) months within which to discover loss sustained by such
Insured prior to the effective date of such termination and shall pay an additional premium
therefor as the Underwriter may require.
Such additional discovery period shall terminate immediately and without notice upon the
takeover of such Insureds business by any State or Federal official or agency, or by any
receiver or liquidator. Promptly after such termination the Underwriter shall refund to the
Insured any unearned premium.
The right to purchase such additional discovery period may not be exercised by any State or
Federal official or agency, or by any receiver or liquidator, acting or appointed to take over
the Insureds business.
SECTION 15. CENTRAL HANDLING OF SECURITIES
The Underwriter shall not be liable for loss in connection with the central handling of
securities within the systems established and maintained by any Depository (Systems), unless
the amount of such loss exceeds the amount recoverable or recovered under any bond or policy or
participants fund insuring the Depository against such loss (the Depositorys Recovery); in
such case the Underwriter shall be liable hereunder only for the Insureds share of such excess
loss, subject to the applicable Limit of Liability, the Deductible Amount and the other terms of
this Bond.
For determining the Insureds share of such excess loss, (1) the Insured shall be deemed to have
an interest in any certificate representing any security included within the Systems equivalent
to the interest the Insured then has in all certificates representing the same security included
within the Systems; (2) the Depository shall have reasonably and fairly apportioned the
Depositorys Recovery among all those having an interest as recorded by appropriate entries in
the books and records of the Depository in Property involved in such loss, so that each such
interest shall share in the Depositorys Recovery in the ratio that the value of each such
interest bears to the total value of all such interests; and (3) the Insureds share of such
excess loss shall be the amount of the Insureds interest in such Property in excess of the
amount(s) so apportioned to the Insured by the Depository.
This Bond does not afford coverage in favor of any Depository or Exchange or any nominee in
whose name is registered any security included within the Systems.
SECTION 16. ADDITIONAL COMPANIES INCLUDED AS INSURED
If more than one entity is named as the Insured:
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A.
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the total liability of the Underwriter hereunder for each Single Loss shall not exceed
the Limit of Liability which would be applicable if there were only one named Insured,
regardless of the number of Insured entities which sustain loss as a result of such Single
Loss,
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B.
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the Insured first named in Item 1 of the Declarations shall be deemed authorized to
make, adjust, and settle, and receive and enforce payment of, all claims hereunder as the
agent of each other Insured for such purposes and for the giving or receiving of any notice
required or permitted to be given hereunder; provided, that the Underwriter shall promptly
furnish each named Insured Investment Company with (1) a copy of this Bond and any
amendments thereto, (2) a copy of each formal filing of a claim hereunder by any other
Insured, and (3) notification of the terms of the settlement of each such claim prior to
the execution of such settlement,
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C.
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the Underwriter shall not be responsible or have any liability for the proper
application by the Insured first named in Item 1 of the Declarations of any payment made
hereunder to the first named Insured,
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D.
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for the purposes of Sections 4 and 13, knowledge possessed or discovery made by any
partner, officer or supervisory Employee of any Insured shall constitute knowledge or
discovery by every named Insured,
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E.
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if the first named Insured ceases for any reason to be covered under this Bond, then
the Insured next named shall thereafter be considered as the first named Insured for the
purposes of this Bond, and
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F.
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each named Insured shall constitute the Insured for all purposes of this Bond.
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SECTION 17. NOTICE AND CHANGE OF CONTROL
Within thirty (30) days after learning that there has been a change in control of an Insured by
transfer of its outstanding voting securities the Insured shall give written notice to the
Underwriter of:
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A.
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the names of the transferors and transferees (or the names of the beneficial owners if
the voting securities are registered in another name), and
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B.
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the total number of voting securities owned by the transferors and the transferees (or
the beneficial owners), both immediately before and after the transfer, and
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C.
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the total number of outstanding voting securities.
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As used in this Section, control means the power to exercise a controlling influence over the
management or policies of the Insured.
SECTION 18. CHANGE OR MODIFICATION
This Bond may only be modified by written Rider forming a part hereof over the signature of the
Underwriters authorized representative. Any Rider which modifies the coverage provided by
Insuring Agreement A, Fidelity, in a manner which adversely affects the rights of an Insured
Investment Company shall not become effective until at least sixty (60) days after the
Underwriter has given written notice thereof to the Securities and Exchange Commission,
Washington, D.C., and to each Insured Investment Company affected thereby.
IN WITNESS WHEREOF, the Underwriter has caused this Bond to be executed on the Declarations Page.
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 1
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INSURED
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BOND NUMBER
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Highland Floating Rate Fund, LLC
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04704107B
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EFFECTIVE DATE
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BOND PERIOD
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AUTHORIZED REPRESENTATIVE
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May 2, 2007
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May 2, 2007 to July 31, 2008
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/s/ Maggie Sullivan
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In consideration of the premium charged for this Bond, it is hereby understood and agreed that Item
1 of the Declarations, Name of Insured, shall include the following:
Highland Floating Rate Fund, LLC
Highland Corporate Opportunities Fund
Highland Credit Strategies Fund
Highland Distressed Opportunities, Inc.
Highland Institutional Floating Rate Income Fund
Highland Floating Rate Advantage Fund
Highland Floating Rate Fund
Prospect Street High Income Portfolio, Inc.
Prospect Street Income Shares Inc.
Restoration Opportunities Fund
Highland Funds I, a series fund consisting of:
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¡
Highland Equity Opportunities Fund
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¡
Highland High Income Fund
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¡
Highland Income Fund
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Except as above stated, nothing herein
shall be held to alter, waive or extend any of the terms of this Bond.
RN1.0-00 (1/02)
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 2
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INSURED
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BOND NUMBER
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Highland Floating Rate Fund, LLC
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04704107B
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EFFECTIVE DATE
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BOND PERIOD
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AUTHORIZED REPRESENTATIVE
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May 2, 2007
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May 2, 2007 to July 31, 2008
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/
s
/
Maggie Sullivan
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In consideration of the premium charged for this Bond, it is hereby understood and agreed that
notwithstanding Section 2.Q of this Bond, this Bond is amended by adding an additional Insuring
Agreement J as follows:
J. COMPUTER SECURITY
Loss (including loss of Property) resulting directly from Computer Fraud;
provided
, that
the Insured has adopted in writing and generally maintains and follows during the Bond Period all
Computer Security Procedures. The isolated failure of the Insured to maintain and follow a
particular Computer Security Procedure in a particular instance will not preclude coverage under
this Insuring Agreement, subject to the specific exclusions herein and in the Bond.
1.
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Definitions
. The following terms used in this Insuring Agreement shall have
the following meanings:
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a.
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Authorized User means any person or entity designated by the Insured (through
contract, assignment of User Identification, or otherwise) as authorized to use a
Covered Computer System, or any part thereof. An individual who invests in an Insured
Fund shall not be considered to be an Authorized User solely by virtue of being an
investor.
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b.
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Computer Fraud means the unauthorized entry of data into, or the deletion or
destruction of data in, or change of data elements or programs within, a Covered
Computer System which:
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(1)
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is committed by any Unauthorized Third Party anywhere, alone or in
collusion with other Unauthorized Third Parties;
and
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(2)
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is committed with the conscious manifest intent (a) to cause the Insured
to sustain a loss,
and
(b) to obtain financial benefit for the perpetrator
or any other person;
and
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(3)
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causes (x) Property to be transferred, paid or delivered;
or
(y)
an account of the Insured, or of its customer, to be added, deleted, debited or
credited;
or
(z) an unauthorized or fictitious account to be debited or
credited.
|
|
c.
|
|
Computer Security Procedures means procedures for prevention of unauthorized
computer access and use and administration of computer access and use as provided in
writing to the Underwriter.
|
|
|
d.
|
|
Covered Computer System means any Computer System as to which the Insured has
possession, custody and control.
|
|
|
e.
|
|
Unauthorized Third Party means any person or entity that, at the time of the
Computer Fraud, is not an Authorized User.
|
|
|
f.
|
|
User Identification means any unique user name (
i.e.
, a series of characters)
that is assigned to a person or entity by the Insured.
|
2.
|
|
Exclusions
. It is further understood and agreed that this Insuring Agreement J
shall not cover:
|
|
a.
|
|
Any loss covered under Insuring Agreement A, Fidelity, of this Bond;
and
|
|
|
b.
|
|
Any loss resulting directly or indirectly from Theft or misappropriation of
confidential or proprietary information, material or data (including but not limited to
trade secrets, computer programs or customer information);
and
|
|
|
c.
|
|
Any loss resulting from the intentional failure to adhere to one or more
Computer Security Procedures;
and
|
|
|
d.
|
|
Any loss resulting from a Computer Fraud committed by or in collusion with:
|
|
(1)
|
|
any Authorized User (whether a natural person or an entity);
or
|
|
|
(2)
|
|
in the case of any Authorized User which is an entity, (a) any
director, officer, partner, employee or agent of such Authorized User, or
(b) any entity which controls, is controlled by, or is under common control
with such Authorized User (Related Entity), or (c) any director, officer,
partner, employee or agent of such Related Entity;
or
|
|
|
(3)
|
|
in the case of any Authorized User who is a natural person, (a)
any entity for which such Authorized User is a director, officer, partner,
employee or agent (Employer Entity), or (b) any director, officer,
partner, employee or agent of such Employer Entity, or (c) any entity which
controls, is controlled by, or is under common control with such Employer
Entity (Employer-Related Entity), or (d) any director, officer, partner,
employee or agent of such Employer-Related Entity;
and
|
|
e.
|
|
Any loss resulting from physical damage to or destruction of any Covered
Computer System, or any part thereof, or any data, data elements or media associated
therewith;
and
|
|
|
f.
|
|
Any loss resulting from Computer Fraud committed by means of wireless access to
any Covered Computer System, or any part thereof, or any data, data elements or media
associated therewith;
and
|
|
|
g.
|
|
Any loss not directly and proximately caused by Computer Fraud (including,
without limitation, disruption of business and extra expense);
and
|
|
|
h.
|
|
Payments made to any person(s) who has threatened to deny or has denied
authorized access to a Covered Computer System or otherwise has threatened to disrupt
the business of the Insured.
|
For purposes of this Insuring Agreement, Single Loss, as defined in Section 1.X of this Bond,
shall also include all loss caused by Computer Fraud(s) committed by one person, or in which one
person is implicated, whether or not that person is specifically identified. A series of losses
involving unidentified individuals, but arising from the same method of operation, may be deemed by
the Underwriter to involve the same individual and in that event shall be treated as a Single Loss.
It is further understood and agreed that nothing in this Rider shall affect the exclusion set forth
in Section 2.0 of this Bond.
Coverage under this Insuring Agreement shall terminate upon termination of this Bond. Coverage
under this Insuring Agreement may also be terminated without terminating this Bond as an entirety:
|
(a)
|
|
by written notice from the Underwriter not less than sixty (60) days prior to
the effective date of termination specified in such notice; or
|
|
|
(b)
|
|
immediately by written notice from the Insured to the Underwriter.
|
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
RN19.0-04 (12/03)
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 3
|
|
|
|
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
|
|
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
|
|
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
|
|
|
|
May 2, 2007
|
|
May 2, 2007 to July 31, 2008
|
|
/s/ Maggie Sullivan
|
In consideration of the premium charged for this Bond, it is hereby understood and agreed that the
Deductible Amount for Insuring Agreement E, Forgery or Alteration, and Insuring Agreement F,
Securities, shall not apply with respect to loss through Forgery of a signature on the following
documents:
|
(1)
|
|
letter requesting redemption of $50,000 or less payable by check to the shareholder
of record and addressed to the address of record; or,
|
|
|
(2)
|
|
letter requesting redemption of $50,000 or less by wire transfer to the record
shareholders bank account of record; or
|
|
|
(3)
|
|
written request to a trustee or custodian for a Designated Retirement Account (DRA)
which holds shares of an Insured Fund, where such request (a) purports to be from or at
the instruction of the Owner of such DRA, and (b) directs such trustee or custodian to
transfer $50,000 or less from such DRA to a trustee or custodian for another DRA
established for the benefit of such Owner;
|
provided
, that the Limit of Liability for a Single Loss as described above shall be $50,000
and that the Insured shall bear 20% of each such loss. This Rider shall not apply in the case of
any such Single Loss which exceeds $50,000; in such case the Deductible Amounts and Limits of
Liability set forth in Item 3 of the Declarations shall control.
For purposes of this Rider:
|
(A)
|
|
Designated Retirement Account means any retirement plan or account
described or qualified under the Internal Revenue Code of 1986, as amended, or a
subaccount thereof.
|
|
|
(B)
|
|
Owner means the individual for whose benefit the DRA, or a subaccount
thereof, is established.
|
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
RN27.0-02 (1/02)
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 4
|
|
|
|
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
|
|
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
|
|
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
|
|
|
|
May 2, 2007
|
|
May 2, 2007 to July 31, 2008
|
|
/s/ Maggie Sullivan
|
In consideration of the premium charged for this Bond, it is hereby understood and agreed that this
Bond does not cover any loss resulting from or in connection with the acceptance of any Third Party
Check, unless
|
(1)
|
|
such Third Party Check is used to open or increase an account which is registered
in the name of one or more of the payees on such Third Party Check, and
|
|
|
(2)
|
|
reasonable efforts are made by the Insured, or by the entity receiving Third Party
Checks on behalf of the Insured, to verify all endorsements on all Third Party Checks
made payable in amounts greater than $100,000 (provided, however, that the isolated
failure to make such efforts in a particular instance will not preclude coverage,
subject to the exclusions herein and in the Bond),
|
and then only to the extent such loss is otherwise covered under this Bond.
For purposes of this Rider, Third Party Check means a check made payable to one or more parties
and offered as payment to one or more other parties.
It is further understood and agreed that notwithstanding anything to the contrary above or
elsewhere in the Bond, this Bond does not cover any loss resulting from or in connection with the
acceptance of a Third Party Check where:
|
(1)
|
|
any payee on such Third Party Check reasonably appears to be a corporation or other
entity; or
|
|
|
(2)
|
|
such Third Party Check is made payable in an amount greater than $100,000 and does
not include the purported endorsements of all payees on such Third Party Check.
|
It is further understood and agreed that this Rider shall not apply with respect to any coverage
that may be available under Insuring Agreement A, Fidelity.
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
RN30.0-01 (1/02)
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 5
|
|
|
|
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
|
|
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
|
|
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
|
|
|
|
May 2, 2007
|
|
May 2, 2007 to July 31, 2008
|
|
/s/ Maggie Sullivan
|
In consideration for the premium charged for this Bond, it is hereby understood and agreed that
notwithstanding anything to the contrary in this Bond (including any other rider thereto), this
Bond shall not cover any loss (including, without limitation, any loss of Property) caused by,
resulting from, or in any way in connection with any Act of Terrorism (including, without
limitation, any loss caused by, resulting from, or in any way in connection with any act or
omission by or on behalf of any Insured in detecting, preventing, responding to, or recovering
from, or in failing to detect, prevent, respond to, or recover from, any Act of Terrorism).
For purposes of this endorsement, an Act of Terrorism means any activity that (1) involves a
violent act or the unlawful use of force or an unlawful act dangerous to human life, tangible or
intangible property or infrastructure, or a threat thereof; and (2) appears to be intended to (a)
intimidate or coerce a civilian population, or (b) disrupt any segment of the economy of a
government de jure or de facto, state, or country; or (c) overthrow, influence, or affect the
conduct or policy of any government de jure or de facto by intimidation or coercion; or (d) affect
the conduct of a government de jure or de facto by mass destruction, assassination, kidnapping or
hostage taking.
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
RN46.0-00 (4/02)
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 6
|
|
|
|
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
|
|
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
|
|
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
|
|
|
|
May 2, 2007
|
|
May 2, 2007 to July 31, 2008
|
|
/s/ Maggie Sullivan
|
In consideration of the premium charged for this Bond, it is hereby understood and agreed that
notwithstanding anything to the contrary in this Bond (including Insuring Agreement I), this Bond
does not cover loss caused by a Phone/Electronic Transaction requested:
|
|
|
by voice over the telephone;
or
|
|
|
|
|
by use of an automated telephone tone or voice response system;
or
|
|
|
|
|
by Telefacsimile;
or
|
|
|
|
|
by transmissions over the Internet (including any connected or associated intranet
or extranet) or utilizing modem or similar connections;
or
|
|
|
|
|
by wireless device transmissions over the Internet (including any connected or
associated intranet or extranet),
|
except insofar as such loss is covered under Insuring Agreement A Fidelity of this Bond.
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
RN48.0-03 (12/03)
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 7
|
|
|
|
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
|
|
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
|
|
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
|
|
|
|
May 2, 2007
|
|
May 2, 2007 to July 31, 2008
|
|
/s/ Maggie Sullivan
|
Most property and casualty insurers, including ICI Mutual Insurance Company (ICI Mutual), are
subject to the requirements of the Terrorism Risk Insurance Act of 2002, as amended (the Act).
The Act establishes a Federal insurance backstop under which ICI Mutual and these other insurers
will be partially reimbursed for future
insured losses
resulting from certified
acts of
terrorism.
(Each of these
bolded terms
is defined by the Act.) The Act also places certain
disclosure and other obligations on ICI Mutual and these other insurers.
Pursuant to the Act, any future losses to ICI Mutual caused by certified
acts of terrorism
will
be partially reimbursed by the United States government under a formula established by the Act.
Under this formula, the United States government will reimburse ICI Mutual for 90% of ICI Mutuals
insured losses
in excess of a statutorily established deductible until total insured losses of
all participating insurers reach $100 billion. If total insured losses of all property and
casualty insurers reach $100 billion during any applicable period, the Act provides that the
insurers will not be liable under their policies for their portions of such losses that exceed such
amount. Amounts otherwise payable under this bond may be reduced as a result.
This bond has no express exclusion for
acts of terrorism.
However, coverage under this bond
remains subject to all applicable terms, conditions and limitations of the bond (including
exclusions) that are permissible under the Act. The portion of the premium that is attributable to
any coverage potentially available under the bond for
acts of terrorism
is one percent (1%).
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 8
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
May 23, 2007
|
|
May 2, 2007 to July 31, 2008
|
|
/S/ John T. Mulligan
|
|
In consideration of the premium charged for this Bond, it is hereby understood and agreed that
Item 1 of the Declarations, Name of Insured, shall include the following:
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 9
|
|
|
|
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
|
|
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
|
|
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
|
|
|
|
March 10, 2008
|
|
May 2, 2007 to July 31, 2008
|
|
/s/ John T. Mulligan
|
In consideration of the premium charged for this Bond, it is hereby understood and agreed that the
Limit of Liability for the following Insuring Agreements is hereby amended, effective March 10,
2008, to be:
|
|
|
|
|
|
|
|
|
|
|
Limit of Liability
|
Insuring Agreement A-
|
|
FIDELITY
|
|
$
|
7,525,000
|
|
Insuring Agreement C-
|
|
ON PREMISES
|
|
$
|
7,525,000
|
|
Insuring Agreement D-
|
|
IN TRANSIT
|
|
$
|
7,525,000
|
|
Insuring Agreement E-
|
|
FORGERY OR ALTERATION
|
|
$
|
7,525,000
|
|
Insuring Agreement F-
|
|
SECURITIES
|
|
$
|
7,525,000
|
|
Insuring Agreement G-
|
|
COUNTERFEIT CURRENCY
|
|
$
|
7,525,000
|
|
Insuring Agreement J-
|
|
COMPUTER SECURITY
|
|
$
|
7,525,000
|
|
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
RN4.0-02 (1/02)
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 10
|
|
|
|
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
|
|
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
|
|
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
|
|
|
|
January 17, 2008
|
|
May 2, 2007 to July 31, 2008
|
|
/s/ John T. Mulligan
|
In consideration of the premium charged for this Bond, it is hereby understood and agreed that the
name of the Insured identified in Item 1 of the Declarations, Name of Insured, as
Restoration
Opportunities Fund is changed to:
Highland Special Situations Fund
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
RN8.0-00 (1/02)
ICI MUTUAL INSURANCE COMPANY
INVESTMENT COMPANY BLANKET BOND
RIDER NO. 11
|
|
|
|
|
|
|
|
|
|
INSURED
|
|
|
|
BOND NUMBER
|
|
|
|
|
|
Highland Floating Rate Fund, LLC
|
|
|
|
04704107B
|
|
|
|
|
|
EFFECTIVE DATE
|
|
BOND PERIOD
|
|
AUTHORIZED REPRESENTATIVE
|
|
|
|
|
|
|
|
May 2, 2007 to July 31, 2008
|
|
/s/ John T. Mulligan
|
In consideration of the premium charged for this Bond, and notwithstanding Item 1 of the
Declarations, Name of Insured, or any other Rider to this Bond, it is hereby understood and agreed
that the following shall not be Insureds under this Bond as of the effective date indicated:
|
|
|
|
|
EFFECTIVE DATE
|
Highland Floating Rate Fund, LLC
|
|
March 26, 2008
|
Highland Corporate Opportunities Fund
|
|
September 26, 2007
|
Highland Institutional Floating Rate Income Fund
|
|
May 2, 2007
|
Except as above stated, nothing herein shall be held to alter, waive or extend any of the terms of
this Bond.
RN2.1-00 (1/02)
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