[Federal Register Volume 80, Number 28 (Wednesday, February 11, 2015)]
[Notices]
[Pages 7650-7654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02796]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31448; File No. 812-14407]


NexPoint Credit Strategies Fund, et al.; Notice of Application

February 5, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 17(b) of 
the Investment Company Act of 1940 (the ``Act'') granting an exemption 
from section 17(a) of the Act, and under section 17(d) of the Act and 
rule 17d-1 thereunder permitting certain joint transactions.

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Applicants: NexPoint Credit Strategies Fund (``NHF''), NexPoint 
Residential Trust, Inc. (``NXRT REIT''), Freedom REIT, LLC (``Freedom 
REIT'') (each, a ``Fund,'' and together, the ``Funds''), NexPoint 
Advisors, L.P. (``NHF Adviser''), and NexPoint Real Estate Advisors, 
L.P. (``NXRT Adviser'') (each, an ``Adviser,'' and together, the 
``Advisers''), NexPoint Residential Trust Operating Partnership, L.P. 
(``NXRT OP''), and NexPoint Residential Merger Company, LLC (``NXRT 
LLC'') (collectively, the ``Applicants'').
SUMMARY: Summary of Application: Applicants seek an order to permit NHF 
to transfer certain real estate assets (the ``Multifamily Properties'') 
held by Freedom REIT, NHF's wholly-owned subsidiary, to NXRT REIT, a 
real estate investment trust (``REIT'') and NHF's wholly-owned 
subsidiary, in exchange for NXRT REIT common stock; to permit NHF to 
distribute such common stock to NHF's shareholders; and to permit NXRT 
Adviser to enter into an investment advisory agreement with NXRT REIT.

DATES: Filing Dates: The application was filed on December 22, 2014 and 
amended on February 4, 2015.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on February 25, 2015 and should be accompanied by proof of service 
on the applicants, in the form of an affidavit, or, for lawyers, a 
certificate of service. Pursuant to Rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. The Applicants: c/o David J. 
Harris, Esq., and Thomas J. Friedmann, Esq., Dechert LLP, 1900 K Street 
NW., Washington, DC 20006-6808.

FOR FURTHER INFORMATION CONTACT: Anil K. Abraham, Senior Special 
Counsel, at (202) 551-2614, or James M. Curtis, Branch Chief, at (202) 
551-6712 (Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. NHF was organized as a Delaware statutory trust and is 
registered under the Act as a non-diversified, closed-end management 
investment company. NHF has elected to be treated as a regulated 
investment company (``RIC'') under Subchapter M of the Internal Revenue 
Code of 1986, as amended (the ``Code''). NHF's investment objectives 
are to provide both current income and capital appreciation, which it 
seeks to achieve by investing primarily in bonds and other debt 
obligations, including below-investment grade debt obligations, and 
equity.
    2. Freedom REIT, a direct, wholly-owned subsidiary \1\ of NHF, was 
organized on October 12, 2012 as a Delaware limited liability company 
and subsequently elected to be treated as a REIT under section 856 of 
the Code. Freedom REIT is considered a single investment for purposes 
of determining

[[Page 7651]]

NHF's compliance with its RIC diversification requirements and in NHF's 
financial statements pursuant to rule 6-03 under the Securities 
Exchange Act of 1934 (``Exchange Act'').
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    \1\ As defined in section 2(a)(43) of the Act, a ``wholly-owned 
subsidiary'' of a person means a company 95% or more of the 
outstanding voting securities of which are owned by such person, or 
by a company which, within the meaning of this paragraph, is a 
wholly-owned subsidiary of such person.
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    3. NXRT REIT was organized as a Maryland corporation and filed a 
registration statement on Form 10 on September 29, 2014 to register its 
shares under section 12(b) of the Exchange Act. NXRT REIT amended that 
registration statement on November 7, 2014 and January 9, 2015. On the 
effective date of the Spin-Off Transaction (defined below) (``Effective 
Date''), NHF Adviser intends to cause the shares of NXRT REIT to be 
listed on the New York Stock Exchange (``NYSE''). The business 
objectives of NXRT REIT are to: (a) Deliver stable, attractive yields 
and long-term capital appreciation to its shareholders; (b) acquire 
multifamily properties in markets with attractive job growth and 
household formation fundamentals primarily in the southeastern United 
States and Texas; (c) acquire assets significantly below replacement 
costs; (d) implement a value-add program to increase returns to 
shareholders; and (e) own assets that provide lifestyle amenities and 
upgraded living spaces to low and moderate income renters.
    4. NXRT OP was organized as a Delaware limited partnership and is 
wholly-owned by NXRT REIT. NXRT OP was formed solely to implement the 
Spin-Off Transaction and the subsequent operation of NXRT REIT's 
business on a tax-efficient basis.
    5. NXRT LLC was organized as a Delaware limited liability company 
and is wholly-owned by Freedom REIT. NXRT LLC was formed solely to 
implement the Spin-Off Transaction on a tax-efficient basis.
    6. NHF Adviser was organized as a Delaware limited liability 
company and is registered as an investment adviser under the Investment 
Advisers Act of 1940 (``Advisers Act''). NHF Adviser is wholly-owned by 
an affiliate of Highland Capital Management, L.P. (``Highland''). 
Highland is also registered as an investment adviser under the Advisers 
Act. NHF Adviser currently acts as the investment adviser to NHF 
pursuant to an investment advisory agreement (the ``NHF Advisory 
Agreement'') between NHF and NHF Adviser. NHF Adviser employs portfolio 
management team members that currently manage Freedom REIT's portfolio.
    7. NXRT Adviser was organized as a Delaware limited partnership and 
is registered as an investment adviser under the Advisers Act and is a 
wholly-owned subsidiary of NHF Adviser. Following the Spin-Off 
Transaction, NXRT Adviser will serve as the investment adviser to NXRT 
REIT pursuant to an investment advisory agreement (``NXRT Advisory 
Agreement''). Following the Spin-Off Transaction, the portfolio 
management team members that currently manage Freedom REIT's portfolio 
will advise NXRT REIT as employees of NXRT Adviser.
    8. NHF's current prospectus sets forth a non-fundamental policy of 
investing at least 80% of NHF's assets in loans, bonds, debt 
obligations, and structured products under normal market conditions. 
NHF may invest up to 20% of its assets in other types of investments 
(the ``20% Limit''). Accordingly, NHF limits its investment in Freedom 
REIT to 20% of its total assets, or approximately $252 million as of 
December 31, 2014. As of that date, the value of the Multifamily 
Properties held by Freedom REIT was approximately $238 million, or 
approximately 19% of the total assets of NHF. Based on additional 
multifamily properties under contract and expected to close in the 
first quarter of 2015, Freedom REIT is expected to approach the 20% 
Limit in the first quarter of 2015, at which time NHF will be unable to 
make additional investments in Freedom REIT.
    9. Without the consummation of the Spin-Off Transaction, NHF would 
be unable to invest in additional multifamily real estate properties 
for the benefit of its shareholders, and NHF Adviser would likely have 
to liquidate Freedom REIT's Multifamily Properties over time in order 
to maximize shareholder value. NHF Adviser believes the terms that NHF 
would realize in connection with any such liquidation would be 
significantly less favorable to NHF shareholders than if the 
Multifamily Properties were spun-off in the Spin-Off Transaction.
    10. To enable NHF's shareholders to determine whether and to what 
extent they will have exposure to multifamily real estate, the NHF 
Board (``NHF Board''), including a majority of the trustees who are not 
interested persons \2\ (as defined in section 2(a)(19) of the Act) (the 
``Independent Trustees'') of NHF, has approved the Spin-Off 
Transaction, subject to the issuance of the requested order and the 
approval of a majority of the outstanding voting securities (as defined 
in section 2(a)(42) of the Act) of NHF of the NXRT Advisory Agreement. 
If the required approvals are obtained, NHF will cause: (a) Freedom 
REIT to contribute the Multifamily Properties to NXRT LLC; (b) Freedom 
REIT to distribute all of its membership interests in NXRT LLC to NHF; 
and (c) NXRT LLC to merge with NXRT OP, a wholly-owned subsidiary of 
NXRT REIT. NXRT REIT's acquisition of the Multifamily Properties will 
be consistent with its investment goals, policies, and restrictions. 
NHF will distribute all of the NXRT REIT shares on the Effective Date 
to NHF shareholders (with the Freedom REIT's contribution of the 
Multifamily Properties to NXRT LLC, the distribution of the membership 
interests of NXRT LLC to NHF, the merger of NXRT LLC with NXRT OP and 
the execution of the NXRT Advisory Agreement, collectively, the ``Spin-
Off Transaction'').
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    \2\ An ``interested person'' is defined under section 2(a)(19) 
of the Act to include, among other things, ``any affiliated person'' 
of an investment company. Under section 2(a)(3) of the Act, an 
``affiliated person'' of another person means (A) any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5 per centum or more of whose outstanding voting securities of 
such other person; (B) any person 5 per centum or more of whose 
outstanding voting securities are directly or indirectly owned, 
controlled or held with power to vote, by such other person; (C) any 
person directly or indirectly controlling, controlled by, or under 
common control with, such other person; (D) any officer, director, 
partner, copartner, or employee of such other person; (E) if such 
other person is an investment company, any investment adviser 
thereof or any member of an advisory board thereof; and (F) if such 
other person is an unincorporated investment company not having a 
board of directors, the depositor thereof.
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    11. Each NHF shareholder will receive a pro rata distribution of 
NXRT REIT shares based upon the number of NHF shares that each 
shareholder owns on the distribution record date. If such distribution 
had occurred on December 31, 2014, the aggregate fair value of the 
shares of NXRT REIT distributed to NHF shareholders would have been 
$238 million.
    12. The Advisers believe that the Spin-Off Transaction offers the 
most cost-effective and efficient means by which NHF shareholders can 
be given the opportunity to choose for themselves whether, and to what 
extent, they will continue NXRT REIT's multifamily property investment 
strategy by continuing to hold the NXRT REIT shares they receive in the 
Spin-Off Transaction. At the same time, the Spin-Off Transaction 
creates a cost-effective way for NHF shareholders who are not 
interested in having as much exposure to the multifamily real estate 
market to receive immediate liquidity for all or a portion of such 
assets.
    13. The Spin-Off Transaction will not be consummated unless and 
until each of the following approvals is obtained: (a) The NHF Board 
and a majority of the

[[Page 7652]]

Independent Trustees will approve the NXRT Advisory Agreement at an in-
person meeting of the NHF Board that complies with the procedural 
requirements of section 15 of the Act; (b) NHF shareholder approval of 
the NXRT Advisory Agreement will be sought at a special meeting of NHF 
shareholders anticipated to be held in March 2014; and (c) the board of 
directors of NXRT REIT (``NXRT Board''), including a majority of the 
directors who are not interested persons (as defined in section 
2(a)(19) of the Act) (the ``Independent Directors'') of NXRT, will 
ratify and approve the NXRT Advisory Agreement in accordance with the 
requirements of section 15(c) of the Act, and NXRT Adviser and NXRT 
REIT will comply with section 15 of the Act, as provided in the 
Condition below.
    14. The NHF Board, including its Independent Trustees, has 
considered that the Spin-Off Transaction should result in the following 
benefits to NHF shareholders: (a) NXRT REIT shares will be issued to 
investors at a lower transaction cost than is typically the case for a 
newly organized REIT because there will be no underwriting discounts or 
commissions incurred by NHF, NXRT REIT, or any shareholder thereof in 
connection with the Spin-Off Transaction; (b) NHF shareholders will not 
incur incremental investment advisory fees relating to the management 
of the Multifamily Properties as a result of the Spin-Off Transaction, 
neither of the Advisers is entitled to receive, either before or after 
the Spin-Off Transaction, a performance-based incentive fee, 
internalization fee, or any ``break-up'' or termination fees under 
their respective investment advisory contracts and the NXRT Advisory 
Agreement will contain the same terms for reimbursement of 
administrative costs and out-of-pocket expenses incurred by NXRT 
Adviser and its affiliates as are currently in place for NHF and NHF 
Adviser; (c) neither NHF Adviser nor NXRT Adviser will receive any 
compensation other than fees under the NHF Advisory Agreement or the 
NXRT Advisory Agreement in connection with the Spin-Off Transaction; 
(d) although NXRT REIT will not be an investment company regulated 
under the Act, NXRT REIT will commit in its articles of incorporation 
that it will not enter into an investment advisory agreement unless 
that agreement complies with section 15 of the Act and has been 
approved in compliance with section 15(c) of the Act and any applicable 
rules thereunder or published guidance of the Commission or its staff; 
(e) the Independent Directors will not overlap with the Independent 
Trustees; (f) the Spin-Off Transaction is not expected to increase or 
decrease the aggregate net assets of NHF and NXRT REIT; and (g) NHF 
shareholders will be able to maintain, increase or decrease their 
exposure to the multifamily property market by holding, buying, or 
selling, respectively, shares of NXRT REIT.
    15. The NXRT Advisory Agreement will be approved by a majority of 
the NXRT Board, as well as by a majority of the Independent Directors, 
at an in-person meeting called for such purpose. That agreement will 
have an initial term of up to two years, and will continue thereafter 
only if such continuance is approved in accordance with section 15(c) 
of the Act. Any material change in the terms of the NXRT Advisory 
Agreement will require the approval of a majority of the outstanding 
voting securities (as defined in section 2(a)(42) of the Act) of NXRT 
REIT, and the NXRT Advisory Agreement will terminate in the event of 
its assignment (as defined in section 2(a)(4) of the Act). The NXRT 
Advisory Agreement will be terminable by the board or shareholders of 
NXRT REIT at any time on 60 days' notice without penalty. NXRT REIT's 
articles of incorporation will also require that a majority of its 
directors be Independent Directors.
    16. NHF Adviser believes that holding the Multifamily Properties in 
NXRT REIT instead of NHF may benefit shareholders by reducing a 
discount that may be attributable to such assets. NHF shares, like 
shares of many registered closed-end funds, have traded at a discount 
to net asset value (``NAV''). As of January 30, 2015, NHF shares were 
trading at a 14.3% discount to NAV, whereas REIT shares generally trade 
closer to their NAVs than registered closed-end funds such as NHF. 
Based upon historical and current relative trading values in the 
secondary market for REITs and closed-end funds, the Advisers 
anticipate that NXRT REIT common stock will trade at or near its 
implied NAV after the Spin-Off Transaction. If the common stock of NXRT 
REIT trades at its implied NAV following the Spin-Off Transaction, NHF 
shareholders would, in effect, have eliminated the discount on a 
portion of their NHF shares. In addition, the discount at which many 
closed-end fund shares trade limits a closed-end fund's ability to 
raise incremental capital for investment, including investments 
necessary to fund capital expenditures in multifamily properties. NXRT 
REIT may be better able to realize the value of the Multifamily 
Properties than would NHF, absent the Spin-Off Transaction. The 
Applicants believe the Spin-Off Transaction is the most cost-effective 
and efficient way to maximize value to NHF shareholders from the 
Multifamily Properties.
    17. Counsel has advised NXRT REIT that the distribution of shares 
of NXRT REIT to NHF shareholders likely will be a taxable event for NHF 
shareholders, but NHF Adviser estimates that the tax impact of the 
Spin-Off Transaction is likely to be modest. The realization of certain 
taxable gains at NHF are expected to be substantially offset by 
existing capital loss carry-forwards, scheduled to expire starting in 
2015, to the extent that the Multifamily Properties have been held for 
more than one year. Any gain not offset by such capital loss carry-
forwards will be recognizable by NHF shareholders to the extent it 
exceeds undistributed net income. Distributing such gains may permit 
NHF to avoid paying or to reduce federal excise tax on undistributed 
income. The NHF Board, including the Independent Trustees, has 
considered the potential tax consequences of the Spin-Off Transaction 
and has determined that the significant benefits of the Spin-Off 
Transaction outweigh the adverse tax consequences to NHF and its 
shareholders, particularly because such tax consequences are expected 
to be minimal.
    18. The costs of organizing NXRT REIT and effecting the 
distribution of NXRT REIT shares to NHF shareholders, including the 
fees and expenses of counsel and accountants and printing, listing and 
registration fees, the costs of soliciting NHF's shareholders' approval 
of the Transaction, and the costs incurred in connection with this 
Application, are estimated to be approximately $3 million. These 
expenses will be borne ratably by NHF and NXRT REIT, with such expense 
allocations subject to the approval of the Independent Trustees and 
Independent Directors. A portion of this amount represents costs that 
would have been incurred directly or indirectly in the ordinary course 
of operations by NHF. NXRT REIT will incur operating expenses on an 
ongoing basis, including investment advisory fees and legal, auditing, 
transfer agency, and custody expenses that, when aggregated with the 
fees payable by NHF for similar services after the Spin-Off 
Transaction, should be approximately the same as, or slightly higher 
(due to marginal duplication) than, the fees currently payable by NHF 
for such services. Under the terms of the NXRT Advisory Agreement, NXRT 
Adviser will not receive any fees for investment advisory

[[Page 7653]]

services prior to the Effective Date. If the Spin-Off Transaction is 
not completed by March 31, 2015, NHF will be obligated to pay 
approximately $5 million in additional fees and expenses to the Federal 
Home Loan Mortgage Corporation when the mortgages on the Multifamily 
Properties are assigned.

Applicants' Legal Analysis

    1. Applicants request an order under section 17(b) of the Act 
granting an exemption from section 17(a) of the Act and under section 
17(d) of the Act and rule17d-1 thereunder permitting certain joint 
transactions.
    2. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and an affiliated 
person of that investment company. Section 2(a)(3) of the Act defines 
an ``affiliated person'' of another person to include (a) any person 
directly or indirectly owning, controlling, or holding with power to 
vote 5% or more of the outstanding voting securities of the other 
person, (b) any person 5% or more of whose voting securities are 
directly or indirectly owned controlled or held with the power to vote 
by the other person, and (c) any person directly or indirectly 
controlling, controlled by, or under common control with, the other 
person. Each of Freedom REIT and NXRT REIT may be viewed as an 
affiliated person of NHF under section 2(a)(3) because NHF will own, 
directly or indirectly, 100% of the outstanding voting securities of 
each prior to the consummation of the Spin-Off Transaction. Each of 
Freedom REIT and NXRT REIT may also be viewed as an affiliated person 
of NHF to the extent that they may be deemed to be under common control 
by virtue of having investment advisers that are under common control. 
As a result of the affiliation between NHF and each of Freedom REIT and 
NXRT REIT, section 17(a)(1) could be deemed to prohibit (a) Freedom 
REIT's contribution of the Multifamily Properties to NXRT REIT for 
shares issued by NXRT REIT and (b) Freedom REIT's distribution to NHF 
of the NXRT REIT shares, and section 17(a)(2) could be deemed to 
prohibit NXRT REIT from purchasing the Multifamily Properties in 
consideration for shares issued by NXRT REIT.
    3. Applicants request an exemption pursuant to section 17(b) of the 
Act from the provisions of section 17(a) to permit the Applicants to 
effect the Spin-Off Transaction. Section 17(b) authorizes the 
Commission to issue such an exemptive order if the Commission finds 
that the terms of the proposed transaction are fair and reasonable and 
do not involve overreaching on the part of any persons concerned, and 
the proposed transaction is consistent with the policy of each 
registered investment company and the general purposes of the Act.
    4. Applicants assert that the terms of the Spin-Off Transaction, 
including the consideration to be paid or received, are fair and 
reasonable and do not involve overreaching by any person concerned. 
Applicants state that the proposed contribution by Freedom REIT of the 
Multifamily Properties to NXRT REIT in exchange for shares of NXRT REIT 
common stock will not change the fair value of such assets as 
determined by NHF Adviser in accordance with the valuation policies 
established by, and subject to the supervision of, the NHF Board. Such 
valuations will be passed upon by the NHF Board and NXRT REIT Board 
(including the Independent Trustees and Independent Directors, 
respectively, thereon) on a business day to be selected by the NHF 
Board (the ``Valuation Date''). As noted above, it is anticipated that 
such assets will consist largely of the Multifamily Properties, which 
have been held by Freedom REIT, on average, for several fiscal quarters 
and the valuation of which is well understood by NHF Adviser and the 
NHF Board. The shares of NXRT REIT that will be distributed to the NHF 
shareholders pro rata in the Spin-Off Transaction will be valued based 
on the value of NXRT REIT's assets.
    5. The Spin-Off Transaction will be consistent with the investment 
policies of NHF and NXRT REIT, as will be fully disclosed to 
shareholders of NHF in the proxy statement seeking NHF shareholder 
approval of the NXRT Advisory Agreement (``Proxy Statement'') and as 
disclosed by NXRT REIT in its registration statement on Form 10. The 
Proxy Statement that will be used to solicit the approval of NHF's 
shareholders for the NXRT Advisory Agreement will describe the 
investment objectives and policies of NHF and NXRT REIT, the management 
of NXRT REIT, and the terms of the Spin-Off Transaction. The Proxy 
Statement will be used to solicit the approval of NHF's shareholders of 
the Spin-Off Transaction at shareholder meeting to take place following 
the issuance of the requested order. NHF's shareholders will have the 
opportunity to vote after having received all material disclosure 
concerning the NXRT Advisory Agreement. The Spin-Off Transaction will 
not change the underlying assets owned by current NHF shareholders. 
However, following the Spin-Off Transaction certain of such assets, the 
Multifamily Properties, will be held through a REIT not regulated under 
the Act. The remaining assets will continue to be held through NHF, a 
closed-end management investment company regulated under the Act.
    6. The Applicants assert that the proposed Spin-Off Transaction is 
being proposed to benefit NHF and its shareholders. The NHF Board and 
the NXRT Board, including a majority of each's Independent Trustees and 
Independent Directors, respectively, have each determined that 
participation in the Spin-Off Transaction is in the best interests of 
NHF and NXRT REIT, as applicable, and that the interests of the 
existing stockholders of NHF will not be diluted as a result of 
effecting the Spin-Off Transaction. Such findings, and the basis upon 
which the findings were made, will be recorded fully in the minute 
books of NHF and NXRT REIT.
    7. Applicants also seek an order under section 17(d) of the Act and 
rule 17d-1 thereunder. Section 17(d) of the Act and rule 17d-1 
thereunder generally prohibit, among other things, transactions in 
which a registered investment company and any affiliated person of such 
a company may be deemed to be acting jointly and as principal. In 
passing on applications for these orders, rule 17d-1 provides that the 
Commission will consider whether the participation of the investment 
company is consistent with the provisions, policies and purposes of the 
Act, and the extent to which the participation is on a basis different 
from or less advantageous than that of the other participants. 
Applicants request an order pursuant to rule 17d-1 to the extent that 
the participation of the Applicants in the Spin-Off Transaction may be 
deemed to constitute a prohibited joint transaction.
    8. Applicants state that the Spin-Off Transaction will not place 
any of NHF, NXRT REIT or existing NHF shareholders in a position less 
advantageous than that of any other participant in the Spin-Off 
Transaction. The value of NHF's assets transferred to NXRT REIT (and 
the shares of NXRT REIT stock received in return) will be based on 
their fair values as determined by the Advisers and the Boards of the 
Funds on the Valuation Date in accordance with the requirements of the 
Act and pursuant to valuation policies and procedures adopted by the 
Boards of NHF and NXRT REIT. The NXRT REIT shares will be distributed 
to NHF's shareholders, leaving such shareholders in the same investment 
posture immediately following the Spin-Off Transaction as before, 
subject only to the allocation of transaction costs and expenses and 
changes in the market

[[Page 7654]]

prices of the underlying assets subsequent to the Spin-Off Transaction.
    9. Applicants assert that the Spin-Off Transaction is being 
proposed to benefit NHF shareholders. The advisory fees for NXRT REIT 
will be substantially similar to those paid by NHF prior to the Spin-
Off Transaction, and neither Adviser nor any affiliated person of NHF 
or NXRT REIT will receive additional fees on a consolidated basis 
solely as a result of the Spin-Off Transaction. The Board of NHF has 
determined that the prospective benefits to the Advisers would be 
marginal compared to the prospective benefits to NHF shareholders. In 
addition, by consummating the Spin-Off Transaction, NHF would enable 
its shareholders to receive securities without the costs associated 
with a public offering.

Applicants' Condition

    NXRT REIT will commit in its articles of incorporation that it will 
comply with section 15 of the Act as if it were an investment company 
registered under the Act, and that it will not enter into an investment 
advisory agreement unless that agreement complies with section 15 of 
the Act and any applicable rules thereunder or published guidance of 
the Commission or its staff.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-02796 Filed 2-10-15; 8:45 am]
BILLING CODE 8011-01-P