Highland Funds Ii NPORTP Highland Small-Cap Equity Fund (Jun 2022 report)

INVESTMENT PORTFOLIO (unaudited)


As of June 30, 2022		Highland Small-Cap Equity Fund


Shares			Value ($)
	Common Stocks — 50.8%
	COMMUNICATION SERVICES — 0.4%
	3,227	Sinclair Broadcast Group, Inc., Class A		65,831

	CONSUMER DISCRETIONARY — 2.6%
	4,204	Genesco, Inc.(a)		209,822
	1,325	LKQ Corp.(b)		65,044
	1,388	Oxford Industries, Inc.(b)		123,171

				398,037

	ENERGY — 1.0%
	4,599	SM Energy Co.(b)		157,240

	FINANCIALS — 11.9%
	2,450,000	Alpha Services and Holdings ADR(a)		541,450
	2,125,000	Eurobank Ergasias Services and Holdings ADR(a)		881,769
	273	First Citizens BancShares, Inc., Class A(b)		178,482
	5,866	KKR & Co., Inc., Class A(b)		271,537

				1,873,238

	HEALTHCARE — 6.5%
	9,898	Aerie Pharmaceuticals, Inc.(a)(c)		74,235
	7,817	Amicus Therapeutics, Inc.(a)(b)		83,955
	127	Charles River Laboratories International, Inc.(a)(b)		27,174
	37,000	Coherus Biosciences, Inc.(a)(c)		267,880
	7,399	Collegium Pharmaceutical, Inc.(a)		131,110
	23,381	Heron Therapeutics, Inc.(a)(b)		65,233
	99	ICON PLC ADR(a)(b)		21,453
	133	Molina Healthcare, Inc.(a)(b)		37,188
	1,135	NuVasive, Inc.(a)		55,797
	631	Pacira BioSciences, Inc.(a)(c)		36,787
	64,770	Paratek Pharmaceuticals, Inc.(a)		125,006
	3,814	Pediatrix Medical Group, Inc.(a)		80,132

				1,005,950

	INDUSTRIALS — 1.9%
	13,773	Luxfer Holdings PLC ADR(b)		208,248
	947	Science Applications International Corp.(b)		88,166

				296,414

	INFORMATION TECHNOLOGY — 3.9%
	5,550	Alteryx, Inc., Class A(a)(b)		268,731
	3,370	Avaya Holdings Corp.(a)		7,549
	4,944	Ebix, Inc.		83,553
	1,470	SS&C Technologies Holdings, Inc.		85,363
	274	Teledyne Technologies, Inc.(a)(b)		102,780
	1,619	Teradata Corp.(a)(b)		59,919

				607,895

	MATERIALS — 9.8%
	12,072	Loma Negra Cia Industrial Argentina ADR		61,325
	250,000	MPM Holdings, Inc.(a)(d)		1,250,000
	694	Quaker Chemical Corp.		103,767
	1,527	Sensient Technologies Corp.(b)		123,015

				1,538,107


Shares			Value ($)
	Common Stocks (continued)
	REAL ESTATE — 11.8%
	28,317	NexPoint Residential Trust, Inc., REIT(b)(e)		1,770,096
	10,266	Spirit MTA, REIT(f)(g)		6,641
	1,678	Spirit Realty Capital, Inc., REIT		63,395

				1,840,132

	UTILITIES — 1.0%
	50,783	Central Puerto ADR(a)		155,904

		Total Common Stocks (Cost $8,866,463)		7,938,748

	Registered Investment Companies — 14.8%
	37,597	Highland Global Allocation Fund (b)(e)		363,563
	118,673	NexPoint Diversified Real Estate Trust (b)(e)		1,956,918

		Total Registered Investment Companies (Cost $2,576,889)		2,320,481

	Preferred Stock — 6.0%
	REAL ESTATE — 6.0%
	58,822	Braemar Hotels & Resorts, Inc., REIT 5.50%(b)(h)		941,152

		Total Preferred Stock (Cost $891,518)		941,152

	Master Limited Partnerships — 3.7%
	ENERGY — 3.7%
	32,972	Energy Transfer L.P.		329,061
	10,392	Western Midstream Partners L.P. (b)		252,629

				581,690

		Total Master Limited Partnerships (Cost $524,281)		581,690


Principal Amount ($)
	Repurchase Agreement(i)(j) — 0.0%
	572	HSBC Securities USA 1.480%, dated 06/30/2022 to be repurchased on 07/01/2022, repurchase price $572 (collateralized by U.S. Government obligations, ranging in par value $0 - $162, 0.000% - 6.500%, 11/15/2023 - 08/15/2051; with total market value $583)		572

		Total Repurchase Agreements (Cost $572)		572

INVESTMENT PORTFOLIO (unaudited) (concluded)


As of June 30, 2022		Highland Small-Cap Equity Fund


Shares			Value ($)
	Cash Equivalents — 21.5%
	MONEY MARKET FUND(k) — 21.5%
	3,363,486	Dreyfus Treasury Obligations Cash Management, Institutional Class 1.320%		3,363,486

		Total Cash Equivalents (Cost $3,363,486)		3,363,486

	Total Investments - 96.8%			15,146,129

	(Cost $16,223,209)

	Securities Sold Short— (8.4)%
	Exchange-Traded Funds — (3.3)%
	(2,000)	iShares U.S. Home Construction ETF (l)		(105,000	)
	(1,000)	iShares U.S. Real Estate ETF (l)		(91,980	)
	(824)	iShares U.S. Transportation ETF (l)		(175,429	)
	(2,510)	SPDR S&P Retail ETF (l)		(145,982	)

		Total Exchange-Traded Funds (Proceeds $599,947)		(518,391	)

	Common Stocks — (5.1)%
	INDUSTRIALS — (4.0)%
	(10,100)	Aris Water Solution, Inc., Class A (l)		(168,468	)
	(617)	Old Dominion Freight Line, Inc. (l)		(158,125	)
	(1,600)	Saia, Inc. (l)		(300,800	)

				(627,393	)

	INFORMATION TECHNOLOGY — (1.1)%
	(2,500)	Blackline, Inc. (l)		(166,500	)

		Total Common Stocks (Proceeds $897,912)		(793,893	)

		Total Securities Sold Short - (8.4)% (Proceeds $1,497,859)		(1,312,284	)

	Other Assets & Liabilities, Net - 11.6%(m)			1,815,716

	Net Assets - 100.0%			15,649,561

(a)	Non-income producing security.

(b)	All or part of this security is pledged as collateral for short sales. The fair value of the securities pledged as collateral was $6,475,781.

(c)	Securities (or a portion of securities) on loan. As of June 30, 2022, the fair value of securities loaned was $105,693. The loaned securities were secured with cash and/or securities collateral of $105,693. Collateral is calculated based on prior day’s prices.

(d)

Restricted Securities. These securities are not registered and may not be sold to the public. There are legal and/or contractual restrictions on resale. The Fund does not have the right to demand that such securities be registered. The values of these securities are determined by valuations provided by pricing services, brokers, dealers, market makers, or in good faith under the policies and procedures established by the Board. Additional Information regarding such securities follows:


Restricted Security	Security Type	Acquisition Date		Cost of Security		Fair Value at Period End		Percent of Net Assets
MPM Holdings, Inc.	Common Stock		5/15/2019	$	—	$	1,250,000		8.0	%

(e)	Affiliated issuer. Assets with a total aggregate fair value of $4,090,577, or 26.1% of net assets, were affiliated with the Fund as of June 30, 2022.

(f)

Securities with a total aggregate value of $6,641, or 0.0% of net assets, were classified as Level 3 within the three-tier fair value hierarchy. Please see Notes to Investment Portfolio for an explanation of this hierarchy, as well as a list of unobservable inputs used in the valuation of these instruments.

(g)

Represents fair value as determined by the Fund’s Board of Trustees (the “Board”), or its designee in good faith, pursuant to the policies and procedures approved by the Board. The Board considers fair valued securities to be securities for which market quotations are not readily available and these securities may be valued using a combination of observable and unobservable inputs. Securities with a total aggregate value of $6,641, or 0.0% of net assets, were fair valued under the Fund’s valuation procedures as of June 30, 2022. Please see Notes to Investment Portfolio.

(h)	Perpetual security with no stated maturity date.

(i)	Tri-Party Repurchase Agreement.

(j)	This security was purchased with cash collateral held from securities on loan. The total value of such securities as of June 30, 2022 was $572.

(k)	Rate reported is 7 day effective yield.

(l)	No dividend payable on security sold short.

(m)	As of June 30, 2022, $1,751,099 in cash was segregated or on deposit with the brokers to cover investments sold short and is included in “Other Assets & Liabilities, Net”.

INVESTMENT PORTFOLIO (unaudited)


As of June 30, 2022		Highland Funds II

Organization

Highland Funds II (the “Trust”) is a Massachusetts business trust organized on August 10, 1992. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. It comprises two portfolios (each a “Fund” and collectively the “Funds”) that are currently being offered. This report covers information for the period ended June 30, 2022 for one of the Funds: Highland Small-Cap Equity Fund (the “Small-Cap Equity Fund”). The Highland Global Allocation Fund is reported separately.

Valuation of Investments

In computing the Fund’s net assets attributable to shares, securities with readily available market quotations on the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotation (NASDAQ) or other nationally recognized exchange, use the closing quotations on the respective exchange for valuation of those securities. Securities for which there are no readily available market quotations will be valued pursuant to policies adopted by the Fund’s Board of Trustees (the “Board”). Typically, such securities will be valued at the mean between the most recently quoted bid and ask prices provided by the principal market makers. If there is more than one such principal market maker, the value shall be the average of such means. Securities without a sale price or quotations from principal market makers on the valuation day may be priced by an independent pricing service. Generally, the Fund’s loan and bond positions are not traded on exchanges and consequently are valued based on a mean of the bid and ask price from the third-party pricing services or broker-dealer sources that the Investment Adviser has determined to have the capability which provide appropriate pricing services and which have been approved by the Board.

Securities for which market quotations are not readily available, or for which the Fund has determined that the price received from a pricing service or broker-dealer is “stale” or otherwise does not represent fair value (such as when events materially affecting the value of securities occur between the time when market price is determined and calculation of the Fund’s NAV) will be valued by the Fund at fair value, as determined by the Board or its designee in good faith in accordance with procedures approved by the Board, taking into account factors reasonably determined to be relevant, including: (i) the fundamental analytical data relating to the investment; (ii) the nature and duration of restrictions on disposition of the securities; and (iii) an evaluation of the forces that influence the market in which these securities are purchased and sold. In these cases, the Fund’s NAV will reflect the affected portfolio securities’ fair value as determined in the judgment of the Board or its designee instead of being determined by the market. Using a fair value pricing methodology to value securities may result in a value that is different from a security’s most recent sale price and from the prices used by other investment companies to calculate their NAVs. Determination of fair value is uncertain because it involves subjective judgments and estimates.

There can be no assurance that the Fund’s valuation of a security will not differ from the amount that it realizes upon the sale of such security. Those differences could have a material impact to the Funds.

Fair Value Measurements

The Fund has performed an analysis of all existing investments and derivative instruments to determine the significance and character of inputs to their fair value determination. The levels of fair value inputs used to measure the Fund’s investments are characterized into a fair value hierarchy. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment’s valuation. The three levels of the fair value hierarchy are described below:

NOTES TO INVESTMENT PORTFOLIO (unaudited) (continued)


As of June 30, 2022		Highland Funds II


Level 1 —		Quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement;

Level 2 —		Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active, but are valued based on executed trades; broker quotations that constitute an executable price; and alternative pricing sources supported by observable inputs are classified within Level 2. Level 2 inputs are either directly or indirectly observable for the asset in connection with market data at the measurement date; and

Level 3 —		Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. In certain cases, investments classified within Level 3 may include securities for which the Fund has obtained indicative quotes from broker-dealers that do not necessarily represent prices the broker may be willing to trade on, as such quotes can be subject to material management judgment. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The Investment Adviser has established policies and procedures, as described above and approved by the Board, to ensure that valuation methodologies for investments and financial instruments that are categorized within all levels of the fair value hierarchy are fair and consistent. A Pricing Committee has been established to provide oversight of the valuation policies, processes and procedures, and is comprised of personnel from the Investment Adviser and its affiliates. The Pricing Committee meets monthly to review the proposed valuations for investments and financial instruments and is responsible for evaluating the overall fairness and consistent application of established policies.

The fair value of the Fund’s common stocks, preferred stocks, registered investment companies, master limited partnerships that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable.

At the end of each calendar quarter, the Investment Adviser evaluates the Level 2 and 3 assets and liabilities for changes in liquidity, including but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and the existence of contemporaneous, observable trades in the market. Additionally, the Investment Adviser evaluates the Level 1 and 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Fund’s investments may fluctuate from period to period. Additionally, the fair value of investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values the Fund may ultimately realize. Further, such investments may be subject to legal and other restrictions on resale or otherwise less liquid than publicly traded securities.

NOTES TO INVESTMENT PORTFOLIO (unaudited) (continued)


As of June 30, 2022		Highland Funds II

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Fund’s assets as of June 30, 2022 is as follows:


	Total value at June 30, 2022 ($)			Level 1 Quoted Price ($)			Level 2 Significant Observable Inputs ($)		Level 3 Significant Unobservable Inputs⁽¹⁾ ($)
Highland Small-Cap Equity Fund
Assets
Common Stocks
Communication Services		65,831			65,831			—		—
Consumer Discretionary		398,037			398,037			—		—
Energy		157,240			157,240			—		—
Financials		1,873,238			1,873,238			—		—
Healthcare		1,005,950			1,005,950			—		—
Industrials		296,414			296,414			—		—
Information Technology		607,895			607,895			—		—
Materials		1,538,107			288,107			1,250,000		—
Real Estate		1,840,132			1,833,491			—		6,641
Utilities		155,904			155,904			—		—
Registered Investment Companies		2,320,481			2,320,481			—		—
Preferred Stock
Real Estate		941,152			941,152			—		—
Master Limited Partnerships
Energy		581,690			581,690			—		—
Repurchase Agreements		572			572			—		—
Cash Equivalents		3,363,486			3,363,486			—		—

Total Assets		15,146,129			13,889,488			1,250,000		6,641

Liabilities
Securities Sold Short
Common Stocks
Industrials		(627,393	)		(627,393	)		—		—
Information Technology		(166,500	)		(166,500	)		—		—
Exchange Traded Funds		(518,391	)		(518,391	)		—		—

Total Liabilities		(1,312,284	)		(1,312,284	)		—		—

Total		13,833,845			12,577,204			1,250,000		6,641

(1)	A reconciliation of Level 3 instruments is presented when the Fund has a significant amount of Level 3 investments at the beginning and/or end of the period in relation to the net assets. Management has concluded that Level 3 investments are not material in relation to net assets.

NOTES TO INVESTMENT PORTFOLIO (unaudited) (concluded)


As of June 30, 2022		Highland Funds II

Affiliated Issuers

Under Section 2(a)(3) of the Investment Company Act of 1940, as amended, a portfolio company is defined as “affiliated” if a fund owns five percent or more of its outstanding voting securities or if the portfolio company is under common control. The table below shows affiliated issuers of the Fund as of June 30, 2022:


Small-Cap Equity Fund
Issuer	Shares at September 30, 2021		Beginning Value as of September 30, 2021 $		Purchases at Cost $		Proceeds from Sales $			Distribution to Return of Capital $			Net Realized Gain/(Loss) on Sales of Affiliated Issuers $			Change in Unrealized Appreciation/ (Depreciation) $		Ending Value as of June 30, 2022 $		Shares at June 30, 2022		Affiliated Income $		Cap Gain Distributions $
Majority Owned, Not Consolidated
None
Other Affiliates
NexPoint Residential Trust, Inc., REIT		28,075		1,737,281		20,231		—			(25,787	)		—			38,371		1,770,096		28,317		5,547		—
Highland Global Allocation Fund (Registered Investment Company)		39,647		360,391		—		(19,994	)		—			(3,637	)		26,803		363,563		37,597		26,717		—
NexPoint Diversified Real Estate Trust (Registered Investment Company)		118,673		1,650,741		—		—			—			—			306,177		1,956,918		118,673		53,403		—
Other Controlled
None

Total		186,395		3,748,413		20,231		(19,994	)		(25,787	)		(3,637	)		371,351		4,090,577		184,587		85,667		—

For more information with regard to significant accounting policies, see the most recent annual or semi-annual report filed with the U.S. Securities and Exchange Commission.

Highland Funds Ii NPORT-PHighland Small-Cap Equity Fund (Jun 2022 report)