You are cordially invited to attend ~~the 2022 Annual~~a Special Meeting of Shareholders of NexPoint Diversified Real Estate Trust ~~(the~~(“NXDT” or the “Company”) ~~to be held~~on Monday, January 30, 2023, at ~~300 Crescent Court, Suite 700, Dallas, Texas 75201, on Tuesday, June 14, 2022, at 8:15~~9:00 a.m. Central Time ~~(the “Annual Meeting”)~~to consider a proposal to adopt the Long Term Incentive Plan Proposal described below. The special meeting will be held exclusively through a virtual format. You will not be able to attend the meeting in person. The Board believes that the Long Term Incentive Plan Proposal is in the best interest of shareholders because it believes it will align the interests of management with shareholders. Details regarding the business to be conducted at the ~~Annual~~Special Meeting are more fully described in the accompanying Notice of ~~Annual~~Special Meeting of Shareholders and Proxy Statement.

~~In addition to voting on the Proposal described in the Notice of Annual Meeting of Shareholders and Proxy Statement,~~

We hope that you will ~~have an opportunity~~be able to ~~hear a report on~~attend the ~~Company and to discuss other matters of interest to you as a shareholder.~~

~~It is very important that your shares be represented at the Annual~~Special Meeting. Whether or not you plan to attend, ~~I urge you to~~ please ~~complete, date, sign and mail~~vote using the ~~enclosed~~internet or telephone procedures described on the proxy card or sign, date and promptly mail a proxy card in the provided, pre-addressed postage paid envelope to assure that your shares are represented at the ~~Annual~~Special Meeting. Thank you for being a shareholder and for your continued investment in the Company.

~~Sincerely,~~

~~/s/ James Dondero~~

~~James Dondero~~

~~President and Principal Executive Officer~~

A Special Meeting of Shareholders of NexPoint Diversified Real Estate Trust, a Delaware statutory trust ~~(the ��Company”~~(“NXDT” or the “Company”), will be held virtually, on Monday, January 30, 2023, at ~~300 Crescent Court, Suite 700, Dallas, Texas 75201, on Tuesday, June 14, 2022, at 8:15~~9:00 a.m. Central Time (the ~~“Annual~~“Special Meeting”), for the following purposes:

The Board ~~of Trustees~~unanimously recommends athat you vote ~~for~~“FOR” the Proposal.

The close of business on ~~March 25,~~December 19, 2022 has been fixed as the record date for the determination of shareholders entitled to notice of, and to vote at, the ~~Annual~~Special Meeting and any adjournment or postponements thereof.

While you will not be able to attend the Special Meeting in person, we have structured our virtual Special Meeting to provide shareholders with the same rights as if the meeting were held in person, including the ability to vote shares electronically during the meeting and ask questions in accordance with the rules of conduct for the meeting. To promote fairness and efficient conduct of the meeting, we will respond to no more than two questions from any single shareholder.

If your shares are held by a financial intermediary (such as a broker-dealer), and you want to participate in, but not vote at the Special Meeting, please email AST Fund Solutions, LLC (“AST”) at attendameeting@astfinancial.com with “NXDT Meeting” in the subject line and provide your full name, address and proof of ownership as of December 19, 2022 from your financial intermediary. AST will then email you the registration link. Please be aware if your shares are held through a financial intermediary, and you wish to vote at the Special Meeting, you must first obtain a legal proxy from your financial intermediary. You may forward an email from your financial intermediary containing the legal proxy or attach an image of the legal proxy via email to AST at attendameeting@astfinancial.com and put “NXDT Legal Proxy” in the subject line. AST will then email you the registration link along with the proxy voting control number.

If you are a shareholder of record and wish to attend and vote at the meeting, please send an email to AST at attendameeting@astfinancial.com with “NXDT Meeting” in the subject line and provide your name and address in the body of the email. AST will then email you the registration link for the Special Meeting. If you would like to vote during the Special Meeting, you may do so by entering the control number found on your proxy card.

Requests to attend the Special Meeting must be received by AST no later than 2:00 p.m. Central Time on Friday, January 27, 2023. On the date of the Special Meeting, shareholders are encouraged to log on 15 minutes before the meeting start time. Please contact AST at (877) 283-0325 with any questions regarding accessing the Special Meeting.

Information about the meeting and the matter to be voted on at the meeting is presented in the following proxy statement. We hope that you will plan to virtually attend the Special Meeting.

Please call ~~Di Costa Partners~~AST at ~~(888)~~ ~~915-3802~~(877) 283-0325 for directions on how to attend the ~~Annual~~Special Meeting.

Important Notice Regarding Availability of Proxy Materials for the Shareholder Meeting to be held on June 14, 2022: Copies of these proxy materials, including the Company’s annual shareholder report, the Notice for the Annual Meeting, the Proxy Statement and the form of proxy, are available to you on the Internet at https:// www.eproxyaccess.com/nxdt2022. Copies of the proxy materials are available upon request, without charge, by calling Di Costa Partners, LLC at (888) ~~915-3802~~ ~~or by sending an~~ ~~e-mail~~ ~~to meetinginfo@dicostapartners.com, subject line: NexPoint Diversified Real Estate Trust 100120 Fulfillment.~~

~~Shareholders are encouraged to read all of the proxy materials before voting as the proxy materials contain important information necessary to make an informed decision.~~

The Board of Trustees is requesting your vote. Your vote is important regardless of the number of shares that you own. Whether or not you expect to be present at the ~~Annual~~Special Meeting, please ~~complete and sign~~vote using the ~~enclosed~~internet or telephone procedures described on the proxy card or sign, date and ~~return it~~ promptly mail a proxy card in the ~~enclosed envelope, which needs no~~provided pre-addressed, postage ~~if mailed in the United States.~~paid envelope. If you desire to vote in person at the ~~Annual~~Special Meeting, you may revoke your proxy at any time before it is exercised.


	By Order of the Board of Trustees,

~~/s/ Stephanie Vitiello~~
~~Stephanie Vitiello~~	~~Secretary~~
		Matt McGraner
		Executive VP, Chief Investment Officer
		and Secretary

This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Trustees of NexPoint Diversified Real Estate Trust, a Delaware statutory trust (the “Company” or “NXDT”), for use at the Company’s Annual Meeting of Shareholders to be held at 300 Crescent Court, Suite 700, Dallas, Texas 75201, on Tuesday, June 14, 2022, at 8:15 a.m. Central Time, and at any and all adjournments or postponements thereof (the “Annual Meeting”), for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders dated March 28, 2022. The Company is a ~~closed-end~~ management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). NexPoint Advisors, L.P., a Delaware limited partnership (“NexPoint” or the “Adviser”), with its principal office at 300 Crescent Court, Suite 700, Dallas, Texas 75201, serves as the investment adviser and the administrator to the Company. The Company’s principal executive office is located at 300 Crescent Court, Suite 700, Dallas, Texas 75201.

This Proxy Statement and the accompanying Notice of Annual Meeting of Shareholders and form of proxy are being provided to shareholders on or about April 4, 2022. The Board of Trustees (the “Board”) has fixed the close of business on March 25, 2022 as the record date (the “Record Date”) for the determination of shareholders entitled to receive notice of, and to vote at, the Annual Meeting. As of the Record Date, 37,110,306 shares of the Company’s common shares (“Common Shares”), par value $0.001 per share, were issued and outstanding, and 3,359,593 shares of the Company’s 5.50% Series A Cumulative Preferred Shares, par value $0.001 per share, liquidation preference $25.00 per share (the “Preferred Shares”). Shareholders of the Company are entitled to one vote for each Company share held and fractional votes for each fractional Company share held. Holders of the Preferred Shares, voting as a separate class, are entitled to vote for the election of Ethan Powell as a Class I Trustee. Holders of both the Common Shares and the Preferred Shares, voting as a single class, are entitled to vote for the election of Bryan A. Ward as a Class I Trustee.

If the form of proxy is properly executed and returned in time to be voted at the Annual Meeting, the shares covered thereby will be voted at the Annual Meeting in accordance with the instructions marked thereon. All properly executed proxies received by the Board that do not specify how shares should be voted will be voted ~~“FOR”~~ the election of each of the Trustee nominees listed in the Proposal; and in the discretion of the persons named as proxies in connection with any other matter which may properly come before the Annual Meeting or any adjournment or postponements thereof.

The Board does not know of any matters to be considered at the Annual Meeting other than the election of the Trustees referred to in this Proxy Statement. A shareholder may revoke his or her proxy by appearing at the Annual Meeting, revoking his or her proxy and voting in person, giving written notice of such revocation to the Secretary of the Company or by returning a later-dated proxy before the Annual Meeting.

The presence in person or by proxy of the holders of a majority of the shares of the Company entitled to vote shall constitute a quorum (“Quorum”) for the Company’s Annual Meeting. If a Quorum is not present at the Annual Meeting, or if a Quorum is present but sufficient votes to approve the Proposal are not received, the persons named as proxies may propose one or more adjournments or postponements of the Annual Meeting to permit further solicitation of proxies. Any adjournment or postponement will require the affirmative vote of a majority of those shares that are represented at the Annual Meeting in person or by proxy, whether or not a Quorum is present.

~~Shares represented by properly executed proxies with respect to which (i) a vote is withheld, (ii) the shareholder abstains, or (iii) a broker does not vote (i.e.~~[●], ~~“broker~~ ~~non-votes”)~~ ~~will be treated as shares that are present and entitled to vote for purposes of determining a Quorum. Assuming the presence of a Quorum, abstentions and “broker~~ ~~non-votes”~~ ~~will have no effect on the outcome of the vote on the Proposal.~~2022
Dallas, Texas

In addition to soliciting proxies by mail, the Company’s officers and employees of the Adviser may solicit proxies by Internet or by telephone or in person. Copies of the Notice for the Annual Meeting, the Proxy Statement and the form of proxy are available at https://www.eproxyaccess.com/nxdt2022. The Company has engaged Di Costa Partners, at Di Costa Partners, LLC, 333 Ludlow Street, 5th Floor, South Tower, Stamford, CT 06902 for inquiries, to provide shareholder meeting services, including the distribution of this Proxy Statement and related materials to shareholders as well as assisting the Company in soliciting proxies for the Annual Meeting at an approximate cost of $49,290. The costs of proxy solicitation and expenses incurred in connection with preparing this Proxy Statement and its enclosures will be paid by the Company.

The New York Stock Exchange (“NYSE”) rules do not allow a broker, bank or other nominee who holds shares on your behalf to vote on the Long Term Incentive Plan Proposal described below without your instructions.

The Board of Trustees (the “Board”) of NexPoint Diversified Real Estate Trust, a Delaware statutory trust (“NXDT,” the “Company,” “we,” “us,” or “our”), is providing this proxy statement and accompanying proxy card to you in connection with the solicitation of proxies by the Board for a special meeting of our shareholders to be held virtually on Monday, January 30, 2023, at 9:00 a.m., Central time, and any adjournment or postponements thereof (the “Special Meeting”). We are first making these proxy materials available to shareholders on or about [●], 2022.

The Board has fixed December 19, 2022 as the record date (the “Record Date”) for the determination of shareholders entitled to receive notice of, and vote at, the Special Meeting. As of the Record Date, [•] transferable units of beneficial interest of the Company (“Shares”), par value $0.001 per share, were issued and outstanding, and [•] of the Company’s 5.50% Series A Cumulative Preferred Shares, par value $0.001 per share, liquidation preference $25.00 per share (“Preferred Shares”) were issued and outstanding. Shareholders of the Company are entitled to one vote for each Share and each Preferred Share held. Holders of both the Shares and the Preferred Shares, voting as a single class, are entitled to vote on the proposal detailed herein.

The mailing address of our principal executive offices is 300 Crescent Court, Suite 700, Dallas, Texas 75201.

PROPOSAL 1: APPROVAL OF THE NEXPOINT DIVERSIFIED REAL ESTATE TRUST 2023 LONG TERM INCENTIVE PLAN

The Board is recommending that the Company’s shareholders vote in favor of the LTIP. The LTIP affords the Compensation Committee the ability to design compensatory awards that are responsive to the Company’s needs and includes authorization for a variety of awards designed to advance the interests and long-term success of the Company by attracting, retaining and motivating (i) officers and certain key employees of the Company and any of its affiliates or subsidiaries, including NexPoint Real Estate Advisors X, L.P. (our “Adviser”) and NexPoint Diversified Real Estate Trust Operating Partnership, L.P. (our “Operating Partnership”) (together, the “Company Group”), (ii) certain persons who provide services to the Company Group that are equivalent to the services typically provided by an employee, and (iii) the non-management trustees of the Company.

If the ~~Annual Meeting~~LTIP is ~~postponed or adjourned, these times~~approved by shareholders, it will be ~~extended~~effective as of the day of the Special Meeting. If the LTIP is not approved by our shareholders, no awards will be made under the LTIP.

In evaluating this Proposal, shareholders should consider all of the information in this Proposal.

The Board has unanimously recommended that shareholders vote “FOR” the Long Term Incentive Plan Proposal.

The following description of the LTIP is only a summary of its principal terms and provisions and is qualified in its entirety by reference to ~~11:59 p.m.~~the full copy of the LTIP, attached as Appendix A to this proxy statement.

The LTIP is designed to provide competitive incentives intended to attract, retain, incentivize and reward eligible participants.

Certain individuals selected by the Compensation Committee who are at the time of an award’s grant an officer or other key employee of the Company Group (or have agreed to serve in such capacity within 90 days of the grant date), ~~Eastern Time,~~an individual providing services similar to an employee to the Company Group (provided he or she satisfy the Form S-8 definition of “employee”) or a non-employee trustee of the Company. As of December 19, 2022, there were approximately [•] employees of our Company Group and [•] non-management trustees of the Company expected to participate in the LTIP. As of December 19, 2022, there were approximately [•] consultants expected to participate in the LTIP.

The LTIP will generally be administered by the Compensation Committee (or its successor), or any other committee of the Board designated by the Board to administer the LTIP. As plan administrator, the Compensation Committee has broad authority to determine the terms of the awards granted under the LTIP (subject to the terms thereof) and to make all other determinations it deems necessary or advisable to administer the LTIP properly. The interpretation and construction by the Compensation Committee of any provision of the LTIP or of any award agreement or related document, and any determination by the Compensation Committee pursuant to any provision of the LTIP or of any such agreement, notification or document, will be final and conclusive.

The Compensation Committee may also delegate its authority under the LTIP: (i) to a subcommittee of the Compensation Committee; (ii) if permitted by applicable law and with respect to the committee’s administrative duties and powers, to one or more committee members, officers, agents or advisors of the Company as it deems advisable; and (iii) by resolution to one or more officers of the Company with respect to selecting eligible employee participants (provided they are not subject to Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) reporting requirements) and determining award size, subject to certain additional limitations in the LTIP.

Subject to adjustment as provided in the LTIP, the number of Shares available under the LTIP shall not exceed 2,545,000 Shares.

If any award granted under the LTIP is cancelled or forfeited, expires or is settled for cash (in whole or in part), the Shares subject to such award will again be available for issuance under the LTIP. However, none of the following Shares will be added back to the Shares authorized for grant under the LTIP: (a) Shares withheld by the Company, tendered or otherwise used in payment of the exercise price of an option right; (b) Shares withheld by the Company or tendered or otherwise used to satisfy tax withholding obligations; (c) Shares subject to a SAR that are not actually issued in connection with its settlement of Shares on exercise thereof and (d) Shares that are reacquired by the Company on the ~~day before~~open market or otherwise using option rights proceeds.

Shares issued or transferred under awards granted under the ~~reconvened meeting.~~LTIP in substitution for or conversion of, or in connection with an assumption of, stock or stock-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with the Company or any of its subsidiaries will not count against (or be added back to) the aggregate share limit or other LTIP limits described above (“Substitute Awards”). Additionally, shares available under certain plans that we or our subsidiaries may assume in connection with corporate transactions from another entity may be available for certain awards under the LTIP, under the circumstances further described in the LTIP, but will not count against the aggregate share limit or other LTIP limits described above (“Assumed Plan Awards”).

Notwithstanding anything else contained in this Proposal to the contrary, except in the case of ~~five Trustees, four~~Substitute Awards, Assumed Plan Awards and cash incentive awards, awards that are granted under the LTIP will be subject to a minimum vesting period of ~~whom are not “interested persons”~~one year from the date of grant (“Minimum Vesting Requirement”). Notwithstanding the foregoing, the award may provide for acceleration of vesting in the event of a participant’s retirement, death or disability or in the event of a double-trigger change in control of the Company (as described below). The Compensation Committee may grant awards covering up to 5% of the maximum number of Shares in the Share Reserve (subject to adjustment as provided in the LTIP) for issuances under the LTIP, without regard to the Minimum Vesting Requirement.

Pursuant to the LTIP, the Company may grant option rights (including “incentive stock options” as defined in Section 422 of the Internal Revenue Code (the “Code”) (or “ISOs”)), SARs, restricted shares, restricted shares units (“RSUs"), performance shares, performance units, cash incentive awards, profits interest units and certain other awards based on or related to our Shares.

Each grant of an award under the LTIP will be evidenced by an award agreement or agreements which will contain such terms and provisions as the Compensation Committee may determine, consistent with the LTIP. Each award may be subject to time-based, service-based or performance-based vesting. Any award under the LTIP may provide for acceleration of vesting in the event of a participant’s retirement, death or disability or in the event of a double-trigger change in control of the Company (as described below). A brief description of the types of awards which may be granted under the LTIP is set forth below.

If there is any change in the Company’s capitalization (including resulting from a stock split) or a corporate transaction (including a merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, redomestication, partial or complete liquidation or other distribution of assets, or issuance of rights or warrants to purchase securities), the Compensation Committee will adjust the number and kind of Shares or other securities permitted to be delivered under the LTIP, adjust the terms of outstanding awards, including the number and kind of Shares or other securities subject to outstanding awards, in each case as and to the extent the Compensation Committee determines an adjustment to be appropriate and equitable, to prevent dilution or enlargement of rights.

In the event of any such transaction or event, or in the event of a change in control of the Company, the Compensation Committee may provide in substitution for any or all outstanding awards under the LTIP such alternative consideration (including cash), if any, as it may in good faith determine to be equitable under the circumstances and will require in connection therewith the surrender of all awards so replaced in a manner that complies with Section 409A of the Code.

The LTIP includes “double-trigger” acceleration provisions with respect to the vesting of awards in connection with a change in control of the Company. Under the LTIP, the vesting of awards will accelerate in connection with a change in control only where either (a) within a specified period the participant’s service is involuntarily terminated by the Company for reasons other than for cause or the participant terminates his or her employment or service for good reason or (b) the award is not assumed or converted into a replacement award in a manner described in the award agreement.

The LTIP includes a definition of “change in control.” In general, except as may be otherwise prescribed by the Compensation Committee in any award agreement, a change in control will be deemed to have occurred if: (a) individuals who constitute the Board on the effective date of the LTIP cease for any reason to constitute at least a majority of the Board, unless their replacements are approved as described in the LTIP (subject to certain exceptions described in the LTIP); (b) a person or group becomes the beneficial owner of 35% or more of the then-outstanding Shares or the combined voting power of our then-outstanding securities entitled to vote generally in the election of directors, subject to certain exceptions; (c) the Company closes a reorganization, merger, consolidation, significant sale or purchase of assets, in each case which causes the persons or groups who are the beneficial owners of 35% or more of the then-outstanding Shares or the combined voting power of our then-outstanding securities entitled to vote generally in the election of directors to cease to be such beneficial owners of the entity resulting from such transaction, in substantially the same proportions of ownership as immediately prior to such transaction, as further described in the LTIP; (d) the Company’s shareholders approve its complete liquidation or dissolution; or (e) the Adviser is terminated.

The LTIP permits the Company to grant awards subject to the achievement of certain specified management objectives. Management objectives are defined as the measurable performance objective or objectives established pursuant to the LTIP for participants who have received grants of performance shares, performance units or cash incentive awards or, when so determined by the Compensation Committee, option rights, SARs, restricted shares, RSUs, dividend equivalents or other awards. Management objectives may be described in terms of company-wide objectives or objectives that are related to the performance of the individual participant or of one or more of the subsidiaries, divisions, departments, regions, functions or other organizational units within the Company or its subsidiaries. The management objectives may be made relative to the performance of other companies or subsidiaries, divisions, departments, regions, functions or other organizational units within such other companies, and may be made relative to an index or one or more of the performance objectives themselves.

Any award agreement may provide for the cancellation or forfeiture and repayment to us of any award or gain related to an award, or other provisions intended to have a similar effect, upon such terms and conditions as may be determined by the Compensation Committee from time to time or as may be required by the Compensation Committee or under Section 10D of the Exchange Act and any applicable rules and regulations promulgated by the SEC or any national securities exchange or national securities association on which our Shares may be traded.

The LTIP will become effective on the date it is approved by the Company’s shareholders and will terminate as to future awards on the tenth anniversary thereof.

The Board may amend the LTIP at any time, but no amendment, alteration or termination of the LTIP may impair the rights of any participant with respect to outstanding awards without the participant’s consent or permit the Board to amend awards in violation of the LTIP’s prohibition on repricing underwater option rights and SARs. In addition, the Board would need shareholder approval of an amendment if it (a) would materially increase the benefits accruing to participants under the LTIP, (b) would materially increase the number of securities which may be issued under the LTIP, (c) would materially modify the requirements for participation in the LTIP, or (d) must otherwise be approved by the Company’s shareholders in order to comply with applicable law or the rules of the stock exchange(s) on which the Shares are traded. Shareholder approval will be obtained to increase the Share Reserve (subject to adjustment as described above), and for any amendment that would require such approval to comply with any rules of the stock exchange(s) on which the Shares are traded or other applicable law. The Board may, in its discretion, terminate the LTIP at any time. Termination of the LTIP will not affect the rights of participants or their successors under any awards outstanding and not exercised in full on the date of termination.

The following discussion of certain relevant United States federal income tax effects applicable to certain awards granted under the LTIP is only a summary of certain of the United States federal income tax consequences applicable to United States residents under the LTIP, and reference is made to the Code for a complete statement of all relevant federal tax provisions. No consideration has been given to the effects of foreign, state, local and other laws (tax or other) on the LTIP or on a participant, which laws will vary depending upon the particular jurisdiction or jurisdictions involved. In particular, participants who are stationed outside the United States may be subject to foreign taxes as a result of the LTIP.

Nonqualified Option Rights: An optionee subject to United States federal income tax will generally not recognize taxable income for United States federal income tax purposes upon the grant of a nonqualified stock option. Rather, at the time of exercise of the nonqualified stock option, the optionee will recognize ordinary income, and the Company will be entitled to a deduction, in an amount equal to the excess of the fair market value of the Shares on the date of exercise over the exercise price. If the Shares acquired upon the exercise of a nonqualified stock option are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of such shares on the date of such exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the optionee), depending upon the length of time such shares were held by the optionee.

Incentive Stock Options: An optionee subject to United States federal income tax will generally not recognize taxable income for United States federal income tax purposes upon the grant of an ISO (within the meaning of Section 422 of the Code) and the Company will not be entitled to a deduction at that time. If the ISO is exercised during employment or within 90 days following the termination thereof (or within one year following termination, in the case of a termination of employment due to retirement, death or disability, as such terms are defined in the ~~1940 Act) (the “Independent Trustees”)~~LTIP), the optionee will not recognize any income and the Company will not be entitled to a deduction. The excess of the fair market value of the Shares on the exercise date over the exercise price, however, is includible in computing the optionee’s alternative minimum taxable income.

Generally, if an optionee disposes of shares acquired by exercising an ISO either within two years after the date of grant or one year after the date of exercise, the optionee will recognize ordinary income, and the Company will be entitled to a deduction, in an amount equal to the excess of the fair market value of the shares on the date of exercise (or the sale price, if lower) over the exercise price. The balance of any gain or loss will generally be treated as a capital gain or loss to the optionee. If the Shares are disposed of after the two-year and one-year periods described above, the Company will not be entitled to any deduction, and the entire gain or loss for the optionee will be treated as a capital gain or loss.

SARs: A participant subject to United States federal income tax who is granted a SAR will not recognize ordinary income for United States federal income tax purposes upon receipt of the SAR. At the time of exercise, however, the participant will recognize ordinary income equal to the value of any cash received and the fair market value on the date of exercise of any Shares received. The Company will not be entitled to a deduction upon the grant of a SAR, but generally will be entitled to a deduction for the amount of income the participant recognizes upon the participant’s exercise of the SAR. The participant’s tax basis in any Shares received will be the fair market value on the date of exercise and, if the shares are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of the shares on the date of exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the participant) depending upon the length of time such shares were held by the participant.

Restricted Shares: A participant subject to United States federal income tax generally will not be taxed upon the grant of a restricted stock award, but rather will recognize ordinary income for United States federal income tax purposes in an amount equal to the fair market value of the shares at the time the restricted stock is no longer subject to a substantial risk of forfeiture (within the meaning of the Code). The ~~Independent Trustees~~Company generally will be entitled to a deduction at the time when, and in the amount that, the participant recognizes ordinary income on account of the ~~Board~~lapse of the restrictions. A participant’s tax basis in the shares will equal the fair market value of those shares at the time the restrictions lapse, and the participant’s holding period for capital gains purposes will begin at that time. Any cash dividends paid on the shares before the restrictions lapse will be taxable to the participant as additional compensation (and not as dividend income). Under Section 83(b) of the Code, a participant may elect to recognize ordinary income at the time the restricted shares are ~~Mr. Bryan A. Ward, Mr. Ethan Powell, Dr. Bob Froehlich~~awarded in an amount equal to their fair market value at that time, notwithstanding the fact that such shares are subject to restrictions and ~~Mr. Edward Constantino. Mr. John Honis~~a substantial risk of forfeiture. If such an election is made, no additional taxable income will be recognized by such participant at the time the restrictions lapse, the participant will have a tax basis in the restricted shares equal to their fair market value on the date of their award, and the participant’s holding period for capital gains purposes will begin at that time. The Company generally will be entitled to a tax deduction at the time when, and to the extent that, ordinary income is recognized by such participant.

Restricted Shares Units: A participant subject to United States federal income tax who is granted a restricted stock unit will not recognize ordinary income for United States federal income tax purposes upon the receipt of the restricted stock unit, but rather will recognize ordinary income in an amount equal to the fair market value of the Shares at the time of settlement, and the Company will have a corresponding deduction at that time.

Performance Shares, Performance Units, Other Share-Based and Cash-Based Awards: In the case of other stock-based and other cash-based awards, depending on the form of the award, a participant subject to United States federal income tax will not be taxed upon the grant of such an award, but, rather, will recognize ordinary income for United States federal income tax purposes when such an award vests or otherwise is free of restrictions. In any event, the Company will be entitled to a deduction at the time when, and in the amount that, a participant recognizes ordinary income.

Profits Interest Units: A participant subject to United States federal income tax who is granted a profits interest unit generally is not expected to recognize taxable income at the time of grant or the vesting of those units, provided that (a) the award qualify as “profits interests” within the meaning of Revenue Procedures 93-27 and 2001-43; (b) the participant does not dispose of the units within two years of issuance; and (c) certain other requirements are met. Participants generally would make the election provided for under Section 83(b) of the Code, recognizing zero income at the time of grant, in which case the profits interest units could be disposed of within two years of issuance. As a holder of profits interest units, however, a participant will be required to report on his or her income tax return his or her allocable share of the Operating Partnership’s income, gains, losses, deductions and credits in accordance with the partnership agreement, regardless of whether the Operating Partnership actually makes a distribution of cash to the grantee. Distributions of money by the Operating Partnership to the participant, will generally be taxable to the grantee to the extent that such distributions exceed the participant’s tax basis in the Operating Partnership. Any such gain generally will be capital gain, but a portion may be treated as ~~an Interested Trustee~~ordinary income, depending on the assets of the Operating Partnership at that time. Generally, no deduction is available to the Company ~~in light of certain relationships between Mr. Honis and historically affiliated entities~~upon the grant, vesting or disposition of the ~~Adviser.~~units.

Tax Withholding: The Company has the ~~Annual Meeting,~~right to deduct or withhold, or require a participant to remit to the ~~holders~~Company, an amount sufficient to satisfy federal, state, and local taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of grants under the plans.

Certain Tax Code Limitations on Deductibility: Section 162(m) of the ~~Company’s Preferred Shares~~Code generally limits the deductible amount of total annual compensation paid by a public company to each “covered employee” to no more than $1 million. In addition, our ability to obtain a deduction for future payments could be limited by Section 280G of the Code, which provides that certain payments made in connection with a change in control are ~~being asked~~not deductible by the Company (and may be subject to ~~re-elect~~ ~~Ethan Powell~~additional taxes for the grantee).

Section 409A: Some awards under the plans may be considered to be deferred compensation subject to Section 409A of the Code. Failure to satisfy the applicable requirements under this provision for awards considered deferred compensation would result in the acceleration of income and additional income tax liability to the recipient, including certain penalties.

As of the date hereof, no awards have been granted under the LTIP. The aggregate number of shares and aggregate total dollar value of potential future awards under the LTIP that may be made to any of our named executive officers or to our executive officers, non-executive officer employees or non-management trustees as a ~~Class I Trustee~~group is subject to the discretion of the ~~Company,~~Compensation Committee and is not yet determinable.

If the LTIP is approved by our shareholders and becomes effective, we intend to ~~serve for~~file a ~~three-year term until~~Registration Statement on Form S-8 relating to the ~~2025 annual meeting~~issuance of ~~shareholders or until his respective successor is duly elected and qualified.~~

AtShares under the ~~Annual Meeting,~~LTIP with the ~~holders~~SEC pursuant to the Securities Act of 1933, as amended, as soon as practicable after approval of the ~~Company’s Common~~LTIP by our shareholders.

The Company did not maintain, or have any securities authorized for issuance under, any equity compensation plans as of December 31, 2021.

Under the Declaration of Trust, the Long Term Incentive Plan Proposal requires the affirmative vote of a majority of the Shares and Preferred Shares, voting as a single class, ~~are being asked~~present in person or represented by proxy and entitled to ~~re-elect~~ ~~Bryan A. Ward~~vote on the subject matter. For purposes of the foregoing, shareholders will vote as a ~~Class I Trustee of the Company, to serve for a three-year term until the 2025 annual meeting of shareholders or until his respective successor is duly elected and qualified.~~

2For more information, see “Voting Information—Quorum, Abstentions and Broker Non-Votes” and “—Adjournments.”

THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE LONG TERM INCENTIVE PLAN PROPOSAL.

Under the Declaration of ~~Messrs. Powell and Ward are currently serving as a Class I Trustee of~~Trust, the ~~Company and has agreed to continue to serve as a Class I Trustee, if~~ ~~re-elected.~~ ~~If Messrs. Powell and Ward are not available for~~ ~~re-election~~ ~~at the time of the Annual Meeting, the persons named as proxies will vote for such substitute nominee(s) as the Company’s Governance and Compliance Committee may select.~~

The Company’s Board is divided into three classes with the term of office of one class expiring each year. John Honis is currently serving as a Class III Trustee and was last elected to serve a three-year term at the annual meeting of shareholders held on June 11, 2021. Dr. Bob Froehlich and Edward Constantino are currently serving as a Class II Trustees. Dr. Froehlich and Mr. Constantino were last elected to serve until the 2023 annual meeting of shareholders at the Company’s annual meeting of shareholders held on July 14, 2020. Ethan Powell and Bryan A. Ward are currently serving as Class I Trustees. Messrs. Powell and Ward were last elected to serve until the 2022 annual meeting of shareholders at the Company’s annual meeting of shareholders held on June 14, 2019. Messrs. Powell and Ward will each continue to serve as a Class I Trustee if ~~re-elected~~ at the Annual Meeting until the 2025 annual meeting of shareholders or until his respective successor is duly elected and qualifies. The Company’s Trustees are not required to attend the Company’s annual shareholder meetings.

~~The election of Mr. Powell~~Long Term Incentive Plan Proposal requires the affirmative vote of the holders of a plurality of the Preferred Shares of the Company, voting as a separate class, and represented in person or by proxy at the Annual Meeting and entitled to vote for the election of a Trustee.

The election of Mr. Ward requires the affirmative vote of the holders of a plurality of the Common and Preferred Shares of the Company, voting as a single class, and represented in person or by proxy at the Annual Meeting and entitled to vote for the election of a Trustee.

~~Abstentions and “broker~~ ~~non-votes”~~ (i.e., shares held in “street name” by brokers or nominees that indicate on their proxies that they do not have discretionary authority to vote such shares as to the election of a Trustee) are counted as present at the Annual Meeting for purposes of determining a quorum, but, assuming the presence of a Quorum, will have no effect on the outcome of the vote on the Proposal.

Under the Company’s Declaration of Trust and the 1940 Act, the holders of the Company’s Preferred Shares, voting as a separate class, to the exclusion of holders of all other securities and classes of capital shares of the Company, are entitled to elect two of the Company’s Trustees. The holders of the Company’s Preferred Shares are entitled to elect the minimum number of additional Trustees that would represent a majority of the ~~Trustees in the event that dividends on the Company’s Preferred~~ Shares ~~become in arrears for two full years~~ and ~~until all arrearages are eliminated. No dividend arrearages exist as of the date of this Proxy Statement.~~

~~Dr. Froehlich and Mr. Powell have been designated as the trustees representing the holders of the Preferred Shares. This means that Mr. Powell, as a Class I Trustee, will be~~ ~~re-elected~~ ~~solely by the holders of the Preferred Shares at the Annual Meeting of Shareholders this year in 2022 and Dr. Froehlich, as a Class II Trustee, will be~~ ~~re-elected~~ ~~solely by the holders of the Preferred Shares at the Annual Meeting of Shareholders in 2023. The holders of the outstanding capital shares of the Company, including the holders of the~~ Preferred Shares, voting as a single class, ~~elect~~present in person or represented by proxy and entitled to vote on the ~~balance~~subject matter. For purposes of the ~~trustees.~~foregoing, shareholders will vote as a single class.

~~THE BOARD, INCLUDING ALL OF THE INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE~~ ~~RE-ELECTION~~ ~~OF EACH OF THE NOMINEES AS A TRUSTEE.~~

~~Qualifications~~For more information, see “—Quorum, Abstentions and ~~Additional Information about the Nominees for Trustee~~Broker Non-Votes” and ~~the Continuing Trustees~~“—Adjournments.”

You may send in your proxy by one of the ~~considerations that led~~following methods:

1. If you received your proxy card(s) by mail, complete, sign and return the ~~Board to conclude that~~enclosed proxy card promptly in the ~~nominees for Trustee or~~postage paid envelope.

2. Call the ~~individuals serving as continuing Trustees~~toll-free number listed on the front of the ~~Company should be nominated or so serve, as~~

~~well as the nominees’ and each Trustee’s name and certain biographical information as reported by them~~3. Log on to the ~~Company. Among the factors the Board considered when concluding that an individual should be a nominee for Trustee or serve~~website listed on the Board were the following: the individual’s experience, skills, expertise, education, knowledge, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, the candidate’s ability to qualify as an Independent Trustee and the existence of any other relationships that might give rise to a conflict of interest and other relevant factors that the Company’s Governance and Compliance Committee considers appropriate in the contextfront of the ~~needs~~enclosed proxy card. Have your control number (located on the enclosed proxy card) available for reference. The system will prompt you with instructions on how to vote.

In addition, shareholders of record may vote in person (virtually) at the Special Meeting. If your shares are held by a bank, broker or other nominee (that is, in “street name”), you are considered the beneficial owner of your shares and you should refer to the instructions provided by your bank, broker or nominee regarding how to vote. In addition, because a beneficial owner is not the shareholder of record, you may not vote shares held by a bank, broker or nominee in street name at the Special Meeting unless you obtain a “legal proxy” from the bank, broker or nominee that holds your shares, giving you the right to vote the shares at the Special Meeting.

A quorum of shareholders is required to take action at the Special Meeting. The presence in person (virtually) or by proxy of the ~~Board (e.g., whether~~holders of a ~~candidate is an “audit committee financial expert” under the federal securities laws).~~

~~In respect~~majority of the Trustee nominees and each continuing Trustee, the individual’s professional accomplishments and prior experience, including, in some cases, in fields related to the operations of the Company, were a significant factor in the determination that each of the individuals should be a nominee for Trustee or serve as a Trustee of the Company. The Trustee nominees’ and each continuing Trustee’s professional experience and additional considerations that contributed to the Board’s conclusion that an individual should serve on the Board are summarized in the table below.

The “Fund Complex,” as referred to herein consists of: the Company, each series of Highland Funds I (“HFI”), each series of Highland Funds II (“HFII”), Highland Income Fund (“HFRO”), Highland Global Allocation Fund (“GAF”), NexPoint Real Estate Strategies Fund (“NRESF”), and NexPoint Capital, Inc. (the “BDC”), a ~~closed-end~~ ~~management investment company that has elected to be treated as a business development company under the 1940 Act.~~

Set forth below are the names and certain information regarding the Company’s executive officers. Such officers serve at the pleasure of the Trustees or until their successors have been duly elected and qualified. The Trustees may fill any vacancy in office or add any additional officers at any time.

~~Set forth in the table below is the dollar range of~~ shares of the Company entitled to vote shall constitute a quorum for the Special Meeting. Our Shares and Preferred Shares represented by valid proxies or in person (virtually) will count for the ~~aggregate dollar range~~purpose of determining the presence of a quorum for the Special Meeting. Votes cast by proxy or in person (virtually) at the Special Meeting will be tabulated by the inspector of election appointed for the Special Meeting. Abstentions will be counted as shares ~~beneficially owned by each Trustee~~present for purposes of determining whether a quorum is present at the Special Meeting, and will have the effect of a vote “against” the applicable Proposal. Broker non-votes will not be deemed present for purposes of determining whether a quorum is present and, therefore, will have no effect on the applicable Proposal.

~~As of February 28, 2022,~~Special Meeting may adjourn the Trustees and officers of the Company as a group owned 15.71% of the Company’s outstanding Common Shares, including shares of the Common Stock directly owned by the Adviser over which Mr. Dondero controls through his control of NexPoint Advisors GP, LLC, the general partner of the Adviser.

As of February 28, 2022, none of the Independent Trustees or their immediate family members owned beneficially or of record any securities issued by the Adviser, the principal underwriter, or any person controlling, controlled by, or under common control with the Adviser or principal underwriter.

~~The Board oversees the management and operations of the Company. Like most registered investment companies, the~~ ~~day-to-day~~ management and operation of the Company is performed by various service providers to the Company, such as the Adviser, and the distributor, administrator, custodian, and transfer agent. The Board has appointed senior employees of certain of these service providers as officers of the Company, with responsibility to monitor and report to the Board on the Company’s operations. The Board receives regular reportsSpecial Meeting from these officers and service providers regarding the Company’s operations. For example, the Treasurer provides reports as to financial reporting matters and investment personnel report on the performance of the Company. The Board has appointed a Chief Compliance Officer who administers the Company’s compliance program and regularly reports to the Board as to compliance matters. Some of these reports are provided as part of formal Board meetings, which are typically held quarterly, and involve the Board’s review of, among other items, recent Company operations. The Board also periodically holds telephonic meetings as part of its review of the Company’s activities. From time to time ~~one or more members of the Board may also meet with management in less formal settings, between scheduled Board meetings,~~ to ~~discuss various topics. In all cases, however, the role of the Board and of any individual Trustee is one of oversight and not of management of the~~ ~~day-to-day~~ ~~affairs of the Company and its oversight role does not make the Board a guarantor of the Company’s investments, operations or activities.~~

The Board has structured itself in a manner that it believes allows it to perform its oversight function effectively. The Board consists of five Trustees, four of whom are not “interested persons,” as defined in the 1940 Act and are “independent” as defined in Rule 303A.02 of the New York Stock Exchange Listed Company Manual. The remaining Trustee, Mr. Honis, is currently treated as an “interested person” of the Company (an “Interested

Trustee”). Mr. Powell serves as Chairman of the Board. The Trustees meet periodically throughout the year to oversee the Company’s activities, review contractual arrangements with service providers for the Company and review the Company’s performance. During the fiscal year ended December 31, 2021, the Board convened twenty two times. Each Trustee attendedreconvene at least 75% of the aggregate of the total number of meetings of the Board and Committees on which he served during the periods that he served. The Company encourages, but does not require, Trustees to attend the Annual Meeting.

The Board periodically reviews its leadership structure, including the role of the Chairman. The Board also completes an annual self-assessment during which it reviews its leadership and Committee structure and considers whether its structure remains appropriate in light of the Company’s current operations. The Board believes that its leadership structure, including the current percentage of the Board who are Independent Trustees is appropriate given its specific characteristics. These characteristics include: (i) the extent to which the work of the Board is conducted through the standing committees, and that the Audit and Qualified Legal Compliance Committee (the “Audit Committee”) and the Governance and Compliance Committee meetings are each chaired by an Independent Trustee; (ii) the extent to which the Independent Trustees meet as needed, together with their independent legal counsel, in the absence of members of management and any member of the Board who is considered an “interested person” of the Company; and (iii) Mr. Powell’s and Mr. Honis’ previous positions with HCMFA and/or historical affiliates of the Adviser, which enhances the Board’s understanding of the operations of the Adviser.

~~Board Oversight of Risk Management.~~ The Board’s role is one of oversight, rather than active management. This oversight extends to the Company’s risk management processes. These processes are embedded in the responsibilities of officers of, and service providers to, the Company. For example, the Adviser and other service providers to the Company are primarily responsible for the management of the Company’s investment risks. The Board has not established a formal risk oversight committee; however, much of the regular work of the Board and its standing Committees addresses aspects of risk oversight. For example, the Trustees seek to understand the key risks facing the Company, including those involving conflicts of interest; how management identifies and monitors these risks on an ongoing basis; how management develops and implements controls to mitigate these risks; and how management tests the effectiveness of those controls.

In the course of providing that oversight, the Board receives a wide range of reports on the Company’s activities from the Adviser and other service providers, including reports regarding the Company’s investment portfolio, the compliance of the Company with applicable laws, and the Company’s financial accounting and reporting. The Board also meets periodically with the Company’s Chief Compliance Officer to receive reports regarding the compliance of the Company with the federal securities laws and the Company’s internal compliance policies and procedures and meets with the Company’s Chief Compliance Officer periodically, including at least annually, to review the Chief Compliance Officer’s annual report, including the Chief Compliance Officer’s risk-based analysis for the Company. The Board’s Audit Committee also meets regularly with the Treasurer and the Company’s independent registered public accounting firm to discuss, among other things, the internal control structure of the Company’s financial reporting function. The Board also meets periodically with the portfolio managers of the Company to receive reports regarding the management of the Company, including its investment risks.

The Board recognizes that not all risks that may affect the Company can be identified, that it may not be practical or cost-effective to eliminate or mitigate certain risks, that it may be necessary to bear certain risks (such as investment-related risks) to achieve the Company’s goals, that reports received by the Trustees with respect to risk management matters are typically summaries of the relevant information, and that the processes, procedures and controls employed to address risks may be limited in their effectiveness. As a result of the foregoing and other factors, risk management oversight by the Board and by the Committees is subject to substantial limitations.

The Board conducts much of its work through certain standing Committees. The Board has three Committees, the Audit Committee, the Governance and Compliance Committee, and the Distribution and Alternatives Oversight Committee, each of which are discussed in greater detail below. The Board has adopted charters for each of these committees.

~~The Audit and Qualified Legal Compliance Committee.~~ The members of the Audit Committee are Dr. Froehlich and Messrs. Constantino, Ward and Powell, each of whom is independent for purposes of the 1940 Act. The Audit Committee is responsible for (i) approving the Company’s independent accountants, (ii) reviewing with the Company’s independent accountants the plans and results of the audit engagement and the adequacy of the Company’s internal accounting controls and (iii) approving professional services provided by the Company’s independent accountants. The Audit Committee is charged with compliance with Rules 205.2(k) and 205.3(c) of Title 17 of the Code of Federal Regulations regarding alternative reporting procedures for attorneys representing the Company who appear and practice before the SEC on behalf of the Company. The Audit Committee is also responsible for reviewing and overseeing the valuation of debt and equity securities that are not publicly traded or for which current market values are not readily available pursuant to policies and procedures adopted by the Board. The Board and Audit Committee will use the services of one or more independent valuation firms to help them determine the fair value of these securities. In addition, each member of the Audit Committee meets the current independence and experience requirements of Rule ~~10A-3~~ ~~under the Securities Exchange Act of 1934, as amended (the “1934 Act”).~~

~~The Audit Committee met four times during the fiscal year ended December 31, 2021. Mr. Ward acts as the Chairman of the Audit Committee and as the audit committee financial expert.~~

~~The Governance and Compliance Committee.~~ The Company’s Governance and Compliance Committee’s function is to oversee and make recommendations to the full Board or the Independent Trustees, as applicable, with respect to the governance of the Company, selection and nomination of Trustees, compensation of Trustees, and related matters, as well as to oversee and assist Board oversight of the Company’s compliance with legal and regulatory requirements and to seek to address any potential conflicts of interest between the Company and NexPoint in connection with any potential or existing litigation or other legal proceeding related to securities held by the Company and the Adviser or another client of the Adviser. The Governance and Compliance Committee is also responsible for at least annually evaluating each Trustee and determining whether to recommend each Trustee’s continued service in that capacity. The Governance and Compliance Committee will consider recommendations for Trustee nominees from shareholders sent to the Secretary of the Company, 300 Crescent Court, Suite 700, Dallas, Texas 75201. A nomination submission must include all information relating to the recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Trustees, as well as information sufficient to evaluate the recommended nominee’s ability to meet the responsibilities of a Trustee of the Company. Nomination submissions must be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Governance and Compliance Committee. The Governance and Compliance Committee is currently comprised of Dr. Froehlich and Messrs. Constantino, Ward and Powell, each of whom is independent for purposes of the 1940 Act. The Governance and Compliance Committee met seven times during the fiscal year ended December 31, 2021.

~~The Distribution and Alternatives Oversight Committee.~~ The members of the Distribution and Alternatives Oversight Committee are Dr. Froehlich and Messrs. Honis, Ward, and Powell. The Distribution and Alternatives Oversight Committee is responsible for reviewing arrangements with financial intermediaries who provide service to the Company, including Company payments to financial intermediaries, and for overseeing any funds that, in the Board’s determination, employ alternative investment strategies. Mr. Honis serves as Chairman of the Distribution and Alternatives Oversight Committee. The Distribution and Alternatives Oversight Committee met three times during the fiscal year ended December 31, 2021.

The executive officers of the Company receive no direct remuneration from the Company. Each Trustee who oversees all of the funds in the Fund Complex receives an annual retainer of $150,000 payable in quarterly installments and allocated among each portfolio in the Fund Complex based upon relative net assets. The annual retainer for a Trustee who does not oversee all of the funds in the Fund Complex is prorated based on the portion of the $150,000 annual retainer allocable to the funds overseen by such Trustee. The Trustees are reimbursed for actual ~~out-of-pocket~~ expenses relating to attendance at meetings. The Trustees do not receive any separate compensation in connection with service on Committees or for attending Board or Committee Meetings; however, the Chairman of the Board and the Chairman of the Audit Committee each receive an additional payment of $10,000 payable in quarterly installments and allocated among each portfolio in the Fund Complex based on relative net assets. The Trustees do not have any pension or retirement plan.

The following table summarizes the compensation paid by the Company to its Trustees and the aggregate compensation paid by the Fund Complex to the Trustees for services rendered in the fiscal year ended December 31, 2021.

To the knowledge of management of the Company and the Board, the following shareholder(s) or “groups,” as the term is defined in Section 13(d) of the 1934 Act, beneficially owned, or were owners of record of, more than 5% of the Company’s outstanding Common Shares as of February 28, 2022:

To the knowledge of management of the Company and the Board, the following Preferred Shares shareholder(s) or “groups,” as the term is defined in Section 13(d) of the 1934 Act, beneficially owned, there were no owners of record of, more than 5% of the Company’s outstanding shares as of February 28, 2022.

Members of senior management also serve as officers of other investment managers affiliated with the Adviser that do and may in the future manage investment funds, accounts or other investment vehicles with investment objectives similar to those of the Company. In addition, the Company’s executive officers and trustees and the employees of the Adviser serve or may serve as officers, directors or principals of entities that operate in the same or ~~related, lines~~some other place, and notice need not be given of ~~business as~~any such adjourned Special Meeting if the ~~Company does or~~time and place, if any, thereof and the means of ~~investment funds, accounts or other investment vehicles managed~~remote communications, if any, by which shareholders and proxyholders may be deemed to be present in person and vote at such adjourned Special Meeting are announced at the ~~Company’s affiliates. These investment funds, accounts or other investment vehicles may have investment objectives similar to~~Special Meeting. At the ~~Company’s investment objective.~~

~~As a result,~~adjourned Special Meeting, the Company may ~~not~~transact any business which might have been transacted at the Special Meeting. If after the adjournment a new record date is fixed for the adjourned Special Meeting, notice of the adjourned Special Meeting shall be given to each shareholder of record entitled to vote at the ~~opportunity~~Special Meeting and each other shareholder entitled to ~~participate~~notice of the Special Meeting.

Any proxies may be revoked at any time before they are exercised at the Special Meeting by timely filing with us a written notice of revocation, by timely delivering to us a duly executed proxy bearing a later date, by voting over the Internet or by telephone at a later time in ~~certain investments made~~the manner provided on the proxy card or by ~~investment funds, accounts~~attending the Special Meeting and voting at the meeting. Votes provided over the Internet, by telephone or by mail must be received by 5:00 p.m. Eastern time on January 27, 2023. If you hold shares in the name of a brokerage firm, bank, nominee or other ~~investment vehicles managed by the Adviser or its affiliates. However,~~institution, you must provide a legal proxy from that institution in order to ~~fulfill its fiduciary duties to each of its clients,~~revoke your shares at the ~~Adviser intends to allocate investment opportunities~~Special Meeting. Being present in person (virtually) at the Special Meeting alone does not revoke a ~~manner that is fair~~previously executed and equitable over time and is consistent with the Adviser’s allocation policy, investment objective and strategies so that the Company is not disadvantaged in relation to any other client. Where the Company is able to ~~co-invest~~ ~~consistent with the requirements of the 1940 Act, if sufficient securities or loan amounts are available to satisfy the Company’s and each such account’s proposed demand, the opportunity~~returned proxy.

Unless revoked as described above, all properly executed proxies will be ~~allocated in accordance with the Adviser’s~~ ~~pre-transaction~~ determination. If there is an insufficient amount of an investment opportunity to satisfy the Company’s demand and that of other accounts sponsored or managed by the Adviser or its affiliates, the allocation policy provides that allocations among the Company and such other accounts will generally be made pro rata based on the amount that each such party would have invested if sufficient securities or loan amounts were available. Where the Company is unable to ~~co-invest~~ consistent with the requirements of the 1940 Act, the Adviser’s allocation policy further provides for investments to be allocated on a random or rotational basis to assure that all clients have fair and equitable access to such investment opportunities.

The Board, in consultation with the Company’s Chief Executive Officer, Chief Compliance Officer and legal counsel, may review potential related party transactions and, during these reviews, it may also consider any conflicts of interest brought to its attention pursuant to the Company’s Code of Conduct or the Company’s or the Adviser’s Rule ~~17j-1~~ ~~Code of Ethics.~~

The Company has entered into an investment advisory agreement with the Adviser pursuant to which the Adviser has agreed to provide investment advisory services to the Company. In exchange for these services, the Company will pay the Adviser a fee for investment management services. The Company’s contractual advisory fee for the year ended December 31, 2021 was 1.00%.

The Company has entered into an administration agreement with the Adviser. For its services, the Adviser receives an annual fee, payable monthly, in an amount equal to 0.20% of the average weekly value of the Company’s Managed Assets.

~~Under a separate~~ ~~sub-administration~~ ~~agreement, the Adviser has delegated certain administrative functions to SEI Global Funds Services (“SEI”). The Adviser pays SEI directly for these~~ ~~sub-administration~~ ~~services.~~

The Adviser has entered into a Services Agreement with Skyview Group (“Skyview”), effective February 25, 2021, pursuant to which the Adviser will receive administrative and operational support services to enable it to provide the required advisory services to the Company. The Adviser will compensate all Adviser and Skyview personnel who provide services to the Company.

In the future, the Company may engage the Adviser or certain of its affiliates to provide services other than those discussed above. Any arrangements would be subject to approval by the Board prior to the Adviser or its affiliates being engaged to provide services to the Company.

Section 16(a) of the 1934 Act and Section 30(h) of the 1940 Act, and the rules thereunder, require that the Company’s Trustees and officers, the Adviser, certain persons affiliated with the Adviser, and persons who own beneficially, directly or indirectly, more than 10% of the Company’s outstanding interests (collectively, “Section 16 reporting persons”), file initial reports of beneficial ownership and reports of changes in beneficial ownership of Company interests with the SEC and the New York Stock Exchange. Section 16 reporting persons are required by SEC regulations to furnish to the Company copies of all Section 16(a) forms they file with respect to shares of the Company. The Company believes that during the past fiscal year, the Officers, Trustees and greater than 10% beneficial holders of the Company complied with all applicable filing requirements.

Cohen & Company, Ltd. (“Cohen”), an independent registered public accounting firm located at 1350 Euclid Avenue, Suite 800, Cleveland, OH 44115, serves as the Company’s independent registered public accounting firm. Representatives of Cohen will not be presentvoted at the Annual Meeting but Cohen has been given the opportunity to make a statement if they desire to do so and will be available should any matter arise requiring their presence. After reviewing the Company’s audited financial statements for the fiscal year ended December 31, 2021, the Company’s Audit Committee recommended to the Company’s Board that such statements be included in the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2021. A copy of the Audit Committee’s report appears below.

The independent registered public accounting firm for the Company during the fiscal year ended December 31, 2019 was PricewaterhouseCoopers LLP (“PwC”), located at 2121 N. Pearl Street, Suite 2000, Dallas, TX 75201. On June 8, 2020, the Company dismissed PwC as its independent registered public accounting firm, effective on such date. The decision to dismiss PwC was approved by the Audit Committee and by the full Board. On June 18, 2020, the Board approved the appointment of Cohen as the Company’s independent registered public accounting firm. Cohen was engaged by the Company on August 7, 2020.

PwC’s audit reports on the Company’s financial statements for the fiscal years ended December 31, 2019 and 2018 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

During the two years ended December 31, 2019 and the subsequent interim period through June 8, 2020, during which PwC served as the Company’s independent registered public accounting firm, there were no: (1) disagreements (as defined in Item 304(a)(1)(iv) of Regulation ~~S-K~~ and the related instructions) with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events (as described in Item 304(a)(1)(v) of Regulation ~~S-K).~~

During the two years ended December 31, 2019 and the subsequent interim period through August 7, 2020, neither management, the Company, nor anyone on its behalf, consulted Cohen regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the financial statements of the Company and no written report or oral advice was provided to the Company by Cohen or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation ~~S-K~~ ~~and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation~~ ~~S-K).~~

~~The Company provided Cohen with a copy of the disclosure it is making in response to Item 304(a) of Regulation~~ ~~S-K~~ and requested that Cohen furnish the Company with letters addressed to the SEC, pursuant to Item 304(a) containing any new information, clarification of the Company’s expression of its view, or the respects in which it does not agree with the statements made by the Company in response to Item 304(a). Copies of such letters, if available, were filed as an exhibit in the Company’s Form ~~N-CSR~~ ~~on March 11, 2021.~~

The Company provided PwC with a copy of these disclosures and requested that PwC furnish the Company with a letter addressed to the SEC stating whether it agreed with the statements made by the Company in response to Item 304(a) of Regulation ~~S-K,~~ ~~and, if not, stating the respects in which it does not agree. A copy of the letter was filed as an exhibit to the Company’s Form~~ ~~N-CSR~~ ~~on March 11, 2021.~~

~~The following chart reflects fees paid to Cohen in the Company’s last two fiscal years. One hundred percent (100%) of all services provided by Cohen to the Company in each year were~~ ~~pre-approved~~ ~~and no fees were subject to~~ ~~pre-approval~~ ~~by the Audit Committee pursuant to Rule~~ ~~2-01(c)(7)(i)(C)~~ ~~of Regulation~~ ~~S-X.~~ ~~The audit services are approved by the Audit Committee pursuant to an audit engagement letter, and,~~ in accordance with your directions on the ~~Company’s~~ ~~pre-approval~~ ~~policies and procedures,~~proxy. If a properly executed proxy gives no specific instructions, the ~~Audit Committee~~Shares represented by your proxy will be voted FOR the adoption of the ~~Company must~~ ~~pre-approve~~ ~~all~~ ~~non-audit~~ ~~services provided by Cohen,~~Long Term Incentive Plan.

Role of our Board and ~~all~~ ~~non-audit~~ ~~services provided by Cohen~~Executive Officers

On July 1, 2022, the Securities and Exchange Commission (the “SEC”) issued an order pursuant to ~~the Adviser, or any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the Company that are related to the operations and financial reporting~~Section 8(f) of the ~~Company. In some circumstances, when certain services were not recognized at the time~~Investment Company Act of ~~the engagement to be~~ ~~non-audit~~ ~~services, the~~ ~~pre-approval~~ ~~requirement may be waived if the aggregate amount of the fees for such~~ ~~non-audit~~ ~~services constitutes less than five percent of the total amount of revenues paid to Cohen by the Company during the fiscal year in which the~~ ~~non-audit~~ ~~services are provided. Cohen provided~~ ~~non-audit~~ services to the Adviser during the Company’s last two fiscal years, but these services did not relate directly to the operations and financial reporting of the Company, and therefore were not subject to ~~pre-approval~~ ~~pursuant to Rule~~ ~~2-01(c)(7)(ii)~~ ~~of Regulation~~ ~~S-X.~~ ~~Cohen did not provide any~~ ~~non-audit~~ ~~services to any entity controlling, controlled by or under common control with the Adviser~~1940 (the “1940 Act”) declaring that ~~provides ongoing services to the Company. The Audit Committee has considered whether the provision of~~ ~~non-audit~~ ~~services that were rendered to the Adviser was compatible with maintaining Cohen’s independence.~~

~~Audit Fees.~~ ~~Audit fees consist of fees billed for professional services rendered for the audit of the Company’s~~ ~~year-end~~ consolidated financial statements and reviews of the interim consolidated financial statements included in quarterly reports and services that are normally provided by the auditor in connection with statutory and regulatory filings. These services also include the required audits of the Company’s internal controls over financial reporting.

~~Audit-Related Fees.~~ Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” These services include attestation services that are not required by statute or regulation, consultations concerning financial accounting and reporting standards, and fees related to requests for documentation and information from regulatory and other government agencies.

~~Tax Fees.~~ ~~Tax fees consist of fees billed for professional services for tax compliance. These services include assistance regarding federal, state, and local tax compliance.~~

~~All Other Fees.~~ ~~All other fees include fees for products and services other than the services reported above.~~

The Audit Committee oversees the Company’s accounting and financial reporting processes and the audits of the Company’s financial statements. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements, the Company’s accounting and financial and reporting principles, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Audit Committee reviewed the audited financial statements in the Annual Report dated December 31, 2021 with management and discussed the quality of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

The Audit Committee has considered and discussed the above described December 31, 2021 audited financial statements with management and with Cohen. The Audit Committee has also discussed with Cohen the matters required to be discussed by the statement on Auditing Standards No. 1301, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T, ~~The Auditor’s Communication With Those Charged With Governance~~. The Audit Committee reviewed with Cohen, who is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgment as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. Finally, the Audit Committee reviewed the written disclosures and the letters from Cohen required by PCAOB Rule 3526, ~~Communication with Audit Committees Concerning Independence~~~~, as currently in effect, has considered whether the provision of other~~ ~~non-audit~~ ~~services by Cohen to the Company are compatible with maintaining Cohen’s independence, and has discussed with Cohen its independence of the Company.~~

The Audit Committee discussed with Cohen the overall scope and plans for the audit. The Audit Committee met with Cohen to discuss the results of their audit, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.

Based upon the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to in this proxy statement and in the Audit Committee’s Charter, the Audit Committee recommended to the Board (and the Board has approved) that the Company’s audited financial statements be included in the Annual Report to Shareholders for the fiscal year ended December 31, 2021 and filed with the SEC.

Shareholders are reminded, however, that the members of the Audit Committee are not professionally engaged in the practice of auditing or accounting. Members of the Audit Committee rely, without independent verification, on the information provided to them and on the representations made by management and Cohen. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions, referred to above, do not assure that the audit of the Company’s financial statements has been carried out in accordance with the standards of the PCAOB, that the financial statements are presented in conformity with accounting principles generally accepted in the United States of America or that the Company’s independent registered public accounting firm is, in fact, “independent.”

The Trustees do not intend to present any other business at the Annual Meeting nor are they aware that any shareholder intends to do so. If, however, any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy will vote thereon in accordance with their judgment.

At a special meeting of shareholders on August 28, 2020, shareholders approved proposals (i) to change the Company’s business from a registered investment company that invests primarily in debt and equity securities to a diversified real estate investment trust (“REIT”), (ii) to amend the Company’s fundamental investment restrictions to permit the Company to engage in its new business (collectively, the “Conversion”), and (iii) to amend and restate the Company’s Agreement and Declaration of Trust. Although the Company has ~~taken significant steps~~ceased to ~~implement the Conversion, it is still contingent upon regulatory approval and the ability to reconfigure the Company’s portfolio to attain REIT status and deregister as an investment company.~~

~~We are continuing to realign our portfolio so that we are no longer~~be an investment company under the 1940 Act ~~and we filed an application~~(the “Deregistration Order”). The issuance of the Deregistration Order enables us to proceed with the ~~SEC for a deregistration order on March 31, 2021 and amendments to the application on September 13, 2021, November 5, 2021 and December 2, 2021. We intend to continue to sell certain~~full implementation of our ~~existing investments and fully transition our portfolio into~~new business mandate to operate as a diversified real estate ~~and real estate related investments as opportunities within the new~~ investment ~~scope arise, subject to applicable compliance requirements and other business considerations.~~

~~Once the Conversion is fully implemented, it is expected~~trust that ~~investments will be diversified among~~focuses primarily on investing in various commercial real estate property types and across the capital structure, including but not limited to: equity, mortgage debt, mezzanine debt and preferred equity. ~~It is expected that property types will primarily include industrial, hospitality, net lease, retail, office, storage and healthcare and, to~~After the extent currently owned, multifamily and single-family rentals; however, the Company would have the authority to invest without limitation in any property type. As of the date of this proxy statement, the Company’s real estate portfolio consists of multifamily, single-family, net lease, hospitality, retail, storage, office, and other assets.

~~The Company will invest primarily in real estate and real estate related assets; however, the Company may, to a limited extent, continue to hold, acquire or transact in certain~~ ~~non-real~~ estate securities. To permit us to engage in our new business, our fundamental investment restrictions regarding purchasing and selling real estate and originating loans and certain of our fundamental investment restrictions have been amended to allow us to engage in our business as a diversified REIT.

The Conversion process is nearly complete — the Company now qualifies as a REIT for tax purposes and lacks only final deregistration approval from the SEC. However, there can be no assurance that conversion of the Company to REIT status will improve its performance or reduce the discount to the Company’s net asset value. Further, the SEC may determine not to grant the Company’s request for a deregistration order, which would materially change the Company’s plans for its business and investments, and the Company would likely retain its current ~~closed-end~~ ~~fund structure for the foreseeable future.~~

In addition, these risks associated with the Conversion may adversely affect our financial condition, yield on investment, results of operations, cash flow, per share trading price of the Common Shares and Preferred Shares, our ability to satisfy debt service obligations, if any, and to make cash distributions to shareholders, including dividends on the Preferred Shares. Whether we remain a registered investment company or convert to a diversified REIT, the Common Shares and the Preferred Shares, like an investment in any other public company, are subject to investment risk, including the possible loss of your investment.

The following information is a summary of the changes approved by shareholders. This information may not reflect all of the changes that have occurred since a shareholder originally purchased Common Shares or Preferred Shares. Additional detail regarding these changes is available in the Company’s definitive proxy statement filed on July 10, 2020.

As a diversified REIT, the Company’s primary investment objective is to provide both current income and capital appreciation. The Company seeks to achieve this objective by investing among various commercial real estate property types and across the capital structure, including but not limited to: equity, mortgage debt, mezzanine debt and preferred equity. The Adviser focuses on opportunistic investments in real estate properties with a ~~value-add~~ component and real estate credit. The objective is to increase the cash flow and value of the Company’s properties, acquire properties with cash flow growth potential and achieve capital appreciation for shareholders through a ~~value-add~~ program. The Company pursues real estate credit investments based on where the Adviser believes the various real estate subsectors are within the broader real estate cycle and tactically allocate among these opportunities.

Underlying property types will primarily include industrial, hospitality, net lease, retail, office, storage and healthcare and, to the extent currently owned, multifamily and single-family rentals; however, the Company may invest without limitation in any property type. As of the date of this proxy statement, the Company’s real estate portfolio consists of multifamily, single-family, net lease, hospitality, retail, storage, office, and other assets.

The Adviser and the Board believe that a diversified investment approach is appropriate for the current market environment. However, to capitalize on investment opportunities at different times in the economic and real estate investment cycle, the Company may change the Company’s investment strategy from time to time. The Adviser and the Board believe that the flexibility of the Company’s investment strategy and the experience and resources of the Adviser and its affiliates, will allow us to take advantage of changing market conditions to provide both current income and generate capital appreciation. The Board will be able to modify such strategies without the consent of the shareholders to the extent that the Board determines that such modification is in the Company’s best interest.

~~Leverage Policies and Financing Strategy.~~ ~~To increase the returns on the Company’s investments, after issuance~~receipt of the Deregistration Order the Company ~~plans~~made certain changes to ~~employ both direct~~the makeup of its Board and ~~structural leverage~~executive officers.

For fiscal years ending December 31, 2020 and December 31, 2021, the Board oversaw the management and operations of the Company. Like most registered investment companies, the day-to-day management and operation of the Company was performed by various service providers to the Company, such as the Adviser, and the distributor, administrator, custodian, and transfer agent. The Board appointed senior employees of certain of these service providers as officers of the Company, with the responsibility to monitor and report to the Board on the Company’s ~~property~~operations. The Board received regular reports from these officers and ~~debt investments, which~~service providers regarding the Company’s operations.

The officers, who are employees of our Adviser, have not received, nor do we expect they will in the future receive, any cash compensation from the Company ~~expects generally will~~for their services. Similarly, we do not ~~exceed, on a debt~~provide such officers with pension benefits, perquisites or other personal benefits. Instead, we pay our Adviser the fees described below. Our Compensation Committee does not make determinations with respect to ~~equity basis, a ratio of~~ ~~3-to-1,~~ ~~an increase from the ratio of~~ ~~1-to-2~~ ~~set~~compensation paid by ~~the 1940 Act.~~

~~Leverage will take the form of repurchase~~our Adviser or margin facilities collateralized by the Company’s debt investments and mortgage debt collateralized the Company’s property investments. At the REIT level the Company may have a revolving corporate credit facility, or may issue unsecured debt, mezzanine debt or preferred equity. The Company believes that the relationships the Adviser and its affiliates ~~as well as other companies managed by~~to such officers.

During the Adviser’s affiliates (the “NexPoint managed companies”), have with banks, life insurance companies, Freddie Mac and The Federal National Mortgage Association, or Fannie Mae, provide the Company with a unique opportunity to invest alongside quality sponsors and the largest multifamily lenders in the U.S.

~~The Company intends to use leverage,~~period prior to the ~~extent available, to make additional investments that may increase the~~ Company’s potential returns. Although the Company is not required to maintain any particular leverage ratio, the amount of leverage we will use for particular investments will depend upon an assessment of a variety of factors, which may include the anticipated liquidity and price volatility of the Company’s assets, the potential for losses in the Company’s portfolio, the gap between the duration of the Company’s assets and liabilities, the availability and cost of financing the Company’s assets, the health of the U.S. economy and commercial real estate markets, the Company’s outlook for the level, slope and volatility of future interest rates, the credit quality of the Company’s borrowers and tenants, the collateral values underlying the Company’s assets and the Company’s outlook for market lending spreads relative to the LIBOR (or other applicable benchmark interest rate index) curve.

~~REIT Operations.~~ The Adviser intends to operate to ensure that we maintain the Company’s qualification as a REIT for U.S. federal tax purposes and, once deregistered, are not required to register as an investment company under the 1940 Act. The Adviser intends to regularly monitor the nature of the Company’s assets and the income they generate to ensure that at all times we maintain the Company’s tax qualification as a REIT and are not required to ~~re-register~~ ~~as an investment company under the 1940 Act. The Board currently reviews the Company’s transactions on a periodic basis to ensure compliance with these operating policies.~~

~~Distribution Policy.~~ The Company intends to make monthly distributions to the Company’s shareholders of amounts that will, at a minimum, enable us to comply with the REIT provisions of the Code that generally require annual distributions of at least 90% of the Company’s REIT taxable income (other than net capital gains). The actual amount of such distributions will be determined on a monthly basis by the Board, taking into account, in addition to the REIT tax requirements, the Company’s cash needs, the market price for the Company’s Common Shares and other factors Board considers relevant.

~~Operating Expenses.~~ ~~Operating expenses may increase as the Conversion becomes fully implemented following~~ receipt of the Deregistration Order, ~~due~~the Company was party to ~~increased costs associated~~an investment advisory agreement (the “Former Advisory Agreement”) with ~~sourcing additional~~an affiliate of the Adviser (the “Former Adviser”) pursuant to which the Former Adviser provided investment advisory services to the Company. The Company’s contractual advisory fee for the years ended December 31, 2020 and December 31, 2021 were equal to 1.00% of the average weekly value of the Company’s managed assets (under the Former Advisory Agreement, “managed assets” was an amount equal to the total assets of the Company, including any form of leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred stock or other preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Fund’s investment objectives and policies, and/or (iv) any other means. For the years ended December 31, 2020 and December 31, 2021, we paid approximately $11.7 million and $11.1 million, respectively, in fees to our Former Adviser.

In connection with the receipt of the Deregistration Order, the Company terminated its Former Advisory Agreement and entered into a new advisory agreement (the “Advisory Agreement”) with the Adviser, pursuant to which the Adviser manages the day-to-day operations of the Company and provides investment management services. The Company’s contractual fees for the period after receipt of the Deregistration Order is equal to 1.20% of the Company’s Managed Assets (as described below). In addition, the Company is required to reimburse the Adviser for certain expenses incurred in connection with its provision of investment management services under the Advisory Agreement. For the twelve-month period following the Company’s receipt of the Deregistration Order, all fees and reimbursed expenses (subject to certain exceptions) paid under the Advisory Agreement may not exceed 1.5% of the Company’s Managed Assets.

Under the Advisory Agreement, “Managed Assets” means an amount equal to the total assets of the Company, including any form of leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing to purchase or develop real estate or other investments, borrowing through a credit facility, or the issuance of debt securities), (ii) the issuance of preferred shares or other preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Company’s investment objectives and ~~costs associated with servicing those investments; however, these expenses are projected~~policies, and/or (iv) any other means. In the event the Company holds collateralized mortgage-backed securities (“CMBS”) where the Company holds the controlling tranche of the securitization and is required to consolidate under GAAP all assets and liabilities of a specific CMBS trust, the consolidated assets and liabilities of the consolidated trust will be netted to calculate the allowable amount to be

~~offset~~Additionally, the Former Advisory Agreement and our Advisory Agreement do not require our named executive officer to dedicate a specific amount of time fulfilling the obligations of the Former Advisor and our Advisor to us under the Former Advisory Agreement and Advisory Agreement and do not require a specific percentage or amount of the fees paid to the Former Adviser or Adviser to be allocated to the compensation of our named executive officer. The Former Adviser and our Adviser do not compensate our named executive officer specifically for their services performed for us as they also serve as officers of other investment vehicles that are sponsored, managed or advised by ~~higher projected income attributable~~affiliates of the Former Adviser and our Adviser. For these reasons, the Former Adviser cannot identify the portion of compensation awarded to ~~increased~~our named executive officer for services rendered solely in his capacity as an officer of the Company. Accordingly, we are unable to provide complete compensation information for our named executive officer as the total compensation of our named executive officer reflects the performance of all the investment vehicles for which he provides services. However, for context, the Former Advisor and/or its affiliates paid our named executive officer aggregate base salary and cash ~~flows from leveraged real estate assets, resulting~~incentive bonuses totaling $2.5 million for the year ended December 31, 2021. This represents approximately 22.5% of the $11.1 million in ~~higher projected net income per common share (thus supporting~~fees paid to the Former Adviser by us for the year ended December 31, 2021. However, if a ~~potentially higher distribution rate~~portion of the aggregate base salary and cash incentive bonuses paid to our named executive officer is allocated to us based on the advisory fees paid to the Former Adviser by us as a percentage of the total advisory fees earned by the Former Adviser and its affiliates, the aggregate base salary and cash incentive bonuses allocated to us for our named executive officer is approximately 3.3% of the fees paid to the Former Adviser by us for the year ended December 31, 2021. The cash compensation paid to our named executive officer is approximately 100% fixed pay and 0% variable/incentive pay. Total compensation paid to our named executive officer in the ~~long term)~~aggregate for the year ended December 31, 2021, including fixed and variable/incentive cash compensation, as well as time-based RSUs of affiliates of the Former Adviser that vested during the year, totaled approximately $5.0 million. This represents base salary of approximately $2.5 million or 50.1%, no cash incentive bonuses and time-based RSU compensation of $2.49 million or 49.9%.

Following the ~~Conversion period ,~~Deregistration Order, and provided our shareholders vote in favor of the ~~Adviser will continue~~Long Term Incentive Plan Proposal, we anticipate providing equity incentive awards to ~~implement~~our officers in the ~~Company’s business strategies~~future, subject to the ~~oversight~~discretion of the ~~Board, including: (a) performing all~~Compensation Committee.

As described above, our executive officers are employed by our Adviser or the Former Adviser and none of our executive officers are employed by the Company. For fiscal years ended December 31, 2020 and December 31, 2021, none of the Company’s ~~day-to-day~~ ~~activities as a public company operating as a diversified REIT; (b) sourcing, analyzing and closing~~executive officers received any remuneration from the ~~Company’s investments; (c) arranging~~Company. We have reported the ~~Company’s financings; (d) performing the Company’s asset management functions by monitoring the performance~~Adviser fee that we pay to our Adviser under “-Overview of Executive Compensation Program” above. Since none of the Company’s ~~borrowers and the maintenance~~executive officers received compensation in excess of $100,000, the Company’s ~~collateral; and (e) when necessary, enforcing~~sole named executive officer was James Dondero, who as the Company’s ~~loan~~President served as its Principal Executive Officer.

No compensation was paid to, earned by or awarded to our President and ~~security rights.~~sole named executive officer, Mr. Dondero, during the fiscal years ended December 31, 2021 and 2020.

There were no outstanding equity awards held by Mr. Dondero during the fiscal year ended December 31, 2021.

There are no potential payments to ~~Certain Other Activities.~~ ~~We may raise additional funds through offerings of equity or debt securities or by retaining cash flow (subject to provisions~~Mr. Dondero in the ~~Code concerning distribution requirements and the taxability of undistributed REIT taxable income)~~event his employment is terminated for any reason whatsoever or a combination of these methods. If the Board determines to raise additional equity capital, it has the authority, without shareholder approval, to issue additional Common Shares or preferred shares of beneficial interest in any manner and on such terms and for such consideration as it deems appropriate, at any time.

~~In addition, to the extent available,~~ the Company ~~intends to borrow money to make investments that may increase~~undergoes a change in control.

As described above under “Compensation of Executive Officers and Trustees – Role of our Board and Executive Officers,” during the ~~Company’s potential returns. The~~fiscal year ended December 31, 2021, the Company intends to use traditional forms of financing, including repurchase agreements, bank credit facilities (including revolving facilities and term loans), public or private debt issuances, securitizations and other sources of financing. We may also issue preferred equity which requires us to pay dividends at fixed or variable rates before we may pay distributions to the Company’s common shareholders. We expect that the Board will periodically review the Company’swas an investment ~~guidelines and the Company’s portfolio and leverage strategies.~~

The Company may invest in equity or debt securities of other REITs or other entities engaged in real estate operating or financing activities, and may do so for the purpose of exercising control over such entities.

The Company does not intend to adopt a formal portfolio turnover policy. Subject to maintaining the Company’s qualification for taxation as a REIT under the Code for U.S. federal income tax purposes and the Company’s exemption from registrationcompany registered under the 1940 Act and maintained a non-management trustee compensation program (the “Prior Trustee Compensation Program”). In connection with the Deregistration Order, the Company adopted a new non-management trustee compensation program, effective July 1, 2022 (the “New Trustee Compensation Program”). Under both programs, only non-management trustees were eligible to receive compensation for their service as a trustee.

Under the Prior Trustee Compensation Program, each of the Company’s trustees who oversaw the Company and the “Fund Complex” (which includes each series of Highland Funds I, each series of Highland Funds II, Highland Income Fund, Highland Global Allocation Fund, NexPoint Real Estate Strategies Fund, and NexPoint Capital, Inc.) received an annual retainer of $150,000 payable in quarterly installments. The annual retainer was allocated among each portfolio in the Fund Complex based upon relative net assets. For a trustee who did not oversee all of the funds in the Fund Complex, the Company prorated the trustee’s annual retainer based on the portion of the $150,000 annual retainer allocable to the funds overseen by such trustee. The Chairman of the Board and the Chairman of the Audit and Qualified Legal Compliance Committee (“Audit Committee”) each received an additional payment of $10,000 payable in quarterly installments and allocable among each portfolio in the Fund Complex based on relative net assets. Other than the annual retainer and chair fees, the trustees were not entitled to any additional compensation in connection with service on committees or for attending Board or committee meetings.

Under the New Trustee Compensation Program, the Company provides the following compensation:

Under both programs, trustees may be reimbursed for eligible expenses relating to attendance at meetings and are otherwise ineligible for any other employee benefit plan or program.

The following table sets forth the compensation paid to or accrued by our non-management trustees under the Prior Trustee Compensation Program during the fiscal year ended December 31, 2021.

The tables below set forth the beneficial ownership information of our Shares and Preferred Shares as of December 19, 2022 for:

Unless otherwise noted below, the address of the persons and entities listed in the table is the address of our Adviser’s office, 300 Crescent Court, Suite 700, Dallas, Texas 75201. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we ~~currently expect~~believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all Shares of the Company and Preferred Shares of the Company reflected as beneficially owned, subject to applicable community property laws.

Beneficial ownership and percentage of beneficial ownership is based on [•] Shares of the Company outstanding at December 19, 2022 and [•] Preferred Shares of the Company outstanding at December 19, 2022.

It is expected that the solicitation of proxies will ~~typically hold investments~~be primarily by mail and telephone. The costs of soliciting proxies will be borne by the Company. The Adviser and its personnel, and personnel of the Adviser’s affiliates, as well as our trustees and officers, may assist in the solicitation of proxies by telephone, facsimile or email and will receive no additional compensation in connection therewith. We have retained AST to provide shareholder meeting services, including the distribution of this proxy statement and related materials to shareholders as well as assisting the Company in soliciting proxies for ~~between two and 10 years. However, in order to maximize returns and manage portfolio risk while maintaining~~ the ~~financial capacity to undertake attractive opportunities that become available to us, we may dispose~~Special Meeting at an approximate cost of ~~an asset earlier than anticipated or hold an investment longer than anticipated if we determined doing so to~~$21,000. These costs will be ~~appropriate based upon market conditions or other factors regarding a particular investment.~~paid by the Company.

Pursuant to our Declaration of Trust and Bylaws, because the Special Meeting is a special meeting of our shareholders, only the business stated in the notice of meeting attached to this Proxy Statement shall be conducted at the Special Meeting. At this time, the Board knows of no other matter which will be brought before the Special Meeting.

Pursuant to our Bylaws, shareholders may make nominations and propose other business only in connection with annual meetings of shareholders. Our Bylaws require compliance with certain procedures for a shareholder to properly make a nomination for election to the Board or to propose other Company business at an annual meeting. In order for a shareholder to properly propose a nominee for election to the Board or propose business outside of Rule 14a-8 under the ~~1934~~Exchange Act, the shareholder must comply, in all respects, with the advance notice and other provisions set forth in our Bylaws, which currently include, among other things, requirements as to the shareholder’s timely delivery of advance notice, ownership of at least a specified minimum amount of our common or preferred shares, asif applicable, for a specified minimum period of time, record ownership and submission of specified information. If a shareholder who is eligible to do so under our Bylaws wishes to nominate a person or persons for election to the Board or propose other Company business at an annual meeting, notice of such proposal must be timely received at our principal executive offices. For such notice to be timely, it must be delivered not less than 120 days (February 14, 2023) nor more than 150 days (January 15, 2023) prior to the anniversary date of the immediately preceding annual meeting of the shareholders (in no event shall the adjournment or postponement of the annual meeting commence or extend the time period for the shareholder to provide notice). However, in the event that the annual meeting is called for a date that is not within 25 days before or after the anniversary date of the immediately preceding annual meeting, in order to be timely, such notice must be received not later than the close of business on the 10^th day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever occurs first. The notice must set forth detailed specified information about any proposed nominee, the shareholder making the nomination and affiliates and associates of that shareholder. As to any other Company business that the

shareholder proposes to bring before ~~the~~an annual meeting, our Bylaws provide that the notice must set forth a description of such business, the reasons for proposing such business at the meeting and any material interest in such business of the shareholder, a description of all agreements, arrangements and understandings involving the shareholder in connection with the proposal of such business and a representation that the shareholder intends to appear in person or by proxy at the meeting to bring the business before the meeting.

Shareholder proposals intended to be presented pursuant to Rule 14a-8 under the ~~1934~~Exchange Act at our 2023 annual meeting of shareholders must be received at our principal executive offices not later than December 1,5, 2022 in order to be considered for inclusion in our proxy statement for our 2023 annual meeting of shareholders; provided that if we hold our 2023 annual meeting on a date that is more than 30 days before or after the first anniversary of the date of our 2022 annual meeting, shareholders must submit proposals for inclusion in our 2023 proxy statement within a reasonable time before we begin to print and send proxy materials. Under Rule 14a-8, we are not required to include shareholder proposals in the proxy materials unless conditions specified in the rule are met.

~~The SEC has adopted~~In addition to satisfying the foregoing requirements under our Declaration of Trust and Bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that ~~permit companies~~sets forth the information required by Rule 14a-19 of the Exchange Act no later than April 15, 2023; provided, however, if the date of the meeting changes by more than 30 calendar days from the previous year, then notice must be provided by the later of 60 calendar days prior to the date of the annual meeting or the 10^th calendar day following the date on which public announcement of the date of the annual meeting is first made by the Company.

Some banks, brokers and ~~intermediaries such as brokers to satisfy delivery requirements for~~other record holders may participate in the practice of “householding” proxy statements ~~with respect to two or more~~and annual reports. This means that, unless shareholders ~~sharing the same address by delivering a single~~give contrary instructions, only one copy of this proxy statement or Notice of Internet Availability of Proxy Materials (“Notice”) addressed to those shareholders or by sending separate Notices for each household account in a single envelope. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for companies. The Company and some brokers household proxy materials or Notices, delivering a single proxy statement or Noticemay be sent to multiple shareholders ~~sharing an address unless contrary instructions have been received from~~of the ~~affected shareholders. Once a shareholder has received notice from a broker or the~~same Company ~~that they~~in each household. The Adviser will ~~be householding materials to the shareholder’s address, householding will continue until the shareholder is notified otherwise or until the shareholder revokes consent.~~

~~We will~~promptly deliver ~~promptly, upon request,~~ a separate copy of ~~any of these documents~~either document to ~~shareholders at a shared address to which a single copy of such document(s) was delivered. Shareholders who wish to receive a separate copy of any of these documents,~~you, if you call or ~~to receive a single copy of such documents if multiple copies were delivered, now or in the future, should submit their request by writing~~write to the ~~Company c/o~~Adviser at the following address or telephone number: NexPoint Real Estate Advisors X, L.P., 300 Crescent Court, Suite 700, Dallas, Texas 75201 or ~~calling~~by telephone at (214) 276-6300.

If you want to receive separate copies of a proxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker or other record holder, or you may contact the Adviser at the above address or telephone number.

At this time, our Board knows of no other matter which will be brought before the Special Meeting. Pursuant to our Declaration of Trust and Bylaws, only the business stated in the notice of meeting attached to this Proxy Statement shall be conducted at the Special Meeting.

1. Purpose. The purpose of this 2023 Long Term Incentive Plan is to enable the Company and its Affiliates and Subsidiaries to attract and retain trustees, officers and other key employees and advisors and to provide to such persons incentives and rewards for performance.

(a) “Adviser” means NexPoint Real Estate Advisors X, L.P., or any subsequent external adviser to the Company hired to perform similar services.

(b) “Affiliate” means any corporation, partnership, joint venture or other entity, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the Company as determined by the Committee or the Board, as applicable, in its discretion. For purposes of this Plan, “Affiliate” includes the Adviser and the Operating Partnership.

(d) “Award Agreement” means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee that sets forth the terms and conditions of the awards granted under the Plan. An Award Agreement may be in an electronic medium, may be limited to notation on the books and records of the Company and, unless otherwise determined by the Committee, need not be signed by a representative of the Company or a Participant.

(e) “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of an Appreciation Right.

(g) “Cash Incentive Award” means a cash award granted pursuant to Section 8 of this Plan.

(h) “Change in Control” has the meaning set forth in Section 13 of this Plan.

(i) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(j) “Committee” means the Compensation Committee of the Board or any other committee of the Board designated by the Board to administer the Plan pursuant to Section 11 of this Plan consisting solely of no fewer than two “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the Exchange Act) and, to the extent of any delegation by the Committee to a subcommittee pursuant to Section 11 of this Plan, such subcommittee.

(k) “Company” means NexPoint Diversified Real Estate Trust, a Delaware statutory trust, and its successors.

(l) “Date of Grant” means the date specified by the Committee on which an award under this Plan will become effective (which date will not be earlier than the date on which the Committee takes action with respect thereto).

(m) “Effective Date” means the date this Plan is approved by the Shareholders of the Company.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.

(o) “Incentive Shares Option” means an Option Right that is intended to qualify as an “incentive stock option” under Section 422 of the Code or any successor provision.

(p) “Management Objectives” means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares, Performance Units, Profits Interest Units or Cash Incentive Awards or, when so determined by the Committee, Option Rights, Appreciation Rights, Restricted Shares, Restricted Shares Units, dividend equivalents or other awards pursuant to this Plan. Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or of one or more of the Subsidiaries, Affiliates, divisions, departments, regions, functions or other organizational units within the Company or its Subsidiaries. The Management Objectives may be made relative to the performance of other companies or subsidiaries, divisions, departments, regions, functions or other organizational units within such other companies, and may be made relative to an index or one or more of the performance objectives themselves. The Committee may grant awards subject to Management Objectives which may be based on one or more, or a combination, of metrics chosen by the Committee (including relative or growth achievement regarding such metrics), including without limitation any of the following:

(i) Profits (e.g., operating income, EBIT, EBT, net income, earnings per share, residual or economic earnings, economic profit – these profitability metrics could be measured before certain specified special items and/or subject to GAAP definition);

(ii) Cash Flow (e.g., EBITDA, free cash flow, free cash flow with or without specific capital expenditure target or range, including or excluding divestments and/or acquisitions, total cash flow, cash flow in excess of cost of capital or residual cash flow or cash flow return on investment);

(iii) Returns (e.g., profits or cash flow returns on: assets, invested capital, net capital employed, and equity; total shareholder return; stock price appreciation);

(iv) Profit Margins (e.g., profits divided by revenues, gross margins and material margins divided by revenues);

(v) Liquidity Measures (e.g., debt-to-capital, debt-to-EBITDA, total debt ratio); and

(vi) REIT Operating Metrics (e.g., core earnings, cash available for distributions, adjusted cash available for distributions, funds from operations, net operating income, book value per share).

(q) “Market Value per Share” means, as of any particular date, the closing price of a Share as reported for that date on the New York Stock Exchange or, if the Shares are not then listed on the New York Stock Exchange, on any other national securities exchange on which the Shares are listed, or if there are no sales on such date, on the next preceding trading day during which a sale occurred. If there is no regular public trading market for the Shares, then the Market Value per Share shall be the fair market value as determined in good faith by the Committee. The Committee is authorized to adopt another fair market value pricing method provided such method is stated in the Award Agreement and is in compliance with the fair market value pricing rules set forth in Section 409A of the Code.

(r) “Operating Partnership” means NexPoint Diversified Real Estate Trust Operating Partnership, L.P., a Delaware limited partnership.

(s) “OP Interests” means limited partnership interests in the Operating Partnership that may be exchanged or redeemed for Shares on a one-for-one basis, or any profits interest in the Operating Partnership that may be exchanged or converted into such limited partnership interests.

(t) “Optionee” means the optionee named in an Award Agreement evidencing an outstanding Option Right.

(u) “Option Price” means the purchase price payable on exercise of an Option Right.

(v) “Option Right” means the right to purchase Shares upon exercise of an option granted pursuant to Section 4 of this Plan.

(w) “Participant” means a person who is selected by the Committee to receive benefits under this Plan and who is at ~~(866)~~ ~~351-4440.~~the time (i) an officer or other key employee of the Company or any Affiliate or Subsidiary, including a person who has agreed to commence serving in such capacity within 90 days of the Date of Grant, (ii) a person who provides services to the Company or any Affiliate or Subsidiary that are equivalent to those typically provided by an employee (provided that such person satisfies the Form S-8 definition of an “employee”), or (iii) a non-employee Trustee.

(x) “Partnership Agreement” means the Limited Partnership Agreement of the Operating Partnership, as amended from time to time.

(y) “Performance Period” means, in respect of a Cash Incentive Award, Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating to such Cash Incentive Award, Performance Share or Performance Unit are to be achieved.

(z) “Performance Share” means a bookkeeping entry that records the equivalent of one Share awarded pursuant to Section 8 of this Plan.

(aa) “Performance Unit” means a bookkeeping entry awarded pursuant to Section 8 of this Plan that records a unit equivalent to $1.00 or such other value as is determined by the Committee.

(bb) “Person” means any individual, entity or group, within the meaning of Section 3(a)(9) of the Exchange Act as used in Section 13(d)(3) or 14(d)(2) of the Exchange Act.

(cc) “Plan” means this NexPoint Diversified Real Estate Trust 2023 Long Term Incentive Plan.

(dd) “Profits Interest Units” means, to the extent authorized by the Partnership Agreement, a unit of the Operating Partnership that is granted pursuant to Section 9 of this Plan and is intended to constitute a “profits interest” within the meaning of the Code.

(ee) “Restricted Shares” means Shares granted or sold pursuant to Section 6 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers has expired.

(ff) “Restricted Shares Units” means an award made pursuant to Section 7 of this Plan of the right to receive Shares, cash or a combination thereof at the end of a specified period.

(gg) “Restriction Period” means the period of time during which Restricted Shares Units are subject to restrictions, as provided in Section 7 of this Plan.

(hh) “Shareholder” means an individual or entity that owns one or more Shares.

(ii) “Shares” means the transferable units of beneficial interest, $0.001 par value per share, of the Company or any security into which such transferable units of beneficial interest may be changed by reason of any transaction or event of the type referred to in Section 12 of this Plan.

(jj) “Spread” means the excess of the Market Value per Share on the date when an Option Right or Appreciation Right is exercised over the Option Price or Base Price provided for in the related Option Right or Appreciation Right, respectively.

(kk) “Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, limited liability company, or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company; provided, however, that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Shares Options, “Subsidiary” means any corporation (as defined in Treasury Regulation §1.421-1(i)) in which at the time the Company owns or controls, directly or indirectly, more than 50 percent of the total combined Voting Power represented by all classes of stock issued by such corporation.

(mm) “Voting Power” means at any time, the combined voting power of the then-outstanding securities entitled to vote generally in the election of Trustees in the case of the Company, or members of the board of directors or similar body in the case of another entity.

(i) Subject to adjustment as provided in Section 12 of this Plan and the share counting rules set forth in Section 3(b) of this Plan, the number of Shares available under the Plan for awards of (A) Option Rights or Appreciation Rights, (B) Restricted Shares, (C) Restricted Shares Units, (D) Performance Shares or Performance Units, (E) Profits Interest Units, (F) awards contemplated by Section 10 of this Plan, or (G) dividend equivalents paid with ~~Trustees~~respect to awards made under the Plan will not exceed in the aggregate, 2,545,000 Shares. Such shares will be shares of original issuance.

(ii) The aggregate number of Shares available for issuance or transfer under Section 3(a)(i) of this Plan will be reduced by one Share for every one Share subject to an award granted under this Plan.

(i) If any award granted under this Plan is cancelled or forfeited, expires or is settled for cash (in whole or in part), the Shares subject to such award will, to the extent of such cancellation, forfeiture, expiration, or cash settlement, again be available under Section 3(a)(i) above.

(ii) Subject to Section 12 hereof, each Profits Interest Unit issued pursuant to an Award Agreement shall count as one Share for purposes of calculating the aggregate number of Shares available for issuance under this Plan as set forth in Section 3(a)(i) above.

(iii) Notwithstanding anything to the contrary contained herein: (A) Shares withheld by the Company, tendered or otherwise used in payment of the Option Price of an Option Right will not be added back to the aggregate number of Shares available under Section 3(a)(i) above; (B) Shares withheld by the Company or otherwise used to satisfy a tax withholding obligation will not be added (or added back, as applicable) to the aggregate number of Shares available under Section 3(a)(i) above; (C) Shares subject to an Appreciation Right that are not actually issued in connection with its settlement of Shares on exercise thereof will not be added back to the aggregate number of Shares available under Section 3(a)(i) above; and (D) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Option Rights will not be added back to the aggregate number of Shares available under Section 3(a)(i) above.

(c) Limit on Incentive Shares Options. Notwithstanding anything in this Section 3 or elsewhere in this Plan to the contrary, and subject to adjustment as provided in Section 12 of this Plan, the aggregate number of Shares actually issued or transferred by the Company upon the exercise of Incentive Shares Options will not exceed 2,545,000 Shares.

(d) Individual Participant Limits. Notwithstanding anything in this Section 3 or elsewhere in this Plan to the contrary, and subject to adjustment as provided in Section 12 of this Plan, no non-employee Trustee will be granted, in any period of one calendar year, awards under the Plan having an aggregate maximum value as of their respective Dates of Grant in excess of $350,000.

(e) Notwithstanding anything in this Plan to the contrary, up to 5% of the maximum number of Shares available for awards under this Plan as provided for in Section 3(a) of this Plan, as may be adjusted under Section 12 of this Plan, may be used for awards granted under Section 4 through Section 10 of this Plan that do not at the Date of Grant comply with the applicable one-year minimum vesting requirements set forth in such sections of this Plan.

4. Option Rights. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of Option Rights. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

(a) Each grant will specify the number of Shares to which it pertains subject to the limitations set forth in Section 3 of this Plan.

(b) Each grant will specify an Option Price per share, which (except with respect to awards under Section 23 of this Plan) may not be less than the Market Value per Share on the Date of Grant, or, in the case of grants of Incentive Shares Options to Shareholders holding at least 10% of the then-outstanding Shares, shall not be less than 110% of Market Value per share on the Date of Grant.

(c) Each grant will specify whether the Option Price will be payable (i) in cash or by check acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or constructive transfer to the Company of Shares owned by the Optionee (or other consideration authorized pursuant to Section 4(d) of this Plan) having a value at the time of exercise equal to the total Option Price, (iii) subject to any conditions or limitations established by the Committee, the Company’s withholding of Shares otherwise issuable upon exercise of an Option Right pursuant to a “net exercise” arrangement, (iv) by a combination of such methods of payment, or (v) by such other methods as may be approved by the Committee.

(d) To the extent permitted by law, any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of the Shares to which such exercise relates.

(e) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised.

(f) Each grant will specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary that is necessary before the Option Rights or installments thereof will become exercisable; provided, that, except as otherwise described in this subsection, no grant of Option Rights may become exercisable sooner than after one year. A grant of Option Rights may provide for the earlier exercise of such Option Rights, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Option Rights are not assumed or converted into replacement awards in a manner described in the Award Agreement.

(g) Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights.

(h) Option Rights granted under this Plan may be (i) options, including, without limitation, Incentive Shares Options, that are intended to qualify under particular provisions of the Code, (ii) options that are not intended to qualify, or (iii) combinations of the foregoing. Incentive Shares Options may only be granted to Participants who meet the definition of “employees” under Section 3401(c) of the Code.

(i) No Option Right will be exercisable more than 10 years from the Date of Grant; provided, that, in the case of Incentive Shares Options granted to 10% Shareholders, no such Option Right shall be exercisable more than 5 years from the Date of Grant.

(j) Option Rights granted under this Plan may not provide for any dividends or dividend equivalents thereon.

(k) Each grant of Option Rights will be evidenced by an Award Agreement. Each Award Agreement will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.

(a) The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to any Participant of Appreciation Rights. An Appreciation Right will be a right of the Participant to receive from the Company an amount determined by the Committee, which will be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.

(b) Each grant of Appreciation Rights may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

(i) Each grant may specify that the amount payable on exercise of an Appreciation Right will be paid by the Company in cash, Shares or any combination thereof.

(ii) Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Committee at the Date of Grant.

(iii) Any grant may specify waiting periods before exercise and permissible exercise dates or periods.

(iv) Each grant may specify the period or periods of continuous service by the Participant with the Company or any Subsidiary that is necessary before the Appreciation Rights or installments thereof will become exercisable; provided, that, except as otherwise described in this subsection, no grant of Appreciation Rights may become exercisable sooner than after one year. A grant of Appreciation Rights may provide for the earlier exercise of such Appreciation Rights, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (A) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (B) such Appreciation Rights are not assumed or converted into replacement awards in a manner described in the Award Agreement.

(v) Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such Appreciation Rights.

(vi) Each grant of Appreciation Rights will be evidenced by an Award Agreement, which Award Agreement will describe such Appreciation Rights, and contain such other terms and provisions, consistent with this Plan, as the Committee may approve.

(d) Each grant will specify in respect of each Appreciation Right a Base Price, which (except with respect to awards under Section 23 of this Plan) may not be less than the Market Value per Share on the Date of Grant;

(e) Successive grants may be made to the same Participant regardless of whether any Appreciation Rights previously granted to the Participant remain unexercised; and

(f) No Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant.

6. Restricted Shares. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the grant or sale of Restricted Shares to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

(a) Each such grant or sale will constitute an immediate transfer of the ownership of Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to.

(b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

(c) Each such grant or sale will provide that the Restricted Shares covered by such grant or sale will be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period to be determined by the Committee at the Date of Grant or until achievement of Management Objectives referred to in subparagraph (e) below. If the elimination of restrictions is based only on the passage of time rather than the achievement of Management Objectives, the period of time will be no shorter than one year.

(d) Each such grant or sale will provide that during or after the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Shares will be prohibited or restricted in the manner and to the extent prescribed by the Committee at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee).

(e) Any grant of Restricted Shares may specify Management Objectives that, if achieved, will result in termination or early termination of the restrictions applicable to such Restricted Shares; provided, however, that notwithstanding subparagraph (c) above, restrictions relating to Restricted Shares that vest upon the achievement of Management Objectives may not terminate sooner than after one year.

(f) Notwithstanding anything to the contrary contained in this Plan (including minimum vesting requirements), any grant or sale of Restricted Shares may provide for the earlier termination of restrictions on such Restricted Shares, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Restricted Shares is not assumed or converted into replacement awards in a manner described in the Award Agreement.

(g) Any such grant or sale of Restricted Shares shall require that any or all dividends or other distributions, whether in cash or additional Shares, paid thereon during the period of such restrictions shall be automatically deferred and paid on a contingent basis based on the Participant’s earning of the Restricted Shares with respect to which such dividends are paid.

(h) Each grant or sale of Restricted Shares will be evidenced by an Award Agreement and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. Unless otherwise directed by the Committee, (i) all certificates representing Restricted Shares will be held in custody by the Company until all restrictions thereon will have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such shares or (ii) all Restricted Shares will be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such Restricted Shares.

7. Restricted Shares Units. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting or sale of Restricted Shares Units to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

(a) Each such grant or sale will constitute the agreement by the Company to deliver Shares or cash, or a combination thereof, to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include the achievement of Management Objectives) during the Restriction Period as the Committee may specify.

(b) If a grant of Restricted Shares Units specifies that the Restriction Period will terminate only upon the achievement of Management Objectives or that the Restricted Shares Units will be earned based on the achievement of Management Objectives, then, notwithstanding anything to the contrary contained in subparagraph (d) below, the applicable Restriction Period may not be a period of less than one year.

(c) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

(d) If the Restriction Period lapses only by the passage of time rather than the achievement of Management Objectives as provided in subparagraph (b) above, each such grant or sale will be subject to a Restriction Period of not less than one year.

(e) Notwithstanding anything to the contrary contained in this Plan (including minimum vesting requirements), any grant or sale of Restricted Shares Units may provide for the earlier lapse or other modification of the Restriction Period, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Restricted Shares Units are not assumed or converted into replacement awards in a manner described in the Award Agreement.

(f) During the Restriction Period, the Participant will have no right to transfer any rights under his or her award and will have no rights of ownership in the Shares deliverable upon payment of the Restricted Shares Units and will have no right to vote them or to receive dividends thereon. The Committee may, at or after the Date of Grant, provide for the payment of dividend equivalents or other distributions on Shares underlying the Restricted Shares Units to the holder thereof either in cash or in additional Shares, subject in all cases to deferral and payment on a contingent basis based on the Participant’s earning of the Restricted Shares Units with respect to which such dividend equivalents are paid.

(g) Each grant or sale of Restricted Shares Units will specify the time and manner of payment of the Restricted Shares Units that have been earned. Each grant or sale will specify that the amount payable with respect thereto will be paid by the Company in Shares or cash, or a combination thereof.

(h) Each grant or sale of Restricted Shares Units will be evidenced by an Award Agreement and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.

8. Cash Incentive Awards, Performance Shares and Performance Units. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting of Cash Incentive Awards, Performance Shares and Performance Units. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

(a) Each grant will specify the number or amount of Performance Shares or Performance Units, or amount payable with respect to Cash Incentive Awards, to which it pertains, which number or amount may be subject to adjustment to reflect changes in compensation or other factors.

(b) The Performance Period with respect to each Cash Incentive Award, Performance Share or Performance Unit will be such period of time (with respect to each Performance Share or Performance Unit not less than one year) as will be determined by the Committee at the time of grant, which may be subject to earlier lapse or other modification, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Cash Incentive Awards, Performance Shares or Performance Units are not assumed or converted into replacement awards in a manner described in the Award Agreement.

(c) Each grant of Cash Incentive Awards, Performance Shares or Performance Units will specify Management Objectives which, if achieved, will result in payment or early payment of the award, and each grant may specify in respect of such specified Management Objectives a minimum acceptable level or levels of achievement and may set forth a formula for determining the number of Performance Shares or Performance Units, or amount payable with respect to Cash Incentive Awards, that will be earned if performance is at or above the minimum or threshold level or levels, or is at or above the target level or levels, but falls short of maximum achievement of the specified Management Objectives.

(d) Each grant will specify the time and manner of payment of Cash Incentive Awards, Performance Shares or Performance Units that have been earned. Any grant may specify that the amount payable with respect thereto may be paid by the Company in cash, in Shares, in Restricted Shares or Restricted Shares Units or in any combination thereof.

(e) Any grant of Cash Incentive Awards, Performance Shares or Performance Units may specify that the amount payable or the number of Shares, shares of Restricted Shares or Restricted Shares Units with respect thereto may not exceed a maximum specified by the Committee at the Date of Grant.

(f) No award under Section 8 of this Plan shall be entitled to dividends. The Committee may, at the Date of Grant of Performance Shares (but not any other award under this Section 8), provide for the payment of dividend equivalents to the holder thereof either in cash or in additional Shares, subject in all cases to deferral and payment on a contingent basis based on the Participant’s earning of the Performance Shares with respect to which such dividend equivalents are paid.

(g) Each grant of Cash Incentive Awards, Performance Shares or Performance Units will be evidenced by an Award Agreement and will contain such other terms and provisions, consistent with this Plan, as the Committee may approve.

9. Profits Interest Units. The Committee may, from time to time and upon such terms and condition as it may determine, authorize the granting of Profits Interest Units. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

(a) Each grant will specify the number of Profits Interest Units to which it pertains, subject to the limitations set forth in Section 3 of this Plan.

(b) Profits Interest Units may only be issued to a Participant for the performance of services to or for the benefit of the Operating Partnership (i) in the Participant’s capacity as a partner of the Operating Partnership, (ii) in anticipation of the Participant becoming a partner of the Operating Partnership (to the extent not already a partner), or (iii) as otherwise determined by the Committee, provided that the Profits Interest Units are intended to constitute “profits interests” within the meaning of the Code, including, to the extent applicable, Revenue Procedure 93-27, 1993-2 C.B. 343 and Revenue Procedure 2001-43, 2001-2 C.B. 191.

(c) Any grant of Profits Interest Units may specify Management Objectives that must be achieved as a condition to the vesting of such Profits Interest Units. Upon vesting, such Profits Interest Units shall become nonforfeitable, except for events that constitute cause.

(d) Each grant will specify the period or periods of continuous employment or service by the Participant with the Company or any Subsidiary that is necessary before the Profits Interest Units or installments thereof will vest; provided no grant of Profits Interest Units may become exercisable sooner than after one year.

(e) Notwithstanding anything to the contrary contained in this Plan (including minimum vesting requirements), any grant of Profits Interest Units may provide for the earlier vesting of such Profits Interest Units, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Profits Interest Units are not assumed or converted into replacement awards in a manner described in the Award Agreement.

(f) Each grant of Profits Interest Units will be evidenced by an Award Agreement. Each Award Agreement will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.

(g) Profits Interest Units granted under this Plan may not provide for any dividends or dividend equivalents thereon; provided, that, Profits Interest Units may be eligible to receive distributions from the Operating Partnership in accordance with the Partnership Agreement.

(a) Subject to applicable law and the applicable limits set forth in Section 3 of this Plan, the Committee may grant to any Participant Shares or such other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of such shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, awards with value and payment contingent upon performance of the Company or specified Subsidiaries, Affiliates or other business units thereof or any other factors designated by the Committee, awards valued by reference to the book value of the Shares or the value of securities of, or the performance of specified Subsidiaries or Affiliates or other business units of the Company, dividend equivalents and awards that are membership interests in a Subsidiary or Operating Partnership, and OP Interests. The Committee will determine the terms and conditions of such awards; provided, that, dividend equivalents may only be granted with respect to Restricted Share Units and Performance Shares. Shares delivered pursuant to an award in the nature of a purchase right granted under this Section 10 will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, Shares, other awards, notes or other property, as the Committee determines.

(b) Cash awards, as an element of or supplement to any other award granted under this Plan, may also be granted pursuant to this Section 10.

(c) The Committee may grant Shares as a bonus, or may grant other awards in lieu of obligations of the Company or a Subsidiary to pay cash or deliver other property under this Plan or under other plans or compensatory arrangements, subject to such terms as will be determined by the Committee in a manner that complies with Section 409A of the Code.

(d) If the earning or vesting of, or elimination of restrictions applicable to, an award granted under this Section 10 (including dividend equivalents) is based only on the passage of time rather than the achievement of Management Objectives, the period of time shall be no shorter than one year. If the earning or vesting of, or elimination of restrictions applicable to, awards granted under this Section 10 (including dividend equivalents) is based on the achievement of Management Objectives, the earning, vesting or restriction period may not terminate sooner than after one year.

(e) Notwithstanding anything to the contrary contained in this Plan (including minimum vesting requirements), any grant of an award under this Section 10 may provide for the earning or vesting of, or earlier elimination of restrictions applicable to, such award, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such awards are not assumed or converted into replacement awards in a manner described in the Award Agreement.

(f) No award under Section 10 of this Plan shall be entitled to dividends. The Committee may provide for the payment of dividend equivalents to the holder of an award granted under Section 10 of this Plan either in cash or in additional Shares, subject in all cases to deferral and payment on a contingent basis based on the Participant’s earning of the award with respect to which such dividend equivalents are paid.

(a) This Plan will be administered by the Committee. The Committee may from time to time delegate all or any part of its authority under this Plan to a subcommittee thereof. To the extent of any such delegation, references in this Plan to the Committee will be deemed to be references to such subcommittee.

(b) The interpretation and construction by the Committee of any provision of this Plan or of any Award Agreement (or related documents) and any determination by the Committee pursuant to any provision of this Plan or of any such agreement, notification or document will be final and conclusive. No member of the Committee shall be liable for any such action or determination made in good faith. In addition, the Committee is authorized to take any action it determines in its sole discretion to be appropriate subject only to the express limitations contained in this Plan, and no authorization in any provision of this Plan is intended or may be deemed to constitute a limitation on the authority of the Committee.

(c) To the extent permitted by law, the Committee may delegate to one or more of its members or to one or more officers of the Company, or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Committee, the subcommittee, or any person to whom duties or powers have been delegated as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee, the subcommittee or such person may have under the Plan. The Committee may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as the Committee: (i) designate employees to be recipients of awards under this Plan; and (ii) determine the size of any such awards; provided, however, that (A) the Committee will not delegate such responsibilities to any such officer for awards granted to an employee who is an officer, Trustee, or more than 10% Beneficial Owner (as defined in Section 12 below) of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Committee in accordance with Section 16 of the Exchange Act; (B) the resolution providing for such authorization sets forth the total number of Shares such officer(s) may grant; and (C) the officer(s) will report periodically to the Committee regarding the nature and scope of the awards granted pursuant to the authority delegated.

12. Adjustments. The Committee shall make or provide for such adjustments in the numbers of Shares covered by outstanding Option Rights, Appreciation Rights, Restricted Shares, Restricted Shares Units, Performance Shares, Performance Units and Profits Interest Units granted hereunder and, if applicable, in the number of Shares covered by other awards granted pursuant to Section 10 hereof, in the Option Price and Base Price provided in outstanding Option Rights and Appreciation Rights, respectively, in the kind of shares covered thereby, in Cash Incentive Awards, and in other award terms, as the Committee, in its sole discretion, exercised in good faith, shall determine is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, redomestication, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event or in the event of a Change in Control, the Committee may provide in substitution for any or all outstanding awards under this Plan such alternative consideration (including cash), if any, as it, in good faith, may determine to be equitable in the circumstances and shall require in connection therewith the surrender of all awards so replaced in a manner that complies with Section 409A of the Code. In addition, for each Option Right or Appreciation Right with an Option Price or Base Price, respectively, greater than the consideration offered in connection with any such transaction or event or Change in Control, the Committee may in its discretion elect to cancel such Option Right or Appreciation Right without any payment to the person holding such Option Right or Appreciation Right. The Committee shall also make or provide for such adjustments in the numbers of shares specified in Section 3 of this Plan as the Committee in its sole discretion, exercised in good faith, shall determine is appropriate to reflect any transaction or event described in this Section 12; provided, however, that any such adjustment to the number specified in Section 3(c) will be made only if and to the extent that such adjustment would not cause any Option Right intended to qualify as an Incentive Share Option to fail to so qualify.

13. Change in Control. For purposes of this Plan, except as may be otherwise prescribed by the Committee in an Award Agreement made under this Plan, a “Change in Control” will be deemed to have occurred upon the occurrence (after the Effective Date) of any of the following events:

(i) individuals who, on the Effective Date, constitute the Board (the “Incumbent Trustees”) cease for any reason to constitute at least a majority of such Board, provided that any person becoming a Trustee after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Trustees then on the Board shall be an Incumbent Trustee; provided, however, that no individual initially elected or nominated as a Trustee of the Company as a result of an actual or threatened election contest with respect to the election or removal of Trustees (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Trustee;

(ii) any Person becomes a Beneficial Owner (as such term is defined in the Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of either (A) 35%or more of the then-outstanding shares of common shares of the Company (“Company Common Shares”) or (B) securities of the Company representing 35% or more of the combined Voting Power of the Company’s then outstanding securities eligible to vote for the election of trustees (the “Company Voting Securities”); provided, however, that for purposes of this subsection (ii), the following acquisitions of Company Common Shares or Company Voting Securities shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or a Subsidiary, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below);

(iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets (a “Sale”) or the acquisition of assets or stock of another corporation or other entity (an “Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the outstanding Company Common Shares and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 35% of, respectively, the then outstanding shares of common stock and the combined Voting Power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries) (the “Surviving Entity”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Shares and the outstanding Company Voting Securities, as the case may be, and (B) no Person (other than (x) the Company or any Subsidiary, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 35%or more of the total common stock or 35% or more of the total Voting Power of the outstanding voting securities eligible to elect directors of the Surviving Entity, and (C) at least a majority of the members of the board of directors of the Surviving Entity were Incumbent Trustees at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);

(iv) approval by the Shareholders of the Company of a complete liquidation or dissolution of the Company; or

14. Detrimental Activity and Recapture Provisions. Any Award Agreement may provide for the cancellation or forfeiture of an award or the forfeiture and repayment to the Company of any gain related to an award, or other provisions intended to have a similar effect, upon such terms and conditions as may be determined by the Committee from time to time, if a Participant, either (a) during employment or other service with the Company or a Subsidiary, or (b) within a specified period after termination of such employment or service, shall engage in any detrimental activity. In addition, notwithstanding anything in this Plan to the contrary, any Award Agreement may also provide for the cancellation or forfeiture of an award or the forfeiture and repayment to the Company of any gain related to an award, or other provisions intended to have a similar effect, upon such terms and conditions as may be required by the Committee or under Section 10D of the Exchange Act and any applicable rules or regulations promulgated by the Securities and Exchange Commission or any national securities exchange or national securities association on which the Shares may be traded.

15. Non U.S. Participants. In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may provide for such special terms for awards to Participants who ~~wish~~are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America or who provide services to ~~communicate~~the Company or any Subsidiary under an agreement with ~~Trustees~~a foreign nation or agency, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of this Plan (including, without limitation, sub-plans) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the Shareholders.

(a) Except as otherwise determined by the Committee, no Option Right, Appreciation Right, Restricted Shares, Restricted Shares Unit, Performance Share, Performance Unit, Profits Interest Unit, Cash Incentive Award, award contemplated by Section 10 of this Plan or dividend equivalents paid with respect to awards made under this Plan will be transferable by the Participant except (i) if it is made by the Participant for no consideration to Immediate Family Members or to a bona fide trust, partnership or other entity controlled by and for the benefit of one or more Immediate Family Members (“Immediate Family Members” mean the Participant’s spouse, children, stepchildren, parents, stepparents, siblings (including half brothers and sisters), in-laws, and other individuals who have a relationship to the Participant arising because of legal adoption; however, no transfer may be made to the extent that transferability would cause Form S-8 or any successor form thereto not to be able to register Shares related to an award) or (ii) by will or the laws of descent and distribution. In no event will any such award granted under the Plan be transferred for value. Except as otherwise determined by the Committee, Option Rights and Appreciation Rights will be exercisable during the Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the Participant in a fiduciary capacity under state law or court supervision.

(b) The Committee may specify at the Date of Grant that part or all of the Shares that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to Restricted Shares Units or upon payment under any grant of Performance Shares, Performance Units or Profits Interest Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, will be subject to further restrictions on transfer.

17. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Committee) may include relinquishment of a portion of such benefit. If a Participant’s benefit is to be received in the form of Shares, and such Participant fails to make arrangements for the payment of tax, then, unless otherwise determined by the Committee, the Company will withhold Shares having a value equal to the amount required to be withheld. Notwithstanding the foregoing, when a Participant is required to pay the Company an amount required to be withheld under applicable income and employment tax laws, the Participant may elect, unless otherwise determined by the Committee, to satisfy the obligation, in whole or in part, by having withheld, from the Shares required to be delivered to the Participant, Shares having a value equal to the amount required to be withheld or by delivering to the Company other Shares held by such Participant. The Shares used for tax withholding will be valued at an amount equal to the market value of such Shares on the date the benefit is to be included in Participant’s income. In no event will the market value of the Shares to be withheld and delivered pursuant to this Section to satisfy applicable withholding taxes in connection with the benefit exceed the minimum amount of taxes required to be withheld, unless (i) an additional amount can be withheld and not result in adverse accounting consequences and (ii) is permitted by the Committee. Participants will also make such arrangements as the Company may require for the payment of any withholding tax obligation that may arise in connection with the disposition of Shares acquired upon the exercise of Option Rights.

(a) To the extent applicable, it is intended that this Plan and any grants made hereunder be exempt from the provisions of Section 409A of the Code (or, to the ~~Independent Trustees as a group) should send communications~~extent Section 409A of the Code applies, compliant with such section), so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the ~~attention~~Participants. This Plan and any grants made hereunder will be administered in a manner consistent with this intent. Any reference in this Plan to Section 409A of the ~~Secretary~~Code will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

(b) Neither a Participant nor any of a Participant’s creditors or beneficiaries will have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under this Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under this Plan and grants hereunder may not be reduced by, or offset against, any amount owing by a Participant to the Company or any of its Subsidiaries.

(c) If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant will be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay it, without interest, on the fifth business day of the seventh month after such separation from service.

(d) Solely with respect to any award that constitutes nonqualified deferred compensation subject to Section 409A of the Code and that is payable on account of a Change of Control (including any installments or stream of payments that are accelerated on account of a Change of Control), a Change of Control shall occur only if such event also constitutes a “change in the ownership,” “change in effective control,” and/or a “change in the ownership of a substantial portion of assets” of the Company ~~c/o NexPoint Advisors, L.P.~~as those terms are defined under Treasury Regulation §1.409A-3(i)(5), ~~300 Crescent Court, Suite 700, Dallas, Texas 75201,~~but only to the extent necessary to establish a time and form of payment that complies with Section 409A of the Code, without altering the definition of Change of Control for any other purposes in respect of such award.

(e) Notwithstanding any provision of this Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to this Plan and grants hereunder as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant will be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with this Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its Affiliates will have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.

(a) The Board may at any time and from time to time amend this Plan in whole or in part; provided, however, that if an amendment to this Plan (i) would materially increase the benefits accruing to Participants under this Plan, (ii) would materially increase the number of securities which may be issued under this Plan, (iii) would materially modify the requirements for participation in this Plan, or (iv) must otherwise be approved by the Shareholders in order to comply with applicable law or the rules of the New York Stock Exchange or, if the Shares are not traded on the New York Stock Exchange, the principal national securities exchange upon which the Shares are traded or quoted, then, such amendment will be subject to Shareholder approval and will not be effective unless and until such approval has been obtained.

(b) Except in connection with a corporate transaction or event described in Section 12 of this Plan or in connection with a Change in Control, the terms of outstanding awards may not be amended to reduce the Option Price of outstanding Option Rights or the Base Price of outstanding Appreciation Rights, or cancel outstanding “underwater” Option Rights or Appreciation Rights in exchange for cash, other awards or Option Rights or Appreciation Rights with an Option Price or Base Price, as applicable, that is less than the Option Price of the original Option Rights or Base Price of the original Appreciation Rights, as applicable, without Shareholder approval. This Section 19(b) is intended to prohibit the repricing of “underwater” Option Rights and Appreciation Rights and will not be construed to prohibit the adjustments provided for in Section 12 of this Plan. Notwithstanding any provision of this Plan to the contrary, this Section 19(b) may not be amended without approval by the Shareholders.

(c) If permitted by Section 409A of the Code, but subject to the paragraph that follows, notwithstanding the Plan’s minimum vesting requirements, and including in the case of termination of employment by reason of death, disability or retirement, or in the case of unforeseeable emergency or other special circumstances or in the event of a Change in Control, to the extent a Participant holds an Option Right or Appreciation Right not immediately exercisable in full, or any Restricted Shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Restricted Shares Units as to which the Restriction Period has not been completed, or any Cash Incentive Awards, Performance Shares, Performance Units or Profits Interest Units which have not been fully earned, or any other awards made pursuant to Section 10 subject to any vesting schedule or transfer restriction, or who holds Shares subject to any transfer restriction imposed pursuant to Section 16(b) of this Plan, the Committee may, in its sole discretion, accelerate the time at which such Option Right, Appreciation Right or other award may be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Restriction Period will end or the time at which such Cash Incentive Awards, Performance Shares, Performance Units or Profits Interest Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award.

(d) Subject to Section 19(b) hereof, the Committee may amend the terms of any award theretofore granted under this Plan prospectively or retroactively. Subject to Section 12 above, no such amendment will impair the rights of any Participant without his or her consent. The Board may, in its discretion, terminate this Plan at any time. Termination of this Plan will not affect the rights of Participants or their successors under any awards outstanding hereunder and not exercised in full on the date of termination.

20. Governing Law. This Plan and all ~~communications~~grants and awards and actions taken hereunder will be ~~directed~~governed by and construed in accordance with the internal substantive laws of the state of incorporation or formation of the Company.

21. Effective Date/Termination. This Plan will be effective as of the Effective Date. No grant will be made under this Plan after the tenth anniversary of the Effective Date, but all grants made on or prior to such date will continue in effect thereafter subject to the ~~Trustee~~terms thereof and of this Plan.

(a) The Company will not be required to issue any fractional Shares pursuant to this Plan. The Committee may provide for the elimination of fractions or ~~Trustees indicated~~for the settlement of fractions in cash.

(b) This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time.

(c) Except with respect to Section 22(e), to the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Shares Option from qualifying as such, that provision will be null and void with respect to such Option Right. Such provision, however, will remain in effect for other Option Rights and there will be no further effect on any provision of this Plan.

(d) No award under this Plan may be exercised by the holder thereof if such exercise, and the receipt of cash or shares thereunder, would be, in the ~~communication~~opinion of counsel selected by the Company, contrary to law or ~~if no Trustee~~the regulations of any duly constituted authority having jurisdiction over this Plan.

(e) Absence on leave approved by a duly constituted officer of the Company or ~~Trustees~~any of its Subsidiaries will not be considered interruption or termination of service of any employee for any purposes of this Plan or awards granted hereunder.

(f) No Participant will have any rights as a shareholder with respect to any shares subject to awards granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the holder of such shares upon the share records of the Company.

(g) The Committee may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant.

(h) Except with respect to Option Rights and Appreciation Rights, the Committee may permit Participants to elect to defer the issuance of Shares under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of this Plan and which are ~~indicated,~~intended to ~~all Trustees.~~comply with the requirements of Section 409A of the Code. The Committee also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts.

COPIES OF THE COMPANY’S ANNUAL REPORT DATED DECEMBER 31, 2021 AND SEMI-ANNUAL REPORT DATED JUNE 30, 2021 TO SHAREHOLDERS ARE AVAILABLE UPON REQUEST, WITHOUT CHARGE, BY WRITING THE COMPANY AT 6201 15TH AVENUE, BROOKLYN, NEW YORK 11219, OR BY CALLING TOLL-FREE (866) ~~351-4440.~~

It(i) If any provision of this Plan is ~~important that proxies~~or becomes invalid, illegal or unenforceable in any jurisdiction, or would disqualify this Plan or any award under any law deemed applicable by the Committee, such provision will be ~~returned promptly. Therefore, whether~~construed or ~~not you expect~~deemed amended or limited in scope to ~~attend the Annual Meeting in person, you are urged~~conform to ~~fill in, sign and return the proxy~~applicable laws or, in the ~~enclosed stamped, self-addressed envelope.~~discretion of the Committee, it will be stricken and the remainder of this Plan will remain in full force and effect.

19(a) Awards may be granted under this Plan in substitution for or in conversion of, or in connection with an assumption of, stock options, stock appreciation rights, restricted stock, restricted stock units or other stock or stock-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with the Company or any Subsidiary. Any conversion, substitution or assumption will be effective as of the close of the merger or acquisition, and, to the extent applicable, will be conducted in a manner that complies with Section 409A of the Code. The awards so granted may reflect the original terms of the awards being assumed or substituted or converted for and need not comply with other specific terms of this Plan, and may account for Shares substituted for the securities covered by the original awards and the number of shares subject to the original awards, as well as any exercise or purchase prices applicable to the original awards, adjusted to account for differences in stock prices in connection with the transaction.

(b) In the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary merges has shares available under a pre-existing plan previously approved by Shareholders and not adopted in contemplation of such acquisition or merger, the shares available for grant pursuant to the terms of such plan (as adjusted, to the extent appropriate, to reflect such acquisition or merger) may be used for awards made after such acquisition or merger under the Plan; provided, however, that awards using such available shares may not be made after the date awards or grants could have been made under the terms of the pre-existing plan absent the acquisition or merger, and may only be made to individuals who were not employees, Trustees or directors of the Company or any Subsidiary prior to such acquisition or merger. Any operation of this Plan in connection with such available shares shall comply with the rules of the applicable national securities exchange on which the Shares are listed.

(c) Any Shares that are issued or transferred by, or that are subject to any awards that are granted by, or become obligations of, the Company under Sections 23(a) or 23(b) above will not reduce the Shares available for issuance or transfer under the Plan or otherwise count against the limits contained in Section 3 of the Plan. In addition, no Shares that are issued or transferred by, or that are subject to any awards that are granted by, or become obligations of, the Company under Sections 23(a) or 23(b) above will be added to the aggregate limit contained in Section 3(a)(i) of the Plan.

24. REIT Status. This Plan shall be interpreted and construed in a manner consistent with the Company’s status as a REIT. No award shall be granted or awarded, and with respect to any award granted under this Plan, such award shall not vest, be exercisable or be settled: (i) to the extent that the grant, vesting, exercise or settlement could cause the Participant or any other person to be in violation of the share ownership limit or any other limitation on ownership or transfer prescribed by the Company’s charter, or (ii) if, in the discretion of the Committee, the grant, vesting, exercise or settlement of the award could impair the Company’s status as a REIT.

The foregoing is hereby acknowledged as being the 2023 Long Term Incentive Plan as adopted by the Board on December 2, 2022, and by the Shareholders on January 30, 2023.

~~THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF NEXPOINT DIVERSIFIED REAL ESTATE TRUST~~~~, a Delaware statutory trust (the “Company”).~~

The undersigned shareholder of NexPoint Diversified Real Estate Trust, ~~hereby appoints Stephanie Vitiello~~a Delaware statutory trust (the “Company”), having received notice of the Special Meeting and ~~Rahim lbrahim and~~management’s Proxy Statement therefor, the terms of each of ~~them, the attorneys~~which are incorporated by reference, and revoking all prior proxies, hereby appoint(s) Mr. Brian Mitts and Mr. Matt McGraner (with full power of substitution), as proxies of the undersigned ~~with full power~~to attend the Special Meeting of ~~substitution,~~Shareholders of the Company to be held on Monday, January 30, 2023 at 9:00 a.m. Central time, and any postponement or adjournment thereof, and to vote ~~as indicated herein,~~and act upon the matters listed on the reverse side in respect to all shares of the ~~Fund standing in the name of~~Company which the undersigned ~~at the close of business on March 25, 2022 (the “Record Date”), at the Annual Meeting of Shareholders~~would be entitled to ~~be held at 300 Crescent Court, Suite 700, Dallas, Texas 75201, on Tuesday, June 14, 2022 at 8:15 a.m., Central Time, and at any adjournments~~vote or ~~postponements thereof (the “Annual Meeting”),~~act upon, with all powers the undersigned would possess if ~~then~~personally present.

The Special Meeting will be held exclusively through a virtual format. You will not be able to attend the Special Meeting in person. If you are a shareholder of record and ~~there personally present (but without limiting~~wish to attend and vote at the ~~general authorization~~Special Meeting, please email AST Fund Solutions, LLC (“AST”) at attendameeting@astfinancial.com with “NXDT Meeting” in the subject line and ~~power hereby given)~~provide your full name and address in the body of the email in order to ~~vote and act upon~~receive the ~~following matters, (as more fully described~~Special Meeting registration link. If your shares in the Company are held by a financial intermediary, please refer to the notice of special meeting in the accompanying Proxy ~~Statement)~~Statement for additional information on how to access the Special Meeting. Requests to attend the Special Meeting must be received by AST no later than 2:00 p.m. Central Time on Friday, January 27, 2023. Please vote your shares in ~~respect of all shares of common and/~~accordance with the instructions on this Proxy Card whether or ~~preferred shares of~~not you attend the Fund. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and of the accompanying Proxy Statement, the terms of each which are incorporated by reference, and revokes any proxy heretofore given with respect to such meeting.Special Meeting.

Do you have questions?If you have any questions about how to vote your proxy or about the meeting in general, please call toll-free (866) 530-8636. Representatives are available to assist you Monday through Friday 9 a.m. to 10 p.m. Eastern Time. Important Notice Regarding ~~the~~Internet Availability of Proxy Materials for the ~~Annual Meeting of Shareholders to be held on June 14, 2022.~~

Special Meeting: The ~~proxy statement for this meeting~~Notice and Proxy Statement is available ~~at www.eproxyaccess.com/nxdt2022~~

at: ~~YOUR SIGNATURE IS REQUIRED~~https://vote.proxyonline.com/nexpoint/docs/nxdt.pdf ~~FOR YOUR VOTE TO BE COUNTED.~~

~~IF YOU ARE NOT VOTING BY PHONE OR INTERNET, PLEASE SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.~~

~~This proxy is solicited on behalf of the Board of Trustees. It will be voted as specified.~~

If no specification is made, this proxy shall be voted FOR the proposal. If any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy will vote thereon in accordance with their judgement.

TO VOTE, MARK ~~BOX(ES)~~CIRCLES BELOW IN BLUE OR BLACK INK AS ~~FOLLOWS:~~FOLLOWS. Example: ☒●

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☒		Definitive Proxy Statement
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HOW TO VOTE	1
PROPOSAL 1: APPROVAL OF THE NEXPOINT DIVERSIFIED REAL ESTATE TRUST 2023 LONG TERM INCENTIVE PLAN	3
Executive Summary and Selected Plan Information	3
Board Recommendation	4
Summary of Material Terms of the LTIP	4
Material U.S. Federal Income Tax Consequences	11
New Plan Benefits	13
Registration with the SEC	13
Equity Compensation Plan Information	14
Required Vote	14
VOTING INFORMATION	14
Required Vote	14
Voting Methods	14
Quorum, Abstentions and Broker Non-Votes	15
Adjournments	15
Revocation of Proxy	15
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS	19
SOLICITATION OF PROXIES	22
SHAREHOLDER NOMINATIONS AND PROPOSALS	22
HOUSEHOLDING OF MEETING MATERIALS	23
OTHER MATTERS	23
APPENDIX A: 2023 Long Term Incentive Plan	A-1


~~via the~~by internet		The web address and instructions for voting ~~VIA THE~~BY INTERNET can be found on the enclosed proxy ~~card or voting instruction form.~~card. You will be required to provide your control number located on the proxy card.

by phone		The toll-free number for voting BY TELEPHONE ~~voting~~ can be found on the enclosed proxy ~~card or voting instruction form.~~card. You will be required to provide your control number located on the proxy card.

by mail		Sign, date and promptly return your proxy card if you are a shareholder of record ~~or voting instruction form if you are a beneficial owner~~ to authorize a proxy BY MAIL.

*Introduction*		We are asking our shareholders to approve the NexPoint Diversified Real Estate Trust 2023 Long Term Incentive Plan, which we refer to as the LTIP. On December [●], 2022, the Compensation Committee of the Board (the “Compensation Committee”) recommended that the Board approve the LTIP, and the Board unanimously approved and determined that the LTIP was advisable and in the best interests of the Company and the Company’s shareholders. The Board subsequently directed that the Long Term Incentive Plan Proposal be submitted for consideration by our shareholders at a Special Meeting.

*Proposed Share Reserve*		The number of Shares that will be authorized for issuance pursuant to the LTIP will not exceed 2,545,000 (the “Share Reserve”). No Preferred Shares will be issuable under the LTIP.

*Expected Duration and Impact on Dilution (as measured through burn rate and overhang)*		The Company recognizes the impact of dilution on our shareholders and has evaluated the request for Shares under the LTIP very carefully in the context of the need to motivate, retain and ensure our leadership team is focused on our strategic and long-term growth priorities. Equity is an important component of a compensation program that aligns with our strategy of achieving long-term, sustainable growth.

		Based on current expectations for possible future awards, the Company is recommending that 2,545,000 Shares be made available for issuance under the LTIP. Based on the closing price on the New York Stock Exchange for the Shares on December 2, 2022 of $13.60 per share, the aggregate market value as of December 2, 2022 of the new 2,545,000 Shares requested under the LTIP was $34,612,000. The Company anticipates these shares will be sufficient to cover equity awards for the next several years. Despite this estimate, the duration of the share reserve may be shorter or longer depending on various factors such as stock price, aggregate equity needs, equity award type mix. Common measures for the use of stock incentive plans include the burn rate and the overhang rate. The burn rate measures the annual dilution from equity awards granted during a particular year. Since the Company has not previously granted any equity awards, its burn rate over the past three years has been 0% each year. The overhang rate is a measure of potential dilution to shareholders. As of December 19, 2022, there were [•] of our Shares outstanding, [•] of our Preferred Shares outstanding and there were no Shares or Preferred Shares subject to outstanding equity awards. The Preferred Shares are not convertible into Shares. If we exclude the impact of the new share request, the Company’s overhang rate as of December 19, 2022 is 0%. If the Company includes the new share request of 2,545,000 Shares, the Company’s Shares overhang rate will be approximately 6.8%. The Company believes this is a reasonable level of dilution and provides the Company with the appropriate flexibility to ensure meaningful equity awards in future years to executives and other key employees to better align their interests with the interests of shareholders.

Option Rights	An option right is a right to purchase shares of the Company upon the exercise of the option right. Option rights granted under the LTIP may consist of ISOs, non-qualified options that are not intended to qualify as an ISO or a combination of both. ISOs may only be granted to participants who meet the definition of employee under Section 3401(c) of the Code. Except with respect to Substitute Awards and Assumed Plan Awards, non-qualified option rights must have an exercise price per share that is not less than the fair market value of a share on the date of grant, and ISOs must have an exercise price per share that is not less than 110% of the fair market value of a share on the date of grant. The term of an option right may not extend more than ten years after the date of the grant; provided, that in the case of ISOs granted to holders of more than 10% of the Company’s shares, no such option right shall be exercisable more than five years from the date of the grant.

	Each grant of an option right will specify the applicable terms of the option right, including the number of Shares subject to the option right and the applicable vesting and forfeiture provisions (whether based on service, performance or otherwise), as determined by the Compensation Committee.

	In addition, each grant will specify the form of consideration to be paid in satisfaction of the exercise price, which may include: (a) cash or check acceptable to the Company, or wire transfer of immediately available funds; (b) the actual or constructive transfer to the Company of Shares owned by the participant (or certain other consideration permitted under the LTIP) with a value at the time of exercise that is equal to the total exercise price; (c) subject to any conditions or limitations established by the Compensation Committee, by a net exercise arrangement pursuant to which the Company will withhold Shares otherwise issuable upon exercise of an option right; (d) by a combination of the foregoing methods; and (e) such other methods as may be approved by the Compensation Committee. To the extent permitted by law, any option right may provide for deferred payment of the exercise price from the proceeds of a sale through a bank or broker of some or all of the shares to which the exercise relates. Option rights granted under the LTIP may not provide for dividends or dividend equivalents.

SARs	The LTIP provides for the grant of SARs. A SAR is a right to receive from us an amount equal to 100%, or such lesser percentage as the Compensation Committee may determine, of the spread between the base price and the value of our Shares on the date of exercise.

	Each grant of a SAR will be evidenced by an award agreement which specifies the applicable terms and conditions of such award, including any vesting and forfeiture provisions (whether based on service, performance or otherwise), as specified by the Compensation Committee. A SAR may be paid in cash, Shares or any combination thereof. Except with respect to Substitute Awards and Assumed Plan Awards, the base price of a SAR may not be less than the fair market value of a Share on the date of grant. The term of a SAR may not extend more than ten years from the date of grant. SARs granted under the LTIP may not provide for dividends or dividend equivalents.

Restricted Shares	Restricted shares constitute an immediate transfer of the ownership of Shares to the participant in consideration of the performance of services, entitling such participant to dividend, voting and other ownership rights, subject to certain vesting conditions and forfeiture conditions (whether based on service, performance or otherwise) determined by the Compensation Committee and set forth in an award agreement specifying the terms and conditions of the award. Each such grant or sale of restricted shares may be made without additional consideration or in consideration of a payment by the participant that is less than the fair market value per Share on the date of grant.

	Any grant of restricted shares shall require that any or all dividends or distributions paid on the restricted shares during the period of such restrictions shall be automatically deferred and paid on a contingent basis based on the participant earning the restricted shares with respect to which such dividends are paid.

Restricted Shares Units		RSUs awarded under the LTIP constitute an agreement by the Company to deliver Shares, cash, or a combination thereof, to the participant in the future. Each grant of an RSU award will be evidenced by an award agreement, which specifies the applicable terms and conditions of such award, including any vesting and forfeiture provisions (whether based on service, performance or otherwise) as determined by the Compensation Committee. Each grant or sale of RSUs may be made without additional consideration or in consideration of a payment by the participant that is less than the fair market value per Share on the date of grant. During the restriction period applicable to RSUs, the participant will have no right to transfer any rights under the award and will have no rights of ownership in the Shares underlying the RSUs and no right to vote them or receive dividends thereon. Rights to dividend equivalents may be extended to and made part of any RSU award at the discretion of and on the terms determined by the Compensation Committee, subject to deferral and payment on a contingent basis based on the participant earning the RSUs with respect to which such dividend equivalents are paid.

Performance Shares, Performance Units and Cash Incentive Awards		Performance shares, performance units and cash incentive awards may also be granted to participants under the LTIP. A performance share is a bookkeeping entry that records the equivalent of one Share, and a performance unit is a bookkeeping entry that records a unit equivalent to $1.00 or such other value as determined by the Compensation Committee. Each grant will specify the applicable terms of the award, including the number or amount of performance shares or performance units, or the amount payable with respect to cash incentive awards, and the applicable vesting and forfeiture provisions (whether based on service, performance or otherwise), as determined by the Compensation Committee.

		In addition, each grant will specify the time and manner of payment of performance shares, performance units or cash incentive awards that have been earned, and any grant may further specify that any such amount may be paid or settled by the Company in cash, Shares, restricted shares, RSUs or any combination thereof. Performance shares, performance units and cash incentive awards are not entitled to receive dividends. Any grant of performance shares may provide for the payment of dividend equivalents in cash or in additional Shares, subject to deferral and payment on a contingent basis based on the participant’s earning of the performance shares with respect to which such dividend equivalents are paid.

Profits Interest Units		A profits interest unit is a unit of the Operating Partnership which is intended to constitute a “profits interest” within the meaning of Revenue Procedures 93-27 and 2001-43. Profits interest units are a form of appreciation award that is valued by reference to the value of a limited partnership interest in the Operating Partnership. Each grant of profits interest units shall be evidenced by an award agreement setting forth the award’s applicable terms and conditions, including the applicable vesting and forfeiture provisions (whether based on service, performance or otherwise), as determined by the Compensation Committee.

	A profits interest unit may only be issued to a participant for the performance of services to, or for the benefit of, the Operating Partnership in the participant’s capacity as a partner of the Operating Partnership, in anticipation of becoming a partner of the Operating Partnership, or otherwise as determined by the Compensation Committee; provided, that, the profits interest units are intended to constitute “profits interests” within the meaning of Revenue Procedures 93-27 and 2001-43. Profits interest units granted under the LTIP may not provide for dividends or dividend equivalents of NXDT, but may be eligible to receive distributions from the Operating Partnership in accordance with the Partnership Agreement.

Other Awards	The Compensation Committee may grant such other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, factors that may influence the value of such Shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, awards with value and payment contingent upon performance of the Company or specified subsidiaries, affiliates or other business units or any other factors designated by the Compensation Committee, awards valued by reference to the book value of Shares or the value of securities of, or the performance of the subsidiaries, affiliates or other business units of the Company, awards that are membership interests in a subsidiary or operating partnership, and interests in the Operating Partnership. The terms and conditions of any such awards will be determined by the Compensation Committee. Shares delivered under an award in the nature of a purchase right granted under the LTIP will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, Shares, other awards, notes or other property, as the Compensation Committee determines.

	Additionally, the Compensation Committee may grant cash awards as an element of any other award, Shares as a bonus, or may grant other awards in lieu of obligations of the Company or a subsidiary to pay cash or deliver other property under the LTIP or under other plans or compensatory arrangements, subject to terms determined by the Compensation Committee in a manner that complies with Section 409A of the Code. Awards in the category of “other awards” under the LTIP shall not be entitled to dividends. Rights to dividend equivalents may be extended to and made part of such other awards at the discretion of and on the terms determined by the Compensation Committee, subject to deferral and payment on a contingent basis based on the participant earning the award with respect to which such dividend equivalents are paid.


~~Name, Date of Birth,~~ ~~Position(s) with the~~ ~~Company and Length of~~ ~~Time Served, Term of~~ ~~Office~~¹~~and Number of~~ ~~Portfolios in the Fund~~ ~~Complex Overseen by the Trustee~~	~~Principal Occupations(s)~~ ~~During the Past Five Years and~~ ~~Other Directorships/Trusteeships~~ ~~Held During the Past Five Years~~	~~Experience, Qualifications,~~ ~~Attributes, Skills for~~ ~~Board Membership~~
~~Independent Trustees~~

~~Dr. Bob Froehlich~~ ~~(4/28/1953)~~ ~~Trustee since December 2013; 3 year term (expiring at 2023 annual meeting).~~ ~~9 funds~~	~~Retired.~~ Director of KC Concessions, Inc. (since January 2013); Director of American Sports Enterprise, Inc. (since January 2013); Chairman and owner, Kane County Cougars Baseball Club (since January 2013); Director of AXAR Acquisition Corp. (formerly AR Capital Acquisition Corp.) (from October 2014 to October 2017); Director of The Midwest League of Professional Baseball Clubs, Inc.; Director of Kane County Cougars Foundation, Inc.; Director of Galen Robotics, Inc.; Chairman and Director of FC Global Realty, Inc. (from May 2017 to June 2018); and Chairman and Director of First Capital Investment Corp. (from March 2017 to March 2018); and Director and Special Advisor to Vault Data, LLC (since February 2018).	Significant experience in the financial industry; significant managerial and executive experience; significant experience on other boards of directors, including as a member of several audit committees.

~~Ethan Powell~~ ~~(6/20/1975)~~ ~~Trustee since December 2013; Chairman of the Board since December 2013; 3 year~~	Principal and CIO of Brookmont Capital Management, LLC since May 2020; CEO, Chairman and Founder of Impact Shares LLC since December 2015; Trustee of the Fund Complex from June 2012 until July 2013 and	~~Significant experience in the financial industry; significant executive experience including past service as an officer of funds in the Fund Complex;~~


~~Interested Trustee~~

~~John Honis~~ ~~(6/16/1958)~~ ~~Trustee since July 2013;~~ ~~3 year term (expiring at 2024 annual meeting).~~ ~~9 funds~~	~~President of Rand Advisors, LLC since August 2013.~~ ~~Manager of Turtle Bay Resort, LLC (August 2011 – December 2018).~~	Significant experience in the financial industry; significant managerial and executive experience, including experience as president, chief executive officer or chief restructuring officer of five telecommunication firms; experience on other boards of directors.


~~Name, Date of Birth, Position(s)~~ ~~held with the Company and Length of~~ ~~Time Served, Term of Office~~		~~Principal Occupations(s) During the Past Five Years~~
~~James Dondero~~ ~~(6/29/1962)~~ ~~President and Principal Executive Officer since May 2015; Indefinite Term~~		~~Founder of NexPoint;~~ ~~Co-founder of HCMLP~~ and HCMFA; Chairman of the Board of NXRT since May 2015; President and a member of the investment committee of NREF since February 2020; Chief Executive Officer and director of NHT since December 2018; Portfolio Manager of NXDT; GAF; HFRO; NexPoint Event Driven Fund (formerly Highland Healthcare Opportunities Fund) and NexPoint Merger Arbitrage Fund (each a series of HFI); Highland ~~Small-Cap~~ ~~Equity Fund (a series of HFII); the BDC; and NRESF.~~

~~Dustin Norris~~ ~~(1/6/1984)~~ ~~Executive Vice President since April 2019; Indefinite Term~~		Head of Distribution and Chief Product Strategist at NexPoint since March 2019; President of NexPoint Securities, Inc. since April 2018; Head of Distribution at HCMFA from November 2017 until March 2019; Chief Product Strategist at HCMFA from September 2015 to March 2019; Officer of the Fund Complex since November 2012.

~~Frank Waterhouse~~ ~~(4/14/1971)~~ ~~Treasurer since May 2015; Principal Accounting Officer since October 2017; Principal Financial Officer since April 2021; Indefinite Term~~		Chief Financial Officer of Skyview Group since February 2021; Chief Financial Officer and Partner of HCMLP from December 2011 and March 2015, respectively, to February 2021; Treasurer of the Fund Complex since May 2015; Principal Financial Officer October 2017 to February 2021.

~~Stephanie Vitiello~~ ~~(6/21/1983)~~ ~~Secretary since April 2021; Chief Compliance Officer and Anti-Money Laundering Officer since November 2021;Indefinite Term~~		Chief Compliance Officer and Counsel of Skyview Group since February 2021. Prior to her current role at Skyview Group, Ms. Vitiello served as Managing Director – Distressed, Assistant General Counsel, Associate General Counsel and ~~In-House~~ ~~Counsel for HCMLP.~~


~~Will Mabry~~ ~~(7/2/1986)~~ ~~Assistant Treasurer since April 2021; Indefinite Term~~		Director, Fund Analysis of Skyview Group since February 2021. Prior to his current role at Skyview Group, Mr. Mabry served as Senior Manager – Fund Analysis, Manager – Fund Analysis, and Senior Fund Analyst for HCMLP.

~~Rahim Ibrahim~~ ~~(8/17/1989)~~ ~~Assistant Secretary since November 2021; Indefinite Term~~		Compliance Analyst for Skyview Group since May 2021. Prior to his current role at Skyview Group, Mr. Ibrahim served as a Compliance Associate for Loring, Wolcott & Coolidge Trust, LLC from October 2019 to May 2021; Corporate Paralegal at Maples Group from April 2018 to October 2019; Associate Engagement Specialist-Compliance at Eze Software Group from June 2017 to April 2018.


~~Name of Trustee~~	~~Dollar Range of~~ ~~Shares of the Company~~¹		~~Aggregate Dollar Range of Equity~~ ~~Securities~~¹ ~~Owned in All Registered~~ ~~Investment Companies Overseen by~~ ~~Trustee in the Fund Complex~~
~~Independent Trustees~~
~~Ethan Powell~~	$	~~1-$10,000~~	~~$10,001-$50,000~~
~~Dr. Bob Froehlich~~	$	~~1-$10,000~~	~~Over $100,000~~
~~Bryan A. Ward~~	$	~~1-$10,000~~	~~$10,001-$50,000~~
~~Edward Constantino~~	$	~~1-$10,000~~	~~$1-$10,000~~
~~Interested Trustee~~
~~John Honis~~		~~None~~	~~None~~


Name of Trustee	Aggregate Compensation From the Company		Pension or Retirement Benefits Accrued as Part of the Company’s Expense		Estimated Annual Benefits Upon Retirement		Aggregate Compensation from the Fund Complex
Independent Trustees
Bryan A. Ward	$	58,249.38	$	0	$	0	$	160,000.00
Dr. Bob Froehlich	$	54,608.80	$	0	$	0	$	150,000.00
Ethan Powell	$	58,249.38	$	0	$	0	$	160,000.00
Edward Constantino	$	48,897.64	$	0	$	0	$	48,897.64

Interested Trustee
John Honis	$	54,608.80	$	0	$	0	$	150,000.00


Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership*	Percentage of Class
Common Shares	Morgan Stanley Smith Barney LLC P.O. Box 703 New York, NY 10014	6,490,392	17.56%

Common Shares	National Financial Services LLC For exclusive benefit of our customers 499 Washington Boulevard Attn. Mutual Funds Dept. 4^th Floor Jersey City, NJ 07310	3,742,337	10.12%

Common Shares	J.P. Morgan Securities 383 Madison Ave New York, NY 10179	3,379,950	9.14%

Common Shares	Charles Schwab 211 Main St San Francisco, CA	2,574,698	6.97%


Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership*	Percentage of Class
Common Shares	Wells Fargo Clearing Services LLC P.O. Box 5268 Sioux Falls, SD 57117	2,399,033	6.49%

Common Shares	Bank of New York Mellon 240 Greenwich Street New York, NY 10286	2,204,845	5.97%

Name	Fees Earned or Paid in Cash ($)(1)	Total ($)(2)

Edward Constantino	48,898	48,898

Dr. Bob Froehlich	54,609	54,609

John Honis	54,609	54,609

Ethan Powell	58,249	58,249

Bryan A. Ward	58,249	58,249


	Fiscal year Ended December 31, 2020		Fiscal year Ended December 31, 2021
Audit Fees paid by Company	$	155,000	$	155,000
Audit-Related Fees paid by Company¹	$	0	$	0
Tax Fees paid by Company²	$	19,000	$	19,000
All Other Fees paid by Company	$	0	$	0
Aggregate Non-Audit Fees paid by Company and Adviser	$	0	$	0

CLASS	NAME	BENEFICIALLY OWNED	PERCENT OF CLASS
Common Shares	5% Shareholders
	James Dondero (1)	6,566,087.90	[•]%
	Morgan Stanley (2)	2,037,005	[•]%
	Named Executive Officers and Trustees
	James Dondero (1)	6,566,087.90	[•]%
	Ed Constantino	16,870	*
	Scott Kavanaugh	41,131	*
	Brian Mitts	2,969	*
	Dr. Arthur Laffer (3)	52,114	*
	Catherine Wood	0	*
	Dr. Carol Swain	0	*
	All Trustees and Executive Officers as a group (10 persons)	6,740,160.48	[•]%
Preferred Shares	Named Executive Officers and Trustees
	James Dondero (4)	58,990	[•]%

Name of Reporting Person	Sole Voting Power		Shared Voting Power		Sole Dispositive Power		Shared Dispositive Power
James D. Dondero^(a)		147,883.7849		6,418,204.1120		147,883.7849		6,418,204.1120
Nancy Marie Dondero^(b)		25,509.8617		3,843,851.0000		25,509.8617		3,843,851.0000

	NEXPOINT DIVERSIFIED REAL ESTATE TRUST
		~~PO Box 211230, Eagan, MN 55121-9984~~

	By:


		Name: Brian Mitts
~~VOTE BY MAIL~~ ~~1. Read the proxy statement.~~	~~2. Check the appropriate box(es) on the reverse side of the proxy card.~~ ~~3. Sign, date and return the proxy card in the envelope provided.~~

			~~VOTE ONLINE~~Title: Chief Financial Officer, Executive VP- ~~1. Read the proxy statement~~Finance, Treasurer and ~~have the proxy card at hand.~~Assistant Secretary ~~2. Go to www.proxyvotenow.com/nxdt~~ ~~3. Follow the simple instructions.~~

			~~VOTE BY PHONE~~ ~~1. Read the proxy statement and have the proxy card at hand.~~ ~~2. Call toll-free~~ ~~855-672-4278~~ ~~3. Follow the simple instructions.~~


		~~CONTROL NUMBER~~

		~~AUTHORIZED SIGNATURE(S)~~ ~~This section must be completed for your vote to be counted.~~


NEXPOINT DIVERSIFIED REAL ESTATE TRUST		PROXY CARD

YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. Your signature(s) on this should be exactly as your name(s) appear on this Proxy (reverse side). If the shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact, executors, administrators, trustees or guardians should indicate the full title and capacity in which they are signing.
		SIGNATURE (AND TITLE IF APPLICABLE) DATE


		SIGNATURE (IF HELD JOINTLY) DATE