The following is an excerpt from an investor letter issued by Highland Capital Management, L.P.:

Over the past several weeks, an unaffiliated investment firm and its investment fund whose names include the word “Highland,” have experienced financial difficulties. We want to clarify that these situations are in no way, shape or form associated with Highland Capital Management, L.P. or the companies we manage, and in contrast, we believe that our firm, funds and the companies we manage are positioned to perform well in the current volatile markets.

Established in 1993 and headquartered in Dallas, Texas, as of June 30, 2007, our firm’s assets under management were over $40 billion in a diversified set of funds and other companies. Our well diversified business consists of structured products, a diversified financial holding company, listed closed-end funds, interval funds, mutual funds, hedge funds, a business development company and separate accounts.

Approximately $18 billion of the firm’s managed assets are in the form of cash flow Collateralized Loan Obligations (“CLOs”) that have average maturities of 10 years. The performance of these funds is determined by cash flow as opposed to market values, and the recent price volatility in the loan market has had no impact on these funds or their financing. These funds have few, if any, defaulted investments and all of our CLOs are performing ahead of the financial performance indicated in their original marketing documents. Highland is one of the most experienced CLO managers, having closed our first CLO in 1995.

We want to reiterate that our firm has historically had minor investment exposure to the subprime sector.

We have no affiliation with the Highland Capital’s special opportunities fund, a fund mentioned in a recent Financial Times article reportedly experiencing recent negative returns.

Our funds are designed to perform well in volatile markets, given their value and multi-strategy focus. We believe our investment style, platform and process have the firm well positioned to capitalize on the volatility, and the re-pricing of risk occurring in the structured products and credit markets. Highland is one of the largest, most experienced and top performing managers in these markets.

We appreciate your business and our relationship, and are committed to being responsible stewards of your capital. If you have any questions regarding any of these matters, please don’t hesitate to contact us, and information on our funds is always available to our investors via our websites www.hcmlp.com and www.highlandfunds.com.

Based in Dallas, Texas with offices in New York and London, Highland Capital Management, L.P. is an SEC-registered investment adviser specializing in alternative investment management. With over $40 billion in assets under management, the firm is a leading manager of syndicated loans, high yield bonds, and structured products for pension plans, insurance companies, banks, foundations, endowments and high net worth individuals.