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Your United Development Funding IV (“UDF IV” or the “Trust”) Board of Trustees and management team have acted, and continue to act, to protect and promote the interests of the Trust’s shareholders.

We have navigated extraordinary challenges and will continue to focus on safeguarding the Trust’s assets and maximizing shareholder value while building on the Trust’s long history of cash distributions.

‍Despite our work to protect your investment, NexPoint Real Estate Opportunities, LLC, an indirect subsidiary of NexPoint Diversified Real Estate Trust (NXDT), and its affiliates (collectively, “NexPoint”) continue to pursue a self-interested campaign at the expense of all UDF IV shareholders.

NexPoint has submitted nominations for a controlling slate of dissident trustees for election at the 2024 Annual Meeting of Shareholders, which will be held on December 10, 2024 at 10:00 AM CST. This is simply the latest step in NexPoint’s ongoing, self-interested campaign, which we believe is aimed at extracting the value of the Trust’s portfolio for its own benefit and to the detriment of all other shareholders. Their recent proxy materials confirmed our suspicions, as they do not present a single viable plan that we believe would enhance value.

NexPoint Has Attempted to Take Over Management of the Trust for the Past 5+ Years, Causing Significant Disruption to the Trust’s Operations and Undermining Our Shareholders’ Investment

NexPoint has launched numerous frivolous lawsuits against the Trust – including a defamation suit – forcing the Trust to waste resources that could otherwise be used for the benefit of shareholders.

In 2020, NexPoint launched a hostile tender offer, which it extended 13 times, to purchase Trust shares at the bargain basement price of $1.10 per share, or approximately a 90% discount to the Trust’s book value per share at the time.

Despite NexPoint’s Malicious Attacks on the Trust, the UDF IV Board and Management Team Have Safeguarded the Value of the Trust’s Portfolio and Continued to Drive Shareholder Returns

The Board has paid cash distributions of approximately $41.9 million, or approximately $1.37 per share, to shareholders since reinstating distributions in the third quarter of 2019. Cash distributions paid since inception total approximately $189.7 million, equating to approximately $6.19 per share.

The Trust has continued to actively and professionally manage its portfolio, including originating 9 new loans since 2020 for a total commitment of over $70 million. Importantly, 8 of these new loans funded new phases of projects for which the Trust has existing loans in its portfolio. These new loans are expected to accelerate the performance of such existing project loans.

The Trust engaged an independent accounting firm that audited the Trust’s 2022 and 2023 financial statements. These audited financial statements were made available to Trust shareholders.

NexPoint has a poor track record of managing its own fund.

NXDT’s Stock Price has Declined Significantly

S&P 500 benchmark index increased 29.01% during the same time period

A subsidiary of NexPoint Advisors is the advisor to NexPoint Diversified Real Estate Trust (NXDT), the NexPoint fund that owns UDF IV shares. Per NXDT’s Q2 2024 Investor Presentation, as of June 30, 2024, NXDT was trading at a 70% discount to its Net Asset Value (NAV).

Losses have mounted for nxdt

According to its own financial reports, NXDT has lost over $246 million since July 2022.¹²

Since September 2023, NXDT has resorted to paying its common shareholders a quarterly distribution payable 80% in stock and only 20% in cash.

Despite this Performance, the Management Team has been Richly Rewarded...³

Since NXDT shareholders approved a long-term incentive plan on January 30, 2023, the Company granted 1,637,269 Restricted Stock Units to its trustees and officers and other employees of the Advisor (603,482 Restricted Stock Units in 2023 and 1,033,787 Restricted Stock Units in the first six months of 2024).

1 NXDT Form 10-Q for the quarterly period ended September 30, 2024
2 NXDT Form 10-K for the fiscal year ended December 31, 2023
3 NXDT Form 10-Q for the quarterly period ended June 30, 2024

Affiliates of James Dondero, NexPoint’s founder, have engaged in willful misconduct and breached their fiduciary duty, and James Dondero and his affiliates are alleged to have engaged in fraudulent transfer of assets and self-dealing.

Dondero and Highland Capital Management Litigation Timeline

UBS Securities (“UBS”) filed a lawsuit in New York State Supreme Court against James Dondero, and several of his current or previous affiliates, claiming he schemed to prevent UBS from collecting $1.3 billion in judgments UBS obtained against entities managed indirectly by Highland Capital Management, L.P. See UBS Securities LLC v. Dondero, New York State Supreme Court, New York County. Special Turnover Petition filed by UBS Securities LLC and UBS AG London Branch against James Dondero et al.*

The SEC issued an Order finding that Highland Capital Management LP, a now bankrupt investment firm co-founded by Dondero, willfully violated Section 206(3) of the Advisers Act. See Investment Advisers Act of 1940 Release No. 3939, Sept, 25, 2014.

A JAMS arbitration panel found that ACIS Capital Management GP, LLC breached its fiduciary duty while James Dondero was an officer. See Terry v. Highland Capital et al, JAMS Arbitration No. 1310022713.

*UDF IV is not responsible, and accepts no liability, for the contents of the Special Turnover Petition filed by UBS Securities LLC and UBS AG London Branch against James Dondero et al. in the Supreme Court of the State of New York and makes no representations or warranties regarding its contents.

On August 8, 2024, UDF IV mailed proxy materials to shareholders, which include the WHITE proxy card and additional details regarding the Board of Trustees’ recommendation of nominees for election to the Board at the 2024 Annual Meeting of Shareholders. The Annual Meeting will be held on December 10, 2024, at 10:00 AM CST in a virtual-only format.

Shareholders have the opportunity to continue UDF IV’s work to protect and enhance shareholder value by reelecting the four independent Trustees- Steven J. Finkle, Lawrence S. Jones, J. Heath Malone and Phillip K. Marshall– who oversee our efforts to protect the value of your investment. We urge you to vote “FOR” ONLY the four nominees proposed by the Board of Trustees on the WHITE proxy card included in the enclosed UDF IV proxy materials.

UDF IV shareholders as of the close of business on November 12, 2024, the record date, are entitled to vote their shares at the Annual Meeting or to submit a proxy before the Annual Meeting.

You will likely continue to receive materials from NexPoint with fictitious claims regarding the Trust as well as our Board and management team. We expect that NexPoint will continue to twist the facts and rehash old events in an attempt to fearmonger and deceive you into supporting their misguided and malicious campaign. Please discard any green or other color proxy card sent to you by NexPoint as it may not include the accurate and complete information to which shareholders are entitled.

The Future of Your Investment in UDF IV is at Stake– Vote TODAY to Protect Your Investment!

Importantly, the $1.37 per share in distributions to shareholders that we have paid since the third quarter of 2019 is far more than NexPoint was willing to offer shareholders for their Trust shares.