United Development Funding IV Recommends Shareholders Reject Hedge Fund NexPoint’s Second Extended Hostile Tender Offer; Provides Supplemental Information

Shareholders should be aware that they are not required to tender any Shares to NexPoint. To reject the Tender Offer, a shareholder should simply ignore it. A shareholder that has already agreed to tender its Shares pursuant to the Tender Offer may withdraw any tender of shares up until March 15, 2021 (as described in the Tender Offer materials). A copy of this press release will be posted to the Trust’s website at www.udfiv.com. The Trust requests that a copy of this press release also be included with all distributions of materials relating to the Tender Offer.

The Trust’s Board of Trustees (the “Board”) has reviewed the terms and conditions of the second extended Tender Offer, considered other information relating to the Trust’s portfolio of assets, current financial condition and future opportunities and evaluated various other factors it deemed relevant, such as its knowledge of NexPoint and its affiliates, including NexPoint Advisors, L.P., Highland Capital Management, L.P. (“Highland”) and NexPoint’s portfolio manager, James Dondero (collectively, “NexPoint/Dondero”). As explained in the Trust’s press releases dated December 17, 2020, January 8, 2021 and January 19, 2021 the Board believes that NexPoint’s extended tender offer price of $1.10 per share represents a substantial discount to the current value of the Trust. In addition, the Board has serious concerns that the principal interests of NexPoint/Dondero and their affiliates in taking over the Trust may be to shield the participants in the illegal short and distort fraud scheme perpetrated against the Trust by notorious hedge fund manager J. Kyle Bass. These and the Board’s additional reasons for recommending that shareholders reject the Tender Offer are described further in the press releases mentioned above, which are available at www.udfiv.com.

The Board also considered more recent information revealed in the Highland bankruptcy case before the U.S. Bankruptcy Court for the Northern District of Texas (the “Court”). The Court recently approved Highland’s amended reorganization plan despite the objections of various creditors, including co-founder and former CEO James Dondero, who was enjoined from interfering with the implementation or consummation of the plan. A transcript from a February 8, 2021 bench ruling by the Court discloses that:

• The Court questioned the good faith of James Dondero and entities he controlled in objecting to the plan, stating that the “Court has good reason to believe” they were objecting to the plan “to be disruptors.”
• Due to the past litigious conduct of James Dondero, whom the Court described as a “serial litigator,” the Court included a “gatekeeper” provision in the plan preventing James Dondero and others from pursuing any claim relating to the Highland bankruptcy case or reorganization plan unless the Court specifically authorizes such action.

As disclosed in the Trust’s January 19, 2021 press release, the Court issued a preliminary injunction on January 11, 2021, enjoining and restraining James Dondero from taking a variety of actions, including making express or implied threats against Highland and its directors, officers, employees, professionals, or agents, in whatever capacity they are acting, and from physically or virtually entering Highland’s offices, computer, email, or information systems, including office space that Highland shares with employees of NexPoint Advisors, NexPoint’s investment advisor. The Court also previously issued a Temporary Restraining Order (TRO) enjoining James Dondero from threatening Highland and its representatives after Highland accused him of the same and of interfering with the bankruptcy proceeding. On January 7, 2021 Highland filed a motion for an order requiring James Dondero to show cause why he should not be held in civil contempt for violating the TRO.

NexPoint and NexPoint Advisors are also defendants in a lawsuit associated with the Highland bankruptcy. On January 13, 2021 NexPoint and NexPoint Advisors were temporarily enjoined and restrained from interfering with or otherwise impeding, directly or indirectly, Highland’s business, and from conspiring, colluding, or collaborating with James Dondero or any entity he owns and/or controls, to engage in such conduct. The Board further observed that none of these significant events regarding the Highland bankruptcy proceeding have been disclosed to Trust shareholders by NexPoint in the Tender Offer materials.

Highland Capital filed for bankruptcy in October 2019 and James Dondero ceded control over the bankrupt firm in January 2020 as part of a deal with creditors. The case and associated proceedings are Highland Cap. Mgmt., L.P. v. Highland Cap. Mgmt. Fund Advisors, L.P., Bankr. N.D. Tex., 19-34054, Highland Capital Management L.P. vs Highland Capital Management Fund Advisors, L.P., NexPoint Advisors, L.P., Highland Income Fund, NexPoint Strategic Opportunities Fund, et al, N.D. Tex., Adv. Proc. No. 21-03000 and Highland Cap. Mgmt., L.P. v. Dondero, Bankr. N.D. Tex., Adv. Proc. No. 20-3190, hearing 1/8/21.

About United Development Funding IV

United Development Funding IV is a Maryland real estate investment trust. UDF IV was formed primarily to generate current interest income by investing in secured loans and producing profits from investments in residential real estate. Additional information about UDF IV can be found on its website at www.udfiv.com. UDF IV may disseminate important information regarding its operations, including financial information, through social media platforms such as Twitter, Facebook and LinkedIn.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements relating to United Development Funding IV and the Tender Offer that are based on management’s current expectations and estimates and are not guarantees of future performance or future events. Such forward-looking statements generally can be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” or other similar words. Readers should be aware that there are various factors, many of which are beyond the Trust’s control, which could cause actual results to differ materially from any forward-looking statements made in this correspondence. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this correspondence. Forward-looking statements in this document speak only as of the date on which such statements were made, and the Trust undertakes no obligation to update any such statements that may become untrue because of subsequent events.