SEC Form N-CSR filed by abrdn Healthcare Investors Shares of Beneficial Interest

 

 

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FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number

811-04889

 

abrdn Healthcare Investors

(Exact name of registrant as specified in charter)

 

1900 Market Street, Suite 200, Philadelphia	13103
(Address of principal executive offices)	(Zip code)

 

Sharon Ferrari, abrdn Inc., 1900 Market Street, Suite 200, Philadelphia, PA 19103

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

1-800-522-5465

 

Date of fiscal year end:	September 30
Date of reporting period:	October 1, 2022 to September 30, 2023

 

 

 

 

ITEM 1. REPORTS TO STOCKHOLDER

 

 

abrdn Healthcare Investors (HQH)

(Formerly Tekla Healthcare Investors)

Annual Report
September 30, 2023

abrdn.com

abrdn Healthcare Investors

Distribution policy: The Fund has implemented a managed distribution policy (the Policy) that provides for quarterly distributions at a rate set by the Board of Trustees. Under the current Policy, the Fund intends to make quarterly distributions at a rate of 2% of the Fund's net assets to shareholders of record. The Policy would result in a return of capital to shareholders, if the amount of the distribution exceeds the Fund's net investment income and realized capital gains. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income."

The amounts and sources of distributions reported in the Fund's notices pursuant to Section 19(a) of the Investment Company Act of 1940 are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that tells you how to report distributions for federal income tax purposes.

During the last fiscal year ended September 30, 2023, the Fund made quarterly distributions totaling $1.61 per share, which were characterized as $1.61 per share of net realized long-term capital gains. Final determination of the tax character of the distributions paid by the Fund in 2023 will be reported to shareholders in January 2024.

You should not draw any conclusions about the Fund's investment performance from the amount of distributions pursuant to the Policy or from the terms of the Policy. The Policy has been established by the Trustees and may be changed or terminated by them without shareholder approval. The Trustees regularly review the Policy and the frequency and rate of distributions considering the purpose and effect of the Policy, the financial market environment, and the Fund's income, capital gains and capital available to pay distributions. The suspension or termination of the Policy could have the effect of creating a trading discount or widening an existing trading discount. At this time there are no reasonably foreseeable circumstances that might cause the Trustees to terminate the Policy.

Consider these risks before investing: As with any investment company that invests in equity securities, the Fund is subject to market risk—the possibility that the prices of equity securities will decline over short or extended periods of time. As a result, the value of an investment in the Fund's shares will fluctuate with the market generally and market sectors in particular. You could lose money over short or long periods of time. Political and economic news can influence market-wide trends and can cause disruptions in the U.S. or world financial markets. Other factors may be ignored by the market as a whole but may cause movements in the price of one company's stock or the stock of companies in one or more industries. All of these factors may have a greater impact on initial public offerings and emerging company shares. Different types of equity securities tend to shift into and out of favor with investors, depending on market and economic conditions. The performance of funds that invest in equity securities of healthcare companies may at times be better or worse than the performance of funds that focus on other types of securities or that have a broader investment style.

Welcome to abrdn

Dear Shareholder,

Effective close of regular business on October 27, 2023, abrdn, Inc. is your new investment adviser. abrdn Inc. assumed responsibility for the management of four former Tekla Capital Management, LLC closed-end funds: abrdn Healthcare Investors (Ticker: HQH), formerly Tekla Healthcare Investors, abrdn Life Sciences Investors (Ticker: HQL), formerly Tekla Life Sciences Investors, abrdn Healthcare Opportunities Fund (Ticker: THQ), formerly Tekla Healthcare Opportunities Fund and abrdn World Healthcare Fund (Ticker: THW), formerly Tekla World Healthcare Fund.

Two existing trustees of the Funds, Jeffrey Bailey and Kathleen Goetz, were joined by four newly elected trustees of the Funds, who were approved by shareholders of HQL on October 3, 2023, by shareholders of HQH on October 13, 2023, and by shareholders of THQ and THW on October 25, 2023, with each approval being contingent upon abrdn's appointment as adviser. The new trustees are Stephen Bird, Rose DiMartino, C. William Maher, and Todd Reit, who will serve as Chair of the Boards.

Upon the close of business on October 27, 2023, nearly all of the investment team responsible for the management of the Funds joined abrdn. The Funds will continue to be managed in accordance with their existing investment objectives and strategies by the same team of Boston-based investment professionals pursuing the same investment philosophy and employing the same investment process that has served the Funds well through the years. abrdn is one of the largest closed-end fund managers globally and is dedicated to creating long-term value for our clients.

As of June 30, 2023, we managed over $602 billion in assets on behalf of institutional and retail clients worldwide. We believe that our global footprint ensures that we are always close to our clients and the challenges they face. Should you have any questions about the recent change in management of the funds, or our U.S. registered fund products, please don't hesitate to contact us. We look forward to serving you.

An Introduction to abrdn

We invest to help our clients create more. More opportunity. More potential. More impact. We offer investment expertise across all key asset classes and markets so that our clients can capture investment potential wherever it arises. By combining market and economic insight with technology and diverse perspectives, we look for optimal ways to help investors navigate the future and reach their financial goals. As a leading global asset manager, abrdn is dedicated to creating long-term value for our clients. Closed-end funds have been a longstanding and important part of our firm's business, and we believe in their long-term value in helping to meet investors' needs. Visit our Investor Center to learn more about abrdn and our entire suite of 16 U.S. closed-end funds across a variety of asset classes.

Shareholder Information

As part of abrdn's commitment to shareholders, we invite you to visit the Funds on the web at www.abrdnhqh.com, www.abrdnhql.com, www.abrdnthq.com and www.abrdnthw.com. Here, you can view monthly fact sheets, quarterly commentary, distribution and performance information, and other Fund literature.

Contact us:

• Visit: https://www.abrdn.com/en-us/cefinvestorcenter

• Email: [email protected]; or

• Call: 1-800-522-5465 (toll free in the U.S.).

Yours sincerely,

Christian Pittard
President

Letter to Shareholders (Unaudited)

Dear Shareholders,

Healthcare continues to be a unique and differentiated sector of the economy. The sector contains relatively non-cyclical defensive components, in the pharmaceutical and payor subsectors, for example. Healthcare also includes highly innovative, capital intensive subsectors like biotechnology that can perform in line with or in contrast to the more defensive market sectors. The overall consequence is that the healthcare sector, as a whole, can perform better or worse than the broad market, depending on a combination of fundamentals and macroeconomic conditions.

Healthcare materially outperformed the broad market in 2022 at a time when interest rates moved much higher quickly and there were heightened recession fears. Outperformance was presumably due to the defensive nature of such healthcare subsectors as Pharmaceuticals and Managed Care. So far in 2023, this trend has reversed. That is, the broad market has materially outperformed healthcare. Part of that outperformance was undoubtedly the result of the AI "craze" earlier in the year, but we believe that a lessening of inflation and a slowing in the rate of interest rate increase, conditions which can favor such sectors as tech, were at least as helpful to broad market advancement.

It is important to note that our faith in the long-term future of healthcare remains strong. We continue to believe in the underlying demographics. The population is aging. People spend more on healthcare as they get older. And innovation moves ahead unbowed. We believe that the combination of these things will 1) continue to help us address unmet medical needs for patients, 2) reduce side effects and extend the lives of patients and 3) reward healthcare investors.

There can be no better example of this than the recent development of the so-called GLP-1 class of incretin drugs being used to treat diabetes and obesity. Results in this area have been truly remarkable. Advancement in A1c control and weight loss for diabetics as well as profound weight loss for individuals battling obesity have been, in our experience, without precedent. Who would have thought, just a few years ago, that a weekly dose of a drug could, over just months, produce weight loss of 20% of body weight. And this class of drugs has the potential to have much broader impact. Initial studies suggest that, simultaneous with weight loss, incretin therapy could provide cardiovascular and renal benefit. Moreover, initial studies suggest that these agents could have potential impact in a wide array of diseases, including but not limited to obstructive sleep apnea, chronic obstructive pulmonary disease (COPD), cancer and CNS diseases like Alzheimer's. There are sure to be bumps in the road during clinical and other evaluation of GLP-1 drugs (which may or may not be represented in your Fund's portfolio at this or other times), but their potential is impressive. Some Wall Street analysts are projecting market size for this class of drugs in excess of $100B. Sales at this level would likely make this class of drugs among the most successful (and arguably the most effective) drugs of all time.

Separately, we note that Tekla has announced that its investment capabilities and management of your Fund have been acquired by abrdn Inc., a prominent U.K. based asset manager. We think this is a win-win-win situation. We believe that Tekla has a highly competent healthcare investment capability; the Company has managed your fund for more than twenty years. Nearly the entire Tekla team will be joining abrdn. This firm is one of the largest and most well-known closed-end fund (CEF) sponsors in the world and possesses premier CEF sponsor capabilities. We expect that with the addition of the Tekla Funds (which have been re-named as abrdn Funds), abrdn will become the third largest CEF sponsor worldwide. We look forward to working with abrdn and believe that the combination of the capabilities of these two fine firms will significantly benefit shareholders. I can tell you personally that it has been both a rewarding experience and a privilege to serve your Fund.

Be well,

Daniel R. Omstead
Vice President and Portfolio Manager

Fund Essentials (Unaudited)

Objective of the Fund

The Fund's investment objective is to seek long-term capital appreciation by investing primarily in securities of healthcare companies. In addition, the Fund seeks to provide regular distribution of realized capital gains.

Description of the Fund

abrdn Healthcare Investors ("HQH") is a non-diversified closed-end healthcare fund traded on the New York Stock Exchange under the ticker HQH. HQH primarily invests in healthcare industries and will emphasize both large established companies and smaller, emerging companies with a maximum of 40% of the Fund's assets in restricted securities of both public and private companies.

Investment Philosophy

The Investment Adviser to the Fund, believes that:

•  Aging demographics and adoption of new medical products and services can provide long-term tailwinds for healthcare companies

•  Late stage biotechnology product pipeline could lead to significant increases in biotechnology sales

•  Robust M&A activity in healthcare may create additional investment opportunities

Fund Overview and Characteristics as of 9/30/23

Market Price1​				$15.55
NAV2​				$18.84
Premium/(Discount)				-17.46%
Average 30 Day Volume				98,912
Net Assets				$931,342,991
Ticker				HQH
NAV Ticker				XHQHX
Commencement of Operations Date				4/22/87
Fiscal Year to Date Distributions Per Share				$1.61

¹​ The closing price at which the Fund's shares were traded on the exchange.

²​ Per-share dollar value of the Fund, calculated by dividing the total value of all the securities in its portfolio, plus any other assets and less liabilities, by the number of Fund shares outstanding.

Holdings of the Fund (Data is based on net assets)

Asset Allocation as of 9/30/23

Sector Diversification as of 9/30/23

This data is subject to change on a daily basis.

Largest Holdings by Issuer (Unaudited)

(Excludes Short-Term Investments)

As of September 30, 2023

Issuer – Sector				% of Net Assets
Regeneron Pharmaceuticals, Inc. – Biotechnology					7.7	%
Amgen, Inc. – Biotechnology					7.4	%
Vertex Pharmaceuticals, Inc. – Biotechnology					7.3	%
Gilead Sciences, Inc. – Biotechnology					5.3	%
Biogen, Inc. – Biotechnology					3.7	%
AstraZeneca plc – Pharmaceuticals					3.6	%
Alnylam Pharmaceuticals, Inc. – Biotechnology					2.4	%
Illumina, Inc. – Life Sciences Tools & Services					2.1	%
Moderna, Inc. – Biotechnology					2.0	%
AbbVie, Inc. – Biotechnology					1.8	%
Johnson & Johnson – Pharmaceuticals					1.6	%
BioMarin Pharmaceutical, Inc. – Biotechnology					1.5	%
Thermo Fisher Scientific, Inc. – Life Sciences Tools & Services					1.5	%
Sarepta Therapeutics, Inc. – Biotechnology					1.5	%
argenx SE – Biotechnology					1.4	%
Exelixis, Inc. – Biotechnology					1.4	%
Neurovance Milestone Interest – Pharmaceuticals					1.4	%
UnitedHealth Group, Inc. – Health Care Providers & Services					1.3	%
Immunovant, Inc. – Biotechnology					1.3	%
Merck & Co., Inc. – Pharmaceuticals					1.3	%

Fund Performance (Unaudited)

Fund and Benchmark Performance and Other Influencing Factors

HQH is a closed-end fund which invests predominantly in healthcare companies. Subject to regular consideration, the Trustees of HQH have instituted a policy of making quarterly distributions to shareholders. The Fund seeks to make such distributions in the form of long-term capital gains.

The Fund considers investments in companies of all sizes and in all healthcare subsectors, including, but not limited to, biotechnology, pharmaceuticals, healthcare equipment, healthcare supplies, life science tools and services, healthcare distributors, managed healthcare, healthcare technology and healthcare facilities. The Fund emphasizes innovation, investing both in public and pre-public venture companies. The Fund considers its venture investments to be a differentiating characteristic. Among the various healthcare subsectors, HQH has considered the biotechnology subsector, including both pre-public and public companies, to be a key contributor to the healthcare sector. The Fund holds biotech assets, including both public and pre-public, often representing 50-65% of net assets.

There is no commonly published index which matches the investment strategy of HQH. The S&P Composite 1500^®​ Health Care Index* (S15HLTH) consists of approximately 170 companies representing most or all of the healthcare subsectors in which HQH typically invests; biotechnology often represents 15-20% of this index. By contrast, the NASDAQ Biotechnology Index^®​* (NBI), which contains approximately 260 constituents, is much more narrowly constructed. The vast majority of this index is comprised of biotechnology, pharmaceutical and life science tools companies. In recent years, biotechnology has often represented 72-82% of the NBI. Neither the S15HLTH nor NBI indices contain any material amount of pre-public company assets.

Given the circumstances, we present both NAV and stock price returns for the Fund in comparison to several commonly published indices. One index, the S&P 500^®​ Index* (SPX), is a commonly considered broad based index; this index is comprised of companies in many areas of the economy, including, but not limited to, healthcare. As described above, the NBI is a healthcare index mostly focused in three healthcare sectors with a high level of biotechnology by comparison. The S15HLTH contains a wider representation of healthcare subsectors, but typically contains a much lower biotechnology composition.

HQH generally invests in a combination of large-cap growth-oriented and earlier stage innovative healthcare companies with a focus on the biotechnology sector. Generally, HQH targets biotechnology exposure below that of the NBI and a higher biotechnology exposure than that of the S15HLTH. We note that, in recent periods, biotechnology has been a significant contributor to returns (both positive and negative) associated with those indices. We believe this sector continues to have significant potential for growth in the future.

Fund Performance for the Period Ended September 30, 2023

For the 12-month period ended September 30, 2023, the return on the Fund's net asset value was up 6.8% and market value was down 1.2%, including reinvestment of dividends and distributions. Over the same period the NBI was up 5.8% and the S15HLTH was up 7.4%, including reinvestment of dividends.

Period				HQH NAV %				HQH MKT %				NBI %				S15HLTH %				SPX %
6 month					-2.39				-7.57				-3.75				-0.29				5.18
1 year					6.80				-1.24				5.79				7.38				21.59
5 year					2.97				1.13				1.31				7.65				9.90
10 year					6.32				4.70				6.66				11.69				11.90

Change in the value of a $10,000 investment

Cumulative total return from 9/30/2013 to 9/30/2023

All performance over one-year has been annualized. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. The NAV total return takes into account the Fund's total annual expenses and does not reflect transaction charges. If transaction charges were reflected, NAV total return would be reduced. All distributions are assumed to be reinvested either in accordance with the dividend reinvestment plan (DRIP) for market price returns or NAV for NAV returns. Until the DRIP price is available from the Plan Agent, the market price returns reflect the reinvestment at the closing market price on the last business day of the month. Once the DRIP is available around mid-month, the market price returns are updated to reflect reinvestment at the DRIP price. The graph and table do not reflect the deduction of taxes a shareholder would pay on fund distributions or the sale of fund shares.

Risk Adjusted NASDAQ Biotechnology Index^®​ computed by the Adviser using Bloomberg data for the NBI and applying the Fund's computed 0.90 beta to NBI performance to reflect the Fund's lower historical risk.

Portfolio Management Commentary

During the period the Fund benefited from certain company selections, by both holding and avoiding ownership of specific stocks, For example, the Fund avoided holding NovoCure Limited (NVCR) whose medical device for treating lung cancer yielded disappointing clinical trial results. The Fund also saw a strong positive stock selection in biotechnology companies for example by holding a position in VectivBio AG (VECT) which was acquired in the period by Ironwood Pharmaceuticals, Inc.

During the period, the Fund's allocation to healthcare equipment and services companies detracted from performance as these subindustry groups lagged their peers. The past year saw heavy losses for small cap public biotechnology stocks and while the Fund did not maintain large positions in small public biotechs, our nearly 10% allocation to private biotechnology companies detracted from performance.

Portfolio Highlights as of September 30, 2023

Among other investments, abrdn Healthcare Investors' performance benefitted in the past year by the following:

Vectivbio Holding AG (VECT) is a clinical stage biotechnology company developing treatments for severe, rare gastrointestinal conditions. Its lead candidate, apraglutide, is in development for Short Bowel Syndrome with Intestinal Failure (SBS-IF) and acute Graft versus Host Disease (aGvHD). The Fund held Vectivbio which had a strong positive return following announcement of Ironwood Pharmaceuticals' acquisition offer in May 2023.

Novocure Ltd (NVCR) is an innovative medical device company whose tumor treating fields therapy uses electric current to kill cancer cells and disrupt their growth and migration. While the therapy has been approved for glioblastoma, an aggressive brain tumor, it has yet to see demonstrable success across more prevalent tumor types such as lung cancer. Novocure stock declined in the period and the Fund benefitted by not owning the stock during the period.

Among other examples, abrdn Healthcare Investors' performance was negatively impacted by the following investments:

Rallybio Corp. (RLYB) is a clinical stage biotechnology company developing therapies for patients with severe and rare disorders. Its lead candidate, RLYB212, is a monoclonal antibody for the prevention of fetal and neonatal alloimmune thrombocytopenia, a rare condition with no currently approved therapies. In the current risk-off environment, investor interest has shifted away from pre-commercial companies with early-stage assets and no revenue. Fund performance was negatively impacted by ownership of Rallybio during the period.

Apellis Pharmaceuticals, Inc. (APLS) is a commercial stage biotechnology company with the first approved therapy for Dry AMD (Dry Age-related Macular Degeneration), a common disease in people over 50 where retina cells die off leading to blurred and reduced central vision and often blindness. The Fund owns APLS and performance was negatively affected when the stock suffered a price decline due to reported cases of ocular inflammation in treated patients that were not observed in the clinical trials.

Sanofi (SNY) is a large pharmaceutical company that focuses on specialty care and vaccines. Over the course of the last year, Sanofi's lead drug, Dupixent, used principally in atopic dermatitis and asthma, has cemented itself as one of the best drug launches of all time, annualizing close to $10B in sales as of Q3 2023. Moreover, the drug showed promising results in COPD, a historically challenging disease to treat, which provides an additional significant market expansion. New leadership under CEO Paul Hudson is strategically focused on creating the best-in-class inflammation and immunology (I&I) company and the Company has been active in business development and further enhancing the pipeline in these indications. The Company's stock outperformed while the Fund held a relatively small position.

Distributions (Unaudited)

The Fund intends to make quarterly distributions at a rate of 2% of the Fund's net assets. The Fund intends to use net realized capital gains when making quarterly distributions, if available, but would make return of capital distributions if the amount of the distribution exceeds the Fund's net investment income and realized capital gains. During the last fiscal year, the Fund made quarterly distributions totaling $1.61 per share, which were characterized as $1.61 per share of net realized long-term capital gains. Final determination of the tax character of the distributions paid by the Fund in 2023 will be reported to shareholders in January 2024.

Distributions of return of capital decrease the Fund's total assets and total assets per share and, therefore, could have the effect of increasing the Fund's expense ratio. In general, the policy of making quarterly distributions at a fixed rate does not affect the Fund's investment strategy. However, in order to make these distributions, the Fund might need to sell portfolio securities at a less than opportune time.

The Fund is covered under exemptive relief received by the Fund's investment adviser from the U.S. Securities and Exchange Commission (SEC) that allows the Fund to distribute long-term capital gains as frequently as monthly in any one taxable year.

*The trademarks NASDAQ Biotechnology Index^®​, S&P Composite 1500^®​ Health Care Index, SPDR^®​ S&P^®​ Biotech ETF and S&P 500^®​ Index referenced in this report are the property of their respective owners. These trademarks are not owned by or associated with the Fund or its service providers, including abrdn Inc.

Schedule of Investments

September 30, 2023

				Shares				Value
Convertible Preferreds and Warrants (Restricted) (a) (b)​ 5.8%
Biotechnology 3.6%
Abcuro, Inc. Series B					266,408			$	1,462,500
Arbor Biotechnologies, Series B, 8.00%					82,076				1,359,999
Arkuda Therapeutics, Inc. Series A, 6.00% (c)​					2,353,932				235
Arkuda Therapeutics, Inc. Series B, 6.00% (c)​					1,044,322				536,259
Flamingo Therapeutics, Inc. Series A3 (d)​					243,458				1,572,689
Hotspot Therapeutics, Inc. Series B, 6.00%					2,875,000				7,725,988
Hotspot Therapeutics, Inc. Series C, 6.00%					632,394				1,699,432
ImmuneID, Inc. Series A, 8.00%					1,020,000				488,070
Incendia Therapeutics, Inc. Series A					1,769,383				3,399,993
Invetx, Inc. Series A, 8.00% (c)​					7,187,500				4,816,344
Invetx, Inc. Series B, 8.00% (c)​					3,089,091				2,070,000
Priothera Ltd. Series A, 6.00% (c) (d)​					346,666				2,565,589
Quell Therapeutics, Series B (d)​					1,553,631				3,229,999
ReCode Therapeutics, Series B, 5.00%					319,138				2,946,665
									33,873,762
Health Care Equipment & Supplies 0.1%
IO Light Holdings, Inc. Series A2					421,634				640,378
Pharmaceuticals 2.1%
Amolyt Pharma SAS Series C (d)​					1,602,836				3,626,441
Biotheryx, Inc. Series E, 8.00%					1,295,238				2,040,000
Curasen Therapeutics, Inc. Series A (c)​					18,203,119				8,728,396
Endeavor Biomedicines, Inc. Series B, 8.00%					657,322				3,099,996
HiberCell, Inc. Series B					2,773,472				1,285,782
HiberCell, Inc. Series C					1,529,261				708,965
HiberCell, Inc. Series C Warrants (expiration date 09/15/28, exercise price $0.46)					1,529,261				0
									19,489,580
Total Convertible Preferreds and Warrants (Cost $73,743,773)									54,003,720
				Principal Amount
Non-Convertible Notes 0.1% (Restricted) (b) (c)​
Pharmaceuticals 0.1%
Curasen Therapeutics, Inc.				$	846,390				846,390
Total Non-Convertible Notes (Cost $846,670)									846,390

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

				Shares				Value
Common Stocks 87.7%
Biotechnology 56.9%
89bio, Inc. (a)​					56,488			$	872,175
AbbVie, Inc.					115,116				17,159,191
Affimed N.V. (a) (d)​					367,414				175,587
Akero Therapeutics, Inc. (a)​					40,050				2,025,729
Alkermes plc (a) (d)​					173,907				4,871,135
Alnylam Pharmaceuticals, Inc. (a)​					124,587				22,064,358
Amgen, Inc.					257,888				69,309,979
Apellis Pharmaceuticals, Inc. (a)​					118,059				4,490,964
Arcutis Biotherapeutics, Inc. (a)​					86,869				461,274
argenx SE ADR (a)​					26,078				12,820,727
Ascendis Pharma A/S ADR (a)​					92,961				8,704,868
BioCryst Pharmaceuticals, Inc. (a)​					370,637				2,624,110
Biogen, Inc. (a)​					132,773				34,123,989
BioMarin Pharmaceutical, Inc. (a)​					163,098				14,430,911
BioNTech SE ADR					66,396				7,213,261
Black Diamond Therapeutics, Inc. (a)​					90,404				259,459
Bridgebio Pharma, Inc. (a)​					124,341				3,278,872
Caribou Biosciences, Inc. (a)​					385,660				1,843,455
Chinook Therapeutics, Inc. CVR (Restricted) (a)​					91,800				150,552
Cytokinetics, Inc. (a)​					132,081				3,891,106
Denali Therapeutics, Inc. (a)​					214,498				4,425,094
Exelixis, Inc. (a)​					584,656				12,774,734
Fusion Pharmaceuticals, Inc. (Restricted) (b) (d)​					7,593				17,768
G1 Therapeutics, Inc. (a)​					200,492				288,708
Galera Therapeutics, Inc. (a)​					296,462				51,911
Gilead Sciences, Inc.					655,681				49,136,734
I-Mab ADR (a)​					53,885				71,128
Immunovant, Inc. (a)​					314,275				12,065,017
Incyte Corp. (a)​					171,457				9,905,071
Intellia Therapeutics, Inc. (a)​					103,664				3,277,856
Intercept Pharmaceuticals, Inc. (a)​					33,437				619,922
Ionis Pharmaceuticals, Inc. (a)​					56,499				2,562,795
Karuna Therapeutics, Inc. (a)​					39,143				6,618,690
Madrigal Pharmaceuticals, Inc. (a)​					10,540				1,539,262
Mereo Biopharma Group plc ADR (a)​					1,063,799				1,372,301
Moderna, Inc. (a)​					182,904				18,892,154
Neurocrine Biosciences, Inc. (a)​					43,499				4,893,637
Novavax, Inc. (a)​					37,188				269,241

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

				Shares				Value
Biotechnology (continued)
Praxis Precision Medicines, Inc. (a)​					51,406			$	87,904
Precision BioSciences, Inc. (a)​					154,807				52,836
Pyxis Oncology, Inc. (a)​					481,646				958,476
Rallybio Corp. (a)​					755,076				2,544,606
Regeneron Pharmaceuticals, Inc. (a)​					86,913				71,525,922
Roivant Sciences Ltd. (a)​					563,349				6,579,916
Sage Therapeutics, Inc. (a)​					42,028				864,936
Sarepta Therapeutics, Inc. (a)​					113,095				13,709,376
Scholar Rock Holding Corp. (a)​					68,117				483,631
Seagen, Inc. (a)​					46,241				9,810,028
Sutro Biopharma, Inc. (a)​					69,389				240,780
TScan Therapeutics, Inc. (a)​					138,057				353,426
Ultragenyx Pharmaceutical, Inc. (a)​					45,126				1,608,742
uniQure N.V. (a) (d)​					244,086				1,637,817
United Therapeutics Corp. (a)​					17,837				4,028,843
Vaxcyte, Inc. (a)​					132,313				6,745,317
Vertex Pharmaceuticals, Inc. (a)​					194,177				67,523,110
Xencor, Inc. (a)​					78,135				1,574,420
									529,883,811
Health Care Equipment & Supplies 5.7%
Abbott Laboratories					114,588				11,097,848
Baxter International, Inc.					39,600				1,494,504
Becton, Dickinson and Co.					3,506				906,406
Cercacor Laboratories, Inc. (Restricted) (b)​					160,000				127,080
DexCom, Inc. (a)​					46,279				4,317,831
Edwards Lifesciences Corp. (a)​					75,377				5,222,118
Guardant Health, Inc. (a)​					173,673				5,147,668
IDEXX Laboratories, Inc. (a)​					15,551				6,799,986
Inspire Medical Systems, Inc. (a)​					21,488				4,264,079
Insulet Corp. (a)​					18,268				2,913,563
Medtronic plc (d)​					52,381				4,104,575
Stryker Corp.					12,890				3,522,450
Zimmer Biomet Holdings, Inc.					24,137				2,708,654
									52,626,762
Health Care Providers & Services 4.8%
Charles River Laboratories International, Inc. (a)​					34,616				6,784,044
Elevance Health, Inc.					18,435				8,026,968
HCA Healthcare, Inc.					16,232				3,992,747
Humana, Inc.					4,847				2,358,162

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

				Shares				Value
Health Care Providers & Services (continued)
InnovaCare, Inc. Escrow Shares (Restricted) (b)​					222,222			$	28,422
Medpace Holdings, Inc. (a)​					12,199				2,953,744
Molina Healthcare, Inc. (a)​					18,161				5,954,810
Tenet Healthcare Corp. (a)​					43,846				2,889,013
UnitedHealth Group, Inc.					24,166				12,184,256
									45,172,166
Life Sciences Tools & Services 4.3%
Adaptive Biotechnologies Corp. (a)​					216,209				1,178,339
Agilent Technologies, Inc.					10,336				1,155,772
Avantor, Inc. (a)​					129,493				2,729,712
Illumina, Inc. (a)​					142,483				19,560,066
Thermo Fisher Scientific, Inc.					27,187				13,761,244
West Pharmaceutical Services, Inc.					5,474				2,053,900
									40,439,033
Medical Devices and Diagnostics 3.3%
Boston Scientific Corp. (a)​					183,360				9,681,408
Danaher Corp.					44,068				10,933,271
Intuitive Surgical, Inc. (a)​					34,571				10,104,758
									30,719,437
Pharmaceuticals 12.7%
Amylyx Pharmaceuticals, Inc. (a)​					136,497				2,499,260
Assertio Holdings, Inc. (a)​					14,226				36,418
AstraZeneca plc ADR					494,952				33,518,149
Bristol-Myers Squibb Co.					119,794				6,952,844
Catalent, Inc. (a)​					42,400				1,930,472
Eli Lilly & Co.					19,770				10,619,060
Endo International plc (a) (d)​					465,507				3,771
Intra-Cellular Therapies, Inc. (a)​					19,220				1,001,170
Jazz Pharmaceuticals plc (a)​					22,124				2,863,730
Johnson & Johnson					93,399				14,546,894
Marinus Pharmaceuticals, Inc. (a)​					385,154				3,100,490
McKesson Corp.					12,176				5,294,734
Merck & Co., Inc.					114,534				11,791,275
Mirati Therapeutics, Inc. (a)​					42,638				1,857,311
Oculis Holding AG (a) (d)​					557,945				6,327,097
Pfizer, Inc.					223,242				7,404,937
Royalty Pharma plc Class A					156,941				4,259,379
Spectrum Pharmaceuticals, Inc. CVR (Restricted) (a) (b)​					79,790				0
Tetraphase Pharmaceuticals, Inc. CVR (a) (b)​					28,747				1,725

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

				Shares				Value
Pharmaceuticals (continued)
Teva Pharmaceutical Industries Ltd. ADR (a)​					291,666			$	2,974,993
VYNE Therapeutics, Inc. (a)​					5,265				21,060
Zoetis, Inc.					5,547				965,067
									117,969,836
Total Common Stocks and Warrants (Cost $786,438,844)									816,811,045
Exchange Traded Funds 0.8%
iShares Nasdaq Biotechnology ETF					24,569				3,004,543
SPDR S&P Biotech ETF					57,000				4,162,140
Total Exchange Traded Funds (Cost $7,597,986)									7,166,683
				Principal Amount
Short-Term Investments 3.5%
Repurchase Agreement, Fixed Income Clearing Corp., repurchase value $32,741,365, 1.60%, dated 09/29/23, due 10/02/23 (collateralized by U.S. Treasury Note 3.625%, due 05/15/26, market value $33,391,823)				$	32,737,000				32,737,000
Total Short-Term Investments (Cost $32,737,000)									32,737,000
Total Investments Before Milestone Interests 97.9% (Cost $901,364,273)									911,564,838
				Interests
Milestone Interests (Restricted) (a) (b)​ 1.5%
Pharmaceuticals 1.5%
Afferent Milestone Interest					1				280,950
Ethismos Research Milestone Interest					1				0
Impact Biomedicines Milestone Interest					1				1,081,983
Neurovance Milestone Interest					1				12,658,771
									14,021,704
Biotechnology 0.0%
Amphivena Milestone Interest					1				0
Rainier Therapeutics Milestone Interest					1				0
Therachon Milestone Interest					1				0
Total Milestone Interests (Cost $7,952,967)									14,021,704
Total Investments 99.4% (Cost $909,317,240)									925,586,542
Other Assets in Excess of Liabilities 0.6%									5,756,449
Net Assets 100%								$	931,342,991

The percentage shown for each investment category in the Schedule of Investments is based on net assets.

(a)  Non-income producing security.

(b)  Security fair valued using significant unobservable inputs. See Investment Valuation and Fair Value Measurements.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

(c)  Affiliated issuers in which the Fund holds 5% or more of the voting securities (total market value of $19,563,213).

(d)  Foreign security.

ADR  American Depository Receipt

CVR  Contingent Value Right

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

Financial statements

STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2023

ASSETS
Investments in unaffiliated issuers, at value (cost $874,751,297)				$	892,001,625
Investments in affiliated issuers, at value (cost $26,612,976)					19,563,213
Milestone interests, at value (cost $7,952,967)					14,021,704
Total investments (cost $909,317,240)					925,586,542
Cash					161
Foreign currency, at value (cost $56)					53
Dividends and interest receivable					197,415
Receivable for investments sold					6,656,449
Prepaid expenses					50,801
Other assets (see Note 1)					272
Total assets					932,491,693
LIABILITIES
Accrued advisory fee					789,431
Accrued investor support service fees					40,903
Accrued shareholder reporting fees					47,562
Accrued trustee fees					31,083
Accrued other					239,723
Total liabilities					1,148,702
Commitments and Contingencies (see Notes 1 and 5)
NET ASSETS				$	931,342,991
SOURCES OF NET ASSETS CONSIST OF
Shares of beneficial interest, par value $.01 per share, unlimited number of shares authorized, amount paid in on 49,442,016 shares issued and outstanding				$	494,420
Additional paid-in-capital					924,876,691
Total distributable earnings (loss)					5,971,880
Total net assets (equivalent to $18.84 per share based on 49,442,016 shares outstanding)				$	931,342,991

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2023

INVESTMENT INCOME
Dividend income				$	8,809,608
Non-cash dividend income					767,416
Interest and other income					620,013
Securities lending, net					94,792
Total investment income					10,291,829
EXPENSES
Advisory fees					9,693,864
Investor support service fees					487,541
Shareholder reporting					178,582
Legal fees					172,963
Administration fees					172,589
Custodian fees					156,108
Trustees' fees and expenses					146,676
Auditing fees					144,500
Transfer agent fees					59,830
Other (see Note 2)					264,657
Total expenses					11,477,310
Net investment loss					(1,185,481	)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on
Investments in unaffiliated issuers					90,152,826
Foreign currency transactions					(3,961	)
Net realized gain					90,148,865
Net change in unrealized appreciation (depreciation) on
Investments in unaffiliated issuers					(31,470,435	)
Investments in affiliated issuers					(6,316,755	)
Milestone interests					5,158,628
Foreign currency					6
Net change in unrealized appreciation (depreciation)					(32,628,556	)
Net realized gain and change in unrealized appreciation (depreciation)					57,520,309
Net increase in net assets resulting from operations				$	56,334,828

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

STATEMENTS OF CHANGES IN NET ASSETS

				Year ended September 30, 2023				Year ended September 30, 2022(1)​
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss				($	1,185,481	)		($	3,670,182	)
Net realized gain					90,148,865				66,381,083
Change in net unrealized depreciation					(32,628,556	)			(256,940,274	)
Net increase (decrease) in net assets resulting from operations					56,334,828				(194,229,373	)
DISTRIBUTIONS TO SHAREHOLDERS (See Note 1)					(77,428,664	)			(84,311,515	)
CAPITAL SHARE TRANSACTIONS
Reinvestment of distributions (2,098,290 and 1,918,258 shares, respectively)					35,872,239				38,203,392
Total capital share transactions					35,872,239				38,203,392
Net increase (decrease) in net assets					14,778,403				(240,337,496	)
NET ASSETS
Beginning of year					916,564,588				1,156,902,084
End of year				$	931,342,991			$	916,564,588

(1)  Audited by a different independent registered public accounting firm.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

Financial highlights

				For the years ended September 30,
				2023(1)​				2022				2021				2020				2019
OPERATING PERFORMANCE PER SHARE
Net asset value per share, beginning of year				$	19.36			$	25.47			$	24.04			$	20.33			$	25.62
Net investment loss (2)​					(0.02	)			(0.08	)			(0.14	)			(0.05	)			(0.07	)
Net realized and unrealized gain (loss)					1.11				(4.20	)			3.63				5.50				(3.46	)
Total increase (decrease) from investment operation					1.09				(4.28	)			3.49				5.45				(3.53	)
Distributions to shareholders from
Net investment income					—				(0.11	)			(0.61	)			(0.01	)			(0.17	)
Net realized capital gains					(1.61	)			(1.72	)			(1.45	)			(1.77	)			(1.65	)
Total distributions					(1.61	)			(1.83	)			(2.06	)			(1.78	)			(1.82	)
Increase resulting from shares repurchased (2)​					—				—				—				0.04				0.06
Net asset value per share, end of year				$	18.84			$	19.36			$	25.47			$	24.04			$	20.33
Per share market value, end of year				$	15.55			$	17.28			$	25.57			$	20.62			$	18.34
Total investment return at market value					(1.24	%)			(26.01	%)			34.64	%			23.38	%			(12.88	%)
Total investment return at net asset value					6.80	%			(16.78	%)			15.03	%			29.77	%			(12.74	%)
RATIOS
Net investment loss to average net assets					(0.12	%)			(0.36	%)			(0.54	%)			(0.20	%)			(0.31	%)
Expenses to average net assets					1.18	%			1.19	%			1.11	%			1.10	%			1.12	%
SUPPLEMENTAL DATA
Net assets at end of year (in millions)				$	931			$	917			$	1,157			$	1,055			$	871
Portfolio turnover rate					42.99	%			41.21	%			69.19	%			52.44	%			47.65	%

(1)  Beginning with the year ended September 30, 2023, the Fund's financial statements were audited by KPMG LLP. Previous years were audited by a different independent registered public accounting firm.

(2)  Computed using average shares outstanding.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

Notes to financial statements SEPTEMBER 30, 2023

(1)  Organization and Significant Accounting Policies

abrdn Healthcare Investors (the Fund) is a Massachusetts business trust formed on October 31, 1986 and registered under the Investment Company Act of 1940 as a non-diversified closed-end management investment company. The Fund commenced operations on April 22, 1987. The Fund's investment objective is to seek long-term capital appreciation by investing primarily in securities of healthcare companies. In addition, the Fund seeks to provide regular distribution of realized capital gains. The Fund invests primarily in securities of public and private companies that are believed by the Fund's Investment Adviser, abrdn Inc. (as of October 27, 2023) (prior to October 27, 2023, Tekla Capital Management, LLC) (the Investment Adviser or the Adviser), to have significant potential for above-average growth. The Fund may invest up to 20% of its net assets in securities of foreign issuers, expected to be located primarily in Western Europe, Canada and Japan, and securities of U.S. issuers that are traded primarily in foreign markets.

The preparation of these financial statements requires the use of certain estimates by management in determining the Fund's assets, liabilities, revenues and expenses. Actual results could differ from these estimates and such differences could be material. The following is a summary of significant accounting policies followed by the Fund, which are in conformity with accounting principles generally accepted in the United States of America (GAAP). The Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board Accounting Standards Codification 946. Events or transactions occurring after September 30, 2023, through the date that the financial statements were issued, have been evaluated in the preparation of these financial statements.

The market value of the Fund's investments will move up and down, sometimes rapidly and unpredictably, based upon political, regulatory, market, economic and social conditions, as well as developments that impact specific economic sectors, industries or segments of the market, including conditions that directly relate to the issuers of the Fund's investments such as management performance, financial condition and demand for the issuers' goods and services. The Fund is subject to the risk that geopolitical events will adversely affect global economies and markets. War, terrorism, and related geopolitical events have led, and in the future may lead, to increased short-term market volatility and may have adverse long-term effects on global economies and markets. Likewise, natural and environmental disasters and epidemics or pandemics may be highly disruptive to economies and markets. This means that the Fund may lose money on its investment due to unpredictable drops in a security's value or periods of below-average performance in a given security or in the securities market as a whole.

Investment Valuation

Shares of publicly traded companies listed on national securities exchanges or trading in the over-the-counter market are typically valued at the last sale price as of the close of trading,

generally 4 p.m. Eastern Time. The Board of Trustees of the Fund (the Trustees) has established and approved fair valuation policies and procedures with respect to securities for which quoted prices may not be available or which do not reflect fair value. Convertible, corporate and government bonds are valued using a third-party pricing service. Restricted securities of companies that are publicly traded are typically valued based on the closing market quote on the valuation date adjusted for the impact of the restriction as determined in good faith by the Adviser also using fair valuation policies and procedures approved by the Trustees described below. Non-exchange traded warrants of publicly traded companies are generally valued using the Black-Scholes model, which incorporates both observable and unobservable inputs. Short-term investments with a maturity of 60 days or less are generally valued at amortized cost, which approximates fair value. See also Subsequent Event Note 6.

Convertible preferred shares, warrants or convertible note interests in private companies, milestone interests and other restricted securities, as well as shares of publicly traded companies for which market quotations are not readily available, such as stocks for which trading has been halted or for which there are no current day sales, or which do not reflect fair value, are typically valued in good faith, based upon the recommendations made by the Adviser pursuant to fair valuation policies and procedures approved by the Trustees.

The Adviser has a Valuation Sub-Committee comprised of senior management which reports to the Valuation Committee of the Board at least quarterly. Each fair value determination is based on a consideration of relevant factors, including both observable and unobservable inputs. Observable and unobservable inputs considered may include (i) the existence of any contractual restrictions on the disposition of securities; (ii) information obtained from the company, which may include an analysis of the company's financial statements, products, intended markets or technologies; (iii) the price of the same or similar security negotiated at arm's length in an issuer's completed subsequent round of financing; (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies; or (v) a probability and time value adjusted analysis of contractual terms. Where available and appropriate, multiple valuation methodologies are applied to confirm fair value. Significant unobservable inputs identified by the Adviser are often used in the fair value determination. A significant change in any of these inputs may result in a significant change in the fair value measurement. Significant unobservable inputs identified by the Adviser are often used in the fair value determination. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different from the valuations used at the date of these financial statements.

Milestone Interests

The Fund holds financial instruments which reflect the current value of future milestone payments the Fund may receive as a result of contractual obligations from other parties. The

value of such payments are adjusted to reflect the estimated risk based on the relative uncertainty of both the timing and the achievement of individual milestones. A risk to the Fund is that the milestones will not be achieved and no payment will be received by the Fund. The milestone interests were received as part of the proceeds from the sale of seven private companies. Any payments received are treated as a reduction of the cost basis of the milestone interests with payments received in excess of the cost basis treated as a realized gain. The contractual obligations with respect to the milestone interests provide for payments at various stages of the development of Afferent, Amphivena, Ethismos Research, Impact Biomedicines, Neurovance, Rainer Therapeutics and Therachon's principal product candidate as of the date of the sale.

The following is a summary of the impact of the milestone interests on the financial statements as of and for the year ended September 30, 2023:

Statement of Assets and Liabilities, Milestone interests, at value				$	14,021,704
Statement of Assets and Liabilities, Total distributable earnings				$	6,068,737
Statement of Operations, Change in unrealized appreciation (depreciation) on Milestone interests				$	5,158,628

Options on Securities

An option contract is a contract in which the writer (seller) of the option grants the buyer of the option, upon payment of a premium, the right to purchase from (call option) or sell to (put option) the writer a designated instrument at a specified price within a specified period of time. Certain options, including options on indices, will require cash settlement by the Fund if the option is exercised.

The Fund's obligation under an exchange traded written option or investment in an exchange traded purchased option is valued at the last sale price or in the absence of a sale, the mean between the closing bid and asked prices. Gain or loss is recognized when the option contract expires, is exercised or is closed.

If the Fund writes a covered call option, the Fund foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the Fund writes a put option it accepts the risk of a decline in the market value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. The Fund's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the risk that an illiquid secondary market will limit the Fund's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities or currencies hedged.

All options on securities and securities indices written by the Fund are required to be covered. When the Fund writes a call option, this means that during the life of the option the Fund may own or have the contractual right to acquire the securities subject to the option or may maintain with the Fund's custodian in a segregated account appropriate liquid securities in an amount at least equal to the market value of the securities underlying the option. When the Fund writes a put option, this means that the Fund will maintain with the Fund's custodian in a segregated account appropriate liquid securities in an amount at least equal to the exercise price of the option.

There were no outstanding call options written and put options purchased at September 30, 2023.

Other Assets

Other assets in the Statement of Assets and Liabilities consists of amounts due to the Fund at various times in the future in connection with the sale of investments in one private company.

Investment Transactions and Income

Investment transactions are recorded on a trade date basis. Gains and losses from sales of investments are recorded using the "identified cost" method. Interest income is recorded on the accrual basis, adjusted for amortization of premiums and accretion of discounts. Dividend income is recorded on the ex-dividend date, less any foreign taxes withheld. Upon notification from issuers, some of the dividend income received may be redesignated as a reduction of cost of the related investment if it represents a return of capital. Stock dividends are reflected as non-cash dividend income on the Statement of Operations.

The aggregate cost of purchases and proceeds from sales of investment securities (other than short-term investments) for the year ended September 30, 2023 totaled $405,859,253 and $438,703,858, respectively.

Securities Lending

The securities lending arrangement was terminated on July 18, 2023. Prior to July 18, 2023, the Fund may have lended its securities to approved borrowers to earn additional income. The Fund received cash collateral from the borrower and the initial collateral received by the Fund was required to have a value of at least 102% of the current value of the loaned securities traded on U.S. exchanges, and a value of at least 105% for all other securities. The Fund invested its cash collateral in State Street Institutional U.S. Government Money Market Fund (SAHXX), which is registered with the Securities and Exchange Commission (SEC) as an investment company. SAHXX invests substantially all of its assets in the State Street U.S. Government Money Market Portfolio. The Fund received the benefit of any gains and bear any losses generated by SAHXX with respect to the cash collateral.

The Fund had the right to recall loaned securities on demand. If a borrower failed to return loaned securities when due, then the lending agent was responsible and indemnified the Fund for the lent securities. The lending agent used the collateral received from the borrower to purchase replacement securities of the same issue, type, class and series of the loaned securities. If the value of the collateral was less than the purchase cost of replacement securities, the lending agent was responsible for satisfying the shortfall but only to the extent that the shortfall was not due to any decrease in the value of SAHXX.

Although the risk of loss on securities lent was mitigated by receiving collateral from the borrower and through lending agent indemnification, the Fund could have experienced a delay in recovering securities or could have experienced a lower than expected return if the borrower failed to return the securities on a timely basis. The Fund received compensation for lending its securities by retaining a portion of the return on the investment of the collateral and compensation from fees earned from borrowers of the securities. Securities lending income received by the Fund was net of fees retained by the securities lending agent. Net income received from SAHXX was a component of securities lending income as recorded on the Statement of Operations.

Repurchase Agreements

In managing short-term investments the Fund may from time to time enter into transactions in repurchase agreements. In a repurchase agreement, the Fund's custodian takes possession of the underlying collateral securities from the counterparty, the market value of which is at least equal to the principal, including accrued interest, of the repurchase transaction at all times. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral by the Fund may be delayed. The Fund may enter into repurchase transactions with any broker, dealer, registered clearing agency or bank. Repurchase agreement transactions are not counted for purposes of the limitations imposed on the Fund's investment in debt securities.

Distribution Policy

Pursuant to a Securities and Exchange Commission exemptive order, the Fund may make periodic distributions that include capital gains as frequently as 12 times in any one taxable year in respect of its common shares, and the Fund has implemented a managed distribution policy (the Policy) providing for quarterly distributions at a rate set by the Trustees. Under the current Policy, the Fund intends to make quarterly distributions at a rate of 2% of the Fund's net assets to shareholders of record. The Fund intends to use net realized capital gains when making quarterly distributions, if available, but the Policy would result in a return of capital to shareholders if the amount of the distribution exceeds the Fund's net investment income and realized capital gains. If taxable income and net long-term realized gains exceed the amount required to be distributed under the Policy, the Fund will at a minimum make distributions necessary to comply with the requirements of the Internal Revenue Code. The Policy has been

established by the Trustees and may be changed by them without shareholder approval. The Trustees regularly review the Policy and the frequency and rate of distribution considering the purpose and effect of the Policy, the financial market environment, and the Fund's income, capital gains and capital available to pay distributions.

The Fund's policy is to declare quarterly distributions in stock. The distributions are automatically paid in newly-issued full shares of the Fund unless otherwise instructed by the shareholder. Fractional shares will generally be settled in cash, except for registered shareholders with book entry accounts of the Fund's transfer agent who will have whole and fractional shares added to their accounts. The Fund's transfer agent delivers an election card and instructions to each registered shareholder in connection with each distribution. The number of shares issued will be determined by dividing the dollar amount of the distribution by the lower of net asset value or market price on the pricing date. If a shareholder elects to receive a distribution in cash, rather than in shares, the shareholder's relative ownership in the Fund will be reduced. The shares reinvested will be valued at the lower of the net asset value or market price on the pricing date. Distributions in stock will not relieve shareholders of any federal, state or local income taxes that may be payable on such distributions. Additional distributions, if any, made to satisfy requirements of the Internal Revenue Code may be paid in stock, as described above, or in cash.

Share Repurchase Program

In March 2023, the Trustees approved the renewal of the repurchase program to allow the Fund to repurchase up to 12% of its outstanding shares in the open market for a one-year period ending July 14, 2024. Prior to this renewal, in March 2022, the Trustees approved the renewal of the share repurchase program to allow the Fund to repurchase up to 12% of its outstanding shares for a one-year period ending July 14, 2023. The share repurchase program is intended to enhance shareholder value and potentially reduce the discount between the market price of the Fund's shares and the Fund's net asset value.

During the years ended September 30, 2023 and September 30, 2022, the Fund did not repurchase any shares through the repurchase program.

Federal Taxes

It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute to its shareholders substantially all of its taxable income and its net realized capital gains, if any. Therefore, no Federal income or excise tax provision is required.

As of September 30, 2023, the Fund had no uncertain tax positions that would require financial statement recognition or disclosure. The Fund's federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.

Distributions

The Fund records all distributions to shareholders on the ex-dividend date. Such distributions are determined in conformity with income tax regulations, which may differ from GAAP. These differences include temporary and permanent differences from losses on wash sale transactions, passive foreign investment companies transactions, installment sale adjustments, foreign currency gains and losses and net operating losses. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution under income tax regulations. At September 30, 2023, the Fund reclassified ($192,907) from accumulated net realized loss on investment and $2,438,263 to undistributed net investment income, with a net impact of ($2,245,356) to paid in capital, for current period book/tax differences.

The tax basis components of distributable earnings and the tax cost as of September 30, 2023 were as follows:

Cost of investments for tax purposes				$	923,509,603
Gross tax unrealized appreciation				$	191,398,301
Gross tax unrealized depreciation				($	189,321,362	)
Net tax unrealized appreciation on investments				$	2,076,936
Late-year ordinary capital loss deferrals				($	260,997	)
Undistributed long term capital gains					4,155,941

The Fund has designated the distributions for its taxable years ended September 30, 2023 and 2022 as follows:

Distributions paid from:				2023				2022
Ordinary income (includes short-term capital gain)				$	—			$	5,266,396
Long-term capital gain				$	77,428,664			$	79,045,119

Commitments and Contingencies

Under the Fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

Investor Support Services

Destra Capital Advisors LLC (Destra) provide the Fund investor support services in connection with the ongoing operation of the Fund. The Fund paid Destra a fee in an annual amount equal to 0.05% of the average aggregate daily value of the Fund's Managed Assets pursuant to the investor support services agreement.

(2)  Investment Advisory and Other Affiliated Fees

The Fund entered into an Investment Advisory Agreement (the Advisory Agreement) with the Adviser. Pursuant to the terms of the Advisory Agreement, the Fund paid the Adviser a monthly fee at the rate when annualized of (i) 2.50% of the average net assets for the month of its venture capital and other restricted securities up to 25% of net assets and (ii) for all other net assets, 0.98% of the average net assets up to $250 million, 0.88% of the average net assets for the next $250 million, 0.80% of the average net assets for the next $500 million and 0.70% of the average net assets thereafter. The aggregate fee would not exceed a rate when annualized of 1.36%. For the fiscal year ended September 30, 2023, the Fund paid advisory fees at an effective rate of 0.99%.

The Fund entered into a Services Agreement (the Agreement) with the Adviser. Pursuant to the terms of the Agreement, the Fund reimbursed the Adviser for certain services related to a portion of the payment of salary and provision of benefits to the Fund's Chief Compliance Officer. During the year ended September 30, 2023, these payments amounted to $120,156 and are included in the Other category of expenses in the Statement of Operations, together with insurance and other expenses incurred to unaffiliated entities. Expenses incurred pursuant to the Agreement as well as certain expenses paid for by the Adviser are allocated to the Fund in an equitable fashion as approved by the Trustees or officers of the Fund who are also officers of the Adviser. See also Subsequent Event Note 6.

The Fund pays compensation to Independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The Fund does not pay compensation directly to Trustees or officers of the Fund who are also officers of the Adviser.

(3)  Other Transactions with Affiliates

An affiliate company is a company in which the Fund holds 5% or more of the voting securities. Transactions involving such companies during the year ended September 30, 2023 were as follows:

Affiliated Companies				Beginning Value as of September 30, 2022				Purchases at Cost				Proceeds from Sales				Net Realized Gain/(Loss) on sale of Affiliated Companies				Change in Unrealized Appreciation/ Depreciation				Ending Value as of September 30, 2023*
Arkuda Therapeutics, Inc.				$	5,024,265			$	985,141			$	—			$	—			($	5,472,912	)		$	536,494
Curasen Therapeutics, Inc.					8,414,141				1,172,219				—				—				(11,574	)			9,574,786
Invetx, Inc.					6,886,344				—				—				—				—				6,886,344
Priothera Ltd.					3,397,500				358				—				—				(832,269	)			2,565,589
				$	23,722,250			$	2,157,718			$	—			$	—			($	6,316,755	)		$	19,563,213

Affiliated Companies				Shares as of September 30, 2023*				Principal Amount as of September 30, 2023				Dividend/ Interest Income from Affiliated Companies				Capital Gain Distributions from Affiliated Companies
Arkuda Therapeutics, Inc.					3,398,254			$	—			$	—			$	—
Curasen Therapeutics, Inc.					18,203,119				846,390				8,905				—
Invetx, Inc.					10,276,591				—				—				—
Priothera Ltd.					346,666				—				—				—
					32,224,630			$	846,390			$	8,905			$	—

* Amphivena Therapeutics, Inc. was an affiliate as of September 30, 2022 but not an affiliate as of September 30, 2023.

(4)  Fair Value Measurements

The Fund uses a three-tier hierarchy to prioritize the assumptions, referred to as inputs, used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels. Level 1 includes quoted prices in active markets for identical investments. Level 2 includes prices determined using other significant observable inputs (including quoted prices for similar investments, interest rates, credit risk, etc.). The independent pricing vendor may value bank loans and debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, and/or other methodologies designed to identify the market value for such securities and such securities are considered Level 2 in the fair value hierarchy. Level 3 includes prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). These inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. See also Subsequent Event Note 6.

For the year ended September 30, 2023, the total amount of transfers between Level 3 and Level 1 was $3,137,593. The investment was transferred due to an initial public offering and the value is being supported by the market price.

The following is a summary of the levels used as of September 30, 2023 to value the Fund's investments.

Assets at Value				Level 1				Level 2				Level 3				Total
Convertible Preferreds
Biotechnology				$	—			$	—			$	33,873,762			$	33,873,762
Health Care Equipment & Supplies					—				—				640,378				640,378
Pharmaceuticals					—				—				19,489,580				19,489,580
Non-Convertible Notes
Pharmaceuticals					—				—				846,390				846,390
Common Stocks And Warrants
Biotechnology					529,715,491				168,320				—				529,883,811
Health Care Equipment & Supplies					52,499,682				—				127,080				52,626,762

Assets at Value				Level 1				Level 2				Level 3				Total
Health Care Providers & Services				$	45,143,744			$	—			$	28,422			$	45,172,166
Life Sciences Tools & Services					40,439,033				—				—				40,439,033
Medical Devices And Diagnostics					30,719,437				—				—				30,719,437
Pharmaceuticals					117,968,111				1,725				—				117,969,836
Exchange Traded Funds
Exchange Traded Funds					7,166,683				—				—				7,166,683
Short-term Investments
Repurchase Agreement					—				32,737,000				—				32,737,000
Milestone Interests
Pharmaceuticals					—				—				14,021,704				14,021,704
Biotechnology					—				—				0	*			0	*
Other Assets					—				—				272				272
Total				$	823,652,181			$	32,907,045			$	69,027,588			$	925,586,814

* Represents security valued at zero.

The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.

Investments in Securities				Balance as of September 30, 2022				Net realized gain (loss) and change in unrealized appreciation (depreciation)				Cost of purchases and conversions				Proceeds from sales and conversions				Net transfers into (out of) Level 3				Balance as of September 30, 2023
Convertible Preferreds
Biotechnology				$	43,293,435			($	10,275,493	)		$	3,993,413				—			($	3,137,593	)		$	33,873,762
Health Care Equipment & Supplies					1,423,015				(783,389	)			752				—				—				640,378
Pharmaceuticals					25,114,132				(7,026,772	)			4,802,216				(3,399,996	)			—				19,489,580
Convertible Notes
Biotechnology					0	*			—				—				—				—				—
Non-Convertible Notes
Pharmaceuticals					—				(321	)			846,711				—				—				846,390
Common Stocks and Warrants
Health Care Equipment & Supplies					618,886				(491,806	)			—				—				—				127,080
Health Care Providers & Services					56,533				20,583				—				(48,694	)			—				28,422
Pharmaceuticals					—				(6,383	)			6,383				—				—				0	*

Investments in Securities				Balance as of September 30, 2022				Net realized gain (loss) and change in unrealized appreciation (depreciation)				Cost of purchases and conversions				Proceeds from sales and conversions				Net transfers into (out of) Level 3				Balance as of September 30, 2023
Milestone Interests
Biotechnology				$	1,529,091			($	1,529,091	)		$	—			$	—			$	—			$	—
Health Care Equipment & Supplies					1,090				(948	)			—				(142	)			—				—
Pharmaceuticals					7,340,318				6,681,386				—				—				—				14,021,704
Other Assets					272				—				—				—				—				272
Total				$	79,376,772			($	13,412,234	)		$	9,649,475			($	3,448,832	)		($	3,137,593	)		$	69,027,588
Net change in unrealized appreciation (depreciation) from investments still held as of September 30, 2023																								($	12,794,884	)

* Represents security valued at zero.

The following is a quantitative disclosure about significant unobservable inputs used in the valuation of the fair value of Level 3 assets.

Fair Value at September 30, 2023

Valuation Technique

Unobservable Input

Range (Weighted Average)

Common Stocks

$

127,080

Market approach

Discount for lack of marketability

75.00% (75.00%)

Revenue Allocation

10.00%(10.00%)

28,422

Probability adjusted value

Probability of events Timing of events

50.00%-100.00% (50.00%) 0.50-2.50 (0.50) years

Convertible Preferreds and Warrants

54,850,110

Transaction Price

(a)

N/A

Milestones Interests

14,021,704

Probability adjusted value

Probability of events Timing of events

0.00%-100.00% (47.44%) 0.00-12.25 (3.15) years

Other Assets

272

Probability adjusted value

Probability of events Timing of events

5.00% (5.00%) 7.75 (7.75) years

$

69,027,588

(a) The valuation technique used as a basis to approximate fair value of these investments is based on a transaction price or subsequent financing rounds.

(5)  Private Companies and Other Restricted Securities

The Fund may invest in private companies and other restricted securities if these securities currently comprise 40% or less of net assets. The value of these securities represented 7% of the Fund's net assets at September 30, 2023.

At September 30, 2023, the Fund had a commitment of $2,491,466 relating to additional investments in three private companies.