SEC Form N-CSRS filed by abrdn Healthcare Opportunities Fund Shares of Beneficial Inter
$THQ
Finance Companies
Finance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
| Investment Company Act file number: | 811-22955 |
| Exact name of registrant as specified in charter: | abrdn Healthcare Opportunities Fund |
| Address of principal executive offices: | 1900 Market Street, Suite 200 |
| Philadelphia, PA 19103 | |
| Name and address of agent for service: | Sharon Ferrari |
| abrdn Inc. | |
| 1900 Market Street Suite 200 | |
| Philadelphia, PA 19103 | |
| Registrant’s telephone number, including area code: | 1-800-522-5465 |
| Date of fiscal year end: | September 30 |
| Date of reporting period: | March 31, 2024 |
Item 1. Reports to Stockholders.
abrdn Healthcare Opportunities Fund (THQ)
(formerly, Tekla Healthcare Opportunities Fund)
(formerly, Tekla Healthcare Opportunities Fund)
Semi-Annual Report
March 31, 2024
abrdn.com
Distribution Plan (unaudited)
Distribution Disclosure
Classification (unaudited)
abrdn Healthcare Opportunities Fund
Letter to Shareholders (unaudited)
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| 1 | Past performance is no guarantee of future results. Investment returns and principal value will fluctuate and shares, when sold, may be worth more or less than original cost. Current performance may be lower or higher than the performance quoted. NAV return data include investment management fees, custodial charges and administrative fees (such as Trustee and legal fees) and assumes the reinvestment of all distributions. |
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| 2 | Assuming the reinvestment of dividends and distributions. |
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| 3 | The Fund’s total return is based on the reported NAV for each financial reporting period end and may differ from what is reported on the Financial Highlights due to financial statement rounding or adjustments. |
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| 4 | The S&P Composite 1500® Health Care Index is an unmanaged index that comprises those companies included in the S&P Composite 1500 that are classified as members of the GICS® Health Care sector. S&P 500® Health Care Corporate Bond Index, a subindex of the S&P 500 Bond Index, seeks to measure the performance of the U.S. corporate debt issued by constituents in the health care sector of the S&P 500. The S&P 500 Bond Index is designed to be a corporate-bond counterpart to the S&P 500. The S&P Composite 1500 Health Care REITs Index comprises those companies included in the S&P Composite 1500 that are classified as members of the GICS Health Care REITS industry. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
| abrdn Healthcare Opportunities Fund | 1 |
Letter to Shareholders (unaudited) (continued)
| 2 | abrdn Healthcare Opportunities Fund |
Letter to Shareholders (unaudited) (concluded)
information. In addition, you can receive
electronic versions of important Fund documents, including annual reports, semi-annual reports, prospectuses and proxy statements. Sign up today at
https://www.abrdn.com/en-us/cefinvestorcenter/contact-us/preferences
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,
/s/ Christian Pittard
Christian Pittard
President
Christian Pittard
President
{foots1}
All amounts are U.S. Dollars
unless otherwise stated.
| abrdn Healthcare Opportunities Fund | 3 |
Letter from Daniel Omstead, Founder of Tekla Capital
Management LLC
| 4 | abrdn Healthcare Opportunities Fund |
Total Investment Return (unaudited)
The following table summarizes
the average annual Fund performance compared to the Fund’s primary benchmark for the six-month (not annualized), 1-year, 3-year, 5-year and 10-year periods ended March 31, 2024.
| 6 Months | 1 Year | 3 Years | 5 Years | Since Inception | |
| Net Asset Value (NAV) | 15.78% | 14.97% | 6.78% | 10.18% | 9.46% |
| Market Price | 23.66% | 16.06% | 4.34% | 10.19% | 7.73% |
| 80% S&P Composite 1500 Healthcare Index, 15% S&P 500 HealthCare Corporate Bond Index, 5% S&P Composite 1500 Health Care REITS Index | 14.20% | 13.46% | 7.21% | 9.94% | 10.04% |
Performance of a $10,000
Investment (as of March 31, 2024)
This graph shows the change in
value of a hypothetical investment of $10,000 in the Fund for the periods indicated. For comparison, the same investment is shown in the indicated index.
Returns represent past
performance. Total investment return at NAV is based on changes in the NAV of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program
sponsored by the Fund’s transfer agent. All return data at NAV includes fees charged to the Fund, which are listed in the Fund’s Statement of Operations under “Expenses.” Total investment
return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE during the period and assumes reinvestment of dividends and distributions, if any, at market prices
pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. The Fund’s total investment return is based on the reported NAV as of the financial reporting period end date of March
31, 2024. Because the Fund’s shares trade in the stock market based on investor demand, the Fund may trade at a price higher or lower than its NAV. Therefore, returns are calculated based on both market price
and NAV. Past performance is no guarantee of future results. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received
from the Fund. The current performance of the Fund may be lower or higher than the figures shown. The Fund’s yield, return, market price and NAV will fluctuate. Performance information current to the most recent
month-end is available at www.abrdnthq.com or by calling 800-522-5465.
The annualized net operating
expense ratio, excluding fee waivers based on the six-month period ended March 31, 2024 was 3.18%. The annualized net operating expense ratio net of fee waivers based on the six-month period ended March 31, 2024 was
3.17%. The annualized net operating expense ratio, net of fee waivers and excluding interest expense based on the six-month period ended March 31, 2024 was 1.44%.
| abrdn Healthcare Opportunities Fund | 5 |
Portfolio Composition (as a percentage of net assets) (unaudited)
As of March 31, 2024
| Asset Allocation | |
| Common Stocks | 102.0% |
| Non-Convertible Notes | 18.1% |
| Convertible Preferred Stocks | 0.9% |
| Milestone Interest | 0.0% |
| Short-Term Investments | 3.7% |
| Call Options Written | (0.1%) |
| Liabilities in Excess of Other Assets | (24.6%) |
| 100.0% |
| Industries | |
| Pharmaceuticals | 36.6% |
| Health Care Providers & Services | 27.7% |
| Health Care Equipment & Supplies | 21.7% |
| Biotechnology | 20.5% |
| Life Sciences Tools & Services | 10.8% |
| Health Care REITs | 3.2% |
| Health Care Technology | 0.3% |
| Healthcare Service | 0.2% |
| Short-Term Investments | 3.7% |
| Liabilities in Excess of Other Assets | (24.7%) |
| 100.0% |
| Top Ten Holdings | |
| Eli Lilly & Co. | 11.3% |
| UnitedHealth Group, Inc. | 8.7% |
| Merck & Co., Inc. | 6.8% |
| Johnson & Johnson | 6.5% |
| AbbVie, Inc. | 6.0% |
| Thermo Fisher Scientific, Inc. | 4.5% |
| Abbott Laboratories | 3.2% |
| Elevance Health, Inc. | 3.1% |
| Regeneron Pharmaceuticals, Inc. | 2.5% |
| Boston Scientific Corp. | 2.5% |
| 6 | abrdn Healthcare Opportunities Fund |
Portfolio of Investments (unaudited)
As of March 31, 2024
| abrdn Healthcare Opportunities Fund | 7 |
Portfolio of Investments (unaudited) (continued)
As of March 31, 2024
| 8 | abrdn Healthcare Opportunities Fund |
Portfolio of Investments (unaudited) (concluded)
As of March 31, 2024
| Number of Contracts (100 shares each) | Notional Amount ($) | Value ($) | |
| Option Contracts Written—(0.1)% | |||
| Call Options Written—(0.1)% | |||
| Abbott Laboratories Apr24 113 Call | 257 | (2,904,100) | (71,446) |
| AbbVie, Inc. Apr24 182.5 Call | 159 | (2,901,750) | (36,888) |
| Acadia Healthcare Co., Inc. Apr24 80 Call | 223 | (1,784,000) | (52,405) |
| Amgen, Inc. Apr24 285 Call | 82 | (2,337,000) | (44,936) |
| Argenx SE Apr24 420 Call | 81 | (3,402,000) | (46,575) |
| AstraZeneca PLC Apr24 68 Call | 342 | (2,325,600) | (54,720) |
| Baxter International, Inc. Apr24 43 Call | 527 | (2,266,100) | (52,700) |
| Biogen, Inc. Apr24 225 Call | 186 | (4,185,000) | (31,620) |
| Cytokinetics, Inc. Apr24 75 Call | 302 | (2,265,000) | (72,480) |
| Edwards Lifesciences Corp. Apr24 97.5 Call | 180 | (1,755,000) | (25,200) |
| Elevance Health, Inc. Apr24 530 Call | 44 | (2,332,000) | (30,360) |
| Eli Lilly & Co. Apr24 800 Call | 81 | (6,480,000) | (93,150) |
| Gilead Sciences, Inc. Apr24 75 Call | 312 | (2,340,000) | (20,904) |
| HCA Healthcare, Inc. Apr24 340 Call | 86 | (2,924,000) | (29,670) |
| Humana, Inc. Apr24 370 Call | 122 | (4,514,000) | (40,504) |
| Illumina, Inc. Apr24 140 Call | 81 | (1,134,000) | (40,500) |
| Insulet Corp. Apr24 175 Call | 65 | (1,137,500) | (35,360) |
| Johnson & Johnson Apr24 160 Call | 106 | (1,696,000) | (19,610) |
| Medtronic PLC Apr24 85 Call | 205 | (1,742,500) | (62,525) |
| Molina Healthcare, Inc. Apr24 430 Call | 55 | (2,365,000) | (18,700) |
| Thermo Fisher Scientific, Inc. Apr24 587.5 Call | 49 | (2,878,750) | (15,803) |
| UnitedHealth Group, Inc. Apr24 502.5 Call | 58 | (2,914,500) | (49,300) |
| Vertex Pharmaceuticals, Inc. Apr24 430 Call | 132 | (5,676,000) | (63,360) |
| Zimmer Biomet Holdings, Inc. Apr24 130 Call | 261 | (3,393,000) | (93,960) |
| Zoetis, Inc. Apr24 170 Call | 135 | (2,295,000) | (54,000) |
| Total Call Options Written (Premiums received $(870,462)) | (1,156,676) | ||
See Notes to Financial
Statements.
| abrdn Healthcare Opportunities Fund | 9 |
Statement of Assets and Liabilities (unaudited)
As of March 31, 2024
| Assets | |
| Investments, at value (cost $944,764,647) | $ 1,116,299,864 |
| Short-term investments, at value (cost $33,547,020) | 33,547,020 |
| Milestone interests, at value(cost $277,782) | — |
| Cash | 61,224 |
| Receivable for investments sold | 17,714 |
| Interest and dividends receivable | 2,403,603 |
| Prepaid expenses in connection with bank loan | 11,065 |
| Prepaid expenses | 188,015 |
| Total assets | 1,152,528,505 |
| Liabilities | |
| Bank loan payable | 225,000,000 |
| Interest payable on line of credit | 2,695,992 |
| Written Options, at value(premiums received $870,462) | 1,156,676 |
| Investment advisory fees payable (Note 3) | 918,671 |
| Administration fees payable (Note 3) | 84,458 |
| Investor relations fees payable (Note 3) | 12,686 |
| Trustee fees payable | 12,003 |
| Other accrued expenses | 204,377 |
| Total liabilities | 230,084,863 |
| Commitments and Contingencies (Notes 7 & 10) | |
| Net Assets | $922,443,642 |
| Composition of Net Assets | |
| Common stock (par value $0.010 per share) (Note 5) | $ 413,561 |
| Paid-in capital in excess of par | 791,957,998 |
| Distributable earnings | 130,072,083 |
| Net Assets | $922,443,642 |
| Net asset value per share based on 41,356,058 shares issued and outstanding | $22.30 |
Amounts listed as
“–” are $0 or round to $0.
See Notes to Financial
Statements.
| 10 | abrdn Healthcare Opportunities Fund |
Statement of Operations (unaudited)
For the Six-Months Ended March 31, 2024
| Net Investment Income | |
| Investment Income: | |
| Dividends (net of foreign withholding taxes of $198) | $ 7,679,724 |
| Interest and amortization of discount and premium and other income | 4,466,632 |
| Total investment income | 12,146,356 |
| Expenses: | |
| Investment advisory fee (Note 3) | 5,430,561 |
| Investor relations fees and expenses (Note 3) | 236,005 |
| Administration fee (Note 3) | 107,128 |
| Legal fees and expenses | 90,131 |
| Custodian’s fees and expenses | 86,643 |
| Reports to shareholders and proxy solicitation | 81,562 |
| Trustees' fees and expenses | 76,080 |
| Independent auditors’ fees and tax expenses | 58,000 |
| Transfer agent’s fees and expenses | 18,101 |
| Insurance expense | 16,740 |
| Miscellaneous | 111,631 |
| Total operating expenses, excluding interest expense | 6,312,582 |
| Interest expense | 7,516,983 |
| Total operating expenses before reimbursed/waived expenses | 13,829,565 |
| Expenses waived by investment adviser (Note 3) | (45,503) |
| Net expenses | 13,784,062 |
| Net Investment Loss | (1,637,706) |
| Net Realized/Unrealized Gain/(Loss) from Investments and Foreign Currency Related Transactions: | |
| Net realized gain/(loss) from: | |
| Investments | (1,328,885) |
| Written options | 3,402,553 |
| 2,073,668 | |
| Net change in unrealized appreciation/(depreciation) on: | |
| Investments | 123,284,043 |
| Written options | (300,774) |
| 122,983,269 | |
| Net realized and unrealized gain from investments and written options | 125,056,937 |
| Change in Net Assets Resulting from Operations | $123,419,231 |
See Notes to Financial
Statements.
| abrdn Healthcare Opportunities Fund | 11 |
Statements of Changes in Net Assets
| For the Six-Month Period Ended March 31, 2024 (unaudited) | For the Year Ended September 30, 2023 | |
| Increase/(Decrease) in Net Assets: | ||
| Operations: | ||
| Net investment loss | $(1,637,706) | $(2,479,365) |
| Net realized gain from investments and written options | 2,073,668 | 56,915,790 |
| Net change in unrealized appreciation on investments and written options | 122,983,269 | (1,650,171) |
| Net increase in net assets resulting from operations | 123,419,231 | 52,786,254 |
| Distributions to Shareholders From: | ||
| Distributable earnings | (33,498,436) | (55,830,678) |
| Net decrease in net assets from distributions | (33,498,436) | (55,830,678) |
| Change in net assets | 89,920,795 | (3,044,424) |
| Net Assets: | ||
| Beginning of period | 832,522,847 | 835,567,271 |
| End of period | $922,443,642 | $832,522,847 |
Amounts listed as
“–” are $0 or round to $0.
See Notes to Financial
Statements.
| 12 | abrdn Healthcare Opportunities Fund |
Statement of Cash Flows (unaudited)
For the Six-Months Ended March 31, 2024
| Cash flows from operating activities: | |
| Net increase/(decrease) in net assets resulting from operations | $ 123,419,231 |
| Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: | |
| Investments purchased | (151,396,739) |
| Investments sold and principal repayments | 176,683,788 |
| Proceeds from option contracts written | 3,822,520 |
| Decrease in short-term investments, excluding foreign government | 6,622,980 |
| Net amortization/accretion of premium/(discount) | (5,827) |
| Increase in interest, dividends and other receivables | (247,151) |
| Increase in prepaid expenses | (118,280) |
| Decrease in interest payable on revolving credit facility | (13,413) |
| Decrease in accrued investment advisory fees payable | (13,954) |
| Decrease in other accrued expenses | (36,866) |
| Net change in unrealized appreciation of investments and options | (122,983,269) |
| Net realized gain on investments transactions and options | (2,073,668) |
| Net cash provided by operating activities | 33,659,352 |
| Cash flows from financing activities: | |
| Distributions paid to shareholders | (33,598,666) |
| Net cash used in financing activities | (33,598,666) |
| Net change in cash | 60,686 |
| Unrestricted and restricted cash and foreign currency, beginning of period | 538 |
| Unrestricted and restricted cash and foreign currency, end of period | $61,224 |
| Supplemental disclosure of cash flow information: | |
| Cash paid for interest and fees on borrowing | $7,530,396 |
See Notes to Financial
Statements.
| abrdn Healthcare Opportunities Fund | 13 |
Financial Highlights
| For the Six-Month Period Ended March 31, | For the Fiscal Years Ended September 30, | |||||
| 2024 (unaudited)(a) | 2023 (b) | 2022 | 2021 | 2020 | 2019 | |
| PER SHARE OPERATING PERFORMANCE(c): | ||||||
| Net asset value per common share, beginning of period | $20.13 | $20.20 | $23.64 | $20.28 | $18.80 | $21.11 |
| Net investment income/(loss) | (0.04) | (0.06) | 0.01 | 0.16 | 0.13 | 0.07 |
| Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions | 3.02 | 1.34 | (2.10) | 4.55 | 2.69 | (1.06) |
| Total from investment operations applicable to common shareholders | 2.98 | 1.28 | (2.09) | 4.71 | 2.82 | (0.99) |
| Distributions to common shareholders from: | ||||||
| Net investment income | (0.81) | (0.18) | (0.04) | (0.91) | (0.71) | (0.15) |
| Net realized gains | – | (1.17) | (1.31) | (0.44) | (0.64) | (1.20) |
| Total distributions | (0.81) | (1.35) | (1.35) | (1.35) | (1.35) | (1.35) |
| Effect of Fund shares repurchased | – | – | – | – | 0.01 | 0.03 |
| Net asset value per common share, end of period | $22.30 | $20.13 | $20.20 | $23.64 | $20.28 | $18.80 |
| Market price, end of period | $20.10 | $16.98 | $18.12 | $22.65 | $18.09 | $17.46 |
| Total Investment Return Based on(d): | ||||||
| Market price | 23.66% | 0.56% | (14.84%) | 33.28% | 11.71% | 0.63% |
| Net asset value | 15.72%(e) | 6.94% | (9.08%) | 24.14% | 16.30% | (3.81%) |
| Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data: | ||||||
| Net assets applicable to common shareholders, end of period (000 omitted) | $922,444 | $832,523 | $835,567 | $977,364 | $838,429 | $779,686 |
| Average net assets applicable to common shareholders (000 omitted) | $869,241 | $885,296 | $947,190 | $942,855 | $824,606 | $800,189 |
| Net operating expenses, net of fee waivers | 3.17%(f) | 2.95% | 1.87% | 1.66% | 2.05% | 2.42% |
| Net operating expenses, excluding fee waivers | 3.18%(f) | – | – | – | – | – |
| Net operating expenses, net of fee waivers and excluding interest expense | 1.44%(f) | 1.47% | 1.46% | 1.44% | 1.48% | 1.50% |
| Net Investment income (loss) | (0.38%)(f) | (0.28%) | 0.05% | 0.69% | 0.63% | 0.39% |
| Portfolio turnover | 14%(g) | 44% | 49% | 58% | 59% | 56% |
| Senior securities (loan facility) outstanding (000 omitted) | $225,000 | $225,000 | $225,000 | $225,000 | $225,000 | $225,000 |
| Asset coverage ratio on revolving credit facility at period end | 510% | 470% | 471% | 534% | 473% | 447% |
| Asset coverage per $1,000 on revolving credit facility at period end | $5,100 | $4,700 | $4,714 | $5,344 | $4,726 | $4,465 |
| (a) | Effective October 27, 2023, abrdn Inc. became the investment adviser of the Fund. Prior to October 27, 2023, the Fund was managed by Tekla Capital Management, LLC.See Notes to Financial Statements. |
| 14 | abrdn Healthcare Opportunities Fund |
Financial Highlights (concluded)
| (b) | 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. |
| (c) | Based on average shares outstanding. |
| (d) | Total investment return based on market value is calculated assuming that shares of the Fund’s common stock were purchased at the closing market price as of the beginning of the period, dividends, capital gains and other distributions were reinvested as provided for in the Fund’s dividend reinvestment plan and then sold at the closing market price per share on the last day of the period. The computation does not reflect any sales commission investors may incur in purchasing or selling shares of the Fund. The total investment return based on the net asset value is similarly computed except that the Fund’s net asset value is substituted for the closing market value. |
| (e) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
| (f) | Annualized. |
| (g) | Not annualized. |
Amounts listed as
“–” are $0 or round to $0.
See Notes to Financial
Statements.
| abrdn Healthcare Opportunities Fund | 15 |
Notes to Financial Statements (unaudited)
March 31, 2024
March 31, 2024
| 16 | abrdn Healthcare Opportunities Fund |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| abrdn Healthcare Opportunities Fund | 17 |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
A summary of standard
inputs is listed below:
| Security Type | Standard Inputs |
| Foreign equities utilizing a fair value factor | Depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security. |
The following is a
summary of the inputs used as of March 31, 2024 in valuing the Fund's investments and other financial instruments at fair value. The inputs or methodology used for valuing securities are not necessarily an indication
of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:
| Investments, at Value | Level 1 – Quoted Prices | Level 2 – Other Significant Observable Inputs | Level 3 – Significant Unobservable Inputs | Total |
| Assets | ||||
| Investments in Securities | ||||
| Common Stocks | $941,018,993 | $– | $– | $941,018,993 |
| Non-Convertible Notes | – | 166,730,865 | – | 166,730,865 |
| Convertible Preferred Stocks | – | – | 8,550,006 | 8,550,006 |
| Milestone Interest | – | – | – | – |
| Short-Term Investment | 33,547,020 | – | – | 33,547,020 |
| Total Investments | $974,566,013 | $166,730,865 | $8,550,006 | $1,149,846,884 |
| Total Investment Assets | $974,566,013 | $166,730,865 | $8,550,006 | $1,149,846,884 |
| Liabilities | ||||
| Other Financial Instruments | ||||
| Written Options | $(1,156,676) | $– | $– | $(1,156,676) |
| Total Investment Liabilities | $(1,156,676) | $– | $– | $(1,156,676) |
| 18 | abrdn Healthcare Opportunities Fund |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| Rollforward of Level 3 Fair Value Measurements For the Six Months Ended March 31, 2024 | |||||
| Investments in Securities | Balance as of September 30, 2023 | Net Realized Gain (Loss) and Change in Unrealized Appreciation (Depreciation) | Net Purchases and conversions | Balance as of March 31, 2024 | Net Change in Unrealized Appreciation (Depreciation) from Investments Held at March 31, 2024 |
| Convertible Preferred Stocks | |||||
| Biotechnology | $1,649,995 | $(708) | $1,650,703 | $3,299,990 | $(708) |
| Health Care Equipment & Supplies | 288,357 | (288,338) | 0 | 19 | (288,338) |
| Pharmaceuticals | 3,499,997 | 0 | 1,750,000 | 5,249,997 | 0 |
| Milestone Interest | |||||
| Biotechnology | 0 | 0 | 0 | 0 | 0 |
| Total | $5,438,349 | $(289,046) | $3,400,703 | $8,550,006 | $(289,046) |
| Description | Fair Value at 03/31/24 | Valuation Technique (s) | Unobservable Inputs | Range | Weighted Average | Relationship Between FairValue and Input; if input value increases then Fair Value: |
| Convertible Preferred Stocks | $8,550,006 | Transaction Price | (a) | N/A | N/A | Increase |
| Milestone Interests | $0 | Probability adjusted value | Probability of events Timing of events | 0.00% 1.25-12.25 years | 0.00% 6.75 years | Increase Decrease |
| $8,550,006 |
Amounts listed as
“–” are $0 or round to $0.
| (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. |
b. Restricted
Securities:
| abrdn Healthcare Opportunities Fund | 19 |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| 20 | abrdn Healthcare Opportunities Fund |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
Summary of Derivative
Instruments:
The Fund may use
derivatives for various purposes as noted above. The following is a summary of the fair value of derivative instruments, not accounted for as hedging instruments, as of March 31, 2024:
| Risk Exposure Category | |||||||
| Interest Rate Contracts | Foreign Currency Contracts | Credit Contracts | Equity Contracts | Commodity Contracts | Other | Total | |
| Liabilities: | |||||||
| Unrealized depreciation on: | |||||||
| Written Options, market value | $– | $– | $– | $1,156,675 | $– | $– | $1,156,675 |
| Total | $– | $– | $– | $1,156,675 | $– | $– | $1,156,675 |
Amounts listed as
“–” are $0 or round to $0.
The effect of derivative
instruments on the Statement of Operations for the six-month period ended March 31, 2024:
| Risk Exposure Category | ||||||
| Interest Rate Contracts | Foreign Currency Contracts | Credit Contracts | Equity Contracts | Commodity Contracts | Total | |
| Realized Gain/(Loss) on Derivatives Recognized as a Result of Operations: | ||||||
| Net realized gain/(loss) on: | ||||||
| Written Options | $– | $– | $– | $3,402,553 | $– | $3,402,553 |
| Total | $– | $– | $– | $3,402,553 | $– | $3,402,553 |
| Net Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized as a Result of Operations: | ||||||
| Net change in unrealized appreciation/(depreciation) of: | ||||||
| Written Options | $– | $– | $– | $(300,774) | $– | $(300,774) |
| Total | $– | $– | $– | $(300,774) | $– | $(300,774) |
Amounts listed as
“–” are $0 or round to $0.
| abrdn Healthcare Opportunities Fund | 21 |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| 22 | abrdn Healthcare Opportunities Fund |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| abrdn Healthcare Opportunities Fund | 23 |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
7. Private Companies and Other
Restricted Securities
The Fund may invest in private
companies and other restricted securities if these securities would currently comprise 10% or less of Managed Assets. The value of these securities represented 15.3% of the Fund’s Managed Assets at March 31,
2024.
At March 31, 2024, the Fund had
no commitment.
The following table details the
acquisition date, cost, carrying value per unit, and value of the Fund’s private companies and other restricted securities at March 31, 2024. The Fund on its own does not have the right to demand that such
securities be registered.
| Security | Acquisition Date | Cost | Carrying Value per Unit | Value |
| Abcuro, Inc., Series B — Convertible Preferred Stock | 08/10/23, 12/19/23 | $3,300,698 | $5.49 | $3,299,990 |
| Endeavor Biomedicines, Inc., Series B — Convertible Preferred Stock | 01/21/22 | 3,504,343 | 4.71 | 3,499,997 |
| Engrail Therapeutics, Inc., Series B — Convertible Preferred Stock | 03/14/24 | 1,750,000 | 1.06 | 1,750,000 |
| IO Light Holdinigs, Inc., Series A2 — Convertible Preferred Stock | 04/30/20,05/17/21, 09/15/21* | 628,386 | 1.52 | 19 |
| Rainier Therapeutics, Inc. Milestone Interest | 09/28/21 | 277,782 | 0.00 | 0 |
| $9,461,209 | $8,550,006 |
| * | Interest received as part of a corporate action for a previously owned security. |
8. Revolving Credit
Facility
| 24 | abrdn Healthcare Opportunities Fund |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| abrdn Healthcare Opportunities Fund | 25 |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| 26 | abrdn Healthcare Opportunities Fund |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| abrdn Healthcare Opportunities Fund | 27 |
Notes to Financial Statements (unaudited) (continued)
March 31, 2024
March 31, 2024
| 28 | abrdn Healthcare Opportunities Fund |
Notes to Financial Statements (unaudited) (concluded)
March 31, 2024
March 31, 2024
11. Tax
Information
The U.S. federal
income tax basis of the Fund's investments (including derivatives, if applicable) and the net unrealized appreciation as of March 31, 2024, were as follows:
| Tax Cost of Securities | Unrealized Appreciation | Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) |
| $987,778,955 | $259,211,508 | $(96,273,117) | $162,938,391 |
| abrdn Healthcare Opportunities Fund | 29 |
Supplemental Information (Unaudited)
Board Consideration of the new
Advisory Agreement
At an in-person meeting held
on June 26, 2023, the Trustees then-currently serving as Trustees of the Fund (the "Current Trustees"), including all of the Trustees who are not "interested persons" (the "Independent Trustees") as defined in the
1940 Act, voting separately, unanimously determined, with respect to the Fund, that the terms of the new investment advisory agreement (each a "New Advisory Agreement") are fair and reasonable and approved the
New Advisory Agreement as being in the best interests of such Fund and its shareholders. In making its determination, the Board considered materials that were specifically prepared by abrdn Inc. and Tekla Capital
Management, LLC ("Tekla") regarding the June 20, 2023, Tekla purchase agreement (the "Purchase Agreement") with abrdn pursuant to which Tekla has agreed to sell certain assets to abrdn relating to Tekla's advisory
business for the Fund (the "Asset Transfer") and the New Advisory Agreement, including information with respect to abrdn Inc. that was provided in response to a number of questions and supplemental information
requests from counsel to the Independent Trustees and the Fund. In addition, prior to the June 26, 2023 Board meeting, the Trustees met with representatives of abrdn and Tekla and with the four then-nominated Trustees
to serve as Trustees of the Fund (the "New Trustees"). The Independent Trustees of the Fund also met separately with their independent counsel to consider and discuss the New Advisory Agreement with respect to the
Fund. The Trustees considered that the key members of the investment team currently managing the Fund at Tekla had entered into employment agreements with abrdn Inc. prior to Tekla and abrdn Inc. signing the Purchase
Agreement and that substantially all of members of the investment team currently managing the Fund at Tekla are expected join abrdn Inc. as full-time employees and continue to manage the Fund under the New Advisory
Agreement. In their deliberations, the Independent Trustees had the opportunity to meet privately on several occasions without representatives of abrdn or Tekla present and were represented throughout the process by
counsel to the Independent Trustees and the Funds.
In approving the New Advisory
Agreement, the Board considered, among other things, the nature, extent, and quality of the services to be provided by abrdn Inc., the investment performance of the Fund and abrdn Inc., the costs of services to be
provided by abrdn Inc. and profits expected to be realized by abrdn Inc. with respect to the Fund. The Trustees also considered whether the proposed fee levels reflect any economies of scale for the benefit of Fund
shareholders and the extent to which economies of scale would be realized as the Fund grows. The Board also evaluated the financial strength of abrdn Inc. and abrdn Inc.'s ability to manage the Fund, noting that
substantially all of the members of the investment team currently managing the Fund at Tekla are expected to continue to do so under the New Advisory Agreement. Counsel to the Independent Trustees and the Fund
provided the Independent Trustees with a memorandum regarding the statutory and regulatory requirements for approval and disclosure of investment advisory agreements. With respect to the Fund, the Board, including the
Independent Trustees, evaluated all of the foregoing and, considering all factors together, determined in the exercise of its business judgment that the approval of the New Advisory Agreement is in the best interests
of the Fund and its shareholders. The following provides more detail on certain factors considered by the Trustees and the Board's conclusions with respect to each such factor.
Nature, extent and quality of the services. The Trustees received and considered various information regarding the nature, extent and quality of the advisory services to
be provided by abrdn Inc. to the Fund under the New Advisory Agreement. abrdn Inc. provided detailed responses to requests submitted by counsel to the Independent Trustees and the Fund. Prior to the June 26, 2023
meeting, the Trustees also received an in-person presentation from senior personnel across various departments of abrdn. The Trustees considered the information provided with respect to the resources that would be
dedicated to the Fund and further considered that substantially all of the members of the investment team currently managing the Fund are expected to continue to do so under the New Advisory Agreement. Further, the
Trustees noted that abrdn Inc. has advised the Trustees that in transitioning the management of the Fund, abrdn Inc. would be focused on minimizing any disruption to the Fund and its shareholders. The Trustees
considered that abrdn Inc. is a very large asset manager and has extensive experience in managing closed-end funds. The Trustees noted that closed-end funds are an important element of the abrdn client base in the
U.S. and globally and further noted that abrdn Inc. has substantial experience in assimilating closed-end funds into its family of funds.
The Trustees considered that
as of December 31, 2022, abrdn had approximately $452 billion in assets under management and that abrdn Inc. manage 13 U.S. closed-end funds and 25 non-U.S. closed-end funds, totaling $29.8 billion in assets as of
January 24, 2023. They also considered that while abrdn Inc. does not currently manage any healthcare or biotech strategies, substantially all of the members of the investment team currently managing the Fund at Tekla
are expected to join abrdn Inc. as full-time employees and continue to manage the Fund under the New Advisory Agreement and abrdn Inc. had expressed its commitment to integrating this team into its organization and to
expanding its expertise in the healthcare and biotech sectors more generally. The Trustees further considered that abrdn Inc. is committed to its asset management business and, in particular, its closed-end fund
platform, has knowledge of the closed-end fund marketplace and has dedicated closed-end fund investor services professionals.
The Trustees noted abrdn
Inc.'s and Tekla's representation that, if abrdn Inc. were approved as the Fund's investment adviser, there would be no expected diminution in the nature, quality and extent of services provided to the Fund and its
shareholders, including administrative, regulatory and compliance services. The Trustees further considered certain differences in the valuation policies of abrdn Inc. and Tekla.
Based on the foregoing and other
relevant information reviewed, the Trustees concluded that, overall, they were satisfied with assurances from abrdn Inc. as to the expected nature, extent and quality of the services to be provided to the Fund under
the New Advisory Agreement.
| 30 | abrdn Healthcare Opportunities Fund |
Supplemental Information (Unaudited) (continued)
Investment performance. The Trustees considered and reviewed the investment performance record of abrdn Inc. in managing other closed-end funds. The Trustees noted that
abrdn Inc. does not currently manage any healthcare or biotech strategies. The Board also considered the information received and reviewed throughout the year and in connection with its recent annual approval of the
investment advisory agreement between such Fund and Tekla (the "Tekla Advisory Agreement") regarding the Fund's performance, as well as the investment strategy and the investment team, both of which are expected to
remain unchanged under the New Advisory Agreement. Furthermore, the Trustees considered that the Fund's investment objectives, fundamental and non-fundamental policies are not expected to change as a result of the New
Advisory Agreement.
Fees and Expenses. The Trustees considered that, with respect to the Fund, the advisory fee schedule would be the same under the New Advisory Agreement as under the Tekla
Advisory Agreement. The Trustees considered the various services to be provided by abrdn Inc. to the Fund under the New Advisory Agreement and reviewed comparisons of the Fund's proposed expense ratios to: (i) those
of a peer group of other investment companies identified by an independent service provider engaged by the Independent Trustees in connection with their most recent renewal of the Tekla Advisory Agreement in March of
2023; and (ii) the Fund's current expenses and expense ratios under the Tekla Advisory Agreement. The Trustees noted that abrdn Inc.'s proposed fees are within the range of fees presented in the comparative
information. The Trustees considered, among other things, that the Fund's aggregate expenses incurred in any fiscal year, including but not limited to investment advisory fees (but excluding borrowing costs, taxes,
brokerage commissions, and any non-routine expenses) ("Operating Expenses") are expected to decrease as a result of expense limitation agreements abrdn Inc. has agreed to impose, which will be in effect for at least
two years from the date that abrdn Inc. begins managing the Fund and that the services to be provided by abrdn Inc. under the New Advisory Agreement are at least comparable to the services provided to the Fund under
the Tekla Advisory Agreement.
Economies of Scale. The Trustees noted that while the Fund, as a closed-end fund, generally would not present the opportunity for economies of scale by themselves,
abrdn's large platform presented new opportunities for the Fund to receive the benefits of economies of scale through abrdn's relationships with service providers and other operational efficiencies. The Trustees noted
that the New Advisory Agreement, like the Tekla Advisory Agreement, do not provide for breakpoints that might reduce the effective fee rate paid by a Fund to the extent such Fund's net assets should increase. The
Trustees considered that, given the closed-end structure of the Fund and the fact that, absent a rights offering or other secondary offering, any significant growth in assets generally will occur through appreciation
in the value of the Fund's investment portfolio.
The Trustees also noted abrdn
Inc.'s representation that it would attempt to achieve economies of scale through relationships with brokers, administrative systems and other efficiencies. The Trustees considered the ways in which abrdn Inc. may be
able to achieve economies of scale for the Fund but noted that there can be no assurances that economies of scale will be achieved by abrdn Inc. Under the circumstances, the Board concluded that, with respect to the
Fund, the proposed advisory fees are not excessive and that the advisory fee structure for the Fund is appropriate.
Fall-Out Benefits and Other Factors. The Trustees also considered information regarding potential "fall-out" or ancillary benefits that would be received by abrdn as a
result of its relationship with the Fund. The Board received and considered information regarding the extent to which abrdn might derive other ancillary benefits from fund operations, including the potential for
procuring additional business as a result of the prestige and visibility associated with its role as investment adviser to the Fund. The Board concluded that, to the extent abrdn derives other benefits from its
relationship with the Fund, those benefits are not so significant as to render abrdn Inc.'s fees excessive.
The Trustees also considered
that Tekla has a financial interest under the Purchase Agreement in having the Board and shareholders approve the New Advisory Agreement.
Costs of Services Provided and Profitability. In evaluating the costs of the services to be provided by abrdn Inc. under the New Advisory Agreement and the expected
profitability to abrdn Inc. from its proposed relationship with the Fund, the Trustees once again considered, among other things, that there would be no increase in advisory fee rate under the New Advisory Agreement.
The Trustees further noted the pro forma nature of the profitability information presented and that it was not possible to predict with certainty how abrdn Inc.'s profitability actually would be affected by becoming
the investment adviser to the Fund, but that they had been satisfied, based on their review of the projected profitability of abrdn Inc., that the profitability from its relationship with the Fund would not be
excessive.
Based on the information
provided to and evaluated by the Trustees, the Trustees concluded that, with respect to the Fund, the fees proposed to be charged by abrdn Inc. under the New Advisory Agreement are fair and reasonable in light of the
quality and nature of the services proposed to be provided by abrdn Inc. and that the proposed profitability of abrdn Inc.'s relationship with the Fund will not be excessive.
Conclusion. In their deliberations, the Trustees did not identify any single item that was all-important or controlling and each Trustee may have attributed different
weights to various factors. After an evaluation of the above-described factors and based on their deliberations and analysis of the information provided, the Trustees concluded that, with respect to the Fund, approval
of the New Advisory Agreement is in the best interests of the Fund and its shareholders. Accordingly, the Trustees, including the Independent Trustees voting separately, unanimously approved the New
| abrdn Healthcare Opportunities Fund | 31 |
Supplemental Information (Unaudited) (concluded)
Advisory Agreement with respect to the Fund.
Shareholders approved the New Advisory Agreement on October 25, 2023. Effective October 27, 2023, abrdn Inc. became the investment adviser of the Fund.
| 32 | abrdn Healthcare Opportunities Fund |
Dividend Reinvestment and Optional Cash Purchase
Plan (Unaudited)
| abrdn Healthcare Opportunities Fund | 33 |
Dividend Reinvestment and Optional Cash Purchase
Plan (Unaudited) (concluded)
| 34 | abrdn Healthcare Opportunities Fund |
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[THIS PAGE INTENTIONALLY LEFT BLANK]
Corporate Information
The Financial Statements
as of March 31, 2024, included in this report, were not audited and accordingly, no opinion is expressed thereon.
Notice is hereby given in
accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may purchase, from time to time, shares of its common stock in the open market.
Shares of abrdn
Healthcare Opportunities Fund are traded on the NYSE under the symbol “THQ.” Information about the Fund’s net asset value and market price is available at www.abrdnthq.com.
This report, including
the financial information herein, is transmitted to the shareholders of abrdn Healthcare Opportunities Fund for their general information only. It does not have regard to the specific investment objectives, financial
situation and the particular needs of any specific person. Past performance is no guarantee of future results.
THQ-SEMI-ANNUAL
Item 2. Code of Ethics.
This item is inapplicable to semi-annual report on Form N-CSR.
Item 3. Audit Committee Financial Expert.
This item is inapplicable to semi-annual report on Form N-CSR.
Item 4. Principal Accountant Fees and Services.
This item is inapplicable to semi-annual report on Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
This item is inapplicable to semi-annual report on Form N-CSR.
Item 6. Schedule of Investments.
(a) Schedule of Investments in securities of unaffiliated issuers as of close of the reporting period is included as part of the Reports to Shareholders filed under Item 1 of this Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
This item is inapplicable to semi-annual report on Form N-CSR.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a) Not applicable to semi-annual report on Form N-CSR.
(b) There has been no change, as of the date of this filing, in any of the portfolio managers identified in response to paragraph (a)(1) of this Item in the registrant’s most recently filed annual report on Form N-CSR. On March 21, 2024, the Fund announced the appointment of Dr. Jason Akus as co-lead portfolio manager to the Fund alongside Dr. Daniel Omstead. Dr. Akus has served on the investment team with Dr. Omstead for over 20 years. Dr. Omstead was the founder of Tekla Capital Management (TCM) that served as the investment advisor to the Funds from 2001 until October 27, 2023, when a strategic transaction with abrdn Inc. (“abrdn”) was completed and the Fund’s advisory agreement transferred to abrdn. Dr. Akus’ appointment is part of the orderly transition of Dr. Omstead’s responsibilities as the lead portfolio manager to the Fund. Dr. Omstead continued to serve as the co-lead portfolio manager alongside Dr. Akus through May 31, 2024. Subsequently, Dr. Akus took over as lead portfolio manager and Dr. Omstead will remain at abrdn and serve in an advisory role to Dr. Akus and the investment team until September 30, 2024.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
| Period | (a) Total No. of Shares Purchased |
(b) Average Price Paid per Share |
(c) Total No. of Shares Purchased as Part of Publicly Announced Plans or Programs(1) |
(d) Maximum No. of Shares that May Yet Be Purchased Under the Plans or Programs(1) |
|||||||||||
| Month #1 (Oct. 1, 2023 — Oct. 31, 2023) | — | — | — | 4,962,727 | |||||||||||
| Month #2 (Nov. 1, 2023 — Nov. 30, 2023) | — | — | — | 4,962,727 | |||||||||||
| Month #3 (Dec. 1, 2023 — Dec. 31, 2023) | — | — | — | 4,962,727 | |||||||||||
| Month #4 (Jan. 1, 2024 — Jan. 31, 2024) | — | — | — | 4,962,727 | |||||||||||
| Month #5 (Feb. 1, 2024 — Feb. 29, 2024) | — | — | — | 4,962,727 | |||||||||||
| Month #6 (Mar. 1, 2024 — Mar. 31, 2024) | — | — | — | 4,962,727 | |||||||||||
| Total | — | $ | — | — | |||||||||||
| (1) | On March 19, 2015, the share repurchase program was announced, which has been subsequently reviewed and approved by the Board of Trustees. In March 2024, the Board 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, 2025. Prior to this renewal, in March 2023, 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, 2024. |
Item 10. Submission of Matters to a Vote of Security Holders.
During the period ended March 31, 2024, there were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.
Item 11. Controls and Procedures.
| (a) | The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a3(b)) and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d15(b)). |
| (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable
Item 13. Recovery of Erroneously Awarded Compensation
Not appliable
Item 14. Exhibits.
| (a)(1) | Not applicable. |
| (a)(2) | The certifications of the registrant as required by Rule 30a-2(a) under the Act are exhibits to this Form N-CSR . |
| (a)(3) | Any written solicitation to purchase securities under Rule 23c-1 under the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable. |
| (a)(4) | Change in Registrant’s independent public accountant. Not applicable. |
| (b) | The certifications of the registrant as required by Rule 30a-2(b) under the Act are exhibits to this Form N-CSR . |
| (c) | A copy of the Registrant’s notices to stockholders, which accompanied distributions paid, pursuant to the Registrant’s Managed Distribution Policy since the Registrant’s last filed N-CSR, are filed herewith as Exhibits (c)(1), (c)(2), (c)(3), (c)(4), (c)(5) and (c)(6) as required by the terms of the Registrant’s SEC exemptive order. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| abrdn Healthcare Opportunities Fund | ||
| By: | /s/ Christian Pittard | |
| Christian Pittard, | ||
| Principal Executive Officer of abrdn Healthcare Opportunities Fund | ||
Date: June 10, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By: | /s/ Christian Pittard | |
| Christian Pittard, | ||
| Principal Executive Officer of abrdn Healthcare Opportunities Fund |
Date: June 10, 2024
| By: | /s/ Sharon Ferrari | |
| Sharon Ferrari, | ||
| Principal Financial Officer of abrdn Healthcare Opportunities Fund |
Date: June 10, 2024