UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

OMB APPROVAL

 

OMB Number:    3235-0578
Expires:   
January 31, 2016
Estimated average burden hours per response........10.5

 

 

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-04889

 

 

Tekla Healthcare Investors

(Exact name of registrant as specified in charter)

 

100 Federal Street, 19th Floor, Boston, MA

 

02110

(Address of principal executive offices)

 

(Zip code)

 

 

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

617-772-8500

 

 

Date of fiscal year end:

September 30

 

 

 

 

Date of reporting period:

06/30/15

 

 



 

Item 1.  Schedule of Investments.

 



 

TEKLA HEALTHCARE INVESTORS

SCHEDULE OF INVESTMENTS

JUNE 30, 2015

(Unaudited)

 

SHARES

 

 

 

VALUE

 

 

 

CONVERTIBLE PREFERRED AND WARRANTS (Restricted)(a) (b) — 3.3%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 1.0%

 

 

 

18,875,301

 

CytomX Therapeutics, Inc.

 

$

2,800,000

 

3,696,765

 

EBI Life Sciences, Inc. Series A (c)

 

18,854

 

4,118,954

 

Euthymics Biosciences, Inc. Series A (c)

 

1,582,914

 

77,632

 

Neurovance, Inc. Series A (c)

 

626,490

 

965,354

 

Neurovance, Inc. Series A-1 (c)

 

7,790,407

 

 

 

 

 

12,818,665

 

 

 

Medical Devices and Diagnostics — 2.3%

 

 

 

3,364,723

 

AlterG, Inc. Series C

 

1,379,536

 

114,158

 

CardioKinetix, Inc. Series C (c)

 

1,606,089

 

205,167

 

CardioKinetix, Inc. Series D (c)

 

781,071

 

632,211

 

CardioKinetix, Inc. Series E (c)

 

1,799,905

 

580,225

 

CardioKinetix, Inc. Series F (c)

 

1,982,281

 

N/A

(d)

CardioKinetix, Inc. warrants (expiration 12/11/19) (c)

 

0

 

N/A

(d)

CardioKinetix, Inc. warrants (expiration 6/03/20) (c)

 

0

 

12,695

 

CardioKinetix, Inc. warrants (expiration 8/15/24) (c)

 

0

 

3,109,861

 

Dynex Technologies, Inc. Series A (c)

 

1,554,931

 

142,210

 

Dynex Technologies, Inc. warrants (expiration 4/01/19) (c)

 

0

 

11,335

 

Dynex Technologies, Inc. warrants (expiration 5/06/19) (c)

 

0

 

8,998,436

 

IlluminOss Medical, Inc. Series C-1 (c)

 

3,450,000

 

11,410,347

 

Insightra Medical, Inc. Series C (c)

 

4,830,000

 

1,222,537

 

Insightra Medical, Inc. Series C-2 (c)

 

517,500

 

4,482,636

 

Insightra Medical, Inc. warrants (expiration 5/28/25) (c)

 

0

 

3,669,024

 

Labcyte, Inc. Series C

 

2,615,647

 

160,767

 

Labcyte, Inc. Series D

 

133,372

 

3,109,861

 

Magellan Diagnostics, Inc. Series A (c)

 

2,131,188

 

142,210

 

Magellan Diagnostics, Inc. warrants (expiration 4/01/19) (c)

 

0

 

11,335

 

Magellan Diagnostics, Inc. warrants (expiration 5/06/19) (c)

 

0

 

13,823,805

 

Palyon Medical Corporation Series A (c)

 

2,944

 

27,100,879

 

Palyon Medical Corporation Series B (c)

 

1,897

 

N/A

(d)

Palyon Medical Corporation warrants (expiration 4/26/19) (c)

 

0

 

65,217

 

TherOx, Inc. Series H

 

652

 

149,469

 

TherOx, Inc. Series I

 

1,495

 

4,720,000

 

Tibion Corporation Series B

 

0

 

N/A

(d)

Tibion Corporation warrants (expiration 7/12/17)

 

0

 

N/A

(d)

Tibion Corporation warrants (expiration 10/30/17)

 

0

 

N/A

(d)

Tibion Corporation warrants (expiration 11/28/17)

 

0

 

3,750,143

 

Veniti, Inc. Series A (c)

 

3,789,519

 

1,881,048

 

Veniti, Inc. Series B (c)

 

1,994,851

 

1,031,378

 

Veniti, Inc. Series C (c)

 

1,180,000

 

 

 

 

 

29,752,878

 

 

 

TOTAL CONVERTIBLE PREFERRED AND WARRANTS
(Cost $48,005,567)

 

42,571,543

 

 

The accompanying notes are an integral part of these Schedule of Investments.

 



 

PRINCIPAL
AMOUNT

 

 

 

VALUE

 

 

 

CONVERTIBLE AND NON-CONVERTIBLE NOTES — 0.5%

 

 

 

 

 

Convertible Notes — 0.5%

 

 

 

 

 

Medical Devices and Diagnostics — 0.1%

 

 

 

$

1,725,000

 

Insightra Medical, Inc. Promissory Note, 8.00%, due 11/1/15 (Restricted) (a) (c) 

 

$

1,725,000

 

43,658

 

Palyon Medical Corporation Promissory Note, 8.00% due 7/15/15 (Restricted) (a) (c) 

 

44

 

52,210

 

Palyon Medical Corporation Promissory Note, 8.00% due 8/15/15 (Restricted) (a) (c) 

 

52

 

37,421

 

Palyon Medical Corporation Promissory Note, 8.00% due 12/15/15 (Restricted) (a) (c) 

 

37

 

16,145

 

Palyon Medical Corporation Promissory Note, 8.00%, due 12/29/15 (Restricted) (a) (c) 

 

16

 

53,818

 

Palyon Medical Corporation Promissory Note, 8.00% due 5/15/16 (Restricted) (a) (c)

 

54

 

 

 

 

 

1,725,203

 

 

 

Pharmaceuticals — 0.4%

 

 

 

3,500,000

 

Spectrum Pharmaceuticals, Inc., 2.75% due 12/15/18(f)

 

3,285,625

 

3,150,000

 

TetraLogic Pharmaceuticals Corporation, 8.00% due 6/15/19 (f) 

 

1,860,469

 

 

 

 

 

5,146,094

 

 

 

TOTAL CONVERTIBLE NOTES

 

6,871,297

 

 

 

Non-Convertible Notes (Restricted)(a) (b) — 0.0%

 

 

 

 

 

Medical Devices and Diagnostics — 0.0%

 

 

 

342,899

 

Tibion Corporation Non-Cvt. Promissory Note, 0.00%, due 12/31/18

 

0

 

40,596

 

Tibion Corporation Non-Cvt. Promissory Note, 0.00%, due 12/31/18

 

0

 

 

 

TOTAL NON-CONVERTIBLE NOTES

 

0

 

 

 

TOTAL CONVERTIBLE AND NON-CONVERTIBLE NOTES
(Cost $9,099,033)

 

6,871,297

 

 

SHARES

 

 

 

 

 

 

 

COMMON STOCKS AND WARRANTS — 93.3%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 51.9%

 

 

 

259,000

 

ACADIA Pharmaceuticals Inc. (b)

 

10,846,920

 

321,170

 

Acorda Therapeutics, Inc. (b)

 

10,704,596

 

297,306

 

Alexion Pharmaceuticals plc (b)

 

53,744,006

 

426,717

 

Alkermes plc (b)

 

27,454,972

 

244,165

 

Amgen Inc.

 

37,484,211

 

163,461

 

Biogen Inc. (b)

 

66,028,436

 

406,545

 

BioMarin Pharmaceutical Inc. (b)

 

55,607,225

 

993,770

 

Celgene Corporation (b)

 

115,013,971

 

10,996

 

Celladon Corporation warrants (Restricted, expiration 10/10/18) (a) (b)

 

18,803

 

 

The accompanying notes are an integral part of these Schedule of Investments.

 



 

SHARES

 

 

 

VALUE

 

 

 

Common Stocks and Warrants — continued

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — continued

 

 

 

2,723

 

Ceres, Inc. warrants (Restricted, expiration 9/05/15) (a) (b)

 

$

0

 

35,000

 

Cidara Therapeutics, Inc. (b)

 

490,700

 

162,820

 

Flex Pharma, Inc. (b)

 

2,800,504

 

14,000

 

Galapagos NV (b) (e)

 

721,000

 

997,392

 

Gilead Sciences, Inc.

 

116,774,655

 

227,164

 

Intra-Cellular Therapies, Inc. (b)

 

7,257,890

 

218,874

 

Neurocrine Biosciences, Inc. (b)

 

10,453,422

 

483,700

 

Paratek Pharmaceuticals, Inc.

 

12,464,949

 

1,688,191

 

Pieris Pharmaceuticals, Inc. (b)

 

4,642,525

 

46,980

 

Receptos, Inc. (b)

 

8,928,549

 

132,644

 

Regeneron Pharmaceuticals, Inc. (b)

 

67,665,684

 

75,000

 

Sangamo BioSciences, Inc. (b)

 

831,750

 

42,000

 

Ultragenyx Pharmaceutical Inc. (b)

 

4,300,380

 

705,199

 

Verastem, Inc. (b)

 

5,317,200

 

474,879

 

Vertex Pharmaceuticals Incorporated (b)

 

58,638,059

 

 

 

 

 

678,190,407

 

 

 

Drug Delivery — 1.2%

 

 

 

306,678

 

Heron Therapeutics, Inc. (b)

 

9,556,086

 

230,000

 

Heron Therapeutics, Inc. warrants (Restricted, expiration 7/01/16) (a) (b)

 

4,795,500

 

208,806

 

IntelliPharmaceutics International Inc. (b) (c)

 

613,890

 

460,200

 

IntelliPharmaceutics International Inc. warrants (Restricted, expiration 2/01/16) (a) (b) (c)

 

248,508

 

 

 

 

 

15,213,984

 

 

 

Drug Discovery Technologies — 4.1%

 

 

 

508,323

 

Incyte Corporation (b)

 

52,972,340

 

 

 

Generic Pharmaceuticals — 16.7%

 

 

 

594,432

 

Akorn, Inc. (b)

 

25,952,901

 

252,901

 

Allergan plc (b)

 

76,745,337

 

245,214

 

Impax Laboratories, Inc. (b)

 

11,260,227

 

916,393

 

Mylan NV (b)

 

62,186,429

 

286,650

 

Sagent Pharmaceuticals, Inc. (b)

 

6,968,462

 

598,158

 

Teva Pharmaceutical Industries Ltd. (e)

 

35,351,138

 

 

 

 

 

218,464,494

 

 

 

Healthcare Services — 7.5%

 

 

 

247,541

 

Aetna, Inc.

 

31,551,575

 

891,470

 

Allscripts Healthcare Solutions, Inc. (b)

 

12,195,310

 

231,000

 

Catamaran Corporation (b)

 

14,109,480

 

120,000

 

Centene Corporation (b)

 

9,648,000

 

222,222

 

InnovaCare Health, Inc. (Restricted) (a) (b) (f)

 

944,444

 

67,862

 

McKesson Corporation

 

15,256,056

 

212,541

 

Molina Healthcare, Inc. (b)

 

14,941,632

 

 

 

 

 

98,646,497

 

 

The accompanying notes are an integral part of these Schedule of Investments.

 



 

SHARES

 

 

 

VALUE

 

 

 

Common Stocks and Warrants — continued

 

 

 

 

 

Medical Devices and Diagnostics — 5.2%

 

 

 

286,540

 

Alere, Inc. (b)

 

$

15,114,985

 

1,155,000

 

Alliqua BioMedical, Inc. (b)

 

6,086,850

 

160,000

 

Cercacor Laboratories, Inc. (Restricted) (a) (b)

 

147,894

 

77,194

 

IDEXX Laboratories, Inc. (b)

 

4,951,223

 

152,687

 

Illumina, Inc. (b)

 

33,340,733

 

208

 

Songbird Hearing, Inc. (Restricted) (a) (b)

 

139

 

60,645

 

Thermo Fisher Scientific Inc.

 

7,869,295

 

 

 

 

 

67,511,119

 

 

 

Pharmaceuticals — 6.7%

 

 

 

1,473,684

 

Auris Medical Holding AG (b)

 

7,279,999

 

202,600

 

Bristol-Myers Squibb Co.

 

13,481,004

 

147,000

 

Endo International PLC (b)

 

11,708,550

 

289,660

 

Foamix Pharmaceuticals Ltd. (b)

 

2,969,015

 

535,266

 

Ironwood Pharmaceuticals, Inc. (b)

 

6,455,308

 

85,209

 

Jazz Pharmaceuticals plc (b)

 

15,002,749

 

673,204

 

Pfizer, Inc.

 

22,572,530

 

1,037,050

 

TherapeuticsMD, Inc. (b)

 

8,151,213

 

 

 

 

 

87,620,368

 

 

 

TOTAL COMMON STOCKS AND WARRANTS
(Cost $632,868,637)

 

1,218,619,209

 

 

 

EXCHANGE TRADED FUND — 1.6%

 

 

 

57,670

 

iShares Nasdaq Biotechnology ETF

 

21,278,500

 

 

 

TOTAL EXCHANGE TRADED FUND
(Cost $11,259,768)

 

21,278,500

 

 

 

TOTAL INVESTMENTS BEFORE MILESTONE INTEREST - 98.7%
(Cost $701,233,005)

 

1,289,340,549

 

 

INTEREST

 

 

 

 

 

 

 

MILESTONE INTEREST (Restricted)(a) — 0.0%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 0.0%

 

 

 

1

 

Targegen Milestone Interest

 

0

 

 

 

TOTAL MILESTONE INTERESTS
(Cost $4,194,994)

 

0

 

 

 

TOTAL INVESTMENTS - 98.7%
(Cost $705,427,999)

 

1,289,340,549

 

 

 

OTHER ASSETS IN EXCESS OF LIABILITIES - 1.3%

 

16,789,264

 

 

 

NET ASSETS - 100%

 

$

1,306,129,813

 

 


(a)

Security fair valued. See Investment Valuation and Fair Value Measurments.

(b)

Non-income producing security.

(c)

Affiliated issuers in which the Fund holds 5% or more of the voting securities (total market value of $38,228,442).

 

The accompanying notes are an integral part of these Schedule of Investments.

 



 

(d)

Number of warrants to be determined at a future date.

(e)

American Depository Receipt

(f)

Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

 

The accompanying notes are an integral part of these Schedule of Investments.

 



 

TEKLA HEALTHCARE INVESTORS

NOTES TO SCHEDULE OF INVESTMENTS

JUNE 30, 2015

(Unaudited)

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”) have 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. 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 whose quoted price may otherwise not reflect fair value, are valued in good faith by the Adviser using a fair value process pursuant to policies and procedures approved by the Trustees described below. 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 typically 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 valued at amortized cost, which approximates fair value.

 

Convertible preferred shares, warrants or convertible note interests in private companies, milestone interests, other restricted securities, as well as shares of publicly traded companies for which market quotations are not available 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 the Adviser considers 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, the company’s products or intended markets or the company’s 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 term. 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. Due to the uncertainty inherent in the valuation process, such estimates of fair value may differ significantly from the values that would have been used had a ready market for the investments existed, and differences could be material. 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 this Schedule of Investments.

 

Federal Income Tax Cost

 

At June 30, 2015, the cost of securities for Federal income tax purposes was $705,427,999. The net unrealized gain on securities held by the Fund was $583,912,550 including gross unrealized gain of $607,716,624 and gross unrealized loss of $23,804,074.

 

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 period ended June 30, 2015 were as follows:

 

Issuer

 

Value on
September
30, 2014

 

Purchases

 

Sales

 

Income

 

Value on
June 30,
2015

 

CardioKinetix, Inc.

 

$

4,548,481

 

$

1,982,283

 

$

361,416

 

 

 

$

6,169,346

 

Dynex Technologies, Inc.

 

1,554,931

 

 

 

 

 

1,554,931

 

EBI Life Sciences, Inc.

 

18,854

 

 

 

 

 

18,854

 

Euthymics Biosciences, Inc.

 

1,582,914

 

 

 

 

 

1,582,914

 

IlluminOss Medical, Inc.

 

2,232,357

 

1,217,643

 

 

 

 

3,450,000

 

Insightra Medical, Inc.

 

4,830,000

 

2,242,500

 

 

 

 

7,072,500

 

IntelliPharmaceutics International, Inc.

 

2,787,891

 

 

1,963,539

 

 

 

862,398

 

Magellan Diagnostics, Inc.

 

2,131,188

 

 

 

 

 

2,131,188

 

Neurovance, Inc.

 

2,159,333

 

1,707,094

 

 

 

 

8,416,897

 

Palyon Medical Corporation

 

954,225

 

257,074

 

53,822

 

 

 

5,044

 

PHT Corporation

 

11,769,706

 

 

15,046,674

 

 

 

 

Veniti, Inc.

 

5,784,370

 

1,180,000

 

 

 

 

6,964,370

 

 

 

$

40,354,250

 

$

8,586,594

 

$

17,425,451

 

$

0

 

$

38,228,442

 

 



 

TEKLA HEALTHCARE INVESTORS

NOTES TO SCHEDULE OF INVESTMENTS

JUNE 30, 2015

(continued)

 

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.). 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.

 

The following is a summary of the inputs used as of June 30, 2015 to value the Fund’s net assets. For the period ended June 30, 2015, there were no transfers between Levels 1 and 2. The Fund accounts for transfers between levels at the beginning of the period.

 

Assets at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Convertible Preferred and Warrants

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

 

 

 

 

$

12,818,665

 

$

12,818,665

 

Medical Devices and Diagnostics

 

 

 

 

 

29,752,878

 

29,752,878

 

Convertible and Non-Convertible Notes

 

 

 

 

 

 

 

 

 

Medical Devices and Diagnostics

 

 

 

 

 

1,725,203

 

1,725,203

 

Pharmaceuticals

 

 

 

$

5,146,094

 

 

5,146,094

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

678,171,604

 

 

18,803

 

678,190,407

 

Drug Delivery

 

10,169,976

 

 

5,044,008

 

15,213,984

 

Drug Discovery Technologies

 

52,972,340

 

 

 

52,972,340

 

Generic Pharmaceuticals

 

218,464,494

 

 

 

218,464,494

 

Healthcare Services

 

97,702,053

 

 

944,444

 

98,646,497

 

Medical Devices and Diagnostics

 

67,363,086

 

 

148,033

 

67,511,119

 

Pharmaceuticals

 

87,620,368

 

 

 

87,620,368

 

Exchange Traded Fund

 

21,278,500

 

 

 

21,278,500

 

Other Assets

 

 

 

380,149

 

380,149

 

Total

 

$

1,233,742,421

 

$

5,146,094

 

$

50,832,183

 

$

1,289,720,698

 

 

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

 

Level 3 Assets

 

Balance as of
September 30,
2014

 

Net Realized
gain (loss)
and change in
unrealized
appreciation
(depreciation)

 

Cost of
purchases
and
conversions

 

Proceeds
from sales
and
conversions

 

Net
transfers
in (out of)
Level 3

 

Balance as
of June 30,
2015

 

Convertible Preferred and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

3,761,101

 

$

4,546,317

 

$

4,511,247

 

 

 

 

 

$

12,818,665

 

Healthcare Services

 

11,769,706

 

3,276,968

 

 

$

(15,046,674

)

 

 

 

Medical Devices and Diagnostics

 

25,804,838

 

(949,597

)

4,897,637

 

 

 

 

29,752,878

 

Convertible and Non-Convertible Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Devices and Diagnostics

 

361,416

 

(203,054

)

1,928,257

 

(361,416

)

 

 

1,725,203

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

55,750

 

(36,949

)

2

 

 

 

 

18,803

 

Drug Delivery

 

1,245,808

 

3,798,200

 

 

 

 

 

5,044,008

 

Drug Discovery Technologies

 

18

 

(18

)

 

 

 

 

 

Healthcare Services

 

1,166,665

 

(222,568

)

347

 

 

 

 

944,444

 

Medical Devices and Diagnostics

 

93,648

 

54,385

 

 

 

 

 

148,033

 

Milestone Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

0

 

 

 

 

 

 

0

 

Other Assets

 

684,958

 

 

223,022

 

(527,831

)

 

 

380,149

 

Total

 

$

44,943,908

 

$

10,263,684

 

$

11,560,512

 

$

(15,935,921

)

$

0

 

$

50,832,183

 

 



 

TEKLA HEALTHCARE INVESTORS

NOTES TO SCHEDULE OF INVESTMENTS

JUNE 30, 2015

(continued)

 

Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2015                         $6,986,735

 

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

 

 

 

Fair Value at 6/30/2015

 

Valuation Technique

 

Unobservable
Input

 

Range
(Weighted
Average)

Private Companies and Other Restricted Securities

 

$

5,210,705

 

Public market price

 

None

 

N/A

 

 

42,433,999

 

Adjusted Capital asset pricing model

 

Discount Rate

 

13.1%-39% (22.25%)

 

 

 

 

 

 

Price to sales multiple

 

1.8-5.8 (3.31)

 

 

2,805,044

 

Independent valuation

 

None

 

N/A

 

 

382,435

 

Probability adjusted value

 

Probability of events

 

10%-50% (14.79%)

 

 

 

 

 

 

Timing of events

 

0.25-2.58 (1.40) years

 

 

$

50,832,183

 

 

 

 

 

 

 

Private Companies and Other Restricted Securities

 

The Fund may invest in private companies and other restricted securities if these securities would currently comprise 40% or less of net assets. The value of these securities represents 4% of the Fund’s net assets at June 30, 2015.

 

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 June 30, 2015. The Fund on its own does not have the right to demand that such securities be registered.

 



 

TEKLA HEALTHCARE INVESTORS

SCHEDULE OF INVESTMENTS

JUNE 30, 2015

(Unaudited)

 

Security (#)

 

Acquisition
Date

 

Cost

 

Carrying Value
per Unit

 

Value

 

AlterG, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd

 

4/12/13

 

$

2,053,934

 

$

0.41

 

$

1,379,536

 

CardioKinetix, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd

 

5/22/08

 

2,379,165

 

14.07

 

1,606,089

 

Series D Cvt. Pfd

 

12/10/10

 

785,619

 

3.81

 

781,071

 

Series E Cvt. Pfd

 

9/14/11

 

1,803,981

 

2.85

 

1,799,905

 

Series F Cvt. Pfd

 

12/04/14

 

1,982,283

 

3.42

 

1,982,281

 

Warrants (expiration 12/11/19)

 

12/10/09, 2/11/10

 

177

 

0.00

 

0

 

Warrants (expiration 6/03/20)

 

6/03/10, 9/01/10

 

177

 

0.00

 

0

 

Warrants (expiration 8/15/24)

 

8/15/14

 

181

 

0.00

 

0

 

Celladon Corporation

 

 

 

 

 

 

 

 

 

Warrants (expiration 10/10/18)

 

10/10/13

 

145

 

1.71

 

18,803

 

Cercacor Laboratories, Inc. Common

 

3/31/98

 

0

 

0.92

 

147,894

 

Ceres, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 9/05/15)

 

9/05/07

 

29

 

0.00

 

0

 

CytomX Therapeutics, Inc.

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd

 

6/12/15

 

2,800,000

 

0.15

 

2,800,000

 

Dynex Technologies, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

1/03/12

††

287,751

 

0.50

 

1,554,931

 

Warrants (expiration 4/01/19)

 

1/03/12

††

86

 

0.00

 

0

 

Warrants (expiration 5/06/19)

 

1/03/12

††

7

 

0.00

 

0

 

EBI Life Sciences, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

12/29/11

††

19,566

 

0.01

 

18,854

 

Euthymics Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

7/14/10-5/21/12

 

3,792,632

 

0.38

 

1,582,914

 

Heron Therapeutics, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 7/01/16)

 

6/30/11

 

1,236

 

20.85

 

4,795,500

 

IlluminOss Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C-1 Cvt. Pfd

 

9/26/12-6/13/14, 12/17/14

 

3,451,073

 

0.38

 

3,450,000

 

InnovaCare Health, Inc. Common

 

12/21/12

††

965,291

 

4.25

 

944,444

 

Insightra Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd

 

4/29/13-4/17/14

 

4,838,251

 

0.42

 

4,830,000

 

Series C-2 Cvt. Pfd

 

5/25/15

 

517,500

 

0.42

 

517,500

 

Cvt. Promissory Note

 

12/8/14

 

1,725,000

 

100.00

 

1,725,000

 

Warrants (expiration 5/28/25)

 

5/28/15

 

0

 

0.00

 

0

 

IntelliPharmaceutics International Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 2/01/16)

 

1/31/11

 

165

 

0.54

 

248,508

 

Labcyte, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd

 

7/18/05

 

1,925,938

 

0.71

 

2,615,647

 

Series D Cvt. Pfd

 

12/21/12

 

102,912

 

0.83

 

133,372

 

Magellan Diagnostics, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

11/28/06-10/01/09

 

1,454,604

 

0.69

 

2,131,188

 

Warrants (expiration 4/01/19)

 

4/03/09

 

515

 

0.00

 

0

 

Warrants (expiration 5/06/19)

 

5/12/09

 

41

 

0.00

 

0

 

Neurovance, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

12/29/11

††

293,195

 

8.07

 

626,490

 

Series A-1 Cvt. Pfd

 

10/11/12-10/10/13, 3/17/15

 

3,587,363

 

8.07

 

7,790,407

 

 

The accompanying notes are an integral part of these Schedule of Investments.

 



 

Palyon Medical Corporation

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

4/28/09

 

$

2,978,869

 

$

0.00

$

2,944

 

Series B Cvt. Pfd

 

6/28/13

 

1,891,844

 

0.00

1,897

 

Cvt. Promissory Note

 

11/13/14

 

53,822

 

0.10

 

54

 

Cvt. Promissory Note

 

12/16/14

 

37,421

 

0.10

 

37

 

Cvt. Promissory Note

 

1/22/15

 

43,658

 

0.10

 

44

 

Cvt. Promissory Note

 

2/17/15

 

52,210

 

0.10

 

52

 

Cvt. Promissory Note

 

6/29/15

 

16,145

 

0.10

 

16

 

Warrants (expiration 4/26/19)

 

4/25/12

 

0

 

0.00

 

0

 

Songbird Hearing, Inc. Common

 

12/14/00

 

3,004,861

 

0.67

 

139

 

Targegen Milestone Interest

 

7/20/10

 

4,194,994

 

0.00

 

0

 

TherOx, Inc.

 

 

 

 

 

 

 

 

 

Series H Cvt. Pfd

 

9/11/00-8/21/07

 

3,002,748

 

0.01

 

652

 

Series I Cvt. Pfd

 

7/08/05

 

579,958

 

0.01

 

1,495

 

Tibion Corporation

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd

 

2/23/11

 

1,302,544

 

0.00

 

0

 

Non-Cvt. Promissory Note

 

7/12/12

 

343,226

 

0.00

 

0

 

Non-Cvt. Promissory Note

 

4/12/13

 

40,598

 

0.00

 

0

 

Warrants (expiration 7/12/17)

 

7/12/12

 

0

 

0.00

 

0

 

Warrants (expiration 10/30/17)

 

10/30/12

 

0

 

0.00

 

0

 

Warrants (expiration 11/28/17)

 

11/28/12

 

0

 

0.00

 

0

 

Veniti, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

2/28/11

 

3,269,499

 

1.01

 

3,789,519

 

Series B Cvt. Pfd

 

5/24/13

 

1,723,156

 

1.06

 

1,994,851

 

Series C Cvt. Pfd

 

12/12/14

 

1,180,000

 

1.14

 

1,180,000

 

 

 

 

 

$

58,484,370

 

 

 

$

50,452,034

 

 


(#)

See Schedule of Investments and corresponding footnotes for more information on each issuer.

Carrying value per unit is greater than $0.00 but less than $0.01

††

Interest received as part of a corporate action for a previously owned security.

 

The accompanying notes are an integral part of these Schedule of Investments.

 



 

SIGNATURES

 

Pursuant to the requirements of the Securities and 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.

 

(Registrant)

Tekla Healthcare Investors

 

 

 

 

By (Signature and Title)

/s/ Daniel R. Omstead

 

 

Daniel R. Omstead, President

 

 

 

 

Date

8/27/15

 

 

Pursuant to the requirements of the Securities and 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 (Signature and Title)

/s/ Laura Woodward

 

 

Laura Woodward, Treasurer

 

 

 

 

Date

8/27/15