N-Q 1 a11-1181_1nq.htm N-Q

 

 

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

OMB APPROVAL

 

OMB Number:    3235-0578
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FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-04889

 

 

H&Q Healthcare Investors

(Exact name of registrant as specified in charter)

 

2 Liberty Square, 9th Floor, Boston, MA

 

02109

(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:

12/31/10

 

 


 

Item 1.  Schedule of Investments.

 


 

H&Q HEALTHCARE INVESTORS

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2010

(Unaudited)

 

SHARES

 

 

 

VALUE

 

 

 

CONVERTIBLE SECURITIES AND WARRANTS — 9.7% of Net Assets

 

 

 

 

 

Convertible Preferred and Warrants (Restricted)(a) (b) — 9.4%

 

 

 

 

 

Biotechnology/Biopharmaceuticals — 0.7%

 

 

 

2,470,798

 

Euthymics Biosciences, Inc. Series A

 

$

2,470,798

 

306,413

 

MacroGenics, Inc. Series D

 

199,812

 

75,217

 

MacroGenics, Inc. Series D 18 Month Lock-up

 

0

 

 

 

 

 

2,670,610

 

 

 

Drug Discovery Technologies — 1.3%

 

 

 

2,380,953

 

Agilix Corporation Series B (c)

 

141,809

 

375,000

 

Ceres, Inc. Series C

 

2,437,500

 

32,193

 

Ceres, Inc. Series C-1

 

209,255

 

280,105

 

Ceres, Inc. Series D

 

1,820,683

 

40,846

 

Ceres, Inc. Series F

 

265,499

 

8,170

 

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

 

0

 

 

 

 

 

4,874,746

 

 

 

Healthcare Services — 1.3%

 

 

 

5,384,615

 

PHT Corporation Series D (c)

 

4,200,000

 

1,204,495

 

PHT Corporation Series E (c)

 

939,506

 

149,183

 

PHT Corporation Series F (c)

 

116,363

 

 

 

 

 

5,255,869

 

 

 

Medical Devices and Diagnostics — 6.1%

 

 

 

3,424,756

 

CardioKinetix, Inc. Series C (c)

 

762,351

 

6,155,027

 

CardioKinetix, Inc. Series D (c)

 

800,154

 

N/A

 

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

 

0

 

N/A

 

CardioKinetix, Inc. warrants (expiration 06/03/20) (c) (d)

 

0

 

4,852,940

 

Concentric Medical, Inc. Series B (c)

 

2,523,529

 

1,744,186

 

Concentric Medical, Inc. Series C (c)

 

906,977

 

683,000

 

Concentric Medical, Inc. Series D (c)

 

355,160

 

652,013

 

Concentric Medical, Inc. Series E (c)

 

339,047

 

1,724,230

 

Eleme Medical, Inc. Series C (c)

 

17,242

 

1,877,273

 

Interlace Medical, Inc. Series C (c)

 

9,799,365

 

3,669,024

 

Labcyte, Inc. Series C

 

1,920,000

 

3,109,861

 

Magellan Biosciences, Inc. Series A

 

3,109,861

 

142,210

 

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

 

0

 

11,335

 

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

 

0

 

1,547,988

 

OmniSonics Medical Technologies, Inc. Series A-1

 

1,548

 

1,263,099

 

OmniSonics Medical Technologies, Inc. Series B-1

 

1,263

 

13,823,805

 

Palyon Medical Corporation Series A (c)

 

2,211,809

 

65,217

 

TherOx, Inc. Series H

 

108,181

 

149,469

 

TherOx, Inc. Series I

 

247,939

 

4,220

 

TherOx, Inc. warrants (expiration 1/26/11)

 

0

 

8,141

 

TherOx, Inc. warrants (expiration 2/06/11)

 

0

 

921,875

 

Xoft, Inc. Series D

 

682,187

 

176,647

 

Xoft, Inc. Series E

 

130,719

 

N/A

 

Xoft, Inc. warrants (expiration 6/12/14) (d)

 

0

 

 

The accompanying notes are an integral part of these financial statements.

 


 

SHARES

 

 

 

VALUE

 

 

 

Convertible Preferred and Warrants (Restricted)(a) (b) — continued

 

 

 

 

 

Medical Devices and Diagnostics — continued

 

 

 

N/A

 

Xoft, Inc. warrants (expiration 6/30/15) (d)

 

$

 0

 

 

 

 

 

23,917,332

 

 

 

 

 

36,718,557

 

 

 

 

 

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

Convertible Notes (Restricted) (a)  — 0.3%

 

 

 

 

 

Medical Devices and Diagnostics — 0.3%

 

 

 

$

 354,118

 

CardioKinetix, Inc., Cvt. Promissory Notes, 4.25% due 12/11/11 (c)

 

354,118

 

221,217

 

Eleme Medical, Inc., Cvt. Promissory Notes, 10.50% due 12/18/12 (c)

 

2,212

 

562,597

 

Eleme Medical, Inc., Subordinated Cvt. Promissory Notes, 10.50% due 12/18/12 (c)

 

5,626

 

70,240

 

Xoft, Inc., Cvt. Promissory Notes, 10.00% due 4/01/11

 

70,240

 

590,000

 

Xoft, Inc., Cvt. Promissory Notes, 10.00% due 3/31/11

 

590,000

 

74,237

 

Xoft, Inc., Cvt. Promissory Notes, 10.00% due 6/30/11

 

74,237

 

 

 

 

 

1,096,433

 

 

 

 

 

1,096,433

 

 

 

TOTAL CONVERTIBLE SECURITIES AND WARRANTS
(Cost $49,849,138)

 

37,814,990

 

 

 

 

 

 

 

SHARES

 

 

 

 

 

 

 

COMMON STOCKS AND WARRANTS — 83.6%

 

 

 

 

 

Biotechnology/Biopharmaceuticals — 27.4%

 

 

 

91,100

 

Acorda Therapeutics, Inc. (b)

 

2,483,386

 

88,415

 

Alexion Pharmaceuticals, Inc. (b)

 

7,121,828

 

41,141

 

Allergan, Inc.

 

2,825,152

 

318,600

 

Amarin Corporation plc (b)

 

2,615,706

 

72,500

 

Amgen, Inc. (b)

 

3,980,250

 

127,686

 

Amylin Pharmaceuticals, Inc. (b)

 

1,878,261

 

5,910,745

 

Antisoma plc (b) (e)

 

592,266

 

118,000

 

Athersys, Inc. warrants (Restricted, expiration 6/08/12) (a) (b)

 

0

 

118,400

 

Baxter International, Inc.

 

5,993,408

 

280,866

 

Celgene Corporation (b)

 

16,610,415

 

79,471

 

Cephalon, Inc. (b)

 

4,904,950

 

234,455

 

Cubist Pharmaceuticals, Inc. (b)

 

5,017,337

 

 

The accompanying notes are an integral part of these financial statements.

 


 

SHARES

 

 

 

VALUE

 

 

 

Biotechnology/Biopharmaceuticals — continued

 

 

 

69,276

 

Dendreon Corporation (b)

 

$

 2,419,118

 

923,940

 

Elan Corporation plc (b) (f)

 

5,294,176

 

56,068

 

Genzyme Corporation (b)

 

3,992,042

 

306,308

 

Gilead Sciences, Inc. (b)

 

11,100,602

 

140,420

 

Human Genome Sciences, Inc. (b)

 

3,354,634

 

134,874

 

InterMune, Inc. (b)

 

4,909,414

 

260,485

 

Ironwood Pharmaceuticals, Inc. (b)

 

2,696,020

 

148,216

 

Martek Biosciences Corporation (b)

 

4,639,161

 

584,478

 

Neurocrine Biosciences, Inc. (b)

 

4,465,412

 

126,850

 

Seattle Genetics, Inc. (b)

 

1,896,408

 

109,742

 

Vertex Pharmaceuticals, Inc. (b)

 

3,844,262

 

540,610

 

XenoPort, Inc. (b)

 

4,605,997

 

 

 

 

 

107,240,205

 

 

 

Drug Delivery — 0.7%

 

 

 

208,000

 

Alkermes, Inc. (b)

 

2,554,240

 

 

 

 

 

 

 

 

 

Drug Discovery Technologies — 0.0%

 

 

 

70

 

Zyomyx, Inc. (Restricted) (a)(b)

 

17

 

 

 

 

 

 

 

 

 

Generic Pharmaceuticals — 8.6%

 

 

 

1,321,151

 

Akorn, Inc. (b)

 

8,019,387

 

202,223

 

Akorn, Inc. warrants (Restricted, expiration 3/08/11) (a)(b)

 

200,201

 

56,050

 

Impax Laboratories, Inc. (b)

 

1,127,165

 

421,078

 

Mylan, Inc. (b)

 

8,897,378

 

90,637

 

Perrigo Company

 

5,740,041

 

161,089

 

Teva Pharmaceutical Industries, Ltd. (f)

 

8,397,570

 

25,075

 

Watson Pharmaceuticals, Inc. (b)

 

1,295,124

 

 

 

 

 

33,676,866

 

 

 

Healthcare Services — 19.3%

 

 

 

376,873

 

Aetna, Inc.

 

11,498,395

 

222,222

 

Aveta, Inc. (Restricted) (a)(g)

 

2,222,220

 

154,100

 

Charles River Laboratories International, Inc. (b)

 

5,476,714

 

211,650

 

CVS Caremark Corporation

 

7,359,071

 

17,433

 

Express Scripts, Inc. (b)

 

942,254

 

101,133

 

Laboratory Corporation of America Holdings (b)

 

8,891,613

 

85,292

 

McKesson Corporation

 

6,002,851

 

177,528

 

Medco Health Solutions, Inc. (b)

 

10,877,141

 

328,953

 

Pharmaceutical Product Development, Inc.

 

8,927,784

 

24,802

 

UnitedHealth Group, Inc.

 

895,600

 

218,633

 

WellPoint, Inc. (b)

 

12,431,472

 

 

 

 

 

75,525,115

 

 

 

Medical Devices and Diagnostics — 22.4%

 

 

 

235,153

 

Alere, Inc. (b)

 

8,606,600

 

428,560

 

Align Technology, Inc. (b)

 

8,374,062

 

135,500

 

Boston Scientific Corporation (b)

 

1,025,735

 

 

The accompanying notes are an integral part of these financial statements.

 


 

SHARES

 

 

 

VALUE

 

 

 

Medical Devices and Diagnostics — continued

 

 

 

20,653

 

Covidien plc

 

$

 943,016

 

93,931

 

Cynosure, Inc. (b)

 

960,914

 

21,024

 

Danaher Corporation

 

991,702

 

509,696

 

Hologic, Inc. (b)

 

9,592,479

 

129,029

 

IDEXX Laboratories, Inc. (b)

 

8,931,387

 

156,209

 

Illumina, Inc. (b)

 

9,894,278

 

141,628

 

Kinetic Concepts, Inc. (b)

 

5,931,381

 

95,309

 

Life Technologies Corporation (b)

 

5,289,649

 

82,290

 

Masimo Corporation

 

2,392,170

 

160,000

 

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

 

169,324

 

25,869

 

Medtronic, Inc.

 

959,481

 

830,292

 

Medwave, Inc. (b) (c)

 

1,744

 

207,573

 

Medwave, Inc. warrants (Restricted, expiration 8/21/11) (a) (b) (c)

 

0

 

93,008

 

OmniSonics Medical Technologies, Inc. (Restricted) (a) (b)

 

93

 

101,200

 

Palomar Medical Technologies, Inc. (b)

 

1,438,052

 

507,291

 

PerkinElmer, Inc.

 

13,098,253

 

36,000

 

Quest Diagnostics, Inc.

 

1,942,920

 

208

 

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

 

139

 

23,524

 

St Jude Medical, Inc. (b)

 

1,005,651

 

18,488

 

The Cooper Companies, Inc.

 

1,041,614

 

35,500

 

Thermo Fisher Scientific, Inc. (b)

 

1,965,280

 

71,980

 

Thoratec Corporation (b)

 

2,038,474

 

17,925

 

Zimmer Holdings, Inc. (b)

 

962,214

 

 

 

 

 

87,556,612

 

 

 

Pharmaceuticals — 5.2%

 

 

 

292,726

 

Forest Laboratories, Inc. (b)

 

9,361,378

 

74,232

 

Shire plc (f)

 

5,372,912

 

246,973

 

Warner Chilcott plc

 

5,571,711

 

 

 

 

 

20,306,001

 

 

 

TOTAL COMMON STOCKS AND WARRANTS
(Cost $297,994,759)

 

326,859,056

 

 

 

 

 

 

 

 

 

MUTUAL FUND — 3.1%

 

 

 

128,856

 

iShares Nasdaq Biotechnology Index Fund

 

12,037,728

 

 

 

 

 

 

 

 

 

TOTAL MUTUAL FUND
(Cost $11,396,462)

 

12,037,728

 

 

The accompanying notes are an integral part of these financial statements.

 


 

PRINCIPAL
AMOUNT

 

 

 

VALUE

 

 

 

SHORT-TERM INVESTMENT — 1.8%

 

 

 

$

6,957,000

 

Repurchase Agreement, State Street Bank and Trust Co., repurchase value $6,957,006 (collateralized by U.S. Treasury Bill 2.50%, 04/30/15, market value $7,096,500); 0.01% due 01/03/11

 

$

6,957,000

 

 

 

TOTAL SHORT-TERM INVESTMENT
(Cost $6,957,000)

 

6,957,000

 

 

 

TOTAL INVESTMENTS BEFORE MILESTONE INTEREST — 98.2%
(Cost $366,197,359)

 

383,668,774

 

 

 

 

 

 

 

INTEREST

 

 

 

 

 

 

 

MILESTONE INTEREST — 1.6%

 

 

 

 

 

Biotechnology/Biopharmaceuticals — 1.6%

 

 

 

1

 

Targegen Milestone Interest (a) (b)

 

6,262,933

 

 

 

TOTAL MILESTONE INTEREST

 

6,262,933

 

 

 

TOTAL INVESTMENTS - 99.8%
(Cost $372,060,705)

 

389,931,707

 

 

 

OTHER ASSETS IN EXCESS OF LIABILITIES - 0.2%

 

855,178

 

 

 

NET ASSETS - 100%

 

$

 390,786,885

 

 

(a)

Security fair valued.

(b)

Non-income producing security.

(c)

Affiliated issuers in which the Fund holds 5% or more of the voting securities (total market value of $23,477,011).

(d)

Number of warrants to be determined at a future date.

(e)

Foreign Security.

(f)

American Depository Receipt.

(g)

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 financial statements.

 


 

H&Q HEALTHCARE INVESTORS

NOTES TO FINANCIAL STATEMENTS

December 31, 2010

(continued)

 

Other Information

Financial Accounting Standards Board Accounting Standards Codification No. 820, Fair Value Measurements and Disclosures, establishes 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 December 31, 2010 to value the Fund’s net assets:

 

Assets at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

Biotechnology/Biopharmaceuticals

 

—

 

—

 

$

2,670,610

 

$

2,670,610

 

Drug Discovery Technologies

 

—

 

—

 

4,874,746

 

4,874,746

 

Healthcare Services

 

—

 

—

 

5,255,869

 

5,255,869

 

Medical Devices and Diagnostics

 

—

 

—

 

25,013,765

 

25,013,765

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

Biotechnology/Biopharmaceuticals

 

$

107,240,205

 

—

 

—

 

107,240,205

 

Drug Delivery

 

2,554,240

 

—

 

—

 

2,554,240

 

Drug Discovery Technologies

 

—

 

—

 

17

 

17

 

Generic Pharmaceuticals

 

33,476,665

 

—

 

200,201

 

33,676,866

 

Healthcare Services

 

73,302,895

 

—

 

2,222,220

 

75,525,115

 

Medical Devices and Diagnostics

 

87,387,056

 

—

 

169,556

 

87,556,612

 

Pharmaceuticals

 

20,306,001

 

—

 

—

 

20,306,001

 

Mutual Fund

 

12,037,728

 

—

 

—

 

12,037,728

 

Short-Term Investments

 

—

 

$

6,957,000

 

—

 

6,957,000

 

Milestone Interest

 

 

 

 

 

 

 

 

 

Biotechnology/Biopharmaceuticals

 

—

 

—

 

6,262,933

 

6,262,933

 

Other Assets

 

—

 

—

 

1,215,193

 

1,215,193

 

Total

 

$

336,304,790

 

$

6,957,000

 

$

47,885,110

 

$

391,146,900

 

 


 

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, 2010

 

Accrued
discounts/premiums

 

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

 

Net purchases

 

Net sales

 

Net transfers in
(out of) Level 3

 

Balance as of
December 31, 2010

 

Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

814,382

 

—

 

$

12,478

 

$

1,843,750

 

$

—

 

—

 

$

2,670,610

 

Drug Discovery Technologies

 

4,874,746

 

—

 

—

 

—

 

—

 

—

 

4,874,746

 

Healthcare Services

 

5,255,869

 

—

 

—

 

—

 

—

 

—

 

5,255,869

 

Medical Devices and Diagnostics

 

20,020,123

 

—

 

4,469,429

 

524,213

 

—

 

—

 

25,013,765

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

1,180

 

—

 

(1,180

)

—

 

—

 

—

 

0

 

Drug Discovery Technologies

 

17

 

—

 

—

 

—

 

—

 

—

 

17

 

Generic Pharmaceuticals

 

76,845

 

—

 

123,356

 

—

 

—

 

—

 

200,201

 

Healthcare Services

 

2,222,220

 

—

 

—

 

—

 

—

 

—

 

2,222,220

 

Medical Devices and Diagnostics

 

97,193

 

—

 

72,363

 

—

 

—

 

—

 

169,556

 

Milestone Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

6,225,114

 

 

 

37,819

 

—

 

—

 

—

 

6,262,933

 

Other Assets

 

1,266,445

 

 

 

—

 

36,190

 

(87,442

)

 

 

1,215,193

 

Total

 

$

40,854,134

 

—

 

$

4,714,265

 

$

2,404,153

 

$

(87,442

)

$

—

 

$

47,885,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation (depreciation) from investments still held as of December 31, 2010

 

 

 

 

 

 

 

$

4,690,695

 

 

 


 

In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-06, Improving Disclosures about Fair Valuation Measurements (ASU 2010-06). ASU 2010-06 requires new disclosures regarding transfers in and out of Levels 1 and 2 effective for interim and annual reporting periods beginning after December 15, 2009.  For the period ending December 31, 2010, there were no transfers between Levels 1 and 2. ASU 2010-06 will also require additional details regarding Level 3 transaction activity effective for interim and annual periods beginning after December 15, 2010. Management is currently evaluating the impact it will have on its financial statements.

 

Investment Valuation

Investments traded on national securities exchanges or in the over-the-counter market that are National Market System securities are valued at the last sale price or, lacking any sales, at the mean between the last bid and asked prices.  Other over-the-counter securities are valued at the most recent bid prices as obtained from one or more dealers that make markets in the securities. Publicly traded investments for which market quotations are not readily available or whose quoted price may otherwise not reflect fair value, the fair value of convertible preferred, warrants or convertible note interests in private companies, milestone interests and other restricted securities are valued in good faith by the Hambrecht & Quist Capital Management LLC (the “Adviser”) pursuant to valuation policies and procedures approved by the Trustees. Such values are subject to regular oversight and ratification by the Trustees. Because of the uncertainty of fair valuations, these estimated values may differ significantly from the values that would have been used had a ready market for these securities existed, and the differences could be material. Each such fair value determination is based on a consideration of relevant factors. Factors the Adviser considers may include (i) the existence of any contractual restrictions on the disposition of securities; (ii) information obtained from the issuer, 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 a 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. Publicly traded warrants are valued using the Black-Scholes model, which incorporates both observable and unobservable inputs. Short-term investments with maturity of 60 days or less are valued at amortized cost, which approximates fair value.

 

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 12% of the Fund’s net assets at December 31, 2010.

 

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 December 31, 2010. The Fund on its own does not have the right to demand that such securities be registered.

 


 

 

 

 

 

 

 

Carrying

 

 

 

 

 

Acquisition

 

 

 

Value

 

 

 

Security (j)

 

Date

 

Cost

 

per Unit

 

Value

 

Agilix Corporation

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd.

 

11/08/01

 

$

2,495,500

 

$

0.06

 

$

141,809

 

Akorn, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 3/08/11)

 

3/07/06

 

0

 

0.99

 

200,201

 

Athersys, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 6/08/12)

 

6/07/07

 

0

 

0.00

 

0

 

Aveta, Inc.

 

 

 

 

 

 

 

 

 

Common

 

12/21/05

 

3,004,731

 

10.00

 

2,222,220

 

CardioKinetix, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

5/22/08

 

2,377,226

 

0.22

 

762,351

 

Series D Cvt. Pfd.

 

12/10/10

 

781,073

 

0.13

 

800,154

 

Cvt. Promissory Notes

 

12/10/09, 6/03/10

 

354,630

 

1.00

 

354,118

 

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

 

Ceres, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

12/23/98

 

1,502,732

 

6.50

 

2,437,500

 

Series C-1 Cvt. Pfd.

 

3/31/01

 

111,508

 

6.50

 

209,255

 

Series D Cvt. Pfd.

 

3/14/01

 

1,668,294

 

6.50

 

1,820,683

 

Series F Cvt. Pfd.

 

9/05/07

 

268,136

 

6.50

 

265,499

 

Warrants (expiration 9/05/15)

 

9/05/07

 

0

 

0.00

 

0

 

Concentric Medical, Inc.

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd.

 

5/07/02, 1/24/03

 

3,330,988

 

0.52

 

2,523,529

 

Series C Cvt. Pfd.

 

12/19/03

 

1,500,818

 

0.52

 

906,977

 

Series D Cvt. Pfd.

 

9/30/05

 

958,007

 

0.52

 

355,160

 

Series E Cvt. Pfd.

 

12/18/08

 

655,011

 

0.52

 

339,047

 

Elemé Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

7/15/08

 

3,253,243

 

0.01

 

17,242

 

Convertible

 

01/15/10

 

225,813

 

1.00

 

2,212

 

Subordinated Cvt. Promissory Notes

 

12/18/09, 6/04/10

 

569,455

 

1.00

 

5,626

 

Euthymics Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Cvt. Pfd.

 

7/14/10, 9/17/10

 

2,477,061

 

1.00

 

2,470,798

 

Interlace Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

6/10/09

 

2,072,857

 

5.22

 

9,799,365

 

Labcyte Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

7/18/05

 

1,924,893

 

0.52

 

1,920,000

 

MacroGenics, Inc.

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

9/04/08

 

1,002,546

 

0.65

 

199,812

 

Series D Cvt. Pfd. 18 Month Lock-up

 

9/04/08

 

315,748

 

0.00

 

0

 

Magellan Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

11/28/06 - 5/12/09

 

3,117,537

 

1.00

 

3,109,861

 

Warrants (expiration 4/01/19)

 

4/03/09

 

0

 

0.00

 

0

 

Warrants (expiration 5/06/19)

 

5/12/09

 

0

 

0.00

 

0

 

 


 

 

 

 

 

 

 

Carrying

 

 

 

 

 

Acquisition

 

 

 

Value

 

 

 

Security (j)

 

Date

 

Cost

 

per Unit

 

Value

 

Masimo Laboratories, Inc.

 

 

 

 

 

 

 

 

 

Common

 

3/31/98

 

0

 

1.06

 

169,324

 

Medwave, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 8/21/11)

 

8/21/06

 

0

 

0.00

 

0

 

OmniSonics Medical Technologies, Inc.

 

 

 

 

 

 

 

 

 

Series A-1 Cvt. Pfd.

 

10/01/03

 

1,801,555

 

0.001

 

1,548

 

Series B-1 Cvt. Pfd.

 

6/04/07, 11/15/07

 

961,365

 

0.001

 

1,263

 

Common

 

5/24/01, 7/02/07

 

2,409,096

 

0.001

 

93

 

Palyon Medical Corporation

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

4/28/09

 

2,967,403

 

0.16

 

2,211,809

 

PHT Corporation

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

7/23/01

 

4,205,754

 

0.78

 

4,200,000

 

Series E Cvt. Pfd.

 

9/12/03 - 10/14/04

 

941,669

 

0.78

 

939,506

 

Series F Cvt. Pfd.

 

7/21/08

 

122,580

 

0.78

 

116,363

 

Songbird Hearing, Inc.

 

 

 

 

 

 

 

 

 

Common

 

12/14/00

 

3,004,861

 

0.67

 

139

 

Targegen

 

 

 

 

 

 

 

 

 

Milestone Interest

 

07/20/10

 

5,863,346

 

6,262,933.00

 

6,262,933

 

TherOx, Inc.

 

 

 

 

 

 

 

 

 

Series H Cvt. Pfd.

 

9/11/00

 

3,002,748

 

1.66

 

108,181

 

Series I Cvt. Pfd.

 

7/08/05

 

579,958

 

1.66

 

247,939

 

Warrants (expiration 1/26/11)

 

1/26/05

 

0

 

0.00

 

0

 

Warrants (expiration 2/06/11)

 

6/09/04

 

0

 

0.00

 

0

 

Xoft, Inc.

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

3/23/07

 

2,958,518

 

0.74

 

682,187

 

Series E Cvt. Pfd.

 

6/20/08

 

592,532

 

0.74

 

130,719

 

Cvt. Promissory Note

 

6/12/09

 

598,183

 

1.00

 

590,000

 

Cvt. Promissory Note

 

7/1/10, 8/17/10

 

74,237

 

1.00

 

74,237

 

Cvt. Promissory Note

 

10/06/10

 

79,137

 

1.00

 

70,240

 

Warrants (expiration 6/12/14)

 

6/12/09

 

59

 

0.00

 

0

 

Warrants (expiration 6/30/15)

 

7/1/10, 8/17/10

 

7

 

0.00

 

0

 

Zyomyx, Inc.

 

 

 

 

 

 

 

 

 

Common

 

2/19/99 - 7/22/04

 

3,902,233

 

0.25

 

17

 

 

 

 

 

$

68,033,402

 

 

 

$

46,669,917

 

 

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

 


 

Federal Income Tax Cost

At December 31, 2010, the cost of securities for Federal income tax purposes was $372,060,705. The net unrealized gain on securities held by the Fund was $17,871,002, including gross unrealized gain of $62,389,167 and gross unrealized loss of $44,518,165.

 

Affiliated Transactions

An affiliate issuer is a company in which the Fund holds 5% or more of the voting securities. Transactions with such companies during the period ended December 31, 2010 were as follows:

 

Issuer

 

Value on October
1, 2010

 

Purchases

 

Sales

 

Income

 

Value on December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Agilix Corporation

 

$

141,809

 

—

 

$

—

 

$

—

 

$

141,809

 

CardioKinetix, Inc.

 

3,068,236

 

$

426,954

 

—

 

8,987

 

1,916,623

 

Concentric Medical, Inc.

 

4,124,713

 

—

 

—

 

—

 

4,124,713

 

Elemé Medical, Inc.

 

1,684,430

 

27,019

 

—

 

22,620

 

25,080

 

Interlace Medical, Inc.

 

2,065,000

 

—

 

—

 

—

 

9,799,365

 

Medwave, Inc.

 

1,661

 

—

 

—

 

—

 

1,744

 

Palyon Medical Corporation

 

2,211,809

 

—

 

—

 

—

 

2,211,809

 

PHT Corporation

 

5,255,869

 

—

 

—

 

—

 

5,255,869

 

 

 

$

18,553,527

 

$

453,973

 

$

—

 

$

31,607

 

$

23,477,012

 

 


 

Item 2.  Controls and Procedures.

 

(a.)          The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-Q is (i) accumulated and communicated to the investment company’s management, including its certifying officers, to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

(b.)              There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits.

 

Separate certifications for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)).  Filed herewith.

 


 

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)

H&Q Healthcare Investors

 

 

 

 

By (Signature and Title)

/s/ Daniel R. Omstead

 

 

Daniel R. Omstead, President

 

 

 

 

Date

2/28/2011

 

 

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

2/28/2011