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

811-06565

 

 

H&Q Life Sciences 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:

6/30/10

 

 



 

Item 1.  Schedule of Investments.

 



 

H&Q LIFE SCIENCES INVESTORS

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(Unaudited)

 

SHARES

 

 

 

VALUE

 

 

 

CONVERTIBLE SECURITIES AND WARRANTS — 10.1% of Net Assets

 

 

 

 

 

Convertible Preferred (Restricted)(a) (b) — 9.5%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 1.1%

 

 

 

204,275

 

MacroGenics, Inc. Series D

 

$

133,208

 

50,145

 

MacroGenics, Inc. Series D 18 Month Lock-up

 

0

 

1,415,385

 

TargeGen, Inc. Series C

 

1,840,000

 

407,825

 

TargeGen, Inc. Series D

 

530,173

 

 

 

 

 

2,503,381

 

 

 

Drug Discovery Technologies — 1.4%

 

 

 

1,587,302

 

Agilix Corporation Series B (c)

 

94,540

 

250,000

 

Ceres, Inc. Series C

 

1,625,000

 

21,462

 

Ceres, Inc. Series C-1

 

139,503

 

175,540

 

Ceres, Inc. Series D

 

1,141,010

 

28,385

 

Ceres, Inc. Series F

 

184,502

 

5,677

 

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

 

0

 

 

 

 

 

3,184,555

 

 

 

Healthcare Services — 1.5%

 

 

 

3,589,744

 

PHT Corporation Series D (c)

 

2,800,000

 

802,996

 

PHT Corporation Series E (c)

 

626,337

 

99,455

 

PHT Corporation Series F (c)

 

77,575

 

 

 

 

 

3,503,912

 

 

 

Medical Devices and Diagnostics — 5.5%

 

 

 

2,379,916

 

CardioKinetix, Inc. Series C

 

1,640,000

 

N/A

 

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

 

0

 

N/A

 

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

 

0

 

3,235,293

 

Concentric Medical, Inc. Series B (c)

 

1,682,352

 

1,162,790

 

Concentric Medical, Inc. Series C (c)

 

604,651

 

455,333

 

Concentric Medical, Inc. Series D (c)

 

236,773

 

453,094

 

Concentric Medical, Inc. Series E (c)

 

235,609

 

1,198,193

 

Elemé Medical, Inc. Series C

 

644,628

 

1,304,545

 

Interlace Medical, Inc. Series C

 

1,435,000

 

2,446,016

 

Labcyte Inc. Series C

 

1,280,000

 

2,161,090

 

Magellan Biosciences, Inc. Series A

 

2,161,090

 

98,824

 

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

 

0

 

7,877

 

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

 

0

 

1,031,992

 

OmniSonics Medical Technologies, Inc. Series A-1

 

1,031

 

877,747

 

OmniSonics Medical Technologies, Inc. Series B-1

 

877

 

9,606,373

 

Palyon Medical Corporation Series A (c)

 

1,537,020

 

43,478

 

TherOx, Inc. Series H

 

72,122

 

99,646

 

TherOx, Inc. Series I

 

165,293

 

2,813

 

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

 

0

 

5,427

 

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

 

0

 

640,625

 

Xoft, Inc. Series D

 

960,937

 

122,754

 

Xoft, Inc. Series E

 

184,131

 

 



 

SHARES

 

 

 

VALUE

 

 

 

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

 

 

 

N/A

 

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

 

$

0

 

 

 

 

 

12,841,514

 

 

 

 

 

22,033,362

 

 

PRINCIPAL AMOUNT

 

 

 

 

 

 

 

Convertible Notes — 0.6%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 0.1%

 

 

 

$

5,125

 

Euthymics Bioscience, Inc., Cvt. Promissory Note, 8.00% due 2010 (Restricted) (a)

 

5,125

 

152,404

 

TargeGen, Inc., Cvt Promissory Notes, 8.00% due 2010 (Restricted) (a)

 

152,404

 

 

 

 

 

157,529

 

 

 

Drug Discovery Technologies — 0.0%

 

 

 

700,000

 

deCODE Genetics, Inc., 3.50% due 2011

 

13,650

 

 

 

Medical Devices and Diagnostics — 0.5%

 

 

 

369,123

 

CardioKinetix, Inc., Cvt. Promissory Notes, 4.25% due 2010 (Restricted) (a)

 

369,123

 

525,908

 

Elemé Medical, Inc., Subordinated Cvt. Promissory Notes, 10.50% due 2012 (Restricted) (a)

 

525,908

 

410,000

 

Xoft, Inc., Cvt. Promissory Note, 10.00% due 2010 (Restricted) (a)

 

410,000

 

 

 

 

 

1,305,031

 

 

 

 

 

1,476,210

 

 

 

TOTAL CONVERTIBLE SECURITIES AND WARRANTS

(Cost $34,625,118)

 

23,509,572

 

 

SHARES

 

 

 

 

 

 

 

COMMON STOCKS AND WARRANTS — 88.9%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 43.9%

 

 

 

135,564

 

Acorda Therapeutics, Inc. (b)

 

4,217,396

 

837,744

 

Adolor Corporation (b)

 

913,141

 

257,127

 

Affymax, Inc. (b)

 

1,537,619

 

102,610

 

Alexion Pharmaceuticals, Inc. (b)

 

5,252,606

 

191,758

 

Alnylam Pharmaceuticals, Inc. (b)

 

2,880,205

 

184,764

 

AMAG Pharmaceuticals, Inc. (b)

 

6,346,643

 

169,027

 

Amgen Inc. (b) (i)

 

8,890,820

 

144,074

 

Amylin Pharmaceuticals, Inc. (b)

 

2,708,591

 

3,939,544

 

Antisoma plc (b) (e)

 

341,849

 

198,750

 

ARIAD Pharmaceuticals, Inc. (b)

 

560,475

 

82,000

 

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

 

0

 

151,000

 

BioMarin Pharmaceutical Inc. (b)

 

2,862,960

 

25,000

 

Cadence Pharmaceuticals, Inc. (b)

 

176,830

 

 



 

SHARES

 

 

 

VALUE

 

 

 

Biotechnologies/Biopharmaceuticals — continued

 

 

 

218,696

 

Celgene Corporation (b)

 

$

11,114,131

 

100,153

 

Cephalon, Inc. (b)

 

5,683,683

 

174,224

 

Cornerstone Therapeutics Inc. (b)

 

1,026,179

 

203,897

 

Cubist Pharmaceuticals, Inc. (b)

 

4,200,278

 

98,000

 

Curis, Inc. (b)

 

136,220

 

33,620

 

Dendreon Corporation (b)

 

1,086,935

 

94,698

 

Genzyme Corporation (b)

 

4,807,818

 

193,100

 

Gilead Sciences, Inc. (b)

 

6,619,468

 

176,000

 

Human Genome Sciences, Inc. (b)

 

3,988,160

 

133,245

 

InterMune, Inc. (b)

 

1,245,841

 

360,400

 

Isis Pharmaceuticals, Inc. (b)

 

3,449,028

 

218,935

 

Martek Biosciences Corporation (b)

 

5,190,949

 

85,000

 

Momenta Pharmaceuticals, Inc. (b)

 

1,042,100

 

115,200

 

Onyx Pharmaceuticals, Inc. (b)

 

2,487,168

 

145,300

 

Orexigen Therapeutics, Inc. (b)

 

610,260

 

113,086

 

Regeneron Pharmaceuticals, Inc. (b)

 

2,524,080

 

635,098

 

Telik, Inc. (b)

 

495,376

 

208,148

 

Vertex Pharmaceuticals Inc. (b)

 

6,848,069

 

72,000

 

VIVUS, Inc. (b) (i)

 

691,200

 

271,447

 

XenoPort, Inc. (b)

 

2,662,895

 

 

 

 

 

102,598,973

 

 

 

Drug Delivery — 3.5%

 

 

 

283,452

 

Alkermes, Inc. (b)

 

3,528,977

 

260,000

 

DepoMed, Inc. (b)

 

728,000

 

1,033,690

 

DURECT Corporation (b)

 

2,511,867

 

97,000

 

Nektar Therapeutics (b)

 

1,173,700

 

199,514

 

Penwest Pharmaceuticals Co. warrants (Restricted, expiration 3/11/13) (a) (b)

 

201,509

 

 

 

 

 

8,144,053

 

 

 

Drug Discovery Technologies — 3.5%

 

 

 

7,627

 

Clinical Data, Inc. (b)

 

94,880

 

162,288

 

Clinical Data, Inc. CVR (Restricted) (a) (b) (f)

 

18,977

 

315,071

 

Eurand N.V. (b)

 

3,053,038

 

10,958

 

Furiex Pharmaceuticals, Inc. (b)

 

111,333

 

182,270

 

Incyte Corporation (b)

 

2,017,729

 

1,601,039

 

MZT Holdings, Inc. (b) (c)

 

51,233

 

1,846,154

 

MZT Holdings, Inc. warrants (Restricted, expiration 1/17/11) (a) (b) (c)

 

0

 

952,381

 

MZT Holdings, Inc. warrants (Restricted, expiration 1/22/12) (a) (b) (c)

 

0

 

519,595

 

Neurocrine Biosciences, Inc. (b)

 

2,909,732

 

46

 

Zyomyx, Inc. (Restricted) (a) (b)

 

12

 

 

 

 

 

8,256,934

 

 



 

SHARES

 

 

 

VALUE

 

 

 

Generic Pharmaceuticals — 10.1%

 

 

 

1,492,833

 

Akorn, Inc. (b)

 

$

4,433,714

 

108,889

 

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

 

17,422

 

232,516

 

Impax Laboratories, Inc. (b)

 

4,431,755

 

182,386

 

Mylan Inc. (b)

 

3,107,858

 

60,245

 

Perrigo Company (i)

 

3,558,672

 

152,546

 

Teva Pharmaceutical Industries, Ltd. (g)

 

7,930,867

 

 

 

 

 

23,480,288

 

 

 

Healthcare Services — 6.9%

 

 

 

312,500

 

Addus HomeCare Corporation (b)

 

1,871,875

 

55,910

 

Aetna Inc.

 

1,474,906

 

148,148

 

Aveta, Inc. (Restricted) (a) (h)

 

1,481,480

 

296,000

 

CardioNet, Inc. (b)

 

1,622,080

 

175,788

 

Pharmaceutical Product Development, Inc.

 

4,466,773

 

124,217

 

VCA Antech, Inc. (b)

 

3,075,613

 

44,450

 

WellPoint, Inc. (b)

 

2,174,938

 

 

 

 

 

16,167,665

 

 

 

Medical Devices and Diagnostics — 14.8%

 

 

 

284,302

 

Align Technology, Inc. (b)

 

4,227,571

 

85,809

 

Gen-Probe Inc. (b)

 

3,897,445

 

237,544

 

Hologic, Inc. (b)

 

3,308,988

 

73,691

 

IDEXX Laboratories, Inc. (b)

 

4,487,782

 

171,207

 

Illumina, Inc. (b)

 

7,452,641

 

122,594

 

Inverness Medical Innovations, Inc. (b)

 

3,268,356

 

61,014

 

Life Technologies Corporation (b)

 

2,882,911

 

130,000

 

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

 

51,382

 

447,080

 

Medwave, Inc. (b)

 

2,190

 

111,770

 

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

 

0

 

151,430

 

Myriad Genetics, Inc. (b)

 

2,263,878

 

62,005

 

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

 

62

 

139

 

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

 

93

 

53,746

 

Stryker Corporation

 

2,690,525

 

 

 

 

 

34,533,824

 

 

 

Pharmaceuticals — 6.2%

 

 

 

56,511

 

Endo Pharmaceuticals Holdings Inc. (b)

 

1,233,070

 

88,431

 

Forest Laboratories, Inc. (b)

 

2,425,663

 

57,839

 

Pharmasset, Inc. (b)

 

1,581,318

 

63,868

 

Shire plc (g)

 

3,920,218

 

338,000

 

Somaxon Pharmaceuticals, Inc. (b)

 

1,216,800

 

175,694

 

Warner Chilcott plc (b)

 

4,014,608

 

 

 

 

 

14,391,677

 

 

 

TOTAL COMMON STOCKS AND WARRANTS

(Cost $237,281,731)

 

207,573,414

 

 



 

PRINCIPAL
AMOUNT

 

 

 

VALUE

 

 

 

SHORT-TERM INVESTMENT — 1.1%

 

 

 

$

2,633,000

 

Repurchase Agreement, State Street Bank and Trust Co., repurchase value $2,633,000 (collateralized by U.S. Treasury Note 2.5%, 04/30/15, market value $2,689,434); 0.0% due 07/01/10

 

$

2,633,000

 

 

 

TOTAL SHORT-TERM INVESTMENTS

(Cost $2,633,000)

 

2,633,000

 

 

 

TOTAL INVESTMENTS BEFORE OUTSTANDING OPTIONS WRITTEN — 100.1%

(Cost $274,539,849)

 

233,715,986

 

 

NUMBER OF
CONTRACTS
(100 SHARES
EACH)

 

 

 

 

 

 

 

CALL OPTION CONTRACTS WRITTEN — 0.0%

 

 

 

172

 

Amgen, Inc., strike @ 57.5, expires Jul - 2010

 

(1,720

)

720

 

VIVUS, Inc., strike @ 15, expires Jul - 2010

 

(57,600

)

 

 

TOTAL CALL OPTION CONTRACTS WRITTEN

(Premiums received $186,599)

 

(59,320

)

 

 

TOTAL INVESTMENTS NET OF OUTSTANDING OPTIONS WRITTEN — 100.1%

(Cost $274,353,250)

 

233,656,666

 

 

 

OTHER LIABILITIES IN EXCESS OF ASSETS - (0.1%)

 

(349,557

)

 

 

NET ASSETS - 100%

 

$

233,307,109

 

 


(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 $7,946,090).

(d)

Number of warrants to be determined at a future date.

(e)

Foreign security.

(f)

Contingent Value Rights

(g)

American Depositary Receipt.

(h)

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.

(i)

A portion of security is pledged as collateral for call options written.

 



 

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 listed below:

 

·      Level 1 — quoted prices in active markets for identical investments

 

·      Level 2 — prices determined using other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

·      Level 3 — 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, 2010 to value the Fund’s net assets:

 



 

Assets at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

 

 

$

2,660,910

 

$

2,660,910

 

 

 

 

 

Drug Discovery Technologies

 

 

$

13,650

 

3,184,555

 

3,198,205

 

 

 

 

 

Healthcare Services

 

 

 

3,503,912

 

3,503,912

 

 

 

 

 

Medical Devices and Diagnostics

 

 

 

14,146,545

 

14,146,545

 

 

 

 

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

102,598,973

 

 

 

102,598,973

 

 

 

 

 

Drug Delivery

 

7,942,544

 

 

201,509

 

8,144,053

 

 

 

 

 

Drug Discovery Technologies

 

8,237,945

 

 

18,989

 

8,256,934

 

 

 

 

 

Generic Pharmaceuticals

 

23,462,866

 

 

17,422

 

23,480,288

 

 

 

 

 

Healthcare Services

 

14,686,185

 

 

1,481,480

 

16,167,665

 

 

 

 

 

Medical Devices and Diagnostics

 

34,482,287

 

 

51,537

 

34,533,824

 

 

 

 

 

Pharmaceuticals

 

14,391,677

 

 

 

14,391,677

 

 

 

 

 

Short-Term Investments

 

 

2,633,000

 

 

2,633,000

 

 

 

 

 

Other Assets

 

 

 

394,584

 

394,584

 

 

 

 

 

Total

 

$

205,802,477

 

$

2,646,650

 

$

25,661,443

 

$

234,110,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

Option Contracts Written

 

$

 

$

 

$

(59,320

)

$

(59,320

)

 

 

 

 

 

Level 3 Assets

 

Balance as of
September 30, 2009

 

Accrued
discounts/premiums

 

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

 

Net purchases/sales

 

Net transfers in
(out of) Level 3

 

Balance as of June
30, 2010

 

Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

1,811,330

 

 

$

763,346

 

$

86,234

 

 

$

2,660,910

 

Drug Discovery Technologies

 

3,184,555

 

 

 

 

 

3,184,555

 

Healthcare Services

 

3,503,912

 

 

 

 

 

3,503,912

 

Medical Devices and Diagnostics

 

18,766,961

 

 

(2,786,525

)

(1,833,891

)

 

14,146,545

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

187,738

 

 

167,503

 

(355,241

)

 

 

Drug Delivery

 

185,548

 

 

15,961

 

 

 

201,509

 

Drug Discovery Technologies

 

25,442

 

 

(6,453

)

 

 

18,989

 

Generic Pharmaceuticals

 

16,333

 

 

1,089

 

 

 

17,422

 

Healthcare Services

 

1,481,480

 

 

 

 

 

1,481,480

 

Medical Devices and Diagnostics

 

56,419

 

 

(4,882

)

 

 

51,537

 

Other Assets

 

618,509

 

 

429,443

 

(653,368

)

 

394,584

 

Total

 

$

29,838,227

 

$

 

$

(1,420,518

)

$

(2,756,266

)

$

 

$

25,661,443

 

 

Level 3 Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Contracts Written

 

$

 

$

 

$

127,279

 

(186,599

)

$

 

$

(59,320

)

 

 

 

 

 

 

 

Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2010

 

 

 

$

(3,059,530

)

 

In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-06, Improving Disclosures about Fair Value 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 ended June 30, 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 effect that this additional requirement will have on the Fund’s 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 and the fair value of venture capital and other restricted securities are valued in good faith by 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; and (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies.  Short-term investments with maturity of 60 days or less are valued at amortized cost, which approximates fair value.

 

Venture Capital and Other Restricted Securities — The Fund may invest in venture capital and other restricted securities if these securities would currently comprise 40% or less of net assets.  The value of these securities represents 11% of the Fund’s net assets at June 30, 2010.  The following table details the acquisition date, cost, carrying value per unit, and value of the Fund’s venture capital and other restricted securities at June 30, 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

 

$

1,663,667

 

$

0.06

 

$

94,540

 

Akorn, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 3/08/11)

 

3/07/06

 

0

 

0.16

 

17,422

 

Athersys, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 6/08/12)

 

6/07/07

 

0

 

0.00

 

0

 

Aveta, Inc.

 

 

 

 

 

 

 

 

 

Common

 

12/21/05

 

2,003,155

 

10.00

 

1,481,480

 

CardioKinetix, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

5/22/08

 

1,645,087

 

0.69

 

1,640,000

 

Cvt. Promissory Notes

 

12/10/09 - 6/03/10

 

373,947

 

1.00

 

369,123

 

Warrants (expiration 12/11/19)

 

12/10/09, 2/11/10

 

123

 

0.00

 

0

 

Warrants (expiration 6/30/20)

 

6/03/10

 

62

 

0.00

 

0

 

Ceres, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

12/23/98

 

1,000,950

 

6.50

 

1,625,000

 

Series C-1 Cvt. Pfd.

 

3/31/01

 

74,339

 

6.50

 

139,503

 

Series D Cvt. Pfd.

 

3/14/01

 

1,046,887

 

6.50

 

1,141,010

 

Series F Cvt. Pfd.

 

9/05/07

 

186,335

 

6.50

 

184,502

 

Warrants (expiration 9/05/15)

 

9/05/07

 

0

 

0.00

 

0

 

Clinical Data, Inc.

 

 

 

 

 

 

 

 

 

Contingent Value Rights

 

5/28/09

 

0

 

0.12

 

18,977

 

Concentric Medical, Inc.

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd.

 

5/07/02, 1/24/03

 

2,220,659

 

0.52

 

1,682,352

 

Series C Cvt. Pfd.

 

12/19/03

 

1,000,545

 

0.52

 

604,651

 

Series D Cvt. Pfd.

 

9/30/05

 

638,671

 

0.52

 

236,773

 

Series E Cvt. Pfd.

 

12/18/08

 

455,177

 

0.52

 

235,609

 

Elemé Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

7/15/08

 

2,260,641

 

0.54

 

644,628

 

Subordinated Cvt. Promissory Notes

 

12/18/09 - 6/04/10

 

533,868

 

1.00

 

525,908

 

Euthymics Bioscience, Inc.

 

 

 

 

 

 

 

 

 

Cvt. Promissory Note

 

5/14/2010

 

5,125

 

1.00

 

5,125

 

Interlace Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

6/10/09

 

1,440,459

 

1.10

 

1,435,000

 

Labcyte Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

7/18/05

 

1,283,262

 

0.52

 

1,280,000

 

MacroGenics, Inc.

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

9/04/08

 

668,364

 

0.65

 

133,208

 

Series D Cvt. Pfd. 18 Month Lock-up

 

9/04/08

 

210,499

 

0.00

 

0

 

Magellan Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

11/28/06 - 5/12/09

 

2,166,424

 

1.00

 

2,161,090

 

Warrants (expiration 4/01/19)

 

4/03/09

 

0

 

0.00

 

0

 

Warrants (expiration 5/06/19)

 

5/12/09

 

0

 

0.00

 

0

 

Masimo Laboratories, Inc.

 

 

 

 

 

 

 

 

 

Common

 

3/31/98

 

0

 

0.40

 

51,382

 

Medwave, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 8/21/11)

 

8/21/06

 

0

 

0.00

 

0

 

MZT Holdings, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 1/17/11)

 

1/17/06

 

0

 

0.00

 

0

 

Warrants (expiration 1/22/12)

 

1/21/06

 

0

 

0.00

 

0

 

 



 

 

 

 

 

 

 

Carrying

 

 

 

 

 

Acquisition

 

 

 

Value

 

 

 

Security (j)

 

Date

 

Cost

 

per Unit

 

Value

 

OmniSonics Medical Technologies, Inc.

 

 

 

 

 

 

 

 

 

Series A-1 Cvt. Pfd.

 

10/01/03

 

$

1,201,037

 

$

0.001

 

$

1,031

 

Series B-1 Cvt. Pfd.

 

6/04/07, 11/15/07

 

668,067

 

0.001

 

877

 

Common

 

5/24/01, 7/02/07

 

1,606,361

 

0.001

 

62

 

Palyon Medical Corporation

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

4/28/09

 

2,062,094

 

0.16

 

1,537,020

 

Penwest Pharmaceuticals Co.

 

 

 

 

 

 

 

 

 

Warrants (expiration 3/11/13)

 

3/11/08

 

0

 

1.01

 

201,509

 

PHT Corporation

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

7/23/01

 

2,803,841

 

0.78

 

2,800,000

 

Series E Cvt. Pfd.

 

9/12/03-10/14/04

 

627,472

 

0.78

 

626,337

 

Series F Cvt. Pfd.

 

7/21/08

 

81,720

 

0.78

 

77,575

 

Songbird Hearing, Inc.

 

 

 

 

 

 

 

 

 

Common

 

12/14/00

 

2,003,239

 

0.67

 

93

 

TargeGen, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

8/30/05

 

1,842,330

 

1.30

 

1,840,000

 

Series D Cvt. Pfd.

 

5/08/07

 

531,198

 

1.30

 

530,173

 

Cvt. Promissory Notes

 

9/08/09, 10/09/09

 

157,312

 

1.00

 

152,404

 

TherOx, Inc.

 

 

 

 

 

 

 

 

 

Series H Cvt. Pfd.

 

9/11/00

 

2,001,787

 

1.66

 

72,122

 

Series I Cvt. Pfd.

 

7/08/05

 

386,640

 

1.66

 

165,293

 

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

 

2,055,919

 

1.50

 

960,937

 

Series E Cvt. Pfd.

 

6/20/08

 

411,757

 

1.50

 

184,131

 

Cvt. Promissory Note

 

6/12/09

 

415,686

 

1.00

 

410,000

 

Warrants (expiration 6/12/14)

 

6/12/09

 

41

 

0.00

 

0

 

Zyomyx, Inc.

 

 

 

 

 

 

 

 

 

Common

 

2/19/99 - 7/22/04

 

2,601,013

 

0.25

 

12

 

 

 

 

 

$

42,335,760

 

 

 

$

25,266,859

 

 


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

 



 

Federal Income Tax Cost - At June 30, 2010, the total cost of securities for Federal income tax purposes was $274,353,250. The net unrealized loss on securities held by the Fund was $40,696,584, including gross unrealized gain of $18,628,112 and gross unrealized loss of $59,324,696.

 

Affiliate 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 June 30, 2010 were as follows:

 

Issuer

 

Value on October 1,
2009

 

Purchases

 

Sales

 

Income

 

Value on June 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Agilix Corporation

 

$

94,540

 

$

 

$

 

$

 

$

94,540

 

Concentric Medical, Inc.

 

5,306,510

 

 

 

 

2,759,385

 

MZT Holdings, Inc.

 

48,031

 

 

 

 

51,233

 

Palyon Medical Corporation

 

2,050,000

 

 

 

 

1,537,020

 

PHT Corporation

 

3,503,912

 

 

 

 

3,503,912

 

 

 

$

11,002,993

 

$

 

$

 

$

 

$

7,946,090

 

 



 

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 Life Sciences Investors

 

 

 

By (Signature and Title)

/s/ Daniel R. Omstead

 

 

Daniel R. Omstead, President

 

 

 

Date

8/27/2010

 

 

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

8/27/2010