THQ abrdn Healthcare Opportunities Fund

Semiannual Report

Tekla Healthcare Opportunities Fund

March 31, 2023

Tekla Healthcare Opportunities Fund

Distribution policy: The Fund has implemented a managed distribution policy (the Policy) that provides for monthly distributions at a rate set by the Board of Trustees. Under the current Policy, the Fund intends to make monthly distributions at a rate of $0.1125 per share to shareholders of record. The Policy would result in a return of capital to shareholders if the amount of the distribution exceeds the Fund's net investment income and realized capital gains. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income."

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

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

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

Tekla Healthcare Opportunities Fund

Dear Shareholders,

In our view, the healthcare sector represents an attractive sector of the economy in which to invest over any reasonable timeframe and in particular in the current uncertain macro-environment. The sector has performed well over intermediate and long timeframes and is generally thought of as defensive. In addition, the sector is quite diverse, consisting of at least ten subsectors. We like the fact that these subsectors are diversified and often perform differently in divergent macroeconomic environments. Therefore, we can almost always identify a subsector which will benefit from, and hopefully outperform, in the current environment.

Macroeconomics provides much of the uncertainty currently. There is much debate about whether a U.S. and/or worldwide recession looms. Multi-decade highs in interest rates and inflation, an inverted yield curve and a potential housing slump after a Covid associated boom certainly raise the likelihood of a recession in the next year. But historically low unemployment, adequate real 4Q22 GDP growth and a favorable stock market argue against. Our view tips toward the likelihood of a modest recession sometime in the next year. But we have found over a career that while trying to time the market can be difficult, attempting to predict the timing of the next recession is about impossible. As Paul Samuelson once joked, "the stock market has predicted nine of the last five recessions". We think investment in healthcare could serve to blunt the potential impact of any recession.

Healthcare, along with consumer staples and utilities, are generally thought of as defensive. These sectors tend to address basic non-cyclical needs and therefore tend to deliver consistent earnings and stable dividends. As a sector that addresses the wellness of the population, healthcare spending will be among the last things people give up as money gets tight.

Healthcare can certainly exhibit ups and downs but has performed well over the long-term as can be seen in the following table. Over multiple timeframes, the S&P Composite 1500^® Healthcare Index* (S15HLTH), representing the broad healthcare space, has performed well in comparison to the S&P 500^® Index* (SPX), the broad market standard against which many or most investment approaches are typically compared.

We are particularly attracted to the diversity of investment opportunity provided by individual healthcare subsectors. These subsectors include pharmaceuticals, biotechnology, managed care (i.e., MCOs), providers (hospitals), medical technology (medtech), life science tools (LST), distributors, healthcare services and healthcare information technology.

Varying macroeconomic situations often influence our subsector allocation decision making. For example, when investment capital is freely available, speculation typically abounds. At

such times, innovative, pre-profit or even pre-revenue companies in the biotech sector can be good investments. By contrast, when interest rates are high and capital is less available, profitable growing companies, including pharmaceuticals, can be better investments. At the moment, there is limited availability of capital. As such we are tending to be underweight not-yet profitable biotech companies and overweight profitable pharmaceuticals.

In an analogous way, when jobs are plentiful and wages are growing, individuals tend to seek more elective medical procedures. In this case, there is more demand for medical products and hospitals are busier. In this situation, managed care companies, which pay for medical procedures, tend to be more challenged. By contrast, when jobs are tight, demand for medical products and services often declines while managed care companies have lessened reimbursement demands and often perform better. At the moment, utilization of products and services is generally up, so we tend to be overweight medtech and hospitals and underweight managed care.

In large part, our management approach is to bias our subsector allocations based on macro factors while using our knowledge of associated individual companies to create a portfolio that is likely to perform well. In general, we seek to produce a solid risk adjusted performance that allows the Fund to continue to deliver the distributions to which shareholders have become accustomed. We summarize some of the macro factors that currently shape our views:

Clinical and commercial progress is always a key contributor to sentiment toward the healthcare area. In the last several years, particularly lately, we have seen some interesting developments that look to be creating enormous opportunities to address the needs of large groups of older patients. One example is the recent approval of Leqembi, a drug that slows the progression of Alzheimer's disease. This drug reduces the presence of beta amyloid plaque in the brain and has demonstrated an ability to slow the progression of Alzheimer's. Several other drugs are in late-stage development in the Alzheimer's disease space. The Alzheimer's Association reports that about one in every nine people over 65 have Alzheimer's.

Diabetes and obesity represent two of the biggest health issues we have seen in recent decades. Each of these conditions represents enormous challenges for the healthcare system. Approximately one in ten Americans have diabetes and approximately 40% of American adults over 20 are obese. This twin condition is often referred to as diabesity. In the last year or two we have seen the development of several drugs (i.e., Mounjaro, Wegovy and Ozempic) in the GLP 1 class that have had impact in one or both of these conditions. This class of drugs has the potential to dramatically impact diabesity with a market size that could reach $100B.

There has also been notable progress in the area of a condition called fatty liver which may affect 25% of the adult American population and particularly in an associated liver condition NASH (Non Alcoholic Steatohepatitus) which is thought to effect up to 6.5% of American adults with fatty liver. After many years and multiple attempts, we have, in the last year, seen

a positive clinical trial (i.e., the MAESTRO_NASH study by Madrigal Pharmaceuticals, Inc.). This Phase III study showed, for the first time, statistically significant benefits in both NASH resolution and fibrosis improvement in a pivotal study. It has reignited the interests of both investors and biopharma companies to NASH, which is a potentially multi-billion dollar market that has heretofore seen few, if any, positive developments.

Merger & Acquisition (M&A) activity also contributes to sentiment in the healthcare space, particularly in the biotech subsector. It is notable that M&A activity is up as we write this letter in late April 2023. Importantly we have recently seen acquisitions of both large (i.e., Horizon Therapeutics plc and Seagen, Inc.) and small (i.e., Prometheus Biosciences, Inc., Bellus Health, Inc., Provention Bio, Inc., Concert Pharmaceuticals, Inc. and CinCor Pharma, Inc.) biotech companies. We are hopeful that this is the start of a longer M&A trend.

On the Regulatory/Legislative side, we note that In August 2022, President Biden signed into law the Inflation Reduction Act (IRA), which contains several material changes to Medicare reimbursement and drug pricing policies. While some aspects of the law may serve to lower patients' financial burden while also increasing access to medicines, such as a cap on Part D out-of-pocket spending, other portions may alter how and which drugs are developed by the biopharma industry. Most notably, beginning in 2026 Medicare will be able to "negotiate" prices for an increasing number of drugs with high overall Medicare spend that have been on the market for a certain length of time. This may result in companies re-evaluating the costs, risks and benefits of bringing certain medicines to market. Importantly, we may see a shift towards the development of more complex biologic drugs, as the IRA provides 13 years of protection prior to negotiation eligibility compared to only 9 years for oral "small molecule" drugs. Another provision of the law imposes a penalty on any company raising the price of their existing drugs more than the rate of inflation, although the impact of this may be limited given that annual price increases have moderated in recent years. The market has taken these developments in stride, but there may be increasing focus on the impacts of the law once CMS releases the initial list of negotiation-eligible drugs later in 2023.

Overall, despite a challenging macro environment that seems to have held the market back a bit, we see more positives than negatives in the above developments. In the short-term we see the defensive characteristics of healthcare as attractive. In the intermediate and longer-term, we see the underlying fundamentals combined with favorable U.S. population demographics compelling in comparison to most other sectors.

Be well,

Daniel R. Omstead
President and Portfolio Manager

Fund Essentials

Objective of the Fund

The Fund's investment objective is to seek current income and long-term capital appreciation.

Description of the Fund

Tekla Healthcare Opportunities Fund (THQ) is a non-diversified closed-end healthcare fund traded on the New York Stock Exchange under the ticker THQ. THQ employs a versatile growth and income investment strategy investing across all healthcare sub-sectors and across a company's full capital structure.

Investment Philosophy

Tekla Capital Management LLC, the Investment Adviser to the Fund, believes that:

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

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

•  Investment opportunity spans 11 sub-sectors including biotechnology, healthcare technology, managed care and healthcare REITs

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

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

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

³ As a percentage of managed assets.

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

Asset Allocation as of 3/31/23

Sector Diversification as of 3/31/23

This data is subject to change on a daily basis.

Largest Holdings by Issuer

(Excludes Short-Term Investments)

Fund Performance

Fund and Benchmark Performance and Other Influencing Factors

THQ is a closed-end fund which invests predominantly in healthcare companies. Subject to regular consideration, the Trustees of THQ have instituted a policy of making monthly distributions to shareholders.

The Fund invests in equity and debt of healthcare companies. The Fund seeks to benefit from the earnings growth of the healthcare industry while capturing income. Income is derived from multiple sources including equity dividends, fixed income coupons, real estate investment trust distributions, convertible securities coupons and selective equity covered call writing premiums. In order to accomplish its objectives, THQ often holds a majority of its assets in equities. Allocation of assets to various healthcare sectors can vary significantly as can the percentage of the portfolio which is overwritten.

The Fund may invest up to 20 percent of managed assets, measured at the time of investment, in the debt of healthcare companies. It may also invest up to 25 percent of

managed assets in healthcare REITs. The Fund may also hold up to 30 percent of managed assets in convertible securities and may invest a portion of its assets in restricted securities. In order to generate additional "current" income THQ often sells (or writes) calls against a material portion of its equity assets. The portion of equity assets overwritten can vary, but usually represents less than 20 percent of managed assets. At times, the overwritten portion of assets is materially less than 20 percent of managed assets. The use of covered calls is intended to produce "current" income but may limit upside in bullish markets. The Fund may also use leverage to enhance yield. The Fund may incur leverage up to 20 percent of managed assets at the time of borrowing. "Managed Assets" means the total assets of the Fund (including any assets attributable to borrowings for investment purposes) minus the sum of the Fund's accrued liabilities (other than liabilities representing borrowings for investment purposes).

The Fund considers investments in companies of all sizes and in all healthcare subsectors, including, but not limited to, biotechnology, pharmaceuticals, healthcare equipment, healthcare supplies, life science tools and services, healthcare distributors, managed healthcare, healthcare technology and healthcare facilities. The Fund emphasizes innovation, investing both in public and pre-public venture companies. The Fund considers its pre-public and other restricted investments to be a differentiating characteristic. Among the various healthcare subsectors, THQ has considered the biotechnology subsector, including both pre-public and public companies, to be a key contributor to the healthcare sector. The Fund holds biotech assets, including both public and pre-public, often representing 15-30% of net assets.

There is no commonly published index which matches the investment strategy of THQ. With respect to the Fund's equity investments, THQ often holds 15-30% of its managed assets, measured at the time of investment, in biotechnology. The S15HLTH consists of approximately 180 companies representing most or all of the healthcare subsectors in which THQ typically invests; biotechnology often represents 15-20% of this index. By contrast, the NASDAQ Biotechnology Index^®* (NBI), which contains approximately 270 constituents, is much more narrowly constructed. The vast majority of this index is comprised of biotechnology, pharmaceutical and life science tools companies. In recent years, biotechnology has often represented 72-82% of the NBI. Neither the S15HLTH nor NBI indices contain any material amount of pre-public company assets.

The S&P 500^® Health Care Corporate Bond Index* (SP5HCBIT) measures the performance of U.S. corporate debt issued by constituents in the healthcare sector of the SPX. This index is generally reflective of the debt assets in which THQ invests though the Fund invests in the SPX debt components as well as those of smaller capitalization companies.

The S&P Composite 1500^® Health Care REITs Index* (S15HCRT) is comprised of U.S. publicly traded REITs in the healthcare sector. This index is generally reflective of the REITs in which THQ invests.

Given the circumstances, we present both NAV and stock returns for the Fund in comparison to several commonly published indices. We note that THQ is a dynamically configured multi-asset class healthcare growth and income fund. There is no readily available index comprised of similar characteristics to THQ and to which THQ can directly be compared. Therefore, we provide returns for a number of indices representing the major components of THQ's assets. Having said this, we note that there are no readily available indices representing the covered call strategy employed by THQ or the restricted security components of THQ.

Inception date July 29, 2014

Change in the value of a $10,000 investment

Cumulative total return from 7/29/2014 to 3/31/2023

All performance over one-year has been annualized. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. The NAV total

return takes into account the Fund's total annual expenses and does not reflect transaction charges. If transaction charges were reflected, NAV total return would be reduced. All distributions are assumed to be reinvested either in accordance with the dividend reinvestment plan (DRIP) for market price returns or NAV for NAV returns. Until the DRIP price is available from the Plan Agent, the market price returns reflect the reinvestment at the closing market price on the last business day of the month. Once the DRIP is available around mid-month, the market price returns are updated to reflect reinvestment at the DRIP price. The graph and table do not reflect the deduction of taxes a shareholder would pay on fund distributions or the sale of fund shares.

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

Portfolio Management Commentary

The largest positive contribution to Fund relative performance was company stock selection and an overweight allocation to health care facilities. Company stock selection was most positive in large cap biotechnology companies such as Horizon Therapeutics plc (HZNP) and in healthcare equipment companies such as DexCom, Inc. (DXCM). On December 12, 2022, Amgen, Inc. (AMGN) announced its nearly $28 billion acquisition offer (at a 36% premium) for Horizon, which develops treatments for thyroid eye disease. DexCom, which was up 44% in the period, is a leading provider of continuous glucose monitor devices for diabetes patients and continued its robust sales growth. The Fund had a positive industry allocation effect being overweight facilities including leading provider HCA Healthcare, Inc. (HCA), up 44% in the past six months.

The largest negative contribution to Fund relative performance was company stock selection and an overweight allocation to small cap biotechnology companies. Stock selection resulted in underperformance in managed care companies including the Fund holding Molina Healthcare, Inc. (MOH), which fell 19% in the past six months. Rallybio Corp., a Fund position which fell 60%, is typical among the group of early stage biotechs that underperformed in the period even though the company itself did not have significant negative updates. We also estimate that the venture portfolio returns lagged the benchmark in the past six months, detracting from performance.

We also note that interest expenses constituted a significant portion of overall Fund expenses in the reporting period and had a detrimental impact on performance.

Portfolio Highlights as of March 31, 2023

Among other investments, Tekla Healthcare Opportunities Fund's performance benefited in the past six-month period by the following:

CVS Health Corp. (CVS) is a large vertically integrated managed care organization and is one of the largest retail pharmacies and pharmacy benefit managers (PBMs) in the U.S. Recent underperformance has come on the heels of growing PBM political scrutiny and ongoing retail pharmacy reimbursement pressure. Additionally, a recent large PBM customer loss represents a headwind to the Company's 2024 outlook. The Fund benefited from being underweight CVS during this period of underperformance.

Catalent, Inc. (CTLT) is one of the largest contract manufacturing organizations for biotechnology and pharmaceutical products. The Company's stock declined late last year due to a sharp drop in revenues from COVID vaccine production. With the stock trading at multi-year lows, we saw an attractive entry point as Catalent had several growth drivers on the horizon, including a contract with Novo Nordisk A/S (NVO) to produce Wegovy, an anti-obesity drug and one of the fastest growing pharmaceutical products. The stock price rose sharply in the first quarter of 2023 while the Fund was overweight as Wegovy prescriptions reached new highs and COVID-related revenues stabilized.

Horizon Therapeutics plc (HZNP) is a specialty pharmaceuticals company transitioning to a focused orphan disease business model. With 12 marketed therapies, including first-in-class Tepezza for thyroid eye disease, and a pipeline of over 20 programs in development, Horizon was recently acquired by Amgen for $28 billion. The Fund was overweight Horizon which had a strong positive return following Amgen's acquisition offer in December 2022.

Among other examples, Tekla Healthcare Opportunities Fund's performance was negatively impacted by the following investments:

Rallybio Corp. (RLYB) is a clinical stage biotechnology company developing therapies for patients with severe and rare disorders. Its lead candidate, RLYB212, is a monoclonal antibody for the prevention of fetal and neonatal alloimmune thrombocytopenia, a rare condition with no currently approved therapies. In the current risk-off environment, investor interest has shifted away from pre-commercial companies with early-stage assets and no revenue. As a result, the Company's stock underperformed in the period while the Fund was overweight.

Molina Healthcare, Inc. (MOH) provides Medicaid managed care services and has exposure to Medicare and state health insurance exchanges. In 2021 and 2022, Molina saw its Medicaid membership growth accelerate from new contract wins and from a halt in state Medicaid redeterminations during the COVID pandemic. More recently, the stock underperformed in anticipation that some of the membership gains would reverse once state Medicaid redeterminations resume and the Federal Public Health Emergency ends. The Fund was overweight during this period of underperformance.

Guardant Health, Inc. (GH) is a leading precision oncology company focused on using liquid biopsy for cancer detection and diagnostics through its proprietary blood tests, vast data sets, and advanced analytics. The Fund has maintained an overweight position in the stock as it underperformed in the six-month period due to disappointing results from its colorectal cancer or CRC screening product. While the accuracy of the Guardant CRC screening test is not best in class, it did meet the bar needed for reimbursement and may see clinical adoption due to its convenience.

*The trademarks NASDAQ Biotechnology Index^®, S&P Composite 1500^® Health Care Index, S&P 500^® Index, S&P 500^® Health Care Corporate Bond Index, and S&P Composite 1500^® Health Care REITs Index referenced in this report are the property of their respective owners. These trademarks are not owned by or associated with the Fund or its service providers, including Tekla Capital Management LLC.

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

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

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

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

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