SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
H&Q HEALTHCARE INVESTORS
H&Q LIFE SCIENCES INVESTORS
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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H&Q HEALTHCARE INVESTORS
H&Q LIFE SCIENCES INVESTORS
30 Rowes Wharf, Fourth Floor
Boston, Massachusetts 02110-3328
(617) 310-0567772-8500
NOTICE OF JOINT ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
H&Q HEALTHCARE INVESTORS and H&Q LIFE SCIENCES INVESTORS:
An Annual Meeting of Shareholders of H&Q Healthcare Investors and of H&Q
Life Sciences Investors (each a "Fund") will be held on Tuesday,Thursday, June 25, 2002,24, 2004,
at 9:00 a.m. at the Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts
02110, for the following purposes:
(1) The election of Trustees of each Fund; (2) The approval of a new investment advisory agreement between each
Fund and
Hambrecht & Quist Capital Management LLC;
(3) The ratification or rejection of the selection of
PricewaterhouseCoopers LLP as the independent public accountants of
each Fund for the fiscal year ending September 30, 2002; and
(4)(2) The transaction of such other business as may properly come before the
Annual Meeting and any adjournmentadjournment(s) or adjournmentspostponement(s) thereof.
Although the Annual Meetings are held together for convenience in order to
hear common presentations, each Fund's shareholders take action independently of
the other. Shareholders of record at the close of business on May 15, 200214, 2004 will
be entitled to vote at the Annual Meeting or at any adjournmentadjournment(s) or
adjournmentspostponement(s) thereof.
By Order of the Board of Trustees,
[SIGNATURE]
Jennifer/s/ Kimberley L. Morris,Carroll
Kimberley L. Carroll,
Secretary
May 20, 2002
- --------------------------------------------------------------------------------24, 2004
PLEASE COMPLETE, DATE AND SIGN THE PROXY FOR THE SHARES HELD BY YOU AND RETURN
THE PROXY IN THE ENVELOPE PROVIDED (OR TAKE ADVANTAGE OF THE ELECTRONIC OR
TELEPHONIC VOTING PROCEDURES DESCRIBED ON THE VOTING INSTRUCTION CARD) SO THAT YOUR VOTE CAN BE RECORDED. NO POSTAGE
IS REQUIRED IF THE ENVELOPE IS MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT
YOU RETURN YOUR SIGNED PROXY PROMPTLY, (OR VOTE BY OTHER AVAILABLE MEANS), REGARDLESS OF THE SIZE OF YOUR HOLDINGS,
SO THAT A QUORUM MAY BE ASSURED.
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H&Q HEALTHCARE INVESTORS
H&Q LIFE SCIENCES INVESTORS
JOINT PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Trustees of H&Q Healthcare Investors ("HQH") and of H&Q Life
Sciences Investors ("HQL" and, together with HQH, each is referred to
separately as the "Fund" and collectively as the "Funds") of proxies to be voted
at the Joint Annual Meeting of Shareholders (the "Annual Meeting") of the Funds to be held on June 25, 2002,24,
2004 (the "Annual Meeting"), and any adjournmentadjournment(s) or adjournmentspostponement(s) thereof,
for the purposes set forth in the accompanying Notice of Annual Meeting, dated
May 20, 2002.24, 2004. Unless otherwise indicated, all information in this Proxy
Statement and each proposal ("Proposal") applies separately to each Fund. This
Proxy Statement, the Notice of Annual Meeting and the Proxy Card(s) are first
being mailed to shareholders on or about May 20,
2002.
Proposal 1 relates to the election of Trustees for each Fund, Proposal 2
relates to the approval of a new investment advisory agreement for each Fund and
Proposal 3 relates to the ratification of the independent public accountants of
each Fund.24, 2004.
Each Fund's shareholders will vote separately on each Proposal.
Each Fund's Annual Report with respectProposal 1 which relates
to the fiscal year ended
September 30, 2001 was mailed to shareholders on or about November 30, 2001.election of Class C Trustees for each Fund.
Each Fund will furnish, without charge, a copy of its Annual Report, or the
most recent Semi-Annual Report succeeding the Annual Report, if any, to a
shareholder upon request. Requests may be sent to each Fund at 30 Rowes Wharf,
Fourth Floor, Boston, MA 02110-3328 or be made by calling (800) 327-6679.451-2597.
PROPOSAL 1
ELECTION OF TRUSTEES
Each Fund's Declaration of Trust provides that the Board of Trustees shall
be divided into three classes with staggered terms. The term of office of the
Class AC Trustees expires on the date of the 20022004 Annual Meeting, and the term of
office of the Class BA and Class CB Trustees will expire one and two years,
respectively, thereafter. Trustees chosen to succeed the Class AC Trustees whose
terms are expiring will be elected for a three-year term.
Each Fund's Declaration of Trust provides that a majority of the Trustees
shall fix the number of the entire Board of Trustees and that such number shall
be at least three and no greater than fifteen. Each Fund's Board of Trustees has
fixed the number of Trustees at seven. Proxies will be voted for the election of
the following twothree nominees for HQH and threetwo nominees for HQL. Each nominee is
presently serving as a Class AC Trustee and has consented to continue to so
serve. In the event that a nominee is unable to serve for any reason (which is
not now expected), when the election occurs, the accompanying Proxy will be
voted for such other person or persons as the Board of Trustees may recommend.
The nominees to serve as Class AC Trustees until the 2005 Annual Meeting are
Alan G. Carr and Henri A. Termeer for HQH and Robert P. Mack, M.D., Eric
Oddleifson and Oleg M. Pohotsky for HQL. The Class B Trustees serving until the
2003 Annual Meeting are Lawrence S. Lewin and Uwe E. Reinhardt, Ph.D. for HQH
and Alan G. Carr and Henri A. Termeer for HQL. The Class C Trustees serving
until the 20042007 Annual Meeting are
Robert P. Mack, M.D., Eric Oddleifson and Oleg M. Pohotsky for HQH and Lawrence
S. Lewin and Uwe E. Reinhardt, Ph.D. for HQL. The addressClass A Trustees serving until
the 2005 Annual Meeting are Henri A. Termeer for each nomineeHQH and Trustee is c/oRobert P. Mack, M.D.,
Eric Oddleifson and Oleg M. Pohotsky for HQL. The Class B Trustees to serve
until the Fund at the Fund's
address as set forth above.2006 Annual Meeting are Daniel R. Omstead, Eng.ScD., Lawrence S. Lewin
and Uwe E. Reinhardt, Ph.D. for HQH and Daniel R. Omstead, Eng.ScD. and Henri A.
Termeer for HQL.
1
The nominees and Trustees and their principal occupations for at least the
last five years are as follows:set forth in the table below.
NUMBER OF FUNDS
NAME (AGE), BUSINESS EXPERIENCE AND DIRECTORSHIPS, SHARES BENEFICIALLY OWNED
TERM OF TRUSTEESHIP AND OTHER POSITIONSADDRESS, POSITION(S) HELD WITH THE FUNDS ASIN FUND COMPLEX
AND LENGTH OF APRIL 1, 2002
AS OF APRIL 1, 2002 HQH HQLTIME SERVED, PRINCIPAL OCCUPATION(S) OVERSEEN BY
DURING PAST FIVE YEARS AND OTHER DIRECTORSHIPS HELD BY TRUSTEE OR NOMINEE
TRUSTEE OR NOMINEE FOR TRUSTEE FOR TRUSTEE
- ------------------------------------------------------- ------------ ------------------------------------------------------------------ ------------------
INTERESTED TRUSTEES*
ALAN G. CARR (67)INDEPENDENT TRUSTEES AND NOMINEES
LAWRENCE S. LEWIN^+ (66), 28,825(1) 16,385
Chairman (since 2001), President (from 1992-2001),
Director (since 1986) and Senior Vice President (from
1986-1992)3305 ROLLING ROAD, CHEVY CHASE, MD 20815 2
Trustee of the Adviser; Managing Director (from
1992-1999) of Hambrecht & Quist Group; and President
Emeritus (since 2001), President (from 1987-2001) and
TrusteeHQH (since 1987) and of HQL (since 1992) and Chairman of HQH and HQL
(since 1992) of HQL.
NON-INTERESTED TRUSTEES
LAWRENCE S. LEWIN (63)2000), 2,200 2,920
FormerlyExecutive Consultant (since December 1999); Chief Executive
Officer (from 1970-1999) of The Lewin Group (healthcare public policy and
managementManagement consulting), a subsidiary of Quintiles Transnational Corp.; andDirector
(since 2003) of Medco Health Solutions, Inc.
ROBERT P. MACK, M.D.#^ (68), 30 ROWES WHARF, BOSTON, MA 02110 2
Trustee (since 1987)1991) of HQH and (since 1992) of HQL, and Chairman (since 2000) of HQH
and of HQL.
ROBERT P. MACK, M.D. (66), 2,921 -0- Consultant in Orthopedic
Surgery to Orthopedic Associates of Aspen (since 2001)2000). Orthopedic Surgeon
(from 1996-1998) at the Steadman-Hawkins Orthopedic
Clinic and (from 1977-1996) at the Denver Orthopedic
Clinic; Director of the Department of Orthopedic
Surgery at Metropolitan General Hospital and Assistant
Professor of Orthopedics at Case Western Reserve
University, Cleveland, OH (from 1968-1977); and Trustee
(since 1991) of HQH and (since 1992) of HQL.
ERIC ODDLEIFSON** (67)#+ (69), 2,237 1,375
Partner (since 2001) and Managing Director (from
1997-2000) of Renewable Resources LLC (forest
properties investment); formerly Managing Director
(from 1995-1997) of UBS Asset Management (forest
properties investment); formerly President, Director
and Chief Investment Officer (from 1984-1995) of
Resource Investments, Inc. (forest properties
investment); and42 RIVER ROAD, COHASSET, MA 02025 2
Trustee (since 1992) of HQH and of HQL.HQL (since 1992), Partner (1997-2003) and Investment
Committee Chair (since Sept. 2003) of GMO Renewable Resources LLC (timber
investment management).
OLEG M. POHOTSKY (55)POHOTSKY**#+ (57), -0- -0-
Most recently,30 ROWES WHARF, BOSTON, MA 02110 2
Trustee of HQH and of HQL (since 2000), Financial Consultant (since 2002);
Senior Vice President (from 1991-2001) of FAC/Equities, a division of First
Albany Corporation (investment bank); General Partner (1989-1991) of
Strategic Capital Associates (financial advisory firm);
General Partner (1986-1987) of Capital Growth Partners
(private mezzanine capital institutional investment
partnership); and Trustee (since 2000) of HQH and of
HQL..
UWE E. REINHARDT, PH.D.** (64)(66), 592 57930 ROWES WHARF, BOSTON, MA 02110 2
Trustee of HQH (since 1988) and of HQL (since 1992), Professor of Economics
(since 1968) at Princeton University; andDirector (since 2000) of Triad Hospitals,
Inc.; Director (since 2002) of Boston Scientific; Director (since 2002) of
Amerigroup, Inc.; Director (since 2001) of Duke University; Director (since
2001) of the Duke University Health System; Director (since 2002) of the
National Bureau of Economic Research.
HENRI A. TERMEER^ (58), GENZYME CORPORATION, 500 KENDALL STREET, CAMBRIDGE, MA 02139 2
Trustee (since 1988) of HQH (since 1989) and of HQL (since 1992) of HQL.
HENRI A. TERMEER** (56), -0- -0- Chairman (since 1988),
Chief Executive Officer (since 1985), and President (since 1983) of Genzyme
Corporation (human healthcare products); Director (since 1987) of ABIOMED, Inc.; Director (since 1992) of AutoImmune,
Inc.; Director (since 1993) of Genzyme Transgenics;
Director (since 1996) of Diacrin, Inc.; and Trustee
(since 1989)
INTERESTED TRUSTEE
DANIEL R. OMSTEAD, ENG.SCD.* (50), 30 ROWES WHARF, BOSTON, MA 02110 2
President of HQH and of HQL (since 1992)2001); Trustee of HQL.
------ ------
ALL TRUSTEES OF EACH FUND AS A GROUP........... 36,775 21,259HQH and of HQL (since
2003), President, Chief Executive Officer and Managing Member (since July 2002)
of Hambrecht & Quist Capital Management LLC; President and Chief Executive
Officer (2001-June 2002) and Managing Director (2000-June 2002) of Hambrecht &
Quist Capital Management, Inc.; President and Chief Executive Officer (from
1998-2000) of Reprogenesis, Inc.
- -------------------------------
* Trustee considered to be an "interested person" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act") (an "Interested
Person"), through
position or affiliation with Hambrecht & Quist Capital Management IncorporatedLLC (the
"Adviser").
** Member of each Fund's Audit Committee.
(1) Mr. Carr's shares include 479 shares held by a family member as to which he
disclaims any beneficial interest.# Member of each Fund's Valuation Committee.
^ Member of each Fund's Corporate Governance and Nominating Committee.
+ Member of each Fund's Qualified Legal Compliance Committee.
2
The following table sets forth, for each Trustee, the aggregate dollar
range of equity securities owned of each Fund and in the aggregate as of April 1,
2002.March
15, 2004. The information as to beneficial ownership is based upon statements
furnished by each Trustee.
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN BOTH
DOLLAR RANGE OF EQUITY DOLLAR RANGE OF EQUITY FUNDS OVERSEEN BY
NAME OF TRUSTEE SECURITIES IN HQH SECURITIES IN HQL TRUSTEE IN FUND COMPLEX
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Alan G. Carr Over $100,000 Over $100,000 Over $100,000INDEPENDENT TRUSTEES
Lawrence S. Lewin $10,001-$50,000 $10,001-$50,000 $50,001-$100,000 Over $100,000
Robert P. Mack, M.D.M.D $50,001-$100,000 None $50,001-$100,000
Eric Oddleifson $50,001-$100,000 $10,001-$50,000 Over $100,000
Oleg M. Pohotsky None None None
Uwe E. Reinhardt, Ph.D. $10,001-$50,000 $10,001-$50,000 $50,001-$10,001-$100,000
Oleg M. Pohotsky50,000
Henri A. Termeer None None None
Uwe E. Reinhardt, Ph.D. $10,001-$50,000 $10,001-$50,000 $10,001-$50,000
Henri A. TermeerINTERESTED TRUSTEE
Daniel R. Omstead, ENGSCD None None None$0-$10,000 $0-$10,000
DuringAlthough Trustees are encouraged to attend the fiscal year ended September 30, 2001, fiveannual meetings of
each
Fund'sshareholders to the extent they are able, the Funds have no formal policy with
regard to board members' attendance at annual meetings of shareholders. Last
year, five of the seven Trustees then in office attended the annual meeting of
shareholders.
Shareholders wishing to send communications to the Boards may communicate
with members of the Boards of Trustees by submitting a written communication
directed to the applicable Board of Trustees were held. Each Trustee attendedin care of the Funds' Secretary,
Kimberley L. Carroll, at least 75% of those
meetings.30 Rowes Wharf, Boston, MA 02110.
STANDING COMMITTEES
AUDIT COMMITTEE. Each Fund has an Audit Committee comprised solely of
Trustees who are not Interested Persons"interested persons" (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Funds and the Adviser (each an "Independent
Trustee") and who are "independent" as defined in the New York Stock Exchange
("NYSE") Listing Standards (each an "Independent Trustee").Standards. Each Fund's Board of Trustees has adopted a written
charter for the Audit Committee.Committee and such Charter is annexed to this Proxy
Statement as Exhibit A. The principal purpose of each Fund's Audit Committee is
to assist the Board of Trustees in fulfilling its responsibility to oversee
management's conduct of the Fund's financial reporting process, including
reviewing the financial reports and other financial information provided by the
Fund, the Fund's systems of internal accounting and financial controls and the
annual independent audit process.
For each Fund, the Audit Committee's role is one of oversight, and it is
recognized that the Fund's management is responsible for preparing the Fund's
financial statements and that the outside auditor is responsible for auditing
those financial statements. Although each Audit Committee member must be
financially literate and one member must have accounting or financial management
expertise (as determined by the Board of Trustees in its business judgement)judgment),
Audit Committee members are not professionally engaged in the practice of
accounting or auditing and are not experts in the fields of accounting or
auditing, including with respect to auditor independence. Audit Committee
members rely, without independent verification, on the information provided to
them and on the representations made by management and each Fund's independent
public accountants.
Each Fund's Audit Committee reviewed and discussed the Fund's audited
financial statements with management for the Fund's fiscal year ended
September 30, 2001, and discussed with the Fund's independent public
accountants, PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), the matters
required to be discussed by SAS 61 (Communication with Audit Committees), which
includes, among other items, matters relating to the conduct of an audit of the
Fund's financial statements. Each Fund's Audit Committee received the written
disclosures and the letter from PricewaterhouseCoopers required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
and discussed with PricewaterhouseCoopers its independence. Based on its review
and discussions with management and PricewaterhouseCoopers, each Fund's Audit
Committee recommended to the Board of Trustees that the Fund's audited financial
statements for the Fund's fiscal year ended September 30, 2001 be included in
the Fund's Annual Report for filing with the Securities and Exchange Commission
(the "SEC").
3
The members of each Fund's Audit Committee are Mssrs.Messrs. Oddleifson, ReinhardtPohotsky
and Termeer.Reinhardt. Mr. OddleifsonPohotsky is the Chairman of each Fund's Audit Committee. Each
Fund's Audit Committee held one meeting during the fiscal year ended September
30, 2001.2003.
NOMINATING AND GOVERNANCE COMMITTEE. Each Audit Committee member attended that meeting. Neither Fund has a Nominating and
Governance Committee comprised solely of Independent Trustees who are
"independent" as defined in the NYSE Listing Standards. Each Fund's Board of
Trustees has adopted a written charter for the Nominating and Governance
Committee, which is attached to this Joint Proxy Statement as Exhibit B.
Each Fund's Nominating and Governance Committee requires that each
prospective trustee candidate have a college degree or equivalent business
experience, and that each candidate is not serving in a similar capacity on the
board of a registered investment company which is not sponsored or advised by
the Funds' investment adviser or its affiliates. The Committees may also take
into account other factors when considering and evaluating potential trustee
candidates, including but not limited to: (i) availability and commitment to
attend meetings and perform responsibilities on the Board; (ii) relevant
industry and related experience; (iii) educational background; (iv) financial
expertise; (v) the candidate's ability, judgment and expertise; and (vi) the
overall diversity of the Board's composition.
The Committees may identify prospective trustees from any reasonable
source, including, but not limited to, the consultation of third-party trustee
search services. Each Fund's Nominating and Governance Committee will consider
potential trustee candidates recommended by shareholders, provided that the
proposed candidates (i) satisfy any minimum qualifications of the Fund for its
trustees; (ii) are not "interested persons" (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Fund or the Adviser; and (iii) are
"independent" as defined in the NYSE Listing Standards. In order to be evaluated
by the appropriate Committee, trustee candidates recommended by shareholders
must also meet certain eligibility requirements as set out in the Committees'
Nominating Charter. Other than those eligibility requirements, the Committees
shall not evaluate shareholder trustee nominees in a different manner than other
nominees. The standard of the Committees is to treat all equally qualified
nominees in the same manner.
All shareholder recommended nominee submissions must be received by the
Funds by the deadline for submission of any shareholder proposals which would be
included in the Funds' proxy statement for the next annual meeting of the Funds.
Each nominating committeeshareholder or compensation committee.shareholder group must meet the requirements
stated in the Nominating Charter. A nominating shareholder or shareholder group
may not submit more than one nominee per year. When nominating a trustee
candidate, shareholders must include in their notice to the Funds' Secretary:
(i) the shareholder's contact information; (ii) the trustee candidate's contact
information and the number of Fund shares owned by the proposed candidate; (iii)
all information regarding the candidate that would be required to be disclosed
in solicitations of proxies for elections of trustees required by Regulation 14A
of the Securities Act of 1934, as amended; and (iv) a notarized letter executed
by the trustee candidate, stating his or her intention to serve as a nominee and
be named in the Fund's proxy statement, if nominated by the Board of Trustees,
and to be named as a trustee if so elected. Once a nomination has been timely
received in proper form, the nominee will be asked to complete an eligibility
questionnaire to assist the Funds in assessing the nominee's qualifications as a
potential Independent Trustee and as someone who is "independent" under the NYSE
Listing Standards. The Nominating and Governance Committee will make such
determinations in its sole discretion and such determinations shall be final.
4
The members of each Fund's Nominating and Governance Committee are Messrs.
Lewin and Termeer and Dr. Mack. Mr. Lewin is the Chairman of each Fund's
Nominating and Governance Committee. Each Fund's Nominating and Governance
Committee did not meet during the fiscal year ended September 30, 2003.
VALUATION COMMITTEE. Each Board has delegated to each Fund's Valuation
Committee general responsibility for determining, in accordance with each Fund's
valuation procedures, the value of assets held by each Fund on any day on which
the net asset value per share is determined. Each Valuation Committee may
appoint, and has appointed, a Sub-Committee made up of employees and officers of
the Adviser, to deal in the first instance with day to day valuation decisions,
subject to oversight by the Valuation Committee. Each Valuation Committee shall
meet as often as necessary to ensure that each action taken by the Sub-Committee
is reviewed within a calendar quarter of the occurrence. In connection with its
review, each Valuation Committee shall ratify or revise the pricing
methodologies authorized by the Sub-Committee since the last meeting of the
Valuation Committee. Each Valuation Committee is charged with the responsibility
of determining the fair value of each Fund's securities or other assets in
situations set forth in each Fund's valuation procedures.
The members of each Fund's Valuation Committee are Messrs. Oddleifson and
Pohotsky and Dr. Mack. Each Fund's Valuation Committee held two meetings during
the fiscal year ended September 30, 2003.
QUALIFIED LEGAL COMPLIANCE COMMITTEE. Each Fund has a Qualified Legal
Compliance Committee ("QLCC") comprised solely of Independent Trustees. Each
Fund's Board of Trustees has adopted a written charter for the QLCC. The
principal purpose of each Fund's QLCC is to review and respond to reports of
Evidence of a Material Violation (as defined in the QLCC charter). Reporting
Evidence of a Material Violation is required under the Standards of Professional
Conduct for Attorneys adopted by the Commission under the Sarbanes-Oxley Act of
2002 (the "Standards"). Under the Standards, if an attorney appearing and
practicing before the Commission in the representation of an issuer, such as the
Funds, becomes aware of Evidence of a Material Violation by the issuer or by any
officer, trustee, employee or agent of the issuer, the Standards provide for the
attorney to report such evidence to the issuer's QLCC forthwith. In discharging
its role, the QLCC is granted the power to investigate any Evidence of a
Material Violation brought to its attention with full access to all books,
records, facilities and personnel of the Funds and the power to retain outside
counsel, auditors or other experts for this purpose.
The members of each Fund's QLCC are Messrs. Lewin, Oddleifson and Pohotsky.
Mr. Pohotsky is the Chairman of each Fund's QLCC. Neither Fund's QLCC met during
the fiscal year ended September 30, 2003.
ATTENDANCE. During the fiscal year ended September 30, 2003, each Fund's
Board of Directors held four meetings; each Fund's Valuation Committee held two
meetings; and each Fund's Audit Committee held one meeting. Each of the Trustees
then in office, other than Dr. Reinhardt, attended at least 75% of the aggregate
number of meetings of the Board of Trustees and of all the Committees of the
Board on which he served. During the fiscal year ended September 30, 2003, Dr.
Reinhardt attended 50% of the meetings of the Board of Trustees and none of the
meetings of the Committees of the Board on which he served.
5
COMPENSATION OF TRUSTEES
Each Fund currently pays each of its Independent Trustees an annual fee of
$15,000 plus $1,500$20,000. For the fiscal year ended September 30, 2003, the annual fee was
$15,000. Trustees of each Fund are also paid $1,000 for each Board and Committee
meeting attended.attended in person and $500 for each Board and Committee meeting
attended by telephone. The Chairman of the Board of Trustees of each Fund
receives an additional annual fee of $3,000.$2,500, the Chairman of each Committee
receives an additional annual fee of $1,500 and each Committee member receives
an additional annual fee of $500. Independent Trustees are also reimbursed for
travel expenses incurred in connection with attending such meetings. For the
fiscal year ended September 30, 2001,2003, the Independent Trustees as a group
received $142,724$136,980 from HQH and $140,559$134,714 from HQL for fees and reimbursed
expenses. No other direct compensation has been paid by the Funds to the
Trustees and officers as a group. Trustees and officers of the Funds who hold
positions with the Adviser receive indirect compensation from the Funds in the
form of the investment advisory fee paid to the Adviser. Compensation TableThe following table
sets forth information regarding compensation of Trustees by the Funds for the
fiscal year ended September 30, 2003, but does not include expenses.
COMPENSATION TABLE
For the fiscal year ended September 30, 20012003
AGGREGATE ACCRUED PENSION OR RETIREMENT TOTAL COMPENSATION
INDEPENDENTAGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FROM TRUST AND
COMPENSATION OR RETIREMENT FROMAS PART OF TRUST BENEFITS UPON FUND COMPLEX
NAME OF TRUSTEE FROM EACH FUND BENEFITS (TWO FUNDS)EXPENSES RETIREMENT PAID TO TRUSTEES
- -------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Lawrence S. Lewin $25,500 None $51,000$ 24,000 N/A N/A $ 48,000
Robert P. Mack, M.D. $22,500 None $45,000$ 21,000 N/A N/A $ 42,000
Eric Oddleifson $22,500 None $45,000$ 24,000 N/A N/A $ 48,000
Oleg M. Pohotsky $22,500 None $45,000$ 24,000 N/A N/A $ 48,000
Uwe E. Reinhardt, Ph.D. $22,500 None $45,000$ 18,000 N/A N/A $ 36,000
Henri A. Termeer $21,000 None $42,000$ 19,500 N/A N/A $ 39,000
INTERESTED TRUSTEES
Alan G. Carr* $ 0 N/A N/A $ 0
Daniel R. Omstead, Eng.ScD. $ 0 N/A N/A $ 0
- ----------
* Mr. Carr passed away in October 2003.
EXECUTIVE OFFICERS
The following table sets forth information (Name (Age), Address, Positions
with the Funds) for at least the last five years with respect to the executive
officers of the Funds who do not named above.also serve as Trustees. Each officer has been
elected by the Board of Trustees and serves at the pleasure of the Trustees.
ALAN G. CARR (67),
Chairman (since 2001), President (from 1992-2001), Director (since 1986) and
Senior Vice President (from 1986-1992) of the Adviser; Managing Director (from
1992-1999) of Hambrecht & Quist Group; and President Emeritus (since 2001),
President (from 1987-2001) and Trustee (since 1987) of HQH and (since 1992) of
HQL.
DANIEL R. OMSTEAD, ENGSCD (48),
President (since 2001) of HQH and of HQL; President and Chief Executive
Officer (since 2001) and Managing Director (since 2000) of the Adviser; formerly
President and Chief Executive Officer (from 1997-2000) and Chief Operating
Officer (1997) of Reprogenesis, Inc.
KIMBERLEY L. CARROLL (46)(48), 30 ROWES WHARF, BOSTON, MA 02110
Treasurer and Chief Financial Officer (since 1987) of HQH and (since 1992)
of HQL; and Vice President (since 1991) and Treasurer (since 2000) of the
Adviser.
4
JENNIFER L. MORRIS (33),
Secretary (since 2001)2004) of HQH and of HQL; and AssistantHQL, Vice President (since 1999) and Manager, Corporate Communications (from 1996-1999)Treasurer
of the Adviser.Investment Adviser (since 2002); Vice President (from 1991-July 2002) and
Treasurer (from 2000-July 2002) of Hambrecht & Quist Capital Management, Inc.
6
REQUIRED VOTE
Each Fund's Declaration of Trust states that the Trustees shall be elected
by a plurality of the Fund's shares voting at the Annual Meeting. The Trustees
recommend a vote FOR all nominees.
PROPOSAL 2
APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
INTRODUCTION
Hambrecht & Quist Capital Management Incorporated (also referred to herein
as the "Adviser") acts as the investment adviser to the Funds pursuant to a
separate investment advisory agreement between the Adviser and each Fund (each,
a "Current Agreement" and collectively, the "Current Agreements"). On May 2,
2002, the Adviser and Hambrecht & Quist California ("H&Q California"), which is
the 100% owner of the Adviser, entered into an asset purchase agreement (the
"Asset Purchase Agreement") with Hambrecht & Quist Capital Management LLC (the
"New Adviser") pursuant to which the New Adviser will acquire certain assets and
assume certain liabilities of the Adviser (the "Transaction").
The New Adviser is organized as a limited liability company under the laws
of Delaware. The New Adviser is a newly-formed, SEC-registered investment
adviser and is 100% owned by Alan G. Carr and Daniel R. Omstead (together,
Mr. Carr and Dr. Omstead are referred to hereinafter as the "Principals").
Currently, Mr. Carr is Chairman and Dr. Omstead is President and Chief Executive
Officer of the Adviser. Mr. Carr is also Chairman and Dr. Omstead is also
President and Chief Executive Officer of the New Adviser, although these titles
are subject to change.
As a result of the Transaction, each Fund's Current Agreement with the
Adviser will terminate. Therefore, in anticipation of the Transaction, a new
investment advisory agreement between each Fund and the New Adviser (each, a
"New Agreement" and collectively, the "New Agreements") is being proposed for
approval by the shareholders of each Fund.
The form of each Fund's New Agreement is attached hereto as Exhibit A. THE
TERMS OF EACH FUND'S NEW AGREEMENT ARE SUBSTANTIALLY IDENTICAL TO THE TERMS OF
EACH FUND'S CURRENT AGREEMENT, EXCEPT FOR THE EFFECTIVE DATE, INITIAL TERM, THE
PARTIES AND CERTAIN PROVISIONS RELATING TO THE USE OF THE H&Q NAME. The material
terms of each Fund's Current Agreement are described under "Description of the
Current Agreements" below.
The information set forth in this Proxy Statement and any accompanying
materials concerning the Transaction, the Asset Purchase Agreement, the New
Adviser, the Adviser and its affiliates has been provided to the Funds by the
New Adviser, the Adviser and its affiliates.
BOARD APPROVAL AND RECOMMENDATION
On March 22, 2002, the Board of Trustees, including each of the Independent
Trustees, voted unanimously to approve the New Agreement for each Fund and to
recommend its approval to shareholders. For information about the Board's
deliberations and the reasons for their recommendation, please see "Board
Considerations" below. The Board of Trustees of each Fund unanimously recommends
that the Fund's shareholders vote in favor of the approval of the New Agreement
for the Fund.
5
INFORMATION CONCERNING THE TRANSACTION AND THE NEW ADVISER
DESCRIPTION OF THE TRANSACTION. On May 2, 2002, the Adviser and H&Q
California, which is the 100% owner of the Adviser and is itself an indirect
wholly-owned subsidiary of J.P. Morgan Chase & Co., entered into the Asset
Purchase Agreement with the New Adviser. Under the Asset Purchase Agreement, the
New Adviser will acquire certain assets of the Adviser and assume certain
liabilities of the Adviser for approximately $9.2 million.
As discussed above, each Fund's Current Agreement will terminate upon the
consummation of the Transaction. If the New Agreement is not approved by a
Fund's shareholders, the Fund's Current Agreement will continue in effect until
July 31, 2002 and, at such time, the Board of Trustees would make such
arrangements for the management of the Fund's investments as it deems
appropriate and in the best interests of the Fund. Such arrangements could
include extending the term of the Fund's Current Agreement.
The Transaction is subject to a number of conditions that are contained in
the Asset Purchase Agreement, including the approval of the New Agreements by
the shareholders of the Funds. In addition, these conditions require, among
other things, the receipt of all material consents, approvals, permits and
authorizations from appropriate governmental entities and other third parties;
the absence of any temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the Transaction; that the
representations and warranties of the parties to the Transaction are true and
correct in all material respects; that the parties to the Transaction have
performed in all material respects all obligations and covenants that they are
required to perform; and that the parties to the Transaction have delivered
appropriate certificates and resolutions as to the authorizations in connection
with the Transaction. The Transaction is expected to close on or about June 30,
2002.
Under the Asset Purchase Agreement, the New Adviser has agreed that it will
use its reasonable best efforts to ensure the satisfaction of the conditions set
forth in Section 15(f) of the 1940 Act, as discussed under "Board
Considerations" below.
THE NEW ADVISER. As noted above, the New Adviser, which is organized as a
limited liability company under the laws of Delaware, is a newly-formed,
SEC-registered investment adviser and is 100% owned by the Principals. The New
Adviser will be engaged primarily in the business of providing investment
advisory services to the Funds, assuming shareholder approval of the New
Agreements. As discussed more fully below, the members of the Adviser's existing
management team have accepted, in principle, offers of employment with the New
Adviser, subject to the closing of the Transaction (see "Operation of the New
Adviser" and "Board Considerations" below). As of the date hereof, the New
Adviser does not have any clients or assets under management. The New Adviser's
principal offices are located at 30 Rowes Wharf, Fourth Floor, Boston,
Massachusetts 02110-3328 and its telephone number is (617) 310-0567,
representing no change from the current Adviser.
The Principals, Mr. Carr and Dr. Omstead, who currently serve as the senior
executive officers and portfolio managers of the Adviser, also will serve as the
senior executive officers and portfolio managers of the New Adviser. The
Principals have a combined experience of more than 50 years in portfolio
management and healthcare company operations and management. Mr. Carr has been
the portfolio manager since inception of both H&Q Healthcare Investors and H&Q
Life Sciences Investors and has an extensive background in the investment field.
Dr. Omstead's experience includes positions of significant responsibility in
pharmaceutical and biotechnology company operations. Dr. Omstead was Managing
6
Director of the Adviser from 2000 to 2001, and, since 2001, he has served as
President and Chief Executive Officer of the Adviser and President of the Funds.
The other employees of the Adviser who are expected to become employees of
the New Adviser have an additional 70+ years of relevant experience in the
investment industry, with more than half of those years in the employment of the
Adviser. Many of these individuals possess graduate degrees in relevant fields
of study: four have MBAs and two have medical degrees. The Principals believe
that the experience of these employees will provide continuity in the management
and operation of the Funds following the consummation of the Transaction.
As is the case with the Adviser, the New Adviser expects that its employees
will meet with management of current and potential portfolio companies on a
regular basis and will attend healthcare related scientific and investor
conferences throughout the year. The New Adviser also expects to have access to
research from a wide variety of resources, which it will use in combination with
its own experience and due diligence to make investment decisions. The New
Adviser anticipates that it will have the same access to the number and quality
of venture capital investments that the Adviser currently has.
PERFORMANCE INFORMATION FOR THE FUNDS
The following table sets forth information about the performance of each
Fund's stock price and net asset value, as well as the performance of
comparative indices, as of March 31, 2002, for the periods shown. Historic
performance is not necessarily indicative of future performance.
ONE YEAR THREE YEAR FIVE YEAR TEN YEAR
-------- ---------- --------- ---------
HQH stock price 22.9% 37.2% 18.7% 9.3%
HQL stock price 29.8% 39.2% 20.5% 9.46%*
HQH net asset value 9.4% 25.1% 16.3% 10.8%
HQL net asset value 8.0% 25.7% 16.5% 10.15%*
Russell 2000 Index 14.0% 9.8% 9.5% 11.1%
S&P 500 Index 0.3% -2.5% 10.2% 13.3%
- -------------------
* Since inception (June 30, 1992).
Notes:
(1) Periods over one year are annualized.
(2) Returns are calculated using the modified-Dietz methodology using monthly
closing prices ending March 31, 2002.
HQH has paid out $25.73 per share in distributions since inception. HQL has
paid out $11.57 per share in distributions since inception. The net asset value
per share of each Fund has ranged from as high as $53.69 to as low as $6.16 for
HQH and as high as $44.80 to as low as $9.98 for HQL. As of April 1, 2002, the
net asset value per share of HQH was $25.56 and the net asset value per share of
HQL was $21.33.
OPERATION OF THE NEW ADVISER
As proposed, the New Adviser will serve as the registered investment adviser
to the Funds under the New Agreements following the Transaction, subject to
shareholder approval. With the approval of H&Q California, the existing
employees of the Adviser have accepted, in principle, offers of employment from
the New Adviser, subject to the closing of the Transaction. Generally, this
means that the New Adviser will be staffed by the same employees as the Adviser
and that such employees will perform substantially similar duties for the New
Adviser as they do for the Adviser. Accordingly, the Principals have advised the
Independent Trustees that they believe that the New Adviser will provide
services to
7
the Funds that will be substantially identical in scope and quality to those
currently being provided to the Funds by the Adviser, as discussed more fully
below under "Board Considerations."
BOARD CONSIDERATIONS
On February 15, 2002, the Principals met with the Independent Trustees and
informed them of their intention to form a new entity to acquire certain assets
and assume certain liabilities of the Adviser. At that meeting, the Principals
discussed with the Independent Trustees the general terms of the proposed
acquisition, the general corporate structure of the New Adviser, the background
of certain key employees of the Adviser, their views on the proposed
transaction, and their general plans for operating the New Adviser. In addition,
the Independent Trustees considered information supplied to them by the Adviser
concerning, among other things, the nature, quality and extent of services
provided by the Adviser to the Funds; investment performance, both of the Funds
themselves and relative to appropriate peer groups and market indices;
investment management fees, expense ratios and asset sizes of the Funds
themselves and relative to appropriate peer groups; and the Adviser's
profitability from managing the Funds (both individually and collectively).
Over the course of the following weeks, the Independent Trustees met, both
privately and with the Principals and other senior personnel of the Adviser, to
discuss the potential benefits and risks to the Funds and their shareholders
arising from the proposed Transaction. The Independent Trustees were assisted
throughout this process by their independent legal counsel.
On March 8, 2002, the Principals entered into a non-binding letter of intent
with H&Q California whereby the Principals agreed, subject to a number of
contingencies (including the execution of a definitive transaction agreement),
to form the New Adviser to acquire certain assets and assume certain liabilities
of the Adviser. Thereafter, the Independent Trustees met on March 22, 2002 to
review and discuss the Transaction and its potential impact on the Funds and
their shareholders.
In the course of their review, the Independent Trustees requested and
reviewed substantial information regarding, among other things: the New
Adviser's staffing plans and its plans to develop its investment advisory
capabilities; the extent to which the Principals and other employees of the
Adviser will continue to be involved with the Funds as employees of the New
Adviser following the Transaction; the arrangements of the New Adviser to retain
and attract key personnel; the New Adviser's future business plans, including
its plans to develop and offer additional asset management products and services
and the potential impact, if any, on the New Adviser's service capabilities if
such plans are implemented; each Fund's fee structure and the costs of the
Transaction to the Funds; and the financial resources of the New Adviser,
including its financial structure, stability and cash flow.
The Independent Trustees gave consideration to the fact that each employee
of the Adviser is expected to become an employee of the New Adviser and that
such employees will perform substantially similar duties for the New Adviser as
they do for the Adviser. In this connection, the Independent Trustees also took
into account the Principals' assurances that they intend to continue to be fully
involved with the operation of the Funds and that they will commit a substantial
portion of their net worth to the organization of the New Adviser. The
Independent Trustees considered that the Principals' own financial success will
be integrally linked to the success of the Funds.
The Independent Trustees also considered the New Adviser's plans to provide
equity or other financial incentives to retain and attract key personnel to
satisfy themselves that the New Adviser will be effectively staffed by qualified
and experienced personnel throughout the term of the New Agreements.
Specifically, the Independent Trustees discussed the Principals' plans to
implement a retention system
8
designed to induce key employees of the New Adviser to stay with the firm and
participate in its anticipated financial success.
The Independent Trustees weighed the Principals' assurances that the New
Adviser will have the human and economic resources to service the Funds
effectively. The Independent Trustees took into account the Principals'
representations that the New Adviser is committed to the continuance, without
interruption, of services to each Fund of at least the type and quality
currently provided by the Adviser. Furthermore, the Independent Trustees
considered the Principals' assurances that any new investment service or product
offered by the New Adviser would not result in any adverse change in the
investment management or operations of the Funds and that they did not plan to
make any material change to the level of investment advisory services currently
rendered to the Funds.
The Independent Trustees reviewed each Fund's investment advisory fee
structure, taking into account the unique characteristics of the Fund's
investment portfolio, the Fund's investment performance and the level of
services received from the Adviser. The Independent Trustees took into account
that the Funds will not bear any costs of the Transaction or any additional
expenses as a result of the Transaction. In this connection, the Independent
Trustees considered that the New Adviser has undertaken to pay the costs of the
Annual Meeting to the extent they exceed the costs of the Funds' joint annual
meeting in 2001 (see "General" below).
The Independent Trustees considered representations by the New Adviser
regarding its financial resources, including its plans regarding its business,
financial structure, stability and cash flow. They also considered the projected
income statements of the New Adviser, including anticipated revenues and
expenses. The Independent Trustees weighed the New Adviser's commitment and
financial ability to establish and maintain a significant cash flow reserve that
would contribute to its financial wherewithal. The New Adviser gave assurances
to the Independent Trustees concerning the adequacy of its financial resources,
which the Independent Trustees considered along with assurances from the New
Adviser that it would establish a substantial cash reserve to help maintain its
economic viability.
The New Adviser and the Adviser also gave assurances to the Independent
Trustees that they intend to comply with Section 15(f) of the 1940 Act.
Section 15(f) provides a non-exclusive safe harbor for an investment adviser to
an investment company to receive benefits in connection with a sale of
securities of, or a sale of any other interest in, the investment adviser so
long as two conditions are met. First, for a period of three years after the
transaction, at least 75% of the board members of the investment company must be
persons who are not "interested persons" of the investment company's investment
adviser or its predecessor. The current composition of each Fund's Board of
Trustees is and will continue to be in compliance with this provision of
Section 15(f). Second, an "unfair burden" must not be imposed upon the
investment company as a result of the transaction or any express or implied
terms, conditions or understandings applicable thereto. The New Adviser has
agreed that it, and its affiliates, will take no action that would have the
effect of imposing an "unfair burden" on either Fund in connection with the
Transaction.
In addition, at the March 22 meeting, the Independent Trustees received an
update of the information they received in connection with their February 15
meeting, which concerned, among other things, the nature, quality and extent of
services provided by the Adviser to the Funds; investment performance, both of
the Funds themselves and relative to appropriate peer groups and market indices;
venture investment activity; the Funds' audits; investment management fees,
expense ratios and asset sizes of the Funds themselves and relative to
appropriate peer groups; and the Adviser's profitability from managing the Funds
(both individually and collectively).
9
Based on all of the foregoing, at a meeting on March 22, 2002, the Board of
Trustees voted unanimously to approve the New Agreements and to recommend them
to the shareholders for their approval.
PORTFOLIO TRANSACTIONS
Pursuant to the Current Agreements, in executing transactions and selecting
brokers or dealers (which may include any affiliate of the Adviser to the extent
permitted by the 1940 Act) the Adviser will use its best efforts to obtain the
best price and execution for the Funds. In assessing the best price and
execution available for any portfolio transaction, the Adviser will consider all
factors it deems relevant including, but not limited to, price (including any
applicable brokerage commission or dealer spread), size of order, difficulty of
execution, and operational facilities of the firm involved and the firm's risk
in positioning a block of securities. In selecting brokers or dealers to execute
a particular transaction and in evaluating the best price and execution
available, the Adviser may consider the brokerage and research services (as
those terms of are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) provided to the Funds and/or other
accounts over which the Adviser exercises investment discretion. Such services
may be useful to the Adviser in connection with its services to other clients.
The New Adviser's brokerage policies pursuant to the New Agreements will be the
same in all material respects as those of the Adviser pursuant to the Current
Agreements.
DESCRIPTION OF THE CURRENT AGREEMENTS
SERVICES PROVIDED. Each Fund's Current Agreement states that, subject to the
supervision and direction of the Board, the Adviser will: (a) act in strict
conformity with the Fund's Declaration of Trust, the 1940 Act and the Investment
Advisers Act of 1940, as the same may be amended from time to time; (b) manage
the Fund's portfolio in accordance with the Fund's investment objective and
policies as stated in the Fund's Prospectus; (c) make investment decisions for
the Fund; (d) place purchase and sale orders for portfolio transactions for the
Fund; (e) supply the Fund with office facilities (which may be in the Adviser's
own offices), statistical and research data, data processing services, clerical,
internal executive and administrative services, and stationery and office
supplies; (f) supply or direct and supervise a third party administrator or
custodian in the provision to the Fund of accounting and bookkeeping services,
the calculation of the net asset value of shares of the Fund, internal auditing
services, and other clerical services in connection therewith; and (g) prepare
or supervise and direct a third party administrator or custodian in the
preparation of reports to shareholders of the Fund, tax returns and reports to
and filings with the SEC and state Blue Sky authorities.
In providing these services, the Adviser is required to provide investment
research and supervision of each Fund's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
each Fund's assets. In addition, the Adviser is required to furnish each Fund
with whatever statistical information the Fund may reasonably request with
respect to the securities that the Fund may hold or contemplate purchasing.
EXPENSES PAID BY THE ADVISER. Each Fund's Current Agreement states that the
Adviser shall bear all expenses in connection with the performance of its
services thereunder, including compensation of and office space for officers and
employees of the Fund connected with investment and economic research, trading
and investment management of the Fund, as well as the fees of all Trustees of
the Fund who are "affiliated persons" of the Adviser, as that term is defined in
the 1940 Act, or any of its "affiliated persons."
10
EXPENSES PAID BY THE FUNDS. Each Fund's Current Agreement states that the
Fund shall pay (or, in the event that such expenses are paid by the Adviser,
shall reimburse the Adviser for) all other expenses incurred in the organization
and operation of the Fund including, among other things, expenses for legal and
auditing services, costs of printing proxy statements, prospectuses, stock
certificates and shareholder reports, charges of the custodian, any
sub-custodian and transfer agent, expenses in connection with the Fund's
dividend reinvestment plan, SEC and National Association of Securities
Dealers, Inc. fees, fees and expenses of the Trustees who are not "affiliated
persons" of the Adviser or any of its "affiliated persons", accounting and
valuation costs, administrator's fees, membership fees in trade associations,
fidelity bond coverage for the Fund's officers and employees, errors and
omissions insurance coverage for Trustees and officers, interest, brokerage
costs, taxes, stock exchange listing fees and expenses, expenses of qualifying
the Fund's shares for sale in various states, expenses associated with personnel
performing exclusively shareholder servicing functions, certain other
organization expenses, litigation and other extraordinary or non-recurring
expenses, and other expenses properly payable by the Fund.
COMPENSATION PAID TO THE ADVISER. Under each Fund's Current Agreement, the
Fund pays the Adviser as compensation for services rendered a fee, computed
monthly, equal when annualized to (1) 2.5% of the average net assets for such
month of its venture capital and other restricted securities constituting up to
25% of net assets and (2) the percentage that corresponds to the fee table below
of the average net assets for such month of all other assets ("Other Assets");
provided that in no event will such monthly fee when annualized exceed 1.375% of
the average net assets of the Fund for such month.
ANNUALIZED
VALUE OF OTHER ASSETS FEE RATE
- --------------------- ----------
$250,000,000 or less 1.0%
$250,000,001 to $500,000,000 0.9%
$500,000,001 to $1,000,000,000 0.8%
In excess of $1,000,000,000 0.7%
For these purposes, "venture capital and other restricted securities" are
securities of issuers for which no market quotations are readily available and
securities of companies for which market quotations are readily available but
which are subject to legal or contractual restrictions on resale. Securities of
companies for which public information is available but as to the sale of which
the safe harbor provided by Rule 144(k) is not available are considered to be
subject to legal or contractual restrictions on resale. For the fiscal year
ended September 30, 2001, HQH paid the Adviser an advisory fee of $4,411,094 and
HQL paid the Adviser an advisory fee of $3,142,957. As of April 1, 2002, HQH had
net assets of $328,054,977 and HQL had net assets of $213,525,591.
LIABILITY OF THE ADVISER. Each Fund's Current Agreement provides that the
Adviser shall not be held responsible for any loss incurred by any act or
omission of any broker and that the Adviser also shall not be liable to the Fund
or to any shareholder of the Fund for any error or judgment or for any loss
suffered by the Fund in connection with rendering services thereunder, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the 1940
Act) or (b) a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties thereunder. Subject to the foregoing, each Fund indemnifies the
Adviser, and its directors, officers and employees to the maximum extent
permitted by Article V of the Fund's Declaration of Trust.
11
TERMINATION OF THE AGREEMENT. Each Fund's Current Agreement may be
terminated by either the Fund or the Adviser by not less than thirty days' nor
more than sixty days' written notice to the other party.
ADDITIONAL INFORMATION ABOUT THE CURRENT AGREEMENTS
The date of each Fund's Current Agreement is April 30, 2000. Each Fund's
Current Agreement was last submitted to a vote by the Fund's shareholders on
June 8, 2000, for the primary purpose of approving a reduced management fee
rate. Each Fund's Current Agreement was last approved by the Trustees on
March 22, 2002 and the date to which it was last continued is July 31, 2002.
THE NEW AGREEMENTS
The New Agreement for each Fund will be dated as of the date of the
consummation of the Transaction, which is expected to close on or about
June 30, 2002. Each Fund's New Agreement will be in effect for an initial term
of one year and may be continued thereafter from year to year only if
specifically approved at least annually by the vote of "a majority of the
outstanding voting securities" (as defined below under "PROXIES AND VOTING AT
THE ANNUAL MEETING") of each Fund, or by the Board of Trustees, and, in either
event, the vote of a majority of the Independent Trustees, cast in person at a
meeting called for such purpose. As noted above, if the New Agreement is not
approved by a Fund's shareholders, that Fund's Current Agreement will continue
in effect until July 31, 2002 and, at that time, the Board of Trustees would
make such arrangements for the management of the Fund's investments as it deems
appropriate and in the best interests of the Fund. Such arrangements could
include extending the term of the Fund's Current Agreement.
DIFFERENCES BETWEEN THE CURRENT AND NEW AGREEMENTS
The terms of each Fund's New Agreement are substantially identical to the
terms of each Fund's Current Agreement, except for the effective date, initial
term, the parties and certain provisions relating to the use of the H&Q name, as
described below. The investment advisory fee rates paid by the Funds to the New
Adviser under the New Agreements will be the same as those currently in effect
under the Current Agreements.
Under the Current Agreements, each Fund acknowledges that the terms
"Hambrecht & Quist" and "H&Q" are property rights of the Adviser and its
affiliates and that such entities may permit other entities to use such terms as
part of their names. Each Fund currently agrees that, if the Adviser ceases to
act as investment adviser to the Fund, the Fund's license to use the term "H&Q"
as part of its name will terminate, unless an agreement can be reached on its
continued use by the Fund. If an agreement acceptable to all parties cannot be
reached, each Fund will take all necessary actions to change its name to a name
not including such terms.
Under the New Agreements, each Fund would acknowledge that the New Adviser's
use of the term "H&Q" is pursuant to a written license agreement (the "License
Agreement"), a copy of which the New Adviser has provided to the Fund. Under the
License Agreement, the New Adviser may sublicense the term "H&Q" to a fund for
which it serves as investment adviser, for use as part of the fund's name,
pursuant to a written sublicense agreement. In connection with the New
Agreements, each Fund would agree that its right to use the term "H&Q" is
subject in all respects to the terms of the License Agreement. In addition, each
Fund would agree that if the License Agreement terminates, or if the New Adviser
ceases to act as investment adviser to the Fund, the Fund's sublicense to use
the term "H&Q" as part of its name will terminate, at which time the Fund will
take all necessary action to change its name to a name not including such term.
12
REQUIRED VOTE
The 1940 Act requires that each Fund's New Agreement be approved by a
"majority of the outstanding voting securities" of the Fund, as defined below
under "PROXIES AND VOTING AT THE MEETING." The Trustees recommend a vote FOR the
approval of each Fund's New Agreement.
PROPOSAL 3
RATIFICATION OR REJECTION OF SELECTION
OF INDEPENDENT PUBLIC ACCOUNTANTS
Pursuant to the 1940 Act, at a meeting called for such purpose on
November 6, 2001, each Fund's Audit Committee recommended and a majority of the
Board of Trustees of each Fund, including a majority of the Independent
Trustees, selected PricewaterhouseCoopers as the independent public accountants
for the Fund for the fiscal year ending September 30, 2002. Prior to the
selection of PricewaterhouseCoopers, Arthur Andersen LLP ("Andersen") served as
each Fund's independent public accountants before resigning as such as of
September 27, 2001. Andersen's resignation was prompted by revisions to the
SEC's auditor independence requirements. As a result of those revisions,
Andersen may no longer be considered "independent" with respect to the Funds
because of its commercial banking relationship with J.P. Morgan Chase & Co., the
parent company of the Adviser. Accordingly, at a meeting called for such purpose
on September 26, 2001, a majority of the Board of Trustees of each Fund,
including a majority of the Independent Trustees, approved the engagement
PricewaterhouseCoopers as the Fund's independent public accountants for the
remainder of the Fund's fiscal year ended September 30, 2001. Each Fund's Audit
Committee participated in and approved the decision to change the Fund's
independent public accountants.
During the fiscal years of each Fund ended September 30, 1999 and
September 30, 2000, Andersen's audit reports contained no adverse opinion or
disclaimer of opinion; nor were its reports qualified or modified as to
uncertainty, audit scope, or accounting principles. Further, in connection with
the audits of each Fund for the fiscal years ended September 30, 1999 and
September 30, 2000, and through September 27, 2001, there were no disagreements
between either Fund and Andersen on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
if not resolved to the satisfaction of Andersen would have caused it to make
reference to the disagreements in its report on the financial statements for
such years.
Each Fund has been advised that neither PricewaterhouseCoopers nor any of
its partners has any direct or material indirect financial interest in the Fund,
nor has had any connection during the past three years with the Fund in the
capacity of promoter, underwriter, voting trustee, director, officer or
employee. Accounting services to be performed by PricewaterhouseCoopers for each
Fund will consist of the examination of the annual financial statements of the
Fund, consultation on financial, accounting and reporting matters, review and
consultation regarding various filings with the SEC and attendance at some
meetings of the Board of Trustees. PricewaterhouseCoopers also will perform
non-audit services consisting of review and/or preparation of income tax returns
of each Fund. Representatives of PricewaterhouseCoopers will be present and
available for questioning at the Annual Meeting and will have an opportunity to
make a statement.
The following table shows fees paid to PricewaterhouseCoopers for the audit
of each Fund's most recent annual financial statements. The information in the
column "Audit Fees" shows the amounts paid for the audit and review of financial
statements of each Fund. The information in the column "All Other Fees" shows
the aggregate amounts paid to PricewaterhouseCoopers by each Fund for
tax-related
13
services. No other fees were paid to PricewaterhouseCoopers by the Funds, the
Adviser and all entities controlling, controlled by, or under common control
with the Adviser that provide services to the Funds. The Audit Committee of the
Board of Trustees has considered whether PricewaterhouseCoopers' provision of
non-audit services, the compensation for which is disclosed under "All Other
Fees," is compatible with maintaining PricewaterhouseCoopers' independence.
AUDIT FEES ALL OTHER FEES*
---------- ---------------
H&Q Healthcare Investors $38,500 $9,600
H&Q Life Sciences Investors $38,500 $6,400
- -------------------
* Represents aggregate fees billed for all other non-audit services, namely,
tax-related services.
REQUIRED VOTE
The selection of PricewaterhouseCoopers as each Fund's independent public
accountants for the fiscal year ending September 30, 2002, is submitted to the
shareholders for ratification and requires the affirmative vote of a majority of
the Fund's shares voting at the Annual Meeting. The Trustees recommend a vote
FOR the selection of PricewaterhouseCoopers as the independent public
accountants of each Fund.
INFORMATION PERTAINING TO THE ADVISER
Hambrecht & Quist Capital Management Incorporated,LLC, a California corporation,limited liability company under
the laws of Delaware, is the investment adviser for each Fund. Under each Fund's
Current Agreement, the Adviser is responsible for the management of the Fund's
assets, subject to the supervision of the Board of Trustees. The Adviser manages
the investments of each Fund in accordance with its investment objective and
policies. The Adviser also is obligated to supervise and perform certain
administrative and management services and is obligated to provide the office
space, facilities, equipment and personnel necessary to perform its duties. The
Funds pay no salaries. The salaries of all officers of the Funds and all
personnel of the Funds or of the Adviser performing services relating to
research, statistical or investment activities, and of all Trustees who are
Interested Persons of the Funds or of the Adviser, are paid by the Adviser or an
affiliate thereof. The Adviser is located at 30 Rowes Wharf, Fourth Floor,
Boston, MA 02110-3328.
The Trust's current Adviser is owned by Daniel R. Omstead, Mary N. Omstead
and the Alan G. Carr Irrevocable Trust. Mr. Carr, a former portfolio manager,
president and trustee of the Trust, passed away in October 2003. Dr. Omstead is
currently the President and Chief Executive Officer of the Adviser. Mary Omstead
is Dr. Omstead's wife. Under the terms of the Adviser's current Amended and
Restated Limited Liability Company Agreement, the Adviser will purchase the Alan
G. Carr Irrevocable Family Trust's interest in the Adviser over the course of a
number of years.
Daniel R. Omstead serves as President and Chief Executive Officer of the
Adviser, whichAdviser. The address for Dr. Omstead is his principal occupation. Alan G. Carr serves as Chairman and
Director ofc/o the Adviser which is his principal occupation. The other Directors
of the Adviser are David G. Golden and Steven N. Machtinger. Mr. Golden's
principal occupation is Managing Director and Director of Global Technology,
Media and Telecom Investment Banking for J.P. Morgan Securities Inc.
Mr. Machtinger's principal occupation is Managing Director and Associate General
Counsel for J.P. Morgan Securities Inc. The Adviser's address isat 30 Rowes Wharf,
Fourth Floor, Boston, MAMassachusetts 02110-3328.
REPORT OF THE AUDIT COMMITTEE OF EACH FUND;
INFORMATION REGARDING THE FUNDS' INDEPENDENT ACCOUNTANTS
Each Fund's Audit Committee reviewed and discussed the Fund's audited
financial statements with management for the Fund's fiscal year ended
September 30, 2003, and discussed with the Fund's independent accountants for
the fiscal year ended September 30, 2003, PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), the matters required to be discussed by SAS 61
(Communication with Audit Committees) and SAS 90 (Audit Committee
Communications), which includes, among other items, matters relating to the
conduct of an audit of the Fund's financial statements. Each Fund's Audit
Committee received the written disclosures and the letter from
PricewaterhouseCoopers required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees) and discussed with
PricewaterhouseCoopers its independence. Based on its review and discussions
with management and PricewaterhouseCoopers, each Fund's Audit Committee
recommended to the Board of Trustees that the Fund's audited financial
statements for the Fund's fiscal year ended September 30, 2003 be included in
the Fund's Annual Report for filing with the Securities and Exchange
Commission (the "SEC").
PricewaterhouseCoopers had been selected as the independent accountants
of the Funds for their fiscal years ending September 30, 2004. On May 7,
2004, PricewaterhouseCoopers resigned as the Funds' independent accountants
for their fiscal years ending September 30, 2004 effective upon the
completion of services related to the Funds' semi-annual financial
statements. The reports provided
7
by PricewaterhouseCoopers for each of the Funds for the fiscal years ending
September 30, 2002 and September 30, 2003 were unqualified and contained no
adverse opinion or disclaimer of opinion, nor were the reports modified as to
uncertainty, audit scope, or accounting principle. Further, in connection
with its audits for the two previous fiscal years and through the date of
this proxy statement, there have been no disagreements between
PricewaterhouseCoopers and the Funds on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure,
which disagreements, if not resolved to their satisfaction, would have caused
PricewaterhouseCoopers to reference the subject matter of the disagreements
in its report on the financial statements for such years. The Funds are
currently seeking to retain new independent auditors for their fiscal years
ending September 30, 2004.
The following tables set forth the aggregate fees billed for professional
services rendered by PricewaterhouseCoopers to the Funds during the Funds' two
most recent fiscal years:
H&Q HEALTHCARE INVESTORS
FISCAL YEAR AUDIT FEES AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
- ----------- ---------- ------------------ ------------ ----------
2003 $ 41,250 $ 10,000 $ 11,160 $ 0
2002 $ 38,500 $ 9,000 $ 9,600 $ 0
H&Q LIFE SCIENCES INVESTORS
FISCAL YEAR AUDIT FEES AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
- ----------- ---------- ------------------ ------------ ----------
2003 $ 41,250 $ 10,000 $ 7,440 $ 0
2002 $ 38,500 $ 9,000 $ 6,400 $ 0
All of the services described in the tables above were approved by the
Audit Committee pursuant to its pre-approval policies and procedures (the
"Pre-Approval Policies and Procedures") which are summarized below to the extent
that such services were required to be pre-approved by the Audit Committee.
The aggregate non-audit fees billed by PricewaterhouseCoopers for services
rendered to HQH and to the Adviser, is wholly-ownedor an affiliate thereof that provides
ongoing services to HQH, for the fiscal years ended September 30, 2002 and 2003,
amounted to $9,600 and $11,160, respectively. The aggregate non-audit fees
billed by Hambrecht &
Quist California,PricewaterhouseCoopers for services rendered to HQL and to the
Adviser, or an affiliate thereof that provides ongoing services to HQL, for the
fiscal years ended September 30, 2002 and 2003, amounted to $6,400 and $7,440,
respectively.
The Funds' Audit Committees have adopted Pre-Approval Policies and
Procedures pursuant to which the Committees pre-approve all audit and non-audit
services provided by the Funds' independent auditor (the "Auditor") and any
non-audit services provided by the Auditor to the Funds' Investment Adviser and
Service Affiliates during the period of the Auditor's engagement to provide
audit services to the Funds, if those services directly impact the Funds'
operations and financial reporting. Audit services include those typically
associated with the annual audit such as evaluation of internal controls.
Non-Audit services include certain services that are audit-related, such as
consultations regarding financial accounting and reporting standards and tax
services. Certain services may not be provided by the Auditor to the Funds' or
the Funds' Service Affiliates without jeopardizing the Auditor's independence.
These services are deemed prohibited services and include certain management
functions; human resources services; broker-dealer, investment adviser or
investment banking services; legal services; and expert services unrelated to
the audit. Other services are conditionally
8
prohibited and may be provided if the Audit Committees reasonably conclude that
the results of the services will not be subject to audit procedures during an
audit of the Funds' financial statements. These types of services include
bookkeeping; financial information systems design and implementation; appraisal
or valuation services; actuarial services; and internal audit outsourcing
services.
The Pre-Approval Policies and Procedures require Audit Committee approval
of the engagement of the Auditor for each fiscal year and approval of the
engagement by at least a California corporation,majority of the Funds' independent trustees. In
determining whether to engage the Auditor for its audit services, the Audit
Committees will consider the Auditor's proposed fees for the engagement, in
light of the scope and nature of the audit services that the Funds will receive.
The Pre-Approval Policies and Procedures also permit the Audit Committees to
pre-approve the provisions of types or categories of permissible non-audit
services for the Funds and their Service Affiliates on an annual basis at the
address of One Bush Street,
San Francisco, California 94104, which is indirectly wholly-owned by J.P. Morgan
Chase & Co., at the address of 270 Park Avenue, New York, New York 10017. The
address for Dr. Omstead and Mr. Carr is c/o the Adviser at the addresstime of the AdviserAuditor's engagement and on a project-by-project basis. At the time
of the annual engagement of the Funds' Auditor, the Audit Committees are to
receive a list of the categories of expected non-audit services with a
description and an estimated budget of fees. In their pre-approval, the Audit
Committees should determine that the provision of the service is consistent
with, and will not impair, the ongoing independence of the Auditor and set forth above.any
limits on fees or other conditions they find appropriate. Non-audit services may
also be approved on a project-by-project basis by the Audit Committees
consistent with the same standards for determination and information.
The Audit Committees may also appoint a Designated Member of the Committees
to pre-approve non-audit services that have not been pre-approved or material
changes in the nature or cost of any non-audit services previously pre-approved.
The Designated Member may not pre-approve any project the estimated budget (or
budgeted range) of fees of which exceed or may exceed $15,000 per Fund. Any
actions by the Designated Member are to be ratified by the Audit Committees by
the time of their next scheduled meeting. The Funds' Pre-Approval Policies and
Procedures are reviewed annually by the Audit Committees and the Funds maintain
a record of the decisions made by the Committees pursuant to these procedures.
INFORMATION PERTAINING TO THE CUSTODIAN AND TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND REGISTRAR
The Funds' securities and cash are held under a custodian contract by State
Street Bank and Trust Company (the "Custodian"), whose principal business
address is 225 Franklin Street, Boston, MA 02110. The Custodian also performs
certain accounting related functions for Mr. Goldenthe Funds, including calculation of NAV
and Mr. Machtinger is c/o
J.P. Morgan Securitiesnet income.
EquiServe, Inc. serves as Dividend Disbursing Agent. EquiServe Trust
Company, a fully owned subsidiary of EquiServe, Inc., serves as (1) the Plan
Agent for the Funds' Dividend Reinvestment Plan and (2) the Transfer Agent and
Registrar for Shares of the Funds. EquiServe, Inc. and EquiServe Trust Company
have their principal business at One Bush150 Royall Street, San Francisco, California 94104.Canton, MA 02021.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and Section 30(j) of the 1940 Act, as
applied to a fund,Fund, require the fund'sFund's officers and directors, investment
manager, affiliates of the investment manager, and persons who 14
beneficially own
more than ten percent of a registered class of the fund'sFund's outstanding securities
("Reporting Persons"), to file reports of ownership of the fund'sFund's securities and
changes in
9
such ownership with the SEC and the NYSE. Such persons are required by SEC
regulations to furnish the fundFund with copies of all such filings.
Based solely upon its review of the copies of such forms received by it,
and written representations from certain Reporting Persons that no year-end
reports were required for those persons, each Fund believes that during the
fiscal year ended September 30, 2001,2003, its Reporting Persons complied with all
applicable filing requirements.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Trustees is not aware
that any matters are to be presented for action at the Annual Meeting other than
those described above. Should other business properly be brought before the
Annual Meeting, it is intended that the accompanying Proxy will be voted thereon
in accordance with the judgment of the persons named as proxies.
PROXIES AND VOTING AT THE ANNUAL MEETING
Shareholders who execute proxies may revoke them at any time before they
are voted by written notice to the Secretary of the Fund at 30 Rowes Wharf,
Fourth Floor, Boston, MA 02110-3328, or by casting a vote at the Annual Meeting.
All valid proxies received prior to the Annual Meeting, or any adjournmentadjournment(s) or
adjournmentspostponements(s) thereof, will be voted at the Annual Meeting and any
adjournments or postponements thereof.
The representation in person or by proxy of a majority of the outstanding
shares of each Fund is necessary to constitute a quorum for transacting business
at the Annual Meeting. For purposes of determining the presence of a quorum,
abstentions and broker "non-votes" will be treated as shares that are present.
Broker non-votes are proxies received by a Fund from brokers or nominees when
the broker or nominee has neither received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on a
particular matter. Broker non-votes are unlikely to be relevant to the Annual
Meeting because each of the ProposalsProposal to be voted upon by the shareholders involves mattersa
matter that the NYSE considers to be routine and within the discretion of
brokers to vote if no customer instructions are received.
Shareholders of each Fund will vote separately with respect to each
Proposal. Proposal 1
which requires the approval of a plurality of shares voting at the Annual
Meeting (i.e., the twothree nominees, in the case of HQH, and the threetwo nominees, in
the case of HQL, receiving the greatest number of votes will be elected). Proposal 2 requires the affirmative vote of the holders of a "majority
of the outstanding voting securities" of the Fund, as defined below. Proposal 3
requires the approval of a majority of shares voting at the Annual Meeting.
The term "majority of the outstanding voting securities," as defined in the
1940 Act and as used in connection with Proposal 2, means: the affirmative vote
of the lesser of (i) 67% of the voting securities of the Fund present at the
Annual Meeting if more than 50% of the outstanding voting securities of the Fund
are present in person or by proxy or (ii) more than 50% of the outstanding
voting securities of the Fund.
Abstentions will not be counted in favor of, but will have no other effect on,
the votes for Proposals 1 and 3. Abstentions will have the effect of a "no"
vote on Proposal 2.
15
1.
Matters on which a choice has been provided will be voted as indicated on
the proxy card and, if no instruction is given, the persons named as proxies
will vote the shares represented thereby in favor of each Proposal referred to
in the Proxy Statement,1, and will use
their best judgment in connection with the transaction of such other business as
may properly come before the Annual Meeting or any adjournmentadjournment(s) or
adjournmentspostponement(s) thereof.
In the event that sufficient votes in favor of any Proposal set forth in the
Notice of Annual Meeting1 are not received
by June 25, 2002,24, 2004 or the necessary quorum has not been obtained, the persons
named as proxies on the enclosed proxy card may propose one or more adjournments
of the Annual Meeting to permit further solicitation. Any such adjournment will
require the affirmative vote of the holders of a majority of the shares present
in person or by proxy at the session of the Annual Meeting to be adjourned. The
persons named as proxies on the enclosed proxy card will vote in favor of such
adjournment those proxies which they are entitled
10
to vote in favor of the Proposal for which further solicitation of proxies is to be made.Proposal. They will vote against any such adjournment
those proxies required to be voted against suchthe Proposal. The costs of any such additional solicitation and of any adjourned
session will be borne by the New Adviser.
As of April 1, 2002,May 14, 2004, there were 12,833,98015,108,430 shares of beneficial interest of
HQH and 10,009,51611,719,045 shares of beneficial interest of HQL issued and outstanding.
Shareholders will be entitled to one vote for each share held. Only shareholders
of record at the close of business on May 15, 2002,14, 2004, the record date, will be
entitled to vote at the Annual Meeting. As of April 1, 2002,May 14, 2004, the Trustees and
officers of theeach Fund individually and as a group beneficially owned less than
1% of the outstanding voting securities of each Fund. To the Fund. Asbest of April 1, 2002, HQH and
HQL were not awarethe Fund's
knowledge, based upon filings made with the SEC, as of any person thatMay 14, 2004, no persons
or group beneficially owned more than 5% of the voting securities of either
Fund's outstanding voting securities.Fund.
PROPOSALS FOR 20032005 ANNUAL MEETING
Shareholder proposals for each Fund's 20032005 Annual Meeting must be received
at the Fund's executive offices at 30 Rowes Wharf, Fourth Floor, Boston,
Massachusetts 02110-3328 no later than January 9, 200324, 2005 for inclusion in the
20032005 Proxy Statement and form of proxy. Submission of such proposals does not
insure that they will be included in the 20032005 Proxy Statement or submitted for a
vote at the 20032005 Annual Meeting.
In addition, under Rule 14a-4 of the SEC's proxy rules a company may use
discretionary voting authority to vote on matters coming before an annual
meeting of shareholders if the company does not have notice of the matter at
least 45 days before the date corresponding to the date on which the company
first mailed its proxy materials for the prior year's annual meeting of
shareholders or the date specified by an overriding advance notice provision in
the company's by-laws. As neither Funds' by-laws contain such an advance notice
provision, the Funds may use discretionary voting authority to vote on matters
coming before the Funds' 2005 Annual Meeting of Shareholders, if the Funds do
not have written notice of a shareholder proposal on or before April 9, 2005.
GENERAL
The New Adviser has undertaken toFund will pay the costs of the Annual Meeting to the
extent they exceed $8,580, which was the cost of preparing, assembling and mailing the
Funds' joint annual meetingmaterial in 2001. The first $8,580connection with solicitation of the costs of the Annual Meetingproxies, and will be borne 60%
by HQHreimburse brokers,
nominees and 40% by HQL.similar record holders for their reasonable expenses incurred in
connection with forwarding proxy material to beneficial holders. In addition to
the solicitation by use of the mails, certain officers of the FundsFund and certain
employees of the Adviser, who will receive no compensation for their services
other than their regular salaries, may solicit the return of proxies personally
or by telephone or facsimile.
Furthermore, Georgeson Shareholder Communications, Inc. ("Georgeson") has
been engaged to assist in the solicitation of proxies for the Funds, at an
estimated cost of $6,000 per Fund, plus expenses. Such costs will be borne by
the New Adviser. As the Annual Meeting date approaches, certain shareholders may
receive a telephone call from a representative of Georgeson if their votes have
not yet been received.
Authorization to permit Georgeson to execute proxies may be obtained by
telephonic or electronically transmitted instructions from shareholders of each
Fund. Proxies that are obtained telephonically will be recorded in accordance
with the procedures described below. The Funds believe that these
16
procedures are reasonably designed to ensure that both the identity of the
shareholder casting the vote and the voting instructions of the shareholder are
accurately determined.
In all cases where a telephonic proxy is solicited, the Georgeson
representative is required to ask for the shareholder's full name and address,
or the last four digits of the shareholder's social security or employer
identification number, or both, and to confirm that the shareholder has received
the proxy materials in the mail. If the shareholder is a corporation or other
entity, the Georgeson representative is required to ask for the person's title
and confirmation that the person is authorized to direct the voting of the
shares. If the information solicited agrees with the information provided to
Georgeson, then the Georgeson representative has the responsibility to explain
the process, read the Proposals listed on the proxy card and ask for the
shareholder's instructions on each Proposal. Although the Georgeson
representative is permitted to answer questions about the process, he or she is
not permitted to recommend to the shareholder how to vote, other than to read
any recommendation set forth in this Proxy Statement. Georgeson will record the
shareholder's instructions on the card. Within 72 hours, the shareholder will be
sent a letter or mailgram confirming his or her vote and asking the shareholder
to call Georgeson immediately if his or her instructions are not correctly
reflected in the confirmation.
Shareholders may also provide their voting instructions through telephone
touch-tone voting or Internet voting. These options require shareholders to
input a control number which is located on each voting instruction card. After
inputting this number, shareholders will be prompted to provide their voting
instructions on each Proposal. Shareholders will have an opportunity to review
their voting instructions and make any necessary changes before submitting their
voting instructions and terminating their telephone call or Internet link.
Shareholders who vote via the Internet, in addition to confirming their voting
instructions prior to submission, will also receive an e-mail confirming their
instructions upon request.
If a shareholder wishes to participate in the Annual Meeting, but does not
wish to give a proxy by telephone or electronically, the shareholder may still
submit the proxy card(s) originally sent with this Proxy Statement or attend in
person. Should shareholders require additional information regarding the proxy
or replacement proxy card(s), they may contact Warren Antler at (212) 806-8572.
Any proxy given by a shareholder is revocable until voted at the Annual Meeting.
H&Q HEALTHCARE INVESTORS
H&Q LIFE SCIENCES INVESTORS
May 20, 2002
1724, 2004
11
EXHIBIT A
[HH&Q HEALTHCARE INVESTORS]
[HINVESTORS
H&Q LIFE SCIENCES INVESTORS]
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT, dated as of ___________________ between
[H&Q Healthcare Investors] [H&Q Life Sciences Investors],INVESTORS
(each a Massachusetts
business trust (the "Fund"), and Hambrecht & Quist Capital Management LLC, a
Delaware limited liability company (the "Investment Adviser"),
W I T N E S S E T H:
That in consideration
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
PURPOSE:
The principal purpose of the mutual covenants herein contained, itAudit Committee is agreed
as follows:
1. SERVICES TO BE RENDERED BY THE INVESTMENT ADVISER TO THE FUND.
Subject to the supervision and direction ofassist the Board of
Trustees in fulfilling its responsibility to oversee the integrity of the Fund's
financial statements and the Fund's compliance with legal and regulatory
requirements and to oversee management's conduct of the Fund's financial
reporting process, including reviewing the financial reports and other financial
information provided by the Fund, the Fund's systems of internal accounting and
financial controls and the annual independent audit process.
In discharging its oversight role, the Committee is granted the power to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Fund and the Investment Adviser will:
a. actpower to retain outside
counsel, auditors, other experts or advisers for this purpose.
The outside auditor for the Fund is ultimately accountable to the Board and
the Committee, as representatives of the shareholders. The Committee shall be
responsible for overseeing the qualifications and independence of the outside
auditor.
MEMBERSHIP:
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements applicable to
audit committee members as set forth in strict conformity withRule 303.01 of the Fund's DeclarationNew York Stock
Exchange Listed Company Manual. Without limiting the foregoing, each member of
Trust,the Committee shall:
- be a person who is not an "interested person" of the Fund, as that
term is defined in Section 2(a)(19) of the Investment Company Act of
1940, (the "1940 Act")as amended;(1)
- be barred from directly or indirectly(2) accepting any accounting,
legal, consulting, investment banking or financial advisory or other
compensatory fee(3) from the Fund, other than in the member's capacity
as a member of the Committee, the Board, or any other Board committee;
and
- have no relationship to the Fund that may interfere with the exercise
of his or her independence from management and the Investment Advisers
ActFund.
- ----------
(1) Section 2(a)(19) provides, in part, that "interested person" means (A) when
used with respect to an investment company - (i) any affiliated person of
1940,such company,...any interested person of any investment adviser of... such
company...PROVIDED that no person shall be deemed to be an interested
person of an investment company solely by reason of his being (aa) a member
of its board of directors or advisory board."
(2) Indirect payments include payments to spouses, to minor children or
stepchildren or to children or stepchildren sharing a home with the member.
Indirect payments also include payments accepted by an entity in which such
member is a partner, member, officer (such as managing director) or
executive officer, or occupies a similar position (except limited partners,
non-managing members and those occupying similar positions who, in each
case, have no active role in providing services to the sameentity) and which
provides accounting, consulting, legal, investment banking or financial
advisory services to the issuer or any subsidiary of the issuer.
12
KEY RESPONSIBILITIES:
The Committee's role is one of oversight, and it is recognized that the
Fund's management is responsible for preparing the Fund's financial statements
and that the outside auditor is responsible for auditing those financial
statements.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide and may be varied from time to time as appropriate under the
circumstances:
- The Committee, in its capacity as a committee of the Board, shall be
amended;
b. managedirectly responsible for the appointment, compensation, retention and
oversight of the work of any outside auditor engaged (including
resolution of disagreements between management and the auditor
regarding financial reporting) for the purpose of preparing or issuing
an audit report or performing other audit, review or attest services
for the Fund. (See "Pre-Approval" below.) The outside auditor must
report directly to the Committee.
- The Committee shall review with management and the outside auditor the
Fund's portfolio in accordanceannual audited financial statement and quarterly financial
statements.
- The Committee shall review with the Fund's investment
objectiveoutside auditor: (1) all critical
accounting policies and practices to be used; (2) all alternative
treatments within Generally Accepted Accounting Principles for
policies and practices related to material items that have been
discussed with management, including: (i) ramifications of the use of
such alternative disclosures and treatments, and (ii) the treatment
preferred by the outside auditor; (3) other material written
communications between the outside auditor and management, such as stated inany
management letter or schedule of unadjusted differences; and (4) all
non-audit services provided by the Fund's Prospectus;
c. make investment decisions for the Fund;
d. place purchase and sale orders for portfolio transactions for the Fund;
e. supply the Fund with office facilities (which may be in the Investment
Adviser's own offices), statistical and research data, data processing
services, clerical, internal executive and administrative services, and
stationery and office supplies;
f. supply or direct and supervise a third party administrator or custodian
in the provisionauditor to the Fund of accounting"investment company
complex"(4) that were not pre-approved by the Committee or its
Delegate(s) (see "Pre-Approval" below).
- The Committee shall periodically discuss with management and bookkeeping services, the
calculation ofoutside auditor the net asset value of shares of the Fund, internal auditing
services,quality and other clerical services in connection therewith; and
g. prepare or supervise and direct a third party administrator or custodian
in the preparation of reports to shareholders of the Fund, tax returns and
reports to and filings with the Securities and Exchange Commission ("SEC")
and state Blue Sky authorities.
In providing these services, the Investment Adviser will provide investment
research and supervisionadequacy of the Fund's investments and conductinternal
controls.
- ----------
(3) Compensatory fees do not include the receipt of fixed amounts of
compensation under a continual
program of investment, evaluation and, if appropriate, sale and reinvestmentretirement plan (including deferred compensation) for
prior service with the listed issuer (provided that the compensation is not
contingent in any way on continued service. The requirement for the
compensation to be fixed precludes retirement payments that are tied to the
continued performance of the Fund's assets. In addition,relevant entity, but does not preclude
customary objectively determined adjustment provisions such as cost of
living adjustments.
(4) As defined in Rule 2-01(f)(14) of Regulation S-X, an "investment company
complex" includes:
(A) An investment company and its investment adviser or sponsor;
(B) Any entity controlled by or controlling an investment adviser or
sponsor in paragraph (A) above, or any entity under common control with an
investment adviser or sponsor in paragraph (A) above, if the Investment Adviser will furnishentity:
(1) is an investment adviser or sponsor; or
(2) is engaged in the Fund
with whatever statistical information the Fund may reasonably request with
respectbusiness of providing administrative, custodian,
underwriting, or transfer agent services to the securitiesany investment company,
investment adviser, or sponsor; and
(C) Any investment company or entity that the Fund may hold or contemplate purchasing.
2. BROKERAGE.
In executing transactionswould be an investment company
but for the portfolio and selecting brokers or dealers
(which brokers or dealers may include any affiliateexclusions provided by Section 3(c) of the Investment Adviser to
the extent permittedCompany
Act of 1940 that has an investment adviser or sponsor included in this
definition by either paragraph (A) or (B) above.
13
- The Committee annually shall request, review and discuss a report by
the 1940 Act)outside auditor delineating the Investment Adviser will use its best
efforts to obtainauditor's internal quality control
procedures; any material issues raised by the best price and execution for the Fund. In
A-1
assessing the best price and execution available for any portfolio transaction,
the Investment Adviser will consider all factors it deems relevant including,
but not limited to, price (including any applicable brokerage commissionmost recent internal
quality-control review or dealer spread), size of order, difficulty of execution, and operational
facilitiespeer review of the firm involvedauditor, or by any
inquiry of governmental or professional authorities, within the
preceding five years; and all relationships between the firm's risk in positioning a block of
securities. In selecting brokers or dealers to execute a particular transactionoutside
auditor and in evaluating the best price and execution available, the Investment Adviser
may consider the brokerage and research services (as those terms of are defined
in Section 28(e) of the Securities Exchange Act of 1934 (the "Exchange Act"))
provided to the Fund and/or other accounts over which the Investment Adviser
exercises investment discretion. It is understood that such services may be
useful to the Investment Adviser in connection with its services to other
clients.
On occasions when the Investment Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Investment Adviser, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Investment Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund, and shall take, or recommend to such
other clients.
3. OTHER AGREEMENTS; USE OF NAME, ETC.
It is understood that anythe Board to
take, appropriate action in response to the outside auditor's report
to satisfy itself of the shareholders, Trustees, officers, agentsoutside auditor's independence.
- The Committee shall review in advance the staffing of the annual
independent audit with the outside auditor and obtain a satisfactory
representation from the outside auditor that such staffing complies
with all applicable laws, regulations and rules regarding the rotation
of audit partners.
- The Committee shall establish procedures for: (i) the receipt,
retention and treatment of complaints received by the Fund regarding
accounting, internal accounting controls, or auditing matters; and
(ii) the confidential, anonymous submission by employees of the Fund
or of the Fund's management of concerns regarding questionable
accounting or auditing matters.
- The Committee shall investigate any reports from Fund officers
regarding: (i) significant deficiencies in the internal controls that
could adversely affect the Fund's ability to record, process,
summarize, and report financial data and any material weaknesses in
the Fund's internal controls; and (ii) any fraud, whether or not
material, that involves management or other employees who play a
significant role in the Fund's internal controls.
- The Committee shall discuss the Fund's earnings press releases,
financial information and earnings guidance provided to analysts and
rating agencies.
- The Committee shall discuss the Fund's policies with respect to risk
assessment and risk management.
- The Committee shall hold separate periodic meetings with management,
the internal auditors and the outside auditor.
- The Committee shall review with the outside auditor any audit problems
and difficulties that may arise and management's response thereto.
- The Committee shall set and review with the outside auditor clear
hiring policies for employees or former employees of the outside
auditor.
- The Committee shall hold regular meetings with the Board.
PRE-APPROVAL:
Audit Services
Before an outside auditor is engaged by the Fund to render audit services,
the Committee shall review and approve the engagement. (See also "Delegation"
below.)
- ----------
An "investment adviser," for purposes of this definition, does not include
a sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser. A "sponsor,"
for purposes of this definition, is an entity that establishes a unit
investment trust.
14
Permissible Non-Audit Services
The Committee shall review and approve in advance any proposal (except as
set forth in (a) through (c) below) that the Fund employ its outside auditor to
render "permissible non-audit services" to the Fund. (A "permissible non-audit
service" is defined as a non-audit service that is not prohibited by Rule
2-01(c)(4) of Regulation S-X(5) or other applicable law or regulation.) The
Committee shall also review and approve in advance any proposal (except as set
forth in (a) through (c) below) that management, and any entity controlling,
controlled by, or under common con trol with management that provides ongoing
services to the Fund (a "service affiliate"), employ the Fund's outside auditor
to render non-audit services, if such engagement would relate directly to the
operations and financial reporting of the Fund. As a part of its review, the
Committee shall consider whether the provision of such services is consistent
with the outside auditor's independence. (See also "Delegation" below.)
Pre-approval by the Committee of non-audit services is not required so long
as:
(a) all non-audit services that were not pre-approved do not aggregate to
more than 5% of the total fees paid to the outside auditor by the
Fund, management or a service affiliate for non-audit services that
were subject to pre-approval by the Committee during the fiscal year
in which the services were provided;
(b) such services were not recognized by the Fund at the time of the
engagement to be non-audit services; and
(c) such services are promptly brought to the attention of the Committee
and approved prior to the completion of the audit by the Committee or
its Delegate(s) (as defined below).
Delegation
The Committee may delegate to one or more of its members ("Delegates")
authority to pre-approve the outside auditor's provision of audit services or
permissible non-audit services to the Fund, or the provision of non-audit
services to management or any service affiliate. Any pre-approval determination
made by a Delegate shall be presented to the full Committee at its next meeting.
The Committee shall communicate any pre-approval made by it or a Delegate to
management, who will ensure that the appropriate disclosure is made in the
Fund's periodic reports and other documents as required under the federal
securities laws.
COMPLIANCE:
Ongoing compliance items in connection with this Charter shall include:
- The Committee must annually review and reassess the adequacy and
performance of the Charter and the Committee.
- The independence of each current and future Committee Member must be
determined to comply with the provisions of Rule 303.01 of the NYSE
Listed Company Manual and any other applicable law or regulation.
- ----------
(5) Non-audit services that are prohibited by Rule 2-01(c)(4) of Regulation S-X
include: (1) bookkeeping or other services related to accounting records or
financial statements of the audit client; (2) financial information systems
design and implementation; (3) appraisal or valuation services, fairness
opinions, or contribution-in-kind reports; (4) actuarial services; (5)
internal audit outsourcing services; (6) management functions; (7) human
resources; (8) broker-dealer, investment adviser, or investment banking
services; (9) legal services; and (10) expert services unrelated to the
audit.
15
- The Fund must file a written affirmation with the NYSE within a
reasonable period of time after (i) the Board's annual appointment of
the Committee; or (ii) the composition of the Committee changes. The
written affirmation must be in the form required by the NYSE.
- Each member of the Committee must be financially literate and one
member must have accounting or financial management expertise (as
determined by the Board in its business judgement).(6) Such a
determination by the Board shall have no effect on the duties,
obligations or liability of the member so designated, or on the
duties, obligations or liability of the other members of the Committee
or the Board.
FUNDING:
The Fund must provide for appropriate funding, as determined by the
Committee, in its capacity as a committee of the Board, for payment of:
- compensation to any outside auditor engaged for the purpose of
preparing or issuing an audit report or performing other audit, review
or attest services for the Fund;
- compensation to any outside counsel, auditors, other experts or
advisers employed by the Committee, as it determines necessary to
carry out its duties; and
- ordinary administrative expenses of the Committee that are necessary
or appropriate in carrying out its duties.
Adopted: November 10, 2003
- ----------
(6) While a Committee member may be a shareholder, director, officer, agent or
employee of or be otherwise interestedfinancial expert, the member could still
satisfy this provision without being designated a financial expert.
16
EXHIBIT B
H&Q HEALTHCARE INVESTORS
H&Q LIFE SCIENCES INVESTORS
(each a "Fund," collectively, the "Funds")
NOMINATING CHARTER
For convenience, this Charter refers to the Funds and their Boards and
Committees in the Investment Advisersingular. However, this Charter applies to each Fund, its
Board and in any
affiliate thereof with the Investment Adviserits Committees independently.
COMMITTEE MEMBERSHIP:
The Nominating and that the Investment Adviser
and any affiliate thereof with the Investment Adviser may have an interest in
the Fund. It is also understood that the Investment Adviser and persons
affiliated with the Investment Adviser have and may have advisory, management
service or other contracts with other organizations and persons, and may have
other interests and businesses and that the Fund shall have no interest in the
profits or opportunities derived from the same, that the Investment Adviser may
give advice and take action in the performance of its duties with respect to
such other clients that may differ from advice given on the timing or nature of
action taken with respect to the Fund. Nothing in this Agreement shall be deemed
to confer upon the Investment Adviser any obligation to acquire for the accountGovernance Committee (the "Committee") of the Fund a position in any security that the Investment Adviser or any
affiliate thereof may acquire for its own account or for the accountBoard of
any
other client, if in the sole and absolute discretion of the Investment Adviser
it is not for any reason practical or desirable to acquire a position in such
security for the Fund's account.
The Investment Adviser shall authorize and permit any of its partners,
officers, directors and employees who may be elected as Trustees or officers of
the Fund to serve in the capacities in which they are elected. Services to be
furnished by the Investment Adviser under this Agreement may be furnished
through the medium of any of such partners, officers, directors or employees.
The Fund acknowledges that Investment Adviser's use of the term "H&Q" is
pursuant to a written license agreement (the "License Agreement""Board"), a copy of
which the Investment Adviser has provided to the Fund. The Fund further
acknowledges that under the License Agreement the Investment Adviser may
sublicense the term "H&Q" to a fund for which it serves as investment adviser,
for use as part of the fund's name, pursuant to a written sublicense agreement
that (a) is at least as protective of the rights of the licensor under the
License Agreement as the License Agreement and (b) does not permit the fund to
sub-sublicense the term "H&Q". The Fund agrees that its right to use the term
"H&Q" is subject in all respects to the terms of the License Agreement. The Fund
further agrees that if the License Agreement terminates for any reason, or if
the Investment Adviser ceases to act as investment adviser to the Fund,
A-2
the Fund's sublicense to use the term "H&Q" as part of its name will terminate,
at which time the Fund will take all necessary action to change its name to a
name not including such term.
4. COMPENSATION.
The Fund will pay to the Investment Adviser as compensation for the
Investment Adviser's services rendered a fee, computed monthly, equal when
annualized to (1) 2.5% of the average net assets for such month of its venture
capital and other restricted securities constituting up to 25% of net assets and
(2) the percentage that corresponds to the fee table below of the average net
assets for such month of all other assets ("Other Assets"); provided that in no
event shall such monthly fee when annualized exceed 1.375% of the average net
assets of the Fund for such month.
ANNUALIZED
VALUE OF OTHER ASSETS FEE RATE
- --------------------- ----------
$250,000,000 or less 1.0%
$250,000,001 to $500,000,000 0.9%
$500,000,001 to $1,000,000,000 0.8%
In excess of $1,000,000,000 0.7%
For purposes of this section, "average net assets" for any month shall be
equal to the average of the net asset value of the appropriate assets at the
last business day of such month and the net asset value of the appropriate
assets at the last business day of the prior month. In determining average net
assets for purposes of clauses (1) and (2) above, liabilities and expenses of the Fund shall be allocated pro rata based on the ratio that the assets referred
to in each clause bear to the total assetscomposed entirely of the Fund. Such fee shall be
payable for each month within five business days after the end of the such
month.
For purposes of this Section 4, "venture capital and other restricted
securities" shall be securities of issuers for which no market quotations are
readily available and securities of companies for which market quotations are
readily available but which are subject to legal or contractual restrictions on
resale. Securities of companies for which public information is available but as
to the sale of which the safe harbor provided by Rule 144(k) is not available
shall be considered to be subject to legal or contractual restrictions on
resale.
In the event that expenses of the Fund for any fiscal year should exceed the
expense limitation on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Fund are
qualified for offer and sale, the compensation due the Investment Adviser for
such fiscal year shall be reduced by the amount of such excess by a reduction or
refund thereof. In the event that the expenses of the Fund exceed any expense
limitation which the Investment Adviser may, by written notice to the Fund,
voluntarily declare to be effective subject to such terms and conditions as the
Investment Adviser may prescribe in such notice, the compensation due the
Investment Adviser shall be reduced and if necessary the Investment Adviser
shall assume expenses of the Fund, to the extent required by such expense
limitation. In no event shall the provisions of this Section 4 require the
Investment Adviser to reduce its fee if not so required by an applicable statute
or regulatory authority.
If the Investment Adviser shall serve for less than the whole of a month,
the foregoing compensation shall be pro rated.
5. EXPENSES.
The Investment Adviser will bear all expenses in connection with the
performance of its services under this Agreement, including compensation of and
office space for officers and employees of the Fund connected with investment
and economic research, trading and investment management of the
A-3
Fund, as well as the fees of all Trusteestrustees of the
Fund who (1) are "affiliatednot "interested persons" (as that term is defined in the
Investment Company Act of 1940, as amended ("1940 Act")) of the Investment Adviser,Fund or the
Fund's investment adviser and (2) are "independent" as defined in the New York
Stock Exchange ("NYSE") Listing Standards. The President of the Fund, although
not a member of the Committee, will cooperate with the Committee by recommending
candidates and recruiting them for the Board of Trustees (the "Board") of the
Fund and for executive offices of the Fund, and otherwise assisting the
Committee to discharge its responsibilities.
MISSION:
The mission of the Committee under this Nominating Charter, is to promote
the effective participation of qualified individuals on the Board, Committees of
the Board, and as executive officers of the Fund.
NOMINATING FUNCTION - BOARD:
1. The Committee shall make nominations for trustees and officers of the
Fund and submit such nominations to the full Board. The Committee shall evaluate
candidates' qualifications for such positions, and, in the case of candidates
for independent trustee positions, their independence from the Fund's investment
adviser and other principal service providers. Persons selected as independent
trustees must not be "interested persons" (as that term is defined in the 1940
Act, or
any of its "affiliated persons."
The Fund shall pay (or, in the event that such expenses are paid by the
Investment Adviser, shall reimburse the Investment Adviser for) all other
expenses incurred in the organization and operation of the Fund including, among
other things, expenses for legal and auditing services, costs of printing proxy
statements, prospectuses, stock certificates and shareholder reports, charges of
the custodian, any sub-custodian and transfer agent, expenses in connection with
the Dividend Reinvestment Plan, SEC and National Association of Securities
Dealers, Inc. fees, fees and expenses of the Trustees who are not "affiliated
persons" of the Investment Adviser or any of its "affiliated persons",
accounting and valuation costs, administrator's fees, membership fees in trade
associations, fidelity bond coverage for the Fund's officers and employees,
errors and omissions insurance coverage for Trustees and officers, interest,
brokerage costs, taxes, stock exchange listing fees and expenses, expenses of
qualifying the Fund's shares for sale in various states, expenses associated
with personnel performing exclusively shareholder servicing functions, certain
other organization expenses, litigation and other extraordinary or non-recurring
expenses, and other expenses properly payable by the Fund.
6. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of any
penalty in the event of its assignment, and this Agreement shall not be amended
unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Fund, and by the vote cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Fund who are not interested persons of the Fund or of the
Investment Adviser.
7. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall remain
in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 6) until terminated as follows:
a. Either party hereto may at any time terminate this Agreement by not less
than thirty (30) days' nor more than sixty (60) days' written notice
delivered or mailed by registered mail, postage prepaid, to the other party;
or
b. If (i) the TrusteesAct) of the Fund or the shareholders byFund's investment adviser. The Committee shall also
consider the affirmative
vote of a majority of the outstanding shares of the Fund and (ii) a majority
of the Trustees of the Fund who are not interested persons of the Fund or of
the Investment Adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Agreement, then this Agreement shall
automatically terminate at the close of business on ______________ or the
expiration of one year from the effective date of the last such continuance,
whichever is later.
Action by the Fund under (a) above may be taken either by (i) vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 7 shall be without
the paymenteffect of any penalty.
8. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority of
outstanding shares of the Fund" means the affirmative vote, at a duly called and
held meeting of shareholders of the Fund, (a) of
A-4
the holders of 67% or more of the shares of the Fund present (in person or by
proxy) and entitled to vote at such meeting, if the holders of more than 50% of
the outstanding shares of the Fund entitled to vote at such meeting are present
in person or by proxy, or (b) of the holders of more than 50% of the outstanding
shares of the Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings definedrelationships beyond those delineated in the 1940 Act
andthat might impair independence, E.G. business, financial or family relationships
with the Rules and Regulations thereunder,
subject, however to such exemptions asinvestment adviser. In determining nominees' qualifications for Board
membership, the Committee shall consider factors which may be granteddelineated in this
Charter or the Fund's bylaws, and may consider such other factors as it may
determine to be relevant to fulfilling the role of being a member of the Board.
2. The Committee may consider potential trustee candidates recommended by
shareholders, provided that the SEC under said Act;
the term "specifically approve at least annually" shall be construed in a manner
consistent with the 1940 Act and the Rules and Regulations thereunder; and the
term "brokerage and research services" shall have the meaning given in the
Exchange Act and the Rules and Regulations thereunder.
9. NON-LIABILITY OF THE INVESTMENT ADVISER.
The Investment Adviser shall not be held responsible forproposed candidates: (i) satisfy any loss incurred
by any act or omission of any broker. The Investment Adviser also shall not be
liable to the Fund or to any shareholderminimum
qualifications of the Fund for any error or judgment
or for any loss suffered by the Fund in connection with rendering services
hereunder except (a) a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the 1940 Act) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Investment
Adviser, or reckless disregard of its obligations and duties hereunder. Subject
to the foregoing, the Fund also shall indemnify the Investment Adviser, and any
officer, director and employee thereof to the maximum extent permitted by
Article V of the Fund's Declaration of Trust.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Declaration of Trust of the Fund is on file with the Secretary
of the Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Fund as Trustees and not
individually and that the obligations of this instrumenttrustees; (ii) are not binding upon
any of the Trustees or shareholders individually but are binding only upon the
assets and property of the Fund.
11. FURNISHING OF MATERIALS.
During the term of this Agreement, the Fund agrees to furnish the Investment
Adviser at its principal executive office all prospectuses, proxy statements,
report to shareholders, sales literature, or other material prepared for
distribution to shareholders"interested persons"
of the Fund or the public, which referFund's investment adviser within the meaning of the 1940 Act;
and (iii) are "independent" as defined in the NYSE listing standards. In order
for the Committee to evaluate any nominee recommended by a shareholder or
shareholder group, potential trustee candidates and nominating shareholders or
shareholder groups must satisfy the
17
requirements(1) provided in Appendix A to this Charter. Other than the
requirements provided in Appendix A, the Committee shall not otherwise evaluate
shareholder trustee nominees in a different manner than other nominees and the
standard of the Committee is to treat all equally qualified nominees in the same
manner.
3. Once a nomination has been timely received in proper form, the nominee
will be asked to complete an eligibility questionnaire to assist the Fund in
assessing the nominee's qualifications as a potential independent Trustee and as
someone who is "independent" under the NYSE Listing Standards. The Committee
will make such determinations in its sole discretion and such determinations
shall be final.
4. The Committee may identify prospective trustees from any reasonable
source, including, but not limited to, the Investment Adviserconsultation of third-party trustee
search services.
5. The Committee requires that each prospective trustee candidate have a
college degree or equivalent business experience. In addition, it is the Board's
policy that trustees on the Board may not serve in a similar capacity on the
board of a registered investment company which is not sponsored or advised by
the Fund's investment adviser or its affiliates. The Committee may take into
account a wide variety of factors in considering prospective trustee candidates,
including (but not limited to): (i) availability and commitment of a candidate
to attend meetings and perform his or her responsibilities on the Board; (ii)
relevant industry and related experience; (iii) educational background; (iv)
financial expertise; (v) the candidate's ability, judgment and expertise; and
(vi) overall diversity of the Board's composition.
6. The Committee shall evaluate the participation and contribution of
each trustee coming to the end of his or her term before deciding whether to
recommend reelection. The Committee may seek the views of other trustees to
assist them in this evaluation.
7. The Committee shall periodically review the composition of the Board
to determine whether it may be appropriate to add individuals with different
backgrounds or skills from those already on the Board.
8. The Committee shall periodically review trustee compensation and shall
recommend any way,appropriate changes to the Board as a group.
9. The Committee shall periodically review issues related to the
succession of officers of the Fund, including the Chairman of the Board.
NOMINATING FUNCTION - COMMITTEES:
1. The Committee shall make nominations for membership on all committees
of the Fund and submit such nominations to the full Board, and shall review
committee assignments as necessary.
2. The Committee shall review as necessary the responsibilities of any
committees of the Board, whether there is a continuing need for each committee,
whether there is a need for additional committees, and whether committees should
be combined or reorganized. The Committee shall consult with, and receive
recommendations in connection with the foregoing from the Board and Fund
management, and shall make recommendations for any such action to the full
Board.
- ----------
(1) These requirements are based on proposed Securities Exchange Act Rule
14a-11(b) and (c) and may be amended depending on the text of that Rule as
finally adopted.
18
OTHER POWERS AND RESPONSIBILITIES:
1. The Committee shall normally meet yearly prior to use thereofthe meeting of the
full Board, to carry out its nominating function, and not to use such material
if the Investment Adviser reasonably objects in writing within five business
days (orat such other time as may be mutually agreed) after receipt thereof. In
the event of termination of this Agreement, the Fund will continue to furnish to
the Investment Adviser copies of any of the above-mentioned materials which
refer in any way to the Investment Adviser. The Fund shall furnish or
otherwise
make available to the Investment Adviser such other information relating to the
business affairs of the Fundtimes as the Investment Adviser at any time,Committee or from timeBoard may determine appropriate or necessary, and is
empowered to time, reasonably requests in orderhold special meetings as circumstances require.
2. The Committee shall have the resources and authority appropriate to
discharge its obligations hereunder.
12. GOVERNING LAW.
This Agreement shall be governed byresponsibilities, including authority to utilize Fund counsel and
construed in accordanceto retain experts or other persons with specific competence at the lawsexpense of
the CommonwealthFund.
3. The Committee shall review this Charter periodically and recommend any
changes to the full Board.
May 20, 2004
19
APPENDIX A
PROCEDURES AND ELIGIBILITY REQUIREMENTS FOR
SHAREHOLDER SUBMISSION OF NOMINEE CANDIDATES
A. Nominee Requirements
Trustee nominees recommended by shareholders must fulfill the following
requirements:(2)
1. The nominee may not be the nominating shareholder, a member of Massachusetts.
A-5
IN WITNESS WHEREOF, the
Fund andnominating shareholder group, or a member of the Investment Adviserimmediate family of the
nominating shareholder or any member of the nominating shareholder group.
2. Neither the nominee nor any member of the nominee's immediate family
may be currently employed or employed within the last year by any nominating
shareholder entity or entity in a nominating shareholder group.
3. Neither the nominee nor any immediate family member of the nominee is
permitted to have each caused
this instrument to be signed in duplicate in its behalf by its Presidentaccepted directly or indirectly, during the year of the
election for which the nominee's name was submitted, during the immediately
preceding calendar year, or during the year when the nominee's name was
submitted, any consulting, advisory, or other compensatory fee from the
nominating shareholder or any member of a nominating shareholder group.
4. The nominee may not be an executive officer, thereunto duly authorized, alldirector (or person
performing similar functions) of the nominating shareholder or any member of the
nominating shareholder group, or of an affiliate of the nominating shareholder
or any such member of the nominating shareholder group.
5. The nominee may not control (as "control" is defined in the 1940 Act)
the nominating shareholder or any member of the nominating shareholder group (or
in the case of a holder or member that is a fund, an interested person of such
holder or member as defined by Section 2(a)(19) of the 1940 Act).
B. Nominating Shareholder or Shareholder Group Requirements
The nominating shareholder or shareholder group must meet the following
requirements:
1. Any shareholder or shareholder group submitting a proposed nominee
must beneficially own, either individually or in the aggregate, more than 5% of
the Fund's securities that are eligible to vote at the time of submission of the
nominee and at the time of the annual meeting where the nominee may be elected.
Each of the securities used for purposes of calculating this ownership must have
been held continuously for at least two years as of the date first hereinabove
written.
[H&Q HEALTHCARE INVESTORS]
[H&Q LIFE SCIENCES INVESTORS]
By:of the nomination.
In addition, such securities must continue to be held through the date of the
meeting. The nominating shareholder or shareholder group must also bear the
economic risk of the investment and the securities used for purposes of
calculating the ownership cannot be held "short."
2. The nominating shareholder or shareholder group must also submit a
certification which provides the number of shares which the person or group has
(i) sole power to vote or direct the vote; (ii) shared power to vote or direct
the vote; (iii) sole power to dispose or direct the disposition of such shares;
and (iii) shared power to dispose or direct the disposition of such shares. In
addition, the certification shall provide that the shares have been held
continuously for at least 2 years.
- ---------------------------------------
Title:
- -------------------------------------
HAMBRECHT & QUIST CAPITAL MANAGEMENT LLC
By:
- ---------------------------------------
Title:
- -------------------------------------
A-6----------
(2) Unless otherwise specified herein, please refer to the Securities Exchange
Act of 1934 and regulations thereunder for interpretations of terms used in
this Appendix A.
20
[HQCM -C. Deadlines and Limitations
A nominating shareholder or shareholder group may not submit more than one
nominee per year. All shareholder recommended nominee submissions must be
received by the Fund by the deadline for submission of any shareholder proposals
which would be included in the Fund's proxy statement for the next annual
meeting of the Fund.
D. Making a Submission
Shareholders recommending potential trustee candidates must substantiate
compliance with these requirements at the time of submitting their proposed
trustee candidate to the attention of the Fund's Secretary. Notice to the Fund's
Secretary should include: (i) the shareholder's contact information; (ii) the
trustee candidate's contact information and the number of Fund shares owned by
the proposed candidate; (iii) all information regarding the candidate that would
be required to be disclosed in solicitations of proxies for elections of
trustees required by Regulation 14A of the 1934 Act; and (iv) a notarized letter
executed by the trustee candidate, stating his or her intention to serve as a
nominee and be named in the Fund's proxy statement, if nominated by the Board of
Trustees, to be named as a trustee if so elected.
21
HQHCM-PS-04
H & Q HEALTHCARE INVESTORS] [FILE NAME: ZHQHC2.ELX] [VERSION - (1)]
[04/11/02] [ORLG. 04/11/02]INVESTORS
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
[GRAPHIC]
YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.
VOTE-BY-INTERNET VOTE-BY-TELEPHONE
Log on to the Internet and go to Call toll-free
http://www.eproxyvote.com/hqh OR 1-877-PRX-VOTE (1-877-779-8683)
[GRAPHIC] [GRAPHIC]
IF YOU VOTE OVER THE INTERNET OR BY TELEPHONE, PLEASE DO NOT MAIL YOUR CARD.
DETACH HERE ZHQHC2IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
H&Q HEALTHCARE INVESTORS
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ALL NOMINEES.
1. On the election of three Trustees:
NOMINEES: (01) Robert P. Mack, M.D., (02) Eric Oddlelfson and
(03) Oleg M. Pohotsky
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
/ /
---------------------------------------
For all nominees except as noted above
2. In their discretion, on all other business that may properly come before
the Annual Meeting and any adjournment(s) or postponement(s) thereof.
Mark box at right if an address change or comment has been noted on the reverse
side of this card. / /
Please be sure to sign and date this Proxy.
Signature: ________________ Date: __________ Signature: ___________ Date: ______
DETACH HERE
H&Q HEALTHCARE INVESTORS
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 25, 200224, 2004
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Alan G. Carr,Daniel R. Omstead, ENG ScD, Henri A. Termeer and
Kimberley L. Carroll, and each of them, proxies of the undersigned, with full
powers of substitution, to vote at the Annual Meeting of Shareholders of H&Q
HEALTHCARE INVESTORS (the "Fund") to be held on June 25, 200224, 2004 at 9:00 A.M. at
the Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts 02110, and at any
adjournmentadjournment(s) or adjournmentspostponement(s) thereof, all the shares of the Fund
outstanding in the name of the undersigned as follows on the reverse of this
card.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR TRUSTEE, FOR APPROVAL OF
PROPOSAL 2, FOR ADOPTION OF PROPOSAL 3, AND WITH RESPECT TO
ITEM 4,2, AS SAID PROXIES, AND EACH OF THEM, MAY DETERMINE.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign this proxy exactly as your name appears on the books of the Fund.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- ---------------------------------------------------------------- -------------------------------
- ---------------------------------- ---------------------------------------------------------------- -------------------------------
- ---------------------------------- ---------------------------------------------------------------- -------------------------------
H & Q HEALTHCARE INVESTORS
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02490
- -----------------------------------------------------------------------------------------------------------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- -----------------------------------------------------------------------------------------------------------------------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
- -----------------------------------------------------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD. 1. READ THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-799-8683). HTTP://WWW.EPROXYVOTE.COM/HQH
3. ENTER YOUR VOTER CONTROL NUMBER LOCATED ON YOUR PROXY 3. ENTER YOUR VOTER CONTROL NUMBER LOCATED ON YOUR PROXY
CARD ABOVE YOUR NAME. CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS. 4. FOLLOW THE INSTRUCTIONS PROVIDED.
- -----------------------------------------------------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to HTTP://WWW.EPROXYVOTE.COM/HQH anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
[HQHCM - H & Q HEALTHCARE INVESTORS] [FILE NAME: ZHQHC1.ELX] [VERSION - (1)]
[04/11/02] [ORIG. 04/11/02]
DETACH HERE
ZHQHC1
|X| PLEASE MARK
VOTES AS IN
THIS EXAMPLE
- --------------------------------------------------------
H&Q HEALTHCARE INVESTORS
- --------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL
NOMINEES.
1. On the election of two Trustees: 2. Approval of a new investment FOR AGAINST ABSTAIN
NOMINEES: (01) Alan G. Carr and (02) Henri A. advisory agreement between [ ] [ ] [ ]
Termeer the Fund and Hambrecht &
Quist Capital Management
FOR WITHHELD LLC. (THE BOARD OF TRUSTEES
ALL [ ] [ ] FROM ALL RECOMMENDS A VOTE FOR);
NOMINEES NOMINEES
3. Ratification of the selection FOR AGAINST ABSTAIN
[ ] ______________________________________ of PricewaterhouseCoopers LLP [ ] [ ] [ ]
For all nominees except as noted above as Independent Public
Accountants of the Fund for the
fiscal year ending September 30,
2002 (THE BOARD OF TRUSTEES
RECOMMENDS A VOTE FOR);
4. In their discretion, on all other business that may properly
come before the Annual Meeting and any adjournment or
adjournments thereof.
Mark box at right if an address change or comment has been [ ]
noted on the reverse side of this card.
Please be sure to sign and date this proxy.
Signature: Date: Signature: Date: ____________
------------- -----------
[HQCM
H & Q LIFE SCIENCES INVESTORS][FILE NAME: ZHQHL2.ELX][VERSION - (1)]
[04/11/02][ORLG. 04/11/02]INVESTORS
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
[GRAPHIC]
YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.
VOTE-BY-INTERNET VOTE-BY-TELEPHONE
Log on to the Internet and go to Call toll-free
http://www.eproxyvote.com/hql OR 1-877-PRX-VOTE (1-877-779-8683)
[GRAPHIC] [GRAPHIC]
IF YOU VOTE OVER THE INTERNET OR BY TELEPHONE, PLEASE DO NOT MAIL YOUR CARD.
DETACH HERE ZHQHL2IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
H&Q LIFE SCIENCES INVESTORS
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ALL NOMINEES.
1. On the election of two Trustees:
NOMINEES: (01) Lawrence S. Lewin and (02) Uwe E. Reinhardt, Ph.D.
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
/ /
---------------------------------------
For all nominees except as noted above
2. In their discretion, on all other business that may properly come before
the Annual Meeting and any adjournment(s) or postponement(s) thereof.
Mark box at right if an address change or comment has been noted on the reverse
side of this card. / /
Please be sure to sign and date this Proxy.
Signature: ________________ Date: __________ Signature: ___________ Date: ______
DETACH HERE
H&Q LIFE SCIENCES INVESTORS
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 25, 200224, 2004
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Alan G. Carr,Daniel R. Omstead, ENG ScD, Henri A. Termeer and
Kimberley L. Carroll, and each of them, proxies of the undersigned, with full
powers of substitution, to vote at the Annual Meeting of Shareholders of
H&Q LIFE SCIENCES INVESTORS (the "Fund") to be held on June 25, 200224, 2004 at
9:00 A.M. at the Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts
02110, and at any adjournmentadjournment(s) or adjournmentspostponement(s) thereof, all the shares of
the Fund outstanding in the name of the undersigned as follows on the reverse of
this card.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR TRUSTEE, FOR APPROVAL OF
PROPOSAL 2, FOR ADOPTION OF PROPOSAL 3, AND WITH RESPECT TO
ITEM 4,2, AS SAID PROXIES, AND EACH OF THEM, MAY DETERMINE.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign this proxy exactly as your name appears on the books of the Fund.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- ---------------------------------------------------------------- -------------------------------
- ---------------------------------- ---------------------------------------------------------------- -------------------------------
- ---------------------------------- ----------------------------------
H & Q LIFE SCIENCES INVESTORS
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02490
- -------------------------------------------------------------------------------------------------------------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- -------------------------------------------------------------------------------------------------------------------------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
- -------------------------------------------------------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD. 1. READ THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-799-8683). HTTP://WWW.EPROXYVOTE.COM/HQL
3. ENTER YOUR VOTER CONTROL NUMBER LOCATED ON YOUR PROXY 3. ENTER YOUR VOTER CONTROL NUMBER LOCATED ON YOUR PROXY
CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS. 4. FOLLOW THE INSTRUCTIONS PROVIDED.
- -------------------------------------------------------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to HTTP://WWW.EPROXYVOTE.COM/HQL anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
[HQHLS - H & Q LIFE SCIENCES INVESTORS] [FILE NAME: ZHQHL1.ELX] [VERSION - (1)]
[04/11/02] [ORIG. 04/11/02]
DETACH HERE
ZHQHL1
|X| PLEASE MARK
VOTES AS IN
THIS EXAMPLE
- --------------------------------------------------------
H&Q LIFE SCIENCES INVESTORS
- --------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL
NOMINEES.
1. On the election of three Trustees: 2. Approval of a new investment FOR AGAINST ABSTAIN
NOMINEES: (01) Robert P. Mack, M.D., (02) Eric advisory agreement between [ ] [ ] [ ]
Oddleifson and (03) Oleg M. Pohotsky the Fund and Hambrecht &
Quist Capital Management
FOR WITHHELD LLC. (THE BOARD OF TRUSTEES
ALL [ ] [ ] FROM ALL RECOMMENDS A VOTE FOR);
NOMINEES NOMINEES
3. Ratification of the selection FOR AGAINST ABSTAIN
[ ] ______________________________________ of PricewaterhouseCoopers LLP [ ] [ ] [ ]
For all nominees except as noted above as Independent Public
Accountants of the Fund for the
fiscal year ending September 30,
2002 (THE BOARD OF TRUSTEES
RECOMMENDS A VOTE FOR);
4. In their discretion, on all other business that may properly
come before the Annual Meeting and any adjournment or
adjournments thereof.
Mark box at right if an address change or comment has been [ ]
noted on the reverse side of this card.
Please be sure to sign and date this proxy.
Signature: Date: Signature: Date: ____________
------------- ----------------------------------------- -------------------------------