DEF 14A
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a2136787zdef14a.txt
DEF 14A
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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(3) Filing Party:
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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) 772-8500
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 Thursday, June 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; and
(2) The transaction of such other business as may properly come before the
Annual Meeting and any adjournment(s) or postponement(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 14, 2004 will
be entitled to vote at the Annual Meeting or at any adjournment(s) or
postponement(s) thereof.
By Order of the Board of Trustees,
/s/ Kimberley L. Carroll
Kimberley L. Carroll,
Secretary
May 24, 2004
PLEASE COMPLETE, DATE AND SIGN THE PROXY FOR THE SHARES HELD BY YOU AND RETURN
THE PROXY IN THE ENVELOPE PROVIDED 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, 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 of the Funds to be held on June 24,
2004 (the "Annual Meeting"), and any adjournment(s) or postponement(s) thereof,
for the purposes set forth in the accompanying Notice of Annual Meeting, dated
May 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 24, 2004.
Each Fund's shareholders will vote separately on Proposal 1 which relates
to the 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) 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 C Trustees expires on the date of the 2004 Annual Meeting, and the term of
office of the Class A and Class B Trustees will expire one and two years,
respectively, thereafter. Trustees chosen to succeed the Class C 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 three nominees for HQH and two nominees for HQL. Each nominee is
presently serving as a Class C 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 C Trustees until the 2007 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 Class A Trustees serving until
the 2005 Annual Meeting are Henri A. Termeer for HQH and Robert P. Mack, M.D.,
Eric Oddleifson and Oleg M. Pohotsky for HQL. The Class B Trustees to serve
until the 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 set forth in the table below.
NUMBER OF FUNDS
NAME (AGE), ADDRESS, POSITION(S) HELD WITH THE FUNDS IN FUND COMPLEX
AND LENGTH OF TIME 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
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INDEPENDENT TRUSTEES AND NOMINEES
LAWRENCE S. LEWIN^+ (66), 3305 ROLLING ROAD, CHEVY CHASE, MD 20815 2
Trustee of HQH (since 1987) and of HQL (since 1992) and Chairman of HQH and HQL
(since 2000), Executive Consultant (since December 1999); Chief Executive
Officer (from 1970-1999) of The Lewin Group (healthcare public policy and
Management consulting), a subsidiary of Quintiles Transnational Corp.; Director
(since 2003) of Medco Health Solutions, Inc.
ROBERT P. MACK, M.D.#^ (68), 30 ROWES WHARF, BOSTON, MA 02110 2
Trustee (since 1991) of HQH and (since 1992) of HQL, Consultant in Orthopedic
Surgery to Orthopedic Associates of Aspen (since 2000).
ERIC ODDLEIFSON**#+ (69), 42 RIVER ROAD, COHASSET, MA 02025 2
Trustee of HQH and of HQL (since 1992), Partner (1997-2003) and Investment
Committee Chair (since Sept. 2003) of GMO Renewable Resources LLC (timber
investment management).
OLEG M. POHOTSKY**#+ (57), 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).
UWE E. REINHARDT, PH.D.** (66), 30 ROWES WHARF, BOSTON, MA 02110 2
Trustee of HQH (since 1988) and of HQL (since 1992), Professor of Economics
(since 1968) at Princeton University; Director (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 of HQH (since 1989) and of HQL (since 1992), Chairman (since 1988),
Chief Executive Officer (since 1985), and President (since 1983) of Genzyme
Corporation (human healthcare products); Director (since 1987) of ABIOMED, Inc.
INTERESTED TRUSTEE
DANIEL R. OMSTEAD, ENG.SCD.* (50), 30 ROWES WHARF, BOSTON, MA 02110 2
President of HQH and of HQL (since 2001); Trustee of HQH 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.
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* Trustee considered to be an "interested person" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"), through
position or affiliation with Hambrecht & Quist Capital Management LLC (the
"Adviser").
** Member of each Fund's Audit Committee.
# 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 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
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INDEPENDENT TRUSTEES
Lawrence S. Lewin $10,001-$50,000 $10,001-$50,000 $50,001-$100,000
Robert P. Mack, 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 $10,001-$50,000
Henri A. Termeer None None None
INTERESTED TRUSTEE
Daniel R. Omstead, ENGSCD None $0-$10,000 $0-$10,000
Although Trustees are encouraged to attend the annual meetings of
shareholders 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 in care of the Funds' Secretary,
Kimberley L. Carroll, at 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" (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 Fund's Board of Trustees has adopted a written
charter for the Audit 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 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.
3
The members of each Fund's Audit Committee are Messrs. Oddleifson, Pohotsky
and Reinhardt. Mr. Pohotsky is the Chairman of each Fund's Audit Committee. Each
Fund's Audit Committee held one meeting during the fiscal year ended September
30, 2003.
NOMINATING AND GOVERNANCE COMMITTEE. Each 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 shareholder or 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
$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 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 $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, 2003, the Independent Trustees as a group
received $136,980 from HQH and $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. The 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, 2003
PENSION OR RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FROM TRUST AND
COMPENSATION AS PART OF TRUST BENEFITS UPON FUND COMPLEX
NAME OF TRUSTEE FROM EACH FUND EXPENSES RETIREMENT PAID TO TRUSTEES
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INDEPENDENT TRUSTEES
Lawrence S. Lewin $ 24,000 N/A N/A $ 48,000
Robert P. Mack, M.D. $ 21,000 N/A N/A $ 42,000
Eric Oddleifson $ 24,000 N/A N/A $ 48,000
Oleg M. Pohotsky $ 24,000 N/A N/A $ 48,000
Uwe E. Reinhardt, Ph.D. $ 18,000 N/A N/A $ 36,000
Henri A. Termeer $ 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
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* 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 also serve as Trustees. Each officer has been
elected by the Board of Trustees and serves at the pleasure of the Trustees.
KIMBERLEY L. CARROLL (48), 30 ROWES WHARF, BOSTON, MA 02110
Treasurer and Chief Financial Officer (since 1987) of HQH and (since 1992)
of HQL; Secretary (since 2004) of HQH and of HQL, Vice President and Treasurer
of the 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.
INFORMATION PERTAINING TO THE ADVISER
Hambrecht & Quist Capital Management LLC, a 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. The address for Dr. Omstead is c/o the Adviser at 30 Rowes Wharf,
Fourth Floor, Boston, Massachusetts 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, or 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 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 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
time of the Auditor'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 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 the Funds, including calculation of NAV
and net 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 150 Royall Street, 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, require the Fund's officers and directors, investment
manager, affiliates of the investment manager, and persons who beneficially own
more than ten percent of a registered class of the Fund's outstanding securities
("Reporting Persons"), to file reports of ownership of the Fund's securities and
changes in
9
such ownership with the SEC and the NYSE. Such persons are required by SEC
regulations to furnish the Fund 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, 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 adjournment(s) or
postponements(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 the Proposal to be voted upon by the shareholders involves a
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 Proposal 1
which requires the approval of a plurality of shares voting at the Annual
Meeting (i.e., the three nominees, in the case of HQH, and the two nominees, in
the case of HQL, receiving the greatest number of votes will be elected).
Abstentions will not be counted in favor of, but will have no other effect on,
the votes for Proposal 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 Proposal 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 adjournment(s) or
postponement(s) thereof.
In the event that sufficient votes in favor of Proposal 1 are not received
by June 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. They will vote against any such adjournment
those proxies required to be voted against the Proposal.
As of May 14, 2004, there were 15,108,430 shares of beneficial interest of
HQH and 11,719,045 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 14, 2004, the record date, will be
entitled to vote at the Annual Meeting. As of May 14, 2004, the Trustees and
officers of each Fund individually and as a group beneficially owned less than
1% of the outstanding voting securities of each Fund. To the best of the Fund's
knowledge, based upon filings made with the SEC, as of May 14, 2004, no persons
or group beneficially owned more than 5% of the voting securities of either
Fund.
PROPOSALS FOR 2005 ANNUAL MEETING
Shareholder proposals for each Fund's 2005 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 24, 2005 for inclusion in the
2005 Proxy Statement and form of proxy. Submission of such proposals does not
insure that they will be included in the 2005 Proxy Statement or submitted for a
vote at the 2005 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 Fund will pay the cost of preparing, assembling and mailing the
material in connection with solicitation of proxies, and will reimburse brokers,
nominees and 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 Fund 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.
H&Q HEALTHCARE INVESTORS
H&Q LIFE SCIENCES INVESTORS
May 24, 2004
11
EXHIBIT A
H&Q HEALTHCARE INVESTORS
H&Q LIFE SCIENCES INVESTORS
(each a "Fund")
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
PURPOSE:
The principal purpose of the Audit Committee is to assist 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 power 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 Rule 303.01 of the New York Stock
Exchange Listed Company Manual. Without limiting the foregoing, each member of
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, 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 Fund.
----------
(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
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 entity) 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
directly 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 annual audited financial statement and quarterly financial
statements.
- The Committee shall review with the outside 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 any
management letter or schedule of unadjusted differences; and (4) all
non-audit services provided by the auditor to the "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 the
outside auditor the quality and adequacy of the Fund's internal
controls.
----------
(3) Compensatory fees do not include the receipt of fixed amounts of
compensation under a retirement 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 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 entity:
(1) is an investment adviser or sponsor; or
(2) is engaged in the business of providing administrative, custodian,
underwriting, or transfer agent services to any investment company,
investment adviser, or sponsor; and
(C) Any investment company or entity that would be an investment company
but for the exclusions provided by Section 3(c) of the Investment Company
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 outside auditor delineating the auditor's internal quality control
procedures; any material issues raised by the most recent internal
quality-control review or peer review of the auditor, or by any
inquiry of governmental or professional authorities, within the
preceding five years; and all relationships between the outside
auditor and the Fund, and shall take, or recommend to the Board to
take, appropriate action in response to the outside auditor's report
to satisfy itself of the outside 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 financial 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 singular. However, this Charter applies to each Fund, its
Board and its Committees independently.
COMMITTEE MEMBERSHIP:
The Nominating and Governance Committee (the "Committee") of the Board of
Trustees (the "Board") of the Fund shall be composed entirely of trustees of the
Fund who (1) are not "interested persons" (as that term is defined in the
Investment Company Act of 1940, as amended ("1940 Act")) of the 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) of the Fund or the Fund's investment adviser. The Committee shall also
consider the effect of any relationships beyond those delineated in the 1940 Act
that might impair independence, E.G. business, financial or family relationships
with the investment adviser. In determining nominees' qualifications for Board
membership, the Committee shall consider factors which may be delineated 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 proposed candidates: (i) satisfy any minimum
qualifications of the Fund for its trustees; (ii) are not "interested persons"
of the Fund or the Fund'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 consultation 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 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 the meeting of the
full Board, to carry out its nominating function, and at such other time or
times as the Committee or Board may determine appropriate or necessary, and is
empowered to hold special meetings as circumstances require.
2. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including authority to utilize Fund counsel and
to retain experts or other persons with specific competence at the expense of
the Fund.
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 the
nominating shareholder group, or a member of the immediate 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 accepted 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, director (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 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.
----------
(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
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
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 IF 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 24, 2004
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints 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 24, 2004 at 9:00 A.M. at
the Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts 02110, and at any
adjournment(s) or postponement(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, AND WITH RESPECT TO
ITEM 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 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 IF 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 24, 2004
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints 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 24, 2004 at
9:00 A.M. at the Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts
02110, and at any adjournment(s) or postponement(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, AND WITH RESPECT TO
ITEM 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?
------------------------------ -------------------------------
------------------------------ -------------------------------
------------------------------ -------------------------------