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Exhibit 99.CODE ETH
EXHIBIT 1
CODE OF ETHICS
SARBANES-OXLEY CODE OF ETHICS
INTRODUCTION
The Board of Trustees of H&Q Life Sciences Investors and H&Q
Healthcare Investors (each, a "Fund") has established this Code of Ethics
("Code") in accordance with the Sarbanes-Oxley Act of 2002 and the rules
promulgated thereunder. This Code does not supersede or otherwise affect the
separate code of ethics that the Fund and its investment adviser have adopted
pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended
("1940 Act").
This Code is designed to deter wrongdoing and promote: (i) honest
and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships; (ii)
full, fair, accurate, timely, and understandable disclosure in reports and
documents that the Fund files with, or submits to, the Securities and
Exchange Commission ("SEC") and in other public communications made by the
Fund; (iii) compliance with applicable governmental laws, rules, and
regulations; (iv) the prompt internal reporting of violations of the Code to
an appropriate person or persons; and (v) accountability for adherence to the
Code. The Code applies to the Fund's President and Treasurer and Secretary
(collectively, "Covered Officers," each of whom is set forth in Exhibit A).
A. PRINCIPLES OF HONEST AND ETHICAL CONDUCT
1. General Objectives
The Fund expects all Covered Officers to adhere to the highest possible
standards of honest and ethical conduct. All Covered Officers are expected to
handle actual or apparent conflicts of interest between personal and
professional relationships in a manner that is above reproach, and to place the
interests of the Fund above their own personal interests.
2. Conflicts of Interest
All Covered Officers should be scrupulous in avoiding a conflict of
interest with regard to the Fund's interests. A conflict of interest occurs when
an individual's private interest interferes in any way with the interests of the
Fund. This includes any specific situation or transaction that the Trustees of
the Fund who are not interested persons as defined in the 1940 Act, would
consider to create the appearance of a conflict of interest. A conflict
situation can arise when a Covered Officer takes actions or has interests that
may make it difficult to perform his or her work for the Fund objectively and
effectively. Conflicts of interest also arise when a Covered Officer, or a
member of his or her family, receives improper benefits as a result of his or
her position with the Fund, whether such benefits are received from the Fund or
a third party. Any conflict of interest that arises in a specific situation or
transaction must be disclosed by the Covered Officer and resolved before taking
any action.
Conflicts of interest may not always be evident, and Covered Officers
should consult with the Funds' Chief Compliance Officer or the Fund's legal
counsel if they are uncertain about any situation.
Examples of possible conflicts of interest include:
I) OUTSIDE EMPLOYMENT OR ACTIVITIES. Covered Officers may not engage in
any outside employment or activity that interferes with their
performance or responsibilities to the Fund or is otherwise in
conflict with or prejudicial to the Fund. A Covered Officer must
disclose to the Funds' Chief Compliance Officer any outside
employment or activity that may constitute a conflict of interest
and obtain the Funds' Chief Compliance Officer's approval before
engaging in any such employment or activity.
II) GIFTS. Covered Officers may not accept gifts or other items of more
than small value, consistent with industry standards from any person
or entity that does business with or on behalf of the Fund.
III) OTHER SITUATIONS. Because other conflicts of interest may arise, it
would be impractical to attempt to list all possible situations in
this Code. If a proposed transaction or situation raises questions
or doubts, a Covered Officer should consult with the Funds' Chief
Compliance Officer before engaging in the transaction or activity.
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3. Corporate Opportunities
Covered Officers may not exploit for their own personal gain, or for
the personal gain or their family members or relatives, opportunities that are
discovered through the use of Fund property, information, or position, unless
the opportunity is first disclosed fully in writing to the Board of Trustees and
the Board of Trustees declines to pursue such opportunity.
B. FULL, FAIR, ACCURATE, TIMELY, AND UNDERSTANDABLE DISCLOSURE IN FUND
DISCLOSURE AND REPORTING DOCUMENTS
As a registered investment company, it is of critical importance that
the Fund's public communications, reports, and filings contain full, fair,
accurate, timely, and understandable disclosure. Accordingly, Covered Officers
are expected to consider it central to their roles as officers of the Fund to
promote full, fair, accurate, timely, and understandable disclosure in the
Fund's public communications and reports, and in the documents that the Fund
files with, or submits to, the Securities and Exchange Commission (the "SEC").
Depending on his or her position with the Fund, a Covered Officer may
be called upon to provide necessary information to make the Fund's public
reports, communications, and SEC filings and submissions complete, fair, and
understandable. The Fund expects Covered Officers to take this responsibility
very seriously and to provide prompt and accurate answers to inquiries related
to the Fund's public disclosure requirements. Covered Officers may be asked to
certify the accuracy of all responses and information provided for inclusion in
the Fund's public reports, communications, and SEC filings and submissions.
C. COMPLIANCE WITH APPLICABLE GOVERNMENTAL RULES AND REGULATIONS
As a registered investment company, the Fund is subject to regulation
by the SEC and must comply with Federal securities laws and regulations, as well
as other applicable laws. The Fund insists on strict compliance with the spirit
and the letter of these laws and regulations. Each Covered Officer shall
cooperate with Fund counsel, the Fund's independent accountants, and the Fund's
other service providers with the goal of maintaining the Fund's material
compliance with applicable governmental rules and regulations.
The Fund expects its Covered Officers to comply with all laws, rules,
and regulations applicable to the Fund's operations and business. Covered
Officers should seek guidance whenever they are in doubt as to the applicability
of any law, rule, or regulation, or regarding any contemplated course of action.
Covered Officers should also make use of the various guidelines which the Fund
and its service providers have prepared on specific laws and regulations. If in
doubt on a course of action, a good guideline is "always ask first, act later"
- -- if you are unsure of what to do in any situation, seek guidance before you
act.
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Covered Officers are encouraged to attend courses and seminars for the
purpose of keeping themselves apprised of developments relating to those
governmental statutes, rules, and regulations applicable to the Fund.
Upon obtaining knowledge of any material violation of any applicable
law, rule, or regulation by the Fund or a person acting with or on behalf of the
Fund, a Covered Officer shall report such violation to the Funds' Compliance
Officer, Fund counsel, or both. (See Section VI of the Code for a discussion of
reporting Code violations.) Each Covered Officer shall cooperate or take such
steps as may be necessary or appropriate to remedy any such material violation.
D. CONFIDENTIALITY
Covered Officers must maintain the confidentiality of information
entrusted to them by the Fund, except when disclosure is authorized by Fund
counsel or required by laws or regulations. Whenever possible, Covered Officers
should consult with Fund counsel if they believe they have a legal obligation to
disclose confidential information. Confidential information includes all
non-public information that might be of use to competitors, or harmful to the
Fund or its shareholders, if disclosed. The obligation to preserve confidential
information continues even after employment as a Covered Officer ends.
E. PROMPT INTERNAL REPORTING OF VIOLATIONS OF THE CODE; EVALUATION OF
POSSIBLE VIOLATIONS; DETERMINATION OF SANCTIONS
1. Reporting to the Funds' Chief Compliance Officer
A Covered Officer shall promptly report knowledge of, or
information concerning, any material violation of this Code to the
Funds' Chief Compliance Officer. Any such report shall preferably be
in writing, and shall describe in reasonable detail the conduct that
such Covered Officer believes to have violated this Code. The Funds'
Chief Compliance Officer shall also have the authority to draft a
report of a suspected material violation of the Code, if no written
report is made by a Covered Officer.
2. Evaluation of Reports
The Funds' Chief Compliance Officer shall then consult with
Fund counsel to the extent necessary to determine whether the
reported conduct actually violates the Code. If it is determined that
there has been a violation of the Code, the Funds' Chief Compliance
Officer will determine (in consultation with Fund counsel) whether
the violation has had or may have, in the reasonable judgment of the
Funds' Chief Compliance Officer, a material adverse impact upon the
Fund.
i NO MATERIAL ADVERSE IMPACT ON THE FUND. If the Funds' Chief
Compliance Officer determines that the violation has not
caused a material adverse impact upon the Fund, the Funds'
Chief Compliance Officer shall determine what sanctions, if
any, may be appropriate for the violation. (See G of this
Code for a discussion of possible sanctions.)
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ii MATERIAL ADVERSE IMPACT ON THE FUND. If the Funds' Chief
Compliance Officer determines that the violation has caused
a material adverse impact upon the Fund, the Funds' Chief
Compliance Officer shall promptly notify the Board of such
violation. The Board shall be entitled to consult with
independent legal counsel to determine whether the
violation actually has had a material adverse impact upon
the Fund; to formulate sanctions, if any, appropriate for
the violation; or for any other purpose that the Board, in
its business judgment, determines to be necessary or
advisable. (See G of this Code for a discussion of possible
sanctions.)
3. Periodic Reports by the Funds' Chief Compliance Officer to Board
of Trustees.
The Funds' Chief Compliance Officer shall report to the Board
at each regularly scheduled Board meeting all violations of this Code
(whether or not they caused a material adverse impact upon the Fund)
and all sanctions imposed.
F. WAIVERS OF PROVISIONS OF THE CODE
1. Waivers.
A Covered Officer may request a waiver of a provision
of this Code if there is a reasonable likelihood that a
contemplated action would be a material departure from a
provision of the Code. Waivers will not be granted except
under extraordinary or special circumstances.
The process of requesting a waiver shall consist of the
following steps:
i. The Covered Officer shall set forth a request for
waiver in writing and submit such request to the
Funds' Chief Compliance Officer. The request shall
describe the conduct, activity, or transaction for
which the Covered Officer seeks a waiver, and
shall briefly explain the reason for engaging in
the conduct, activity, or transaction.
ii. The determination with respect to the waiver shall
be made in a timely fashion by the Funds' Chief
Compliance Officer, in consultation with Fund
counsel, and submitted to the Board for
ratification.
iii. The decision with respect to the waiver request
shall be documented and kept in the Fund's records
for the appropriate period mandated by applicable
law or regulation.
2. Disclosure of Waivers.
To the extent required by applicable law, waivers
(including "implicit waivers") shall be publicly disclosed on
a timely basis. An "implicit waiver" is defined as the Fund's
failure to take action within a reasonable period of time
regarding a material departure from a provision of the Code
that has been made known to an "executive officer" of the
Fund. For this purpose, an "executive officer" is a Fund's
President or
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Chief Executive Officer, Vice President (who is in charge
of a principal policymaking function), or any other person
who performs similar policymaking functions for the Fund.
For the purpose of determining whether an "implicit waiver"
has occurred, if a material departure from a provision of
the Code is known only by the Covered Officer who has
caused the material departure, the material departure will
not be considered to have been made known to an executive
officer of the Fund.
G. ACCOUNTABILITY FOR ADHERENCE TO THE CODE
The matters covered in this Code are of the utmost importance to the
Fund and its shareholders, and are essential to the Fund's ability to conduct
its business in accordance with its stated values. Covered Officers are expected
to adhere to these rules in carrying out their duties for the Fund.
The Fund will, if appropriate, take action against any Covered Officer
whose actions are found to violate this Code. Sanctions for violations of the
Code may include, among other things, a requirement that the violator undergo
training related to the violation, a letter of sanction, the imposition of a
monetary penalty, and/or suspension or termination of the employment of the
violator. Where the Fund has suffered a loss because of violations of this Code
or applicable laws, regulations, or rules, it may pursue its remedies against
the individuals or entities responsible.
H. RECORDKEEPING
1. General.
The Fund requires accurate recording and reporting of information
in order to make responsible business decisions. All of the Fund's
books, records, accounts and financial statements must be maintained in
reasonable detail, must appropriately reflect the Fund's transactions
and must conform both to applicable legal requirements and to the
Fund's system of internal controls.
2. Code of Ethics Records.
A copy of this Code, any amendments hereto, and any reports or
other records created in relation to waivers of or amendments to
provisions of this Code shall be kept as records of the Fund for six
years from the end of the fiscal year in which such document was
created. Such records shall be furnished to the SEC or its staff upon
request.
I. AMENDMENTS TO THE CODE
The Covered Officers and the Funds' Chief Compliance Officer are
encouraged to recommend improvements to this Code to the Board, and the Board
may amend the Code in its discretion. In connection with any amendment to the
Code, the Funds' Chief Compliance Officer shall prepare a brief description of
the amendment, in order that this description may be disclosed in accordance
with applicable law and regulations.
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EXHIBIT A: COVERED OFFICERS
Daniel R. Omstead, President
Kimberley Carroll, Treasurer