H&Q HEALTHCARE INVESTORS (Form: N-2, Received: 04/16/2014 17:24:52)

NAMES, ADDRESSES(1) AND
DATES OF BIRTH

POSITION WITH THE
TRUST, TERM OF
OFFICE(2) AND LENGTH
OF TIME SERVED

PRINCIPAL OCCUPATION(S) DURING PAST 5
YEARS AND OTHER DIRECTORSHIPS HELD

NUMBER OF
PORTFOLIOS IN
TRUST
COMPLEX
OVERSEEN BY
TRUSTEE

INTERESTED TRUSTEES:

Daniel R. Omstead, Ph.D. (3)
7/1953

President (since 2001)
Trustee (since 2003)

President of the Fund and H&Q Life Sciences Investors (since 2001); President, Chief Executive Officer and Managing Member of Tekla Capital Management LLC (since 2002); Director, AlterG, Inc. (since 2013); Director, Magellan Diagnostics, Inc. (since 2006); Director, Palyon Medical Corporation (since 2009); Director, Dynex Corporation (since 2012); Director, IlluminOss Medical, Inc. (since 2012).

As filed with the Securities and Exchange Commission on [ ], 2014.

1933 Act File No. 333-[ ]
1940 Act File No. 811-04889

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-2

x REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

o PRE-EFFECTIVE AMENDMENT NO.

o POST-EFFECTIVE AMENDMENT NO.

x REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 19

H&Q HEALTHCARE INVESTORS

(Exact Name of Registrant as Specified in Charter)

2 Liberty Square, 9 th Floor

Boston, MA 02109
(Address of Principal Executive Offices)
(617) 772-8500

(Registrant’s Telephone Number, including Area Code)

Daniel R. Omstead, Ph.D.
2 Liberty Square, 9 th Floor
Boston, MA 02109

(Name and Address of Agent for Service)

Copies of Communications to:

Joseph R. Fleming, Esq.
Dechert LLP
One International Place, 40 th Floor

100 Oliver Street
Boston, MA 02110

Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are being offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. o

It is proposed that this filing will become effective when declared effective pursuant to Section 8(c).

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

TITLE OF SECURITIES
BEING REGISTERED

AMOUNT BEING
REGISTERED

PROPOSED
MAXIMUM
OFFERING PRICE
PER UNIT(1)

PROPOSED
MAXIMUM
OFFERING
PRICE(1)

AMOUNT OF
REGISTRATION
FEE

Shares of Beneficial Interest ($.01 par value)

[ ]

1,000,000

128.80

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933 based on the average high and low prices of H&Q Healthcare Investors reported on the New York Stock Exchange on April 16, 2014.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine.

H&Q HEALTHCARE INVESTORS
CROSS REFERENCE SHEET

BETWEEN ITEMS OF REGISTRATION STATEMENT (FORM N-2) AND PROSPECTUS PURSUANT TO RULE 495(A)

ITEM NO.	CAPTION	LOCATION IN PROSPECTUS OR STATEMENT OF ADDITIONAL INFORMATION (“SAI”)

1.	Outside Front Cover Page	Front Cover Page
2.	Cover Pages; Other Offering Information	Front Cover Page
3.	Fee Table and Synopsis	Trust Expenses; Prospectus Summary
4.	Financial Highlights	Financial Highlights and Investment Performance
5.	Plan of Distribution	Front Cover Page; Prospectus Summary; The Offer
6.	Selling Stockholders	Not Applicable
7.	Use of Proceeds	Use of Proceeds
8.	General Description of the Registrant	Front Cover Page; Prospectus Summary; Financial Highlights and Investment Performance; Investment Objective and Policies; Risk Factors; Description of the Trust; Additional Information About Investments, Investment Techniques and Risks; Investment Restrictions; The Trust
9.	Management	Management of the Trust; Administrator, Custodian, Transfer Agent, Dividend Disbursing Agent, Registrar and Subscription Agent; Trustees and Officers; Investment Adviser and Investment Advisory Agreement
10.	Capital Stock, Long-Term Debt, and Other Securities	Front Cover Page; Description of the Trust; Dividends and Distributions; Quarterly Distribution Policy; Net Asset Value; Taxation, The Trust
11.	Defaults and Arrears on Senior Securities	Not Applicable
12.	Legal Proceedings	Not Applicable
13.	Table of Contents of the Statement of Additional Information	Table of Contents of Statement of Additional Information
14.	Cover Page of SAI	Cover Page of SAI

PROSPECTUS

The information contained in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS

DATED [ ], 2014

H&Q HEALTHCARE INVESTORS

[ ] Shares
Issuable Upon Exercise Of Non-Transferable Rights
To Subscribe For Such Shares

New York Stock Exchange Symbol: HQH

H&Q Healthcare Investors (the “Trust”) is issuing non-transferable rights (“Rights”) to its Shareholders of record as of the close of business on [ ], 2014 (the “Record Date”). These Rights will allow you to subscribe for one (1) Share of the Trust for every three (3) Rights held (the “Offer”). You will receive one Right for each whole Share that you hold of record as of the Record Date, rounded down to the nearest number of Rights evenly divisible by three. The Rights will not be listed for trading on the New York Stock Exchange (“NYSE”) or any other exchange. You may also purchase Shares not acquired by other Shareholders subject to certain limitations and subject to allotment as described in this Prospectus.

The Subscription Price per Share will be 95% of the volume weighted average price of a Share on the NYSE on [ ], 2014 (the “Pricing Date”) and the three preceding business days .

Rights may be exercised at anytime until 5:00 p.m., Eastern Time, [ ], 2014, unless the Offer is extended as discussed in this Prospectus. As the Offer expires before [ ], 2014, Shareholders who exercise their Rights will not know the Subscription Price at the time they exercise their Rights. For additional information regarding the Offer, please call [ ] (the “Information Agent”) at [ ].

The Trust is a diversified, closed-end management investment company whose shares of beneficial interest are listed and traded on the NYSE under the symbol “HQH.” The Trust’s investment objective is to seek long-term capital appreciation by investing primarily in equity and related securities (including securities subject to legal or contractual restrictions on resale) of U.S. and foreign companies principally engaged in the healthcare industries (“Healthcare Companies”). The Trust may invest in securities of emerging growth Healthcare Companies, which may offer limited products or services or which are at the research and development stage with no marketable or approved products or technologies. The Trust may also invest up to 40% of its net assets in venture capital or other securities that are subject to legal or contractual restrictions on resale (“Restricted Securities”). The Trust’s investments in Restricted Securities may include “start-up,” early and later stage financings of privately held companies (sometimes referred to as “venture capital” investments), private placements by public companies, and interests in joint ventures and limited partnerships. See “Risk Factors — Investment in Emerging Growth Companies” and “Risk Factors — Liquidity of Portfolio Investments.” The Trust may also invest in securities of large, well-known companies with existing products in the healthcare industries. The Trust may not be able to achieve its investment objective. For a discussion of the risks associated with an investment in the Trust, see “Risk Factors.”

The Trust adopted a managed distribution policy in May 1999 pursuant to an exemptive order obtained from the Securities and Exchange Commission (“SEC” or “Commission”). The Trust intends to make regular quarterly distributions at a rate equal to 2.0% of the Trust’s net asset value (“NAV”). The Trust’s Board of Trustees (the “Board”) may modify or terminate the managed distribution policy at any time; any such change or termination may have an adverse effect on the market price for the Trust’s Shares.

To the extent that the Trust’s taxable income in any fiscal year exceeds the aggregate amount distributed pursuant to the managed distribution policy based on a fixed percentage of its NAV, the Trust would make an additional distribution in the amount of that excess near the end of the fiscal year. To the extent that the aggregate amount distributed by the Trust based on a fixed percentage of its net asset value exceeds its current and accumulated earnings and profits, the amount of that excess would constitute a return of capital or net realized capital gains for tax purposes.

The actual sources of the Trust’s quarterly distributions may be net investment income, net realized capital gains, return of capital or a combination of the foregoing and may be subject to retroactive recharacterization at the end of the Trust’s fiscal year based on tax regulations. The actual amounts attributable to each of these sources will be reported to Shareholders in January of each year on Form 1099-DIV.

This Prospectus sets forth concisely the information about the Trust you should know before investing, including information about risks. You should read this Prospectus and retain it for future reference. A Statement of Additional Information dated [ ], 2014 (the “SAI”) containing additional information about the Trust has been filed with the Commission and is incorporated by reference in its entirety into this Prospectus. A copy of the SAI, the table of contents of which appears on page [ ] of this Prospectus, and the Trust’s annual and semi-annual reports may be obtained without charge by contacting the Information Agent at [ ]. The Commission maintains a website (http://www.sec.gov) that contains material incorporated by reference and other information regarding the Trust. The Trust’s annual and semi-annual reports are also available on the Trust’s website (www.teklacap.com).

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

	Estimated Subscription Price(1)	Estimated Sales Load	Estimated Proceeds To Trust Or Other Persons(2)

Per Share	$	None	$
Total Maximum	$	None	$

[ ], 2014

(1) Estimated on the basis of the volume weighted average share price of a Share on the NYSE on [ ], 2014 and the three preceding business days. The Trust may increase the number of Shares subject to subscription by up to 25% of the Shares offered hereby, or up to an additional [ ] Shares, for an aggregate total of [ ] Shares. If the Trust increases the number of Shares subject to subscription by 25%, the total maximum Estimated Subscription Price will be approximately $[ ] and the total maximum Estimated Proceeds to the Trust will be approximately $[ ]. No sales load will be charged by the Trust in connection with this Offer. However, Shareholders that choose to exercise their Rights through broker-dealers, banks and nominees may incur a servicing fee charged by such broker-dealer, bank or nominee.

(2) Before deduction of expenses related to the Offer incurred by the Trust, estimated at approximately $[ ].

The Trust announced the Offer before the opening of trading on the NYSE on March 12, 2014. The NAV at the close of business on March 11, 2014 was $29.31, and the last reported sales price of a Share on the NYSE on that date was $29.25.

The Trust may increase the number of Shares subject to subscription by up to 25%, or up to an additional [ ] Shares, for an aggregate total of [ ] Shares.

As a result of the terms of the Offer, Shareholders who do not fully exercise their Rights, including the Over-Subscription Privilege described in the section of this Prospectus entitled “The Offer—Over-Subscription Privilege,” will, upon the completion of the Offer, own a smaller proportional interest in the Trust than they owned before the Offer. The Offer will result in either a dilution or accretion of NAV for all Shareholders, whether or not they exercise some or all of their Rights, because the Subscription Price per Share may be less than or greater than the then-current NAV per Share. The amount of dilution or accretion might be significant. See “The Offer.”

The Trust’s investment adviser is Tekla Capital Management LLC. The employees of Trust’s investment adviser and the Trustees and officers of the Trust may purchase Shares through the Primary Subscription and the Over-Subscription Privilege on the same terms as other Shareholders.

Information about the Trust can be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Call (202) 551-8090 for information on the operation of the Public Reference Room. This information is also available at the Commission’s Internet site at http://www.sec.gov, and copies may be obtained upon payment of a duplicating fee by writing the Public Reference Section of the Commission, 100 F Street, NE, Washington, DC 20549.

PROSPECTUS SUMMARY

You should consider the matters discussed in this summary before investing in the Trust through the Offer. The following summary is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Prospectus.

THE OFFER

The Offer		H&Q Healthcare Investors (the “Trust”) is issuing to its shareholders of record (“Shareholders”) as of the close of business on [ ], 2014 (the “Record Date”) non-transferable rights (“Rights”) to subscribe for an aggregate of [ ] shares of beneficial interest (“Shares”) of the Trust (the “Offer”). You will receive one Right for each whole Share you held as of the Record Date, rounded down to the nearest number of Rights evenly divisible by three. You may subscribe for one Share for every three Rights you hold (the “Primary Subscription”). Any Shareholder on the Record Date who is issued fewer than three Rights will not be entitled to subscribe for a Share in the Offer.

Subscription Price		The subscription price per Share (the “Subscription Price”) will be 95% of the volume weighted average price of a Share on the NYSE on the Pricing Date and the three preceding business days.

		As the Expiration Date is before the Pricing Date, Shareholders who choose to exercise their Rights will not know the Subscription Price at the time they exercise their Rights.

Subscription Period		Rights may be exercised at any time during the subscription period (the “Subscription Period”), which starts on [ ], 2014 and ends at 5:00 p.m., Eastern time, on [ ], 2014 (the “Expiration Date”).

Over-Subscription Privilege		The Trust may, at its discretion, issue up to an additional 25% of the Shares in the Offer to honor over-subscription requests, if there are not enough Shares available from the Primary Subscription to honor all over-subscription requests (the “Over-Subscription Privilege”). If there are enough Shares left after the Primary Subscription, all over-subscriptions will be honored in full. If there are not enough Shares available to honor all over-subscriptions (after giving effect to any increase in the number of Shares to be offered), the available Shares will be allocated pro rata among those who over-subscribe based on the number of Rights originally issued to them by the Trust. The number of Shares issued to Shareholders who subscribe pursuant to the Over-Subscription Privilege will generally be in proportion to the number of Shares owned by them in the Trust on the Record Date. The allocation process may involve a series of allocations to assure that the total number of Shares available for over-subscriptions is distributed on a pro rata basis.

Fractional Shares		Fractional Shares will not be issued upon the exercise of Rights. Therefore, Shares will be issued for Rights submitted in multiples of three only.

Purpose of the Offer		The Trust’s Investment Adviser believes, and the Trustees concur, that increasing the Trust’s assets for investment through the Offer will benefit the Trust and its Shareholders by allowing the Trust to take further advantage of available investment opportunities in securities of Healthcare Companies. While there can be no assurance that any benefits will be realized, increasing the Trust’s investment assets through the Offer is intended to:

		· allow the Trust to make greater or additional investments at a time when the Trust’s Investment Adviser believes that securities of Healthcare Companies, including investments in new target validation approaches, other innovative medical technology companies, medical devices, specialty and generic pharmaceutical companies and healthcare information services, are positioned for price appreciation due to (i) demographic changes, (ii) recent developments in the pharmaceutical, biotechnology and medical technology industries relating to products that have or will extend or improve the quality of patients’ lives, and (iii) the recent passage of the Patient Protection and Affordable Care Act, which may result in volume and utilization increases;

		· p rovide the Trust with the ability to make additional investments without realizing capital gains on current investments or otherwise selling current investments at an unfavorable time;

		· increase the Trust’s average investment size, giving the Trust additional negotiating leverage and pricing influence over venture capital, private investments in public entities (PIPEs) and other private equity investments and investments in the public markets; and · provide the Investment Adviser with additional flexibility in managing the Trust’s portfolio to satisfy applicable portfolio diversification requirements.

		In addition, the Offer may reduce operating costs per Share. The Offer allows you the opportunity to purchase additional Shares of the Trust at a price that will be below the average market value calculated at the Expiration Date. See “The Offer—Purpose of the Offer.”

Use of Proceeds		The Trust expects to invest the net proceeds in accordance with the Trust’s investment objective and policies. Investment of the proceeds is expected to take up to six months from their receipt by the Trust, depending on market conditions and the availability of appropriate securities. See “Use of Proceeds.”

Notice of NAV Decline		The Trust will suspend the Offer until it amends this Prospectus if, after the effective date of this Prospectus, the Trust’s net asset value (“NAV”) declines more than 10% from its NAV as of that date. If that occurs, the Trust will notify you of the decline and permit you to cancel your exercise of your Rights. Shareholders will have their payment for additional Shares returned to them if they opt to cancel the exercise of their Rights. Shareholders will have their payment for additional Shares returned to them if they opt to cancel the exercise of their rights.

How to Obtain Subscription Information		· Contact your broker, bank or trust company. · Contact [ ] (the “Information Agent”) toll-free at [ ].

How to Subscribe		You may subscribe in one of two ways:

		· Deliver a completed Exercise Form and payment to [ ] (the “Subscription Agent”) by the Expiration Date.

		· If your Shares are held in a brokerage, bank or trust account, have your broker, bank or trust company deliver a Notice of Guaranteed Delivery to the Subscription Agent by the Expiration Date.

Tax Consequences		For Federal income tax purposes, neither the receipt nor the exercise of the Rights will result in taxable income to Shareholders. You will not realize a taxable loss, if your Rights expire without being exercised. See “The Offer—Certain Federal Income Tax Consequences of the Offer.”

IMPORTANT DATES TO REMEMBER

Record Date		[ ], 2014

Subscription Period		[ ], 2014 through [ ], 2014*

Deadline for delivery of Exercise Form together with payment of Estimated Subscription Price or for delivery of Notice of Guaranteed Delivery		[ ], 2014*

Expiration Date		[ ], 2014*

Pricing Date		[ ], 2014*

Deadline for payment of final Subscription Price pursuant to Notice of Guaranteed Delivery		[ ], 2014*

Confirmation to Registered Shareholders**		[ ], 2014*

For Registered Shareholder Purchases—deadline for payment of unpaid balance if final Subscription Price is higher than Estimated Subscription Price		[ ], 2014*

* Unless the Offer is extended.

** Registered Shareholders are those Shareholders who are the record owners of Trust Shares (that is, their names appear directly on the records of the Trust’s transfer agent) and whose Shares are not held through a broker-dealer or other nominee or intermediary.

THE TRUST

The Trust		The Trust is a diversified, closed-end management investment company. The Trust was organized as a Massachusetts business trust on October 31, 1986, and commenced operations on April 22, 1987. As of March 31, 2014, the Trust had 28,279,729 Shares outstanding. Shares of the Trust are traded on the NYSE under the symbol “HQH.” As of [ ], 2014, the Trust’s NAV per Share was $[ ] and the Trust’s last reported share price of a Share on the NYSE was $[ ].

Distributions		The Trust intends to make quarterly distributions to its Shareholders equal to 2.0% of the Trust’s net asset value. Net realized capital gains in excess of the total distributed under this policy are generally included in the December distribution. The Trust’s quarterly distribution policy may be changed by the Board of Trustees (the “Board”) without Shareholder approval.

		The current distribution policy is to declare distributions in Shares. Distributions will automatically be paid in newly-issued full Shares of the Trust plus cash in lieu of any fraction of a Share, unless otherwise instructed by the Shareholder. If a Shareholder elects to receive a distribution in cash, rather than in Shares, the Shareholder’s relative ownership in the Trust will be reduced.

		The first regular quarterly distribution to be paid on Shares acquired upon exercise of Rights will be the first quarterly distribution the record date for which occurs after the issuance of the Shares. The Shares issued in the Offer will not be entitled to the distribution to be declared to Shareholders of record on [ ], 2014, which is payable in June, 2014.

General Investment Guidelines		The Trust’s investment objective is to seek long-term capital appreciation by investing primarily in securities of Healthcare Companies. Under normal market conditions, the Trust expects to invest at least 80% of its net assets in securities of Healthcare Companies. This policy may not be changed without 60 days’ prior notice to Shareholders. The Trust will not have less than 25% of its net assets invested in Healthcare Companies. A company will be deemed to be a Healthcare Company if, at the time the Trust makes an investment in the company, 50% or more of such company’s sales, earnings or assets arise from or are dedicated to, or are expected to arise from or be dedicated to, healthcare products or services or medical technology activities. The Investment Adviser determines, in its discretion, whether a company is a Healthcare Company. The Trust may also invest up to 20% of its net assets in the securities of foreign issuers, expected to be located primarily in Western Europe, Canada and Japan, and securities of U.S. issuers traded in foreign markets (“Foreign Securities”). The Trust may buy and sell currencies for the purpose of settlement of transactions in Foreign Securities.

Venture Capital Investments		The Trust emphasizes investment in securities of emerging growth Healthcare Companies. These investments are often venture capital investments. The Trust may invest up to 40% of its net assets in Restricted Securities, including venture capital investments. The Trust’s investments in Restricted Securities may include “start-up,” early and later stage financings of privately-held companies and private placements in public companies. See “Investment Objective and Policies.”

Investment Adviser		Tekla Capital Management LLC (the “Investment Adviser”) serves as investment adviser to the Trust. The Investment Adviser also serves as investment adviser to

		H&Q Life Sciences Investors (“HQL”), a closed-end management investment company that invests in companies in the life sciences industries. See “Management of the Trust—Investment Adviser.” The majority of the Board is unaffiliated with the Investment Adviser; nevertheless, the Trust may be subject to certain potential conflicts of interest. See “Portfolio Transactions and Brokerage.”

Portfolio Management		Currently, Daniel R. Omstead, Ph.D., Christopher F. Brinzey, M.B.A., Frank T. Gentile, Ph.D. and Jason C. Akus, M.D./M.B.A. are members of the team that makes investments on behalf of the Trust. These members also perform other duties, including making investment decisions on behalf of HQL. Dr. Omstead has overall investment decision responsibility for the Trust and HQL. See “Management of the Trust—Investment Adviser.”

Compensation of Investment Adviser		For the services provided by the Investment Adviser under the Investment Advisory Agreement between the Investment Adviser and the Trust (“Advisory Agreement”), the Trust pays a fee, computed and payable monthly, equal when annualized to (i) 2.5% of the average net assets for the month of its venture capital and other Restricted Securities (as defined) up to 25% of net assets and (ii) for all other assets, 0.98% of the average net assets up to $250 million, 0.88% of the average net assets for the next $250 million, 0.80% of the average net assets for the next $500 million and 0.70% of the average net assets thereafter. The aggregate monthly fee may not exceed a rate when annualized of 1.36% (approximately 0.11% per month). Because the advisory fee is based on the average net assets of the Trust, and since the Offer is expected to result in an increase in net assets, the Investment Adviser may benefit from the Offer by an increase in the dollar amount of the fee. The Investment Adviser has agreed to waive fees to which it might otherwise be entitled under the current fee rate schedule during the one-year period following completion of the Offer. During the one-year period following completion of the Offer, the Investment Adviser will waive its fees such that the Trust will pay a fee, computed and payable monthly, equal when annualized to (i) 2.5% of the average net assets for the month of its venture capital and other Restricted Securities (as defined) up to 25% of net assets and (ii) for all other assets, 0.98% of the average net assets up to $250 million, 0.88% of the average net assets for the next $250 million, 0.70% of the average net assets for the next $500 million and 0.70% of the average net assets thereafter, provided that the aggregate monthly fee may not exceed a rate when annualized of 1.36% (approximately 0.11% per month). The Investment Adviser’s compensation is subject to annual review by the Board.

RISK FACTORS

This Prospectus contains certain statements that may be deemed to be “forward-looking statements.” Actual results could differ materially from those projected in the forward-looking statements as a result of uncertainties set forth below and elsewhere in the Prospectus. See “Risk Factors” for a more complete description of risks that may be associated with an investment in the Trust.

Dilution—Net Asset Value and Non-Participation in the Offer		Shareholders who do not fully exercise their Rights including the Over-Subscription Privilege described in the section of this Prospectus entitled “The Offer-Over-Subscription Privilege,” will, at the completion of the Offer, own a smaller proportional interest in the Trust than if they exercised their Rights. As a result of the Offer, Shareholders may experience dilution in NAV per Share, if the Subscription Price is below the then current NAV per Share. If the Subscription Price per Share is below the then current NAV per Share, Shareholders will experience an immediate dilution of the aggregate NAV of their Shares, if they do not participate in the Offer, and will experience a reduction in the NAV per Share whether or not they participate in the Offer. The Trust cannot state precisely the extent of this dilution (if any) if Shareholders do not exercise their Rights because the Trust does not know what the NAV per Share will be at the time of the Offer or what proportion of the Rights will be exercised. Assuming, for example, that all Rights are exercised, the Estimated Subscription Price is [ ] and the Trust’s NAV per Share is [ ], the Trust’s NAV per Share (after payment of estimated offering expenses) would be reduced by approximately $[ ] per Share. See “Risk Factors - Dilution of Net Asset Value and Effect of Non-Participation in the Offer. ”

Share Price Volatility		Volatility in the market price of Shares may increase during the Subscription Period. The Offer may result in some Shareholders selling their Shares, which would exert downward price pressure on the price of Shares, while others wishing to participate in the Offer may buy Shares, having the opposite effect.

Under-Subscription		It is possible that the Offer will not be fully subscribed. Under-subscription of the Offer could have an impact on the net proceeds of the Offer and the ratios described herein.

Market Risk		As with any investment company that invests in equity securities, the Trust is subject to market risk—the possibility that the prices of equity securities will decline over short or extended periods of time. As a result, the value of an investment in the Trust’s Shares will fluctuate with the market generally and market sectors in particular. You could lose money over short or long periods of time.

		Political and economic news can influence market-wide trends and can cause disruptions in the U.S. or world financial markets. Other factors may be ignored by the market as a whole but may cause movements in the price of one company’s stock or the stock of companies in one or more industries. All of these factors may have a greater impact on initial public offerings and emerging company shares.

Selection Risk		Different types of equity securities tend to shift into and out of favor with investors, depending on market and economic conditions. The performance of funds that invest in equity securities of Healthcare Companies may at times be better or worse than the performance of funds that focus on other types of securities or that have a broader investment style.

Concentration in the Healthcare Industries		Under normal market conditions, the Trust expects to invest at least 80% of its net assets in securities of Healthcare Companies. This policy may not be changed without 60 days’ prior written notice to Shareholders. The Trust will not have less than 25% of its net assets invested in Healthcare Companies. As a result, the Trust’s portfolio may be more sensitive to, and possibly more adversely affected by, regulatory, economic or political factors or trends relating to the healthcare industries than a portfolio of companies representing a larger number of industries. As a result of its concentration policy, the Trust’s investments may be subject to greater risk and market fluctuation than a fund that has securities representing a broader range of investments.

		Healthcare Companies have in the past been characterized by limited product focus, rapidly changing technology and extensive government regulation. In particular, technological advances can render an existing product, which may account for a disproportionate share of a company’s revenue, obsolete. Obtaining governmental approval from agencies such as the Food and Drug Administration (FDA) for new products can be lengthy, expensive and uncertain as to outcome. These factors may result in abrupt advances and declines in the securities prices of particular companies and, in some cases, may have a broad effect on the prices of securities of companies in particular healthcare industries.

		Intense competition exists within and among certain healthcare industries, including competition to obtain and sustain proprietary technology protection, including patents, trademarks and other intellectual property rights, upon which Healthcare Companies can be highly dependent for maintenance of profit margins and market share. The complex nature of the technologies involved can lead to patent disputes, including litigation that could result in a company losing an exclusive right to a patent.

		Cost containment measures implemented by the federal government, state governments and the private sector have adversely affected certain sectors of the healthcare industries. The implementation of any such further cost containment measures may have an adverse effect on some companies in the healthcare industries.

		Product development efforts by Healthcare Companies may not result in commercial products. Even after a product is commercially released, governmental agencies may require additional clinical trials or change the labeling requirements for products if additional product side effects are identified, which could have a material adverse effect on the market price of the securities of those Healthcare Companies.

		Certain Healthcare Companies in which the Trust may invest may be exposed to potential product liability risks that are inherent in the testing, manufacturing, marketing and sale of pharmaceutical, medical device or other products. There can be no assurance that a product liability claim would not have a material adverse effect on the business, financial condition or securities prices of a company in which the Trust has invested.

		All of these factors may cause the value of the Trust’s Shares to fluctuate significantly over relatively short periods of time.

Investment in Emerging Growth Companies		The Trust may invest in equity securities of emerging growth Healthcare Companies. While these securities offer the opportunity for significant capital gains, these investments also involve a degree of risk that can result in substantial losses. There can be no assurance that securities of start-up or

		emerging growth companies will, in the future, yield returns commensurate with their associated risks.

Liquidity of Portfolio Investments		The Trust may invest in securities that are traded in the over-the-counter market or on regional stock exchanges where the low trading volume of a particular security may result in abrupt and erratic price movements or that are not traded in any market. An investment in such securities may have limited liquidity, and the Trust may find it necessary to sell at a discount from recent prices or to sell over extended periods of time when disposing of such securities. In addition, the Trust may invest up to 40% of its net assets in Restricted Securities, which by their terms are illiquid. Restricted Securities in which the Trust may invest cannot be sold except in a public offering registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an exemption from the Securities Act or in compliance with applicable Securities and Exchange Commission (the “Commission”) regulations.

Valuation of Venture Capital Investments and Restricted Securities		Some of the Trust’s investments are subject to restrictions on resale and generally have no established trading market. Because of the type of investments that the Trust makes and the nature of its business, the valuation process requires an analysis of various factors. The Trust’s fair value methodology includes the examination of, among other things, (i) the existence of any contractual restrictions on the disposition of the securities; (ii) information obtained from the issuer, which may include an analysis of the company’s financial statements, the company’s products or intended markets, or the company’s technologies; and (iii) with respect to certain Restricted Securities, the price of a security negotiated at arm’s-length in an issuer’s subsequent completed round of financing.

		As there is typically no readily available market value for the venture capital investments and some of the other Restricted Securities in the Trust’s portfolio, venture capital investments and such other Restricted Securities in the Trust’s Portfolio are valued at fair value as determined in good faith by the Board pursuant to a valuation policy and a consistently applied valuation process. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Trust’s investments determined in good faith by the Board, or in accordance with valuation procedures approved by the Board, may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment subject to fair value determinations, while employing a consistently applied valuation process for the types of investments the Trust makes.

Foreign Securities		The Trust may invest up to 20% of its net assets in Foreign Securities. Foreign Securities may be less liquid and have prices that are more volatile than securities of comparable U.S. companies. An investment in Foreign Securities may also involve currency risk.

Key Personnel		There may be only a limited number of securities professionals who have comparable experience to that of the Trust’s existing portfolio management team in the area of Healthcare Companies. If one or more of the team members dies, resigns, retires or is otherwise unable to act on behalf of the Investment Adviser, there can be no assurance that a suitable replacement could be found immediately.

Concentration of Investments		The Trust may from time to time concentrate its investments in a few issuers and take large positions in those issuers. As a result, the Trust may be subject to a

		greater risk of loss than an investment company that diversifies its investments more broadly. Taking larger positions is also likely to increase the volatility of the Trust’s NAV reflecting fluctuation in the value of its large holdings. The Trust may make investments in any company with the objective of controlling or influencing the management and policies of that company. Investing for the purpose of controlling or influencing the management and policies of a company could potentially make the Trust less diversified and more susceptible to declines in the value of the company’s stock. The Investment Adviser may seek a control position in private venture capital investments where the Investment Adviser believes its knowledge and experience will be of significant benefit to the invested company and, therefore, to the Trust’s investment. The Investment Adviser expects to seek control in public companies only occasionally and most often in companies with a small capitalization.

Discount to NAV		Market price risk is a risk separate and distinct from the risk that the Trust’s NAV will decrease. Although the Trust’s Shares have recently traded on the NYSE at a market price above their net asset value (a premium), the Trust’s Shares have traded in the market below NAV per Share (a discount), at NAV per Share and above NAV per Share (premium) since the commencement of the Trust’s operations. There can be no assurance that the Trust’s shares will trade at a premium in the future, or that any such premium will be sustainable. The Trust’s Shares have traded at discounts of as much as 30.91% since the Trust commenced operations. In the year ended December 31, 2013, the Trust’s Shares traded in the market at a daily average premium to NAV of 2.59%. As of [ ], 2014, the Trust’s Shares traded in the market at a daily [ ]% discount to their NAV. The Trust cannot predict whether the Shares will trade in the future at, above or below their NAV.

Anti-Takeover Provisions		The Trust’s Amended and Restated Declaration of Trust (“Declaration of Trust”), dated April 21, 1987, presently has provisions that could have the effect of limiting the ability of other entities or persons to (1) acquire control of the Trust, (2) cause it to engage in certain transactions, or (3) modify its structure. The By-Laws also contain provisions regarding qualifications for nominees for Trustee positions, advance notice of Shareholder proposals, and requirements for the call of special Shareholder meetings. These provisions may be considered “anti-takeover” provisions.

Repurchase of Shares		You may dispose of your Shares on the NYSE or other markets on which the Shares may trade, but because the Trust is a closed-end investment company, you do not have the right to redeem your Shares. At least once a year the Board considers whether the Trust should repurchase its Shares in the open market or make a tender offer, and the Board has maintained a Share repurchase program for the Trust since 2010. Any repurchases will comply with the provisions of the Investment Company Act of 1940, as amended (“Investment Company Act”), and Massachusetts law that apply to open market transactions. In March 2013, the Board approved the continuation of the repurchase program to allow the Trust to repurchase up to 12% of its outstanding Shares in the open market during a one-year period beginning July 11, 2013. In March 2014, the Board approved the continuation of the repurchase program to allow the Trust to repurchase up to 12% of its outstanding Shares in the open market during a one-year period beginning July 11, 2014. The Share repurchase program is intended to enhance Shareholder value and potentially reduce the discount between the market price of the Trust’s Shares and the Trust’s NAV per Share. There is no assurance that any action undertaken to repurchase Shares will result in the Shares trading at a price which approximates NAV per Share. Repurchases of Shares by the Trust would also decrease its total assets and may increase its expenses as a percentage of average net assets as a result. The Trust’s net income, if any, would be reduced by the amount of any interest owed on any borrowings made to finance any Share repurchase transactions.

Related Party Transactions

The majority of the Board is unaffiliated with the Investment Adviser; nevertheless, the Trust may be subject to certain potential conflicts of interest. Although the Trust has no obligation to do so, it may place brokerage orders with brokers who provide supplemental investment research and market and statistical information about Healthcare Companies and the healthcare industries to the Investment Adviser. In addition, other investment companies advised by the Investment Adviser may concurrently invest with the Trust in Restricted Securities under certain conditions. The Investment Adviser may also provide managerial assistance to issuers of securities in which the Trust invests. The Trust also may invest, subject to applicable law, in companies in which the principals of the Investment Adviser or Trustees of the Trust have invested, or for which they serve as directors or executive officers.

TRUST EXPENSES

Fees and Expenses

Annual Expenses (as a percentage of average net assets attributable to Shares)

Management Fee(1)			%
Other Expenses(2)			%
Total Annual Expenses(3)			%

(1) The Investment Adviser has contractually agreed to waive a portion of management fees for a one-year period following completion of the Offer. See “The Trust — Compensation of the Investment Adviser.” Absent such waiver the management fee would be [ ]%.

(2) “Other Expenses” have been estimated for the current fiscal year.

(3) The estimated [ ]% expense ratio assumes that the Offer is fully subscribed, yielding estimated net proceeds of approximately $[ ] (assuming a Subscription Price of $[ ] per Share) and that, as a result, based on the Trust’s net assets attributable to Shareholders on [ ], 2014 of $[ ], the net assets attributable to Shareholders would be $[ ].

Hypothetical Example

The following hypothetical example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in Shares of the Trust. These amounts are based upon payment by the Trust of investment advisory fees and other expenses at the levels set forth in the table above.

You would directly or indirectly pay the following expenses on a $1,000 investment in the Trust, assuming (i) all dividends and other distributions are reinvested at NAV per Share, (ii) the market price at the time of investment was equal to the NAV per share, (iii) the percentage amounts listed under Annual Expenses above remain the same in the years shown, and (iv) a 5% annual return:

1 Year		3 Years		5 Years		10 Years
$	[ ]	$	[ ]	$	[ ]	$	[ ]

See also Note (3) above for assumptions made in calculating the expenses in this hypothetical example. See “Financial Highlights” for the Trust’s actual ratio of expenses to average net assets for the fiscal year ended September 30, 2013.

The purpose of the table above is to assist you in understanding the various cost and expenses that you will bear directly or indirectly as an investor in the Trust. For more information on the management fees paid by the Trust, see “The Trust—Compensation of Investment Adviser.”

The purpose of the table above is to assist you in understanding the various costs and expenses that you will bear directly or indirectly as an investor in the Trust. For more information regarding the management fees paid by the Trust, refer to the section of this Prospectus entitled “Management of the Trust—Investment Adviser.”

The above tables and the assumption in the hypothetical example of a 5% annual return are required by regulations of the Commission applicable to all investment companies. The assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of the Trust’s Shares.

This Hypothetical Example should not be considered a representation of past or future expenses, and the Trust’s actual expenses may be greater or less than those shown.

FINANCIAL HIGHLIGHTS AND INVESTMENT PERFORMANCE

Financial Highlights

The financial highlights table is intended to help you understand the Trust’s financial performance. Information is shown for the Trust’s last ten fiscal years. Certain information reflects financial results from a single Trust Share. The information was audited by Deloitte & Touche LLP, an independent registered public accounting firm. This information should be read in conjunction with the audited financial statements and accompanying notes as of and for the fiscal year ended September 30, 2013, which are incorporated by reference in the SAI.

FINANCIAL HIGHLIGHTS

	For the years ended September 30,
	2013			2012			2011			2010			2009
OPERATING PERFORMANCE FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
Net asset value per share, beginning of year	$	19.20		$	14.46		$	14.47		$	14.05		$	16.58
Net investment loss (1)	(0.20		)	(0.05		)(2)	(0.16		)(3)	(0.07		)(4)	(0.17		)
Net realized and unrealized gain (loss)	7.51			6.07			1.40			0.81			(1.51		)
Total increase (decrease) from investment operations	7.31			6.02			1.24			0.74			(1.68		)
Distributions to shareholders from:
Net realized capital gains	(1.61		)	(1.32		)	(1.26		)	(0.37		)	(0.12		)
Return of capital (tax basis)	—			—			—			—			(0.73		)
Total distributions	(1.61		)	(1.32		)	(1.26		)	(0.37		)	(0.85		)
Increase resulting from shares repurchased (1)	—			0.04			0.01			0.05			—
Net asset value per share, end of year	$	24.90		$	19.20		$	14.46		$	14.47		$	14.05
Per share market value, end of year	$	23.97		$	18.36		$	13.15		$	12.08		$	11.32
Total investment return at market value	41.12		%	51.43		%	18.90		%	10.04		%	(10.33		)%
RATIOS
Expenses to average net assets	1.26		%	1.42		%	1.47		%	1.44		%	1.52		%
Net investment loss to average net assets	(0.92		)%	(0.28		)%(2)	(1.00		)%(3)	(0.45		)%(4)	(1.30		)%
SUPPLEMENTAL DATA
Net assets, end of year (in millions)	$	690		$	510		$	379		$	365		$	356
Portfolio turnover rate	35.41		%	86.28		%	93.75		%	48.68		%	66.34		%

	For the year ended September 30,
	2008		2007		2006		2005		2004
OPERATING PERFORMANCE FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
Net asset value per share:
beginning of year	$19.14		$17.31		$19.65		$18.12		$19.63
Net investment loss (1)	(0.18	)	(0.18	)	(0.13	)(5)	(0.21	)	(0.28	)
Net realized and unrealized gain (loss)	(0.95	)	3.45		(0.60	)	3.18		0.57
Total increase (decrease) from investment operations	(1.13	)	3.27		(0.73	)	2.97		0.29
Distribution to shareholders from Net realized capital gains	(1.43	)	(1.44	)	(1.61	)	(1.44	)	(1.80	)
Net asset value per share:
end of year	$16.58		$19.14		$17.31		$19.65		$18.12
Per share market value:
end of year	$13.70		$17.30		$16.74		$18.64		$18.11

Total investment return at market value	(12.96	)%	12.34	%	(1.58	)%	11.56	%	12.99	%

RATIOS:
Expenses to average net assets	1.51	%	1.52	%	1.54	%	1.56	%	1.63	%
Net investment loss to average net assets	(0.99	)%	(1.00	)%	(0.73	)%(5)	(1.17	)%	(1.42	)%
SUPPLEMENTAL DATA:
Net Assets, end of year(in millions)	$403		$444		$385		$417		$369
Portfolio turnover rate	65.38	%	115.77	%	63.78	%	92.68	%	33.65	%

(1) Computed using average shares outstanding.

(2) Includes special dividends from four issuers in the aggregate amount of $0.13 per share. Excluding the special dividends, the ratio of net investment loss to average net assets would have been (1.05%).

(3) Includes a special dividend from an issuer in the amount of $0.02 per share. Excluding the special dividend, the ratio of net investment loss to average net assets would have been (1.11%).

(4) Includes a special dividend from an issuer in the amount of $0.05 per share. Excluding the special dividend, the ratio of net investment loss to average net assets would have been (0.83%).

(5) Includes a special dividend from an issuer in the amount of $0.08 per share. Excluding the special dividend, the ratio of net investment loss to average net assets would have been (1.14%)

Portfolio Characteristics

A substantial portion of the Trust’s investment portfolio consists of venture capital and private equity investments. As of March 31, 2014, 3.7% of the Trust’s assets were invested in Restricted Securities of 24 Healthcare Companies, five of which were publicly-traded. The Trust continues to value this security below current market prices as it remains restricted as to resale.

From inception, the Trust has made 488 venture capital investments in 132 private companies and 26 private placements in public companies.

The following sets forth certain information with respect to the composition of the Trust’s investment portfolio as of March 31, 2014.

Sector Diverisification (% of Net Assets)

As of March 31, 2014
(Unaudited)

The following table sets forth the Trust’s ten largest holdings as a percentage of net assets as of March 31, 2014.

Ten Largest Holdings By Issuer

(Excludes Short-Term Investments)
(As of March 31, 2014)
(Unaudited)

	% of Net Assets
Gilead Sciences, Inc.	9.57	%
Celgene Corporation	5.93	%
Regeneron Pharmaceuticals, Inc.	5.65	%
Amgen, Inc.	5.01	%
Biogen Idec, Inc.	4.76	%
Alexion Pharmaceuticals, Inc.	4.64	%
Actavis plc	4.25	%
Allergan, Inc.	3.49	%
Mylan, Inc.	3.20	%
Vertex Pharmaceuticals, Inc.	3.18	%

Share Price and NAV

The Trust’s Shares are publicly-held and have been listed and are trading on the NYSE under the symbol “HQH.” The following table sets forth for the quarters indicated the high and low closing prices per Share on the NYSE, the corresponding NAV per Share, the percentage premium or discount at such closing prices, and the number of Shares traded.

The NAV per Share as of the close of business on [ ], 2014 was $[ ] and the last reported sales price of a Share that day was $[ ].

	Market	Corresponding	Market		Corresponding
Quarter	Price(1)	Net Asset	Premium/		Price(1)	Net Asset	Premium/		Trading
Ending	High	Value(2)	(Discount)(2)		Low	Value(2)	(Discount)(2)		Volume(1)
Fiscal 2011
Dec. 31	$13.45	$15.47	(13.06	)%	$11.99	$14.35	(16.44	)%	$5,149,523
Mar. 31	14.72	16.11	(8.63	)	13.42	15.47	(13.25	)	5,568,105
June 30	15.95	16.91	(5.68	)	14.39	16.06	(10.40	)	5,132,135
Sept. 30	15.83	17.21	(8.02	)	12.26	14.10	(13.05	)	5,348,063
Fiscal 2012
Dec. 31	14.11	15.70	(10.13	)	12.52	13.95	(10.25	)	4,536,895
Mar. 31	16.47	17.87	(7.83	)	14.15	15.77	(10.27	)	5,185,566
June 30	17.27	18.21	(5.16	)	15.63	17.14	(8.81	)	5,037,182
Sept. 30	18.36	19.20	(4.38	)	16.85	18.31	(7.97	)	5,856,403
Fiscal 2013
Dec. 31	18.47	19.57	(5.62	)	16.85	17.91	(5.92	)	5,891,734
Mar. 31	19.98	20.89	(4.36	)	17.76	18.88	(5.93	)	7,391,354
June 30	23.86	23.14	3.11		20.00	20.87	(4.17	)	9,238,221
Sept. 30	25.83	24.95	3.53		22.53	23.43	(3.84	)	7,518,769
Fiscal 2014
Dec. 31	27.79	26.16	6.23		22.67	23.50	(3.53	)	5,229,254
Mar. 31	31.63	30.63	3.27		25.98	27.16	(4.35	)	7,954,040

(1) As reported by the NYSE.

(2) Based on the Trust’s computations, on the day that the high or low market price was recorded.

Shares of the Trust have frequently traded at a discount to NAV but have occasionally traded at a premium to NAV. There can be no assurance that Shares will trade at premium to NAV in the future. Certain features of and steps taken by the Trust may have tended to reduce the discount from NAV at which its Shares might otherwise have traded, although the Trust is not able to determine what effect, if any, these various features and steps may have had. The Trust’s current 2% distribution policy (see “Dividends and Distributions”), begun in May 1999, may have contributed to this effect. This trend may also have resulted in whole or in part from other factors, such as the Trust’s investment performance and the performance of the healthcare industry generally. At least once a year the Board considers whether the Trust should repurchase its Shares in the open market or make a tender offer. In March, 2013, the Board approved the continuation of the repurchase program to allow the Trust to repurchase up to 12% of its outstanding Shares in the open market during a one-year period beginning July 11, 2013. In March, 2014, the Board approved the continuation of the repurchase program to allow the Trust to repurchase up to 12% of its outstanding Shares in the open market during a one-year period beginning July 11, 2014. The Trust’s Declaration of Trust also requires that the Board annually consider and vote upon the conversion of the Trust to an open-end company.

Investment Performance

The table below presents average annual total returns of the Trust’s Shares on two separate bases. The first column presents the Trust’s market value return, which is the average annual rate of return, based on the Trust’s market value, on an amount invested in the Trust from the beginning to the end of the stated period and assumes reinvestment of net investment income dividends and capital gains distributions. This figure reflects the actual experience of a Shareholder, before commission costs, who bought and sold Shares of the Trust at the beginning and ending dates. The second column features the NAV return, which presents the same information, but values the Trust at NAV rather than market value.

The record of the NASDAQ Biotech Index has been included so that the Trust’s results may be compared with an unmanaged capitalization-weighted index consisting of 122 small and large biotech companies. The record of the S&P 500 Index has been included so that the Trust’s results may be compared with an unmanaged, base-weighted methodology index including 500 leading companies in leading industries in the U.S. focused on the large cap segment of the market.

The figures for each index assume reinvestment of dividends. It is not possible to invest directly in any index.

H&Q Healthcare Investors Annualized Returns (for periods ended March 31, 2014)

					NASDAQ
	HQH		HQH		BIOTECH		S&P 500
	STOCK*		NAV**		INDEX*		INDEX*

1 YEAR	46.87	%	40.52	%	47.90	%	21.85	%
3 YEARS	34.26	%	29.57	%	33.33	%	14.65	%
5 YEARS	30.56	%	24.78	%	29.29	%	21.15	%
10 YEARS	11.18	%	11.19	%	12.23	%	7.42	%

* Source: Bloomberg, Total Annualized Compounded Return.

** Source: Based on the Trust’s computations.

The above results represent past performance and should not be considered an indication of future performance. The information is provided for purposes of presenting an historical perspective of the Trust. The investment return and net asset and market prices will fluctuate, so that Shares may be worth more or less than their original cost when sold.

THE OFFER

Terms of the Offer

The Trust is issuing to its Shareholders non-transferable Rights to subscribe for an aggregate of [ ] Shares. The Trust may increase the number of Shares subject to subscription by up to 25% of the Shares, for an aggregate total of [ ] Shares. Shareholders will receive one non-transferable Right for each Share held as of the Record Date, rounded down to the nearest number of Rights evenly divisible by three. The Rights entitle a Shareholder to acquire, at the Subscription Price, one Share for every three Rights held. If you exercise all of the Rights issued to you, you may subscribe for Shares which were not otherwise subscribed for by others in the Primary Subscription.

Rights may be exercised at any time during the Subscription Period, which commences on [ ], 2014 and ends at 5:00 p.m., Eastern Time, on [ ], 2014, unless extended by the Trust (such date, as it may be extended, is referred to in this Prospectus as the “Expiration Date”).

Fractional Shares will not be issued upon the exercise of Rights. Therefore, Shares will be issued for Rights submitted in multiples of three only.

The Rights are non-transferable. Therefore, only the underlying Shares will be listed for trading on the NYSE or any other exchange.

Shares acquired pursuant to the Over-Subscription Privilege are subject to allotment, which is more fully discussed under “The Offer—Over-Subscription Privilege.”

For purposes of determining the number of Shares a Shareholder may acquire pursuant to the Offer, broker-dealers whose Shares are held of record by Cede & Co., Inc. (“Cede”), nominee for the Depository Trust Company, or by any other depository or nominee, will be deemed to be the holders of the Rights that are issued to Cede or such other depository or nominee on their behalf.

The Subscription Price will be 95% of the volume weighted average price of a Share on the NYSE on the Pricing Date and the three preceding business days. Since the time of the close of the Offer on the Expiration Date is before the Pricing Date, Shareholders who choose to exercise their Rights will not know the Subscription Price at the time they exercise their Rights.

The Rights will be evidenced by Exercise Forms which will be mailed to Shareholders. You may exercise your Rights by completing an Exercise Form and delivering it, together with payment by means of (i) a check or money order or (ii) a Notice of Guaranteed Delivery to the Subscription Agent during the Subscription Period. The methods by which Rights may be exercised and Shares paid for are set forth below in “Exercise of Rights” and “Payment for Shares.”

Purpose of the Offer

The Board has determined that it is in the best interests of the Trust and its Shareholders to increase the assets of the Trust available for investment through the Offer, so that the Trust will be in a better position to more fully take advantage of available investment opportunities in Healthcare Companies, including investments in specialty generic pharmaceuticals companies, medical devices, healthcare information service, new target validation approaches, and other innovative medical technology companies. The Board was informed by the Investment Adviser that many high quality investment opportunities are available, and that Shareholders could potentially realize significant benefits from increased investment in both venture capital securities and publicly traded Healthcare Companies. The Board was also informed that increasing the asset size through a Rights Offering may favorably affect the Trust’s expense ratio, which could be beneficial to the Trust’s Shareholders. The Board unanimously approved the Offer and concluded that increasing the assets of the Trust through the Offer would be beneficial to the Trust and its Shareholders. However, there can be no assurance that the anticipated benefits discussed herein will occur as a result of increasing the assets of the Trust through the Offer.

In determining that the initiation of the Offer and the proposed terms of the Offer were in the best interest of Shareholders, the Board considered a variety of factors, including those set forth below:

Recent Developments in Certain Healthcare Sectors. Demographic changes continue to create new medical opportunities. The population of Americans age 65 and older continues to grow at a very high rate. According to the U.S. Census Bureau, the percentage of the U.S. population 65 or older will be 19% in 2030 versus 13% in 2010. Furthermore, the population of the oldest Americans in this group, those 85 or older will increase from 5.8 million in 2010 to 8.7 million in 2030. This population consumes three to four times the healthcare goods and services as the rest of the population. This will drive increased consumption of all types of medical products, from drugs to orthopedic and surgical procedures. Furthermore, the Medicare Payment Advisory Commission estimates this trend will drive Medicare enrollment from 48 million enrollees in 2011 to an estimated 79 million by the year 2030. This trend will further increase the demand for new healthcare services and technologies.

In addition, recent developments in the pharmaceutical, biotechnology, and medical technology industries have produced a series of products that will extend or improve the quality of patients’ lives, especially in the areas of oncology, infectious disease, inflammation and orphan diseases. The last five years has seen the commercialization of products that have made significant advances in treating cancer, hepatitis C, diabetes, osteoporosis, rheumatoid arthritis, irritable bowel syndrome, multiple sclerosis, HIV, cystic fibrosis, and hypercholesterolemia. In the next five years, the Investment Adviser anticipates approval of other novel products that will have a comparable impact in treating additional indications in oncology, mental health, respiratory disorders, pain, the broader cystic fibrosis population, and multiple orphan indications.

The Patient Protection and Affordable Care Act (PPACA), or the Affordable Care Act (ACA), a U.S. federal statute, was signed into law by President Barack Obama on March 23, 2010. Together with the Health Care and Education Reconciliation Act, PPACA probably represents the most significant government expansion and regulatory expansion of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965. The PPACA is aimed at increasing the rate of health insurance coverage for Americans and reducing the overall costs per capita of health care. It provides a number of mechanisms, including mandates, subsidies, and tax credits to employers and individuals to expand insurance coverage to 30 million new people. Additional reforms are targeted to improve healthcare outcomes and streamline the delivery of health care. The Investment Adviser expects that this significant piece of legislation will result in volume and utilization increases. In general, these volume increases, the result of increased insurance coverage, should bode well for hospitals, medical device, and drug utilization trends. Additionally, the healthcare insurers (Payors/HMOs) may see increased costs from higher healthcare utilization rates. Despite some of these costs, there will be pockets of opportunity even with the payors. For example, Medicaid-focused HMOs stand to see large enrollment gains that will lead to double-digit sales growth for the foreseeable future.

Based on these trends and events, the Investment Adviser continues to believe, and has advised the Board, that there are attractive opportunities for investment in Healthcare Companies.

In addition to the companies and products in which the Trust has already invested, the Investment Adviser sees great additional promise from several developing trends. In particular, the Investment Adviser sees potential in the areas of 1) biopharmaceuticals, including products for novel targets, 2) orphan and ultra-orphan indications, including gene therapy, 3) specialty pharmaceuticals, 4) generic pharmaceuticals, 5) healthcare services, 6) novel medical devices, 7) healthcare information services, and 8) products that will benefit from changes in the regulatory landscape such as the FDA’s “breakthrough designation,” which is intended for products that treat a serious medical condition that may be substantially superior to available therapy (such a designation may expedite the approval process). Completion of the Offer will allow the Trust to continue to invest in and/or own stock in the companies in which it has already invested and invest in additional companies on the forefront of these developing trends. Without completing the Offer, the Trust may well have to choose between maintaining some of its existing investments and investing in companies which will take advantage of the developing trends.

Additional Investments . In order to take advantage of new investment opportunities in the healthcare industries without the Offer, the Trust might be required to sell a portion of its existing investments which would result in transaction costs and may result in a realization of significant capital gains or otherwise take place at a time when the investment sold may not have fully achieved the Trust’s investment objective for it. The Offer provides the Trust with the ability to both capitalize on new investment opportunities and maintain its investment in existing assets.

Increased Investment Size. The Investment Adviser believes that larger investments by the Trust provide additional negotiating leverage and pricing influence over venture capital, private investments in public entities (PIPEs), and other private equity investments and investments in the public markets. With an increased asset base through the Offer, the Trust may be able to make investments of the size necessary to achieve more favorable investment terms. An increase in assets available for investment should allow the Trust to take advantage of a number of investment opportunities in both publicly-traded Healthcare Companies as well as private venture capital securities. This would potentially allow the Trust to more fully take advantage of a number of attractive long-term trends that the Investment Adviser is witnessing in the healthcare industries, particularly with regards to investments in large mid-cap biopharmaceutical companies, healthcare services, healthcare information services and other innovative biopharmaceutical companies.

Operating Efficiencies and Other Shareholder Benefits.

Reduction in Operating Costs Per Share . The Board was advised by the Investment Adviser that the Trust could potentially achieve additional economies of scale as a result of an increase in the Trust’s total assets. The Investment Adviser believes that the increase in assets from the Offer could reduce the Trust’s expenses as a percentage of average net assets per Share because the Trust is expected to reach a breakpoint in the investment advisory fee, if the Offer is fully subscribed, and fixed costs would be spread over a greater number of Shares. In addition, the Investment Adviser has voluntarily agreed to waive advisory fees to which it might otherwise be entitled under its Investment Advisory Agreement with the Trust for a one-year period, if the Offer is completed. See the section entitled “Prospectus Summary — The Trust — Compensation of Investment Adviser” in this Prospectus.

Liquidity and Discount . The Investment Adviser believes that having more assets under management will benefit existing Shareholders by providing greater liquidity (given expected higher average trading volumes) and make the Trust more attractive to large institutional investors that may not have previously thought they could

purchase enough Shares to assemble an acceptably sized position. These factors could ultimately work to keep the Trust’s discounts narrower than might otherwise occur.

Opportunity to Purchase Below Market Price. The Offer affords existing Shareholders the opportunity to purchase additional Shares at a price that will be below market value at the Expiration Date. However, Shareholders who do not fully exercise their Rights will own, upon completion of the Offer, a smaller proportional interest in the Trust than they owned before the Offer. The Board took this into account in adopting the Subscription Price formula applicable to the Offer and selecting the ratio of Rights offered relative to the number of Shares held on the Record Date. See “Risk Factors.”

The Trust’s Shares traded at a premium as of [ ], 2014. If the Trust’s Shares continue to trade at a premium, the Offer could increase the NAV of the Trust, if the discounted Subscription Price exceeds the NAV.

The Board voted unanimously to approve the terms of the Offer. One of the Trust’s Trustees who voted to authorize the Offer is affiliated with the Investment Adviser and, therefore, will benefit indirectly from the Offer. The other six Trustees are not “interested persons” of the Trust within the meaning of the Investment Company Act. The Board noted that the Investment Adviser will benefit from the Offer because its fee is based on the net assets of the Trust. The Board also noted that the Investment Adviser has voluntarily agreed to waive advisory fees to which it otherwise might be entitled under its Investment Advisory Agreement with the Trust for a one-year period, if the Offer is completed (see the section entitled “The Trust — Investment Adviser” in this Prospectus) and that the Board annually considers the breakpoint and fee rate schedule in connection with its consideration of the continuation of the Investment Advisory Agreement. It is not possible to state precisely the amount of additional compensation the Investment Adviser might receive as a result of the Offer because it is not known how many Shares will be subscribed for and because the proceeds of the Offer will be invested in additional portfolio securities, which will fluctuate in value. However, if the Offer is fully subscribed, it would add (net of offering expenses) approximately $[ ] to the net assets of the Trust. This amount, assuming no fluctuation due to changes in the market, would add $[ ] to the Investment Adviser’s annual compensation based upon an advisory fee of [ ] during the one-year period following completion of the Offer (and $[ ] to the Investment Adviser’s annual compensation thereafter based upon an advisory fee of [ ], unless the Investment Adviser’s fee waiver were to remain in effect for any subsequent period — see the section entitled “Prospectus Summary — The Trust — Compensation of Investment Adviser”). The Trust’s assets could increase further if the Shares subject to the Over-Subscription Privilege were to be issued. The Board also took into account the Investment Adviser’s commitment to continue to build out its infrastructure, including development of a staff adequate in number, experience and qualifications to meet future demands of the Trust (and HQL) for investment management services.

The Board considered the possibility of a decline in the market price of Shares of the Trust. The Board was advised by the Investment Adviser that, if market conditions were to become less favorable, the Investment Adviser may desire to re-evaluate its recommendation of the Offer. The Investment Adviser indicated to the Board that, should the Trust begin to trade at a significant discount to NAV, it would re-examine its recommendation of the Offer and may consider recommending cancellation of the Offer or a change in the terms of the Offer.

The Trust will suspend the Offer until it amends this Prospectus if, after the effective date of this Prospectus, the Trust’s NAV declines more than 10% from its NAV as of that date. A Shareholder who exercises Rights pursuant to the Primary Subscription is hereinafter referred to as an “Exercising Shareholder”. In such event, the Trust will notify Shareholders and permit Exercising Shareholders to cancel exercise of their Rights. Exercising Shareholders will have their payment for additional Shares returned to them if they opt to cancel the exercise of their Rights.

The Trust may, in the future, choose to make additional rights offerings from time to time for a number of Shares and on terms that may or may not be similar to this Offer. Any such future rights offerings will be made in accordance with the then applicable requirements of the Investment Company Act and the Securities Act.

There can be no assurance that the Trust or its Shareholders will achieve any of the foregoing objectives or benefits through the Offer.

Over-Subscription Privilege

If some Shareholders do not exercise all of the Rights initially issued to them in the Primary Subscription, such Shares which have not been subscribed for will be offered, by means of the Over-Subscription Privilege, to Shareholders who have exercised all the Rights initially issued to them and who wish to acquire more than the number of Shares for which the Rights issued to them are exercisable. Shareholders who exercise all the Rights initially issued to them will be asked to indicate, on the Exercise Form which they submit with respect to the exercise of the Rights, how many Shares they are willing to acquire pursuant to the Over-Subscription Privilege. The Trust may, at its discretion, issue up to an additional 25% of the Shares in the Offer to honor over-subscription requests, if sufficient Shares are not available from the Primary Subscription to honor all over-subscriptions. If sufficient Shares remain, all over-subscriptions will be honored in full. If sufficient Shares are not available to honor

all over-subscriptions (after giving effect to any increase in the number of Shares to be offered), the available Shares will be allocated among those who over-subscribe based on the number of Rights originally issued to them by the Trust, so that the number of Shares issued to Shareholders who subscribe pursuant to the Over-Subscription Privilege will generally be in proportion to the number of Shares owned by them in the Trust on the Record Date. The allocation process may involve a series of allocations to assure that the total number of Shares available for over-subscriptions is distributed on a pro-rata basis. The Over-Subscription Privilege may result in additional dilution of interest and voting rights to Shareholders, and additional reduction in the Trust’s NAV per Share.

The Trustees and officers of the Trust and employees of the Investment Adviser may purchase Shares in the Offer and pursuant to the Over-Subscription Privilege. Any such purchases will be made on the same terms applicable to other Shareholders.

The Subscription Price

The Subscription Price per Share will be 95% of the volume weighted average price of a Share on the NYSE on the Pricing Date and the three preceding business days.

The Trust announced the Offer before the opening of trading on the NYSE on March 12, 2014. The NAV per Share at the close of business on March 12, 2014 was $29.50, and the last reported share price of a Share on the NYSE on that date was $29.21. Since the Expiration Date occurs before the Pricing Date, Shareholders who decide to acquire Shares on the Primary Subscription or pursuant to the Over-Subscription Privilege will not know the purchase price for such Shares when they make such decision. Information about the Trust’s NAV per Share may be obtained by calling 1-800-451-2597.

Expiration of the Offer

Rights will expire at 5:00 p.m., Eastern Time, on the Expiration Date and thereafter may not be exercised, unless the Offer is extended.

Any extension, termination, or amendment will be followed as promptly as practical by announcement thereof, such announcement in the case of an extension to be issued no later than 9:00 a.m., Eastern Time, on the next business day following the previously scheduled Expiration Date. The Trust will not, unless otherwise obligated by law, have any obligation to publish, advertise, or otherwise communicate any such announcement other than by making a release to the Dow Jones News Service or such other means of announcement as the Trust deems appropriate.

The Trust may elect to terminate the Offer, if in the judgment of the Board, market circumstances significantly change. In such event, the Board would likely determine that the risks associated with proceeding with the Offer would be greater to the Trust and the Shareholders than the risks associated with early termination, which risks could include negative public perception of the Trust and a negative impact on the Trust’s performance.

Subscription Agent

The Subscription Agent is [ ], which will receive, for its administrative, processing, invoicing and other services as Subscription Agent, a fee estimated to be $[ ], which includes reimbursement for all out-of-pocket expenses related to the Offer. Signed Exercise Forms should be sent to the Subscription Agent , by one of the methods described below:

Subscription Certificate
Delivery Method		Address
By First Class Mail
		[Insert address]

By Overnight Courier or Express Mail		[Insert address]

By Broker-Dealer or other Nominee
(Notice of Guaranteed Delivery)

Shareholders whose Shares are held in a brokerage, bank or trust account may contact their broker or other nominee and instruct them to submit a Notice of Guaranteed Delivery and Payment on their behalf.

Delivery to an address other than as set forth above does not constitute a valid delivery.

Information Agent

Any questions or requests for assistance may be directed to the Information Agent at its telephone number and address listed below:

[Insert name, address and telephone number]
Toll Free: [ ]

You may also call the Trust at (617) 772-8500 or contact your bank, broker or other nominee for information with respect to the Offer.

The Information Agent will receive a fee estimated to be approximately $[ ], which includes reimbursement for all out-of-pocket expenses related to its services as Information Agent.

Exercise of Rights

Rights may be exercised by completing and signing the reverse side of the Exercise Form which accompanies this Prospectus and mailing it in the envelope provided, or otherwise delivering the completed and signed Exercise Form to the Subscription Agent, together with payment for the Shares as described below under “Payment for Shares.” Completed Exercise Forms and related payments must be received by the Subscription Agent before 5:00 p.m., Eastern Time, on or before the Expiration Date (unless payment is effected by means of a Notice of Guaranteed Delivery as described below under “Payment for Shares”) at the offices of the Subscription Agent at the address set forth above. A Shareholder who exercises Rights pursuant to the Primary Subscription is hereinafter referred to as an “Exercising Shareholder.” Rights may also be exercised through an Exercising Shareholder’s broker, who may charge such Exercising Shareholder a servicing fee.

Shareholders for whom there is not a current address (“stop mail” accounts) will not be mailed this Prospectus or other subscription materials. Shareholders whose record addresses on the Record Date are outside the U.S. will not be mailed Exercise Forms.

Exercising Shareholders Who Are Record Owners. Exercising Shareholders may choose between either option set forth under “Payment for Shares” below. If time is of the essence, option (2) will permit timely delivery of the Exercise Form and payment after the Expiration Date.

Investors Whose Shares are Held By A Broker-Dealer or Other Nominee . Exercising Shareholders whose Shares are held by a Nominee such as a broker-dealer, bank or trust company must contact the Nominee to exercise their Rights. In that case, the Nominee will complete the Exercise Form on behalf of the Exercising Shareholder and arrange for proper payment by one of the methods set forth under “Payment for Shares” below.

Nominees . Nominees who hold Shares for the account of others should notify the respective beneficial owners of such Shares as soon as possible to ascertain such beneficial owners’ intentions and to obtain instructions with respect to exercising the Rights. If the beneficial owner so instructs, the nominee should complete the Exercise Form and submit it to the Subscription Agent with the proper payment described under “Payment for Shares” below.

All questions as to the validity, form, eligibility (including times of receipt and matters pertaining to beneficial ownership) and the acceptance of subscription forms and the Subscription Price will be determined by the Trust, which determinations will be final and binding. No alternative, conditional or contingent subscriptions will be accepted. The Trust reserves the absolute right to reject any or all subscriptions not properly submitted or the acceptance of which would, in the opinion of the Trust’s counsel, be unlawful. The Trust also reserves the right to waive any irregularities or conditions, and the Trust’s interpretations of the terms and conditions of the Offer shall be final and binding. Any irregularities in connection with subscriptions must be cured within such time as the Trust shall determine unless waived. Neither the Trust nor the Subscription Agent shall be under any duty to give notification of defects in such subscriptions or incur any liability for failure to give such notification. Subscriptions will not be deemed to have been made until such irregularities have been cured or waived.

Payment for Shares

You may exercise your Rights and pay for Shares subscribed for pursuant to the Primary Subscription and Over-Subscription Privilege in one of the following ways:

(1) Deliver Exercise Form and Payment to the Subscription Agent by the Expiration Date:

Exercising Shareholders may deliver to the Subscription Agent at any of the offices set forth above on page [ ] (i) a completed and executed Exercise Form indicating the number of Rights they have been issued and the number of Shares they are acquiring pursuant to the Primary Subscription, as well as the number of any additional Shares they would like to subscribe for under the Over-Subscription Privilege and (ii) payment for all such ordered Shares based on the Estimated Subscription Price of $[ ] per Share, both no later than 5:00 p.m., Eastern Time, on the Expiration Date.

The Subscription Agent will deposit all checks received by it for the purchase of Shares into a segregated interest bearing account of the Trust (the interest from which will belong to the Trust) pending proration and distribution of Shares.

A payment pursuant to this method (1) must be in U.S. dollars by money order or check drawn on a bank located in the U.S., (2) must be payable to “H&Q Healthcare Investors” and (3) must accompany an executed Exercise Form for such subscription to be accepted. Third (or multiple) party checks will not be accepted.

(2) Contact Your Broker, Bank or Trust Company to Deliver Notice of Guaranteed Delivery to the Subscription Agent by the Expiration Date:

Exercising Shareholders may request a NYSE or Financial Industry Regulatory Authority, Inc. (“FINRA”) member, bank or trust company to execute a Notice of Guaranteed Delivery (or equivalent electronic information) and deliver it, by facsimile or otherwise, to the Subscription Agent by 5:00 p.m., Eastern Time, on the Expiration Date indicating (i) the number of Rights they wish to exercise, the number of Primary Subscription Shares they wish to acquire, and the number of Over-Subscription Privilege Shares for which they wish to subscribe and (ii) guaranteeing delivery of payment and a completed Exercise Form from such Exercising Shareholder by [ ], 2014. You must arrange for payment to the nominee, who will in turn submit the Exercise Form and payment on your behalf by [ ], 2014. The Subscription Agent will not honor a Notice of Guaranteed Delivery unless the completed Exercise Form is received by the Subscription Agent by the close of business on [ ], 2014 and full payment for the Shares is received by it by the close of business on [ ], 2014.

On [ ], 2014 (the “Confirmation Date”), the Subscription Agent will send a confirmation to each Exercising Shareholder (or, if the Shares are held by a depository or other nominee, to such depository or other nominee), showing (i) the number of Shares acquired pursuant to the Primary Subscription, (ii) the number of Shares, if any, acquired pursuant to the Over-Subscription Privilege, (iii) the per Share and total purchase price for the Shares, and (iv) any additional amount payable by such Exercising Shareholder to the Trust or any excess to be refunded by the

Trust to such Exercising Shareholder in each case based upon the final Subscription Price. Any additional payment required from an Exercising Shareholder must be received by the Subscription Agent by [ ], 2014 (the “Final Payment Date”). Any excess payment to be refunded by the Trust to an Exercising Shareholder will be mailed by the Subscription Agent to the holder as promptly as practicable after the Final Payment Date. In the case of any Shareholder who exercises his or her right to acquire Shares pursuant to the Over-Subscription Privilege, any excess payment which would otherwise be refunded to the Shareholder will be applied by the Trust toward payment for additional Shares acquired pursuant to exercise of the Over-Subscription Privilege. Any additional payment required from a Shareholder must be received by the Subscription Agent by the close of business on [ ], 2014. Any excess payment to be refunded by the Trust to a Shareholder will be mailed by the Subscription Agent to such Shareholder as promptly as possible within ten (10) business days after the Confirmation Date. All payments by a Shareholder must be made in United States dollars by money order or check drawn on a bank located in the United States of America and payable to H&Q Healthcare Investors .

Issuance and delivery of certificates for the Shares purchased are subject to actual collection of checks and actual payment pursuant to any Notice of Guaranteed Delivery.

If an Exercising Shareholder does not make payment of any additional amounts due by [ ], 2014, the Trust reserves the right to take any or all of the following actions: (i) apply any payment received by it toward the purchase of the greatest whole number of Shares which could be acquired by such Exercising Shareholder upon exercise of the Primary Subscription and/or Over-Subscription Privilege based on the amount of such payment; (ii) allocate the Shares subject to subscription rights to one or more other Shareholders; (iii) sell all or a portion of the Shares deliverable upon exercise of subscription rights on the open market and apply the proceeds thereof to the amount owed; and/or (iv) exercise any and all other rights or remedies to which it may be entitled, including, without limitation, the right to set-off against payments actually received by it with respect to such subscribed Shares.

An Exercising Shareholder will not have the right to cancel the exercise of Rights or rescind a purchase after the Subscription Agent has received payment, either by means of a Notice of Guaranteed Delivery or a check or money order, except as described under “The Offer—Notice of NAV Decline.”

The risk of delivery of subscription forms and payments to the Subscription Agent will be borne by the Exercising Shareholder and not the Trust, the Subscription Agent or the Information Agent. If the mail is used to exercise Rights, it is recommended that such Exercise Forms and payment be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the Trust and clearance of payment before 5:00 p.m., Eastern time, on the Expiration Date. Because uncertified personal checks may take at least five business days to clear and may, at the discretion of the Trust, not be accepted if not cleared before the Expiration Date, you are strongly encouraged to pay, or arrange for payment, by means of certified or bank cashier’s check.

Notice of NAV Decline

The Trust will suspend the Offer until it amends this Prospectus if, after the effective date of this Prospectus, the Trust’s NAV declines more than 10% from its NAV as of that date. In such event, the Trust will notify you of any such decline and thereby permit you to cancel your exercise of your Rights. Shareholders will have their payment for additional Shares returned to them, if they opt to cancel the exercise of their Rights.

Delivery of Shares

Shareholders whose Shares are held of record by Cede or by any other depository or Nominee on their behalf or their broker-dealers’ behalf will have any Shares that they acquire pursuant to the Offer credited to the account of Cede or such other depository or nominee. With respect to all other Shareholders, Shares will be issued after the expiration of the Offer, and clearance of checks, which can take up to 15 days.

Employee Plan Considerations

Shareholders that are employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (including corporate savings and 401(k) plans), and plans that are subject to Code Section 4975, such as profit sharing/retirement plans for self-employed individuals and Individual Retirement Accounts (collectively, “Retirement Plans”) should be aware that additional contributions of cash to Retirement Plans (other than rollover contributions or trustee-to-trustee transfers from other Retirement Plans) to exercise Rights would be treated as Retirement Plan contributions and therefore, when taken together with contributions previously made, may be treated as excess or nondeductible contributions and may be subject to excise taxes. In the case of Retirement Plans qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), additional cash contributions could cause violations of the maximum contribution limitations of Section 415 of the Code or other qualification rules. Retirement Plans in which contributions are so limited should consider whether there is an additional source of funds available within the Retirement Plan, such as a reallocation from another investment option or other liquidation of assets, with which to exercise the Rights. Because the rules governing Retirement Plans are extensive and complex, Retirement Plans contemplating the exercise of Rights should consult with their counsel before such exercise.

Retirement Plans and other tax exempt entities should also be aware that if they borrow to finance their exercise of Rights, they may become subject to the tax on unrelated business taxable income under Section 511 of the Code. If any portion of an Individual Retirement Account (“IRA”) is used as security for a loan, the portion so used will be treated as a distribution to the IRA depositor.

ERISA contains fiduciary responsibility requirements, and ERISA and the Code contain prohibited transactions rules that may affect the exercise of Rights. Due to the complexity of these rules and the penalties for noncompliance, Retirement Plans should consult with their counsel regarding the consequences of their exercise of Rights under ERISA and the Code.

Certain Federal Income Tax Consequences of the Offer

The following discussion summarizes the principal federal income tax consequences of the Offer to Shareholders and Exercising Shareholders. It is based upon the Code, U.S. Treasury regulations, Internal Revenue Service rulings and policies and judicial decisions in effect on the date of this Prospectus. This discussion does not address all federal income tax aspects of the Offer that may be relevant to a particular Shareholder because of his individual circumstances or to Shareholders subject to special treatment under the Code (such as insurance companies, financial institutions, tax-exempt entities, dealers in securities, foreign corporations, and persons who are not citizens or residents of the U.S.), and it does not address any state, local or foreign tax consequences. Accordingly, each Shareholder should consult his or her own tax advisor as to the specific tax consequences of the Offer to him or her. Each Shareholder should also review the discussion of certain tax considerations affecting the Trust and Shareholders set forth under “Taxation” below.

For federal income tax purposes, neither the receipt nor the exercise of the Rights by Shareholders will result in taxable income to those Shareholders, and no loss will be realized if the Rights expire without exercise.

The Shareholder’s basis in the Right will be zero unless either (i) the fair market value of the Right on the date of distribution is 15% or more of the fair market value on such date of the Shares with respect to which the Right was distributed, or (ii) the Shareholder elects, on its federal income tax return for the taxable year in which the Right is received, to allocate part of the basis of such Shares to the Right. If either of clauses (i) and (ii) is applicable, then if the Right is exercised, the Exercising Shareholder will allocate its basis in the Shares with respect to which the Right was distributed between such Shares and the Right in proportion to the fair market values of each on the date of distribution.

The holding period of a Right received by a Shareholder includes the holding period of the Shares with regard to which the Right is issued. If the Shareholder exercises a Right, the holding period of the Shares acquired begins on the date the Right is exercised.

In the event a Shareholder allows rights to expire without exercising them, the Rights will be deemed to have a zero basis and, therefore, the Shareholder will not recognize any loss upon the expiration of the Rights. In addition, the tax basis of the Shares with respect to which the expired Rights were distributed will remain unchanged compared to their basis prior to the Offer.

The Shareholder’s basis for determining gain or loss upon the sale of a Share acquired upon the exercise of a right will be equal to the sum of the Shareholder’s basis in the Right, if any, and the Subscription Price. Gain or loss recognized by a Shareholder upon the sale of a Share acquired through the Offer will be capital gain or loss (assuming the Share was held as a capital asset at the time of sale) and will be long-term capital gain or loss if the Share was held for more than a year.

The foregoing is only a summary of the applicable federal income tax laws presently in effect and does not include any state or local tax consequences of the Offer. Moreover, the foregoing does not address the many factors that may determine whether an investor will be liable for the federal alternative minimum tax. You should consult your own tax advisor concerning the tax consequences of this transaction.

Special Considerations

Shareholders who do not fully exercise their Rights should expect that they will, at the completion of the Offer, own a smaller proportional interest in the Trust than would otherwise be the case if they exercised their Rights. The Trust cannot determine the extent of this dilution at this time because it does not know what proportion of the Trust’s Shares will be purchased as a result of the Offer.

Shareholders who do not fully exercise their Rights may experience dilution in their holdings because they will indirectly bear the expenses of the Offer. Further, Shareholders that do not submit subscription requests pursuant to the Over-Subscription Privilege may also experience dilution in their holdings, if the Trust offers additional Shares for subscription. The Trust cannot state precisely the amount of any potential decrease in NAV because it does not know at this time how many Shares will be subscribed for or what the NAV or market price per Share will be at the Pricing Date. As of [ ], 2014, the Trust’s Shares traded at a [ ]% [premium above/discount to] NAV. If the Trust’s Shares trade at a similar [premium above/discount to] NAV as of the Pricing Date, the Trust estimates that such dilution would be minimal. See “Risk Factors—Dilution of NAV and Effect of Non-Participation in the Offer.” Except as described in this Prospectus, you will have no right to rescind your subscription requests after receipt of your payment for Shares by the Subscription Agent.

Other Rights Offerings

The Trust made a rights offering in February 1997 at a price that was lower than its then-current NAV. The Trust also made a rights offering in May 2004 at a price that was lower than its then-current NAV and may have similar rights offerings in the future. Any such future rights offerings would be separately registered with the Commission and made by means of separate prospectuses.

Restriction on Foreign Shareholders

Shareholders on the Record Date whose record addresses are outside the United States will receive written notice of the Offer; however, Exercise Forms will not be mailed to such Shareholders. The Rights to which those Exercise Forms relate will be held by the Subscription Agent for such foreign Shareholders’ accounts until instructions are received in writing with payment to exercise the Rights. If no such instructions are received by the Expiration Date, such Rights will expire. See “Subscription Agent.”

USE OF PROCEEDS

Assuming all Shares offered hereby are sold at an estimated Subscription Price (the “Estimated Subscription Price”) of $[ ] per Share, the net proceeds of the Offer will be approximately $[ ], after deducting expenses payable by the Trust estimated at approximately $[ ]. The net proceeds of the Offer will be invested in accordance with the Trust’s investment objective and policies. See “Investment Objective and Policies.” Various factors affect investments in

emerging growth companies that are different from factors affecting investments in large well-known companies, including the additional research required to investigate a large number of small companies and the volatility and illiquidity of securities of those companies. Accordingly, initial investment of the proceeds in publicly-traded securities may take place during a period of up to six months following completion of the Offer, depending on market conditions and the availability of appropriate securities. Restricted Securities may be purchased as appropriate opportunities arise, which could take up to one year or longer, and the Trust may choose to be more fully invested in publicly-traded securities during such period. Pending investment in the securities described above, the proceeds will be held in obligations of the U.S. Government, its agencies or instrumentalities (“U.S. Government Securities”), highly rated money market instruments or mutual funds that invest in such instruments. As a result of this short-term investment of the proceeds, a lower return may be realized.

INVESTMENT OBJECTIVE AND POLICIES

General

The Trust’s investment objective is to seek long-term capital appreciation by investing primarily in Healthcare Companies. The Trust’s investment objective is a fundamental policy and may not be changed without the affirmative vote of the holders of a majority of the outstanding Shares (as that term is defined in Section 2(a)(42) of the Investment Company Act). For a more detailed additional descriptions of the Trust’s investment objective and policies, see the section of this Prospectus entitled “Additional Investment Techniques” and the section of the SAI entitled “Additional Information about Investments, Investment Techniques and Risks.”

For a description of the risks that may be associated with an investment in the Trust, see the section of this Prospectus entitled “Risk Factors.”

In an effort to achieve its investment objective, the Trust will invest primarily in securities of U.S. and foreign companies that are generally believed by the Investment Adviser to have significant potential for above-average long-term growth in revenues and earnings. The Investment Adviser expects that such companies generally will possess some or all of the following characteristics, in the Investment Adviser’s judgment: current or anticipated strong market position for their services or products, experienced business management, recognized technological expertise, and the ability either to generate funds internally to finance growth or to secure outside sources of capital. For companies with earnings, the Investment Adviser generally will attempt to invest in securities that sell at price-earnings ratios or at multiples of underlying asset or potential values which, relative to other comparable securities or to the company’s growth expectations, the Investment Adviser believes do not fully reflect the company’s potential.

The Trust may invest in securities of emerging growth Healthcare Companies, which may offer limited products or services or which are at the research and development stage with no marketable or approved products or technologies. The Trust also may invest in securities of large, well-known companies with existing products in the healthcare industries that are believed by the Investment Adviser to be undervalued in relation to their long-term growth potential or asset value.

The Trust also may invest up to 40% of its net assets in Restricted Securities.

The Trust also may invest up to 20% of its net assets in Foreign Securities. The Trust may buy and sell currencies for the purpose of settlement of transactions in Foreign Securities.

Under normal market conditions, the Trust will invest at least 80% of its net assets in securities of Healthcare Companies and is required, except for temporary defensive purposes, to invest at least 25% of its net assets in such companies. For purposes of satisfying the foregoing requirements, a company will be deemed to be a Healthcare Company if, at the time the Trust makes an investment therein, 50% or more of such company’s sales, earnings or assets arise from or are dedicated to, or are expected to arise from or be dedicated to, healthcare products or services or medical technology activities. Determinations as to whether a company is a Healthcare Company will be made by the Investment Adviser in its discretion.

The equity and related securities in which the Trust may invest consist of common stock of Healthcare Companies and, to a lesser extent, of preferred stock, convertible debt, limited partnership interests and warrants or other rights to acquire common or preferred stocks of such companies. The Trust’s investments in venture capital opportunities, which are considered Restricted Securities, will be made primarily in convertible preferred stock. The Trust may also purchase non-convertible debt securities in connection with its venture capital investments, and otherwise when the Investment Adviser believes that such investments would be consistent with the Trust’s investment objective. While these debt investments typically will not be rated, the Investment Adviser believes that, in light of the risk characteristics associated with investments in emerging growth companies (see “Risk Factors”), if such investments were to be compared with investments rated by S&P or Moody’s, they may be rated as low as “C” in the rating categories established by S&P and Moody’s. Such securities are commonly referred to as “junk bonds” and are considered, on balance, as predominantly speculative.

Put or Call Options

The Trust may purchase and sell (or write) put or call options on any security in which it is permitted to invest or on any index of securities or other index the change in value of which has a high degree of correlation with the changes in value of the Trust’s portfolio securities, and may purchase and sell (or write) on a covered basis financial futures contracts and options on such futures. Under normal market conditions, the Trust does not intend to engage in the practices described in this section to any significant extent.

The Trust also has adopted certain other investment restrictions in an effort to achieve its investment objective. See “Investment Restrictions” in the SAI.

Recent Developments in Certain Healthcare Sectors

Demographic changes continue to create new medical opportunities. The population of Americans age 65 and older continues to grow at a very high rate. According to the U.S. Census Bureau, the percentage of the U.S. population 65 or older will be 19% in 2030 versus 13% in 2010. Furthermore, the population of the oldest Americans in this group, those 85 or older, will increase from 5.8 million in 2010 to 8.7 million in 2030. This population consumes three to four times the healthcare goods and services as the rest of the population. This will drive an increase in all types of medical products, from drugs to orthopedic procedures. Furthermore, the Medicare Payment Advisory Commission estimates this trend will drive Medicare enrollment from 48 million enrollees in 2011 to an estimated 79 million by the year 2030. This trend will further increase the demand for new healthcare services and technologies.

In addition to the companies and products in which the Trust has already invested, the Investment Adviser sees great promise from several developing trends, particularly in the areas of 1) biopharmaceuticals, including products for novel targets, 2) orphan and ultra-orphan indications, including gene therapy, 3) specialty pharmaceuticals, 4) generic pharmaceuticals, 5) healthcare services, 6) novel medical devices, and 7) products that will benefit from changes in the regulatory landscape such as the FDA’s “breakthrough designation,” which is intended for products that treat a serious medical condition that may be substantially superior to available therapy (such a designation may expedite the approval process). A major benefit to Shareholders from the proposed rights offering will be the ability of the Trust to incrementally invest in additional companies on the forefront of these developing trends.

The Patient Protection and Affordable Care Act (PPACA), or the Affordable Care Act (ACA), a United States federal statute, was signed into law by President Barack Obama on March 23, 2010. Together with the Health Care and Education Reconciliation Act, PPACA probably represents the most significant government expansion and regulatory expansion of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965. The PPACA is aimed at increasing the rate of health insurance coverage for Americans and reducing the overall costs per capita of health care. It provides a number of mechanisms, including mandates, subsidies, and tax credits to

employers and individuals to expand insurance coverage to 30 million new people. Additional reforms are targeted to improve healthcare outcomes and streamline the delivery of health care. The Investment Adviser expects that this significant piece of legislation will likely result in volume and utilization increases. In general, these volume increases, the result of increased insurance coverage, should bode well for hospitals, medical device, and drug utilization trends. On the other hand, the healthcare insurers (Payors/HMOs) may see increased costs from higher healthcare utilization rates. Despite some of these costs, there will be pockets of opportunity even with the payors. For example, Medicaid-focused HMOs stand to see large enrollment gains that will lead to double-digit sales growth for the foreseeable future.

To better describe the potential opportunities in various sub-sectors, the following information describes examples of trends in key sub-sectors.

i. Biopharmaceuticals. Prescription medicines play a large role in saving and improving lives. Over the last 25 years, prescription medicines have significantly reduced deaths from major diseases such as heart disease, several cancers, and HIV/AIDS. They have also improved the quality of life for people suffering from conditions such as arthritis and Alzheimer’s disease. Recent advances have included entirely new classes of treatments for diabetes, hypertension, and HIV/AIDS; a new generation of personalized medicines; and the very first treatments for a number of rare diseases, such as Pompe disease and Hunter syndrome. As our population ages and faces increased rates of disease, medical advances in the drug arena will be key to alleviating suffering.

Oncology is an area of particularly strong interest. In recent years, genetic sequencing of tumors has become the standard of care at many centers. A number of companies are heavily involved in the development of targeted therapies for multiple solid and liquid tumors. Drugs targeting the epidermal growth factor receptor (EGFR), the B-RAF gene, and anaplastic lymphoma kinase (ALK) receptor already exist, and hundreds of programs are in development for the next generation of novel agents. Another important area in oncology is stimulating the immune system to combat the tumor. Some immune stimulating agents, such as Provenge and Yervoy, have been approved in the last 2-3 years while multiple immunomodulators targeting programmed cell death 1 (PD-1) and programmed cell death ligand 1 (PDL-1) are in Phase III trials. Recent clinical progress in the area of RNA interference (RNAI) presents a new approach to a number of old and new targets. This technology has the possibility to access so-called ‘undrug-able’ targets. We also foresee an increased use of biomarker development in early and late stage clinical trials to increase productivity.

ii. Orphan and Ultra-Orphan Disease. In addition to positive drug development in Pompe disease and Hunter syndrome, other recent approvals are for diseases such as postherpetic neuralgia (PHN) and atypical hemolytic-uremic syndrome (aHUS). Since the enactment of the Orphan Drug Act in the early 1980’s, over 400 products targeting these diseases have been approved, over 100 since 2006. There are between 6000 and 7000 rare disease affecting some 25 million Americans and even more worldwide. Recently, companies have begun to develop products for so-called ultra-orphan indications (defined as occurring in 20 patients/1 million in the general population). The Investment Adviser believes that investment in companies targeting orphan and ultra-orphan indications is advantageous given (a) the life-saving nature of these medicines, particularly in children, (b) the relatively small clinical programs needed, (c) the ease of third party reimbursement and (d) the years of marketing exclusivity granted by regulatory agencies. Areas that are being investigated today include sickle cell anemia, child and adult cerebral adrenoleukodystrophy (ALD), beta-Thalassemia, transthyretin related (TTR) amyloidosis and Morquio A Syndrome. Many of these products are being treated by gene therapy approaches, which may be able to integrate within the patient’s own DNA to provide a permanent cure for the patient.

iii. Specialty Pharmaceuticals. The specialty pharmaceutical sector is evolving into a sector that we anticipate will be a high growth area of the healthcare industry and a key component to the Trust’s portfolio. Early in the evolution of this sector, specialty pharmaceuticals were used to describe companies built around drug delivery systems or companies built around older, under-promoted, acquired products. The business models of these companies were low margin businesses surviving on single digit royalty streams and products where pricing pressures existed.

Today these companies are migrating to higher value proprietary models. Drug delivery companies are taking existing, validated molecules and using their delivery systems, including oral, transdermal, and sustained release systems, to supersede intravenous, injectable or multiple dose a day regimes. The companies pursuing this life cycle extension strategy are improving therapy not only through greater patient compliance with prescription directions, but also by improved administration of consistently efficacious quantities of the compound. Other companies within the specialty pharmaceutical model are pursuing a more acquisitive business model. This too has been a very successful approach, as they have taken advantage of larger pharmaceutical companies purging non-core assets. In each of these basic approaches, the result has been a growing opportunity for smaller and more agile companies to in-license later-staged product(s), cost effectively develop the products by leveraging existing data packages, or use more rapid paths to FDA approval, and develop commercial organizations that compete with larger biotech and pharmaceutical companies in niche markets. The Investment Adviser expects the specialty pharmaceutical sector will continue to offer attractive market returns.

iv. Generic Pharmaceutical. The North American generic drug industry is approximately $70 billion in size and has grown at a compound annual growth rate of 7.9%, according to various reports. It is estimated that, within the United States, 80% of all drugs dispensed today are generic drugs. The growth has been driven by a number of factors, the most important of which has been the utilization of generic drugs as a low cost alternative. According to a report from the Generic Pharmaceutical Association (GPhA), the use of generic drugs concluded that the use of these low cost alternatives saved the healthcare system $217 billion in 2012. Another report published by the Managed Care Institute showed that a 1% increase in generic drug utilization could generate savings to healthcare payors of $1.2 billion each year.

While cost saving has motivated the success of generics to this point, many other growth drivers exist within the generic drug industry that continue to make the Investment Adviser optimistic about increasing investment exposure to this sector. The Investment Adviser is seeing a more aggressive approach by the generic drug manufacturers to file for generic alternatives. This has led to an increase in the number of abbreviated new drug applications (ANDAs) filed and a current backlog of pending approvals of nearly 2,000 ANDAs at the FDA. From a regulatory standpoint, the FDA’s implementation of generic drug user-fee account (GDUFA) has increased the staff at the Office of Generic Drugs in an effort to improve manufacturing and safety standards as well as provide the staffing levels to more rapidly procure approval of ANDA filings. The Investment Adviser believes a new pathway to approve bio-similar drugs could be determined in the near future that would unlock an additional $40 billion in potential product sales for generic drug manufacturers to develop. Finally, the Investment Adviser expects that over 70 products generating over $70 billion in branded sales will lose patent protection by 2017. This brand-to-generic conversion opportunity represents nearly 25% of the branded pharmaceutical market today. While these numbers are subject to a number of factors, including patent disputes, the availability of these products in generic form could significantly grow the generic market, making it a compelling area of continued investment going forward.

v. Healthcare Services. The healthcare services sector includes companies from managed care organizations, healthcare facilities, drug distributors, pharmacy benefit managers to other alternative care providers. Companies within this industry sector provide varying degrees of services focused on improving access, coverage and quality of healthcare deliveries. In a market-based healthcare system such as the one found in the United States, services are usually paid for by the patient, the patient’s health insurance company, or through government assisted payments (Medicaid and Medicare). Given these dynamics of the payment system, the stocks within the healthcare services sector are often sensitive to changes in the economy as well as to any adjustments to the payment system itself. With the economic challenges faced over the last few years and the changes to the healthcare system with the implementation of PPACA, this has not been a sector of focus for the Trust. However, with the economy showing signs of picking up and the uncertainties of healthcare reform largely behind us, the Investment Adviser believes the investment opportunity in the healthcare services sector has improved. Specific areas within the managed care industry may experience dramatic gains from the availability of insurance to an additional 30 million people made possible by the PPACA.

vi. Novel Medical Devices. Medical technology includes all products used in healthcare other than pharmaceuticals. Products range from crutches to spine implants to drug-eluting stents to vagal nerve stimulators. Medical devices sales were $95 billion in the U.S. in 2010, and worldwide projections are for sales of greater than $350 billion by 2015. It accounts for 6% of all dollars spent in healthcare in the United States. Many medical technology companies are under $500 million in market capitalization. Medical technology company valuations are directly correlated with the underlying company fundamentals; and thus stock performance is a function of operational performance. The price movements of large pharmaceutical and biotechnology companies are less correlated with their earnings. The Investment Adviser believes that medical technology companies that achieve good earnings performance will produce returns that are less susceptible to fluctuations in general market conditions that affect large pharmaceuticals and biotechnology companies.

The Investment Adviser sees several strong areas of growth in this sector. One is the use of devices that can be implanted via minimally invasive procedures, instead of large open surgical procedures that entail significant cost and morbidity. Trans-catheter aortic valve replacement (TAVR) is one example. Another is the use of devices in areas not traditionally served by implants such as those to treat heart failure or the use of left ventricular assist devices (LVADs) as destination therapy as opposed to a bridge to heart transplants. A third involves the use of a diagnostic tool (imaging, biomarker or other) that will be marketed along with a drug agent. The Investment Adviser sees this as a big growth driver as personalized medicine becomes a bigger part of oncology and other therapeutic areas.

vii. Healthcare Information Services. Information-based services or technologies, while used extensively in other paper record-intensive industries, have lagged in their use within healthcare. The Investment Adviser believes this represents an interesting area of future investment for the Trust. A number of factors in recent years have led to this conclusion. The most important factor driving this conclusion was the enactment of the Health Information Technology for Economic and Clinical Health Act (HITECH) in 2009. The law was implemented to improve American healthcare delivery and patient care through an unprecedented investment in Health IT (HIT). Additionally, as part of the PPACA, the government established the Medicare Shared Savings Program (MSSP), which encourages investment in infrastructure and redesign of processes in the interest of delivering high quality and efficient care. The Investment Adviser believes the continual drive to achieve the level of connectivity and integration under HITECH and MSSP will continue to lead to the investment in and use of healthcare-related technology solutions.

viii. Regulatory Changes . In the very recent past, the FDA has made a number of changes to its requirements for drug development that the Investment Adviser believes create new opportunities for investment by the Trust. New FDA review guidelines such as the Prescription Drug User Fee Account V program (PDUFA V) and GDUFA include user fees that will expand the budgets and staff of this critical organization. Eventually these changes should translate to a more efficient agency. As more new products are developed, clinical trial designs will become more complex. The Investment Adviser believes that its expertise in evaluating these trial designs gives the Investment Adviser (and therefore the Trust) a competitive advantage in selecting companies for investment. The changes made at the FDA have, in the Investment Adviser’s opinion, led to more transparency, which has resulted in a much more active and efficient agency. During 2012, a record level of drug approvals was achieved. It also appears the FDA has begun to look more favorably at the approvability of truly novel drugs with compelling clinical data, even if the data are relatively early stage, involving a relatively small number of patients. In fact, FDA has created a new “Breakthrough Designation” for a number of truly novel agents. This designation is intended for products that treat a serious medical condition and that may be substantially superior to available therapy, and it may expedite the approval process. Through August of 2013, 14 drugs received this designation with two already approved. The Investment Adviser believes that its experience in drug development will allow it to critically evaluate company submissions made on early clinical data, and that this capability gives it additional opportunities to invest. As noted earlier, the Investment Adviser also anticipates the FDA will soon define a path to approval of generic biologics, as there is currently no viable path. Once an approved approach is defined, the Investment Adviser believes a number of companies will take advantage of this path forward. The experience of the Investment Adviser’s staff in this area will allow the Investment Adviser to capitalize on this opportunity on behalf of the Trust.

Other

The Trust may also invest in companies and industries that are benefiting from the growth of healthcare industries. These companies may include real estate investment trusts (REITs) which derive their income from the ownership, leasing, or financing of healthcare facilities, manufacturers of nutritional products, and key suppliers of services or equipment.

Significant declines in the stock prices of many companies in the healthcare industries have constrained the ability of some private companies to raise capital to finance their growth and fund research. The Investment Adviser continues to believe that this presents opportunities, especially in its venture capital investing. In addition, shares of many publicly-traded Healthcare Companies also appear to be trading at attractive valuations when compared to stocks of companies in other industries.

RISK FACTORS

General Risk Factors

An investment in the Shares of the Trust involves a high degree of risk. Prospective investors should consider carefully the following risk factors in addition to the other information set forth in this Prospectus. For additional information regarding the risks that may be associated with an investment in the Trust, see “Additional Information About Investments, Investment Techniques and Risks” in the SAI.

Because the Trust intends to invest substantially all of its assets in equity securities of Healthcare Companies, an investor should be aware of certain special considerations and risk factors relating to investments in such companies. No assurance can be given that Healthcare Companies will grow, that a sufficient number of appropriate investments will be available or that the Trust’s particular investment choices will be successful. Investors should also be aware of considerations and risks relating to the Trust’s investment practices. An investment in the Trust should not itself be considered a balanced investment program and should be considered to provide diversification as only part of a more complete investment program. The Trust is intended for long-term investors not seeking current income.

Dilution of NAV and Effect of Non-Participation in the Offer

As a result of the terms of the Offer, Shareholders who do not fully exercise their Rights, including the Over-Subscription Privilege, will, at the completion of the Offer, own a smaller proportional interest in the Trust than they owned prior to the Offer . In addition, an immediate dilution of the NAV per Share may be experienced by all Shareholders as a result of the Offer whether or not they exercise any or all of their Rights, if the Subscription Price of each Share is less than the then current NAV per Share and the number of Shares outstanding after the Offer increases in greater proportion than the increase in the net assets of the Trust. If the Subscription Price is greater than the then current NAV per Share and the number of Shares outstanding after the Offer increases proportionately less than the increase in the net assets of the Trust, all Shareholders may experience an immediate accretion of the aggregate NAV per Share, whether or not they exercise any or all of their Rights.

If you do not participate in the Over-Subscription Privilege, your percentage ownership may also be diluted. Although it is not possible to state precisely the amount of such a decrease or increase in value, because it is not known at this time how many Shares will be subscribed for or what the Subscription Price will be, such dilution or accretion might be substantial.

The following examples show the impact of the Offer on NAV per Share assuming an Estimated Subscription Price less than the then current NAV per Share and an Estimated Subscription Price greater than the then current NAV per Share. The actual Subscription Price may be greater or lesser than the Estimated Subscription Price or such assumed Subscription Price.

NAV per Share above Estimated Subscription Price (1)

NAV	$	[ ]
Estimated Subscription Price	$	[ ]
Reduction in NAV($) (2)	[ ]
Reduction in NAV(%)	[ ]

NAV per Share below Estimated Subscription Price (1)

NAV	$	[ ]
Estimated Subscription Price	$	[ ]
Increase in NAV($) (2)	[ ]
Increase in NAV(%)	[ ]

(1) Both examples assume the full Primary and Over-Subscription Privilege are exercised. Actual amounts may vary due to rounding.

(2) Assumes $[ ] in estimated offering expenses.

Market Risk

As with any investment company that invests in equity securities, the Trust is subject to market risk—the possibility that the prices of equity securities will decline over short or extended periods of time. As a result, the value of an investment in the Trust’s Shares will fluctuate with the market generally and market sectors in particular. You could lose money over short or long periods of time.

Political and economic news can influence market-wide trends and can cause disruptions in the U.S. or world financial markets. Other factors may be ignored by the market as a whole but may cause movements in the price of one company’s stock or the stock of companies in one or more industries. All of these factors may have a greater impact on initial public offerings and emerging company shares.

Selection Risk

Different types of equity securities tend to shift into and out of favor with investors, depending on market and economic conditions. The performance of funds that invest in equity securities of Healthcare Companies may at times be better or worse than the performance of funds that focus on other types of securities or that have a broader investment style.

Concentration in the Healthcare Industries

Under normal market conditions, the Trust expects to invest primarily in securities of Healthcare Companies representing a small number of industries and to invest at least 25% of its net assets in securities of Healthcare Companies. The Trust’s portfolio therefore may be more sensitive to, and possibly more adversely affected by, regulatory, economic or political factors or trends relating to the healthcare industries than a portfolio of companies representing a larger number of industries. This risk is in addition to the risks normally associated with any strategy seeking capital appreciation by investing in a portfolio of equity securities.

Healthcare industries are characterized by limited product focus, rapidly changing technology and extensive government regulation. In particular, technological advances can render an existing product, which may account for a disproportionate share of a company’s revenue, obsolete. Obtaining governmental approval from agencies such as the FDA for new products can be lengthy, expensive and uncertain as to outcome. Such delays in product development may result in the need to seek additional capital, potentially diluting the interests of existing investors such as the Trust. In addition, governmental agencies may, for a variety of reasons, restrict the release of certain innovative technologies of commercial significance. These various factors may result in abrupt advances and declines in the securities prices of particular companies and, in some cases, may have a broad effect on the prices of securities of companies in particular healthcare industries.

Intense competition exists within and among certain healthcare industries, including competition to obtain and sustain proprietary technology protection. Healthcare Companies can be highly dependent on the strength of patents, trademarks and other intellectual property rights for maintenance of profit margins and market share. The complex nature of the technologies involved can lead to patent disputes, including litigation that could result in a company losing an exclusive right to a patent. Competitors of Healthcare Companies, particularly of the emerging growth Healthcare Companies that the Trust emphasizes, may have substantially greater financial resources, more extensive development, manufacturing, marketing and service capabilities, and a larger number of qualified managerial and technical personnel. Such competitors may succeed in developing technologies and products that are more effective or less costly than any that may be developed by Healthcare Companies in which the Trust invests and may also prove to be more successful in production and marketing. Competition may increase further as a result of potential advances in health services and medical technology and greater availability of capital for investment in these fields.

With respect to healthcare, cost containment measures already implemented by the federal government, state governments and the private sector have adversely affected certain sectors of these industries. The implementation of the ACA may create increased demand for healthcare products and services but also may have an adverse effect on some companies in the healthcare industries. Increased emphasis on managed care in the U.S. may put pressure on the price and usage of products sold by Healthcare Companies in which the Trust may invest and may adversely affect the sales and revenues of Healthcare Companies.

Product development efforts by Healthcare Companies may not result in commercial products for many reasons, including, but not limited to, failure to achieve acceptable clinical trial results, limited effectiveness in treating the specified condition or illness, harmful side effects, failure to obtain regulatory approval, and high manufacturing costs. Even after a product is commercially released, governmental agencies may require additional clinical trials or change the labeling requirements for products if additional product side effects are identified, which could have a material adverse effect on the market price of the securities of those Healthcare Companies.

Certain Healthcare Companies in which the Trust may invest may be exposed to potential product liability risks that are inherent in the testing, manufacturing, marketing and sale of pharmaceuticals, medical devices or other products. There can be no assurance that a product liability claim would not have a material adverse effect on the business, financial condition or securities prices of a company in which the Trust has invested.

All of these factors may cause the value of the Trust’s Shares to fluctuate significantly over relatively short periods of time. While a concentration of investments in any healthcare industry or in Healthcare Companies generally may increase the risk and volatility of an investment company’s portfolio, the Trust will endeavor to reduce risk by having a portfolio of investments that is diversified within its stated objective and policies. Such volatility is not limited to the biotechnology industry, and companies in other industries may be subject to similar abrupt movements in the market prices of their securities. No assurance can be given that future declines in the market prices of securities of companies in the industries in which the Trust may invest will not occur, or that such declines will not adversely affect the NAV of the Trust or the price of the Shares.

Investment in Emerging Growth Companies

The Trust may invest in equity securities of emerging growth Healthcare Companies. While these securities offer the opportunity for significant capital gains, such investments also involve a degree of risk that can result in substantial losses. Some of the Healthcare Companies in which the Trust may invest are expected to be companies that are in a “start-up” stage of development, have little or no operating history, operate at a loss or with substantial variations in operating results from period to period, have limited products, markets, financial resources or management depth, or have the need for substantial additional “follow-on” capital to support expansion or to achieve or maintain a competitive position. Such additional investments may dilute the interests of prior investors, such as the Trust. Some of these Healthcare Companies may be emerging companies at the research and development stage with no marketable or approved products or technology. There can be no assurance that securities of start-up or emerging growth companies will, in the future, yield returns commensurate with their associated risks.

Liquidity of Portfolio Investments

The Trust may invest in securities that are traded in the over-the-counter markets or on regional stock exchanges where the low trading volume of a particular security may result in abrupt and erratic price movements or that are not traded in any market. An investment in such securities may have limited liquidity, and the Trust may find it necessary to sell at a discount from recent prices or to sell over extended periods of time when disposing of such securities. In addition, the Trust may invest up to 40% of its net assets in Restricted Securities, which by their terms are illiquid because they are subject to legal or contractual restrictions on resale. The Trust cannot sell Restricted Securities except in a public offering registered under the Securities Act or pursuant to an exemption from registration under the Securities Act, including a transaction in compliance with Rule 144 under the Securities Act. Rule 144 permits only limited sales under specified conditions unless the Trust has held the securities for at least one year and is unaffiliated with the issuer. Restricted Securities are expected to include venture capital investments that may take many years from the date of initial investment to reach a state of maturity when public disposition can be considered. Adverse conditions in the securities markets at certain times may preclude a public offering of an issuer’s unregistered securities. The lack of an active secondary market and resale restrictions may result in the inability of the Trust to sell a security at an attractive price and may substantially delay the sale of a security that the Trust seeks to sell. Companies whose securities are not publicly-traded are also not subject to the same disclosure and other legal requirements as are applicable to companies with publicly-traded securities. Restricted Securities eligible for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act are subject to the 40% limitation described above.

Valuation of Venture Capital Investments and Restricted Securities

Some of the Trust’s investments are subject to restrictions on resale and generally have no established trading market. Because of the type of investments that the Trust makes and the nature of its business, the valuation process requires an analysis of various factors. The Trust’s fair value methodology includes the examination of, among other things, (i) the existence of any contractual restrictions on the disposition of the securities; (ii) information obtained from the issuer, which may include an analysis of the company’s financial statements, the company’s products or intended markets, or the company’s technologies; and (iii) the price of a security negotiated at arm’s-length in an issuer’s subsequent completed round of financing.

As there is typically no readily available market value for the venture capital investments and some of the other Restricted Securities in the Trust’s portfolio, venture capital investments and such other Restricted Securities in the Trust’s portfolio are valued at fair value as determined in good faith by the Board pursuant to a valuation policy and a consistently applied valuation process. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Trust’s investments determined in good faith by the Board, or in accordance with valuation procedures approved by the Board, may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment subject to fair value determinations, while employing a consistently applied valuation process for the types of investments the Trust makes.

Foreign Securities

The Trust may invest up to 20% of its net assets in Foreign Securities. Foreign Securities may be less liquid and have prices that are more volatile than securities of comparable U.S. companies. Foreign stock exchanges and brokers are generally subject to less governmental supervision and regulation than U.S. exchanges and brokers, and commissions on foreign stock exchanges are generally higher than negotiated commissions in the U.S. Sometimes there are delays in the settlement of transactions effected in foreign markets. Certain countries restrict foreign investments in their securities markets. These restrictions may limit or prohibit investment in certain countries or in certain industries or market sectors, or may increase the cost of investing in securities of particular companies.

Foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards or to other regulatory requirements comparable to those applicable to U.S. companies. There may be less available information concerning non-U.S. issuers of securities held by the Trust than is available concerning U.S. companies.

In some foreign countries, nationalization, expropriation, confiscatory taxation or establishment of currency exchange controls are possible. Income earned in a foreign nation may be subject to taxation (including withholding taxes on interest and dividends), or other taxes may be imposed on investments in Foreign Securities. Other risks associated with investments in Foreign Securities include difficulties in pursuing legal remedies and obtaining judgments in foreign courts, political or social instability and diplomatic developments that could adversely affect the Trust’s investments in companies located in foreign countries. An investment in Foreign Securities may also involve a degree of currency risk.

Key Personnel

Investment decisions on behalf of the Trust are made by a team of individuals. Some members of the group have experience in financial analysis of public and private companies. Others have deep scientific backgrounds and considerable operating experience in biotechnology and/or pharmaceutical companies. Still others have medical degrees. The Investment Adviser believes that the investment process benefits from a considered evaluation of potential investments by a group containing a variety of specialized backgrounds. The team currently in place is composed of members with a variety of specialized backgrounds. The Investment Adviser believes that no single individual in the group is individually critical but believes that the overall capability is key. There may be only a limited number of professionals who have, in total, comparable relevant experience to that of the current group. If one or more team members dies, resigns, retires or is otherwise unable to act on behalf of the Investment Adviser, there can be no assurance that a suitable replacement could be found immediately.

Diversified Status

The Trust operates as a “diversified” management investment company, as defined in the Investment Company Act. Under this definition, at least 75% of the value of the Trust’s total assets must, at the time of investment, consist of cash and cash items (including receivables), U.S. Government Securities, securities of other investment companies, and other securities limited in respect of any one issuer to an amount not greater in value than 5% of the value of the Trust’s total assets and to not more than 10% of the voting securities of a single issuer. This limit does not apply, however, to 25% of the Trust’s assets, which may be invested in a single issuer. Notwithstanding its diversified status, the Trust may, from time to time, concentrate its investments in a few issuers and take large positions in those issuers, consistent with being a “diversified” investment company. As a result, the Trust may be subject to a greater risk of loss than an investment company that diversifies its investments more broadly. Taking larger positions is also likely to increase the volatility of the Trust’s net asset value reflecting fluctuation in the value of its large holdings. The Trust may make investments in any company with the objective of controlling or influencing the management and policies of that company. Investing for the purpose of controlling or influencing the management and policies of a company could potentially make the Trust less diversified and more susceptible to declines in the value of the company’s stock. The Investment Adviser may seek a control position in private venture capital investments where the Investment Adviser believes its knowledge and experience will be of significant benefit to the invested company and, therefore, to the Trust’s investment. The Investment Adviser may seek control in public companies only occasionally and most often in companies with a small capitalization.

Discount to NAV

The Shares are listed on the NYSE under the symbol “HQH.” The shares of closed-end investment companies frequently trade at a discount to NAV but may trade at a premium. This is characteristic of shares of a closed-end fund and is a risk separate and distinct from the risk of a decline in the NAV as a result of a fund’s investment activities. Because of this factor and the nature of the Trust’s investment objective and policies, the Trust is designed primarily for long-term investors and should not be considered a vehicle for trading purposes. Since its initial public offering in April 1987, Shares have traded at various times at both a discount and a premium to NAV. The risk that the Shares may trade at a discount to NAV may be greater for investors expecting to sell their Shares in a relatively short period of time. Since the inception of the Trust in April 1987, the longest consecutive period during which the Shares of the Trust traded at discount to NAV was approximately 123 months and the longest consecutive period during which Shares of the Trust traded at a premium to NAV was approximately 14 months. The Trust cannot predict whether the Shares will trade in the future at, above or below NAV.

Anti-Takeover Provisions

The Trust’s Declaration of Trust has provisions that could have the effect of limiting the ability of other entities or persons to (1) acquire control of the Trust, (2) cause it to engage in certain transactions or (3) modify its structure. The Board is divided into three classes, each having a term of three years. Each year the term of office of one class will expire: Michael W. Bonney, Oleg M. Pohotsky and William S. Reardon, CPA will continue until 2016; Daniel R. Omstead, Ph.D. and Uwe E. Reinhardt, Ph.D. will continue until 2015; and Rakesh K. Jain, Ph.D. and Lucinda H. Stebbins, CPA will continue until 2014. This provision could delay for up to two years the replacement of a majority of the Board. A Trustee may be removed from office by Shareholders only by a vote of two-thirds of the outstanding Shares of the Trust. Subject to the requirements of the Investment Company Act, vacancies on the Board may be filled by the remaining Trustees for the balance of the term of the class.

When a Principal Shareholder (as defined below) is a party to the transaction, the affirmative vote or consent of the holders of 75% of the Trust’s Shares outstanding and entitled to vote will be required to authorize any of the following types of transactions:

(i) the merger or consolidation of the Trust with or into any Principal Shareholder;

(ii) the issuance of any securities of the Trust to any Principal Shareholder for cash (except pursuant to any cash dividend reinvestment program available to all Shareholders and approved by the Trustees);

(iii) the sale, lease or exchange of all or a substantial part of the assets of the Trust to or with any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a 12-month period); or

(iv) the sale or lease to the Trust, in exchange for securities of the Trust, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a 12-month period).

However, such 75% vote or consent will not be required with respect to the foregoing transactions where the Board approves by resolution a memorandum of understanding with the Principal Shareholder with respect to and substantially consistent with such transaction. For this purpose, a “Principal Shareholder” is any corporation, person or other entity which is the beneficial owner, directly or indirectly, of more than five percent (5%) of the outstanding Shares or any “affiliate” or “associate” (as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on April 21, 1987) of a Principal Shareholder. In addition to the Shares which a corporation, person or other entity beneficially owns directly, (a) any corporation, person or other entity shall be deemed to be the beneficial owner of any Shares (i) which it has the right to acquire pursuant to any agreement or upon exercise of the conversion rights or warrants, or otherwise (but excluding Share options granted by the Trust) or (ii) which are beneficially owned, directly or indirectly (including Shares deemed owned through application of clause (i) above), by any other corporation, person or entity with which it or its affiliate or associate has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of Shares, or which is its affiliate or associate, and (b) the outstanding Shares shall include Shares deemed owned through application of clauses (i) and (ii) above but shall not include any other Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights or warrant, or otherwise.

The By-Laws also specify certain maximum qualifications for Trustee positions, require advance written notice of Shareholder proposals, and impose procedural and informational requirements for Shareholders to call special meetings.

These provisions could have the effect of depriving Shareholders of an opportunity to sell their Shares at a premium over prevailing market price by discouraging a third party from seeking to obtain control of the Trust in a tender offer or similar transaction.

Repurchase of Shares

You may dispose of your Shares on the NYSE or other markets on which the Shares may trade, but because the Trust is a closed-end investment company, you do not have the right to redeem your Shares. The Board, however, intends to consider, from time to time, but not less frequently than annually, the desirability of open market purchases or tender offers. The Board has maintained a Share repurchase program for the Trust since 2010. In March 2013, the Trustees approved the continuation of the repurchase program to allow the Trust to repurchase up to 12% of its outstanding Shares in the open market during a one-year period beginning July 11, 2013. In March 2014, the Trustees approved the continuation of the repurchase program to allow the Trust to repurchase up to 12% of its outstanding Shares in the open market during a one-year period beginning July 11, 2014. The Share repurchase program is intended to enhance Shareholder value and potentially reduce the discount between the market price of the Trust’s Shares and the Trust’s NAV per Share. There is no assurance that any action undertaken to repurchase Shares will result in the Shares trading at a price which approximates NAV per Share. Any Share repurchases will be made in open market transactions in accordance with the applicable provisions of the Investment Company Act and Massachusetts law. Shares repurchased by the Trust will be held in its treasury. Although the Trust has no present intention of doing so, it reserves the right to incur debt to finance such repurchases or tender offers, provided that it will not repurchase Shares during the periods when it has outstanding borrowings in excess of 5% of its net assets. Interest on any borrowings to finance Share repurchase transactions will increase the Trust’s expenses and will reduce the Trust’s net income. There can be no assurance that Share repurchases, if any, will cause the Shares to trade at a price equal to or in excess of their NAV per Share. Nevertheless, the possibility that a portion of the Trust’s outstanding Shares may be the subject of repurchases may reduce the spread between market price and NAV per Share that might otherwise exist. The Trust may not repurchase Shares except (i) on a securities exchange and after notification to Shareholders of its intent to purchase Shares within the six months preceding the purchase, (ii) pursuant to a tender offer to all Shareholders, or (iii) as otherwise permitted by the Commission. Any related interest charges will be paid by the Trust and borne pro rata by the Shareholders indirectly through their interest in the Trust.

If the Trust repurchases its Shares for a price below their NAV, the NAV of those Shares that remain outstanding would be enhanced, but this does not necessarily mean that the market price of those outstanding Shares would be affected, either positively or negatively. There is no assurance that any action undertaken to repurchase Shares will result in the Shares trading at a price which approximates NAV. Repurchases of Shares by the Trust would also decrease its total assets and accordingly may increase its expenses as a percentage of average net assets. Further, interest on any borrowings to finance any such Share repurchase transactions would reduce the Trust’s net income, if any.

Related Party Transactions

The Trust also may invest, subject to applicable law, in companies in which the principals of the Investment Adviser or Trustees of the Trust have invested, or for which they serve as directors or executive officers. The Investment Company Act prohibits the Trust from engaging in certain transactions involving its “affiliates,” including, among others, the Trust’s Trustees, officers and employees, the Investment Adviser and any “affiliates” of such affiliates except pursuant to an exemptive order or the provisions of certain rules under the Investment Company Act. In the view of the staff of the Commission, other investment companies advised by the Investment Adviser may, in some instances, be viewed to be affiliates of the Trust. Such legal restrictions and delays and costs involved in obtaining necessary regulatory approvals may preclude or discourage the Trust from making certain investments and no assurance can be given that any exemptive order sought by the Trust will be granted.

Additional Risk Factors - Investment Techniques

In addition to the investment practices described above, the Trust may utilize the following investment practices:

When-issued and Delayed Delivery Transactions

The Trust may purchase securities on a “when issued” basis or a “delayed delivery” basis. “When-issued” securities are securities whose terms are available and for which a market exists, but which are not available for immediate delivery. “Delayed delivery” transactions are those in which the Trust purchases a security but settlement of the transaction is to occur after the customary settlement date. Purchases of when-issued or delayed delivery securities are made at a fixed price for delivery at a later date. The value of the security at the settlement date may be more or less than the purchase price. When-issued and delayed delivery transactions involve the risk that the value of the securities involved may change before they are delivered to the Trust and are subject to certain asset coverage requirements. The Trust will cover its positions in such instruments consistent with Commission guidelines. For example, the Trust may maintain with its custodian a segregated account consisting of cash, U.S. Government Securities or high quality liquid debt obligations having a value at least equal to the Trust’s obligations under such instruments. In addition, the counterparty could fail to perform its part of the contract by failing to buy from or sell to the Trust as previously agreed.

Repurchase Agreements

The Trust may invest in repurchase agreements with respect to 10% of its net assets. Repurchase agreements allow the Trust to acquire a security subject to the obligation of the seller to repurchase and the Trust to resell such security at a fixed time and price reflecting the Trust’s costs and interest. It is the Trust’s present intention to enter into repurchase agreements for a relatively short period (usually not more than one week) only with commercial banks and registered broker-dealers and only with respect to U.S. Government Securities and money market instruments. The Trust intends to take possession of collateral to secure a seller’s repurchase obligation, and the Investment Adviser will monitor repurchase transactions to ensure that the value of the underlying securities will at all times be at least equal to the total amount of the repurchase obligation, including an interest factor. If the seller defaults, the Trust could realize a loss on the sale of the underlying security to the extent that the proceeds of sale, including accrued interest, are less than the resale price provided in the agreement, including interest.

Loans of Portfolio Securities

In an attempt to make productive use of its assets, the Trust may lend its portfolio securities on a short-term basis, subject to the limitation that the Trust will not lend a security if, as a result of such loan, all securities then subject to loans would exceed 33 1/3% of the Trust’s net assets. Loans must be collateralized, on each business day, by an amount of cash, bank letters of credit or U.S. Government Securities equal to the value of the loaned securities. In the event that the Trust invests the cash collateral from such loans of portfolio securities, the Trust may realize additional gains or losses. Lending portfolio securities involves the risk that the borrower could fail to return the securities borrowed, in which case the Trust could suffer a loss.

Hedging

In order to hedge against changes in the value of its portfolio securities, the Trust may from time to time engage in certain hedging strategies. The Trust will engage in hedging activities from time to time in the Investment Adviser’s discretion, and may not necessarily be engaging in such activities when movements in the securities markets, foreign exchange rates, or interest rates that could affect the value of the assets of the Trust occur. The risks of hedging include the possibility that interest rates, securities prices and currency exchange rates may not move in the direction that the portfolio managers anticipated. In addition, the skills involved in employing hedging strategies differ from the skills involved in selecting portfolio securities, and the derivative instruments used in hedging strategies may imperfectly correlate with the underlying security, interest rate or currency being hedged. Hedging strategies can also expose the Trust to the risk of its inability to close-out a hedged position and adverse price movements may result in a loss substantially greater than the Trust’s initial investment in the hedging instrument (potential loss in some hedging strategies is unlimited).

Futures Contracts

The Trust may enter into contracts for the purchase or sale for future delivery (a “futures contract”) of baskets of securities, financial indices, financial instruments or foreign currencies. The Trust would purchase or sell futures

contracts to attempt to protect the value of its securities from market-wide price movements and fluctuations in interest or foreign exchange rates without actually buying or selling securities or foreign currency. Similar to the risks of hedging, the risks of futures contracts include the possibility that interest rates, securities prices and currency exchange rates may not move in the direction anticipated. The skills involved in selecting futures contracts differ from the skills involved in selecting portfolio securities. In addition, the futures contract may imperfectly correlate with the underlying security, interest rate or currency underlying the contract, and there can be no assurance that a liquid market will exist at a time when the Trust seeks to close out a futures position.

Foreign Currency Transactions

The Trust may also enter into forward foreign currency exchange contracts and may purchase and sell (or write) exchange-traded or OTC options on currencies, foreign currency futures contracts and options on foreign currency futures contracts to protect against a decline in the U.S. dollar equivalent value of its foreign currency portfolio securities or the payments thereon that may result from an adverse change in foreign currency exchange rates. Although the Trust believes that use of such strategies may benefit the Trust, if the Investment Adviser’s judgment about the general direction of securities market movements, foreign exchange rates or interest rates is incorrect, the Trust’s overall performance could be poorer than if it had not pursued those strategies. The use of these strategies entails certain risks. Foreign currency exchange rates may fluctuate significantly over short periods of time and may also be affected by political developments, including intervention by U.S. or foreign governments.

Cash, U.S. Government Securities, Money Market Instruments or Money Market Funds

When, in the opinion of the Investment Adviser, adverse market conditions or industry expectations support such action, the Trust may, for temporary defensive purposes, invest up to 75% of its net assets in cash, U.S. Government Securities, money market instruments or money market mutual funds. Money market instruments in which the Trust may invest include certificates of deposit and bankers’ acceptances issued by domestic branches of federally-insured U.S. banks and savings and loan associations and commercial paper and high and upper medium grade corporate debt securities rated, as of the date of purchase, among the following rating categories of the indicated rating service: bonds—Moody’s Aaa, Aa or A; S&P AAA, AA or A; notes-Moody’s MIG-1, MIG-2 or MIG-3; S&P SP-1 + to SP-2; commercial paper — Moody’s P-1; S&P A-1. The Trust also may invest in shares of money market mutual funds that invest in money market instruments and U.S. Government Securities. Money market mutual funds are investment companies and the Trust’s investments in those companies are subject to certain limitations. See “Investment Restrictions”. As a shareholder in money market mutual funds, the Trust will bear its ratable share of such companies’ expenses, including investment adviser or management fees, and will remain subject to the payment of fees to the Investment Adviser. To the extent that the Trust assumes a temporary defensive position for the purpose of avoiding losses, it will not participate in the capital appreciation, if any, of securities in which the Trust would normally invest.

Under normal market conditions, the Trust currently does not intend to engage in the foregoing practices or investments to any significant extent, with the exception of investments in money market instruments.

THE TRUST

Board of Trustees

Under the Trust’s Declaration of Trust and the laws of the Commonwealth of Massachusetts, the Trust’s business and affairs are managed under the direction of its Board. Investment decisions for the Trust are made by the Investment Adviser, subject to any direction it may receive from the Board, which periodically reviews the Trust’s investment performance. The SAI includes additional information about the members of the Board and is available, without charge, upon request, by calling the Information Agent at [ ].

Investment Adviser

The Investment Adviser is a limited liability company organized under the laws of the State of Delaware and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The Investment Adviser is located at 2 Liberty Square, 9 th Floor, Boston, MA 02109.

At inception, Hambrecht & Quist Capital Management Incorporated (“HQCM Inc.”) was the Trust’s investment adviser. HQCM Inc. was formed as a wholly-owned subsidiary of Hambrecht & Quist Group. HQCM Inc. remained the Investment Adviser when The Chase Manhattan Corporation (“Chase”) first acquired Hambrecht & Quist Group and then merged with J.P. Morgan Incorporated to form J.P. Morgan Chase & Co. In 2002, the management of HQCM Inc. formed Hambrecht & Quist Capital Management LLC (“HQCM LLC”), the predecessor of the Investment Adviser, as an independent entity, to affect a buyout of HQCM Inc. In this transaction, HQCM LLC acquired certain of the assets of HQCM Inc., and substantially all of the management and staff of HQCM Inc. became employees of HQCM LLC. HQCM LLC changed its name to Tekla Capital Management LLC in 2012. The Investment Adviser is owned by Daniel R. Omstead and Mary Omstead. Dr. Omstead is currently the President and Chief Executive Officer of the Investment Adviser. Mary Omstead is Dr. Omstead’s wife. Dr. Omstead is President of the Trust.

The Investment Adviser also provides investment advisory services to another closed-end investment company, HQL, which invests in companies in the life sciences industries. As of March 31, 2014, the Investment Adviser managed approximately $1,102,000,000 in assets for the Trust and HQL.

The Investment Advisory Agreement between the Investment Adviser and the Trust (the “Advisory Agreement”) provides that, subject to the supervision and direction of the Board, the Investment Adviser is responsible for the actual management of the Trust’s portfolio. The Investment Adviser is also obligated to supervise or perform certain administrative and management services for the Trust and is obligated to provide the office space, facilities, equipment and personnel necessary to perform its duties under the Advisory Agreement. The responsibility for making decisions to buy, sell or hold a particular security rests with the Investment Adviser. However, the Investment Adviser may consider investment analysis from various sources, including broker-dealers with which the Trust does business.

Subject to the supervision and direction of the Board, the Investment Adviser manages the Trust’s portfolio in accordance with the Trust’s investment objective and policies as stated in the Trust’s Prospectus; makes investment decisions for the Trust; places purchase and sale orders for portfolio transactions for the Trust; supplies the Trust 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; directs and supervises a third party administrator or custodian in the provision to the Trust of accounting and bookkeeping services, the calculation of the NAV of Shares of the Trust, internal accounting services, and other clerical services in connection therewith, and supervises and directs a third party administrator or custodian in the preparation of reports to Shareholders of the Trust, tax returns and reports to and filings with the Commission and state securities authorities. The Investment Adviser also provides investment research and supervision of the Trust’s investments and conducts a continual program of investment, evaluation and, if appropriate, sale and reinvestment of the Trust’s assets. In addition, the Investment Adviser furnishes the Trust with whatever statistical information the Trust may reasonably request with respect to the securities that the Trust may hold or contemplate purchasing.

For the services provided by the Investment Adviser under the Advisory Agreement, the Trust pays a fee, computed and payable monthly, equal when annualized to (i) 2.5% of the average net assets for the month of its venture capital and other Restricted Securities (as defined) up to 25% of net assets and (ii) for the month, for all other assets, 0.98% of the average net assets up to $250 million, 0.88% of the average net assets for the next $250 million, 0.80% of the average net assets for the next $500 million and 0.70% of the average net assets thereafter.

Because the advisory fee is based on the average net assets of the Trust and since the Offer is expected to result in an increase in net assets, the Investment Adviser may benefit from the Offer by an increase in the dollar amount of the fee. However, the Investment Adviser has agreed to waive advisory fees to which it otherwise might be entitled under its Investment Advisory Agreement with the Trust for a one-year period, if the Offer is completed. See the section entitled “Prospectus Summary — The Trust — Compensation of Investment Adviser” in this Prospectus.

The aggregate monthly fee may not exceed a rate when annualized of 1.36% (approximately 0.11% per month).

On March 28, 2014, the Board, and the Independent Trustees voting separately, determined that the terms of the Advisory Agreement are fair and reasonable and approved the continuance of the Advisory Agreement as being in the best interests of the Trust and its Shareholders. In making its determination, the Board considered materials that were specifically prepared by the Investment Adviser at the request of the Board and Trust counsel for purposes of the contract review process, including comparisons of (i) the Trust’s performance to its benchmark, the NASDAQ Biotech Index (“NBI”) and other indexes, and to other investment companies, (ii) the Trust’s expenses and expense ratios to those of a peer group of other investment companies, and (iii) the Investment Adviser’s profitability with respect to its services for the Trust to the profitability of other investment advisers. The Board took into account that the Investment Adviser presently provides investment management services only to the Trust and to HQL and does not derive any benefit from its relationship with the Trust other than receipt of advisory fees pursuant to the Investment Advisory Agreement. The Board also received and reviewed information throughout the year about the portfolio performance, the investment strategy, the portfolio management team and the fees and expenses of the Trust.

In approving the Investment Advisory Agreement, the Board considered, among other things, the nature, extent, and quality of the services to be provided by the Investment Adviser, the investment performance of the Trust and the Investment Adviser, the costs of services provided and profits realized by the Investment Adviser and its affiliates, and whether fee levels reflect economies of scale for the benefit of Trust Shareholders and the extent to which economies of scale would be realized as the Trust grows. The Board reviewed information about the foregoing factors and considered changes, if any, in such information since its previous approval. The Board also evaluated the financial strength of the Investment Adviser and the capability of the personnel of the Investment Adviser, specifically the strength and background of its investment analysts. Trust counsel provided the Board with the statutory and regulatory requirements for approval and disclosure of investment advisory agreements. The Board, including the Independent Trustees, evaluated all of the foregoing and, considering all factors together, determined in the exercise of its business judgment that the continuance of the Investment Advisory Agreement is in the best interests of the Trust and its Shareholders. The following provides more detail on certain factors considered by the Board and the Board’s conclusions with respect to each such factor.

The nature, extent and quality of the services to be provided by the Investment Adviser. On a regular basis the Board considers the roles and responsibilities of the Investment Adviser as a whole, along with specific portfolio management, support and trading functions the Investment Adviser provides to the Trust. The Board considered the nature, extent and quality of the services provided by the Investment Adviser to the Trust. The Board continues to be satisfied with the quality and value of the investment advisory services provided to the Trust by the Investment Adviser, and, in particular, the management style and discipline followed by the Investment Adviser and the quality of the Investment Adviser’s research, trading, portfolio management, compliance and administrative personnel. The Board also took into account the Investment Adviser’s commitment to continue to build out its infrastructure, including development of a staff adequate in number, experience and qualifications to meet the future demands of the Trust (and HQL) for investment management services.

The investment performance of the Trust and the Investment Adviser. On a regular basis the Board reviews performance information for the Trust and discusses the Trust’s investment strategy with the Investment Adviser. The Board reviewed performance information for the Trust for the current year to date and over the past one-, two-, three-, four-, five-, six-, seven-, eight-, nine-, and ten-year periods. Although the NBI’s performance exceeded the Trust’s returns by NAV and by stock price in most of the reported periods, the Board noted that the returns by NAV and by stock price of the Trust (including venture capital investments) were more comparable to the performance of the NBI (which includes only public companies) over the longer periods. In addition, the Trust’s returns by NAV and by stock price exceeded the performance of the S&P 500 Index and the S&P 1500 Healthcare Index for the reported periods, and the Trust’s performance compares well to a peer group of 31 healthcare funds for the reported periods. The Board continues to be satisfied with the investment performance of the Trust and the Investment Adviser.

The costs of services to be provided and profits to be realized by the Investment Adviser from its relationship with the Trust. The Board considered the various services provided by the Investment Adviser to the Trust and reviewed comparative information regarding the expenses and expense ratios of the Trust and a peer group of other investment companies. The Board noted that the Investment Adviser’s fees are within the range of fees presented in

the comparative information and noted that a portion of the Trust’s investment portfolio is invested in venture and restricted securities, a portfolio management service that can command higher management fees than those charged by the Investment Adviser pursuant to the Investment Advisory Agreement. The Board also considered financial information provided by the Investment Adviser, including financial statements of the Investment Adviser and a comparison of the Investment Adviser’s profitability with respect to its services for the Trust to the profitability of other investment advisers. Based on the information provided to and evaluated by the Board, the Board concluded that the fees charged by the Investment Adviser are fair and reasonable in light of the quality and nature of the services provided by the Investment Adviser and that the profitability of the Investment Adviser’s relationship with the Trust has not been excessive. The fees charged by the Investment Adviser are within a reasonable range of fees as compared to fees charged by other investment advisers, and the services provided by the Investment Adviser and the amounts paid under the Investment Advisory Agreement are sufficiently favorable in comparison to the services rendered and fees charged by others for similar services to warrant a finding that fees to be paid by the Trust are fair.

Whether fee levels reflect economies of scale and the extent to which economies of scale would be realized as the Trust grows. The Board considered that the Investment Advisory Agreement provides for breakpoints in the advisory fees so that the Trust will share the benefits of the economies of scale that would inure to the Investment Adviser as the Trust’s assets increase. Given the asset size of the Trust, and as economies of scale are still modest at current Trust asset levels, the Board determined that the Trust’s breakpoint schedule is satisfactory and fair. The Board also noted that the Investment Adviser has voluntarily agreed to waive advisory fees to which it otherwise would be entitled under the Investment Advisory Agreement for a one-year period, if the Offer is completed.

Under the Advisory Agreement, the Investment Adviser has agreed to bear all expenses in connection with the performance of its services under the Advisory Agreement, including compensation of and office space for officers and employees of the Trust connected with investment and economic research, trading and investment management of the Trust, as well as the fees of all Trustees of the Trust who are “affiliated persons” of the Investment Adviser, as that term is defined in the Investment Company Act, or any of its “affiliated persons.” Under the Advisory Agreement, the Trust must pay (or, if Trust expenses are paid by the Investment Adviser, shall reimburse the Investment Adviser for) all other expenses incurred in the organization and operation of the Trust including, among other things, expenses for legal and auditing services, costs of printing proxy statements, prospectuses, share certificates and Shareholder reports, charges of the custodian, any sub-custodian and transfer agent, expenses in connection with the Dividend Reinvestment Plan, the Commission, and FINRA 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 Trust’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 Trust’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 Trust.

Portfolio Management

At the current time, a team of analysts, including Daniel R. Omstead, Ph.D., Christopher F. Brinzey, M.B.A., Frank T. Gentile, Ph.D., and Jason C. Akus, M.D./M.B.A., are members of the team that makes investments on behalf of the Trust. These members also perform other duties, including making investments on behalf of HQL. Dr. Omstead has overall investment decision responsibility for the Trust and HQL. Each of the members of the team listed below has been on the Trust’s portfolio management team, which is responsible for the day-to-day management of the Trust’s portfolio, since joining the Investment Adviser. Each team member’s business experience for at least the last five years is included below.

Daniel R. Omstead, Ph.D., is President and Chief Executive Officer of the Investment Adviser. He is also President of the Trust and HQL and serves on their Valuation Committees. Before joining the Investment Adviser, Dr. Omstead was President and CEO of Reprogenesis, Inc., a private development stage biotech company developing therapies in the field of regenerative medicine. In 2000, Reprogenesis was merged with two other biotech companies to form Curis, Inc. Before joining Reprogenesis, Dr. Omstead was Senior Vice President, Research and Development at Cytotherapeutics, Inc., a public biotech company that developed CNS therapies. Before entering the biotech industry, Dr. Omstead was employed for 14 years in the pharmaceutical industry at Ortho Pharmaceutical

Corporation and at the R.W. Johnson Pharmaceutical Research Institute, both divisions of Johnson & Johnson and at Merck Sharpe & Dohme Research Laboratories, a division of Merck & Company, Inc. While at Johnson & Johnson, Dr. Omstead participated in the development of Orthoclone OKT3 TM , Eprex TM /Procrit TM and other biological products. While at Merck, he worked on the development of Recombivax TM , Mefoxin TM , Heartguard TM and other traditional drug products. Dr. Omstead holds Doctoral and Master’s Degrees in Chemical Engineering and Applied Chemistry from Columbia University and a B.S. degree in Civil Engineering from Lehigh University.

Christopher F. Brinzey, MBA, is Senior Vice President, Research of the Investment Adviser. Mr. Brinzey joined the Investment Adviser in February of 2001 and is responsible for investment research and venture investment due diligence in the following areas: specialty pharmaceuticals and healthcare information technology and services. Before joining the Investment Adviser, Mr. Brinzey was a senior analyst for Advest Incorporated’s healthcare research team where he covered and helped to finance a number of companies in the healthcare information technology and eHealth sector. Other prior work experience includes project management and consulting for SunGard Financial Systems, a subsidiary of SunGard Data Systems, a global IT solutions and eProcessing company. Mr. Brinzey received a B.A. in psychology from Hobart College and an MBA from Northeastern University.

Frank T. Gentile, Ph.D., is Senior Vice President, Research of the Investment Adviser. Dr. Gentile joined the Investment Adviser in September 2002. His emphasis is on the analysis of private and public companies in the fields of Functional Genomics and Proteomics, as well as Cell and Gene Therapy. Previously Dr. Gentile was Vice President, Technology Program Management at Millennium Pharmaceuticals. At Millennium, Dr. Gentile was responsible for management of all technology platform development programs. Before joining Millennium, Dr. Gentile was Vice President of Product Development at Curis, Inc., a biotechnology company in Cambridge developing products in the area of Regenerative Medicine. From 1997 to 2000, he was Director and then Vice President, Program Management at Reprogenesis, Inc. From 1990-1997 he was employed at CytoTherapeutics, Inc., where he held several scientific and management positions. Dr. Gentile received a B.E. degree in Chemical Engineering from The Cooper Union and a Ph.D. in Chemical Engineering from MIT. Before working in industry, he was a post-doctoral fellow at the Swiss Federal Institute of Technology (ETH) in Zurich, Switzerland. He is also an Adjunct Associate Professor of Biotechnology at Brown University. He has written over 120 peer reviewed publications and holds 30 U.S. patents in the area of biotechnology.

Jason C. Akus, M.D./M.B.A., is Senior Vice President, Research and is responsible for investment research and due diligence in the biotechnology, medical device, and diagnostic areas. Dr. Akus joined the Investment Adviser in July of 2001 after graduating from Tufts with an M.D. and M.B.A. Dr. Akus also graduated from Tufts with a B.S. in Mathematics. During medical school, Dr. Akus consulted for a variety of healthcare information technology companies.

See “Investment Adviser and Investment Advisory Agreement in the SAI for further information about compensation of these persons, management of client assets by these persons and ownership of Trust Shares by these persons.

Code of Ethics

The Board approved a Code of Ethics under Rule 17j-1 of the Investment Company Act that covers the Trust and the Investment Adviser. The Code of Ethics establishes procedures for personal investing and restricts certain transactions. Employees subject to the Code of Ethics may invest in securities for their personal investment accounts, including, in certain cases, securities that may be purchased or held by the Trust. See “Code of Ethics” in the SAI.

DESCRIPTION OF TRUST

The Trust is a diversified, closed-end management investment company. The Trust was organized as a Massachusetts business trust on October 31, 1986 pursuant to a Declaration of Trust governed by Massachusetts law and commenced operations on April 22, 1987. The Trust’s Declaration of Trust was amended and restated as of April 21, 1987 (“Amended and Restated Declaration of Trust”). The Amended and Restated Declaration of Trust is referred to in this Prospectus as the “Declaration of Trust” unless the context requires otherwise. The Trust’s principal offices are located at 2 Liberty Square, 9 th Floor, Boston, MA 02019.

The Trust’s capitalization consists of an unlimited number of Shares of beneficial interest, $.01 par value. Each Share represents an equal proportionate beneficial interest in the Trust and, when issued and outstanding, will be fully paid and non-assessable by the Trust. Upon any liquidation of the Trust, Shareholders will be entitled to share pro rata in the net assets of the Trust available for distribution after paying or adequately providing for the payment of all liabilities. The Trust will send annual and semi-annual financial statements to Shareholders and may also issue more abbreviated interim reports to update Shareholders on a quarterly basis. The Trust will hold annual meetings of its Shareholders in accordance with the provisions of the Trust’s By-laws and the rules of the NYSE.

Shareholders are entitled to one vote for each whole Share held and a proportionate fractional vote for each fractional Share held. The Trust’s Shares do not have cumulative voting rights, which means that the holders of more than 50% of the Shares of the Trust voting for the election of Trustees can elect all of the Trustees, and, in such event, the holders of the remaining Shares will not be able to elect any Trustees. The Trust has a classified Board of three classes, whereby one class of Trustees is elected each year.

There were [ ] Shares outstanding as of the Record Date. Assuming that all Rights are exercised pursuant to the Primary Subscription, an additional [ ] Shares will be issued. The Trust may, at its discretion, issue up to an additional 25% of the Shares in the Offer to honor over-subscription requests if sufficient Shares are not available from the Primary Subscription to honor all over-subscriptions.

For information regarding risk factors pertaining to the Trust, see “Risk Factors.”

As of [ ], 2014, to the best of the Trust’s knowledge, and based solely on Schedule 13D/G filings made with the Commission, there was no person who controlled the Trust.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to policies established by the Board, the Investment Adviser is primarily responsible for the execution of the Trust’s portfolio transactions and the allocation of brokerage. In executing such transactions, the Investment Adviser will seek to obtain the best price and execution for the Trust, taking into account such factors as price, size of order, difficulty of execution, operational facilities of the firm involved, the firm’s risk in positioning a block of securities, and research, market and statistical information provided by such firm. While the Investment Adviser generally seeks reasonably competitive commission rates, the Trust will not necessarily pay the lowest commission available.

The Trust intends to purchase and hold securities for capital appreciation and it is not anticipated that frequent portfolio changes will be made for short-term trading purposes or to take advantage of short-term swings in the market. However, changes may be made in the portfolio consistent with the investment objective and policies of the Trust whenever changes are believed by the Investment Adviser to be in the best interest of the Trust and its Shareholders. Risk factors, particularly those relating to a specific security investment or to the market and economic conditions, may also affect the rate at which the Trust buys and sells its portfolio holdings. The Trust has no fixed policy with respect to portfolio turnover rate. The Trust may engage in short-term trading or portfolio securities, including initial public offerings, which may result in increasing the Trust’s portfolio turnover rate. The portfolio turnover rate is calculated by dividing the lesser of purchases or sales of long-term portfolio securities by the average monthly value of the Trust’s long-term portfolio securities. A high rate of portfolio turnover could produce higher trading costs and taxable distributions, which would detract from the Trust’s performance. The Trust’s portfolio turnover rate for the fiscal years ended September 30, 2013 and September 30, 2012 was 35.41% and 86.28%, respectively. The decrease in turnover exhibited from 2012 to 2013 resulted in large part from the consistent upward movement in the price of many of the Trust’s assets during 2013. In periods of consistent upward price movements it is not uncommon to trade less frequently than at other times.

NET ASSET VALUE

The NAV of the Trust’s Shares is calculated at the close of regular trading on the NYSE (generally 4:00 p.m., Eastern Time) every day that the NYSE is open. The Trust makes this information available daily by telephone (800) 451-2597, via its web site (www.teklacap.com) and through electronic distribution for media publication, including major internet-based financial services web sites and portals (bloomberg.com, yahoo.com, cbsmarketwatch.com, etc.). Currently, The Wall Street Journal, The New York Times and Barron’s publish NAVs for closed-end investment companies at least weekly.

Securities for which market quotations are readily available are valued at market price. Portfolio securities that are traded on one or more U.S. national securities exchanges or in the over-the-counter market that are National Market System securities are valued at the last sale price or, lacking any sales, at the mean between last bid and asked prices. Other over-the-counter securities are valued at the most recent bid prices as obtained from one or more dealers that make markets in the securities. Redeemable securities issued by a registered open-end investment company are valued at net asset value per share. Other securities are valued at the mean between the closing bid and asked prices. Short- term investments that mature in 60 days or less are valued at amortized cost, unless the Board determines that such valuation does not constitute fair value.

Bonds, other than convertible bonds, are valued using a third-party pricing system. Convertible bonds are valued using this pricing system only on days when there is no sale reported. Temporary cash investments with maturity of 60 days or less are valued at amortized cost. Puts and calls generally are valued at the close of regular trading on the securities or commodities exchange on which they are primarily traded. Options on securities generally are valued at their last bid price in the case of exchange-traded options or, in the case of OTC-traded options, the average of the last bid price as obtained from two or more dealers unless there is only one dealer, in which case that dealer’s price is used. Forward foreign currency contracts are valued on the basis of the value of the underlying currencies at the prevailing currency exchange rate. The prevailing currency exchange rate shall be determined within one hour of when the most recently available exchange rate information has been received based on information obtained from a bank or banks.

Securities that are primarily traded on foreign securities exchanges generally are valued at the last sale price on the exchange on which they are primarily traded. Foreign securities that are primarily traded on the foreign over-the-counter market are generally valued at the last sale quotation, if market quotations are available, or the last reported bid price if there is no active trading in a particular security on a given day. However, if intervening events result in market volatility that significantly affects the value of any such foreign securities after the close of trading on the relevant foreign market, but before the Trust values its Shares on any particular day on which the Trust is required to value its Shares, the Trust is required to determine the value of such securities at “fair value,” as determined in good faith by or under the direction of the Board.

Quotations of foreign securities in foreign currencies are converted, at current exchange rates, to their U.S. dollar equivalents to determine their current value. In addition, to the extent that the Trust values its foreign securities (other than ADR’s and ADS’s) as of the close of trading on various exchanges and over-the-counter markets throughout the world, the calculation of the Trust’s net asset value may not take place contemporaneously with the valuation of foreign securities held by the Trust.

The value of any security or other asset for which market quotations are not readily available shall be determined in a manner that most fairly reflects the security’s (or asset’s) “fair value.” Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to: (1) the type of the security; (2) the size of the holding (including percent of outstanding securities of issuer held by the Trust); (3) the initial cost of the security; (4) the existence of any contractual restrictions on the security’s disposition and the time to freedom from such restrictions; (5) the price and extent of public trading in similar securities of the issuer or of comparable companies; (6) quotations or prices from broker-dealers and/or pricing services; (7) information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); (8) an analysis of the company’s financial statements; (9) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold (e.g., the existence of pending merger activity, public offerings or tender offers that might affect the value of the security); and (10) with respect to certain Restricted Securities, the price of securities in a subsequent round of financing of an issuer in an arm’s-length transaction, if the round includes a new third party investor.

fluctuations in U.S. or foreign markets; market disruptions or closings caused by human error, equipment failures, natural disasters, armed conflicts, acts of God, governmental actions or other developments, as well as the same or similar events which may affect specific issues or the securities markets even though not tied directly to the securities markets. A significant valuation event occurring after the close of trading but before the time of valuation may mean that the closing price for the security does not constitute a readily available market quotation. If a significant valuation event has occurred, the security will be valued at fair value as determined in good faith by the Board in accordance with the procedures established by the Board and herein described. Such valuations and procedures will be reviewed periodically by the Board.

The fair value of investments for which no market exists cannot be precisely determined. With respect to securities of a company in its early stage of development, valuation will typically be based upon the original cost to the Trust. This methodology will typically be used until significant developments affecting the portfolio company provide a basis for a change in valuation. The status of portfolio companies is monitored for progress against plan, advancement of the stage of product development, and other factors. When revenues and earnings are present they are monitored. Valuation changes are event driven. When an appropriate event occurs (e.g., the completion of a third party transaction or a significant change in business model) valuation is changed accordingly. In addition the Trust will typically base changes in valuation on actual transactions or on actual firm offers by sophisticated independent investors unaffiliated with the Adviser. Legal or contractual restrictions on the sale of portfolio securities by the Trust will be considered in the valuation of such securities.

Other assets, which include cash, prepaid and accrued items, accounts receivable and income on investments and from the sale of portfolio securities, are carried in accordance with generally accepted accounting principles, as are all liabilities. Liabilities primarily include accrued expenses, sums owed for securities purchased and dividends payable.

DIVIDENDS AND DISTRIBUTIONS

The Trust expects to distribute to Shareholders annually dividends of all or a portion of its investment company taxable income, if any. For federal income tax purposes, the Trust is required to distribute substantially all of its investment company taxable income, if any, for each year. Net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss), if any, may be distributed or may be retained at the discretion of the Board. “Investment company taxable income,” as used herein, includes all interest and other ordinary income earned by the Trust on its portfolio holdings and net short-term capital gains in excess of net long-term capital losses, less the Trust’s expenses. See “Taxation—Distributions.”

Various factors will affect the level of the Trust’s income, including the asset mix, the performance of the companies represented in the Trust’s portfolio, and the Trust’s use of hedging and fluctuations in the rate of exchange between foreign currencies and the U.S. dollar to the extent the Trust has invested in Foreign Securities. Notices will be provided in accordance with Section 19(a) of the Investment Company Act.

Quarterly Distribution Policy

The Trust has a managed distribution policy with respect to the Trust’s Shares pursuant to which the Trust currently makes quarterly distributions to its Shareholders equal to 2.0% of the Trust’s net asset value. The Board adopted the policy in May, 1999, and since then the Trust has made quarterly distributions at a rate of 2.00% of the Trust’s net assets, except for the periods from August 4, 2009, to April 5, 2010 (during which distributions were suspended) and from April 5, 2010, to November 1, 2010 (during which the Trust made distributions at a rate of 1.25% of the Trust’s net assets). If, for any taxable year, the total distributions required for the Trust’s distribution policy exceed the Trust’s annual investment company taxable income and net long-term capital gains, the excess will generally be treated as a return of capital (up to the amount of the Shareholder’s adjusted tax basis in his or her Shares). The amount treated as a tax-free return of capital will reduce a Shareholder’s adjusted basis in his or her own Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the sale of his or her Shares. The current distribution policy is to declare distributions in Shares. Distributions will automatically be paid in newly-issued full Shares of the Trust plus cash in lieu of any fraction of a Share, unless otherwise instructed by the Shareholder. If a Shareholder elects to receive a distribution in cash, rather than in Shares, the Shareholder’s relative ownership in the Trust will be reduced.

If the Trust’s investment company taxable income and net long-term capital gains for any taxable year or calendar year exceed the amount required to be distributed under the distribution policy, the Trust will at a minimum make distributions necessary to permit it to qualify for treatment as a regulated investment company under the Code. The Trust has the discretion to retain for reinvestment net long-term capital gains in excess of net short-term capital losses, to the extent that it does not need to distribute these gains to meet its managed distribution obligation or tax requirements. Any retained gains may be subject to taxation, although Shareholders may receive credit for taxes paid by the Trust. It is anticipated that net realized capital gains in excess of the total distributed under this policy would be included in the December distribution.

This distribution policy may, under certain circumstances, have certain adverse consequences to the Trust and its Shareholders. To make such distributions, the Trust may have to sell a portion of its investment portfolio at a time when independent investment judgment might not dictate such action. The Trust’s quarterly distribution policy may be changed by the Board without Shareholder approval.

The Trust’s most recent distribution of $0.53 per Share was payable to Shareholders of record on March 3, 2014. That distribution was paid in Shares and cash (if elected by a Shareholder) on March 31, 2014. For the 2013 calendar year, the Trust distributed a total of $1.73 per Share. The first regular quarterly distribution to be paid on Shares acquired upon exercise of Rights will be the first quarterly distribution the record date for which occurs after the issuance of the Shares. The Shares issued in the Offer will not be entitled to the distribution to be declared to Shareholders of record on May 28, 2014, which is payable on June 30, 2014.

Dividend Reinvestment Plan

Since the Trust’s managed distribution policy was adopted in May 1999, the Trust’s distributions have been made under the managed distribution policy rather than the Dividend Reinvestment Plan (the “Plan”). The Plan is currently inactive.

Under the Plan each Shareholder holding Shares of the Trust would automatically be a participant in the Trust’s Plan, unless the Shareholder elects not to participate in the Plan. Under the Plan, whenever the Trust declared a distribution of dividends and capital gains payable in Shares or cash, the distribution of dividends and capital gains was automatically reinvested by Computershare Trust Company, N.A. (the “Plan Agent”), in whole or fractional Shares of the Trust, as the case may be, for the accounts of the participating Shareholders. Shareholders who specifically elected not to participate in the Plan received all distributions of dividends and capital gains in cash paid by check in U.S. dollars mailed directly to the Shareholders (or if the Shares are held in street or other nominee name, then to the nominee) by the Dividend Disbursing Agent. Shareholders may receive more detailed information regarding the Plan from the Plan Agent.

The Plan Agent served as agent for the Shareholders in administering the Plan. Participants in the Plan would receive Shares valued on the valuation date, generally at the lower of market price or NAV per Share, except as specified below. The valuation date would be the dividend or distribution payment date or a date determined by the Board. Whenever the market price per Share equaled or exceeded NAV per Share on the valuation date, participants would be issued Shares at the greater of (i) NAV per Share or (ii) 95% of the then-current market price of the Shares. If the NAV of the Shares on the valuation date exceeded the market price of the Shares at that time, participants would receive Shares from the Trust valued at the market price. The market price of the Shares on a particular date was the last sales price on the NYSE on that date or, if no sale occurred on the NYSE on that date, then the mean between the closing bid and asked quotations for the Shares on the NYSE on such date; and NAV per Share on a particular date was determined by or on behalf of the Trust.

Experience under the Plan may indicate that changes are desirable. Accordingly, the terms and conditions of the Plan may be amended or supplemented by the Plan Agent or the Trust at any time or times but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Commission or any other regulatory authority, only by mailing to the Shareholders appropriate written notice at least 90 days before the effective date of the change. All correspondence concerning the Plan should be directed to the Plan Agent, Computershare Trust Company, N.A. at 250 Royall Street, Canton, MA 02021. Shareholders may also contact the Plan Agent toll-free by telephone at 800-426-5523.

TAXATION

The following discussion is based upon the advice of Dechert LLP, counsel for the Trust, and is a general summary of the principal U.S. federal income tax considerations regarding an investment in the Trust. The discussion is based on laws, regulations, rulings and decisions currently in effect, all of which are subject to change (possibly with retroactive effect) or different interpretations. The discussion below does not purport to deal with all of the federal income tax consequences applicable to the Trust, or to all categories of investors, some of which may be subject to special rules. Each Shareholder is urged to consult with his or her own tax adviser with respect to the specific federal, state, local, foreign and other tax consequences of investing in Shares of the Trust.

Taxation of the Trust

The Trust intends to qualify and has elected to be treated each taxable year as a regulated investment company (“RIC”) under the Code. The principal federal income tax benefits of qualifying as a RIC, as compared to an ordinary taxable corporation, are that a RIC generally is not itself subject to federal income tax on ordinary investment income and net capital gains that are currently distributed to its shareholders, and that the character of long-term capital gains which are recognized and properly designated by a RIC flows through to its shareholders, who receive (or are deemed to receive) distributions of such income. However, the Trust would be subject to corporate income tax (currently at a maximum marginal rate of 35%) on any undistributed income.

Distributions

Dividends paid from Investment Company taxable income generally will be taxable to Shareholders as ordinary income whether paid in cash or reinvested in the Trust’s Shares. The Trust intends to distribute to its Shareholders substantially all of its investment company taxable income (including distributions of net short-term capital gains), if any, for each year. It is anticipated that the Trust’s income distributions will be paid annually in additional Shares unless the Shareholder elects payment in cash.

A portion of the dividends paid by the Trust may be treated as “qualified dividend income” which is taxable to individuals at the same rates that are applicable to long-term capital gains. A Trust distribution is treated as qualified dividend income to the extent that the Trust receives dividend income from taxable domestic corporations and certain qualified foreign corporations, provided that certain holding period and other requirements are met by both the Trust and the Shareholder. Trust distributions generally will not qualify as qualified dividend income to the extent attributable to interest, capital gains, REIT distributions and distributions from certain non-U.S. corporations.

If a portion of the Trust’s income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Trust may be eligible for the corporate dividends-received deduction provided that certain holding period and other requirements are met by both the Trust and the corporate shareholder.

Distributions of the excess, if any, of net long-term capital gains over net short-term capital losses designated by the Trust as capital gain dividends will be taxable to Shareholders as long-term capital gains, whether paid in cash or reinvested in the Trust’s Shares, regardless of how long the Shareholders have held the Trust’s Shares, and will not be eligible for the dividends received deduction for corporations.

Each year, Shareholders will be notified as to the amount and federal tax status of all dividends and capital gains paid during the prior year. Such dividends and capital gains may also be subject to state or local taxes. Dividends declared in October, November, or December with a record date in such month and paid during the following January will be treated as having been paid by the Trust and received by Shareholders on December 31 of the calendar year in which declared, rather than the calendar year in which the dividends are actually received.

Gain or loss realized upon the sale or exchange of Shares will be a capital gain or loss if the Shares are capital assets in the Shareholder’s hands and generally will be long-term or short-term, depending upon the Shareholder’s holding period for the Shares. You should be aware that any loss realized upon the sale or exchange of Shares held for six months or less will be treated as a long-term capital loss to the extent of any distributions or deemed distributions of long-term capital gain to the Shareholder with respect to such Shares. In addition, any loss realized on a sale or exchange of Shares will be disallowed to the extent the Shares disposed of are replaced within a period of 61 days

beginning 30 days before and ending 30 days after the Shares are disposed of, such as pursuant to the Plan. In such case, the basis of Shares acquired will be adjusted to reflect the disallowed loss.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Trust and net gains from redemptions or other taxable dispositions of Trust Shares) of U.S. individuals, estates and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceeds certain threshold amounts.

If a Shareholder has not furnished a certified correct taxpayer identification number (generally a Social Security number) and has not certified that withholding does not apply, or if the Internal Revenue Service has notified the Trust that the taxpayer identification number listed on the account is incorrect according to their records or that the Shareholder is subject to backup withholding, federal law generally requires the Trust to withhold 28% from any dividends and/or redemptions (including exchange redemptions). Amounts withheld are applied to federal tax liability; a refund may be obtained from the Service if withholding results in overpayment of taxes. Federal law also requires the Trust to withhold up to 30% or the applicable tax treaty rate from ordinary dividends paid to certain nonresident alien and other non-U.S. Shareholder accounts.

This is a brief summary of some of the tax laws that affect an investment in the Trust. Moreover, the foregoing does not address the many factors that may determine whether an investor will be liable for the federal alternative minimum tax. Please see the SAI and a tax adviser for further information.

ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT, DIVIDEND
DISBURSING AGENT, REGISTRAR, AND SUBSCRIPTION AGENT

The Trust’s securities and cash are held under a custodian contract by State Street Bank and Trust Company (the “Custodian”), whose principal business address is One Lincoln Street, Boston, MA 02111. The Custodian also performs certain accounting related functions for the Trust, including calculation of NAV and net income.

State Street Bank and Trust Company (the “Administrator”) also serves as administrator to the Trust pursuant to an Administration Agreement. Under the Administration Agreement, the Trust’s assets are combined with assets of HQL. The combined assets are charged fee computed and payable monthly at an annual rate of (i) .034% of the first $150 million; (ii) .024% of the next $150 million; and (iii) .014% on assets in excess of $300 million, subject to annual minimum fee of $77,500. The Administrative Agreement covers administrative costs including out-of-pocket expenses incurred in the ordinary course of providing services under the Administration Agreement.

Computershare Inc. serves as Dividend Disbursing Agent for the Trust. Computershare Trust Company, N.A., a fully owned subsidiary of Computershare Inc., serves as (1) the Plan Agent for the Trust’s Dividend Reinvestment Plan and (2) the Transfer Agent and Registrar for Shares of the Trust. Computershare Trust Company, N.A. and Computershare Inc. have their principal business at 250 Royall Street, Canton, MA 02021.

LEGAL MATTERS

The validity of the Shares offered hereby will be passed on for the Trust by Dechert LLP, One International Place, 40 th Floor, 100 Oliver Street, Boston, MA 02110.

EXPERTS

The Trust’s financial statements as of and for the fiscal year ended September 30, 2013, incorporated by reference in the SAI, have been incorporated in reliance on the report of Deloitte & Touche LLP, an independent registered public accounting firm, given on the authority of such firm as experts in auditing and accounting.

REPORTS TO SHAREHOLDERS

The Trust will send unaudited semiannual reports and audited annual reports, including a list of investments held, to Shareholders.

ADDITIONAL INFORMATION

The Trust is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act and in accordance therewith is required to file reports, proxy statements and other information with the Commission. Any such reports, proxy statements and other information filed by the Trust can be inspected and copied (at prescribed rates) at the public reference facilities of the Commission, 100 F Street, NE, Washington, D.C. 20549. The Trust’s Shares are listed on the NYSE. Reports, proxy statements and other information concerning the Trust can also be inspected and copied at the Library of the NYSE, 20 Broad Street, New York, NY 10005.

This Prospectus constitutes a part of a registration statement on Form N-2 (together with the SAI and all the exhibits and appendices thereto, the “Registration Statement”) filed by the Trust with the Commission under the Securities Act and the Investment Company Act. This Prospectus and the SAI do not contain all of the information set forth in the Registration Statement. Reference is hereby made to the Registration Statement and related exhibits for further information with respect to the Trust and the Shares offered hereby. Statements contained herein concerning the provisions of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the copy of the applicable document filed with the Commission.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Prospectus constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Trust to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, those listed under “Risk Factors” and elsewhere in this Prospectus. As a result of the foregoing and other factors, no assurance can be given as to the future results, levels of activity or achievements, and neither the Trust nor any other person assumes responsibility for the accuracy and completeness of such statements. To the extent required by law, the Trust undertakes to supplement this Prospectus to reflect any material changes to the Trust after the date of this Prospectus.

TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

	PAGE
Additional Information About Investments, Investment Techniques and Risks	3
Investment Restrictions	8
Trustees and Officers	10
The Trust	18
Investment Adviser and Investment Advisory Agreement	20
Proxy Voting Policy and Procedures	23
Code of Ethics	23
Net Asset Value	24
Portfolio Transactions and Brokerage	25
Quarterly Distribution Policy	27
Tax Matters	28
Administrator, Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar	33
Financial Statements	33
Appendix A—Proxy Voting Policies and Procedures	A-1

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE TRUST’S INVESTMENT ADVISER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF BENEFICIAL INTEREST OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF BENEFICIAL INTEREST BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY SUCH PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME AFTER THE DATE HEREOF. HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THE PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.

TABLE OF CONTENTS

	PAGE
Prospectus Summary	1
Trust Expenses	11
Financial Highlights and Investment Performance	12
The Offer	16
Use of Proceeds	25
Investment Objective and Policies	26
Risk Factors	31
Additional Investment Techniques	37
The Trust	39
Description of Trust	43
Portfolio Transactions and Brokerage	44
Net Asset Value	44
Dividends and Distributions	46
Taxation	48
Administrator, Custodian, Transfer Agent, Dividend Disbursing Agent, Registrar and Subscription Agent	49
Legal Matters	49
Experts	49
Reports to Shareholders	50
Additional Information	50
Special Note Regarding Forward-Looking Statements	50
Table of Contents of Statement of Additional Information	51

[ ] SHARES

H&Q HEALTHCARE INVESTORS

ISSUABLE UPON EXERCISE OF NON-TRANSFERABLE
RIGHTS TO SUBSCRIBE FOR SUCH SHARES

PROSPECTUS

[ ], 2014

The information contained in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION

H&Q HEALTHCARE INVESTORS

STATEMENT OF ADDITIONAL INFORMATION

[ ], 2014

H&Q Healthcare Investors (the “Trust”) is a diversified, closed-end, management investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Trust’s investment objective is to seek long-term capital appreciation by investing primarily in equity and related securities (including securities subject to legal or contractual restrictions as to resale) of U.S. and foreign companies principally engaged in the healthcare industries (“Healthcare Companies”). The Trust will invest primarily in securities of U.S. and foreign companies that generally are believed by the Investment Adviser to have significant potential for above-average, long-term growth in revenues and earnings. The Trust may invest in securities of emerging growth Healthcare Companies, some of which may offer limited products or services or which are at the research and development stage with no marketable or approved products or technologies. The Trust may also invest up to 40% of its net assets in venture capital or other securities subject to legal or contractual restrictions as to resale (“Restricted Securities”). Such securities may be acquired in connection with venture capital opportunities, as well as in private placements of public companies. The Trust may also invest in the securities of large, well-known companies with existing products in the healthcare industries. No assurance can be given that the Trust will achieve its investment objective. The Trust’s investment adviser is Tekla Capital Management LLC (the “Investment Adviser”).

This Statement of Additional Information (“SAI”) is not a prospectus, but should be read in conjunction with the Prospectus for the Trust dated [ ], 2014 (the “Prospectus”). This SAI does not include all information that a prospective investor should consider before purchasing shares of beneficial interest (“Shares”) of the Trust, and investors should obtain and read the Prospectus prior to purchasing Shares. A copy of the Prospectus may be obtained without charge, by calling the Information Agent at [ ]. This SAI incorporates by reference the entire Prospectus.

The Prospectus and this SAI omit certain of the information contained in the Trust’s registration statement filed with the Securities and Exchange Commission (the “Commission”). Information about the Trust can be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Call (202) 942-8090 for information on the operation of the Public Reference Room. This information is also available in the Commission’s Internet site at http://www.sec.gov, and copies may be obtained upon payment of a duplicating fee by writing the Public Reference Section of the Commission, Washington, DC 20549-0102.

TABLE OF CONTENTS

	PAGE
Additional Information About Investments, Investment Techniques and Risks	2
Investment Restrictions	7
Trustees and Officers	9
The Trust	17
Investment Adviser and Investment Advisory Agreement	19
Proxy Voting Policy and Procedures	22
Code of Ethics	22
Net Asset Value	23
Portfolio Transactions and Brokerage	24
Quarterly Distribution Policy	26
Tax Matters	27
Administrator, Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar	32
Financial Statements	32
Appendix A — Proxy Voting Policies and Procedures	A-1

ADDITIONAL INFORMATION ABOUT INVESTMENTS,
INVESTMENT TECHNIQUES AND RISKS

Some of the different types of securities, in which the Trust may invest, subject to its investment objective, policies and restrictions, are described in the Prospectus under “Investment Objectives and Policies” and “Risk Factors.” Additional information concerning certain of the Trust’s investments, investment techniques and investment restrictions is set forth below. The Trust may utilize the following investment practices:

When-issued and Delayed Delivery Transactions

The Trust may purchase securities on a “when issued” basis or a “delayed delivery” basis. “When-issued” securities are securities whose terms are available and for which a market exists, but which are not available for immediate delivery. “Delayed delivery” transactions are those in which the Trust purchases a security but settlement of the transaction is to occur after the customary settlement date. The Trust will enter into such transactions for the purpose of acquiring securities that it wishes to purchase but that are not currently available for purchase. The Trust may dispose of a commitment to purchase prior to settlement. However, the Trust does not intend to make such purchases for speculative purposes. When such transactions are negotiated, the purchase price is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. During the period between commitment and settlement, no payment is made for the securities purchased, and no interest or dividends accrue to the Trust. However, the securities are subject to market fluctuation, and the value at settlement may be less than the purchase price. While awaiting settlement, the Trust will cover its position consistent with Commission guidelines. For example, the Trust could maintain in a segregated account cash, U.S. Government Securities, high quality debt obligations or other liquid securities having a value at least equal to its purchase commitments. The commitment to purchase a security for which payment will be made on a future date may be deemed a separate security and involves a risk of loss if the security declines prior to the settlement date, which risk is in addition to the risk of decline of the Trust’s other assets.

Repurchase Agreements

A repurchase agreement is an agreement under which the Trust acquires a security subject to the obligation of the seller to repurchase and the Trust to resell such security at a fixed time and price (representing the Trust’s cost and interest). It is the Trust’s present intention to enter into repurchase agreements for a relatively short period (usually not more than one week) only with commercial banks and registered broker-dealers and only with respect to U.S. Government Securities and money market instruments. Repurchase agreements may also be viewed as loans made by the Trust, which are collateralized by the securities subject to repurchase. The Trust intends to take possession of collateral, and the Investment Adviser will monitor repurchase transactions to ensure that the value of the underlying securities will at all times be at least equal to the total amount of the repurchase obligation, including the interest factor. If the seller defaults the Trust could realize a loss on the sale of the underlying security to the extent that the proceeds of sale, including accrued interest, are less than the resale price provided in the agreement, including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the Trust may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Trust is treated as an unsecured creditor and required to return the underlying collateral to the seller. The Trust may not enter into repurchase agreements with respect to more than 10% of its net assets.

Loans of Portfolio Securities

In an attempt to make productive use of its assets, the Trust may lend its portfolio securities, subject to the limitation that the Trust will not lend a security if, as a result of such loan, all securities then subject to loans would exceed 33 1/3% of the Trust’s net assets. Under applicable regulatory requirements (which are subject to change), the loan collateral must, on each business day, be at least equal to the value of the loaned securities and must consist of cash, bank letters of credit or U.S. Government Securities. To be acceptable as collateral, letters of credit must obligate a bank to pay amounts demanded by the Trust if the demand meets the terms of the letter. Such terms and the issuing bank must be satisfactory to the Trust. When the Trust lends a security, it is entitled to receive substitute payments in the amount of any dividends or interest on the loaned security and also receives one or more of: (1) a negotiated loan fee; (2) interest on securities used as collateral for the loan; or (3) interest on short-term debt securities

purchased with the loan collateral. Either type of interest may be shared with the borrower of the security. The Trust may also pay reasonable finder’s, custodian and administrative fees. The terms of the Trust’s loans of securities must meet certain requirements under the Internal Revenue Code of 1986, as amended (the “Code”), such as providing that the Trust may terminate the loan upon no more than five days’ notice, and must permit the Trust to reacquire loaned securities in time to vote on any important matter. The Trust will make such loans only to banks and dealers with which it may enter into repurchase agreements. If the borrower fails to return the loaned security, the Trust’s risks include: (1) any costs in disposing of the collateral; (2) loss from a decline in value of the collateral to an amount less than 100% of the securities loaned; (3) being unable to exercise its voting or consent rights with respect to the security; (4) any loss arising from the Trust being unable to settle a sale of such securities in a timely manner; and (5) the inability of the Trust to reacquire the loaned securities.

Hedging

Although the Trust believes that use of such strategies will benefit the Trust, if the Investment Adviser’s judgment about the general direction of securities market movements, foreign exchange rates or interest rates is incorrect the Trust’s overall performance could be poorer than if it had not pursued those strategies. Moreover, changes in the value of the instruments that the Trust purchases to hedge its portfolio securities may not correlate precisely with changes in the value of the portfolio securities the Trust is attempting to hedge. In addition, in situations where the Trust has insufficient cash, it may have to sell assets from its portfolio to meet margin requirements at a time when it may be disadvantageous to do so. The Trust’s hedging activities may also result in a higher portfolio turnover rate and additional brokerage costs.

Options on Securities. The Trust may purchase and sell (or write) put or call options on any security in which it is permitted to invest or on any security the change in value of which has positive or negative correlation with the changes in value of the Trust’s portfolio securities.

Purchasing Put and Call Options . By purchasing a call option on a security, the Trust will obtain the right to buy the securities underlying the option from its counterparty at a specified exercise price prior to or at the expiration of the option. The Trust might for example, purchase call options in anticipation of an increase in the price of the security. Conversely, when the Trust purchases a put option on a security it gives the Trust the right to sell the securities underlying the option to its counterparty at the exercise price prior to or at the expiration of the option. The Trust might for example, purchase put options in anticipation of a decline in the market value of securities in its portfolio (or which the Trust intends to or has the right to acquire).

In case of either put or call options that it has purchased, if the option expires without being sold or exercised, the Trust will experience a loss in the amount of the option premium plus any related commissions.

Writing Put and Call Options. When the Trust sells (writes) put and call options, it receives a premium as the writer of the option. By selling (writing) a call option, the Trust will obligate itself to sell the securities underlying the option to its counterparty at the specified exercise price prior to or at the expiration of the option if it is assigned an exercise notice. If the price of the underlying securities at expiration of the option is below the exercise price, the Trust will retain the full amount of the option premium. That amount, less the commission paid for the option, provides a partial hedge against any decline that may have occurred in the Trust’s portfolio securities. During the term of the option, however, a covered call writer has, in return for the premium on the option, given up the opportunity for capital appreciation above the exercise price of the option if the value of the underlying securities increases, but has retained the risk of loss should the price of the underlying security decline. Conversely, by selling (writing) a put option, the Trust obligates itself to buy the securities underlying the option from its counterparty at the exercise price prior to or at the expiration if it is assigned an exercise notice. Writing a put option constitutes a partial hedge against increasing prices of securities the Trust intends to purchase. If the price of the securities at the

expiration of the option is higher than the exercise price, the Trust will retain the full amount of the option premium which provides a partial hedge against any increase in the price of securities which the Trust intends to purchase. A secured put writer, however, retains the risk of loss should the market value of the underlying security decline below the exercise price of the option, less the premium received on the sale of the option.

Closing Purchase or Sale Transactions. Prior to exercise or expiration, an option position can be terminated only by entering into a closing purchase or sale transaction. Closing purchase transactions are ordinarily effected to realize a profit on an outstanding call option, to prevent an underlying security from being called, to permit the sale of an underlying security or to enable another call option on the underlying security (with either a different exercise price or expiration date or both) to be written. If the Trust is not able to enter into a closing transaction or an offsetting position, it will be required to maintain the securities subject to the call, or the collateral underlying the put, even though it might not be advantageous to do so, until a closing transaction can be entered into or the option is exercised or expires.

The Trust’s ability to close out its position as a writer of an option is dependent upon the existence of a liquid secondary market. There is no assurance that a liquid market will exist, particularly in the case of OTC options, since OTC options will generally be closed out only by entering into a closing transaction with a dealer. In the case of OTC options, the Trust is also subject to the credit risk associated with its counterparties.

Stock Index Options. The Trust may purchase and sell (write) options on stock indices (“index options”). Index options are similar to options on securities except that, rather than taking or making delivery of securities underlying the option at a specified price upon exercise, an index option gives the holder the right to receive cash upon exercise of the option if the level of the stock index upon which the option is based is greater, in the case of a call, or less, in the case of a put, than the exercise price of the option.

The Trust will enter into transactions in index options for a number of reasons including, for example, to hedge against adverse price movements in the stock market generally or in particular market segments. If the Investment Adviser anticipates a general market decline, the Trust could purchase a stock index put option. If the expected market decline materialized, the resulting decrease in the value of the Trust’s portfolio securities would be offset to the extent of the increase in the value of the put option. If the Investment Adviser anticipates a market rise, the Trust may purchase a stock index call option to enable the Trust to participate in the rise until the Trust completes anticipated purchases of securities. Purchasing and selling stock index options may also enable the Investment Adviser to achieve changes in equity positions more efficiently. Stock index options involve risks similar to those associated with options on securities. Because exercises of stock index options are settled in cash, however, call writers such as the Trust cannot provide in advance for their potential settlement obligations by acquiring and holding the underlying securities.

Futures Contracts and Options on Futures Contracts

Futures Contracts. The Trust may enter into contracts for the purchase or sale for future delivery (a “futures contract”) of baskets of securities, financial indices, financial instruments or foreign currencies. The Trust would purchase or sell futures contracts to attempt to protect the value of its securities from market-wide price movements and fluctuations in interest or foreign exchange rates without actually buying or selling securities or foreign currency.

A “sale” of a futures contract (or a “short” futures position) means the assumption of a contractual obligation to deliver the securities or currency underlying the contract at a specified price at a specified future time. A “purchase” of a futures contract (or a “long” futures position) means the assumption of a contractual obligation to acquire the securities or currency underlying the contract at a specified price at a specified future time.

Options on Futures Contracts. Upon exercise of a call option, the Trust receives a long position in the underlying futures contract. As with the purchase of futures contracts, when the Trust is not fully invested it may purchase a call option on a futures contract to hedge against a market advance in which it would not otherwise participate. The purchase of a put option on a futures contract is similar in some respects to the purchase of protective put options on portfolio securities. Upon exercise of a put option, the Trust receives a short position in the underlying futures contract. For example, the Trust may purchase a put option on a futures contract to hedge the Trust’s portfolio against the risk of declining securities values. The writing of a call option on a futures contract constitutes a partial

hedge against declining prices of the components of the futures contract, whereas the writing of a put option on a futures contract constitutes a partial hedge against increasing prices of the financial instrument which is deliverable upon termination of the futures contracts. If the options expire unexercised, the Trust will retain the full amount of the option premium, which provides a partial hedge against any increase in the price of securities which the Trust intends to purchase. If a put or call option the Trust has written is exercised, the Trust will incur a loss which will be reduced by the amount of the premium it receives.

Margin Requirements. At the time a futures contract is purchased or sold, the Trust must allocate cash or securities as a deposit payment (“initial margin”). It is expected that the initial margin on U.S. exchanges may range from approximately 1% to approximately 10% of the value of the securities or commodities underlying the contract. Under certain circumstances, however, such as periods of high volatility, the Trust may be required by an exchange to increase the level of its initial margin payment. Additionally, initial margin requirements may be increased generally in the future by regulatory action. An outstanding futures contract is valued daily and the payment in cash of “variation margin” may be required, a process known as “mark to the market”.

Regulatory Limitations on the Use of Futures Contracts and Options on Futures Contracts. Regulations of the CFTC applicable to the Trust currently require that the Trust limits its transactions in commodity futures or commodity options and swaps such that either (i) the aggregate initial margin and premiums required to establish such positions (excluding positions established solely for bona fide hedging purposes) will not exceed 5% of the liquidation value of the Trust or (ii) the aggregate net notional value of such positions (excluding positions established solely for bona fide hedging purposes) does not exceed 100% of the liquidation value of the Trust. The Investment Adviser reserves the right to comply with such different standard as may be established by CFTC rules and regulations with respect to the purchase or sale of futures contracts or options thereon.

Considerations Concerning Futures Contracts and Options on Futures Contracts. Futures contracts entail special risks. The ordinary spreads between values in the cash and futures markets, due to differences in the character of these markets, are subject to distortions relating to (1) investor’s obligations to meet additional variation margin requirements, (2) decisions to make or take delivery, rather than entering into offsetting transactions and (3) the difference between margin requirements in the securities markets and margin deposit requirements in the futures markets. The possibility of such distortion means that a correct forecast of general market, foreign exchange rate or interest rate trends by the Investment Adviser may still not result in a successful transaction. The Trust’s ability to establish and close out positions in futures contracts and options on futures contracts will be subject to the development and maintenance of a liquid market. Although the Trust generally will purchase or sell only those futures contracts and options thereon for which there appears to be a liquid market, there is no assurance that a liquid market on an exchange will exist for any particular futures contract or option thereon at any particular time. Under certain circumstances, exchanges may establish daily limits in the amount that the price of a futures contract or related options contract may vary either up or down from the previous day’s settlement price. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit.

Exchange Rate Risk

The Trust may enter into forward foreign currency exchange contracts (“forward contracts”) and may purchase and sell (or write) exchange-traded or OTC options on currencies, foreign currency futures contracts and options on foreign currency futures contracts to protect against a decline in the U.S. Dollar equivalent value of its foreign currency portfolio securities or the payments thereon that may result from an adverse change in foreign currency exchange rates. The accurate projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain.

Forward Contracts . A forward contract obligates one party to purchase and the other party to sell a definite amount of a given foreign currency at some specified future date. In some circumstances the purchase or sale of appropriate forward contracts may help offset declines in the U.S. Dollar equivalent value of the Trust’s foreign currency denominated assets and income available for distribution to the Trust’s Shareholders that result from adverse changes in the exchange rate between the U.S. Dollar and the various foreign currencies in which the Trust’s assets or income may be denominated. The U.S. Dollar equivalent value of the principal of and rate of return on foreign currency denominated securities will decline if the exchange rate of the U.S. Dollar rises in relation to that currency.

Such declines could be partially or completely offset by an increase in the value of a forward contract on that foreign currency.

While the use of foreign currency forward contracts may protect the Trust against declines in the U.S. Dollar equivalent value of its assets, their use will reduce the possible gain from advantageous changes in the value of the U.S. Dollar against particular currencies in which their assets are denominated. Moreover, the use of foreign currency forward contracts will not eliminate fluctuations in the underlying U.S. Dollar equivalent value of the prices of or rates of return on the assets held in the portfolio and the use of such techniques will subject the Trust to certain risks.

The foreign exchange markets can be highly volatile, subject to sharp price fluctuations. In addition, trading forward contracts can involve a degree of leverage. As a result, relatively small movements in the rates of exchange between the currencies underlying a contract could result in immediate and substantial losses to the Trust. Trading losses that are not offset by corresponding gains in assets being hedged could sharply reduce the value of the Trust’s portfolio.

Options on Foreign Currencies . Similarly, the Trust may purchase and sell (or write) put and call options on foreign currencies to protect against a decline in the U.S. Dollar equivalent value of its portfolio securities or payments due thereon or a rise in the U.S. Dollar equivalent cost of securities that it intends to purchase. A foreign currency put option grants the holder the right, but not the obligation, at a future date to sell a specified amount of a foreign currency to its counterparty at a predetermined price. Conversely, a foreign currency call option grants the holder the right, but not the obligation, to purchase at a future date a specified amount of a foreign currency at a predetermined price. Where currency exchange rates do not move in the direction or to the extent anticipated, however, the Trust could sustain losses on transactions in foreign currency options which would require it to forego a portion or all of the benefits of advantageous changes in such rates.

As with options on securities or futures contracts, the Trust may write options on foreign currencies in order to receive a premium that may wholly or partially offset any declines in the value of its portfolio securities denominated in foreign currencies. When the Trust writes options on foreign currencies, the Trust also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates.

Futures Contracts and Options on Futures Contracts on Foreign Currencies. Buyers and sellers of foreign currency futures contracts are subject to the same risks that apply to the use of futures generally. In addition, there are risks associated with foreign currency futures contracts and their use as hedging devices similar to those associated with options on foreign currencies described above. Further, settlement of a foreign currency futures contract must occur within the country issuing the underlying currency. Thus, the Trust must accept or make delivery of the underlying foreign currency in accordance with any U.S. or foreign restrictions or regulations regarding the maintenance of foreign banking arrangements by U.S. residents and may be required to pay any fees, taxes or charges associated with such delivery that are assessed in the country of the underlying currency.

Options on foreign currency futures contracts may involve certain additional risks. Trading options on foreign currency futures contracts is relatively new. The ability to establish and close out positions in such options is subject to the maintenance of a liquid secondary market. To mitigate this problem, the Trust will not purchase or write options on foreign currency futures contracts unless and until, in the Investment Adviser’s opinion, the market for such options has developed sufficiently that the risks in connection with such options are not greater than the risks in connection with transactions in the underlying foreign currency futures contracts. Compared to the purchase or sale of foreign currency futures contracts, the purchase of call or put options thereon involves less potential risk to the Trust because the maximum amount at risk is the premium paid for the option (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a foreign currency futures contract would result in a loss, such as when there is no movement in the price of the underlying currency or futures contract, whereas use of the underlying futures contract would not result in a loss.

Coverage Requirements

All options on securities, securities indices, other indices and foreign currencies written by the Trust are required to be covered. When the Trust writes a call option during the life of the option, the Trust may own or have the

contractual right to acquire the securities or foreign currency subject to the option, or may maintain with the Trust’s custodian in a segregated account cash, U.S. Government Securities, other appropriate high quality liquid debt obligations or other liquid securities in an amount at least equal to the market value of the securities or foreign currency underlying the option or may utilize any other instrument or transaction consistent with Commission guidelines. When the Trust writes a put option, the Trust may maintain with the Trust’s custodian in a segregated account cash, U.S. Government Securities, other appropriate high quality debt obligations or other liquid securities in an amount at least equal to the exercise price of the option or may utilize any other instrument or transaction consistent with Commission guidelines.

All futures and forward currency contracts purchased or sold by the Trust are also required to be covered. When the Trust purchases a futures or forward currency contract, the Trust will maintain with the Trust’s custodian in a segregated account an amount of cash, U.S. Government Securities, other appropriate high quality liquid debt obligations or other liquid securities so that the amount so segregated, plus the amount of initial and variation margin held in the account of its broker, if applicable, equals the market value of the futures or forward currency contract or may utilize any other instrument or transaction consistent with Commission guidelines.

When the Trust sells a futures or forward currency contract, during the life of the futures or forward currency contract, the Trust will own or have the contractual right to acquire the securities or foreign currency subject to the futures or forward currency contract, or will maintain with the Trust’s custodian in a segregated account cash, U.S. Government Securities, other appropriate high quality liquid debt obligations or other liquid securities in an amount at least equal to the market value of the securities or foreign currency underlying the futures or forward currency contract or may utilize any other instrument or transaction consistent with Commission guidelines.

If the market value of the contract moves adversely to the Trust, or if the value of the securities in the segregated account declines, the Trust will be required to deposit additional cash or securities in the segregated account at a time when it may be disadvantageous to do so.

INVESTMENT RESTRICTIONS

The Trust has adopted certain fundamental restrictions, which, like its investment objective, may not be changed without the affirmative vote of the holders of a majority of the Trust’s outstanding Shares. As used in this SAI, a “majority of the Trust’s outstanding Shares” means the lesser of (1) 67% of the Shares represented at a meeting at which more than 50% of the outstanding Shares are represented or (2) more than 50% of the outstanding Shares. The Trust may not:

1. With respect to 75% of its total assets, invest in securities of any one issuer if immediately after and as a result of such investment more than 5% of the total assets of the Trust, taken at market value, would be invested in the securities of such issuer. This restriction does not apply to investments in U.S. Government Securities.

2. Purchase or sell commodities or commodities contracts. The prohibition on the purchase or sale of commodities applies to the purchase or sale of “physical” commodities.

3. Purchase or sell real estate; provided that the Trust may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein.

4. Purchase any securities on margin or make short sales of securities, except for short-term credit necessary for the clearance of portfolio transactions.

5. Underwrite securities of other issuers, except to the extent that, in connection with the disposition of its portfolio securities, the Trust may be deemed an underwriter under federal or state securities law.

6. Invest less than 25% of its net assets in securities of companies in the healthcare industries.

7. Invest more than 40% of the Trust’s net assets in venture capital or other Restricted Securities.

8. Issue senior securities or borrow amounts in excess of 10% of its net assets at the time of borrowing, and then only from banks as a temporary measure for extraordinary or emergency purposes or for the repurchase of its securities. The Trust will not repurchase its securities during periods when it has outstanding borrowings in excess of 5% of its net assets. The Trust will not borrow for investment purposes.

9. Mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any securities owned or held by the Trust, except as may be necessary in connection with permitted borrowings under 9 above.

10. Make loans of money, except by the purchase of debt obligations in which the Trust may invest consistent with its investment objective and policies. The Trust reserves the authority to enter into repurchase agreements and to make loans of its portfolio securities to qualified institutional investors, brokers, dealers, banks or other financial institutions, so long as the terms of the loans are not inconsistent with the requirements of the Investment Company Act. Such loans may not exceed an aggregate amount of 33 1/3% of the Trust’s net assets. Repurchase agreements are subject to the percentage limitation described in investment policy 5. below. See also “Repurchase Agreement.”

11. Purchase securities of other investment companies except in connection with a merger, consolidation, acquisition or reorganization, if (a) more than 10% of its total assets would be invested in securities of other investment companies, (b) more than 5% of its total assets would be invested in the securities of any one investment company, or (c) the Trust would own more than 3% of any other investment company’s securities.

In addition, the Trust has adopted the following investment policies, which may be changed by the action of the Board of Trustees (the “Board”) without Shareholder approval:

1. The Trust, under normal circumstances, will have at least 80% of its net assets invested in securities of Healthcare Companies. This investment policy may not be changed without 60 days’ prior notice to Shareholders.

2. To the extent not invested in the Healthcare Company, assets of the Trust will be invested in cash, U.S. Government Securities, money market instruments or money market mutual funds for liquidity. When, in the opinion of the Investment Adviser, adverse market conditions or industry expectations support such action, the Trust may temporarily take a defensive position of up to 75% of net assets in such liquid investments. The money market instruments in which the Trust may invest include certificates of deposit and bankers’ acceptances issued by domestic branches of federally-insured U.S. banks and savings and loan associations and commercial paper and high and upper medium grade corporate debt securities rated, as of the date of purchase, among the highest rating categories of Moody’s Investors Service Inc. (Aaa, Aa or A for bonds; MIG-1, MIG-2 or MIG-3 for notes; P-1 for commercial paper) or Standard & Poor’s Corporation (AAA, AA or A for bonds; SP-1+ to SP-2 for notes; A-1 for commercial paper). The Trust also may invest in shares of money market mutual funds that invest in money market instruments and U.S. Government Securities. Money market mutual funds are investment companies and the Trust’s investments in those companies are subject to the limitations set forth in 11 under “Investment Restrictions.” As a shareholder in money market mutual funds, the Trust will bear its ratable share of such companies’ expenses, including investment adviser or management fees, and will remain subject to payment of fees to the Investment Adviser.

3. The Trust may invest up to 5% of its net assets in warrants, valued at market value. Warrants acquired in units or attached to other securities are not subject to this restriction.

4. The Trust may not enter into repurchase agreements with respect to more than 10% of its net assets. It is the Trust’s present intention to enter into repurchase agreements for a relatively short period (usually not more than one week) only with commercial banks and registered broker-dealers and only with respect to U.S. Government Securities and money market instruments. Repurchase agreements may also be viewed as loans made by the Trust which are collateralized by the securities subject to repurchase. The Trust intends to take possession of collateral, and the Investment Adviser will monitor repurchase transactions to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. See also “Repurchase Agreements.”

5. The Trust may not invest more than 20% of its net assets at the time of purchase in securities of foreign issuers. Such issuers are expected to be companies domiciled in Canada, Western Europe and Japan. The Trust may buy and sell foreign currencies for the purpose of settlement of transactions in foreign securities, but presently does not intend to engage in hedging operations such as buying contracts for purchase in the future of foreign currencies. Any such hedging operations would be limited to 5% of net assets.

Except as otherwise noted, all percentage limitations set forth above apply immediately after a purchase and a subsequent change in the applicable percentage resulting from market fluctuations does not require elimination of any security from the portfolio.

TRUSTEES AND OFFICERS

Overall responsibility for general oversight of the Trust rests with the Board of Trustees (the “Board”). The Board is comprised of seven individuals, six of whom are not “interested persons” of the Trust (as that term is defined in Section 2(a)(19) of the Investment Company Act) (“Independent Trustee”). The Chairman of the Board is an Independent Trustee. The Chairman presides at meetings of the Trustees, participates in the preparation of the agenda for meetings of the Board, and acts as a liaison between the Independent Trustees and the Trust’s management between Board meetings. Except for any duties specified herein, the designation as Chairman does not impose any obligations or standards greater than or different from other Trustees.

The Board holds regular quarterly meetings each year to consider and address matters involving the Trust. The Board also may hold special meetings to address matters arising between regular meetings. The Independent Trustees also meet outside the presence of management in executive session at least quarterly and have engaged independent legal counsel to assist them in performing their oversight responsibilities.

The Board has established Audit, Governance and Nominating, Valuation and Qualified Legal Compliance Committees to assist the Board in the oversight of the management and affairs of the Trust. All of the members of these Committees are Independent Trustees, except for Dr. Omstead, who serves on the Valuation Committee. From time to time the Board may establish additional committees or informal working groups to deal with specific matters.

The Trust is subject to a number of risks including investment, compliance, operational and valuation risks. Although the Investment Adviser and the officers of the Trust are responsible for managing these risks on a day-to-day basis, the Board has adopted, and periodically reviews, policies and procedures designed to address these risks. As part of its regular oversight of the Trust, the Board, directly or through a Committee, interacts with the Trust’s Chief Compliance Officer, the Trust’s independent public accounting firm, and legal counsel to the Trust. These interactions include discussing the Trust’s risk management and controls with the independent registered public accounting firm engaged by the Trust, reviewing valuation policies and procedures and the valuations of specific restricted securities, and receiving periodic reports from the Trust’s Chief Compliance Officer regarding compliance matters relating to the Trust and its major service providers, including results of the implementation and testing of the Trust’s and such providers’ compliance programs. The Board’s oversight function is facilitated by management reporting processes designed to provide information to the Board regarding the identification, assessment, and management of critical risks and the controls and policies and procedures used to mitigate those risks. The Board reviews its role in supervising the Trust’s risk management from time to time and may change the manner in which it fulfills its oversight responsibilities at its discretion at any time.

The Board has determined that its leadership structure is appropriate for the Trust because it enables the Board to exercise informed and independent judgment over matters under its purview, allocates responsibility among committees in a manner that fosters effective oversight and allows the Board to devote appropriate resources to specific issues in a flexible manner as they arise. The Board periodically reviews its leadership structure as well as its overall structure, composition, and functioning, and may make changes at its discretion at any time.

The Trust’s Declaration of Trust provides that the Trust will indemnify Trustees and officers and may indemnify employees and agents of the Trust against liabilities and expenses incurred in connection with claims or litigation in which they may be involved because of their offices with the Trust. However, nothing in the Declaration of Trust or the By-laws of the Trust protects or indemnifies a Trustee, officer, employee or agent against any liability to which

he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.

The names of the Trustees and officers of the Trust, their addresses, ages and principal occupations during the past five years, and, in the case of the Trustees, their positions with certain other organizations and publicly-held companies, are provided in the tables below. Trustees that are deemed “interested persons” (as that term is defined in Section 2(a)(19) of the Investment Company Act) of the Trust or the Investment Adviser are included in the table titled “Interested Trustees.” Trustees who are not interested persons as described above are referred to as Independent Trustees. The Trust and H&Q Life Sciences Investors (“HQL”), another closed-end investment company advised by the Investment Adviser, are the only two portfolios in the Fund Complex.

Trustees

NAMES, ADDRESSES(1) AND DATES OF BIRTH	POSITION WITH THE TRUST, TERM OF OFFICE(2) AND LENGTH OF TIME SERVED	PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD	NUMBER OF PORTFOLIOS IN TRUST COMPLEX OVERSEEN BY TRUSTEE

INDEPENDENT TRUSTEES:

Michael W. Bonney 8/1958	Trustee (since 2011)	Chief Executive Officer and Director, Cubist Pharmaceuticals, Inc. (since 2012); President, Chief Executive Officer and Director, Cubist Pharmaceuticals, Inc. (2003-2012); President, Cubist Pharmaceuticals, Inc. (2002-2003); Director, NPS Pharmaceuticals, Inc. (since 2005); Chairman of the Board of Trustees, Bates College (since 2010); Trustee, Bates College (since 2002) Board member of the Pharmaceutical Research and Manufacturers of America (PhRMA) (since 2009).	2

Rakesh K. Jain, Ph.D. 12/1950	Trustee (since 2007)	Director, Steele Lab of Tumor Biology at Massachusetts General Hospital (since 1991); A.W. Cook Professor of Tumor Biology (Radiation Oncology) at Harvard Medical School (since 1991); Ad hoc Consultant/Scientific Advisory Board Member for pharmaceutical/biotech companies (various times since 2002); Ad hoc Consultant, Gershon Lehman Group (since 2004); Advisory Committee Member, Department of Biotechnology, Government of India (2004 -2009); Director, Co-Founder, XTuit Pharmaceuticals, Inc. (since 2011).	2

Oleg M. Pohotsky 3/1947	Trustee (since 2000) Chairman (since 2012)	Consultant and Managing Partner, Right Bank Partners (since 2002); Adviser, Board of Advisers, Kaufman & Co. LLC (since 2008); Director, Avangardco Investment Holdings (since 2010); Director, New America High Income Fund, Inc. (since 2013).	2

William S. Reardon, CPA 6/1946	Trustee (since 2010)	Independent Consultant (since 2002); Director, Idera Pharmaceuticals, Inc. (since 2002); Director, Synta Pharmaceuticals, Inc. (since 2004).	2

Uwe E. Reinhardt, Ph.D. 9/1937	Trustee (since 1988)	Professor of Economics, Princeton University (since 1968); Director, Boston Scientific Corporation (since 2002); Director, Amerigroup, Inc. (since 2002).	2

Lucinda H. Stebbins, CPA 11/1945	Trustee (since 2006)	Independent Consultant, Deutsche Bank (since 2004); Director, Bald Peak Land Company (since 2008); Trustee, Massachusetts Hospital School (1997-2008).	2

(1) The address for each Trustee is: H&Q Healthcare Investors, 2 Liberty Square, 9 th Floor, Boston, Massachusetts, 02109, 617-772-8500.

(2) Each Trustee currently is serving a three year term.

(3) Trustee considered to be an “interested person” within the meaning of the Investment Company Act of 1940 through his position or affiliation with the Investment Adviser.

The Board believes that each Trustee’s experience, qualifications, attributes and skills on an individual basis and in combination with those of other Trustees lead to the conclusion that each Trustee should serve in such capacity. Among the attributes or skills common to all Trustees are their ability to review critically and to evaluate, question and discuss information provided to them, to interact effectively with the other Trustees, the Trust’s investment adviser, the administrator and other service providers, counsel and independent registered public accounting firm, and to exercise effective and independent business judgment in the performance of their duties as Trustees. Each Trustee’s ability to perform the duties of a trustee effectively has been attained and enhanced through the Trustee’s education, professional training and other life experiences, such as business, consulting or public service positions and through experience from service as a member of this Trust’s Board and that of HQH, public companies, or non-profit entities or other organizations.

Michael W. Bonney: Mr. Bonney is the Chief Executive Officer and member of the Board of Directors of Cubist Pharmaceuticals, Inc., providing the Trust with valuable insight into operating matters relating to biotech companies and the overall healthcare industry. He serves on the Valuation Committee and is Chairman of the Governance and Nominating Committee of the Trust. Mr. Bonney is also a Director and Governance and Nominating Committee Chair of NPS Pharmaceuticals, Inc., is Chairman of the Board of Trustees of Bates College and is a Board member of the Pharmaceutical Research and Manufacturers of America (PhRMA). He holds a BA degree from Bates College.

Rakesh K. Jain, Ph.D.: Dr. Rakesh Jain is the Andrew Werk Cook Professor of Tumor Biology in the Department of Radiation Oncology at Harvard Medical School and the Director of the Edwin L. Steele Laboratory of Tumor Biology at Massachusetts General Hospital, providing the Trust with a valuable perspective on emerging life sciences technologies. Dr. Jain co-founded XTuit Pharmaceuticals, Inc. in 2011, where he also serves as a board member. He serves on the Governance and Nominating Committee of the Trust. Prior to joining Harvard, he was professor of chemical engineering at Columbia University and Carnegie Mellon University. Dr. Jain is regarded as a pioneer in the fields of tumor biology, drug delivery, in vivo imaging and bioengineering. Dr. Jain has authored more than 570 publications. He serves on advisory panels to government, industry and academia, and has served or continues to serve on editorial advisory boards of twenty journals, including Journal of Clinical Oncology and Nature Reviews Clinical Oncology. He has received more than 50 major awards and lectureships, including a Guggenheim Fellowship, the Humboldt Senior Scientist Award, the National Cancer Institute’s Research Career Development Award and Outstanding Investigator Grant, the Academic Scientist of the Year Award from the Pharmaceutical Achievements Awards, the Distinguished Service Award from Nature Biotechnology and the

Innovator Award from the DoD Breast Cancer Program. He is a member of all three branches of U.S. National Academies — the Institute of Medicine, the National Academy of Engineering and the National Academy of Sciences — and the American Academy of Arts and Sciences.

Daniel R. Omstead, Ph.D.: Dr. Omstead is President and Chief Executive Officer of Tekla Capital Management LLC (the “Adviser”), a registered investment adviser that serves as investment adviser to HQH and HQL. Dr. Omstead is also President of HQH and HQL and serves on their Valuation Committees. Dr. Omstead is portfolio manager for the public and restricted/venture portfolios within HQH and HQL. As part of these responsibilities, Dr. Omstead is a member of the Board of Directors of several portfolio companies including AlterG, Inc., IlluminOss Medical, Inc., Magellan Biosciences, Inc., Dynex Corporation, and Palyon Medical Corporation. Prior to joining the Adviser, Dr. Omstead was President and CEO of Reprogenesis, Inc., a private development stage biotech company which developed therapies in the field of tissue engineering and regenerative medicine. Before joining Reprogenesis, Dr. Omstead was Senior Vice President, Research and Development, at Cytotherapeutics, Inc, a public biotech company. Prior to entering the biotech industry, Dr. Omstead was employed for fourteen years in positions of increasing responsibility within the pharmaceutical industry at Ortho Pharmaceutical Corporation and at the R.W. Johnson Pharmaceutical Research Institute, both divisions of Johnson & Johnson, and at Merck, Sharp and Dohme Research Laboratories, a division of Merck & Co., Inc. Dr. Omstead provides the Trust with insights into both pharmaceutical and biotech companies. Dr. Omstead holds Ph.D. and Master’s Degrees in Chemical Engineering and Applied Chemistry from Columbia University and a B.S. degree in Civil Engineering from Lehigh University. He is a member of the Board of Directors of a non-profit agency that provides emergency shelter, housing and supportive services to homeless and low-income individuals and families in the Boston area. Dr. Omstead is also an Overseer at the Joslin Diabetes Center.

Oleg M. Pohotsky: Mr. Pohotsky is a corporate finance and investment professional with over forty years of diversified experience gained both in industry and in financial markets. Mr. Pohotsky serves as Chairman of the Board of Trustees of the Trust and also serves as Chairman of the Trust’s Valuation Committee and serves on the Trust’s Audit Committee. He has over 45 years of cumulative board experience in the full range of organization types: publicly-traded, privately-held, venture-backed and non-profit. He has also served as a director of a healthcare services company listed on the Nasdaq NMS where he was a member of the audit committee. In his various directorships he has also served on investment, compensation, personnel and executive committees. His career spanned over twenty years in the investment industry, both as an investment banker and as a venture capital and private equity investor, and included serving as chairman of the valuation and fairness opinion committee of a NYSE-member firm. Mr. Pohotsky also currently serves on the Board of Directors of Avangardco Investments Holdings, an LSE-listed agribusiness enterprise based in Ukraine, on the Board of Directors of The New America High Income Fund, Inc., a closed end fund investing in high yield securities on a leveraged basis, on the Board of Advisors of Kaufman & Co., LLC, a Boston-based boutique investment banking firm, and is affiliated with GovernanceMetrics International, Inc. as a Senior Advisor. He provides the Trust with valuable experience in valuation and the financial industry. Mr. Pohotsky holds a BSChE degree from Clarkson University, a JD degree from the University of Miami and MBA from the Harvard Business School. He has also been awarded an honorary doctorate by Clarkson University.

William S. Reardon, CPA: Mr. Reardon’s personal experience as a Life Science audit partner at PricewaterhouseCoopers LLP (“PwC”), with a broad spectrum of companies across the corporate life cycle from startup to successful product driven pharmaceutical companies, provides the Trustees of the Trust with a valuable perspective in analyzing life science company opportunities and in valuing the venture portion of the portfolio. Until 2002 Mr. Reardon was a business assurance partner in PwC’s Boston office and leader of the Life Sciences Industry Practice for New England and the Eastern U.S., working closely with many of the Firm’s public clients in SEC-registered equity, convertible and R&D limited partnership offerings and many initial public offerings. He serves on the Valuation and Audit Committees of the Trust. From 1998-2000 he served on the Board of the Emerging Companies Section of the Biotechnology Industry Organization (“BIO”) and from 2000 to 2002 he served on the Board of Directors of the Massachusetts Biotechnology Council (“MBC”). During his professional career, he was a frequent speaker at BIO conferences and MBC Industry meetings on issues affecting biotechnology companies. He currently also serves as a board member and audit committee chair of two development-stage public companies, Synta Pharmaceuticals and Idera Pharmaceuticals. Mr. Reardon is member of the American Institute of CPAs and the Massachusetts Society of CPAs, with an MBA from Harvard Business School and a BA in East Asian History from Harvard College.

Uwe E. Reinhardt, Ph.D.: Dr. Reinhardt is the James Madison Professor of Political Economy at Princeton University, teaching economics and public affairs since 1968, and has been a member of the Institute of Medicine of the National Academy of Sciences since 1978. He serves on the Audit Committee of the Trust. Dr. Reinhardt is recognized as one of the nation’s leading authorities on health care economics, a prominent scholar in health care economics and a frequent speaker and author on subjects ranging from the war in Iraq to the future of Medicare. Dr. Reinhardt provides the Trust with valuable insights in healthcare economics and reform. He is a past president of the Association of Health Services Research. From 1986 to 1995 he served as a commissioner on the Physician Payment Review Committee, established in 1986 by Congress to advise it on issues related to the payment of physicians. He is a senior associate of the Judge Institute for Management of Cambridge University, UK, and a trustee of Duke University and the Duke University Health System. Dr. Reinhardt is or was a member of numerous editorial boards, among them the Journal of Health Economics, the Milbank Memorial Quarterly, Health Affairs, the New England Journal of Medicine, and the Journal of the American Medical Association. Dr. Reinhardt received his Ph.D. from Yale University.

Lucinda H. Stebbins, CPA: Ms. Stebbins brings to the Board over twenty years experience working in the fund industry, providing valuable perspectives on a variety of technical and industry matters. She serves as Chairman of the Audit Committee and is a member of the Governance and Nominating Committee of the Trust. She started her career with the investment management firm of Scudder, Stevens and Clark, which was later merged into the U.S operations of Zurich Financial Services, and then finally acquired by Deutsche Bank. She served as a Senior Vice President at Scudder Investments and subsequently as a Director at Deutsche Asset Management and was an officer of approximately 200 funds in these complexes. Ms. Stebbins’ expertise is in the accounting, tax, and regulatory sides of the Fund business, and she continues to act as an independent consultant to the fund industry. Prior to joining Scudder, she was a Senior Manager at Price Waterhouse and is a member of the Massachusetts Society of CPAs. She also serves on the Board of Bald Peak Land Company and has been on a number of non-profit Boards. She holds an MBA degree from Babson College and a BA in economics from Wellesley College.

Officers

NAME, ADDRESS(1) AND DATE OF BIRTH	POSITION(S) HELD WITH THE TRUST, TERM OF OFFICE(2) AND LENGTH OF TIME SERVED	PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD

Daniel R. Omstead, Ph.D. 7/1953	President (since 2001); Trustee (since 2003)	President of the Fund and H&Q Life Sciences Investors (since 2001); President, Chief Executive Officer and Managing Member of Tekla Capital Management LLC (since 2002); Director, AlterG, Inc. (since 2013); Director, Magellan Diagnostics, Inc. (since 2006); Director, Palyon Medical Corporation (since 2009); Director, Dynex Corporation (since 2012); Director, IlluminOss Medical, Inc. (since 2012).

Laura Woodward, CPA 11/1968	Chief Compliance Officer, Secretary and Treasurer (since 2009)	Chief Compliance Officer, Secretary and Treasurer, the Fund and HQL (since 2009); Chief Compliance Officer and Vice President of Fund Administration, Tekla Capital Management LLC (since 2009); Senior Manager, PricewaterhouseCoopers LLP (1990-2009).

(1) The address for each Officer is: H&Q Healthcare Investors, 2 Liberty Square, 9 th Floor, Boston, Massachusetts, 02109, 617-772-8500.

(2) Each Officer serves in such capacity for an indefinite period of time at the pleasure of the Trustees.

Ownership of Securities

As of March 31, 2014, the Trust’s Trustees and executive officers, as a group, beneficially owned less than 1% of the Trust’s outstanding Shares. The information as to beneficial ownership of securities which appears below is based on statements furnished to the Trust by its Trustees and executive officers.

To the knowledge of the Trust, as of March 31, 2014, there were no control persons of the Trust and no persons were known to own, either beneficially or of record, 5% or more of the Shares of the Trust other than First Trust Portfolios L.P. and Advisors Asset Management, Inc.

As of March 31, 2014, the dollar range of equity securities owned beneficially by each Trustee in the Trust and in any registered investment companies overseen by the Trustee within the same family of investment companies as the Trust is as follows:

Independent Trustees

Name of Trustee	Dollar Range of Equity Securities in the Trust	Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in Family of Investment Companies

Michael W. Bonney	$10,001 - $50,000	$10,001 - $50,000
Rakesh K. Jain, Ph.D.	None	None
Oleg M. Pohotsky	$10,001 - $50,000	$10,001 - $50,000
William S. Reardon, CPA	$10,001 - $50,000	$10,001 - $50,000
Uwe E. Reinhardt, Ph.D.	$10,001 - $50,000	Over $100,000
Lucinda H. Stebbins, CPA	Over $100,000	Over $100,000

Interested Trustees

Name of Trustee	Dollar Range of Equity Securities in the Trust	Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in Family of Investment Companies

Daniel R. Omstead, Ph.D.	Over $100,000	Over $100,000

Dr. Omstead and Ms. Woodward serve as officers of the Trust. As of March 31, 2014, the officers of the Trust beneficially owned 35,836 Shares of the Trust, or less than 1% of the Shares outstanding on that date.

Standing Committees

Audit Committee. The Trust has an Audit Committee comprised solely of Independent Trustees who are “independent” as defined in the New York Stock Exchange (“NYSE”) Listing Standards. The Board has adopted a written charter for the Audit Committee. The Audit Committee charter is available at http://www.teklacap.com/hql-reports.html. The principal purpose of the Trust’s Audit Committee is to assist the Board in fulfilling its responsibility to oversee the integrity of the Trust’s financial statements and the Trust’s compliance with legal and regulatory requirements and to oversee management’s conduct of the Trust’s financial reporting process, including reviewing the financial reports and other financial information provided by the Trust, the Trust’s systems of internal accounting and financial controls and the annual independent audit process.

For the Trust, the Audit Committee’s role is one of oversight, and it is recognized that the Trust’s management is responsible for preparing the Trust’s financial statements and that the outside auditor is responsible for auditing those financial statements. Although the Audit Committee member must be financially literate and one member must have accounting or financial management expertise (as determined by the Board 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 the Trust’s independent public accountants.

The members of the Trust’s Audit Committee are Mr. Pohotsky, Mr. Reardon, Dr. Reinhardt and Ms. Stebbins. Ms. Stebbins is the Chairman of the Trust’s Audit Committee. The Trust’s Audit Committee held four meetings during the fiscal year ended September 30, 2013.

Governance and Nominating Committee. The Trust has a Governance and Nominating Committee comprised solely of Independent Trustees who are “independent” as defined in the NYSE Listing Standards. During the fiscal year ended September 30, 2013, the Board maintained a governance committee and a nominating committee, each with its own written charter. The Board combined those committees and their separate written charters in December, 2013, and adopted the combined written Charter for the Committee.

The principal missions of the Committee are (i) to review, evaluate, and enhance the effectiveness of the Board in its role in governing the Trust and overseeing the management of the Trust and (ii) to promote the effective participation of qualified individuals on the Board, on committees of the Board, and as executive officers of the Trust. The Committee shall consider the Corporate Governance Guidelines that have been approved by the Board in fulfilling its mission.

The Committee reviews, discusses and makes recommendations to the Board relating to those issues that pertain to the effectiveness of the Board in carrying out its responsibilities in governing the Trust and overseeing the Trust’s management. The Committee makes nominations for trustees and officers of the Trust and for membership on all committees of the Board and submits such nominations to the full Board for consideration.

The Trust’s By-Laws require that each prospective trustee candidate have a college degree or equivalent business experience and provide a list of minimum qualifications for trustees, which include expertise, experience or relationships relevant to the business of the Trust. The Trust’s By-Laws also require that a candidate not be serving in any of various positions with another investment company (as defined in the Investment Company Act) that focuses its investments in the healthcare and/or life sciences industries, unless such investment company is managed by the Trust’s investment adviser or an affiliate, or in various positions with the investment adviser, sponsor or equivalent of such an investment company. The Committee 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 of 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 Committee may identify prospective trustees from any reasonable source, including, but not limited to, the consultation of third-party trustee search services. The Committee will consider potential trustee candidates recommended by Shareholders, provided that the proposed candidates (i) satisfy any minimum qualifications of the Trust for its trustees; (ii) are not “interested persons” (as that term is defined in Section 2(a)(19) of the Investment Company Act) of the Trust or the Investment Adviser; and (iii) are “independent” as defined in the NYSE Listing Standards. In order to be evaluated by the Committee, trustee candidates recommended by Shareholders must also meet certain eligibility requirements as set out in the Committee’s Charter. Other than those eligibility requirements, the Committee shall not evaluate Shareholder trustee nominees in a different manner than other nominees. The standard of the Committee is to treat all equally qualified nominees in the same manner.

All recommendations by Shareholders must be received by the Trust by the deadline for submission of any Shareholder proposals which would be included in the Trust’s proxy statement for the next annual meeting of the Trust. Each Shareholder or Shareholder group must meet the requirements stated in the Committee’s Charter in order to recommend a candidate. A Shareholder or Shareholder group may not submit more than one candidate per year. When recommending a trustee candidate, Shareholders must include in their notice to the Trust’s Secretary: (i) the Shareholder’s contact information; (ii) the trustee candidate’s contact information and the number of Trust 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 Trust’s proxy statement, if nominated by the Board, and to serve as a trustee, if so elected. Once a recommendation has been timely received in proper form, the candidate will be asked to complete

an eligibility questionnaire to assist the Trust in assessing the candidate’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.

The members of the Committee are Mr. Bonney, Dr. Jain and Ms. Stebbins. Mr. Bonney is the Chairman of the Committee. During the fiscal year ended September 30, 2013, the former governance committee held two meetings and the former nominating committee held two meetings.

Valuation Committee. The Board has delegated to the Trust’s Valuation Committee general responsibility for determining, in accordance with the Trust’s valuation procedures, the value of assets held by the Trust on any day on which the net asset value per share is determined. The Valuation Committee may appoint, and has appointed, a Sub-Committee made up of employees and officers of the Investment Adviser to deal with day to day valuation decisions, subject to oversight by the Valuation Committee. The Valuation Committee shall meet as often as necessary to ensure that each action taken by the Sub-Committee is reviewed within approximately a calendar quarter of the occurrence. In connection with its review, the Valuation Committee shall ratify or revise the pricing methodologies authorized by the Sub-Committee since the last meeting of the Valuation Committee. The Valuation Committee is charged with the responsibility of determining the fair value of the Trust’s securities or other assets in situations set forth in the Trust’s valuation procedures.

The members of the Trust’s Valuation Committee are Mr. Bonney, Dr. Omstead, Mr. Pohotsky and Mr. Reardon. Mr. Pohotsky is the Chairman of the Trust’s Valuation Committee. The Trust’s Valuation Committee held four meetings during the fiscal year ended September 30, 2013.

Qualified Legal Compliance Committee. The Trust has a Qualified Legal Compliance Committee (“QLCC”) comprised solely of Independent Trustees. The Board has adopted a written charter for the QLCC. The principal purpose of the Trust’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 Trust, 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 Trust and the power to retain outside counsel, auditors or other experts for this purpose.

The members of the Trust’s QLCC are Dr. Jain, Mr. Pohotsky and Mr. Reardon. Mr. Reardon is the Chairman of the Trust’s QLCC. The Trust’s QLCC had no cause to meet during the fiscal year ended September 30, 2013.

Compensation of Trustees

The Trust pays each of the Trustees not affiliated with the Investment Adviser an annual fee of $18,000. Trustees are also paid $1,000 for each Board meeting attended in person, $750 for each Committee meeting attended in person, and $250 for each Board and Committee meeting attended by telephone. The Chairman of the Board receives an additional annual fee of $5,000, the Chairmen of the Audit and Valuation Committees receive an additional annual fee of $2,500, and the Chairman of the Governance and Nominating Committee receives an additional annual fee of $1,250. Each member of the Audit and Valuation Committees receives an additional annual fee of $500 and each member of the Nominating and Governance Committee receives an additional annual fee of $250. Neither the Chairman nor any members of the Qualified Legal Committee receive additional annual fees. Independent Trustees are also reimbursed for travel expenses incurred in connection with attending such meetings. For the fiscal years ended September 30, 2013 and September 30, 2012, the Trust paid such fees and reimbursed such expenses amounting to $171,721 and $175,000, respectively, in the aggregate. No other direct compensation has been paid by the Trust or HQL to the Trustees and officers as a group. Trustees and officers of the Trust who hold positions with the Investment Adviser receive indirect compensation from the Trust in the form of the investment advisory fee paid to the Investment Adviser.

COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2013

NAME OF TRUSTEE	AGGREGATE COMPENSATION FROM TRUST		PENSION OR RETIREMENT BENEFITS ACCRUED AS PART OF TRUST EXPENSES	ESTIMATED ANNUAL BENEFITS UPON RETIREMENT	TOTAL COMPENSATION FROM TRUST AND FUND COMPLEX PAID TO TRUSTEES

INDEPENDENT TRUSTEES
Michael W. Bonney	$	26,500	N/A	N/A	$	53,000
Rakesh K. Jain, Ph.D.	$	28,000	N/A	N/A	$	56,000
Lawrence S. Lewin	$	2,500	N/A	N/A	$	5,000
Oleg M. Pohotsky	$	34,500	N/A	N/A	$	69,000
William S. Reardon	$	30,750	N/A	N/A	$	61,500
Uwe E. Reinhardt, Ph.D.	$	23,500	N/A	N/A	$	47,000
Lucinda H. Stebbins, CPA	$	28,000	N/A	N/A	$	56,000

INTERESTED TRUSTEES
Daniel R. Omstead, Ph.D.	$	0	N/A	N/A	$	0

THE TRUST

The Trust’s capitalization consists of an unlimited number of Shares, $.01 par value. Each Share represents an equal proportionate beneficial interest in the Trust and, when issued and outstanding, will be fully paid and non-assessable by the Trust. Upon any liquidation of the Trust, Shareholders will be entitled to share pro rata in the net assets of the Trust available for distribution after paying or adequately providing for the payment of all liabilities. The Trust will send annual and semi-annual financial statements to Shareholders and may also issue more abbreviated interim reports to update Shareholders on a quarterly basis. The Trust will hold annual meetings of its Shareholders in accordance with the provisions of the Trust’s By-laws and the rules of the New York Stock Exchange (“NYSE”).

Shareholders are entitled to one vote for each whole Share held and a proportionate fractional vote for each fractional Share held. The Trust’s Shares do not have cumulative voting rights, which means that the holders of more than 50% of the Shares of the Trust voting for the election of Trustees can elect all of the Trustees, and, in such event, the holders of the remaining Shares will not be able to elect any Trustees. The Trust has a staggered Board, whereby one class of Trustees is elected each year.

The Trust is an entity of the type commonly known as a “Massachusetts business trust.” Under Massachusetts law, shareholders of such a trust under certain circumstances may be determined to be personally liable as partners for the Trust’s obligations. However, the Trust’s Declaration of Trust contains an express disclaimer of Shareholder liability for the acts or obligations of the Trust and provides for indemnification and reimbursement of expenses out of the Trust’s property for any Shareholder held personally liable for the obligations of the Trust. Thus, the risk of a Shareholder incurring financial loss on account of a Trust liability is limited to circumstances in which the Trust is unable to meet its obligations from the liquidation of its portfolio investments.

The overall management of the Trust is vested in the Board. The Board approves all significant agreements between the Trust and persons or companies furnishing services to it, including the Trust’s agreements with its Investment Adviser, Custodian, any foreign sub-custodians, Registrar and Transfer Agent. The management of the day-to-day operations of the Trust is delegated to its officers and to the Investment Adviser, subject always to the investment objective and policies of the Trust and to general supervision by the Board.

In addition, the Declaration of Trust requires the affirmative vote or consent of the holders of 75% of the Shares of the Trust to authorize certain transactions with a person or entity that is directly, or indirectly through affiliates, the beneficial owner of 5% or more of the outstanding Shares of the Trust unless the Board takes certain actions to

approve such a transaction. These provisions could make it more difficult to change the management of the Trust and could have the effect of depriving Shareholders of an opportunity to sell their Shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Trust in a tender offer or similar transaction. See “Risk Factors — Declaration of Trust” in the Trust’s Prospectus.

Repurchases of Shares and Tender Offers

The Trust is a closed-end, management investment company and as such its Shareholders do not, and will not, have the right to redeem their Shares of the Trust. The Trustees, however, intend to consider, from time to time, but not less frequently than annually, the desirability of open market purchases or tender offers. Any such repurchases will be made in accordance with the applicable provisions of the Investment Company Act and Massachusetts law in open market transactions. Shares repurchased by the Trust will be held in its treasury. In March 2013, the Board approved the continuation of the repurchase program to allow the Trust to repurchase up to 12% of its outstanding shares in the open market during a one-year period beginning July 11, 2013. In March 2014, the Board approved the continuation of the repurchase program to allow the Trust to repurchase up to 12% of its outstanding shares in the open market during a one-year period beginning July 11, 2014. The share repurchase program is intended to enhance Shareholder value and potentially reduce the discount between the market price of the Trust’s shares and the Trust’s net asset value. There is no assurance that any action undertaken to repurchase Shares will result in the Shares trading at a price which approximates net asset value. Although the Trust has no present intention of doing so, it reserves the right to incur debt to finance such repurchases or tender offers, provided that it will not repurchase securities during the periods when it has outstanding borrowings in excess of 5% of its net assets. See “Investment Restrictions.” Interest on any borrowings to finance Share repurchase transactions will increase the Trust’s expenses and will reduce the Trust’s net income. There can be no assurance that Share repurchases, if any, will cause the Shares to trade at a price equal to or in excess of their net asset value. Nevertheless, the possibility that a portion of the Trust’s outstanding Shares may be the subject of repurchases may reduce the spread between market price and net asset value that might otherwise exist. The Trust may not repurchase Shares except (1) on a securities exchange and after notification to Shareholders of its intent to purchase Shares within the six months preceding the purchase, (2) pursuant to a tender offer to all Shareholders, or (3) as otherwise permitted by the Commission.

The Shares of the Trust will trade in the open market at a price which will be a function of several factors, including their supply, demand, investment performance and yield. The shares of closed-end investment companies generally sell at market prices varying from their net asset value (“NAV”) and such shares frequently trade at a discount to NAV, but in some cases trade at a premium. The market price of the Shares will be determined by factors including trading volume of such Shares, general market and economic conditions and other factors beyond the control of the Trust. Therefore, the Trust cannot predict whether its Shares will trade at, below or above NAV. When the Trust repurchases its Shares for a price below their NAV, the NAV of those Shares that remain outstanding will be enhanced, but this does not necessarily mean that the market price of those outstanding Shares will be affected, either positively or negatively.

Conversion to Open-End Investment Company Status

Under the Declaration of Trust, the conversion of the Trust from a closed-end to an open-end investment company would require (1) the approval of the Board, and (2) the affirmative vote or consent of the holders of a majority of the Shares outstanding and entitled to vote. Such a vote would be in addition to any vote or consent required in addition to the vote or consent of Shareholders otherwise required by law or any agreement between the Trust and the NYSE. The Investment Company Act requires that the Trust receive a vote of a majority of its outstanding voting Shares in order to convert the Trust from a closed-end to an open-end investment company.

Such amendment would have to be approved by the Board prior to its submission to Shareholders. The Board is required under the Declaration of Trust to consider and vote annually upon the proposal to convert to open-end status. A proposal to convert the Trust to an open-end company might be supported or opposed by the Board depending on the Board’s judgment as to its advisability in light of circumstances prevailing at the time.

Shareholders of an open-end investment company may require the company to redeem their shares at any time (except in certain circumstances as authorized by or under the Investment Company Act) at their NAV, less such redemption charge, if any, as might be in effect at the time of a redemption. Conversion to an open-end investment

company could require the disposal of illiquid investments to meet current requirements of the Commission that no more than 15% of an open-end investment company’s assets consist of illiquid securities, and would likely require involuntary liquidation of portfolio securities, and the inherent realization of net long-term capital gains in connection therewith, to meet periodic requests for redemption. Moreover, Shares of the Trust would no longer be listed on the NYSE.

INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT

Tekla Capital Management LLC, a limited liability company under the laws of the State of Delaware, serves as the investment adviser to the Trust. The Investment Adviser is an investment adviser registered under the Investment Advisers Act of 1940, as amended. The Investment Adviser is located at 2 Liberty Square, 9 th Floor, Boston, MA 02109.

At inception, Hambrecht & Quist Capital Management Incorporated (“HQCM Inc.”) was the Trust’s investment adviser. HQCM Inc. was formed as a wholly-owned subsidiary of Hambrecht & Quist Group. HQCM Inc. remained the Investment Adviser as The Chase Manhattan Corporation (“Chase”) first acquired Hambrecht & Quist Group and then merged with J.P. Morgan Incorporated to form J.P. Morgan Chase & Co. In 2002, the management of HQCM Inc. formed Hambrecht & Quist Capital Management LLC (“HQCM LLC”), the predecessor of the Investment Adviser, as an independent entity to effect a buyout of HQCM Inc. In this transaction, HQCM LLC acquired certain of the assets of HQCM Inc., and substantially all of the management and staff of HQCM Inc. became employees of HQCM LLC. HQCM LLC changed its name to Tekla Capital Management LLC in 2012. The Investment Adviser is owned by Daniel R. Omstead and Mary Omstead. Dr. Omstead is currently the President and Chief Executive Officer of the Investment Adviser. Mary Omstead is Dr. Omstead’s wife.

Subject to the supervision and direction of the Board, the Investment Adviser manages the Trust’s portfolio in accordance with the Trust’s investment objective and policies as stated in the Trust’s Prospectus; makes investment decisions for the Trust; places purchase and sale orders for portfolio transactions for the Trust; supplies the Trust 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; directs and supervises a third party administrator or custodian in the provision to the Trust of accounting and bookkeeping services, the calculation of the net asset value of shares of the Trust, internal accounting services, and other clerical services in connection therewith; and supervises and directs a third party administrator or custodian in the preparation of reports to Shareholders of the Trust, tax returns and reports to and filings with the Commission and state Blue Sky authorities. In providing these services, the Investment Adviser provides investment research and supervision of the Trust’s investments and conducts a continual program of investment, evaluation and, if appropriate, sale and reinvestment of the Trust’s assets. In addition, the Investment Adviser furnishes the Trust with whatever statistical information the Trust may reasonably request with respect to the securities that the Trust may hold or contemplate purchasing.

For the services provided by the Investment Adviser under the Advisory Agreement, as of the date of this SAI, the Trust will pay a fee, computed and payable monthly, equal when annualized to (1) 2.5% of the average net assets for the month of its venture capital and other Restricted Securities (as defined) up to 25% of net assets and (2) for the month, for all other assets, 0.98% of the average net assets up to $250 million, 0.88% of the average net assets for the next $250 million, 0.80% of the average net assets for the next $500 million and 0.70% of the average net assets thereafter. The aggregate monthly fee may not exceed a rate when annualized of 1.36% (approximately 0.11% per month). The Investment Adviser has agreed to waive a portion of advisory fees to which it otherwise might be entitled under the current fee rate schedule during the one-year period following completion of the rights offering described in the

Prospectus. During the one-year period following completion of the rights offering, the Investment Adviser will waive its fees such that the Trust will pay a fee, computed and payable monthly, equal when annualized to (1) 2.5% of the average net assets for the month of its venture capital and other Restricted Securities (as defined) up to 25% of net assets and (2) for the month, for all other assets, 0.98% of the average net assets up to $250 million, 0.88% of the average net assets for the next $250 million, 0.70% of the average net assets for the next $500 million and 0.70% of the average net assets thereafter, provided that the aggregate monthly fee may not exceed a rate when annualized of 1.36% (approximately 0.11% per month).

The Investment Adviser will not participate directly in the capital appreciation of Restricted Securities. The Investment Adviser may provide managerial assistance to issuers of securities in which the Trust invests. For purposes of calculation of the investment advisory fee, “average net assets” for any month shall be equal to the average of the net asset value of such assets as of the last business day of such month and the net asset value of the appropriate assets as of the last business day of the preceding month. In determining average net assets for purposes of clauses (1) and (2) above, liabilities and expenses of the Trust shall be allocated pro rata based on the ratio that the assets referred to in each clause bear to the total assets of the Trust. Such fee shall be payable for each month within five business days after the end of such month.

For purposes of the calculation of the investment advisory fee, “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.

The Advisory Agreement provides that the Investment Adviser shall not be liable for any loss incurred by any act or omission of any broker. The Advisory Agreement also provides that the Investment Adviser shall not be liable to the Trust or to any Shareholder of the Trust for any error or judgment or for any loss suffered by the Trust in connection with rendering services under the Advisory Agreement except (1) 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 Investment Company Act) or (2) 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 under the Advisory Agreement. Subject to the foregoing, the Advisory Agreement also provides that the Trust shall indemnify the Investment Adviser, and any officer, director and employee of the Investment Adviser to the maximum extent permitted by Article V of the Trust’s Declaration of Trust.

For the fiscal years ended September 30, 2013, September 30, 2012 and September 30, 2011, the Trust paid the Adviser $5,831,878, $4,807,619 and $4,434,713, respectively, in advisory fees.

The services of the Investment Adviser to the Trust are not deemed to be exclusive, and nothing in the Advisory Agreement prevents the Investment Adviser, or any affiliate thereof, from providing similar services to other companies and other clients or from engaging in other activities.

Under the Advisory Agreement, the Trust must 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 Trust 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, the Commission, and the Financial Regulatory Authority, Inc. (“FINRA”) 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 Trust’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 Trust’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 Trust. The Trust may enter into arrangements to have third parties assume any expenses for which it is responsible.

Unless earlier terminated as described below, the Advisory Agreement will remain in effect from year to year if approved annually (1) by the Board or by the holders of a majority of the Trust’s outstanding Shares and (2) by the majority of the Trustees who are not parties to the Advisory Agreement or interested persons of any such party. The Advisory Agreement may be terminated without penalty by (1) the Trust or the Investment Adviser at any time without penalty upon not less than 30 and no more than 60 days’ written notice or (2) a vote of the holders of a majority of the Trust’s outstanding Shares, and will automatically terminate in the event of its assignment. Action by the Trust under (1) above may be taken either by (i) vote of a majority of its Trustees, or (ii) the affirmative vote of a majority of the outstanding shares of the Trust.

The Investment Advisory Agreement (Advisory Agreement) between the Trust and the Adviser provides that the Advisory Agreement will continue in effect so long as its continuance is approved at least annually by (i) by the Trustees of the Trust or the Shareholders by affirmative vote of a majority of the outstanding shares and (ii) a majority of the Trustees of the Trust who are not interested persons, by vote cast in person at a meeting called for the purpose of voting on such approval.

As described in the Prospectus, on March 28, 2014, the Board, and the independent Trustees voting separately, determined that the terms of the Advisory Agreement are fair and reasonable and approved the continuance of the Advisory Agreement as being in the best interests of the Trust and its Shareholders.

Portfolio Management

Currently Daniel R. Omstead, Ph.D., Christopher F. Brinzey, M.B.A., Frank T. Gentile, Ph.D. and Jason C. Akus, M.D./M.B.A. are members of the team that makes investments on behalf of the Trust. These members also perform other duties, including making investment decisions on behalf of H&Q Life Sciences Investors, a closed-end mutual fund, but do not otherwise manage any other accounts. Dr. Omstead has overall investment decision responsibility for the Trust and HQL.

Security Ownership of Portfolio Managers

As of March 31, 2014, the dollar range of Trust securities beneficial owned by Dr. Omstead was over $100,000. As of March 31, 2014, none of the other members of the team owned securities of the Trust.

Portfolio Manager Compensation Structure

The Investment Adviser offers employees what it believes are competitive salaries and benefits in order to attract and retain adequate staff to provide services to the Trusts. The Investment Adviser feels the current staff level is adequate in size, experience and qualifications to effectively manage both the public and restricted portfolios of HQH and HQL. The Investment Adviser further believes that the staff has the unique qualifications and experience to be effective in making purchase and sale decisions and subsequently manage the restricted and venture portfolio.

Dr. Omstead is an owner of the Investment Adviser. He receives compensation for his contribution to the portfolio management team and for his contribution to the general management of the Investment Adviser. As a member of the Investment Adviser, Dr. Omstead also receives distributions made to members. Currently, such distributions are principally the result of the investment advisory fees paid to the Investment Adviser by HQH and HQL.

Mr. Brinzey, Dr. Gentile and Dr. Akus receive a combination of base compensation and discretionary compensation, in the form of a cash bonus paid annually. The methodology used to determine compensation is applied to all accounts managed by the team. Two components are described in detail below.

Base Salary Compensation . The team members receive a base salary compensation linked to individual experience and responsibilities. The amount of base salary is reviewed approximately annually.

Discretionary Compensation . Discretionary compensation is in the form of a cash bonus, paid annually, which is typically up to 50% of the team member’s base salary. Discretionary compensation can vary by team member and circumstances. The discretionary compensation component is determined based on four factors, including investment performance of accounts managed by the team relative to an appropriate benchmark and/or peer funds, performance of specific investments proposed by the individual, financial performance of the Investment Adviser and a qualitative assessment of the individual overall contribution to the investment team and to the Investment Adviser. Discretionary compensation is evaluated annually after the completion of the Trust’s fiscal year.

PROXY VOTING POLICY AND PROCEDURES

The Board has adopted a proxy voting policy and procedure (the “Proxy Voting Policy”), pursuant to which the Trustees have delegated proxy voting responsibility to the Investment Adviser in accordance with the Trust’s Proxy Voting Policy. A copy of the Proxy Voting Policy for the Trust and the Investment Adviser attached as Appendix A to this SAI.

A description of the Trust’s proxy voting policies and procedures and information on how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2013 is available (i) without charge, upon request, by calling 1-800-451-2597, (ii) by writing to Tekla Capital Management LLC at 2 Liberty Square, 9 th Floor, Boston, MA 02109; (iii) on the Investment Adviser’s website at www.teklacap.com; and (iv) on the SEC’s website at www.sec.gov.

CODE OF ETHICS

The Board and the Investment Adviser have approved a Code of Ethics under Rule 17j-1 of the Investment Company Act that covers certain personnel of the Trust and the Investment Adviser. The Code of Ethics establishes procedures for personal investing and restricts certain transactions by certain personnel covered by the Code of Ethics. Persons subject to the Code of Ethics may invest in securities for their personal investment accounts, including, in certain cases, securities that may be purchased or held by the Trust. The Code of Ethics applies to investments by covered persons in their personal accounts, the accounts of family members living in the same household, and accounts in which the covered person has a beneficial interest (i.e., ownership, voting or investment control). Some of the restrictions set forth in the Code of Ethics do not apply to the Trust’s Independent Trustees. In general terms, the Code of Ethics is designed to ensure that the investing activities of covered personnel are conducted in a manner that avoids potential or actual conflicts of interest with the Trust and its Shareholders and that covered personnel conduct their personal investing in a manner consistent with their fiduciary duty towards the Trust and its Shareholders.

The Code of Ethics requires pre-clearance for certain investments in equities (not including mutual funds), imposes reporting requirements, and imposes sanctions for violations. Specifically, among other things, the Code of Ethics prohibits sales of securities to or purchases of securities from the Trust and prohibits the purchase or sale of any security under consideration for trading by the Trust within seven days before or after the Trust trades in the security

The Trust’s Code of Ethics is filed as an exhibit to this registration statement. In addition, you may read and copy the Code of Ethics at the Commission’s Public Reference Room in Washington, DC. You may obtain information on operations of the Public Reference Room by calling the Commission at (202) 551-8090. In addition, the Code of Ethics is available on the EDGAR Database on the Commission Internet site at http://www.sec.gov. You may obtain copies of the Code of Ethics, after paying a duplicating fee, by electronic request at the following email address:

publicinfo@sec.gov, or by writing to the Commission’s Public Reference Section, 100 F Street, NE, Washington, DC 20549.

NET ASSET VALUE

The net asset value (“NAV”) of the Trust’s Shares is calculated at the close of regular trading on the NYSE (generally 4:00 p.m., Eastern Time) every day that the NYSE is open. The Trust makes this information available daily by telephone (800) 451-2597, via its web site (www.teklacap.com) and through electronic distribution for media publication, including major internet-based financial services web sites and portals (bloomberg.com, yahoo.com, cbsmarketwatch.com, etc.). Currently, The Wall Street Journal, The New York Times and Barron’s publish NAVs for closed-end investment companies at least weekly.

NAV is calculated by dividing the value of the securities held by the Trust plus any cash or other assets minus all liabilities, including accrued expenses, by the total number of Shares outstanding at such time. Securities for which market quotations are readily available are valued at market price. Portfolio securities that are traded on one or more U.S. national securities exchanges or in the over-the-counter market that are National Market System securities are valued at the last sale price or, lacking any sales, at the mean between last bid and asked prices. Other over-the-counter securities are valued at the most recent bid prices as obtained from one or more dealers that make markets in the securities. Redeemable securities issued by a registered open-end investment company are valued at net asset value per share. Other securities are valued at the mean between the closing bid and asked prices. Short- term investments that mature in 60 days or less are valued at amortized cost, unless the Board determines that such valuation does not constitute fair value.

Securities that are primarily traded on foreign securities exchanges generally are valued at the last sale price on the exchange on which they are primarily traded. Foreign securities that are primarily traded on the foreign over-the-counter market are generally valued at the last sale quotation, if market quotations are available, or the last reported bid price if there is no active trading in a particular security on a given day. However, if intervening events result in market volatility that significantly affects the value of any such foreign securities after the close of trading on the relevant foreign market, but before the Trust values its Shares on any particular day on which the Trust is required to value its Shares, the Trust may, but is not required to, determine the value of such securities at “fair value,” as determined in good faith by or under the direction of the Board.

Quotations of foreign securities in foreign currencies are converted, at current exchange rates, to their U.S. Dollar equivalents in order to determine their current value. In addition, to the extent that the Trust values its foreign securities (other than ADR’s and ADS’s) as of the close of trading on various exchanges and over-the-counter markets throughout the world, the calculation of the Trust’s net asset value may not take place contemporaneously with the valuation of foreign securities held by the Trust.

extent of public trading in similar securities of the issuer or of comparable companies; (6) quotations or prices from broker-dealers and/or pricing services; (7) information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); (8) an analysis of the company’s financial statements; (9) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold (e.g., the existence of pending merger activity, public offerings or tender offers that might affect the value of the security); and (10) with respect to certain Restricted Securities, the price of securities in a subsequent round of financing of an issuer in an arm’s-length transaction, if the round includes a new third party investor.

Sometimes a “significant valuation event” may cause the market value of a security to differ from the fair market value of that security. A “significant valuation event” is an event that causes or is likely to cause a market quotation to be unavailable or unreliable, and may include: situations relating to a single issue in a market sector; significant fluctuations in U.S. or foreign markets; market disruptions or closings caused by human error, equipment failures, natural disasters, armed conflicts, acts of God, governmental actions or other developments, as well as the same or similar events which may affect specific issues or the securities markets even though not tied directly to the securities markets. A significant valuation event occurring after the close of trading but before the time of valuation may mean that the closing price for the security does not constitute a readily available market quotation. If a significant valuation event has occurred, the security will be valued at fair value as determined in good faith by the Board in accordance with the procedures established by the Board and hereinafter described. Such valuations and procedures will be reviewed periodically by the Board.

The fair value of investments for which no market exists cannot be precisely determined. With respect to securities of a company in its early stage of development, valuation will typically be based upon the original cost to the Trust. This methodology will typically be used until significant developments affecting the portfolio company provide a basis for a change in valuation. The status of portfolio companies is monitored for progress against plan, advancement of the stage of product development, and other factors. When revenues and earnings are present they are monitored. Valuation changes are event driven. When an appropriate event occurs (e.g., the completion of a third party transaction or a significant change in business model) valuation is changed accordingly. In addition the Trust will typically base changes in valuation on actual transactions or on actual firm offers by sophisticated independent investors unaffiliated with the Investment Adviser. Legal or contractual restrictions on the sale of portfolio securities by the Trust will be considered in the valuation of such securities.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to policies established by the Board, the Investment Adviser is primarily responsible for the execution of the Trust’s portfolio transactions and the allocation of brokerage. In executing transactions for the portfolio and selecting brokers or dealers (which brokers or dealers may include any affiliate of the Investment Adviser to the extent permitted by the Investment Company Act), the Investment Adviser will use its best efforts to obtain the best price and execution for the Trust. In 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 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. The Investment Adviser may cause the Trust to pay a broker-dealer that furnishes brokerage and research services a higher commission than that which might be charged by another broker-dealer for effecting the same transaction, provided that the Investment Adviser determines in good faith that such commission is reasonable in relation to the value of the brokerage and research services provided by such broker-dealer, viewed in terms of either the particular transaction or the overall responsibilities of the Investment Adviser to the Trust. In selecting brokers or dealers to execute a particular transaction and in evaluating the best price and execution available, the Investment Adviser may consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to the Trust and/or other accounts over which the Investment Adviser exercises investment discretion. Such brokerage and research services might consist of reports and statistics on specific companies or industries, general summaries of groups of bonds and their comparative earnings and yields, or broad overviews of

the securities markets and the economy. It is further understood that such services may be useful to the Investment Adviser in connection with its services to other clients. While the Investment Adviser generally seeks reasonably competitive commission rates, the Trust will not necessarily pay the lowest commission available.

The Trust has no obligation to deal with any broker or group of brokers in executing transactions in portfolio securities. Brokers who provide supplemental research, market and statistical information to the Investment Adviser may receive orders for transactions by the Trust. The term “research, market and statistical information” includes advice as to the value of securities, the advisability of purchasing or selling securities and the availability of securities or purchasers or sellers of securities, and furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. Information so received will be in addition to and not in lieu of the services required to be performed by the Investment Adviser under the Advisory Agreement and the expenses of the Investment Adviser will not necessarily be reduced as a result of the receipt of such supplemental information. Such information may be useful to the Investment Adviser in providing services to clients other than the Trust, and not all such information may be used by the Investment Adviser in connection with the Trust. Conversely, such information provided to the Investment Adviser by brokers and dealers through whom other clients of the Investment Adviser in the future may affect securities transactions may be useful to the Investment Adviser in providing services to the Trust. To the extent the Investment Adviser receives valuable research, market and statistical information from a broker-dealer, the Investment Adviser intends to direct orders for Trust transactions to that broker-dealer, subject to the foregoing policies, regulatory constraints and the ability of broker dealers to provide competitive prices and commission rates.

The Investment Company Act restricts transactions involving the Trust and its “affiliates,” including among others, the Trust’s Trustees, officers and employees, the Investment Adviser and any “affiliates” of such affiliates. Subject to any such restrictions, investment companies advised by the Investment Adviser may concurrently invest with the Trust in Restricted Securities, and the Trust may also invest in companies in which directors of the Investment Adviser or Trustees of the Trust have invested or for which they serve as directors or executive officers. The Trust seeks to deal directly with the dealers who make markets in the securities involved, except as limited by applicable law and in those circumstances where better prices and execution are available elsewhere. Under the Investment Company Act, persons affiliated with the Trust are generally prohibited from dealing as principal with the Trust in the purchase and sale of securities. Under certain circumstances, affiliated persons of the Trust are permitted to serve as its broker in over-the-counter transactions conducted on an agency basis.

It is likely that, subject to applicable law, the Trust may invest in securities concurrently being purchased by other investment companies advised by the Investment Adviser. Such purchases would be made on terms no less favorable than those under which such investment companies would be acquiring the securities. In the case of concurrent purchases by the Trust and another investment company or companies managed by the Investment Adviser, such purchases would be made where the Investment Adviser has made an independent decision on behalf of the Trust and such other company that the purchase is appropriate in light of the investment objectives, policies, restrictions, current holdings, available cash and portfolio structure of and other factors affecting each. Such investments will be allocated among clients in a manner believed by the Investment Adviser to be equitable to each. The Trust may also from time to time invest in securities of companies in which affiliated persons of the Trust have invested, subject to the provisions of the Investment Company Act and the rules and regulations promulgated thereunder.

The Trust’s portfolio transactions in Restricted Securities are generally subject to Rule 144 under the Securities Act. In general, under Rule 144 as currently in effect, if the Trust has beneficially owned Restricted Securities of a publicly held issuer for a minimum of six months, it will be entitled to sell in any three-month period that number of such securities that will not exceed the greater of 1% of the then outstanding securities of that class or the average weekly trading volume in securities of that class in any national securities exchange and/or in the over-the-counter market during the four calendar weeks immediately preceding the date on which notice of the sale is filed with the Commission. These volume limitations also apply to sales by the Trust of the securities of any issuer as to which it is deemed an affiliate, regardless of whether securities of such issuer are publicly traded. The above-described sales under Rule 144 are subject to certain requirements relating to manner of sale, notice and availability of current public information about the issuer. If the Trust is not deemed to have been an affiliate of the issuer at any time during the 90 days immediately preceding the sale and has beneficially owned Restricted Securities for at least one

year, it is entitled to sell such securities under Rule 144(k) without regard to whether the issuer is publicly-held or to the volume limitations or other requirements described above. When Restricted Securities are sold to the public other than pursuant to Rule 144 or 144A, the Trust may be deemed an “underwriter” with respect thereto for purposes of the Securities Act and subject to liability as such thereunder.

On occasions when the Investment Adviser deems the purchase or sale of a security to be in the best interest of the Trust 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 Trust and to such other clients.

Allocation of transactions, including their frequency, to various broker-dealers is determined by the Investment Adviser with respect to the Trust, based on its best judgment and in a manner deemed fair and reasonable to Shareholders. The primary consideration is prompt execution of orders in an effective manner at the most favorable price. Certain investments may be appropriate for the Trust and also for other clients advised by the Investment Adviser. Investment decisions for the Trust and for other investment accounts managed by the Investment Adviser are made independently of each other in the light of differing conditions. However, the same investment decision may be made for two or more of such accounts. When a purchase or sale of the same security is made at substantially the same time on behalf of the Trust and one or more other accounts, the transaction will be averaged as to price, and available investments allocated as to amount, in a manner the Investment Adviser believes to be equitable to each such account. Although the Investment Adviser seeks the most favorable overall net results for all of the accounts in any aggregated transaction, in some cases, this practice may adversely affect the price paid or received by the Trust or the size of the position obtained or sold by the Trust. To the extent permitted by law, the Investment Adviser may aggregate the securities to be sold or purchase for the Trust with those to be sold or purchased for other investment companies or accounts in order to obtain best execution.

For the fiscal years ended September 30, 2013, September 30, 2012 and September 30, 2011, the Trust paid $466,786, $845,883 and $740,992, respectively, of brokerage commissions.

As stated in the Prospectus, the Trust’s portfolio turnover rate for the fiscal years ended September 30, 2013 and September 30, 2012 was 35.41% and 86.28%, respectively. For a description of the Trust’s portfolio turnover policies, see “Portfolio Transactions and Brokerage” in the Prospectus.

QUARTERLY DISTRIBUTION POLICY

The Trust has a managed distribution policy with respect to the Trust’s Shares, under which the Trust intends to make quarterly distributions to its Shareholders equal to 2.0% of the Trust’s net asset value. The Board adopted the Policy in May, 1999, and since then the Trust has made quarterly distributions at a rate of 2.00% of the Trust’s net assets, except for the periods from August 4, 2009, to April 5, 2010 (during which distributions were suspended) and from April 5, 2010 to November 1, 2010 (during which distributions were suspended) and from April 5, to November 1, 2010 (during which the Trust made distributions at a rate of 1.25% of the Trust’s net assets). If, for any taxable year, the total distributions required for the Trust’s distribution policy exceed the Trust’s annual investment company taxable income and net long-term capital gains, the excess will generally be treated as a return of capital (up to the amount of the Shareholder’s adjusted tax basis in his or her Shares). The amount treated as a tax-free return of capital will reduce a Shareholder’s adjusted basis in his or her own Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the sale of his or her Shares.

If the Trust’s investment company taxable income and net long-term capital gains for any taxable year or calendar year exceed the amount required to be distributed under the distribution policy, the Trust will, at a minimum, make distributions necessary to permit it to qualify for treatment as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”). The Trust has the discretion to retain for reinvestment net long-term capital gains in excess of net short-term capital losses, to the extent that it does not need to distribute these gains to meet its managed distribution obligation or tax requirements. Any retained gains may be subject to taxation, although Shareholders may receive credit for taxes paid by the Trust. It is anticipated that net realized capital gains in excess of the total distributed under this policy would be included in the December distribution.

The Trust’s most recent distribution of $0.53 per Share was payable to Shareholders of record on March 3, 2014. That distribution was paid in Shares (except to the extent Shareholders elected to receive cash) on March 31, 2014. For the 2013 calendar year, the Trust distributed a total of $1.73 per Share.

TAX MATTERS

The following is only a summary of certain U.S. federal income tax considerations generally affecting the Trust and its Shareholders. No attempt is made to present a detailed explanation of the tax treatment of the Trust or its Shareholders, and the following discussion is not intended as a substitute for careful tax planning. Shareholders should consult with their own tax advisers regarding the specific federal, state, local, foreign and other tax consequences of investing in the Trust.

Taxation of the Trust

The Trust intends to qualify and has elected to be treated each taxable year as a regulated investment company under the Code. The principal federal income tax benefits of qualifying as a regulated investment company (“RIC”), as compared to an ordinary taxable corporation, are that a RIC generally is not itself subject to federal income tax on ordinary investment income and net capital gains that are currently distributed to its shareholders, and that the character of long-term capital gains which are recognized and properly designated by a RIC flows through to its shareholders, who receive (or are deemed to receive) distributions of such income. However, the Trust is subject to corporate income tax (currently at a maximum marginal rate of 35%) on any undistributed income.

To qualify as a RIC, the Trust must, among other things, (a) derive in each taxable year at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, net income derived from an interest in a qualified publicly traded partnership and other income derived with respect to its business of investing in such stock, securities or currencies (the “Qualifying Income Requirement”); (b) diversify its holdings so that, at the end of each quarter of the taxable year, (1) at least 50% of the market value of the Trust’s assets is represented by cash and cash items, U.S. Government Securities, the securities of other RICs and other securities, with such other securities of any one issuer limited for the purposes of this calculation to an amount not greater than 5% of the value of the Trust’s total assets and not greater than 10% of the outstanding voting securities of such issuer, and (2) not more than 25% of the value of its total assets is invested in the securities of (i) any one issuer (other than U.S. Government Securities or the securities of other RICs), (ii) two or more issuers (other than the securities of other RICs) which the RIC controls and which are determined to be in the same or similar trades or businesses, and (iii) one or more qualified publicly traded partnerships; and (c) distribute at least 90% of its investment company taxable income (which includes, among other items, dividends, interest and net short-term capital gains in excess of net long-term capital losses) each taxable year. The U.S. Treasury Department has authority to promulgate regulations pursuant to which gains from foreign currency (and options, futures and forward contracts on foreign currency) not directly related to a RIC’s business of investing in stocks and securities would not be treated as qualifying income for purposes of the Qualifying Income Requirement. To date, such regulations have not been promulgated.

If for any taxable year the Trust were to fail to qualify as a RIC, all of the Trust’s taxable income would be subject to federal income tax at the rates applicable to corporations (with no deduction for distributions to Shareholders), and Trust distributions would be taxable to Shareholders as dividends to the extent of the Trust’s earnings and profits.

Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% excise tax. To avoid the excise tax, the Trust must generally distribute during each calendar year an amount at least equal to the sum of (1) 98% of its ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for the one-year period ending on October 31 of the calendar year, and (3) all ordinary income and capital gains for previous years that were not distributed during such years. To avoid application of the excise tax,

the Trust intends to make its distributions in accordance with the calendar year distribution requirement. A dividend will be treated as paid on December 31 of the calendar year if it is declared by the Trust in October, November or December of the year, payable to Shareholders of record on a date in such a month and paid by the Trust during January of the following year. Such dividends will be taxable to Shareholders as of December 31 of the calendar year in which the dividends are declared, rather than during the calendar year in which the dividends are received. If the Trust elects to retain net capital gains and treat such gains as having been distributed, all or a portion of such gains may not be treated as having been timely distributed for purposes of satisfying the excise tax calendar year distribution requirement.

Distributions

Dividends paid from investment company taxable income generally will be taxable to Shareholders as ordinary income whether paid in cash or reinvested in the Trust’s Shares. The Trust intends to distribute to its Shareholders substantially all of its investment company taxable income, if any, for each year. It is anticipated that the Trust’s income distributions will be paid annually in additional Shares unless the Shareholder elects payment in cash.

Distributions of the excess, if any, of net long-term capital gains over net short-term capital losses (“net capital gains”) designated by the Trust as capital gain dividends will be taxable to Shareholders as long-term capital gains, whether paid in cash or reinvested in the Trust’s Shares, regardless of how long the Shareholders have held the Trust’s Shares, and will not be eligible for the dividends received deduction for corporations. The Trust may elect to retain net capital gains. In such event, the Trust will be required to pay federal income taxes on the undistributed net capital gains, but intends to elect to treat such capital gains as having been distributed to Shareholders. As a result, such amounts will be included in the gross income of the Shareholders as long-term capital gains and Shareholders will be able to claim their proportionate share of federal income taxes paid by the Trust on such gains as a credit against their own federal income tax liabilities, and will be entitled to increase the adjusted tax basis of their Shares of the Trust by an amount equal to approximately 65% of the amount of the undistributed capital gains included in their gross income. Organizations or persons not subject to federal income tax on such capital gains (such as, generally, qualified pension and profit-sharing funds, including Individual Retirement Accounts and Keogh plans, and certain trusts, nonresident aliens and foreign corporations) will be entitled to a refund of their pro rata share of such taxes paid by the Trust upon filing appropriate returns or claims for refund with the Internal Revenue Service (“IRS”). Even if the Trust makes such an election, it is possible that the Trust may incur an excise tax as a result of not having distributed sufficient net capital gains.

A distribution of an amount in excess of the Trust’s current and accumulated earnings and profits will be treated by a Shareholder as a return of capital which is applied against and reduces the Shareholder’s basis in his or her Shares. To the extent that the amount of any such distribution exceeds the Shareholder’s basis in his or her Shares, the excess will be treated by the Shareholder as gain from a sale or exchange of the Shares.

If the value of the Trust’s Shares is reduced below a Shareholder’s cost as a result of a distribution of investment company taxable income or net capital gains by the Trust, such distribution will be taxable to the Shareholder. The price of Shares purchased at this time may reflect the amount of the forthcoming distribution. Those purchasing just prior to a distribution of investment company taxable income or net capital gains will receive a distribution which will nevertheless be taxable to them.

Dividends (not including capital gain dividends) received by corporate Shareholders from the Trust qualify for the dividends received deduction for corporate Shareholders to the extent the Trust designates the amount distributed as eligible for the deduction. The aggregate amount designated by the Trust cannot exceed the aggregate amount of dividends received by the Trust from domestic corporations for the taxable year, and the designation of dividend income must generally be the same for all Shares.

The dividends received deduction for corporate Shareholders may be further reduced if the Shares with respect to which dividends are received are treated as debt-financed or if either those Shares or the Shares of the Trust are deemed to have been held by the Trust or its Shareholders, respectively, for less than 46 days.

In addition to furnishing any other required tax statements, the Trust intends to report in written notices to Shareholders regarding the tax status of all distributions made during such taxable year, the amount qualifying for the dividends received deduction for corporations and the amount of undistributed net capital gains and related tax credits.

Sale of Shares

Generally, gain or loss realized upon the sale or exchange of Shares will be capital gain or loss if the Shares are capital assets in the Shareholder’s hands and generally will be long-term or short-term, depending upon the Shareholder’s holding period for the Shares. Investors should be aware that any loss realized upon the sale or exchange of Shares held for six months or less will be treated as a long-term capital loss to the extent of any distributions or deemed distributions of long-term capital gain to the Shareholder with respect to such Shares. In addition, any loss realized on a sale or exchange of Shares will be disallowed to the extent the Shares disposed of are replaced within a period of 61 days beginning 30 days before and ending 30 days after the Shares are disposed of, such as pursuant to the Plan. In such case, the basis of Shares acquired will be adjusted to reflect the disallowed loss.

Legislation passed by Congress requires reporting of adjusted cost basis information for covered securities, which generally include shares of a regulated investment company acquired after January 1, 2012, to the IRS and to taxpayers. Shareholders should contact their financial intermediaries with respect to reporting of cost basis and available elections for their accounts.

The Trust may invest in shares of foreign corporations which may be classified under the Code as passive foreign investment companies (“PFICs”). In general, a foreign corporation is classified as a PFIC if at least one-half of its assets constitute investment-type assets, or 75% or more of its gross income is investment-type income. If the Trust receives a so-called “excess distribution” with respect to PFIC stock, the Trust itself may be subject to a tax on a portion of the excess distribution, whether or not the corresponding income is distributed by the Trust to Shareholders. In general, under the PFIC rules, an excess distribution is treated as having been realized ratably over the period during which the Trust held the PFIC shares. The Trust itself will be subject to tax on the portion, if any, of an excess distribution that is so allocated to prior Trust taxable years and an interest factor will be added to the tax, as if the tax had been payable in such prior taxable years. Gain from the sale of PFIC shares is treated in the same manner as an excess distribution. Excess distributions and gain from the sale of PFIC shares are characterized as ordinary income even though, absent application of the PFIC rules, such gains and certain excess distributions might have been classified as capital gain.

The Trust may elect to mark to market any PFIC shares in lieu of being subject to U.S. federal income taxation. At the end of each taxable year to which the election relates, the Trust would report as ordinary income the amount by which the fair market value of the PFIC stock exceeds the Trust’s adjusted basis in the stock. Any mark-to-market losses and any loss from an actual disposition of shares would be deductible as ordinary losses to the extent of any net mark-to-market gains included in income in prior years. The effect of the election would be to treat excess distributions and gain on dispositions as ordinary income which is not subject to a Trust-level tax when distributed to Shareholders as a dividend. Alternatively, the Trust may elect to include as income and gain its share of the ordinary earnings and net capital gain of certain PFICs in lieu of being taxed in the manner described above.

Currency Fluctuations—“Section 988” Gains or Losses

Under the Code, the gains or losses attributable to fluctuations in exchange rates which occur between the time the Trust accrues receivables or liabilities denominated in a foreign currency and the time the Trust actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of foreign currency or debt securities denominated in a foreign currency and on disposition of certain futures and forward contracts, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the currency, security or contract and the date of disposition also are treated as ordinary

gain or loss. These gains or losses, referred to under the Code as “Section 988” gains or losses, may increase or decrease the amount of the Trust’s investment company taxable income to be distributed to its Shareholders as ordinary income.

Hedging Transactions

Certain futures and foreign currency contracts in which the Trust may invest are “section 1256 contracts.” While gains or losses on section 1256 contracts are considered 60% long-term and 40% short-term capital gains or losses, certain foreign currency futures and foreign currency contracts may give rise to ordinary income or loss, as described above. Also, section 1256 contracts held by the Trust at the end of each taxable year (and, generally, for purposes of the 4% excise tax, on October 31 of each year) are “marked-to-market” with the result that unrealized gains or losses are treated as though they were realized.

Generally, the hedging transactions undertaken by the Trust may result in “straddles” for U.S. federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by the Trust. In addition, losses realized by the Trust on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules have been promulgated, the tax consequences to the Trust of engaging in hedging transactions are not entirely clear.

The Trust may make one or more of the elections available under the Code which are applicable to straddles. If the Trust makes any of the elections, the amount, character and timing of the recognition of gains or losses from the affected straddle positions will be determined under the rules that vary according to the election(s) made. The rules applicable under certain of the elections may operate to accelerate the recognition of gains or losses from the affected straddle positions.

Notwithstanding any of the foregoing, the Trust may recognize gain (but not loss) from a constructive sale of certain “appreciated financial positions” if the Trust enters into a short sale, offsetting notional principal contract, futures or forward contract transaction with respect to the appreciated position or substantially identical property. Appreciated financial positions subject to this constructive sale treatment are interests (including options, futures and forward contracts and short sales) in stock, partnership interests, certain actively traded trust instruments and certain debt instruments. Constructive sale treatment does not apply to certain transactions closed before the end of the thirtieth day after the close of the taxable year, if certain conditions are met.

Foreign Withholding Taxes

Income received by the Trust from non-U.S. sources may be subject to withholding and other taxes imposed by other countries. Because it is not expected that more than 50% of the value of the Trust’s total assets at the close of its taxable year will consist of stock and securities of non-U.S. corporations, it is not expected that the Trust will be eligible to elect to “pass-through” to the Trust’s Shareholders the amount of foreign income and similar taxes paid by the Trust. In the absence of such an election, the foreign taxes paid by the Trust will reduce its investment company taxable income, and distributions of investment company taxable income received by the Trust from non-U.S. sources will be treated as U.S. source income.

Backup Withholding

The Trust may be required to withhold U.S. federal income tax at the rate of 28% of all taxable distributions payable to Shareholders who fail to provide the Trust with their correct taxpayer identification number or to make required certifications, or who have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against a Shareholder’s U.S. federal income tax liability. Certain persons are exempt from the backup withholding requirements. Questions relating to backup withholding should be directed to your tax adviser.

Foreign Shareholders

U.S. taxation of a Shareholder who, as to the U.S., is a non-resident alien individual, a foreign trust or estate, a foreign corporation or foreign partnership (“Foreign Shareholder”) depends on whether the income from the Trust is “effectively connected” with a U.S. trade or business carried on by such Shareholder.

Income Not Effectively Connected

If the income from the Trust is not “effectively connected” with a U.S. trade or business carried on by the Foreign Shareholder, distributions of investment company taxable income will be subject to a U.S. tax of 30% (or lower treaty rate), which tax is generally withheld from such distributions.

Distributions of capital gain dividends and amounts retained by the Trust which are designated as undistributed capital gains will not be subject to U.S. tax at the rate of 30% (or lower treaty rate) unless the Foreign Shareholder is a non-resident alien individual and is physically present in the U.S. for more than 182 days during the taxable year and meets certain other requirements. However, this 30% tax on capital gains of non-resident alien individuals who are physically present in the U.S. for more than the 182-day period only applies in exceptional cases, because any individual present in the U.S. for more than 182 days during the taxable year is generally treated as a resident for U.S. federal income tax purposes; in that case, he or she would be subject to U.S. federal income tax on his or her worldwide income at the graduated rates applicable to U.S. citizens, rather than the 30% U.S. tax. In the case of a Foreign Shareholder who is a non-resident alien individual, the Trust may be required to withhold U.S. federal income tax at a rate of 28% of distributions of net capital gains unless the Foreign Shareholder certifies his or her non-U.S status under penalties of perjury or otherwise establishes an exemption. See “Backup Withholding” above. If a Foreign Shareholder is a non-resident alien individual, any gain such Shareholder realizes upon the sale or exchange of such Shareholder’s Shares of the Trust in the U.S. will ordinarily be exempt from U.S. tax unless such Shareholder is physically present in the U.S. for more than 182 days during the taxable year and meets certain other requirements.

However, subject to certain limitations and the receipt of further guidance from the U.S. Treasury, dividends paid to certain Foreign Shareholders may be exempt from U.S. tax through 2007 to the extent such dividends are attributable to qualified interest and/or net short-term capital gains, provided that the Trust elects to follow certain procedures. The Trust does not anticipate following the procedures and as a result, the full amount of distributions of ordinary dividends, including distributions of any interest or short-term gains will be subject to withholding at a rate of 30 percent or any applicable lower treaty rate.

Income Effectively Connected

If the income from the Trust is “effectively connected” with a U.S. trade or business carried on by a Foreign Shareholder, then distributions of investment company taxable income and capital gain dividends, amounts retained by the Trust which are designated as undistributed capital gains and any gains realized upon the sale or exchange of Shares of the Trust will be subject to U.S. federal income tax at the graduated rates applicable to U.S. citizens, residents and domestic corporations. Such Foreign Shareholders that are corporations may also be subject to the branch profits tax imposed by the Code.

Effective July 1, 2014, the Trust will be required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends and (effective January 1, 2017) redemption proceeds and certain capital gain dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive new reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the Trust to enable the Trust to determine whether withholding is required.

The tax consequences to a Foreign Shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign Shareholders may also be subject to U.S. estate tax with respect to their Trust shares. Foreign Shareholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Trust.

Other Taxes

Distributions may also be subject to state, local and foreign taxes and/or the alternative minimum tax depending on each Shareholder’s particular situation. Shareholders should consult their own tax advisers with respect to their particular situation.

ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND REGISTRAR

The Trust’s securities and cash are held under a custodian contract by State Street Bank and Trust Company (the “Custodian”), whose principal business address is One Lincoln Street, Boston, Massachusetts 02111. Rules adopted under the Investment Company Act permit the Trust to maintain its securities and cash in the custody of certain eligible banks and securities depositories. Pursuant to those Rules, the Trust’s portfolio of securities and cash, when invested in Foreign Securities, will be held by sub-custodians who have been approved by the Board in accordance with the rules and regulations of the Commission following consideration of a number of factors, including, but not limited to, the relationship of the institution with the Custodian, the reliability and financial stability of the institution, the ability of the institution to perform capably custodial services for the Trust, the reputation of the institution in its national market, the political and economic stability of the countries in which the sub-custodians will be located and the risks of potential nationalization or expropriation of Trust assets. The Custodian also performs certain accounting related functions for the Trust, including calculation of NAV and net income.

State Street Bank and Trust Company (the “Administrator”) also serves as administrator to the Trust pursuant to an Administration Agreement. Under the Administration Agreement the Trust’s assets are combined with assets of H&Q Life Science Investors, another closed-end mutual fund managed by the Investment Adviser. The combined assets are charged a fee computed and payable monthly at an annual rate of (i).034% of the first $150 million; (ii) .024% of the next $150 million; (iii) .014% on assets in excess of $300 million, subject to annual minimum fee of $77,500. The Administrative Agreement covers administrative costs, including out-of-pocket expenses incurred in the ordinary course of providing services under the Administration Agreement.

FINANCIAL STATEMENTS

The Trust’s financial statements as of and for the fiscal year ended September 30, 2013, together with the report thereon of Deloitte & Touche LLP, an independent registered public accounting firm, given on the authority of such firm as experts in auditing and accounting, are incorporated in this SAI by reference to the Trust’s September 30, 2013 Annual Report to Shareholders, including the Schedule of Investments, the Statement of Assets and Liabilities, the Statement of Operations, the Statement of Changes in Net Assets, the Statement of Cash Flows and the five-year Financial Highlights. A copy of the Trust’s 2013 Annual Report to Shareholders is available at the SEC’s website (www.sec.gov). copies may also be obtained free of charge upon request from the Trust’s Information Agent at [ ] or from the Trust at (617) 772-8500. It is expected that the unaudited financial statements included in the Trust’s Semi-Annual Report to Shareholders for the six months ended March 31, 2014 will be mailed to Shareholders on or around May 30, 2014, and available on the Trust’s website (www.teklacap.com) on or around June 10, 2014.

Any statement contained in the Trust’s annual report that is incorporated by reference in this SAI shall be deemed modified or superseded for purposes of the Prospectus and this SAI to the extent a statement contained in the Prospectus or this SAI varies from such statement. Any such statement so modified or superseded shall not, except as modified or superseded, be deemed to constitute a part of the Prospectus or this SAI.

APPENDIX A

PROXY VOTING POLICIES AND PROCEDURES

Policy

The following are the policies and procedures adopted and implemented by Tekla Capital Management LLC (“TCM”) for voting proxies with respect to portfolio securities held by H&Q Healthcare Investors and H&Q Life Sciences Investors (each a “Fund” and collectively the “Funds”). The policies and procedures are reasonably designed to ensure that proxies are voted in the best interest of the Funds and the Funds’ shareholders, in accordance with TCM’s fiduciary duties and Rule 206(4)-6 under the Investment Advisers Act of 1940 (the “Investment Advisers Act”). TCM considers the “best interests” of the Funds and their shareholders to mean their best long-term economic interests.

TCM shall vote proxies for the exclusive benefit, and in the best economic interest, of the Funds and their shareholders. Such exercise of voting rights shall be subject to the same standard of care as is generally applicable to TCM’s performance of its duties, as set forth in the advisory agreements with the Funds. The policies and procedures contained herein are designed to be guidelines, however each vote is ultimately cast on a case-by-case basis, taking into consideration the relevant facts and circumstances at the time of the vote. Any material conflicts that may arise will be resolved in the best interests of the Funds and their shareholders.

A proxy committee has been designated and is responsible for administering and overseeing the proxy voting process. The committee consists of the President of TCM, TCM’s Chief Compliance Officer (“CCO”), and the analyst responsible for oversight of the company that is the subject of the proxy. The committee considers proxy questions and determines the vote on behalf of the Funds.

Procedures

Logistics

TCM’s CCO shall be responsible for maintaining the proxy log, monitoring corporate actions and confirming the timely voting of proxies. The proxy log shall contain the following information, in accordance with Form N-PX:

· the name of the issuer;

· the exchange ticker symbol, if available;

· the CUSIP number, if available;

· the shareholder meeting date;

· a brief identification of the matter voted on;

· whether the matter was proposed by the issuer or a security holder;

· whether TCM cast its vote on the matter;

· how TCM cast its vote on the matter (for, against, abstain; for or withhold regarding the election of directors); and

· whether TCM cast its vote for or against management.

TCM’s CCO shall also record whether any conflicts of interest have been identified and, if so, what action was taken to resolve the conflict with respect to each vote cast and each abstention.

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Substantive Voting Decisions

TCM’s substantive voting decisions turn on the particular facts and circumstances of each proxy vote. The following is a list of common proxy vote issues and TCM’s standard considerations when determining how to vote such proxies.

Routine Matters/Corporate Administrative Items . After an initial review, TCM generally votes with management on routine matters related to the operation of the issuer that are not expected to have a significant economic impact on the issuer and/or its shareholders.

Potential for Major Economic Impact . TCM may review and analyze on a case-by-case basis, non-routine proposals that are more likely to affect the structure and operation of the issuer and to have a greater impact on the value of the investment.

Corporate Governance . TCM may review and consider corporate governance issues related to proxy matters and generally supports proposals that foster good corporate governance practices.

Special Interest Issues . TCM may consider: (i) the long-term benefit to shareholders of promoting corporate accountability and responsibility on social issues; (ii) management’s responsibility with respect to special interest issues; (iii) any economic costs and restrictions on management; and (iv) the responsibility of TCM to vote proxies for the greatest long-term shareholder value.

Limitations on Director Tenure and Retirement . TCM may consider: (i) a reasonable retirement age for directors, e.g. 70 or 72; (ii) the introduction of new perspectives on the board; and (iii) the arbitrary nature of such limitations and the possibility of detracting from the board’s stability and continuity.

Directors’ Minimum Stock Ownership . TCM may consider: (i) the benefits of additional vested interest; (ii) the ability of a director to serve a company well regardless of the extent of his or her share ownership; and (iii) the impact of limiting the number of persons qualified to be directors.

D&O Indemnification and Liability Protection . TCM may consider: (i) indemnifying directors for acts conducted in the normal course of business; (ii) limiting liability for monetary damages for violating the duty of care; (iii) expanding coverage beyond legal expenses to acts that represent more serious violations of fiduciary obligation than carelessness ( e.g. negligence); and (iv) providing expanded coverage in cases when a director’s legal defense was unsuccessful if the director was found to have acted in good faith and in a manner that he or she reasonably believed was in the best interests of the issuer.

Director Nominations in Contested Elections . TCM may consider: (i) long-term financial performance of the issuer relative to its industry; (ii) management’s track record; (iii) background to proxy contest; (iv) qualifications of both slates of nominees; (v) evaluations of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and (vi) stock ownership positions.

Cumulative Voting . TCM may consider: (i) the ability of significant stockholders to elect a director of their choosing; (ii) the ability of minority shareholders to concentrate their support in favor of a director or directors of their choosing; and (iii) the potential to limit the ability of directors to work for all shareholders.

Classified Boards . TCM may consider: (i) providing continuity; (ii) promoting long-term planning; and (iii) guarding against unwanted takeovers.

Poison Pills . TCM may consider: (i) TCM’s position on supporting proposals to require a shareholder vote on other shareholder rights plans; (ii) ratifying or redeeming a poison pill in the interest of protecting the value of the issuer; and (iii) other alternatives to prevent a takeover at a price demonstrably below the true value of the issuer.

Fair Price Provisions . TCM may consider: (i) the vote required to approve the proposed acquisition; (ii) the vote required to repeal the fair price provision; (iii) the mechanism for determining fair price; and (iv) whether these provisions are bundled with other anti-takeover measures ( e.g. , supermajority voting requirements) that may entrench management and discourage attractive tender offers.

Equal Access . TCM may consider: (i) the opportunity for significant shareholders of the issuer to evaluate and propose voting recommendations on proxy proposals and director nominees, and to nominate candidates to the board; and (ii) the added complexity and burden.

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Charitable Contributions . TCM may consider: (i) the potential benefits to shareholders; (ii) the potential to detract the issuer’s resources from more direct uses of increasing shareholder value; and (iii) the responsibility of shareholders to make individual contributions.

Stock Authorizations : TCM may consider: (i) the need for the increase; (ii) the percentage increase with respect to the existing authorization; (iii) voting rights of the stock; and (iv) overall capitalization structures.

Preferred Stock . TCM may consider: (i) whether the new class of preferred stock has unspecified voting, conversion, dividend distribution, and other rights; (ii) whether the issuer expressly states that the stock will not be used as a takeover defense or carry superior voting rights; (iii) whether the issuer specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable; and (iv) whether the stated purpose is to raise capital or make acquisitions in the normal course of business.

Director Compensation . TCM may consider: (i) whether director shares are at the same market risk as those of the shareholders; and (ii) how option programs for outside directors compare with the standards of internal programs.

Golden and Tin Parachutes . TCM may consider: (i) whether they will be submitted for shareholder approval; and (ii) the employees covered by the plan and the quality of management.

Compensation . TCM may consider: (i) Whether the company has an independent compensation committee; (ii) whether the compensation committee engaged independent consultants; (iii) whether the compensation committee has lapsed or waived equity vesting restrictions; and (iv) whether the company has adopted or extended a Golden Parachute without shareholder approval. TCM will generally support annual advisory votes on executive compensation.

Limitations

TCM may abstain from voting a proxy if it concludes that the effect on shareholders’ economic interests or the value of the portfolio holding is indeterminable or insignificant. TCM may abstain from voting a proxy if it concludes that the cost of voting is disproportionate to the economic impact the vote would have on the portfolio holdings. With respect to certain privately held companies, TCM may not have the opportunity to vote or may have a limitation on its ability to vote. For example, in certain cases a company may be permitted by its charter or other governing documents to take action without a shareholder meeting and with written consent of fewer than all shareholders.

Conflicts of Interest

The Proxy Committee identifies any potential conflicts of interest. Each potential conflict must be addressed in a manner which will be in the best interest of the Funds and their shareholders. If any potential conflict is identified the Proxy Committee consults with the Funds’ counsel. Where conflicts of interest arise between clients and TCM, TCM may convene an ad-hoc committee to debate the conflict and to give a ruling on a preferred course of action. If the ad-hoc committee determines that TCM has a conflict of interest in any instance, TCM’s CCO shall disclose the conflict to the Board and seek voting instructions.

TCM may cause the proxies to be voted in accordance with the recommendations of an independent third party service provider that TCM may use to assist in voting proxies.

Disclosure

The following disclosure shall be provided in connection with these policies and procedures:

· TCM shall provide a description or a copy of these policies and procedures to the Boards of Trustees of the Funds annually and upon request.

· TCM shall make available to the Funds its proxy voting records, for inclusion on the Funds’ Form N-PX.

· TCM shall include its proxy voting policies and procedures in its annual filing on Form N-CSR.

· TCM shall cause the Funds’ shareholder reports to include a statement that a copy of these policies and procedures is available upon request (i) by calling a toll-free number; (ii) on the Funds’ website, (if the Funds choose); and (iii) on the SEC’s website.

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· TCM shall cause the Funds’ annual and semi-annual reports to include a statement that information is available regarding how the Funds voted proxies during the most recent twelve-month period (i) without charge, upon request, either by calling a toll-free number or on or through the Funds’ website, or both; and (ii) on the SEC’s website.

Recordkeeping

TCM shall maintain records of proxies voted in accordance with Section 204-2 of the Advisers Act, including proxy statements, a record of each vote cast, and a copy of any document created by TCM that was material to making a decision of how to vote the proxy, or that memorializes the basis for TCM’s decision on how to vote the proxy. TCM shall also maintain a copy of its policies and procedures and each written request from a client for proxy voting records and TCM’s written response to any client request, either written or oral, for such records. Proxy statements that are filed on EDGAR shall be considered maintained by TCM. All such records shall be maintained for a period of five years in an easily accessible place, the first two year in the offices of TCM.

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PART C

OTHER INFORMATION

Item 25. Financial Statements and Exhibits

1. Financial Statements (incorporated by reference to Form N-CSR filed on December 5, 2013):

(i) Schedule of Investments as of September 30, 2013

(ii) Statement of Assets and Liabilities as of September 30, 2013

(iii) Statement of Operations for the fiscal year ended September 30, 2013

(iv) Statement of Changes in Net Assets as of September 30, 2013

(v) Statement of Cash Flows as of September 30, 2013

(vi) Financial Highlights

(vii) Notes to Financial Statements

(viii) Report of Independent Public Accountants dated November 25, 2013

2. Exhibits:

a. (i) Amended and Restated Declaration of Trust of the Registrant, dated as of April 21, 1987, is incorporated by reference to Exhibit (a) to Registrant’s registration statement on Form N-2 (File No. 333-19247), filed July 21, 1997

(ii) Notice of Change of Trustee, dated June 2, 2003, is incorporated by reference to Exhibit (a)(ii) to Registrant’s registration statement on Form N-2 (File No. 333-114322), filed April 8, 2004

(iii) Notice of Change of Trustee, dated September 20, 2006, is filed herewith

(iv) Notice of Change of Trustee, dated July 2, 2007, is filed herewith

(v) Notice of Change of Trustee, dated June 8, 2010, is filed herewith

(vi) Notice of Change of Trustee, dated June 29, 2011, is filed herewith

(vii) Amendment Relating to Repurchase of Shares, dated July 8, 2011, is incorporated by reference to Exhibit (a)(iii) from Form N-2/A Registration Statement (File No. 811-04889), filed July 21, 2011

(viii) Notice of Change of Trustee, dated December 14, 2011, is filed herewith

(ix) Notice of Change of Trustee, dated May 2, 2012, is filed herewith

b. By-Laws of the Registrant, as amended, are incorporated by reference to Exhibit (b)(iii) from Form N-2/A Registration Statement (File No. 333-19247), filed December 28, 2012

c. Not Applicable

d. (i) Specimen certificate for Shares of Beneficial Interest is incorporated by reference to Exhibit (d)(i) to Registrant’s registration statement on Form N-2/A (File No. 333-114322), filed May 26, 2004

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(ii) Form of Notice of Guaranteed Delivery to be filed by pre-effective amendment

(iii) Form of Exercise Form to be filed by pre-effective amendment

(iv) Form of Beneficial Owner Certification to be filed by pre-effective amendment

e. Dividend Reinvestment Plan of the Registrant dated May 1995 is incorporated by reference to Exhibit (e) to Registrant’s registration statement on Form N-2 (File No. 333-19247), filed January 3, 1997

f. Not Applicable

g. Investment Advisory Agreement, dated as of July 1, 2009, between the Registrant and Tekla Capital Management LLC (formerly known as Hambrecht & Quist Capital Management, LLC), is filed herewith

h. Not Applicable

i. Not Applicable

j. Custodian Agreement, dated September 30, 2004, between the Registrant and State Street Bank and Trust Company, is filed herewith

k. (i) Administration Agreement between Registrant and State Street Bank and Trust Company, dated as of July 1, 2005, is filed herewith

(ii) Transfer Agency and Service Agreement between Registrant, Computershare Trust Company, N.A. and Computershare Shareholder Services, Inc. (formerly known as EquiServe, Inc.), dated as of March 1, 2006 is filed herewith

(iii) Information Agent Agreement between the Registrant and [ ] to be filed by pre-effective amendment

(iv) Subscription Agent Agreement between the Registrant and [ ] dated [ ] to be filed by pre-effective amendment

l. Opinion and Consent of Dechert LLP to be filed by pre-effective amendment

m. Not Applicable

n. (i) Consent of Deloitte and Touch LLP is filed herewith

n. (ii) Powers of Attorney are filed herewith

o. Not Applicable

p. Not Applicable

q. Not Applicable

r. Code of Ethics of Registrant and its Investment Adviser is filed herewith

Item 26. Marketing Arrangements

Not Applicable

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Item 27. Other Expenses of Issuance and Distribution

The following table sets forth the estimated expenses expected to be incurred in connection with the offering described in this Registration Statement:

Information Agent Fees and Expenses	$	15,000
Printing and mailing	$	160,000
Legal Fees and Expenses	$	300,000
Auditing Fees and Expenses	$	5,000
New York Stock Exchange Listing Fees	$	22,000
Subscription Agent Fees and Expenses	$	28,000
Securities and Exchange Commission Filing Fees	$	15,000
Miscellaneous	$	5,000
Total	$	535,000

Item 28. Persons Controlled by or under Common Control with Registrant

Not Applicable

Item 29. Number of Holders of Securities

As of March 31, 2014, the number of record holders of each class of securities of Registrant was as follows:

Title of Class		Number of Record Holders

Shares of beneficial interest, $.01 par value		456

Item 30. Indemnification

Under Article V of the Registrant’s Amended and Restated Declaration of Trust dated April 21, 1987, as amended, any past or present Trustee or officer of Registrant will be indemnified by the Registrant to the fullest extent permitted by law against liability and against all expenses reasonably incurred by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by reason of his being or having been a Trustee or officer of Registrant, and against amounts paid and incurred by him in the settlement thereof. This provision does not authorize indemnification when it is determined, in the manner specified in the Amended and Restated Declaration of Trust, that the Trustee or officer would otherwise be liable to Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. Expenses of a Trustee or officer may be paid by Registrant in advance of the final disposition of any claim, action, suit or proceeding upon receipt of an undertaking by the Trustee or officer to repay the expenses to Registrant in the event that it is ultimately determined that indemnification of the Trustee or officer is not authorized under the Amended and Restated Declaration of Trust.

The Registrant will purchase insurance insuring its Trustees and officers against certain liabilities incurred in their capacity as such, and insuring the Registrant against any payments which it is obligated to make to such persons under the foregoing indemnification provisions.

Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (“1933 Act”), may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act, and is, therefore, unenforceable. In the event

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that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.

Under the Investment Advisory Agreement between the Registrant and Hambrecht & Quist Capital Management, LLC (the “Investment Adviser”) dated July 1, 2002, the Registrant has agreed to certain limitations on the liability of the Investment Adviser and has agreed to provide certain indemnification. Section 9 of the Investment Advisory Agreement provides as follows:

The Investment Adviser shall not be held responsible for 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 shareholder 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 [Investment Company Act of 1940]) 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.

Item 31. Business and Other Connections of Investment Adviser

Tekla Capital Management LLC was organized in June 2002 for the purpose of providing investment advisory services to H&Q Healthcare Investors and H&Q Life Sciences Investors (File Nos. 811-04889 and 811-06565). Reference is made to “Trustees and Officers” in the Statement of Additional Information and to Schedule A of Part 1 of Form ADV, Uniform Application for Investment Adviser Registration, as amended from time to time, (File No. 801-61018) filed with the Commission for information concerning the business and other connections of Daniel R. Omstead, Eng.ScD., Trustee and President of the Trust and President and CEO of the Investment Adviser.

Item 32. Location of Accounts and Records

Records are located at:

1. Tekla Capital Management LLC
2 Liberty Square, 9 th Floor
Boston, MA 02109

(Registrant’s corporate records and records relating to its function as Investment Adviser to Registrant)

2. State Street Bank and Trust Company
200 Newport Avenue
North Quincy, MA 02171

(Records relating to its function as Custodian to Registrant; and most of Registrant’s accounting and all records relating to its function as Registrant’s accounting agent)

3. State Street Bank and Trust Company

100 Huntington Avenue

Boston, MA 02116

(Records relating to its function as Administrator to Registrant)

4. Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021

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(Records relating to its function as Registrar and Transfer Agent to Registrant)

5. Computershare Inc.
250 Royall Street
Canton, MA 02021

(Records relating to its function as Dividend Disbursing Agent to Registrant)

Item 33. Management Service

Not Applicable

Item 34. Undertakings

1. Registrant hereby undertakes to suspend offering of the shares covered hereby until it amends its prospectus contained herein if (1) subsequent to the effective date of this Registration Statement, its net asset value per share declines more than 10 percent from its net asset value per share as of the effective date of this Registration Statement, or (2) its net asset value increases to an amount greater than its net proceeds as stated in such prospectus.

2. Not Applicable.

3. Not Applicable.

4. Not Applicable.

5. (a) For the purpose of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; and (b) Registrant hereby undertakes that for the purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

6. The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Pre-Effective Amendment No. 2 to its Registration Statement on Form N-2 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston and Commonwealth of Massachusetts on the 16 th day of April, 2014.

H&Q HEALTHCARE INVESTORS

By:	/s/ Daniel R. Omstead
	Daniel R. Omstead, President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date

/s/ Daniel R. Omstead	Trustee and President (Principal Executive Officer)	April 16, 2014
Daniel R. Omstead

/s/ Laura Woodward	Treasurer (Principal Financial Officer)	April 16, 2014
Laura Woodward

/s/ Oleg M. Pohotsky*	Trustee and Chairman of the Board	April 16, 2014
Oleg M. Pohotsky

/s/ Michael W. Bonney*	Trustee	April 16, 2014
Michael W. Bonney

/s/ Rakesh K. Jain*	Trustee	April 16, 2014
Rakesh K. Jain

/s/ William S. Reardon*	Trustee	April 16, 2014
William S. Reardon

/s/ Uwe E. Reinhardt*	Trustee	April 16, 2014
Uwe E. Reinhardt

/s/ Lucinda H. Stebbins*	Trustee	April 16, 2014
Lucinda H. Stebbins

*By:	Daniel R. Omstead as attorney-in-fact of each person so indicated and pursuant to the power of attorney filed herewith.

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H&Q HEALTHCARE INVESTORS

Amendment to Declaration of Trust

Notice of Change of Trustee

WHEREAS, at a meeting of the shareholders of H&Q Healthcare Investors (“The Fund”), the shareholders of the Fund elected Lucinda H. Stebbins as Trustee to the Fund, effective upon her written acceptance and agreement to be bound by the terms of the Declaration of Trust of the Fund, dated and filed with the Secretary of State of the Commonwealth of Massachusetts on October 31, 1986, as amended;

NOW, THEREFORE, as a result of the foregoing Trustee’s election, the eight Trustees of H&Q Life Sciences Investors are:

Lawrence S. Lewin	30 Rowes Wharf, 4 th Floor Boston, MA 02110

Robert P. Mack, M.D.	30 Rowes Wharf, 4 th Floor Boston, MA 02110

Eric Oddliefson	30 Rowes Wharf, 4 th Floor Boston, MA 02110

Daniel R. Omstead	30 Rowes Wharf, 4 th Floor Boston, MA 02110

Oleg M. Pohotsky	30 Rowes Wharf, 4 th Floor Boston, MA 02110

Uwe F. Reinhardt, Ph.D.	30 Rowes Wharf, 4 th Floor Boston, MA 02110

Lucinda H. Stebbins	30 Rowes Wharf, 4 th Floor Boston, MA 02110

Henri A. Termeer	30 Rowes Wharf, 4 th Floor Boston, MA 02110

Designation of Registered Agent

The Fund hereby appoints Daniel R. Omstead, 30 Rowes Wharf, 4 th Floor, Boston, MA 02110, as resident agent of the Fund in the Commonwealth of Massachusetts upon whom may be served any notice, process or pleading in any action proceeding against the Fund or Trustees as such;

IN WITNESS WHEREOF, this Notice has been subscribed this 20 th day of September, 2006, by the undersigned who affirms that the statements made herein are true under the penalties of perjury.

/s/ Kathleen M. Eckert
Kathleen M. Eckert, Secretary

H&Q HEALTHCARE INVESTORS

Amendment to Declaration of Trust

Notice of Change of Trustee

WHEREAS, at a meeting of the shareholders of H&Q Healthcare Investors (“The Fund”), the shareholders of the Fund elected Dr. Rakesh K. Jain as Trustee to the Fund, effective upon his written acceptance and agreement to be bound by the terms of the Declaration of Trust of the Fund, dated and filed with the Secretary of State of the Commonwealth of Massachusetts on October 31, 1986, as amended;

NOW, THEREFORE, as a result of the foregoing Trustee’s election, the eight Trustees of the H&Q Healthcare Investors are:

Rakesh K. Jain, Ph.D.	30 Rowes Wharf, 4 th Floor
	Boston, MA 02110

Lawrence S. Lewin	30 Rowes Wharf, 4 th Floor
	Boston, MA 02110

Robert P. Mack, M.D.	30 Rowes Wharf, 4 th Floor
	Boston, MA 02110

Eric Oddleifson	30 Rowes Wharf, 4 th Floor
	Boston, MA 02110

Daniel R. Omstead, Ph.D.	30 Rowes Wharf, 4 th Floor
	Boston, MA 02110

Oleg M. Pohotsky	30 Rowes Wharf, 4 th Floor
	Boston, MA 02110

Uwe F. Reinhardt, Ph.D.	30 Rowes Wharf, 4 th Floor
	Boston, MA 02110

Lucinda H. Stebbins	30 Rowes Wharf, 4 th Floor
	Boston, MA 02110

IN WITNESS WHEREOF, this Notice has been subscribed this 2nd day of July, 2007, by the undersigned who affirms that the statements made herein are true under the penalties of perjury.


Carolyn Haley, Secretary

H&Q HEALTHCARE INVESTORS

Amendment to Declaration of Trust

Notice of Change of Trustee

WHEREAS, at a meeting of the shareholders of H&Q Healthcare Investors (“The Fund”), the shareholders of the Fund elected Mr. William S. Reardon as Trustee to the Fund, effective upon his written acceptance and agreement to be bound by the terms of the Declaration of Trust of the Fund, dated and filed with the Secretary of State of the Commonwealth of Massachusetts on October 31, 1986, as amended;

NOW, THEREFORE, as a result of the foregoing Trustee’s election, the eight Trustees of the H&Q Healthcare Investors are:

Rakesh K. Jain, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Lawrence S. Lewin	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Eric Oddleifson	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Daniel R. Omstead, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Oleg M. Pohotsky	2 Liberty Square, 9 th Floor
	Boston, MA 02109

William S. Reardon	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Uwe F. Reinhardt, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Lucinda H. Stebbins	2 Liberty Square, 9 th Floor
	Boston, MA 02109

IN WITNESS WHEREOF, this Notice has been subscribed this 8th day of June, 2010, by the undersigned who affirms that the statements made herein are true under the penalties of perjury.

/s/ Laura Woodward
Laura Woodward, Secretary

H&Q HEALTHCARE INVESTORS

Amendment to Declaration of Trust

Notice of Change of Trustee

WHEREAS, upon the death of Eric Oddleifson on June 19, 2011, H&Q Life Sciences Investors (the “Fund”) issues this notice in accordance with the terms of the Declaration of Trust of the Fund, dated and filed with the Secretary of State of the Commonwealth of Massachusetts on October 31, 1986, as amended;

NOW, THEREFORE, as a result of the foregoing occurrence, the seven Trustees of the H&Q Healthcare Investors are:

Rakesh K. Jain, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Lawrence S. Lewin	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Daniel R. Omstead, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Oleg M. Pohotsky	2 Liberty Square, 9 th Floor
	Boston, MA 02109

William S. Reardon	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Uwe F. Reinhardt, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Lucinda H. Stebbins	2 Liberty Square, 9 th Floor
	Boston, MA 02109

IN WITNESS WHEREOF, this Notice has been subscribed this 29th day of June, 2011, by the undersigned who affirms that the statements made herein are true under the penalties of perjury.

/s/ Laura Woodward
Laura Woodward, Secretary

H&Q HEALTHCARE INVESTORS

Amendment to Declaration of Trust

Notice of Change of Trustee

WHEREAS, at a meeting of the Trustees of H&Q Healthcare Investors (“The Fund”), the Trustees of the Fund appointed Mr. Michael W. Bonney as Trustee to the Fund, effective upon his written acceptance and agreement to be bound by the terms of the Declaration of Trust of the Fund, dated and filed with the Secretary of State of the Commonwealth of Massachusetts on October 31, 1986, as amended;

NOW, THEREFORE, as a result of the foregoing Trustee’s appointment, the eight Trustees of the H&Q Healthcare Investors are:

Michael W. Bonney	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Rakesh K. Jain, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Lawrence S. Lewin	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Daniel R. Omstead, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Oleg M. Pohotsky	2 Liberty Square, 9 th Floor
	Boston, MA 02109

William S. Reardon	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Uwe F. Reinhardt, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Lucinda H. Stebbins	2 Liberty Square, 9 th Floor
	Boston, MA 02109

IN WITNESS WHEREOF, this Notice has been subscribed this 14th day of December, 2011, by the undersigned who affirms that the statements made herein are true under the penalties of perjury.

/s/ Laura Woodward
Laura Woodward, Secretary

H&Q HEALTHCARE INVESTORS

Amendment to Declaration of Trust

Notice of Change of Trustee

WHEREAS, upon the death of Lawrence S. Lewin on April 29, 2012, H&Q Life Sciences Investors (the “Fund”) issues this notice in accordance with the terms of the Declaration of Trust of the Fund, dated and filed with the Secretary of State of the Commonwealth of Massachusetts on October 31, 1986, as amended;

NOW, THEREFORE, as a result of the foregoing occurrence, the seven Trustees of the H&Q Healthcare Investors are:

Rakesh K. Jain, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Michael W. Bonney	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Daniel R. Omstead, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Oleg M. Pohotsky	2 Liberty Square, 9 th Floor
	Boston, MA 02109

William S. Reardon	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Uwe F. Reinhardt, Ph.D.	2 Liberty Square, 9 th Floor
	Boston, MA 02109

Lucinda H. Stebbins	2 Liberty Square, 9 th Floor
	Boston, MA 02109

IN WITNESS WHEREOF, this Notice has been subscribed this 2nd day of May, 2012, by the undersigned who affirms that the statements made herein are true under the penalties of perjury.

/s/ Laura Woodward
Laura Woodward, Secretary

H&Q HEALTHCARE INVESTORS

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT, dated as of July 1 2009 between H&Q HEALTHCARE INVESTORS, 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 of the mutual covenants herein contained, it is agreed as follows:

1. Services To Be Rendered by the Investment Adviser to the Fund .

Subject to the supervision and direction of the Board of Trustees of the Fund, the Investment Adviser will:

a. act in strict conformity with the Fund’s Declaration of Trust, the Investment Company Act of 1940 (the “1940 Act”) and the Investment Advisers Act of 1940, as the same may from time to time be amended;

b. manage the 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 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 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 Securities and Exchange Commission (“SEC”) and state Blue Sky authorities.

In providing these services, the Investment Adviser will provide investment research and supervision of the Fund’s investments and conduct a continual program of investment, evaluation and, if appropriate, sale and reinvestment of the Fund’s assets. In addition, the Investment Adviser will furnish the Fund with whatever statistical information the Fund may reasonably request with respect to the securities that the Fund may hold or contemplate purchasing.

2. Brokerage .

In executing transactions for the Fund and selecting brokers or dealers (which brokers or dealers may include any affiliate of the Investment Adviser to the extent permitted by the 1940 Act) the Investment Adviser will use its best efforts to obtain the best price and execution for the Fund. In 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 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 Investment Adviser may consider the brokerage and research services (as those terms 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 to such other clients.

3. Other Agreements; Use of Name, Etc.

It is understood that any of the shareholders, Trustees, officers, agents and employees of the Fund may be a shareholder, director, officer, agent or employee of or be otherwise interested in the Investment Adviser and in any affiliate thereof with the Investment Adviser 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 account 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 account 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 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 officers, directors or employees.

The Fund acknowledges that the Investment Adviser’s use of the term “H&Q” is pursuant to a written license agreement (the “License Agreement”), 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, 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 1.36% of the average net assets of the Fund for such month.

	Annualized
Value of Other Assets	Fee Rate
$250,000,000 or less	0.98	%
$250,000,001 to $500,000,000	0.88	%
$500,000,001 to $1,000,000,000	0.80	%
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 assets of the Fund. Such fee shall be payable for each month within five business days after the end of 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 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 Fund, as well as the fees of all Trustees of the Fund who are “affiliated persons” of the Investment Adviser, 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 and Cash Purchase 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 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;

b. If (i) the Trustees of the Fund or the shareholders by 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 June 30, 2010 or the expiration of one year from the effective date of the last such continuance, whichever is later; or

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 payment 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 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 as defined in the 1940 Act and the Rules and Regulations thereunder, subject, however to such exemptions as may be granted by 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 for 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 shareholder 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 instrument 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 of the Fund or the public, which refer to the Investment Adviser in any way, prior to use thereof and not to use such material if the Investment Adviser reasonably objects in writing within five business days (or 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 Fund as the Investment Adviser at any time, or from time to time, reasonably requests in order to discharge its obligations hereunder.

12. Governing Law .

This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

IN WITNESS WHEREOF, H&Q Healthcare Investors and the Investment Adviser have each caused this instrument to be signed in duplicate on its behalf by its President or other officer thereunto duly authorized, all as of the date first hereinabove written.

H&Q HEALTHCARE INVESTORS


By:	/s/ Daniel R. Omstead

Title:	President, H&Q Healthcare Investors


HAMBRECHT & QUIST CAPITAL MANAGEMENT LLC


By:	/s/ Daniel R. Omstead

Title:	President, Hambrecht & Quist Capital Management LLC

CUSTODIAN AGREEMENT

This Agreement between H & Q HEALTHCARE INVESTORS, a business trust organized and existing under the laws of Massachusetts (the “ Fund ”), and STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company (the “ Custodian ”).

WITNESSETH: that in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:

SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT

The Fund hereby employs the Custodian as the custodian of its assets, including securities which the Fund desires to be held in places within the United States (“ domestic securities ”) and securities it desires to be held outside the United States (“ foreign securities ”). The Fund agrees to deliver to the Custodian all securities and cash owned by it, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by it from time to time, and the cash consideration received by it for such new or treasury shares of beneficial interest of the Fund (“ Shares ”) as may be issued or sold from time to time. The Custodian shall not be responsible for any property of the Fund held or received by the Fund and not delivered to the Custodian Upon receipt of “ Proper Instructions ” (as such term is defined in Section 6 hereof), the Custodian shall from time to time employ one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees of the Fund (the “ Board ”). The Custodian may employ as sub-custodian for the Fund’s foreign securities the foreign banking institutions and foreign securities depositories designated in Schedules A and B hereto, but only in accordance with the applicable provisions of Sections 3 and 4. The Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian.

SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE CUSTODIAN IN THE UNITED STATES

SECTION 2.1 HOLDING SECURITIES . The Custodian shall hold and physically segregate for the account of the Fund all non-cash property, to be held by it in the United States, including all domestic securities owned by the Fund other than (a) securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a “ U.S. Securities System ”).

SECTION 2.2 DELIVERY OF SECURITIES . The Custodian shall release and deliver domestic securities owned by the Fund held by the Custodian or in a U.S. Securities System account of the Custodian, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:

1) Upon sale of such securities for the account of the Fund and receipt of payment therefor;

2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund;

3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof;

4) To the depository agent in connection with tender or other similar offers for securities of the Fund;

5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;

6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;

7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with “street delivery” custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian’s own negligence or willful misconduct;

8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;

9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;

10) For delivery in connection with any loans of securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form (among others) of cash or obligations issued by the United States government, its agencies or

instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian’s account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral;

11) For delivery in connection with any loans of securities made by the Fund to a third party lending agent, or the lending agent’s custodian, in accordance with Proper Instructions (which may or may not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;

12) For delivery as initial or variation margin in connection with trading in futures and options on futures contracts entered into by the Fund;

13) For delivery as security in connection with any borrowing by the Fund requiring a pledge of assets by the Fund, but only against receipt of amounts borrowed;

14) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the “ Exchange Act ”) and a member of The National Association of Securities Dealers, Inc. (“ NASD ”), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund;

15) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission (“ CFTC ”) and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund;

16) Upon receipt of instructions from the transfer agent for the Fund (the “ Transfer Agent ”) for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the Fund’s currently effective prospectus and statement of additional information (the “ Prospectus ”), in satisfaction of requests by holders of Shares for repurchase or redemption;

17) For any other purpose, but only upon receipt of Proper Instructions specifying the securities of the Fund to be delivered and naming the person or persons to whom delivery of such securities shall be made.

SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned

exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment advisor as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Agreement shall be in “street name” or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in “street name”, the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.

SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940, as amended (the “ 1940 Act ”). Monies held by the Custodian for the Fund may be deposited by it to its credit as Custodian in the banking department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the monies to be deposited with each such bank or trust company shall be approved by vote of a majority of the Board. Such monies shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.

SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to the Fund’s custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due the Fund on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled.

SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of the Fund in the following cases only:

1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of repurchase agreements entered into between the Fund and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian’s account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Fund of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund; or (d) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein;

2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof;

3) For the redemption or repurchase of Shares issued as set forth in Section 5 hereof;

4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, administration, shareholder servicing, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;

5) For the payment of any dividends on Shares declared pursuant to the governing documents of the Fund;

6) For payment of the amount of dividends received in respect of securities sold short;

7) For delivery as initial or variation margin in connection with trading in futures and options on futures contracts entered into by the Fund;

8) For any other purpose, but only upon receipt of Proper Instructions specifying the amount of such payment and naming the person or persons to whom such payment is to be made.

SECTION 2.7 APPOINTMENT OF AGENTS . The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Section 2 as the Custodian may from time to time direct; provided , however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder.

SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS . The Custodian may deposit and/or maintain securities owned by the Fund in a U.S. Securities System in compliance with the conditions of Rule 17f-4 of the 1940 Act, as amended from time to time.

SECTION 2.9 SEGREGATED ACCOUNT . The Custodian shall upon receipt of Proper Instructions establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the CFTC or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with swaps arrangements entered into by the Fund, options purchased, sold or written by the Fund, or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the “ SEC ”), or interpretative opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered investment companies, and (iv) for any other purpose upon receipt of Proper Instructions.

SECTION 2.10 OWNERSHIP CERTIFICATES FOR TAX PURPOSES . The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of the Fund held by it and in connection with transfers of securities.

SECTION 2.11 PROXIES . The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities.

SECTION 2.12 COMMUNICATIONS RELATING TO FUND SECURITIES . Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or its agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. Custodian shall supply, upon the request of the Fund, written information concerning nonvoluntary corporate actions such as record and payment dates of dividends.

SECTION 3. PROVISIONS RELATING TO RULES 17F-5 AND 17F-7

SECTION 3.1. DEFINITIONS . As used throughout this Agreement, the following capitalized terms shall have the indicated meanings:

“Country Risk” means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country’s political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country; provided, however, Country Risk shall not include the custody or settlement practices and procedures of an Eligible Foreign Custodian selected by the Foreign Custody Manager that are not prevailing practices in the country in which the Foreign Assets are held.

“Eligible Foreign Custodian” has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned direct or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.

“Eligible Securities Depository” has the meaning set forth in section (b)(1) of Rule 17f-7.

“Foreign Assets” means any of the Fund’s investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Fund’s transactions in such investments.

“Foreign Custody Manager” has the meaning set forth in section (a)(3) of Rule 17f-5.

“Rule 17f-5” means Rule 17f-5 promulgated under the 1940 Act, as amended from time to time.

“Rule 17f-7” means Rule 17f-7 promulgated under the 1940 Act, as amended from time to time.

SECTION 3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER .

3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER . The Fund, by resolution adopted by its Board, hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager of the Fund.

3.2.2 COUNTRIES COVERED . The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Contract, which list of countries may be amended from time to time by the Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the Fund’s assets, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof.

Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by the Fund of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by the Board responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Agreement by the Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A in which the Custodian has previously placed or currently maintains Foreign Assets pursuant to the terms of the Contract. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of the Fund with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn, the Custodian shall immediately cease to be the Foreign Custody Manager of the Fund with respect to that country, and the Custodian shall use commercially reasonable efforts to effect the closing of such account.

The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Sixty days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the

Fund with respect to the country as to which the Custodian’s acceptance of delegation is withdrawn.

3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES :

(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS . Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the relevant market in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1), as amended from time to time.

(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS . The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2), as amended from time to time.

(c) MONITORING . In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor, in accordance with the requirements of Rule 17f-5(c): (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) performance of the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder.

3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY . For purposes of this Section 3.2, the Board, or at its delegation, the Fund’s investment advisor, shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Fund.

3.2.5 REPORTING REQUIREMENTS . The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Fund described in this Section 3.2 after the occurrence of the material change as required by Rule 17f-5(b)(2).

3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE FUND . In performing the responsibilities delegated to it hereunder, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of foreign assets of management investment companies registered under the 1940 Act would exercise.

3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17F-5 . The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the Board has determined that it is reasonable for the Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Contract to the Custodian as the Foreign Custody Manager of the Fund.

3.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER . The Board’s delegation to the Custodian as Foreign Custody Manager of the Fund shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination of the Custodian as Foreign Custody Manager will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Fund with respect to designated countries.

SECTION 3.3 ELIGIBLE SECURITIES DEPOSITORIES .

3.3.1 ANALYSIS AND MONITORING . The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment advisor) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto, as amended from time to time, in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment advisor) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.

3.3.2 STANDARD OF CARE . The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1.

SECTION 3.4 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND . Upon reasonable request of the Fund, the Custodian will use reasonable efforts to arrange for the independent accountants for the Fund to be afforded access to the books and records of any foreign banking institution employed as a Foreign Sub-Custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian as the Foreign Custody Manager of the Fund.

SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE THE UNITED STATES .

SECTION 4.1 DEFINITIONS . As used throughout this Agreement, the following capitalized terms shall have the indicated meanings:

“Foreign Securities System” means an Eligible Securities Depository listed on Schedule B hereto.

“Foreign Sub-Custodian” means a foreign banking institution serving as an Eligible Foreign Custodian hereunder.

SECTION 4.2. HOLDING SECURITIES . The Custodian shall identify on its books as belonging to the Fund the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Fund, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Fund which are maintained in such account shall identify those securities as belonging to the Fund and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.

SECTION 4.3. FOREIGN SECURITIES SYSTEMS . Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.

SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT .

4.4.1. DELIVERY OF FOREIGN SECURITIES . The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Fund held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:

(i) upon the sale of such foreign securities for the Fund in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;

(ii) to the depository agent in connection with tender or other similar offers for foreign securities of the Fund;

(iii) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;

(iv) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;

(v) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian’s own negligence, bad faith or willful misconduct;

(vi) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;

(vii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities;

(viii) for delivery as security in connection with any borrowing by the Fund requiring a pledge of assets by the Fund;

(ix) for delivery as initial or variation margin in connection with trading in options and futures contracts entered into by the Fund;

(x) for delivery in connection with any loans of foreign securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian’s account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral;

(xi) for delivery in connection with any loans of foreign securities made by the Fund to a third party lending agent, or the lending agent’s custodian, in accordance with

Proper Instructions (which may not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;

(xii) for any other purpose, but only upon receipt of Proper Instructions specifying the foreign securities to be delivered and naming the person or persons to whom delivery of such securities shall be made.

4.4.2. PAYMENT OF FUND MONIES . Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of the Fund in the following cases only:

(i) upon the purchase of foreign securities for the Fund, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;

(ii) in connection with the conversion, exchange or surrender of foreign securities of the Fund;

(iii) for the payment of any expense or liability of the Fund, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Contract, legal fees, accounting fees, and other operating expenses;

(iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Fund, including transactions executed with or through the Custodian or its Foreign Sub-Custodians;

(v) for delivery as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund;

(vi) for payment of part or all of the dividends received in respect of securities sold short;

(vii) for delivery in connection with any loans of foreign securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian’s account in the book-entry system authorized by the U.S. Department

of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral;

(viii) for delivery in connection with any loans of foreign securities made by the Fund to a third party lending agent, or the lending agent’s custodian, in accordance with Proper Instructions (which may not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;

(ix) for any other purpose, but only upon receipt of Proper Instructions specifying the amount of such payment and naming the person or persons to whom such payment is to be made.

4.4.3. MARKET CONDITIONS . Notwithstanding any provision of this Contract to the contrary, settlement and payment for Foreign Assets received for the account of the Fund and delivery of Foreign Assets maintained for the account of the Fund may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.

The Custodian shall provide to the Board or its duly-authorized designee the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board or its duly-authorized designee being provided with substantively less information than had been previously provided hereunder.

SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES . The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and, provided that such nominee does not act negligently, the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of the Fund under the terms of this Contract unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.

SECTION 4.6 BANK ACCOUNTS . The Custodian shall identify on its books as belonging to the Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of the Fund with a Foreign Sub-Custodian in accordance with the provisions of this Agreement. All accounts referred to in this

Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Fund. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts.

SECTION 4.7. COLLECTION OF INCOME . The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Fund shall be entitled and shall credit such income, as collected, to the Fund. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures.

SECTION 4.8 SHAREHOLDER RIGHTS . With respect to the foreign securities held pursuant to this Section 4, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights.

SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES . The Custodian shall transmit promptly to the Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Fund (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Fund at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession or control of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power.

SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS . Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and, to the extent possible, to indemnify and hold harmless the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian’s performance of such obligations. At the Fund’s election, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of

any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim.

SECTION 4.11 TAX LAW . The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Fund by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund or the Custodian as custodian of the Fund by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information.

SECTION 4.12. LIABILITY OF CUSTODIAN . The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in the Contract and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care.

SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES .

The Custodian shall receive from the distributor for the Shares or from the Transfer Agent and deposit into the account of the Fund such payments as are received for Shares thereof issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund and the Transfer Agent of any receipt by it of payments for Shares of the Fund.

From such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders.

SECTION 6. PROPER INSTRUCTIONS .

“Proper Instructions”, which may also be standing instructions, as used throughout this Agreement shall mean instructions received by the Custodian from one or more persons or one or more entities as the Board shall have authorized from time to time. Such instructions may be in writing signed by the authorized person or persons or may be in a tested communication or in a communication utilizing access codes effected between electro-mechanical or electronic devices or

may be by such other means and utilizing such intermediary systems and utilities as may be agreed to from time to time by the Custodian and the person giving such instructions, provided that the Fund has followed any security procedures agreed to from time to time by the Fund and the Custodian, including, but not limited to, the security procedures selected by the Fund in the Funds Transfer Addendum to this Agreement. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any multi-party agreement which requires a segregated asset account in accordance with Section 2.9 of this Agreement. The Fund shall cause its duly authorized officer to certify to the Custodian in writing the names and specimen signatures of persons authorized to give Proper Instructions. The Custodian shall be entitled to rely upon the identity and authority of such persons until it receives notice from the Fund to the contrary.

SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY .

The Custodian may in its discretion, without express authority from the Fund:

1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement, provided that all such payments shall be accounted for to the Fund;

2) surrender securities in temporary form for securities in definitive form;

3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and

4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Board.

SECTION 8. EVIDENCE OF AUTHORITY .

The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a copy of a resolution of the Board, certified by the Secretary or an Assistant Secretary of the Fund ( “Certified Resolution” ), as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.

SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET ASSET VALUE AND NET INCOME .

The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board to keep the books of account of the Fund and/or compute the net asset value per Share of the outstanding Shares or, if directed in writing to do so by the Fund, shall itself keep such books of account and/or compute such net asset value per Share. If so directed, the Custodian shall also calculate daily the net income of the Fund as described in the currently effective Prospectus and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per Share and the daily income of the Fund shall be made at the time or times described from time to time in the currently effective Prospectus.

SECTION 10. RECORDS .

The Custodian shall create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of the Fund under the 1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the SEC. The Custodian shall, at the Fund’s request, supply the Fund with a tabulation of securities owned by the Fund and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations.

SECTION 11. OPINION OF FUND’S INDEPENDENT ACCOUNTANT .

The Custodian shall take all reasonable action, as the Fund may from time to time request, to obtain from year to year favorable opinions from the Fund’s independent accountants with respect to its activities hereunder in connection with the preparation of the Fund’s Form N-2, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof.

SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS .

The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System, relating to the services provided by the Custodian under this Agreement; such

reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.

SECTION 13. COMPENSATION OF CUSTODIAN .

The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund.

SECTION 14. RESPONSIBILITY OF CUSTODIAN .

So long as and to the extent that it is in the exercise of reasonable care and good faith, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence, including, without limitation, acting in accordance with any Proper Instruction. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted in good faith pursuant to such advice. The Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk (as defined in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, or acts of war, revolution, riots or terrorism.

Except as may arise from the Custodian’s own negligence, willful misconduct, or bad faith or the negligence or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by: (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by the Fund or its duly-authorized investment manager or investment advisor in their instructions to the Custodian provided such instructions, and Custodian’s reliance upon them, have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian’s sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (v) any delay or failure of any company, corporation, or other body in charge of

registering or transferring securities in the name of the Custodian, the Fund, the Custodian’s sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vi) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (vii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction.

The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth with respect to sub-custodians generally in this Agreement.

If the Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.

If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee’s own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund’s assets to the extent necessary to obtain reimbursement.

In no event shall either party be liable for indirect, special or consequential damages.

SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT .

This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided , however, that the Fund shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of the Fund’s Declaration of Trust, and further provided, that the Fund may at any time by action of its Board (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by

the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.

Upon termination of the Agreement, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its reasonable costs, expenses and disbursements.

SECTION 16. SUCCESSOR CUSTODIAN .

If a successor custodian for the Fund shall be appointed by the Board, the Custodian shall, upon termination and receipt of Proper Instructions, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of the Fund then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of the Fund held in a Securities System.

If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of Proper Instructions, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such alternative arrangements.

In the event that no Proper Instructions designating a successor custodian or alternative arrangements shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a “bank” as defined in the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian hereunder and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement on behalf of the Fund, and to transfer to an account of such successor custodian all of the Fund’s securities held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement.

In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the Proper Instructions or alternative arrangements to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect.

SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS .

In connection with the operation of this Agreement, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be

annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Fund’s Declaration of Trust. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement.

SECTION 18. MASSACHUSETTS LAW TO APPLY .

This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.

SECTION 19. PRIOR AGREEMENTS .

This Agreement supersedes and terminates, as of the date hereof, all prior Agreements between the Fund and the Custodian relating to the custody of the Fund’s assets, including that Agreement dated April 21, 1987.

SECTION 20. NOTICES .

Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.

To the Fund:

H & Q Healthcare Investors

30 Rowes Wharf, 4 th Floor

Boston, MA 02110-3328

Attention: Kim Carroll

Telephone: 617-772-8500

Telecopy: 617-772-8577

To the Custodian:

STATE STREET BANK AND TRUST COMPANY

150 Newport Avenue – AFB/4

North Quincy, MA 02171

Attention: Michael D. Timcoe

Telephone: 617-985-8929

Telecopy: 617-988-0793

Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy

on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.

SECTION 21. REPRODUCTION OF DOCUMENTS .

This Agreement and all schedules, addenda, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

SECTION 22. REMOTE ACCESS SERVICES ADDENDUM .

The Custodian and the Fund agree to be bound by the terms of the Remote Access Services Addendum attached hereto.

SECTION 23. COUNTERPARTS .

This Agreement may be signed in counterparts, all of which shall constitute but one and the same instrument.

SECTION 24. SEVERABILITY .

Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be deemed prohibited or invalid under such applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, and such prohibition or invalidity shall not invalidate the remainder of such provision or the other provisions of this Agreement.

SECTION 25. STATUS OF FUND AS MASSACHUSETTS BUSINESS TRUST .

A copy of the Fund’s Agreement and Declaration of Trust is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed on behalf of the Fund by an officer or Trustee of the Fund in his or her capacity as an officer or Trustee of the Fund and not individually and that the obligations of or arising out of this Agreement are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund.

SECTION 26. SHAREHOLDER COMMUNICATIONS ELECTION .

SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to

requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether it authorizes the Custodian to provide the Fund’s name, address, and share position to requesting companies whose securities the Fund owns. If the Fund tells the Custodian “no”, the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian “yes” or does not check either “yes” or “no” below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund’s protection, the Rule prohibits the requesting company from using the Fund’s name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below.

YES x The Custodian is authorized to release the Fund’s name, address, and share positions.

NO o The Custodian is not authorized to release the Fund’s name, address, and share positions.

IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of September 30, 2004.

H & Q HEALTHCARE INVESTORS		FUND SIGNATURE ATTESTED TO BY:

By:	/s/ Kim Carroll	By:	/s/ Christopher F. Brinzey

Name:	Kim Carroll	Name:	Christopher F. Brinzey

Title:	Treasurer	Title:	Research


STATE STREET BANK AND TRUST COMPANY		SIGNATURE ATTESTED TO BY:


By:	/s/ Joseph L. Hooley	By:	/s/ Jean S. Carr

Name:	Joseph L. Hooley	Name:	Jean S. Carr

Title:	Executive Vice President	Title:	Counsel

FINAL FOR EXECUTION

ADMINISTRATION AGREEMENT

Agreement dated as of July 1, 2005 by and between State Street Bank and Trust Company, a Massachusetts trust company (the “Administrator”) and H&Q Life Sciences Investors and the H&Q Healthcare Investors (individually, a “Trust” and collectively, the “Trusts”).

WHEREAS, each Trust is registered as closed-end management investment companies under the Investment Company Act of 1940, as amended (the “1940 Act”);

WHEREAS, each Trust desires to retain the Administrator to furnish certain administrative services to each Trust, and the Administrator is willing to furnish such services, on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:

1. APPOINTMENT OF ADMINISTRATOR

The Trusts hereby appoint the Administrator to act as administrator with respect to the Trusts for purposes of providing certain administrative services for the period and on the terms set forth in this Agreement. The Administrator accepts such appointment and agrees to render the services stated herein.

In the event that a Trust establishes one or more additional portfolios or funds (the “Additional Trust”) with respect to which it wishes to retain the Administrator to act as administrator hereunder, the applicable Trust shall notify the Administrator in writing. Upon written acceptance by the Administrator, such Additional Trust shall become subject to the provisions of this Agreement to the same extent as the existing Trusts, except to the extent that such provisions (including those relating to the compensation and expenses payable by the Trusts) may be modified with respect to each Additional Trust in writing by the Trusts and the Administrator at the time of the addition of the Additional Trust.

2. DELIVERY OF DOCUMENTS

Each Trust will promptly deliver to the Administrator copies of each of the following documents and all future amendments and supplements, if any:

a. The Trust’s declaration of trust and by-laws;

b. The Trust’s currently effective registration statement under the Securities Act of 1933, as amended (the “1933 Act”), and the 1940 Act and the Trust’s Prospectus(es) and Statement(s) of Additional Information relating to the

Trusts and all amendments and supplements thereto as in effect from time to time;

c. Certified copies of the resolutions of the Board of Trustees of the Trust (the “Board”) authorizing (1) the Trust to enter into this Agreement and (2) certain individuals on behalf of the Trust to (a) give instructions to the Administrator pursuant to this Agreement and (b) sign checks and pay expenses;

d. A copy of the investment advisory agreement between the Trust and its investment adviser; and

e. Such other certificates, documents or opinions which the Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties.

3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR

The Administrator represents and warrants to each Trust that:

a. It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts;

b. It has the power and authority to carry on its business in The Commonwealth of Massachusetts;

c. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement;

d. No legal or administrative proceedings have been instituted or threatened which would impair the Administrator’s ability to perform its duties and obligations under this Agreement;

e. Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Administrator or any law or regulation applicable to it; and

f. It maintains mutual fund industry standard back-up systems and other procedures that are reasonably designed to prevent disruption or delay in the performance of its obligations or duties under this Agreement.

4. REPRESENTATIONS AND WARRANTIES OF THE TRUSTS

Each Trust represents and warrants to the Administrator that:

a. It is a business trust, duly organized, existing and in good standing under the laws of The Commonwealth of Massachusetts;

b. It has the corporate power and authority under applicable laws and by its declaration of trust and by-laws to enter into and perform this Agreement;

c. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement;

d. It is an investment company properly registered under the 1940 Act;

e. A registration statement under the 1933 Act and the 1940 Act has been filed and will be effective and remain effective during the term of this Agreement. The Trust also warrants to the Administrator that as of the effective date of this Agreement, all necessary filings under the securities laws of the states in which the Trust offers or sells its shares have been made;

f. No legal or administrative proceedings have been instituted or threatened which would impair the Trust’s ability to perform its duties and obligations under this Agreement;

g. Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Trust or any law or regulation applicable to it; and

h. As of the close of business on the date of this Agreement, the Trust is authorized to issue shares of beneficial interest.

5. ADMINISTRATION SERVICES

The Administrator shall provide the following services, subject to the control, supervision, authorization and direction of the respective Trust, and, in each case where appropriate, the review and comment by the Trusts’ independent accountants and legal counsel and in accordance with procedures which may be established from time to time between the Trusts and the Administrator:

a. Prepare for review and approval by officers of the respective Trust the Trust’s financial information contained within the Trust’s semi-annual and annual shareholder reports, Form N-Q reports, and other quarterly reports (as mutually agreed upon), including tax footnote disclosures where applicable;

b. Coordinate the audit of the respective Trust’s financial statements by the Trust’s independent accountants, including the preparation of supporting audit workpapers and other schedules, and make such reports and recommendations to the Board concerning the performance of the independent accountants as the Board may reasonably request;

c. Prepare for review by an officer of the respective Trust the Trust’s periodic financial reports required to be filed with the Securities and Exchange Commission (“SEC”) on Form N-SAR and financial information required by Form N-CSR and such other reports, forms or filings as may be mutually agreed upon;

d. Prepare for review by an officer of the respective Trust annual fund expense budgets, perform accrual analyses and rollforward calculations and recommend changes to fund expense accruals on a periodic basis, arrange for payment of the Trusts’ expenses, review calculations of fees paid to the Trusts’ Advisor, custodian, fund accountant, distributor and transfer agent, and obtain authorization of accrual changes and expense payments;

e. Provide periodic testing with respect to compliance with Internal Revenue Code mandatory qualification requirements, the requirements of the 1940 Act and the respective Trust’s Prospectus limitations as may be mutually agreed upon, including quarterly compliance reporting to the Trusts’ officers as well as preparation of Board compliance materials;

f. Prepare and furnish total return performance information, including such information on an after-tax basis, calculated in accordance with applicable U.S. securities laws and regulations, as may be reasonably requested;

g. Prepare and disseminate vendor survey information;

h. Provide periodic reports and reasonable documentation to the Trusts’ Chief Compliance Officer in connection with Rule 38a-1 of the 1940 Act with respect to services provided by the Administrator and the Administrator’s compliance with its operating policies and procedures related thereto;

i. Provide sub-certificates in connection with the certification requirements of the Sarbanes-Oxley Act of 2002 with respect to services provided by the Administrator;

j. Maintain certain books and records of the Trusts as required under Rule 31a-1(b) of the 1940 Act, as may be agreed upon;

k. Consult with the Trusts’ officers, independent accountants, legal counsel, custodian, fund accountant, distributor, and transfer agent in establishing the accounting policies of the Trust;

l. Compute tax basis provisions for both excise and income tax purposes;

m. Prepare each Trust’s federal, state, and local income tax returns and extension requests for review and for execution and filing by the Trusts’ independent accountants and execution and filing by the Trusts’ treasurer, including Form 1120-RIC, Form 8613 and Form 1099-MISC;

n. Coordinate Forms 1042/1042S with the Trusts’ transfer agent;

o. Prepare information for Section 852 mailings; and

P. Review and sign off on periodic income distribution calculations and annual minimum distribution calculations (income and capital gain) prior to their declaration.

The Administrator shall perform such other services for the Trusts that are mutually agreed to by the parties from time to time, for which the Trusts will pay such fees as may be mutually agreed upon, including the Administrator’s reasonable out-of-pocket expenses. The provision of such services shall be subject to the terms and conditions of this Agreement.

The Administrator shall provide the office facilities and the personnel required by it to perform the services contemplated herein.

6. FEES; EXPENSES; EXPENSE REIMBURSEMENT

The Administrator shall receive from each Trust such compensation for the Administrator’s services provided pursuant to this Agreement as may be agreed to from time to time in a written fee schedule approved by the parties and initially set forth in the Fee Schedule to this Agreement. The fees are accrued daily and billed monthly and shall be due and payable upon receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of termination of this Agreement. In addition, the Trusts shall reimburse the Administrator for its reasonable and fully documented out-of-pocket costs incurred in connection with this Agreement.

The Trusts agree promptly to reimburse the Administrator for any equipment and supplies specially ordered by or for a Trust through the Administrator and for any other expenses not contemplated by this Agreement that the Administrator may incur on a Trust’s behalf or at the Trust’s request or with the Trust’s consent. All rights of compensation and expense reimbursement under this Agreement for services performed shall survive the termination of this Agreement.

Each Trust acknowledges and agrees that it will bear all expenses that are incurred in its operation and not specifically assumed by the Administrator. Expenses to be borne by the Trusts, include, but are not limited to: organizational expenses; cost of services of independent accountants and outside legal and tax counsel (including such counsel’s review of the Trusts’ registration statement, proxy materials, federal and state tax qualification as a regulated investment company and other reports and materials prepared by the Administrator under this Agreement); cost of any services contracted for by a Trust or the Trusts directly from parties other than the Administrator; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for a Trust; investment advisory fees; taxes, insurance premiums and other fees and expenses applicable to its operation; costs incidental to any meetings of shareholders including, but not limited to, legal and accounting fees, proxy filing fees and the costs of preparation, printing and mailing of any proxy materials; costs incidental to Board meetings, including fees and expenses of Board members; the salary and expenses of any officer, director\trustee or employee of each Trust; costs incidental to the preparation, printing and distribution of each Trust’s registration statements and any amendments thereto and shareholder reports; cost of typesetting and printing of prospectuses; cost of preparation and filing of each Trust’s tax returns, Form N-2, Form N-PX, Form N-CSR, Form N-Q and Form N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; fidelity bond and directors’ and officers’ liability insurance; and cost of independent pricing services used in computing each Trust’s net asset value.

The Administrator is authorized to and may employ or associate with such person or persons as the Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Administrator and that the Administrator shall be as fully responsible to the Trusts for the acts and omissions of any such person or persons as it is for its own acts and omissions.

7. INSTRUCTIONS AND ADVICE

At any time, the Administrator may apply to any officer of a Trust or the Trust’s investment adviser or their designee for instructions and may consult with its own legal counsel or outside counsel for the Trusts or the independent accountants for the Trust at the expense of the Trusts, with respect to any matter arising in connection with the services to be performed by the Administrator under this Agreement. The Administrator shall not be liable, and shall be indemnified by the Trusts, for any action taken or omitted by it in good faith in reliance upon any such instructions or advice or upon any paper or document believed by it to be genuine and to have been signed by an officer or other representative of the Trusts. The Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the applicable Trust. Nothing in this paragraph shall be construed as imposing upon the Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received.

8. LIMITATION OF LIABILITY AND INDEMNIFICATION

The Administrator shall be responsible for the performance of only such duties as are set forth in this Agreement and, except as otherwise provided under Section 6, shall have no responsibility for the actions or activities of any other party, including other service providers. The Administrator shall have no liability in respect of any loss, damage or expense suffered by the Trusts insofar as such loss, damage or expense arises from the performance of the Administrator’s duties hereunder in reliance upon records that were maintained for the Trusts by entities other than the Administrator prior to the Administrator’s appointment as administrator hereunder. The Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder unless caused by or resulting from or attributable to (a) the negligence, willful misconduct, bad faith or reckless disregard of the Administrator, its officers or employees, or (b) the material breach of this Agreement by the Administrator. The Administrator shall not be liable for any special, indirect, incidental, punitive or consequential damages, including lost profits, of any kind whatsoever (including, without limitation, attorneys’ fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder, each of which is hereby excluded by agreement of the parties regardless of whether such damages were foreseeable or whether either party or any entity had been advised of the possibility of such damages. In any event, the Administrator’s cumulative liability for each calendar year (a “Liability Period”) with respect to the Trusts under this Agreement regardless of the form of action or legal theory shall be limited to its total annual compensation earned with respect to the Trusts and fees payable hereunder during the preceding Compensation Period, as defined herein, for any liability or loss suffered by the Trusts including, but not limited to, any liability relating to qualification of a Trust as a regulated investment company or any liability relating to the Trusts’ compliance with any federal or state tax or securities statute, regulation or ruling during such Liability Period. “Compensation Period” shall mean the calendar year ending immediately prior to each Liability Period in which the event(s) giving rise to the Administrator’s liability for that period have occurred. Notwithstanding the foregoing, the Compensation Period for purposes of calculating the annual cumulative liability of the Administrator for the Liability Period commencing on the date of this Agreement and terminating on December 31, 2005 shall be the date of this Agreement through December 31, 2005, and the Compensation Period for the Liability Period commencing January 1, 2006 and terminating on December 31, 2006 shall be January 1, 2006 through December 31, 2006.

The Trusts shall indemnify and hold the Administrator and its directors, officers, employees and agents harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Administrator resulting from any claim, demand, action or suit in connection with the Administrator’s acceptance of this Agreement, any action or omission by it in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been duly authorized by a Trust or its investment adviser, or upon reasonable reliance on information or records given or made by a Trust or its investment adviser, provided that this indemnification shall not apply to actions or omissions of the Administrator, its officers or employees in cases of its or their own negligence, willful misconduct, bad faith or reckless disregard.

With respect to any claim for indemnification under this Agreement, each Trust will be entitled to participate, as applicable, at its own expense in the defense of any suit brought to enforce any liability subject to such indemnification. In the event a Trust elects to assume the defense of any such suit and retain counsel, the Administrator, or any of its affiliated persons named as defendant or defendants in the suit, may retain additional counsel but shall bear the fees and expenses of such counsel unless (i) the applicable Trust has specifically authorized the retaining of such counsel or (ii) the Administrator shall have determined in good faith that the retention of such counsel is required as a result of a conflict of interest.

The indemnification contained herein shall survive the termination of this Agreement.

9. CONFIDENTIALITY

The Administrator agrees that, except as required by law, regulation or court process, it will keep confidential all records and information in its possession relating to the Trusts or their shareholders or shareholder accounts and will not disclose the same to any person unless the applicable Trust has provided written consent for such disclosure. Prior to disclosing any of the records or information relating to the Trusts without the applicable Trust’s prior written consent, the Administrator will provide the Trust with notice so that the Trust may, if it deems appropriate, seek a protective order or other appropriate remedy or waive compliance with the provisions of this Section 9; provided, however, the foregoing shall not apply if the request for disclosure by its terms prohibits such disclosure to the Trust or any delay. In the event that any relief sought by the Trust is not obtained or is not obtained in a timely manner, the Administrator will furnish only that portion of the records and information of the Trust that it is advised by its counsel necessary to respond to the request. Notwithstanding the foregoing, each Trust acknowledges that the Administrator may provide access to and use of confidential information relating to the Trusts, without the consent of the Trust or prior notice to the Trust, to the Administrator’s respective employees, contractors and agents engaged in activities contemplated by this Agreement or its professional advisors or auditors and who have been apprised of the confidential nature of such information.

10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS

Each Trust assumes full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to it.

In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator agrees that all records which it maintains for a Trust shall at all times remain the property of the applicable Trust, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request. The Administrator further agrees that all records which it maintains for a Trust pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940

Act unless any such records are earlier surrendered as provided above. Records may be surrendered in either written or machine-readable form.

11. SERVICES NOT EXCLUSIVE

The services of the Administrator to the Trusts are not to be deemed exclusive, and the Administrator shall be free to render similar services to others. The Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Trusts from time to time, have no authority to act or represent the Trusts in any way or otherwise be deemed an agent of the Trusts.

12. TERM, TERMINATION AND AMENDMENT

This Agreement shall become effective as of the date first above written. The Agreement shall remain in effect unless terminated by either party on sixty (60) days’ prior written notice. Termination of this Agreement with respect to any given Trust shall in no way affect the continued validity of this Agreement with respect to any other Trust. This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.

Upon termination of this Agreement, the Trusts shall pay to the Administrator such compensation and any reimbursable expenses as may be due under the terms hereof as of the date of such termination, including reasonable out-of-pocket expenses associated with such termination. This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.

13. NOTICES

Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other): if to the Trusts: Hambrecht & Quist Capital Management, LLC, 30 Rowes Wharf, Boston, MA, Attn: Kathleen Eckert, fax: 617-772-8577; if to the Administrator: State Street Bank and Trust Company, P.O. Box 5049, Boston, MA 02206-5049, Attn: Fund Administration Legal Department, fax: 617-662-3805.

14. NON-ASSIGNABILITY

This Agreement shall not be assigned by either party hereto without the prior consent in writing of the other party, except that the Administrator may assign this Agreement to a successor of all or a substantial portion of its business, or to a party controlling, controlled by or under common control with the Administrator.

15. SUCCESSORS

This Agreement shall be binding on and shall inure to the benefit of the Trusts and the Administrator and their respective successors and permitted assigns.

16. ENTIRE AGREEMENT

This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing.

17. WAIVER

The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party.

18. SEVERABILITY

If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances.

19. GOVERNING LAW

This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts.

20. FORCE MAJEURE

In the event the Administrator is unable to perform its obligations or duties under the terms of this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control, including, without limitation, any act of God, strike, riot, act of war, act of terrorism, equipment failure, mechanical failure, power failure or damage, computer virus, governmental action, communication disruption or other causes beyond its control, the Administrator shall not be liable for any loss, damage, cost, charge, counsel fee, payment, expenses or liability to any other party (whether or not a party to this Agreement) resulting from such failure to perform its obligations or duties under this Agreement or otherwise from such causes.

21. SEPARATE AGREEMENTS

The parties affirm and agree that this Agreement shall be enforced as a separate agreement as between the Administrator and each Trust. Nothing in this Agreement shall be interpreted to combine or collectively enjoin the Trusts. For all purposes, this Agreement shall be considered and interpreted as individual agreements between the Administrator and each Trust.

22. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS

A copy of each Trust’s declaration of trust 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 each Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of the Trusts.

23. REPRODUCTION OF DOCUMENTS

This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, xerographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

24. COUNTERPARTS

This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above.

		H&Q LIFE SCIENCES INVESTORS H&Q HEALTHCARE INVESTORS

		By:	/s/ Kathleen Eckert
		Name:	Kathleen Eckert
		Title:	Treasurer


		STATE STREET BANK AND TRUST COMPANY

		By:	/s/ Gary L. French
		Name:	Gary L. French
		Title:	Senior Vice President

TRANSFER AGENCY

AND SERVICE AGREEMENT

between

H & Q LIFE SCIENCES &
H & Q HEALTHCARE INVESTORS

and

COMPUTERSHARE TRUST COMPANY, N.A.

and

COMPUTERSHARE SHAREHOLDER SERVICES, INC.

Table of Contents

Section 1.	Certain Definitions	4

Section 2.	Appointment of Agent	6

Section 3.	Standard Services	7

Section 4.	Dividend Disbursing Services	8

Section 5.	Shareholder Internet Account Access Services	9

Section 6.	Optional Services and Standards	10

Section 7.	Customer Responsibilites For Employee Plan Services	12

Section 8.	Fee and Expenses	13

Section 9.	Representations and Warranties of Transfer Agent	15

Section 10.	Representations and Warranties of Customer	16

Section 11.	Indemnification/Limitation of Liability	16

Section 12.	Damages	18

Section 13.	Responsibilites of the Transfer Agent	18

Section 14.	Covenants of the Customer and Transfer Agent	19

Section 15.	Data Access and Proprietary Information	20

Section 16.	Confidentiality	21

Section 17.	Term and Termination	22

Section 18.	Assignment	23

Section 19.	Unaffiliated Third Parties	23

Section 20.	Miscellaneous	24

Section 20.1	Notices	24

Section 20.2	Successors	24

Section 20.3.	Amendments	24

Section 20.4.	Severability	24

Section 20.5.	Governing Law	24

Section 20.6	Force Majeure	25

Section 20.7	Descriptive Headings	25

Section 20.8	Third Party Beneficiaries	25

Section 20.9	Survival	25

Section 20.10	Priorities	25

Section 20.11.	Merger of Agreement	25

Section 20.12	Counterparts	25

AGREEMENT made as of the 1 st day of March, 2006, by and between H & Q Life Sciences Investors, Inc. and H & Q Healthcare Investors, a corporation, having its principal office and place of business at 30 Rowes Wharf, 4 th Floor, Boston, Massachusetts 02110 (each a “Customer” or the “Customer”), and Computershare Shareholder Services, Inc., (formerly known as EquiServe, Inc.) a Delaware corporation, and its fully owned subsidiary Computershare Trust Company, N.A., (formerly known as EquiServe Trust Company, N.A.) a federally chartered trust company doing business at 150 Royall Street, Canton, Massachusetts 02021, (collectively, the “Transfer Agent” or individually “CSS” and the “Trust Company”, respectively).

WHEREAS, the Customer desires to appoint the Transfer Agent as sole transfer agent, registrar, administrator of dividend reinvestment plans, option plans, and direct stock purchase plans and CSS as dividend disbursing agent and processor of all payments received or made by Customer under this Agreement.

WHEREAS, the Trust Company and CSS desire to accept such respective appointments and perform the services related to such appointments;

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:

1. Certain Definitions.

(a) “Account” or “Accounts” shall mean the account of each Shareholder which account shall hold any full or fractional shares of stock held by such Shareholder and/or outstanding funds or tax reporting to be done.

(b) “Account Agreement” shall have the meaning set forth in Section 7.10 .

(c) “Additional Services” shall mean any and all services which are not Services as set forth in the Fee and Service Schedule, but performed by Transfer Agent upon request of Customer.

(d) “Agreement” shall mean this agreement and any and all exhibits or schedules attached hereto and any and all amendments or modifications, which may from time to time be executed.

(e) “Annual Period” shall mean each twelve (12) month period commencing on the Effective Date and, thereafter, on each anniversary of the Effective Date.

(f) “Closed Account” shall mean an account with a zero share balance, no outstanding funds or no reportable tax information.

(g) “Customer ID(s)” shall have the meaning set forth in Section 15.3 .

(h) “Data Access Service” shall have the meaning set forth in Section 15.1 .

(i) “Dividend Reinvestment Plan” and “Direct Stock Purchase Plan” shall mean the services as set forth in Section 4 and in the Fee and Service Schedule.

(j) “Effective Date” shall mean the date first stated above.

(k) “Employee Stock Purchase Plan” and “Employee Stock Option Plan” shall mean the services as set forth in Section 6.

(l) “Enrollment Materials” shall mean the Plan brochure, enrollment card and other materials prepared by Transfer Agent for distribution to Participants.

(m) “Fee and Service Schedule” shall mean the fees and services set forth in the “Fee and Service Schedule” attached hereto.

(n) “Grant File” shall have the meaning set forth in Section 7.4 .

(o) “Optional Services” shall mean all services described in Section 5 .

(p) “Participant” or “Participants” shall mean employees of Customer who have been granted Options in the Option Plan and Customer’s employees who complete and return a signed enrollment form, which is accepted by Transfer Agent for the Employee Stock Purchase Plan, or Shareholders enrolled in a Dividend Reinvestment Plan or Direct Stock Purchase Plan.

(q) “Password(s)” shall have the meaning set forth in Section 15.3 .

(r) “Payroll File” shall mean the file from Customer delivered to Transfer Agent from time to time setting forth the amount of funds to be delivered on behalf of each Participant in the Employee Stock Purchase Plan and any additional information Transfer Agent may reasonably request.

(s) “Plan” or “Plans” shall mean the Customer’s Employee Stock Purchase Plan and Customer’s Employee Stock Option Plan.

(t) “Proprietary Information” shall have the meaning set forth in Section 15.4 .

(u) “Security Procedures” shall have the meaning set forth in Section 5.1 .

(v) “Services” shall mean any and all services as further described herein and in the “Fee and Service Schedule” or other schedules attached hereto.

(w) “SESO” shall mean the Simultaneous Exercise and Sale of Options services performed by Transfer Agent on behalf of Participants.

(x) “Share” shall mean Customer’s common stock, par value $.01 per share authorized by the Customer’s Articles of Incorporation, and other classes of Customer’s stock to be designated by the Customer in writing and for which the Transfer Agent agrees to service under this Agreement.

(y) “Shareholder” shall mean the holder of record of Shares.

(z) “Shareholder Data” shall have the meaning set forth in Section 15.2 .

(aa) “Shareholder Internet Services” shall have the meaning set forth in Section 5.1 .

2. Appointment of Agent .

2.1 Appointments. The Customer hereby appoints the Transfer Agent to act as sole transfer agent and registrar for all Shares in accordance with the terms and conditions hereof and as administrator of Plans and appoints CSS as dividend disbursing agent and processor of all payments received or made by or on behalf of the Customer under this Agreement, and the Transfer Agent and CSS accept the appointments. Customer shall provide Transfer Agent with certified copies of resolutions dated the date hereof appointing the Trust Company as Transfer Agent.

2.2 Documents . In connection with the appointing of Transfer Agent as the transfer agent and registrar for the Customer, the Customer will provide or has previously provided each of the following documents to the Transfer Agent:

(a) Copies of Registration Statements and amendments thereto, filed with the Securities and Exchange Commission for initial public offerings;

(b) Specimens of all forms of outstanding stock certificates, in forms approved by the Board of Directors of the Customer, with a certificate of the Secretary of the Customer as to such approval;

(c) Specimens of the Signatures of the officers of the Customer authorized to sign stock certificates and individuals authorized to sign written instructions and requests; and

(d) An opinion of counsel for the Customer addressed to both the Trust Company and CSS with respect to:

(i) The Customer’s organization and existence under the laws of its state of organization;

(ii) The status of all Shares of the Customer covered by the appointment under the Securities Act of 1933, as amended, and any other applicable federal or state statute; and

(iii) That all issued Shares are, and all unissued Shares will be, when issued, validly issued, fully paid and non-assessable.

2.3 Records . Transfer Agent may adopt as part of its records all lists of holders, records of Customer’s stock, books, documents and records which have been employed by any former agent of Customer for the maintenance of the ledgers for such shares, provided such ledger is certified by an officer

of Customer or the prior transfer agent to be true, authentic and complete.

2.4 Shares . Customer shall, if applicable, inform Transfer Agent as to (i) the existence or termination of any restrictions on the transfer of Shares and in the application to or removal from any certificate of stock of any legend restricting the transfer of such Shares or the substitution for such certificate of a certificate without such legend, (ii) any authorized but unissued Shares reserved for specific purposes, (iii) any outstanding Shares which are exchangeable for Shares and the basis for exchange, (iv) reserved Shares subject to option and the details of such reservation and (v) special instructions regarding dividends and information of foreign holders.

2.5 Customer’s Agent . Transfer Agent represents that it is engaged in an independent business and will perform its obligations under this Agreement as an agent of Customer.

2.6 Certificates . Customer shall deliver to Transfer Agent an appropriate supply of stock certificates, which certificates shall provide a signature panel for use by an officer of or authorized signor for Transfer Agent to sign as transfer agent and registrar, and which shall state that such certificates are only valid after being countersigned and registered.

3. Standard Services .

3.1 Transfer Agent Services . The Transfer Agent will perform the following services:

In accordance with the procedures established from time to time by agreement between the Customer and the Transfer Agent, the Transfer Agent shall:

(a) issue and record the appropriate number of Shares as authorized and hold such Shares in the appropriate Shareholder account;

(b) effect transfers of Shares by the registered owners thereof upon receipt of appropriate documentation;

(c) act as agent for Shareholders pursuant to the Dividend Reinvestment Plan, and other investment programs as amended from time to time in accordance with the terms of the agreements relating thereto to which the Transfer Agent is or will be a party; and

(d) issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by the Transfer Agent of an open penalty surety bond satisfactory to it and holding it and the Customer harmless, absent notice to the Customer and the Transfer Agent that such certificates have been acquired by a bonafide purchaser. The Transfer Agent, at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof without such indemnity. Further, the Transfer Agent may at its sole option accept indemnification from a Customer to issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed in lieu of an open penalty bond.

3.2 CSS Services . In accordance with procedures established from time to time by agreement between the Customer and CSS, CSS shall:

(a) prepare and transmit payments for dividends and distributions declared by the Customer, provided good funds for said dividends or distributions are received by CSS prior to the scheduled payable date for said dividends or distributions;

(b) issue replacement checks and place stop orders on original checks based on shareholder’s representation that a check was not received or was lost. Such stop orders and replacements will be deemed to have been made at the request of Customer, and Customer shall be responsible for all losses or claims resulting from such replacement; and

(c) Receive all payments made to the Customer or the Transfer Agent under the Dividend Reinvestment Plan, Direct Stock Purchase Plan, and Plans and make all payments required to be made under such plans, including all payments required to be made to the Customer.

3.3 Customary Services . The Transfer Agent shall perform all the customary services of a transfer agent, agent of dividend reinvestment plan, cash purchase plan and other investment programs as described in Section 3.1 consistent with those requirements in effect as of the date of this Agreement. CSS shall perform all the customary services of a dividend disbursing agent and a processor of payments as described in Section 3.2 consistently with those requirements in effect as of the date of this Agreement. The detailed services and definition, frequency, limitations and associated costs (if any) of the Services to be performed by the Transfer Agent are set out in the attached Fee and Service Schedule.

3.4 Compliance with Laws . The Customer agrees that each of the Trust Company and CSS is obligated to and the Trust Company and CSS agree to comply with all applicable federal, state and local laws and regulations, codes, order and government rules in the performance of its duties under this Agreement.

3.5 Unclaimed Property and Lost Shareholders . The Transfer Agent shall report unclaimed property to each state in compliance with state law and Section 17Ad-17 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for lost Shareholders. If the Customer is not in compliance with applicable state laws, there will be no charge for the first two years for this service, other than a charge of $3.00 per due diligence notice mailed; provided that after the first two years, the Transfer Agent will charge Customer its then standard fee plus any out-of-pocket expenses.

3.6 Compliance with Office of Foreign Asset Control (“OFAC”) Regulations . The Transfer Agent shall ensure compliance with OFAC laws.

4. Dividend Disbursing Services .

4.1 Declaration of Dividends . Upon receipt of a written notice from the President, any Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer of Customer declaring the payment of a dividend, CSS shall disburse such dividend payments provided that in advance of such payment, Customer furnishes CSS with sufficient funds. The payment of such funds to CSS for the

purpose of being available for the payment of dividend checks from time to time is not intended by Customer to confer any rights in such funds on Customer’s Shareholders whether in trust or in contract or otherwise.

4.2 Stop Payments . Customer hereby authorizes CSS to stop payment of checks issued in payment of dividends, but not presented for payment, when the payees thereof allege either that they have not received the checks or that such checks have been mislaid, lost, stolen, destroyed or, through no fault of theirs, are otherwise beyond their control and cannot be produced by them for presentation and collection, and CSS shall issue and deliver duplicate checks in replacement thereof, and Customer shall indemnify Transfer Agent against any loss or damage resulting from reissuance of the checks.

4.3 Tax Withholding . CSS is hereby authorized to deduct from all dividends declared by Customer and disbursed by CSS, as dividend disbursing agent, the tax required to be withheld pursuant to Sections 1441, 1442 and 3406 of the Internal Revenue Code of 1986, as amended, or by any Federal or State statutes subsequently enacted, and to make the necessary return and payment of such tax in connection therewith.

5. Shareholder Internet Account Access Services .

5.1 Shareholder Internet Services . The Transfer Agent shall provide internet access to Customer’s shareholders through Transfer Agent’s web site, equiserve.com (“Shareholder Internet Services”), pursuant to its established procedures (“Security Procedures”), to allow shareholders to view their account information and perform certain on-line transaction request capabilities. The Shareholder Internet Services shall be provided at no additional charge at this time, other than the transaction fees currently being charged for the different transactions as described on the Fee and Service Schedule. The Transfer Agent reserves the right to charge a fee for this service at any time in the future.

5.2 Scope of Transfer Agent Shareholder Internet Services Obligations . Transfer Agent shall at all times use reasonable care in performing Shareholder Internet Services under this Agreement. In the absence of breach of its duties under this Agreement, Transfer Agent shall not be liable for any action taken, suffered, or omitted by it or for any error made by it in the performance of its services under this Agreement. With respect to any claims for losses, damages, costs or expenses which may arise directly or indirectly from Security Procedures which Transfer Agent has implemented or omitted, Transfer Agent shall be presumed to have used reasonable care if it has followed, in all material respects, its Security Procedures then in effect. Transfer Agent may, but shall not be required to, modify such Security Procedures from time to time to the extent it believes, in good faith, that such modifications will enhance the security of Shareholder Internet Services. All data and information transmissions accessed via Shareholder Internet Services are for informational purposes only, and are not intended to satisfy regulatory requirements or comply with any laws, rules, requirements or standards of any federal, state or local governmental authority, agency or industry regulatory body, including the securities industry, which compliance is the sole responsibility of Customer.

5.3 No Other Warranties.

EXCEPT AS OTHERWISE EXPRESSLY STATED IN SECTION 5.2 OF THIS AGREEMENT, THE SHAREHOLDER INTERNET SERVICES ARE PROVIDED “AS-IS,” ON AN “AS AVAILABLE” BASIS, AND TRANSFER AGENT HEREBY SPECIFICALLY DISCLAIMS ANY AND ALL REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING SUCH SERVICES PROVIDED BY TRANSFER AGENT HEREUNDER, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.

6. Optional Services and Standards.

6.1 Optional Services.

To the extent that Customer elects to engage any entity other than the Transfer Agent (“Client Vendor”) to provide the services listed below the Customer shall give the Transfer Agent the Transfer Agent the right of first refusal to provide such services upon same terms and fees as the Client Vendor:

(a) Employee plan services;

(b) Employee Stock Purchase Plan Programs; and

(c) Corporate actions (including inter alia, odd lot buy backs, exchanges, mergers, redemptions, subscriptions, capital reorganization, coordination of post-merger services and special meetings).

In the event that the Client Vendor provides that above services, the Client shall pay the Transfer Agent its standard fees and expenses charged by the Transfer Agent for services rendered to support the above services rendered by the Vendor for the benefit of the Client.

6.2 Standards .

Optional Services shall be provided as follows:

(a) Transfer Agent shall, as exercise and sales agent for Customer in connection with the Employee Stock Option Plan, execute the Options granted by Customer to Participants and sell any related Shares in accordance with Transfer Agent’s generally applicable guidelines for plans of this type. Transfer Agent shall establish an Account for each such Participant and shall maintain a record of each transaction in such Account.

(b) In executing purchases and sales of Shares in connection with the Plans, Transfer Agent shall act independently of Customer and shall not consult with or be directed or influenced by Customer in any way. Subject only to the provisions of the Agreement, Transfer Agent shall have full discretion as to all matters relating to such purchases, including determining the number of Shares, if any, to be purchased on any day or at any time of that day, the prices paid for such Shares, the markets on which such purchases are made, and the persons (including the brokers-dealers) from or through whom such

purchases are made.

(c) Transfer Agent shall not be obligated to purchase Shares for any Participant of the Employee Stock Purchase Plan until Transfer Agent (i) is advised by CSS of its receipt from the Customer for each such purchase of available funds (which, in the case of funds transmitted by check, shall mean funds cleared for payment by CSS’s bank), (ii) receives the Payroll File from Customer, and (iii) reconciles the funds received by CSS with the Payroll File to determine that the aggregate amount of funds received correspond to the aggregate of the amounts specified in the Payroll File.

(d) Transfer Agent shall provide Enrollment Materials to Customer for distribution to each potential Participant, which materials shall include, when properly completed, the forms accepted by Transfer Agent to establish an Account. These Enrollment Materials shall be Transfer Agent’s standard forms (unless otherwise requested by Customer and agreed to in advance by Transfer Agent, in which event, Customer shall be charged a fee). In the event another firm has previously provided services similar to those provided by Transfer Agent hereunder in respect to the Plan, Transfer Agent shall not be obligated to receive in any Account assets from such firm until it has accepted properly completed Enrollment Materials from each Participant involved and reconciled the assets received with information received from such firm or Customer detailing the allocation of those assets to each relevant Account; provided that Transfer Agent shall have no responsibility for determining the accuracy of the information received or for the reconciling of such information with any Participant’s entitlements under the Plan.

(e) Transfer Agent shall provide exercise forms and information materials regarding SESO to Customer for distribution to each Participant in the Employee Stock Option Plan, which material shall include, when properly completed, authorization for Transfer Agent to sell the Shares. These materials shall be Transfer Agent’s standard forms (unless otherwise requested by Customer and agreed to in advance by Transfer Agent, in which event, Customer shall be charged a fee pursuant to Section 8 of this Agreement).

(f) Transfer Agent shall transmit to each Participant all proxy statements, annual reports, meeting notices and other materials received from Customer with respect to Shares acquired pursuant to the Plan and held in the Participant’s Account. Proxies shall be voted with respect to full Shares held in a Participant’s Account in accordance with the Participant’s instructions duly delivered to Transfer Agent.

(g) Transfer Agent shall prepare and distribute periodically to each Participant a statement as to the Share acquired for the Participant’s Account under the Plan. Transfer Agent shall provide Customer with summary data regarding Plan Accounts as reasonably requested by Customer and replacement transaction information upon request.

(h) Transfer Agent shall maintain a record of all Options granted by Customer to Participants of the Employee Stock Option Plan including any restricted share awards, and the date each Option granted vests in each account. Transfer Agent shall report to Customer the date on which such Participant exercises an Option and, on a periodic basis, any and all Account information reasonably requested by Customer, in such form as

mutually agreed to by the parties. Transfer Agent shall prepare and distribute to each Participant a statement as to the Options granted, Shares acquired and Shares sold for each Account under the Plan.

7. Customer Responsibilities For Employee Plan Services.

7.1 Payroll Files . Customer shall furnish to Transfer Agent, in a format prescribed by Transfer Agent, all Payroll Files and employee payroll and other information which, Transfer Agent may require in order to perform its Services or calculate its fees under the Agreement. In particular, but not by way of limitation, Customer shall notify Transfer Agent in the manner specified by Transfer Agent of the name and Account number of each Participant who terminates participation in the Plan whether by reason of termination of employment with Customer, cessation of payroll deductions or otherwise. Transfer Agent shall be entitled to rely upon the accuracy and completeness of all information which it reasonably believes to have been furnished to it by Customer or at Customer’s direction and shall have no duty to inquire about such information or about the application of any funds, securities or other assets held by Customer under the Plan.

7.2 Enrollment Materials . Customer shall distribute to each of its employees, and to each employee of any subsidiary or affiliate of Customer participating in the Plan who is eligible to become a Participant, a copy of the Enrollment Materials or a copy of the SESO exercise form and shall be solely responsible for collecting and delivering to Transfer Agent a new account application properly completed and executed by each Participant. Customer shall in no event permit an employee who has not attained the age of majority in the state in which the employee resides to become a Participant and shall refuse to accept Enrollment Materials completed by such an individual.

7.3 Employee Deductions . Customer shall collect all amounts deductible pursuant to the Employee Share Purchase Plan from the compensation of Participants and any other amounts contributed by the Participants pursuant to the Plan and shall make all required contributions, if any, in accordance with such Plan, and shall hold such amounts until delivered to CSS.

7.4 Payroll and Grant Files . Customer shall deliver each Payroll File and grant file (“Grant File”) to Transfer Agent in a machine-readable format conforming to specifications furnished by Transfer Agent from time to time. If a Payroll File or Grant File does not conform to such specifications, processing of such Payroll File by Transfer Agent shall not be required. Each Payroll File shall be reconciled by Customer against the funds and/or Shares referenced in such file prior to delivery of the file to Transfer Agent. If any Payroll File or Grant File submitted to Transfer Agent is incomplete, incorrect or subsequently changed by Customer, Transfer Agent shall not be required to correct, change or otherwise prepare such file for processing unless Customer pays additional fees for customized and manual processing.

7.5 Payment of Funds . All remittances of funds by Customer to CSS with respect to the Employee Share Purchase Plan shall be made either by check or by wire transfer in accordance with instructions received from CSS. All Payroll Files and Grant Files shall be delivered to Transfer Agent at the place and in the manner specified in instructions transmitted by Transfer Agent to Customer.

7.6 Customer Deliveries . All funds paid to CSS and all Payroll Files and Grant Files delivered to Transfer Agent on behalf of Customer and any of its subsidiaries participating in the Plan, as well as all

other notices and instructions relating to the plan or this Agreement, shall be delivered by the department, office or source within Customer, or other person acting on behalf of Customer, specified by Customer. For purposes of the Agreement, any action taken by any person acting on behalf of Customer shall be considered as an action by Customer. Delivery of funds or Payroll Files or Grant Files other than in accordance with Section 7.4 and Section 7.5 shall not constitute delivery within the meaning of the Agreement.

7.7 Reports and Statements . Each report and statement issued by Transfer Agent shall be deemed correct unless Transfer Agent receives written notice of any incorrectness, incompleteness or inaccuracy in the report or statement within thirty (30) days.

7.8 Content of Communications . Customer shall obtain the prior written consent of Transfer Agent to any reference to Transfer Agent or to Services to be furnished by Transfer Agent in any communication or document pertaining to the Plan not prepared by Transfer Agent; provided that Transfer Agent shall have no responsibility or liability for the content of any such communication or document.

7.9 Errors . Customer will promptly notify Transfer Agent of any errors or omissions in information supplied by Customer. In such an event, or in the event Transfer Agent executes a purchase of Shares and subsequently discovers an error or omission in information supplied to it by Customer, Transfer Agent’s sole obligation shall be to use reasonable efforts to correct any resulting errors in any reports prepared for Customer or any Participant, and Customer assumes responsibility for any loss incurred by Transfer Agent.

7.10 Account Agreements . Each Account established for a Participant may be used by the Participant for transactions in such securities (including securities not issued by Customer) and other assets as are allowable for investment by Transfer Agent. The relationship between Transfer Agent and each Participant with respect to the Account and transactions therein shall be governed by a separate agreement between them (an “Account Agreement”) which constitutes part of the Enrollment Materials. Each Account Agreement, unless previously terminated, shall survive the termination of the Agreement, and each Account Agreement and the fees and commissions applied thereunder may be amended from time to time in accordance with the terms thereof without notice to or consent from Customer. Transfer Agent may, at its own expense, solicit indications of interest from or make offers to the Participants regarding securities, or other assets or services upon the consent of Customer, but Customer shall have no responsibility to assist Transfer Agent or make any recommendations to Participants in this regard.

8. Fees and Expenses.

8.1 Fee and Service Schedules . Customer agrees to pay Transfer Agent the fees for Services performed pursuant to this Agreement as set forth in the Fee and Service Schedule attached hereto, for the initial term of the Agreement (the “Initial Term”).

8.2 COLA/Fee Increases . After the Initial Term of the Agreement, providing that service mix and volumes remain constant, the fees listed in the Fee and Service Schedule shall be increased (a) by the accumulated change in the National Employment Cost Index for Service Producing Industries (Finance, Insurance, Real Estate) for the preceding years of the contract, as published by the Bureau of Labor Statistics of the United States Department of Labor or (b) to the Transfer Agent’s minimum fee then in effect, whichever is greater. Fees will be increased on this basis on each successive contract anniversary thereafter.

8.3 Adjustments . Notwithstanding Section 8.1 above, fees, and the out-of-pocket expenses and advances identified under Section 8.4 below, may be changed from time to time as agreed upon in writing between the Transfer Agent and the Customer.

8.4 Out-of-Pocket Expenses . In addition to the fees paid under Section 8.1 above, the Customer agrees to reimburse the Transfer Agent for out-of-pocket expenses, including but not limited to postage, Transfer Agent administrative costs, forms, telephone, microfilm, microfiche, taxes, records storage, exchange and broker fees, or advances incurred by the Transfer Agent for the items set out in Exhibit A attached hereto. In addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Customer, will be reimbursed by the Customer.

8.5 Conversion Funds . Conversion funding required by any out of proof condition caused by a prior agents’ services shall be advanced to Transfer Agent prior to the commencement of services.

8.6 Postage . Postage for mailing of dividends, proxies, Customer reports and other mailings to all Shareholder Accounts shall be advanced to the Transfer Agent by the Customer prior to commencement of the mailing date of such materials.

8.7 Invoices . The Customer agrees to pay all fees and reimbursable expenses within 30 days of the date of the respective billing notice, except for any fees or expenses that are subject to good faith dispute. In the event of such a dispute, the Customer may only withhold that portion of the fee or expense subject to the good faith dispute. The Customer shall notify the Transfer Agent in writing within twenty-one (21) calendar days following the receipt of each billing notice if the Customer is disputing any amounts in good faith. If the Customer does not provide such notice of dispute within the required time, the billing notice will be deemed accepted by the Customer. The Customer shall settle such disputed amounts within five (5) business days of the day on which the parties agree on the amount to be paid by payment of the agreed amount. If no agreement is reached, then such disputed amounts shall be settled as may be required by law or legal process.

8.8 Taxes . Customer shall pay all sales or use taxes in lieu thereof with respect to the Services (if applicable) provided by Transfer Agent under this Agreement.

8.9 Late Payments .

(a) If any undisputed amount in an invoice of the Transfer Agent (for fees or reimbursable expenses) is not paid when due, the Customer shall pay the Transfer Agent interest thereon (from the due date to the date of payment) at a per annum rate equal to one percent (1.0%) plus the Prime Rate (that is, the base rate on corporate loans posted by large domestic banks) published by The Wall Street Journal (or, in the event such rate is not so published, a reasonably equivalent published rate selected by Customer on the first day of publication during the month when such amount was due). Notwithstanding any other provision hereof, such interest rate shall be no greater than permitted under applicable provisions of Massachusetts or New Jersey law.

(b) The failure by Customer to pay an invoice within 90 days after receipt of such invoice or the failure by the Customer to timely pay two consecutive invoices shall constitute a material breach pursuant to Section 17.4(a) below. The Transfer Agent may terminate this Agreement for such material breach

immediately and shall not be obligated to provide the Customer with 30 days to cure such breach.

8.10 Services Required by Legislation . Services required by legislation or regulatory mandate that become effective after the Effective Date of this Agreement shall not be part of the Services, and shall be billed by appraisal.

8.11 Overtime Charges . Overtime charges will be assessed in the event of a late delivery to the Transfer Agent of Customer material for mailings to Shareholders, unless the mail date is rescheduled. Such material includes, but is not limited to, proxy statements, quarterly and annual reports, dividend enclosures and news releases.

8.12 Bank Accounts . The Customer acknowledges that the bank accounts maintained by CSS in connection with the Services will be in its name and that CSS may receive investment earnings in connection with the investment at CSS’s risk and for its benefit of funds held in those accounts from time to time.

9. Representations and Warranties of Transfer Agent .

9.1 Governance . The Trust Company is a federally chartered limited purpose national bank duly organized under the laws of the United States and CSS is a corporation validly existing and in good standing under the laws of the State of Delaware and each has full corporate power, authority and legal right to execute, deliver and perform this Agreement. The execution, delivery and performance of this Agreement by Transfer Agent has been duly authorized by all necessary corporate action and constitutes the legal valid and binding obligation of Transfer Agent enforceable against Transfer Agent in accordance with its terms.

9.2 Compliance . The execution, delivery and performance of the Agreement by Transfer Agent will not violate, conflict with or result in the breach of any material term, condition or provision of, or require the consent of any other party to, (i) any existing law, ordinance, or governmental rule or regulation to which Transfer Agent is subject, (ii) any judgement, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which is applicable to Transfer Agent, (iii) the incorporation documents or by-laws of , or any material agreement to which Transfer Agent is a party.

9.3 Facilities . The Transfer Agent has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.

9.4 Computer Services . DATA ACCESS SERVICE AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. TRANSFER AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CUSTOMER HEREBY ACKNOWLEDGES THAT THE DATA ACCESS SERVICE MAY NOT BE OR BECOME AVAILABLE DUE TO ANY NUMBER OF FACTORS INCLUDING WITHOUT LIMITATION PERIODIC SYSTEM MAINTENANCE, SCHEDULED OR UNSCHEDULED, ACTS OF GOD, TECHNICAL FAILURE, TELECOMMUNICATIONS INFRASTRUCTURE OR DELAY OR DISRUPTION ATTRIBUTABLE TO VIRUSES, DENIAL OF SERVICE ATTACKS, INCREASED OR FLUCTUATING DEMAND, AND ACTIONS AND OMISSIONS OF THIRD PARTIES. THEREFORE TRANSFER AGENT EXPRESSLY DISCLAIMS

ANY EXPRESS OR IMPLIED WARRANTY REGARDING SYSTEM AND/OR DATA ACCESS SERVICE AVAILABILITY, ACCESSABILITY, OR PERFORMANCE.

10. Representations and Warranties of Customer.

The Customer represents and warrants to the Transfer Agent that:

10.1 Organizations . It is a corporation duly organized and existing and in good standing under the laws of Massachusetts;

10.2 Governance. It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement. All corporate proceedings required by said Articles of Incorporation, By-Laws and applicable law have been taken to authorize it to enter into and perform this Agreement; and

10.3 Securities Act of 1933. A registration statement under the Securities Act of 1933, as amended (the “1933 Act”) has been filed and is currently effective, or will be effective prior to the sale of any Shares, and will remain so effective, and all appropriate state securities law filings have been made with respect to all the Shares of the Customer being offered for sale except for any Shares which are offered in a transaction or series of transactions which are exempt from the registration requirements of the 1933 Act and state securities laws; information to the contrary will result in immediate notification to the Transfer Agent.

11. Indemnification/Limitation of Liability.

11.1 Standard of Care. The Transfer Agent shall at all times act in good faith and agrees to use its best efforts within reasonable time limits to insure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors unless said errors are caused by its negligence, bad faith or willful misconduct or that of its employees as set forth and subject to the limitations set forth in Section 11.4 below.

11.2 Customer Indemnity . The Transfer Agent shall not be responsible for, and the Customer shall indemnify and hold the Transfer Agent harmless from and against, any and all losses, claims, damages, costs, charges, counsel fees and expenses, payments, expenses and liability arising out of or attributable to:

(a) All actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, provided such actions are taken in good faith and without negligence or willful misconduct;

(b) The Customer’s lack of good faith, negligence or willful misconduct or the breach of any representation or warranty of the Customer hereunder;

(c) The reliance or use by the Transfer Agent or its agents or subcontractors of information, records and documents which (i) are received by the Transfer Agent or its agents or subcontractors and furnished to it by or on behalf of the Customer, and (ii) have been prepared and /or maintained by the Customer or any other person or firm on behalf of the Customer. Such other person or firm

shall include any former transfer agent or former registrar, or co-transfer agent or co-registrar or any current registrar where the Transfer Agent is not the current registrar;

(d) The reliance or use by the Transfer Agent or its agents or subcontractors of any paper or document reasonably believed to be genuine and to have been signed by the proper person or persons including Shareholders or electronic instruction from Shareholders submitted through the shareholder Internet Services or other electronic means pursuant to security procedures established by the Transfer Agent;

(e) The reliance on, or the carrying out by the Transfer Agent or its agents or subcontractors of any instructions or requests of the Customer’s representatives;

(f) The offer or sale of Shares in violation of any federal or state securities laws requiring that such Shares be registered or in violation of any stop order or other determination or ruling by any federal or state agency with respect to the offer or sale of such Shares;

(g) The negotiations and processing of all checks, including checks made payable to prospective or existing shareholders which are tendered to the Transfer Agent for the purchase of Shares (commonly known as “third party checks”);

(h) Any actions taken or omitted to be taken by any former agent of Customer and arising from Transfer Agent’s reliance on the certified list of holders; and

(i) The negotiation, presentment, delivery or transfer of Shares through the Direct Registration System Profile System.

11.3 Instructions . At any time the Transfer Agent may apply to any officer of the Customer for instruction, and may consult with legal counsel for the Transfer Agent or the Customer with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement, and Transfer Agent and its agents and subcontractors shall not be liable and shall be indemnified by the Customer for any action taken or omitted by it in reliance upon such instructions or upon the advice or opinion of such counsel. The Transfer Agent, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Transfer Agent or its agents or subcontractors by telephone, in person, machine readable input, telex, CRT data entry or similar means authorized by the Customer, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Customer. The Transfer Agent, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of officers of the Customer, and the proper countersignature of any former transfer agent or former registrar, or of a co-transfer agent or co-registrar.

11.4 Transfer Agent Indemnification/Limitation of Liability . Transfer Agent shall be responsible for and shall indemnify and hold the Customer harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to Transfer Agent’s refusal or failure to comply with the terms of this Agreement, or which arise out of Transfer Agent’s negligence or willful misconduct or which arise out of the breach of any representation or warranty of

Transfer Agent hereunder, for which Transfer Agent is not entitled to indemnification under this Agreement; provided, however, that Transfer Agent’s aggregate liability during any term of this Agreement with respect to, arising from, or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by the Customer to Transfer Agent as fees and charges, but not including reimbursable expenses, during the six (6) calendar months immediately preceding the event for which recovery from the Transfer Agent is being sought.

11.5 Notice. In order that the indemnification provisions contained in this Section shall apply, upon the assertion of a claim for which one party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The indemnifying party shall have the option to participate with the indemnified party in the defense of such claim or to defend against said claim in its own name or the name of the indemnified party. The indemnified party shall in no case confess any claim or make any compromise in any case in which the indemnifying party may be required to indemnify it except with the indemnifying party’s prior written consent.

12. Damages.

NO PARTY SHALL BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, LOSS OF ANTICIPATED PROFITS, OCCASIONED BY A BREACH OF ANY PROVISION OF THIS AGREEMENT EVEN IF APPRISED OF THE POSSIBILITY OF SUCH DAMAGES.

13. Responsibilities of the Transfer Agent.

The Transfer Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Customer, by its acceptance hereof, shall be bound:

13.1 Whenever in the performance of its duties hereunder the Transfer Agent shall deem it necessary or desirable that any fact or matter be proved or established prior to taking or suffering any action hereunder, such fact or matter may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant treasurer, the Secretary or any Assistant Secretary of the Customer and delivered to the Transfer Agent. Such certificate shall be full authorization to the recipient for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

13.2 The Customer agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Transfer Agent for the carrying out, or performing by the Transfer Agent of the provisions of this Agreement.

13.3 Transfer Agent, any of its affiliates or subsidiaries, and any stockholder, director, officer or employee of the Transfer Agent may buy, sell or deal in the securities of the Customer or become pecuniary interested in any transaction in which the Customer may be interested, or contract with or lend money to the Customer or otherwise act as fully and freely as though it were not appointed as agent

under this Agreement. Nothing herein shall preclude the Transfer Agent from acting in any other capacity for the Customer or for any other legal entity.

13.4 No provision of this Agreement shall require the Transfer Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it shall believe in good faith that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

14. Covenants of the Customer and Transfer Agent.

14.1 Customer Corporate Authority . The Customer shall furnish to the Transfer Agent the following;

(a) A copy of the Articles of Incorporation and By-Laws of the Customer;

(b) Copies of all material amendments to its Articles of Incorporation or By-Laws made after the date of this Agreement, promptly after such amendments are made; and

(c) A certificate of the Customer as to the Shares authorized, issued and outstanding, as well as a description of all reserves of unissued Shares relating to the exercise of options, warrants or a conversion of debentures or otherwise.

14.2 Transfer Agent Facilities . The Transfer Agent hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Customer for the safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any, and for the preparation, use, and recordkeeping of such certificates, forms and devices.

14.3 Records . The Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. The Transfer Agent agrees that all such records prepared or maintained by it relating to the services performed hereunder are the property of the Customer and will be preserved, maintained and made available in accordance with the requirements of law, and will be surrendered promptly to the Customer on and in accordance with its request.

14.4 Confidentiality . The Transfer Agent and the Customer agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law.

14.5 Non-Solicitation of Transfer Agent Employees . Customer shall not attempt to hire or assist with the hiring of an employee of EquiServe or affiliated companies or encourage any employee to terminate their relationship with EquiServe or its affiliated companies.

14.6 Notification . Customer shall notify Transfer Agent as soon as possible in advance of any stock split, stock dividend similar event which may affect the Shares, and any bankruptcy, insolvency, moratorium or other proceeding regarding Customer affecting the enforcement of creditors’ rights. Notwithstanding any other provision of the Agreement to the contrary, Transfer Agent will have no obligation to perform any Services under the Agreement subsequent to the commencement of any

bankruptcy, insolvency, moratorium or other proceeding regarding Customer affecting the enforcement of creditor’ rights unless Transfer Agent receives assurance satisfactory to it that it will receive full payment for such services. Further, Customer may not assume the Agreement after the filing of a bankruptcy petition without transfer agents written consent.

15. Data Access Service and Proprietary Information.

15.1 Transfer Agent has developed a data access service that enables the Customer to access the Customer’s shareholder records maintained on Transfer Agent’s computer system through the Internet or remote access, as the case may be (the “Data Access Service”). The Customer wishes to use such Data Access Service subject to the terms and conditions set forth herein. Therefore, the Customer and Transfer Agent agree as follows:

15.2 Access to Shareholder Data.

The Service provided to the Customer pursuant to this Agreement shall include granting the Customer access to the Shareholder, Customer and proxy information (“Shareholder Data”) maintained on the records database for the purpose of examining, maintaining, editing, or processing transactions with respect to Shareholder Data.

15.3 Procedures for Access.

To use the Data Access Service, the Customer must access through the Internet or remote terminal, as the case may be, pursuant to the procedures provided by Transfer Agent. Such access is accomplished by entering a unique Customer identification (“Customer ID(s)”) and passwords (“Password(s)”) assigned to the Customer by Transfer Agent. Each Customer ID and Password assigned to the Customer is for use only by the Customer. The Customer shall establish and maintain reasonable security and control over all such Customer IDs and Passwords. Transfer Agent shall maintain reasonable security and control over each Customer ID. After Transfer Agent assigns the Customer a Password, the Customer shall change the Password. The Customer recognizes that Transfer Agent does not have knowledge of the Password, which is selected by the Customer and is within the Customer’s exclusive control after the necessary change. The Customer may change any Password thereafter at any time. Customer agrees to notify Transfer Agent immediately if any employee of Customer granted access to the Data Access Service leaves the employ of the Customer, in order to enable Transfer Agent to terminate such employee’s access.

15.4 Proprietary Information .

The Customer acknowledges that the databases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the Customer by the Transfer Agent as part of the Data Access Service to access Shareholder Data maintained by the Transfer Agent on data bases under the control and ownership of the Transfer Agent or other third party constitute copyrighted, trade secret, or other proprietary information (collectively, “Proprietary Information”) of substantial value to the Transfer Agent or other third party. In no event shall Proprietary Information be deemed Shareholder Data. The Customer agrees to treat all Proprietary Information as proprietary to the Transfer Agent and further agrees that it shall not divulge any Proprietary Information to any person or

organization except as may be provided hereunder. Without limiting the foregoing, the Customer agrees for itself and its employees and agents:

(a) to refrain from copying or duplicating in any way the Proprietary Information, other than to print out pages reflecting Shareholder Data to provide to shareholders or for Customer’s internal use;

(b) to refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform Transfer Agent in a timely manner of such fact and dispose of such information in accordance with Transfer Agent’s instructions;

(c) to refrain from causing or allowing the Proprietary Information from being retransmitted to any other computer facility or other location, except with the prior written consent of Transfer Agent;

(d) that the Customer shall have access only to those authorized transactions agreed upon by the parties; and

(e) to honor all reasonable written requests made by Transfer Agent to protect at Transfer Agent’s expense the rights of Transfer Agent Proprietary Information at common law, under federal copyright law and under other federal or state law.

Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 15 .

15.5 Content . If the Customer notifies the Transfer Agent that any part of the Data Access Service does not operate in material compliance with the user documentation provided by the Transfer Agent for such service, the Transfer Agent shall endeavor in a timely manner to correct such failure. Organizations from which the Transfer Agent may obtain certain data included in the Services are solely responsible for the contents of such data and the Customer agrees to make no claim against the Transfer Agent arising out of the contents of such third party data, including, but not limited to, the accuracy thereof.

15.6 Transactions . If the transactions available to the Customer include the ability to originate electronic instructions to the Transfer Agent in order to (i) effect the transfer or movement of Shares or direct CSS to transfer cash or (ii) transmit Shareholder information or other information, then in such event the Transfer Agent shall be entitled to rely on the validity and authenticity of such instructions without undertaking any further inquiry as long as such instructions are undertaken in conformity with security procedures established by the Transfer Agent from time to time.

16. Confidentiality.

16.1 Covenant. The Transfer Agent and the Customer agree that they will not, at any time during the term of this Agreement or after its termination, reveal, divulge, or make known to any person, firm, corporation or other business organization, any customers’ lists, trade secrets, cost figures and projections, profit figures and projections, or any other secret or confidential information whatsoever,

whether of the Transfer Agent or of the Customer, used or gained by the Transfer Agent or the Customer during performance under this Agreement. The Customer and the Transfer Agent further covenant and agree to retain all such knowledge and information acquired during and after the term of this Agreement respecting such lists, trade secrets, or any secret or confidential information whatsoever in trust for the sole benefit of the Transfer Agent or the Customer and their successors and assigns. The above prohibition of disclosure shall not apply to the extent that the Transfer Agent must disclose such data to its sub-contractor or agent for purposes of providing services under this Agreement.

16.2 Request for Records . In the event that any requests or demands are made for the inspection of the Shareholder records of the Customer, other than request for records of Shareholders pursuant to standard subpoenas from state or federal government authorities (e.g., in divorce and criminal actions), the Transfer Agent will endeavor to notify the Customer and to secure instructions from an authorized officer of the Customer as to such inspection. The Transfer Agent expressly reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by counsel that it may be held liable for the failure to exhibit the Shareholder records to such person or if required by law or court order.

17. Term and Termination.

17.1 Term . The Initial Term of this Agreement shall be three (3) years from the date first stated above unless terminated pursuant to the provisions of this Section 17 . Unless a terminating party gives written notice to the other party sixty (60) days before the expiration of the Initial Term this Agreement will renew automatically from year to year (“Renewal Term”). Sixty (60) days before the expiration of the Initial Term or a Renewal Term the parties to this Agreement will agree upon a Fee Schedule for the upcoming Renewal Term. If no new fee schedule is agreed upon, the fees will increase as set forth in Section 8.2 .

17.2 Early Termination. Notwithstanding anything contained in this Agreement to the contrary, should Customer desire to move any of its Services provided by the Transfer Agent hereunder to a successor service provider prior to the expiration of the then current Initial or Renewal Term, or without the required notice period, the Transfer Agent shall make a good faith effort to facilitate the conversion on such prior date, however, there can be no guarantee that the Transfer Agent will be able to facilitate a conversion of Services on such prior date. In connection with the foregoing, should Services be converted to a successor service provider, or if the Customer is liquidated or its assets merged or purchased or the like with another entity which does not utilize the services of the Transfer Agent, the fees payable to the Transfer Agent shall be calculated as if the services had remained with the Transfer Agent until the expiration of the then current Initial or Renewal Term and calculated at existing rates on the date notice of termination was given to the Transfer Agent, and the payment of fees to the Transfer Agent as set forth herein shall be accelerated to the date prior to the conversion or termination of services. Section 17.2 shall not apply if the Transfer Agent is terminated for cause under Section 17.4(a) of this Agreement. Once this Agreement is terminated, any and all other services provided by Transfer Agent for the Customer will be deemed terminated on said date.

17.3 Expiration of Term . After the expiration of the Initial Term or Renewal Term whichever currently is in effect, should either party exercise its right to terminate, all reasonable out-of-pocket expenses associated with the movement of records and material will be borne by the Customer. Additionally, the Transfer Agent will charge a de-conversion/transition fee in an amount equal to 25% of the

aggregate fees incurred by Customer during the immediately preceding twelve (12) month period, provided, however, such fee shall in no event be less than $3,750.00.

17.4 Termination .

This Agreement may be terminated in accordance with the following:

(a) at any time by any party upon a material breach of a representation, covenant or term of this Agreement by any other unaffiliated party which is not cured within a period not to exceed thirty (30) days after the date of written notice thereof by one of the other parties; and

(b) by Transfer Agent, at any time, in the event that during the term of this Agreement, a bankruptcy or insolvency proceeding is filed by or against Customer or a trustee or receiver is appointed for any substantial part of Customer’s property (and in a case of involuntary bankruptcy, insolvency or receivership proceeding, there is entered an order for relief, or order appointing a receiver or some similar order or decree and Customer does not succeed in having such order lifted or stayed within sixty (60) days from the date of its entry), or Customer makes an assignment of all or substantially all of its property for the benefit of creditors or ceases to conduct its operations in the normal course or business.

17.5 Records. Upon receipt of written notice of termination, the parties will use commercially practicable efforts to effect an orderly termination of this Agreement. Without limiting the foregoing, Transfer Agent will deliver promptly to Customer, in machine readable form on media as reasonably requested by Customer, all Shareholder and other records, files and data supplied to or compiled by Transfer Agent on behalf of Customer.

18. Assignment.

18.1 Affiliates . The Transfer Agent may, without further consent of the Customer assign its rights and obligations hereunto to any affiliated transfer agent registered under Section 17A(c)(2) of the Exchange Act.

18.2 Sub-contractors . Transfer Agent may, without further consent on the part of Customer, subcontract with other subcontractors for telephone and mailing services as may be required from time to time; provided, however, that the Transfer Agent shall be as fully responsible to the Customer for the acts and omissions of any subcontractor as it is for its own acts and omissions.

19. Unaffiliated Third Parties.

Nothing herein shall impose any duty upon the Transfer Agent in connection with or make the Transfer Agent liable for the actions or omissions to act of unaffiliated third parties such as, by way of example and not limitation, airborne services, the U.S. mails and telecommunication companies, provided, if the Transfer Agent selected such company, the Transfer Agent shall have exercised due care in selecting the same.

20. Miscellaneous.

20.1 Notices.

Any notice or communication by the Transfer Agent or the Customer to the other is duly given if in writing and delivered in person or mailed by first class mail, postage prepaid, telex, telecopier or overnight air courier guaranteeing next day delivery, to the other’s address:

If to the Customer:

H & Q Life Sciences Investors and H & Q Healthcare Investors

30 Rowes Wharf, 4 th Floor

Boston, Massachusetts 0210

Telecopy No.: (617) 772-8577

Attn: Kimberly Carroll

If to the Transfer Agent:

Computershare Trust Company, N.A.

250 Royall Street

Canton, MA 02021

Telecopy No.: (781) 575-4188

Attn: General Counsel

The Transfer Agent and the Customer may, by notice to the other, designate additional or different addresses for subsequent notices or communications.

20.2 Successors.

All the covenants and provisions of this agreement by or for the benefit of the Customer or the Transfer Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

20.3 Amendments.

This Agreement may be amended or modified by a written amendment executed by the parties hereto and, to the extent required, authorized or approved by a resolution of the Board of Directors of the Customer.

20.4 Severability .

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provision, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

20.5 Governing Law.

This Agreement shall be governed by the laws of the Commonwealth of Massachusetts.

20.6 Force Majeure.

Notwithstanding anything to the contrary contained herein, Transfer Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.

20.7 Descriptive Headings.

Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

20.8 Third Party Beneficiaries.

The provisions of this Agreement are intended to benefit only the Transfer Agent, the Customer and their respective permitted successors and assigns. No rights shall be granted to any other person by virtue of this agreement, and there are no third party beneficiaries hereof.

20.9 Survival.

All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and protection of proprietary rights and trade secrets shall survive the termination of this Agreement.

20.10 Priorities.

In the event of any conflict, discrepancy, or ambiguity between the terms and conditions contained in this Agreement and any schedules or attachments hereto, the terms and conditions contained in this Agreement shall take precedence.

20.11 Merger of Agreement.

This agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof, whether oral or written.

20.12 Counterparts.

This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by one of its officers thereunto duly authorized, all as of the date first written above.

H & Q LIFE SCIENCES INVESTORS AND

H & Q HEALTHCARE INVESTORS

By:	/s/ Kathleen Eckert
Name:	Kathleen Eckert
Title:	Treasurer

COMPUTERSHARE SHAREHOLDER SERVICES, INC.

COMPUTERSHARE TRUST COMPANY, N.A.

On Behalf of Both Entities

By:	/s/ Dennis V. Moccia
Name:	Dennis V. Moccia
Title:	Managing Director

Exhibit 99.n(i)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Registration Statement on Form N-2 of our report dated November 25, 2013, relating to the financial statements and financial highlights of H&Q Healthcare Investors appearing in the Annual Report on Form N-CSR of H&Q Healthcare Investors for the year ended September 30, 2013, and to the references to us under the headings “Financial Highlights” and “Experts” in the Prospectus and “Financial Statements” in the Statement of Additional Information, which are part of such Registration Statement.

/S/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
April 16, 2014

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee or Officer of H&Q HEALTHCARE INVESTORS (the “Fund”) constitutes and appoints Daniel R. Omstead, Laura Woodward, Joseph R. Fleming and Brian S. Vargo and each of them, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such attorney-in-fact in such attorney-in-fact’s name, place, and stead, in any and all capacities, to sign the Fund’s registration statement on Form N-2 to be filed pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 with respect to the offering and transactions approved by the Trustees of the Fund on March 11, 2014, and any amendments, exhibits, or supplements thereto, and to file and/or withdraw the same, with all other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person in his or her capacity as a Trustee or Officer of the Fund, hereby ratifying and confirming all that each said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.