NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(1) Organization H&Q Life Sciences Investors (the Fund) is a Massachusetts business trust registered under the
Investment Company Act of 1940 as a diversified closed-end management investment company. The Fund's
investment objective is long-term capital appreciation through investment in securities of companies in the life
sciences industries. The Fund invests primarily in securities of public and private companies that are believed to
have significant potential for above-average growth. The Fund was organized on February 20, 1992 and
commenced operations on May 8, 1992. The preparation of these financial statements requires the use of certain
estimates by management in determining the entity's assets, liabilities, revenues and expenses. Actual results could
differ from these estimates. The following is a summary of significant accounting policies consistently followed by
the Fund, which are in conformity with those generally accepted in the investment company industry.
Transactions related to the investments of the Fund are recorded on the date the securities are purchased or sold.
Investments traded on 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. As indicated in Note 5, investments for which market quotations are
not readily available are valued at fair value as determined in good faith by the Board of Trustees of the Fund.
Temporary cash investments with a maturity of 60 days or less are valued at amortized cost.
Gains and losses from sales of investments are recorded using the "identified cost" method for both financial
reporting and Federal income tax purposes. Investment income and expenses are recorded