money & pens

Business as usual under new lead manager

Worldwide Healthcare Trust 26 March 2018 Review
Download PDF

Worldwide Healthcare Trust

Business as usual under new lead manager

Investment trusts

26 March 2018

Price

2,420.0p

Market cap

£1,207m

AUM

£1,269m

NAV*

2,406.2p

Premium to NAV

0.6%

NAV**

2,417.5p

Premium to NAV

0.1%

*Excluding income. **Including income. As at 22 March 2018.

Yield

0.9%

Ordinary shares in issue

49.9m

Code

WWH

Primary exchange

LSE

AIC sector

Specialist: Biotech & Healthcare

Benchmark

MSCI World Health Care

Share price/discount performance

Three-year performance vs index

52-week high/low

2,679.0p

2,265.0p

2,640.8p

2,268.2p

**Including income.

Gearing

Gross*

18.4%

Net*

8.5%

*As at 28 February 2018.

Analysts

Mel Jenner

+44 (0)20 3077 5720

Sarah Godfrey

+44 (0)20 3681 2519

Worldwide Healthcare Trust is a research client of Edison Investment Research Limited

Worldwide Healthcare Trust (WWH) is managed by OrbiMed Capital, a leading specialist healthcare investment company. Since December 2017, following the departure of Sam Isaly, its lead manager is Sven Borho, who is a founding partner of OrbiMed and has been involved with the management of WWH since the trust’s launch in April 1995. Borho is bullish on the outlook for the global healthcare sector due to continued innovation, a benign regulatory environment, an expected acceleration in mergers and acquisitions, and inexpensive company valuations. WWH has a positive long-term performance track record. Its NAV and share price total returns have exceeded the MSCI World Health Care index total returns over one, three, five and 10 years.

12 months ending

Share price
(%)

NAV
(%)

MSCI World
Health Care (%)

DS World Pharm and Biotech (%)

FTSE All-Share
(%)

28/02/14

47.1

39.8

23.5

24.4

13.3

28/02/15

35.8

34.6

27.7

24.9

5.6

29/02/16

(7.3)

(2.9)

1.1

(0.9)

(7.3)

28/02/17

38.6

32.3

24.6

21.4

22.8

28/02/18

5.8

3.7

1.5

0.5

4.4

Source: Thomson Datastream. Note: All % on a total return basis in GBP.

Investment strategy: Bottom-up stock selection

Borho and the well-resourced investment team at OrbiMed undertake thorough fundamental research to construct a portfolio of healthcare stocks that is diversified by geography, subsector and size. There is a range of inputs to the research process, including clinical and regulatory events, doctor surveys and meeting company managements. Reflecting the dominance of the US in the global healthcare industry, around two-thirds of WWH’s portfolio is made up of holdings in American companies. Gearing is regularly employed in the trust; up to 20% of NAV is permitted and at end-February 2018, net gearing was 8.5%.

Market outlook: Potential for increased M&A

In our view, fundamentals within the global healthcare industry are favourable due to product innovation and a supportive regulatory backdrop. Healthcare company valuations are attractive versus their historical averages, and there is potential for increased mergers and acquisitions (M&A) following the recent US tax reforms, which could lead to a positive re-rating of the healthcare sector.

Valuation: Discount has narrowed

WWH’s share price discount to cum-income NAV has narrowed meaningfully from 13.0% at end-June 2016 following the UK’s European referendum, and in recent months the trust has been trading close to NAV. Over the last 12 months, WWH has traded at an average premium of 0.3%, which compares to the average discounts over the last three, five and 10 years of 3.3%, 3.4% and 5.7% respectively. While WWH aims to generate long-term capital growth, rather than income, the trust pays dividends regularly twice a year; its current yield is 0.9%.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

Worldwide Healthcare Trust’s investment objective is to invest worldwide in pharmaceutical, biotechnology and related securities in the healthcare sector to achieve a high level of capital growth. Gearing and derivative transactions are used to mitigate risk and enhance capital returns. In 2010 the mandate was broadened to include healthcare equipment and services and healthcare technology.

12 January 2018: Sam Isaly retired from WWH’s board.

8 December 2017: Announcement that former manager Sam Isaly is to step down from OrbiMed and retire from WWH’s board.

23 November 2017: Six-month results to 30 September 2017. NAV TR +7.4% versus benchmark TR +2.6%, share price TR +10.8%.

15 November 2017: Announcement of first interim dividend of 6.5p per share.

14 June 2017: 12-month results to 31 March 2017. NAV TR +28.9% versus benchmark TR +24.5%, share price TR +35.5%.

Forthcoming

Capital structure

Fund details

AGM

September 2018

Ongoing charges

0.9%

Group

Frostrow Capital LLP

Final results

June 2018

Net gearing

8.5%

Manager

OrbiMed Capital LLC (Sven Borho)

Year end

31 March

Annual mgmt fee

See page 7

Address

25 Southampton Buildings, London, WC2A 1AL, UK

Dividend paid

January, July

Performance fee

See page 7

Launch date

April 1995

Trust life

Indefinite

Phone

+44 (0)20 3008 4910

Continuation vote

Five-yearly, next in 2019

Loan facilities

Up to 20% of net assets

Website

www.worldwidewh.com

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

In line with the requirement for investment trusts to pay out 85% of their income net of expenses, two interim dividends a year are paid in January and July.

The trust has authority to purchase up to 14.99% and allot up to 10% of issued share capital. Allotments in the chart include exercise of subscription shares.

Shareholder base (as at 28 February 2018)

Portfolio exposure by geography (as at 28 February 2018)

Top 10 holdings (as at 28 February 2018)

Portfolio weight %

Company

Region

Sector

28 February 2018

28 February 2017*

Merck

North America

Pharmaceuticals

4.0

4.5

Boston Scientific

North America

Healthcare equipment

3.9

4.2

Novo Nordisk

Europe

Pharmaceuticals

3.7

N/A

Alexion Pharmaceuticals

North America

Pharmaceuticals

3.4

3.8

Bristol-Myers Squibb

North America

Pharmaceuticals

3.2

N/A

Wright Medical Group

Europe

Healthcare equipment

2.9

4.6

Vertex Pharmaceuticals

North America

Biotechnology

2.9

N/A

Biogen

North America

Biotechnology

2.9

3.4

Regeneron Pharmaceuticals

North America

Pharmaceuticals

2.9

N/A

Celgene

North America

Biotechnology

2.6

N/A

Top 10

32.4

36.3

Source: Worldwide Healthcare Trust, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in February 2017 top 10.

Market outlook: Positive industry fundamentals

The performance of global healthcare stocks and the NASDAQ Biotech index over the last five years is shown in Exhibit 2 (LHS). Returns have been strong over the period, particularly for biotech stocks, although their performance has been more volatile than for healthcare stocks in general. The global healthcare industry is dominated by the US, which is home to the majority of the world’s largest pharmaceutical and biotech stocks. The outlook for the healthcare sector for the coming year is positive due to continued product innovation, a benign regulatory environment, reasonable company valuations versus history, and an anticipated acceleration in M&A following US tax reform, which includes a reduction in corporate tax rates and a lower tax burden on the repatriation of overseas assets. Investors seeking exposure to the global healthcare industry may be interested in a well-established, diversified fund with a strong long-term performance track record.

Exhibit 2: Market performance and valuation

NASDAQ Biotech and MSCI World Health Care index total returns in £

Absolute and relative forward P/E multiple for DS World Pharma index

Source: Thomson Datastream, Edison Investment Research. Note: Valuation data as at 23 March 2018.

Fund profile: Global healthcare investment

WWH was launched in April 1995 and is managed by OrbiMed, a leading global specialist investment company with more than $14bn of assets under management. It invests across geographies, capitalisation size and clinical stages and has a longer than 20-year track record investing in both public and private equity. OrbiMed has more than 80 investment professionals undertaking proprietary research, many of whom have PhDs and/or are former founders or CEOs of healthcare companies. Sven Borho, WWH’s lead manager since December 2017, following the departure of Sam Isaly, is a founding partner and leads the six-strong senior management team at OrbiMed, whose members have an average tenure at the company of more than 15 years. Borho works closely with Trevor Polischuk, who is subsector head of OrbiMed’s global pharmaceuticals team, and the rest of the investment professionals, aiming to generate long-term capital growth from a diversified global portfolio of healthcare stocks. Since 1 October 2010, WWH has been benchmarked against the MSCI World Health Care index. There are investment limits in place, including a maximum 15% of the portfolio in a single stock, at the time of acquisition. Normally at least 60% will be invested in larger-cap companies (>$5bn) and at least 20% will be in companies with a market cap below $5bn. A maximum 10% in unquoted securities is permitted, and up to 5% may be invested in each of debt instruments, convertibles and royalty bonds issued by pharmaceutical and biotechnology companies. At the time of acquisition, a maximum of 20% may be invested in each of the following sectors: healthcare equipment and supplies; healthcare technology; and healthcare providers and services. Derivatives may be used to enhance returns and manage risk. WWH does not hedge its foreign currency exposure. Gearing of up to 20% of NAV is permitted; at end-February 2018, net gearing was 8.5%.

The fund manager: Sven Borho and team

The manager’s view: Optimistic outlook for 2018

We met with Borho’s colleague Polischuk, who is very optimistic on the outlook for healthcare stocks in 2018. He says that American politics can have a big impact on share prices, as witnessed in the run-up to the November 2016 presidential election, when there was a lot of discussion surrounding US drug pricing. 2017 witnessed a change, with healthcare stocks trading on fundamentals rather than on political concerns; the manager expects this environment to continue throughout 2018. He views the clarity on US tax reform as a positive, suggesting that benefits will accrue to large-cap pharmaceutical and biotech companies in particular, both from lower corporate tax rates and a reduction in the tax paid on repatriated overseas assets. Overseas cash balances could be used for share repurchases, dividend increases and M&A. So far this year there have been a number of deals announced, such as Celgene’s $9.0bn bid for Juno Pharmaceuticals, at a 130% premium, and Sanofi’s $11.4bn acquisition of Bioverativ, at a 64% premium. The manager expects the level of industry M&A activity to increase in 2018, partly as a result of US tax reform, which could lead to a re-rating of the healthcare sector, where large-cap biotech stocks in particular are looking cheap versus history. He believes there is high demand for emerging biotech companies with mid- to late-stage product pipelines, but he would also not rule out the possibility of mega-mergers within the pharmaceutical and biotech sectors, citing the potential for Pfizer to bid for Bristol-Myers Squibb to bolster its immuno-oncology product offering.

Polischuk also points to continued innovation as a potential driver of higher industry valuations. He says it has been proven time and again that the positive cycle of drug launches and commercial uptake is an important catalyst, and can lead to higher healthcare company valuations as an inflexion in a company’s sales and earnings generally leads to an inflexion in its share price.

The manager is also encouraged by the healthcare regulatory backdrop. In the US, the Food and Drug Administration (FDA) is headed up by Scott Gottlieb, who is ensuring that the time and cost of bringing new drugs to market is reduced. The FDA’s evaluation tools have been modernised and there is an increasing number of generic drug approvals, which is helping to keep drug prices under control. In 2017, there were 46 new molecular entities approved, which is second only to the 1996 record of 53, and generic drug approvals also hit a record of 1,027 during the year. Polischuk is not expecting any imminent legislative changes following President Trump’s failure to repeal/replace the Affordable Care Act (Obamacare) in 2017. He views this as a positive environment as it removes a level of uncertainty, allowing investors to focus on company fundamentals and have more confidence in the potential for positive returns from the healthcare sector.

Each year, in early June in Chicago, the American Society of Clinical Oncology (ASCO) holds a major conference. The manager expects there to be a host of new readouts across different oncology treatments, which could lead to M&A announcements. There are a number of companies developing immuno-oncology drugs for lung cancer. Merck has already had its Keytruda product approved and there is the possibility that AstraZeneca, Bristol-Myers Squibb or Roche could announce data at the ASCO conference regarding the frontline treatment of lung cancer.

Asset allocation

Investment process: Bottom-up stock selection

WWH aims to generate long-term growth from a diversified portfolio of global healthcare stocks. OrbiMed’s investment approach is very collaborative. A key part of the process is a public equity portfolio review (PEPR), which is undertaken five times a week and has been in place since 2009. The senior members of WWH’s investment team discuss the entire portfolio and assess buy, sell and trading ideas, following diligent proprietary fundamental research by all the investment professionals. Research inputs include analysis of clinical and regulatory events, doctor surveys and key opinion leader consultations. Meeting company managements is a key part of the investment process. WWH adopts a catalyst-driven strategy to try to understand the events that will drive stock prices, such as clinical data, drug approvals and product launches.

Within the largest sector of the portfolio, large-cap pharma, WWH’s holdings generally fall into three ‘buckets’: innovation plays, growth stocks and contrarian ideas. Innovation stocks include Chugai Pharmaceuticals and Novo Nordisk, growth stocks include AbbVie and Eli Lilly, while contrarian ideas include Merck, which is generally considered as expensive and having a poor product pipeline, but which OrbiMed believes is underappreciated, and Takeda. The investment team likes the company’s cost-cutting initiatives, which are unusual in Japan, and it is moving from a Japanese to a largely foreign senior management team, aiming to become a major global pharmaceutical company.

Current portfolio positioning

At end-February 2018, WWH’s top 10 positions made up 32.4% of the portfolio, which was a modest decrease in concentration from 36.3% at end-February 2017; five positions were common to both periods. There have only been small changes in geographic exposure over the last 12 months; the trust continues to be dominated by North America (c 65%), which is the largest global healthcare market by quite some margin, and a notable feature of WHH is its above 10% exposure to emerging markets. As shown in Exhibit 3, WWH offers broad exposure to the global healthcare sector. Looking at the largest changes by subsector, over 12 months to end-January 2018, the trust has higher exposure to emerging biotech, with reduced exposure to healthcare services. Investments are made on a bottom-up basis, without reference to the benchmark. It is interesting to note the trust’s meaningful underweight exposure to large-cap pharma, as the manager is finding more exciting investment opportunities elsewhere, such as in emerging biotech and emerging markets, which have very low representation in the index.

Exhibit 3: Portfolio sector exposure vs benchmark (% unless stated)*

Portfolio end-January 2018

Portfolio end-January 2017

Difference
(pp)

Index weight end-January 2018

Difference
(pp)

Large-cap pharma

17.6

15.3

2.4

41.7

(24.1)

Specialty pharma/generics

10.5

10.6

(0.1)

7.0

3.5

Large-cap biotech

14.1

16.2

(2.1)

9.9

4.2

Emerging biotech

19.0

13.6

5.4

2.4

16.6

Medtech/devices

15.8

15.0

0.8

16.7

(0.9)

Emerging markets

11.6

13.9

(2.3)

0.1

11.5

Healthcare services

7.1

11.5

(4.4)

15.1

(8.0)

Life science tools

4.3

4.0

0.3

7.1

(2.8)

100.0

100.0

100.0

Source: Worldwide Healthcare Trust, Edison Investment Research. Note: *Rebased to exclude gearing and structured finance.

Danish pharmaceutical company Novo Nordisk is one of WWH’s largest positions. It has launched a new injectable drug for type II diabetes (semaglutide). Although diabetes is a crowded class, Polischuk says that this drug sets a new bar in terms of efficacy, including weight loss and a reduction in blood sugar levels. Novo Nordisk has also developed an oral formulation of semaglutide, which the manager believes could be 2-3x more powerful than existing diabetes oral formulations; he regards this as a sea change in the treatment of the disease.

A relatively recent addition to the portfolio is Chugai Pharmaceutical. It is benefiting from the US approval of Hemlibra, which it is developing with Roche. This is a novel antibody for the prophylaxis and treatment of bleeding in haemophilia patients. The manager says that the drug is innovative in terms of both efficacy and safety. A European launch is expected later in 2018.

Recent disposals within WWH’s portfolio include Incyte and Roche. Incyte is due to present late-stage data at the ASCO conference. The manager and his team undertook proprietary research to model Incyte’s melanoma combination trial, and are cautious on the outcome.

Roche is one of the pioneers in novel oncology treatments. It has three big incumbent franchises: Avastin, Herceptin and Rituxan, which the manager says are facing biosimilar competition in the next couple of years, putting pressure on Roche’s growth profile.

Performance: Long-term record of outperformance

Since fund inception in April 1995 to end-January 2018, WWH’s NAV total return of 2,926.5% is considerably ahead of the MSCI World Health Care index total return of 1,215.9% (source: OrbiMed). The manager highlights recent significant contributors to the trust’s performance. These include BeiGene, a China-based biotech company in a collaboration with major US biotech company, Celgene. BeiGene enjoyed a significant positive revaluation during 2017. Intuitive Surgical has outperformed the broader healthcare sector over the last 12 months; it is continuing to roll out new robots and next-generation platforms, allowing additional procedures to be undertaken. Novo Nordisk is benefiting from new product developments in its diabetes franchise; its stock performed strongly in 2017, following a period of weakness the previous year due to product pricing concerns. Recent detractors to performance include some of the large-cap biotech stocks, either due to stock-specific weakness following disappointing product or pipeline newsflow, or general concerns about a perceived upcoming patent cliff within the subsector.

Exhibit 4: Investment trust performance to 28 February 2018

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised. Benchmark is DS World Pharma & Biotech index until 30 September 2010 and MSCI World Health Care index thereafter.

Exhibit 5: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI World Health Care

0.8

1.5

0.0

4.3

6.4

34.7

58.3

NAV relative to MSCI World Health Care

(0.4)

0.6

(1.3)

2.2

4.2

24.4

46.9

Price relative to World-DS Pharm & Bio

0.6

0.7

0.1

5.3

12.5

44.6

57.9

NAV relative to World-DS Pharm & Bio

(0.6)

(0.2)

(1.3)

3.2

10.2

33.5

46.6

Price relative to FTSE All-Share

2.8

1.2

(2.6)

1.4

14.5

91.2

221.7

NAV relative to FTSE All-Share

1.5

0.3

(3.9)

(0.6)

12.1

76.5

198.7

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-February 2018. Geometric calculation.

WWH’s relative returns are shown in Exhibit 5. The trust has outperformed the MSCI World Health Care index in both NAV and share price total return terms over one, three, five and 10 years. It has also outperformed the World-DS Pharm & Bio index over these periods. Comparing the trust to the UK stock market, it has outperformed markedly over three, five and 10 years.

Discount: Trading close to NAV

In recent months, WWH has been trading close to NAV. The current 0.1% share price premium to cum-income NAV compares to the range of a 2.3% premium to a 3.7% discount over the last 12 months. It compares with the averages of the last one, three, five and 10 years of a 0.3% premium and 3.3%, 3.4% and 5.7% discounts respectively.

WWH’s board aims to keep the trust’s discount below 6%. Renewed annually, the trust has authority to purchase up to 14.99% and allot up to 10% of issued share capital. In H118, 1.5m new shares were issued at an average 0.7% premium, raising £38.4m. As shown in Exhibit 1, share issuance is ongoing; so far in FY18, a total of 3.4m new shares have been issued raising c £84.9m.

Exhibit 6: Share price premium/discount to NAV (including income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

WWH is a conventional investment trust with one class of share in issue; there are currently 49.9m ordinary shares outstanding. Gearing is permitted up to 20% of net assets, and is implemented via an overdraft facility with J.P. Morgan Chase. At end-February 2018, net gearing was 8.5%.

OrbiMed is paid a base management fee of 0.65% of NAV, and a performance fee of 15% of outperformance versus the benchmark is payable when incremental outperformance since launch has been achieved, and maintained for a 12-month period. From 1 April 2018, Frostrow Capital, WWH’s Alternative Investment Fund Manager, will be paid an annual management fee as follows: up to £150m market cap (0.3%, unchanged); £150 to £500m (0.2%, unchanged); £500m to £1bn (0.15%, increased from 0.125%); £1bn to £1.5bn (0.125%, unchanged); and over £1.5bn (0.075%, reduced from 0.125%). Frostrow continues to receive a fixed fee per annum of £57,500, but is no longer entitled to performance fees.

In FY17, ongoing charges were 0.9%, which was in line with the prior year. Including lower performance fees, ongoing charges were 1.0% versus 2.1% in FY16.

Dividend policy and record

WWH pays dividends twice a year, in January and July. While the trust targets capital growth rather than income, and annual distributions may decrease as well as increase, over the last five years the dividend has compounded at an annual rate of more than 5%. In FY17, the annual dividend of 22.5p was a c 36% increase compared to FY16. At end-H118, the trust’s revenue reserve was £10.7m, which is c 1x the FY17 annual dividend. WWH’s current yield is 0.9%.

Peer group comparison

The selected peer group in Exhibit 7 includes the six members of the AIC Sector Specialist: Biotechnology & Healthcare sector – two biotech funds (Biotech Growth Trust and International Biotechnology Trust); three healthcare funds (BB Healthcare, Polar Capital Global Healthcare Trust and Worldwide Healthcare Trust); and specialist fund investor Syncona. We also include two Switzerland-listed funds (BB Biotech and HBM Healthcare Investments), both of which pay dividends out of capital. WWH’s NAV total returns are above average over one, three and five years, ranking third out of eight funds, third out of seven, and third out of seven respectively. The trust is below average over 10 years. It is trading at a modest premium, broadly in line with the peer group average, which is skewed by Syncona’s large premium. WWH’s ongoing charge is below average, but in common with the majority of its peers a performance fee is payable. The trust’s level of gearing is the highest in the selected peer group and, reflecting its focus on capital growth, WWH has a below-average dividend yield.

Exhibit 7: Selected peer group as at 20 March 2018*

% unless stated

Market cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (ex-par)

Ongoing charge

Perf.
fee

Net
gearing

Dividend yield (%)

Worldwide Healthcare Trust

1,248.5

4.5

21.3

147.0

492.2

1.3

0.9

Yes

109

0.9

BB Biotech Trust

2,834.0

7.1

11.4

224.6

741.0

6.1

1.1

No

103

4.9

BB Healthcare

301.8

0.8

2.5

1.0

No

103

3.1

Biotech Growth

408.7

(3.8)

(11.6)

118.3

702.3

(6.4)

1.1

Yes

105

0.0

HBM Healthcare Investments

817.1

0.2

39.0

207.8

222.7

(12.8)

1.5

Yes

100

4.1

International Biotechnology

214.0

(6.1)

(2.1)

136.1

395.7

(4.8)

0.9

Yes

100

4.5

Polar Capital Global Healthcare

232.3

(5.2)

7.9

59.3

(6.0)

1.5

Yes

100

1.1

Syncona

1,339.7

13.6

25.7

48.1

34.7

1.5

No

100

1.1

Average

924.5

1.4

13.1

134.5

510.8

1.8

1.2

102

2.5

WWH rank in peer group

3

3

3

3

3

4

7

1

7

Source: Morningstar, Edison Investment Research. Note: *Performance data to 19 March 2018. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets (100 = ungeared).

The board

Following the retirement of WWH’s former lead manager, Sam Isaly, there are five directors on the board; all are non-executive and independent of the manager. Sir Martin Smith is the chairman. He was appointed as a director in 2007 and assumed his current role the following year. The senior independent director is David Holbrook, who was appointed in 2007. The other three directors and their year of appointment are Doug McCutcheon (2012), Sarah Bates (2013) and Humphrey van der Klugt (2016).

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority (Financial Conduct Authority). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Worldwide Healthcare Trust and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority (Financial Conduct Authority). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Worldwide Healthcare Trust and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues