Q:  Would you provide a brief overview of the fund? A : The Eaton Vance Worldwide Health Sciences Fund was founded on July 26, 1985, and we currently manage around $1 billion in assets. Initially, the fund was known as Medical Research Investment Fund, but it was eventually renamed to Eaton Vance Worldwide Health Sciences Fund in 1996. OrbiMed Advisors has been the advisor to the fund since 1989, while I have served as the lead portfolio manager of a team of five on this fund since 1996. Q:  What core beliefs guide your investment philosophy? A : As a diversified global fund, we employ a long-term investment philosophy concentrating on health sciences companies. The fund invests worldwide in companies that are principally engaged in the discovery, development, production or distribution of products related to scientific advances in health care, including biotechnology, pharmaceuticals, diagnostics, managed health care, and medical equipment and supplies. Q:  Why do you find emerging markets so attractive? A : In the United States and even more so in Western Europe, growth rates have slowed considerably over the past decade. In contrast, we can still find companies growing profits at more than 20% in emerging markets. India and China stand out among other countries and enjoy very rapid growth rates that are unavailable elsewhere. But on the flip side, the main negative factors are poor liquidity and information flow along with higher risks that are typically associated with emerging markets. Q:  How do you transform your philosophy into an investment strategy? A : First and foremost, we utilize a bottom-up stock selection driven by proprietary research. Although our investable universe comprises all publicly traded healthcare companies worldwide with market caps of more than $500 million, we tend to concentrate on companies with market value of more than $2 billion. In addition to our emphasis on organic growth, we typically approach investments ideas as value investors who like to get in early with patience and discipline. Our team benefits from the input of more than 60 investment professionals who are strictly dedicated to research in the global healthcare sector. Q:  What is your research process? A : Our bottom-up process entails starting with a thematic or economic analysis by focusing on one company at a time. As a rule, we are fully informed about the management of each of the companies we invest in. Since the composition of our portfolio is based on comparing the best healthcare investments to each other, the subsector weightings and the geographic variation are simply a reflection of our individual stock selections. We assign each of our analysts on the team to particular subsectors and geographies. For example, one of the fund’s co-portfolio managers, Trevor Polischuk, is responsible for big pharmaceutical companies as a subsector and Japan as a country. Our daily meetings begin with a thorough discussion of every idea as a detailed investment case presented to a team of ten people. However, Sven H. Borho and I are responsible for the final decision. Q:  How do you build your portfolio? A : In general, we tend to keep the fund reasonably concentrated by holding a total of about 50 companies. The portfolio includes companies that are large, medium and small in market capitalization, and we generally spread our holdings across various development stages. As part of our selection, we monitor every subsector ranging from large pharmaceuticals to biotech, specialty pharmaceutical makers, diagnostics and healthcare services providers including hospital companies, and medical devices. Roche Holdings Ltd, which accounts for 6.7% of the fund, is our largest current holding, followed by other large positions such as Merck with 6.0%, Pfizer with 5.1% and Abbott Laboratories, accounting for 4.5% of the portfolio. What all of these holdings have in common is that they are mature, stable, low-risk companies. Our total allocation to large pharmaceutical companies is approximately 30%, but that obscures our investments in many specialty companies. Currently, 64% of the portfolio is invested in the United States, 35% is allocated to other regions, and 1% is in cash. In terms of global geographic exposure, approximately 5% of the portfolio is now invested in emerging markets, primarily in China and India. Because we prefer to consider candidates one company at a time, we do not generally resort to using a benchmark in the portfolio construction process. Our company selection is primarily based on the growth prospect, competitive dynamics and our outlook of a company’s management. The average portfolio turnover tends to be relatively low at around 50%, with the average holding in the fund being close to two years. As a whole, we prefer to hold companies for a longer period of time when possible, as we have done in Japan with Sawai Pharmaceutical Co., Ltd., which has tripled during a period of more than seven years. Q:  How do you control risk in the portfolio? A : Managing risk for this fund is not an after-thought and it is an integral part of our investment process. We control risk by allocating from small to large companies while also investing from early-stage to late-stage development companies and mature companies. Furthermore, we control risk with the help of position sizes. The end result of all this is that our portfolio has less volatility than the market as reflected currently by a beta of 0.6%. And finally, our experience in managing this fund consistently for more than 23 years further contributes to the stability of the fund. Q:  Would you summarize the key advantages of investing in healthcare stocks? A : We have identified three major advantages, which include two items of demand and one item of supply. Having said that, we are in continuous search of the next new thing. As the world population is aging and becoming wealthier, more and more people use healthcare, with approximately 17% of income in the United States being spent on products and services in the sector. Also, technological innovation largely contributes to finding the next drug or the next device that will eventually benefit more people. A constantly increasing scientific competence leads to new breakthroughs, new businesses and, respectively, new investment opportunities. As an advisor to the fund, we have been focused on researching and covering healthcare for more than two decades, developing a deep understanding of this fast developing sector with all its various segments.