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					Investment Performance of the
Generics Composite


December 31, 2010
                                                                                                                                PricewaterhouseCoopers LLP
                                                                                                                                Chartered Accountants
                                                                                                                                PO Box 82
                                                                                                                                Royal Trust Tower, Suite 3000
                                                                                                                                Toronto Dominion Centre
February 24, 2011                                                                                                               Toronto, Ontario
                                                                                                                                Canada M5K 1G8
                                                                                                                                Telephone +1 416 863 1133
                                                                                                                                Facsimile +1 416 365 8215
Auditors’ Report

To the Directors of
Sectoral Asset Management Inc.


We have audited whether Sectoral Asset Management Inc. (the Company) complied with all
the composite construction requirements of the Global Investment Performance Standards
(GIPS ® Standards), on a firm wide basis for the year ended December 31, 2010. We have
also audited whether the Company designed its processes and procedures to calculate and
present performance results in compliance with the GIPS Standards as of December 31, 2010.

We have also audited the accompanying Investment Performance of the Company's Generics
Composite for the periods from July 1, 2004 (date of composite creation) through
December 31, 2010.

The Company's management is responsible for compliance with the GIPS Standards and the
design of its processes and procedures and for the Investment Performance of the Company's
Generics Composite. Our responsibility is to express an opinion based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards,
which included examining, on a test basis, evidence about the Company's compliance with the
above-mentioned requirements, evaluating the design of the Company's processes and
procedures referred to above, and performing the procedures for a verification and a
performance examination set forth by the GIPS Standards and such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

In our opinion, Sectoral Asset Management Inc has, in all material respects:

           Complied with all the composite construction requirements of the GIPS Standards on a
            firm wide basis for the year ended December 31, 2010; and

           Designed its processes and procedures to calculate and present performance results in
            compliance with the GIPS Standards as at December 31, 2010.



“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers
International Limited, each member firm of which is a separate legal entity.
Also, in our opinion, Investment Performance of the Company's Generics Composite for the
periods from July 1, 2004 through December 31, 2010, is presented, in all material respects, in
conformity with the GIPS Standards.

This report does not relate to any composite presentation of the Company other than the
Company's Generics Composite.




Chartered Accountants, Licensed Public Accountants




                                                                                            (2)
                                                    Generics Composite
                                                    For the periods from July 1, 2004 to
                                                    December 31, 2010




 Annual Returns


12 months                                                                                  Performance
               Composite       Composite                      Performance    S&P500
  ended                                      MSCI World                                     Relative to
                 Return         Return                         Relative to     Total
December                                      Pharma                                       S&P500 Total
                (gross of       (net of                        MSCI World    Return
31 (except                                     Index1                                         Return
                  fees)          fees)                          Pharma        Index1
  where                                          %                                           Index1,2
                    %              %                            Index1,2        %
  noted)                                                                                        %
                                                                   %
     2010          23.8           21.3            -2.5             26.3        15.1            8.7

     2009          45.9           43.1           12.8              33.1        26.5            19.4

     2008          -29.1          -30.4          -20.2             -8.9        -37.0           7.9

     2007           9.6            7.5            -1.5             11.1         5.5            4.1

     2006           3.2            1.2           13.9              -10.7       15.8           -12.6

     2005           9.9            7.7            1.3              8.6          4.9            5.0

     20043          5.0            3.9            0.0              5.0          7.2            -2.2




 1
   Not covered by auditors’ report
 2
   Relative performance of gross returns vis-à-vis the benchmark
 3
   Period from July 1, 2004 to December 31, 2004



 Investment Performance of the Generics Composite                                              Page 2
 December 31, 2010
                                                   Generics Composite
                                                   For the periods from July 1, 2004 to
                                                   December 31, 2010




Cumulative Returns

   From
January 1
                                                                                          Performance
 in each      Composite       Composite                      Performance    S&P500
                                            MSCI World                                     Relative to
 year to        Return         Return                         Relative to     Total
                                             Pharma                                       S&P500 Total
December       (gross of       (net of                        MSCI World    Return
                                              Index1                                         Return
31, 2010         fees)          fees)                          Pharma        Index1
                                                %                                           Index1,2
 (except           %              %                            Index1,2        %
                                                                                               %
  where                                                           %
  noted)
    2010          23.8           21.3            -2.5             26.3        15.1            8.7

2009-2010         80.6           73.5           10.0              70.6        45.5            35.1

2008-2010         28.1           20.7           -12.2             40.3        -8.3            36.4

2007-2010         40.4           29.7           -13.5             53.9        -3.3            43.7

2006-2010         44.9           31.3            -1.5             46.4        12.0            32.9

2005-2010         59.1           41.5            -0.1             59.2        17.5            41.6

2004-20103        67.2           47.0            -0.1             67.3        25.9            41.3




1
  Not covered by auditors’ report
2
  Relative performance of gross returns vis-à-vis the benchmark
3
  Period from July 1, 2004 to December 31, 2010



Investment Performance of the Generics Composite                                              Page 3
December 31, 2010
                                                   Generics Composite
                                                   For the periods from July 1, 2004 to
                                                   December 31, 2010




Annualized Compound Returns

From January                                                                              Performance
                   Composite       Composite        MSCI      Performance    S&P500
1 in each year                                                                             Relative to
                     Return         Return         World       Relative to     Total
 to December                                                                              S&P500 Total
                    (gross of        (net of      Pharma       MSCI World    Return
   31, 2010                                                                                  Return
                      fees)           fees)        Index1       Pharma        Index1
(except where                                                                               Index1,2
                        %               %            %          Index1,2        %
    noted)                                                                                     %
      2010             23.8           21.3          -2.5          26.3        15.1            8.7

    2009-2010          34.4           31.7           4.9          29.5        20.6            13.8

    2008-2010          8.6             6.5          -4.2          12.8        -2.9            11.5

    2007-2010          8.9             6.7          -3.6          12.5        -0.8            9.7

    2006-2010          7.7             5.6          -0.3          8.0          2.3            5.4

    2005-2010          8.0             5.9           0.0          8.0          2.7            5.3

    2004-20103         8.2             6.1           0.0          8.2          3.6            4.6




1
  Not covered by auditors’ report
2
  Relative performance of gross returns vis-à-vis the benchmark
3
  Period from July 1, 2004 to December 31, 2010



Investment Performance of the Generics Composite                                                Page 4
December 31, 2010
                                        Generics Composite
                                        For the periods from July 1, 2004 to
                                        December 31, 2010




Quarterly and Annual Total Returns
(Gross of fees)

                          First       Second        Third     Fourth     Calendar
        Year ended
                         Quarter      Quarter      Quarter    Quarter      Year
       December 31
                           %            %             %         %            %
           2010            12.9         -2.1         8.2        3.5        23.8

           2009            -4.1        27.6         12.5        6.1        45.9

           2008            -2.8         -1.3        -11.1      -16.8       -29.1

           2007             1.0         3.1          3.1        2.1            9.6

           2006             8.5        -11.7         4.2        3.3            3.2

           2005            -5.2         5.1         10.7       -0.3            9.9

           2004              -           -          -6.1       11.9            5.0




Investment Performance of the Generics Composite                                     Page 5
December 31, 2010
                                        Generics Composite
                                        For the periods from July 1, 2004 to
                                        December 31, 2010




Quarterly and Annual Total Returns
(Net of fees)

                           First      Second        Third     Fourth     Calendar
         Year ended
                          Quarter     Quarter      Quarter    Quarter      Year
        December 31
                            %           %             %         %            %
            2010            12.3        -2.6         7.6        3.0        21.3

            2009            -4.6       26.9         12.0        5.5        43.1

            2008            -3.3        -1.8        -11.5      -17.2       -30.4

            2007            0.5         2.6          2.6        1.6            7.5

            2006            8.0        -12.1         3.7        2.8            1.2

            2005            -5.7        4.5         10.2       -0.8            7.7

            2004             -           -          -6.6       11.3            3.9




Investment Performance of the Generics Composite                                     Page 6
December 31, 2010
                                        Generics Composite
                                        For the periods from July 1, 2004 to
                                        December 31, 2010




Composite Statistics
(Total Assets)

                                 Market Value      Total Firm Assets     Percentage of
At December      Number of
                                  (in millions        (in millions      company assets
     31           accounts
                                    of USD)             of USD)               %
    2010             1               597.4             4,445.9                 13.4

    2009             2               603.5             3,462.5                 17.4

    2008             1               157.4             2,924.3                 5.4

    2007             1               175.0             3,454.0                 5.1

    2006             1               210.3             2,666.5                 7.9

    2005             1               194.7             2,238.0                 8.7

    2004             1               124.3             2,283.6                 5.4




Investment Performance of the Generics Composite                                      Page 7
December 31, 2010
                                             Notes to
                                             Generics Composite
                                             December 31, 2010


   1. Basis of presentation

      Sectoral Asset Management Inc. (the Company) was founded in October 2000. Prior to the
      forming of the Company, the principals of the Company managed global biotech equity for
      Pictet & Cie. The Company continues to manage global biotech equity investments for Pictet
      & Cie. All previous decision makers and substantially all assets under management in global
      equity biotech were transferred to the Company and access to research records remains the
      same. As such, the historical performance record of the global biotech equity funds managed
      for Pictet & Cie represent the historical record of the Company.

      The performance results displayed herein represent the investment performance record for a
      composite of global generics equity accounts (the Generics Composite, formerly the Global
      Generics Composite) managed by the Company. Gross performance results do not reflect any
      deduction of investment advisory fees. Net performance results reflect the deduction of the
      Company’s investment advisory fees and other fund management fees. The Company has
      prepared and presented this report in compliance with the Global Investment Performance
      Standards (GIPS®). A complete list and description of all the Company’s composites are
      available, upon request from the Company.

   2. Composite criteria

      The Generics Composite was created on July 1, 2004 and includes all discretionary portfolios
      that have a mandate to take long positions in global generic and specialty pharmaceutical
      equities. Accounts meeting this criterion must be under management for at least one full
      month to be included in the Generics Composite. Closed accounts and accounts transferred
      out are included through to the last full month of management before notice to close or
      transfer the account is received. None of the portfolios included in this composite use
      leverage. However, covered options may be used to a limited extent from time to time.

   3. Calculation methodology

      The Generics Composite results are time-weighted rates of return net of commissions,
      transaction costs and withholding taxes on dividends and have been presented both gross
      and net of investment advisory fees and other fund management expenses. The rates of
      return are computed based on the net investment value of each portfolio included in the
      composite.

      The Company has valued portfolios in U.S. dollars. Investment security transactions are
      accounted for on a trade date basis. Individual account returns are calculated on a time-
      weighted basis. Monthly composite returns are calculated by weighing each account’s
      monthly return by its beginning asset value as a percentage of the total composite asset
      value. Quarterly composite returns are calculated by geometrically linking the monthly
      composite returns. Annual composite returns are computed by geometrically linking the
      quarterly returns.




Investment Performance of the Generics Composite                                          Page 8
December 31, 2010
                                              Notes to
                                              Generics Composite
                                              December 31, 2010



      Cumulative rates of return for multi-year periods are calculated by compounding the annual
      rates of return within such periods. The annualized rate of return is equivalent to the annual
      rate of return which, if earned in each year of the indicated multi-year period, would
      produce the actual cumulative rate of return over the time period.

      Standard deviation is a measure of internal dispersion that is often used in the investment
      industry as an indicator of consistency of returns across portfolios within a composite.
      Standard deviation has not been computed because there are fewer than five accounts in the
      composite.

   4. Comparison with Benchmark

      Relative performance represents the outperformance or underperformance of the gross
      performance of the composite as compared to the Benchmark.

      The performance is presented against two benchmarks: the MSCI World Pharma Index
      (Ticker: MIGUPHA) and the S&P500 Total Return Index (Ticker: SPTR). The MSCI World
      Pharma Index is provided to represent the performance of pharmaceutical stocks during the
      periods indicated. The S&P500 Total Return Index is provided to represent the investment
      environment existing during the periods shown. For comparison purposes, this index is a fully
      invested index, which includes reinvestment of income. The performances of both the
      indices have been linked in the same manner as the Generics Composite. The returns for
      these indices do not include any transaction costs, management fees or other costs.

      Benchmark information has been provided to the Company by Bloomberg.

   5. Fee schedule

      In most cases, the Company charges a fee based on a percentage of assets under
      management. The Company’s basic fee schedule is equal, on an annual basis, to 1% of assets
      under management. The basic fee schedule is not generally negotiable. However, in certain
      circumstances, the Company may negotiate a performance fee arrangement.




Investment Performance of the Generics Composite                                            Page 9
December 31, 2010

				
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