MERRILL LYNCH
HEALTHCARE
FUND, INC.
FUND LOGO
Quarterly Report
January 31, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Company unless
accompanied or preceded by the Company's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
Healthcare Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH HEALTHCARE FUND, INC.
<PAGE>
Worldwide
Investments
As of 1/31/96
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Healthcare Compare Corp. 4.9%
Amgen, Inc. 4.8
Merck & Co., Inc. 4.5
Sandoz AG (Registered) 4.2
Pharmacia & Upjohn Inc. 4.1
VISX, Incorporated 3.5
Pacificare Health Systems, Inc.* 3.5
Elan Corporation PLC (ADR) 3.4
Baxter International, Inc. 3.4
Ciba-Geigy AG (Registered) 3.3
[FN]
*Includes Class A and Class B Shares.
Breakdown of Securities Percent of
By Country Net Assets
United States 68.1%
Switzerland 9.9
Ireland 3.4
Sweden 3.1
France 3.1
Germany 2.4
United Kingdom 1.8
Israel 0.7
Canada 0.5
Denmark 0.4
Japan 0.4
Industries Represented Percent of
In the Portfolio Net Assets
Pharmaceutical--Prescription 23.2%
Medical Specialties 19.0
Health Care Cost Containment 18.6
Pharmaceutical--Diversified 14.6
Biotechnology 7.9
Pharmaceutical--Consumer 7.4
Diagnostics 3.1
<PAGE>
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Phillip L. Kirstein, Senior Vice President
Donald C. Burke, Vice President
Jordan C. Schreiber, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
In our last report to shareholders, we outlined the favorable
outlook for the healthcare products area; that is, pharmaceutical,
hospital supply and medical device companies. Both the economic
environment and other fundamental factors continue to be positive
for this area. In the United States, economic indicators show that
gross domestic product (GDP) growth remains sluggish and
inflationary pressures subdued. The lackluster economic expectations
suggest that general corporate earnings growth will decline and that
there are likely to be earnings surprise shortfalls. In contrast, we
estimate the average 1996 earnings growth rate for the healthcare
products group to at least match the estimated 12% earnings growth
rate achieved in 1995, and there is a reasonable possibility of
positive earnings surprises.
<PAGE>
At the same time, share valuations remain attractive. Based on 1996
earnings estimates, the average price/earnings ratio of the
pharmaceutical group is currently approximately 15% greater than
that of the Standard & Poor's 500 Composite Index. We view this
valuation premium as reasonable, based on the more favorable near-
term outlook for healthcare products companies. A key fundamental
factor in this assessment is the more rapid pace of new drug
approvals we expect because of a policy change at the Food and Drug
Administration (FDA), which has resulted in a more expeditious
regulatory review process. We believe this will continue to benefit
healthcare products companies as new products will come to market
more quickly, accelerating their positive impact on sales and
earnings. In addition, more rapid regulatory review suggests that
research and development expenditures for new products may be lower.
Two other important developments underlying our expectation of
higher valuations for the healthcare products group are industry
consolidations and the low number of important patent expirations
over the next four years. Over the longer term, the aging of the US
population has fundamental positive implications for healthcare
products companies.
The smaller-capitalization biotechnology companies are benefiting
from an improvement in investor sentiment following several
favorable new product announcements. Although share prices have been
subdued for many biotechnology companies, their research efforts
have progressed toward commercialization. Moreover, during the past
year the favorable equity market climate has enabled many companies
to replenish their cash positions so that research efforts may
continue unimpeded by concerns of financial survival.
The healthcare services group continues to underperform the stock
market in the United States. This group consists primarily of health
maintenance organizations (HMOs), physician practice management
companies, and hospital management companies. HMOs have been
especially adversely affected by the impasse between the Clinton
Administration and Republican Congressional leaders in the Medicare/
Medicaid expenditure negotiations. HMOs are viewed by the Republican
Congressional leadership as central to controlling healthcare costs.
Prospects for HMOs will be largely determined by the outcome of this
legislative debate.
During the January quarter, it seemed less likely that the Clinton
Administration and Congress would be able to come to an agreement on
a Federal deficit reduction proposal and its critical healthcare
components. At this time we still expect passage of a deficit-
reduction package, but there is an increasing possibility that
resolution of the healthcare issues will be postponed until after
the November election.
<PAGE>
In the private sector of the economy, healthcare cost inflation has
moderated in the United States. Managed care enrollment continues to
soar. Premium rate increases for HMO enrollees are virtually flat.
However, in the public sector, primarily Medicare and Medicaid,
healthcare cost inflation continues at a close to 10% rate.
Healthcare costs as a percentage of GDP now exceed 15%. Moreover,
since the fastest-growing age group in the economy is the elderly,
who now account for about 15% of the US population and 40% of
healthcare expenditures, the growth rate of the Government's
healthcare costs will accelerate. Therefore, as the urgency for
reform increases, it is likely that the focus on managed care as a
political issue will continue well into 1997 should this issue not
be resolved at this time.
In Europe, we also view the outlook for healthcare products
companies as favorable. The increase of the elderly population and
rising government healthcare costs match the situation in the United
States. European pharmaceutical share price valuations are generally
lower than those of their US counterparts. At the same time,
earnings growth is likely to accelerate for the large multinational
pharmaceutical companies, especially if the US dollar strengthens.
The United States is the source of about 50% of European
pharmaceutical company earnings. For the three months ended January
31, 1996, European pharmaceutical stocks outperformed their local
stock markets in all countries except Germany.
However, in Japan pharmaceutical stocks underperformed the stock
market. Pharmaceutical companies will possibly be negatively
impacted by government-mandated price cuts in April. The actual
price cuts are still being clarified, and the resulting uncertainty
may continue to constrain share prices in the near term.
Investment Activities
At January quarter-end, 68.3% of the Fund's net assets was allocated
to US healthcare stocks, primarily in the healthcare products area.
Our investments in European healthcare companies accounted for 24.1%
of net assets, and the exposure to Japan was 3.8%.
Our investment focus continues to favor companies with accelerating
earnings growth based on new or cost-saving products and services.
Noteworthy purchases during the quarter were Parexel International
Corp. and IBAH Inc. These two US-based clinical research companies
with global presences serve as outsource research providers for
pharmaceutical companies. Parexel and IBAH oversee clinical studies
and regulatory approval processes for major pharmaceutical companies
throughout the world. Their businesses are growing rapidly as
pharmaceutical companies seek to reduce the fixed costs associated
with bringing new drugs to the market.
<PAGE>
Another new investment is Healthcare Compare Corp., a preferred
provider organization with a national network of hospitals and
physicians. For multi-site companies with employees throughout the
United States, Healthcare Compare offers a convenient and economical
alternative to HMOs and other health insurance plans. Physicians and
hospitals who are part of the Healthcare Compare network offer
discounted healthcare services to employees of participating
companies, so employees need not change their medical insurance if
they are relocated.
In Conclusion
We thank you for your investment in Merrill Lynch Healthcare Fund,
Inc., and we look forward to reviewing our outlook and strategy with
you again in our upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Jordan C. Schreiber)
Jordan C. Schreiber
Vice President and Portfolio Manager
February 26, 1996
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
<PAGE>
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after 8 years.
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Average Annual
Total Return+++
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/95 +49.85% +41.99%
2/01/90++ through 12/31/95 +12.69 +11.67
Five Years Ended 12/31/95 +16.82 +15.57
Ten Years Ended 12/31/95 +12.14 +11.54
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
++On February 1, 1990, Merrill Lynch Asset Management became the
sole investment adviser.
<PAGE>
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/95 +48.09% +44.09%
2/01/90++ through 12/31/95 +11.54 +11.54
Five Years Ended 12/31/95 +15.61 +15.61
Inception (10/21/88) through 12/31/95 +11.32 +11.32
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
++On February 1, 1990, Merrill Lynch Asset Management became the
sole investment adviser.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 12/31/95 +48.09% +47.09%
Inception (10/21/94) through 12/31/95 +33.92 +33.92
[FN]
*Maximum contingent sales charge is 1% and is reduced to 0% after 1
year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 12/31/95 +49.12% +41.29%
Inception (10/21/94) through 12/31/95 +32.56 +26.71
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
1/31/96 10/31/95 1/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $5.16 $4.65 $3.61 +45.84%(1) +13.22%(1)
Class B Shares 4.58 4.16 3.25 +44.15(1) +12.61(1)
Class C Shares 4.59 4.16 3.26 +44.02(1) +12.86(1)
Class D Shares 5.02 4.53 3.52 +45.59(1) +13.13(1)
Class A Shares--Total Return +48.82(2) +15.53(2)
Class B Shares--Total Return +47.45(2) +15.19(2)
Class C Shares--Total Return +47.32(2) +15.44(2)
Class D Shares--Total Return +48.65(2) +15.51(2)
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.097 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.099 per share ordinary
income dividends and $0.097 per share capital gains distributions.
</TABLE>
<TABLE>
Performance
Summary--
Class A Shares+++
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
4/1/83--12/31/83 $ 9.15 $ 9.56 -- $0.120 + 5.85%
1984 9.56 8.83 $ 0.040 0.090 - 6.34
1985 8.83 10.65 -- 0.120 +22.16
1986 10.65 11.94 0.530 0.100 +17.86
1987 11.94 9.90 3.347 0.015 +10.24
1988 9.90 9.56 0.825 0.145 + 6.39
1989 9.56 9.09 1.422 0.068 +11.46
1990 9.09 7.29 0.832 0.489 - 6.19
1991 7.29 9.18 -- 1.320 +45.71
1992 9.18 4.03 4.123++ 1.028 + 6.92
1993 4.03 3.91 -- 0.013 - 2.63
1994 3.91 3.46 0.266 -- - 4.30
1995 3.46 4.98 0.097 0.099 +49.85
1/1/96--1/31/96 4.98 5.16 -- -- + 3.61
------- ------
Total $11.482 Total $3.607
Cumulative total return as of 1/31/96: +294.59%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
++Figure includes a $0.879 and $3.089 return of capital on 4/22/92
and 4/27/92, respectively.
<PAGE>
+++See Important Note on page 7.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary--
Class B Shares+++
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $10.24 $9.55 $0.825 $0.089 + 2.22%
1989 9.55 9.07 1.422 0.006 +10.70
1990 9.07 7.19 0.832 0.455 - 7.42
1991 7.19 8.96 -- 1.291 +44.21
1992 8.96 3.72 4.123++ 1.028 + 5.46
1993 3.72 3.59 -- -- - 3.49
1994 3.59 3.13 0.266 -- - 4.99
1995 3.13 4.43 0.097 0.099 +48.09
1/1/96--1/31/96 4.43 4.58 -- -- + 3.39
------ ------
Total $7.565 Total $2.968
Cumulative total return as of 1/31/96: +123.65%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
++Figure includes a $0.879 and $3.089 return of capital on 4/22/92
and 4/27/92, respectively.
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class C Shares+++
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $3.27 $3.13 -- -- - 4.28%
1995 3.13 4.43 $0.097 $0.099 +48.09
1/1/96--1/31/96 4.43 4.59 -- -- + 3.61
------ ------
Total $0.097 Total $0.099
Cumulative total return as of 1/31/96: +46.87%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares+++
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $3.61 $3.39 -- -- - 6.09%
1995 3.39 4.85 $0.097 $0.099 +49.12
1/1/96--1/31/96 4.85 5.02 -- -- + 3.51
------ ------
Total $0.097 Total $0.099
Cumulative total return as of 1/31/96: +44.94%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
+++Important Note:
Prior to April 27, 1992, Merrill Lynch Healthcare Fund, Inc. was
known as Sci/Tech Holdings, Inc. and contained, in addition to a
healthcare portfolio, a portfolio of technology securities. The data
on pages 4-7 include the performance of the technology portfolio
which is no longer part of the Fund. Set forth below are performance
data which, for the period before April 27, 1992, include only the
performance of the healthcare portfolio and a pro rata allocated
portion of Sci/Tech Holdings, Inc.'s cash reserves. On February 1,
1990, Merrill Lynch Asset Management became the sole investment
adviser.
</TABLE>
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/95 +49.85% +41.99%
2/01/90++ through 12/31/95 +18.59 +17.51
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
++Due to the inability to completely isolate the performance of
Sci/Tech Holdings, Inc.'s technology portfolio from its healthcare
portfolio, computations are based upon management's estimates of the
healthcare portfolio.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/95 +48.09% +44.09%
2/01/90++ through 12/31/95 +17.85 +17.85
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
++Due to the inability to completely isolate the performance of
Sci/Tech Holdings, Inc.'s technology portfolio from its healthcare
portfolio, computations are based upon management's estimates of the
healthcare portfolio.
<PAGE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 2/01/90 to 1/31/96++
%Change % Change
<S> <C> <C>
Class A Shares--Total Return +48.82% +184.08%
Class B Shares--Total Return +47.45 +173.15
<FN>
++Due to the inability to completely isolate the performance of
Sci/Tech Holdings, Inc.'s technology portfolio from its healthcare
portfolio, computations are based upon management's estimates of the
healthcare portfolio.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
NORTH Shares Percent of
AMERICA Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Biotechnology 15,000 Biochem Pharma, Inc. $ 496,407 $ 656,250 0.2%
Medical 159,000 ISG Technologies, Inc. 787,206 924,553 0.3
Specialties
Investments in Canada 1,283,613 1,580,803 0.5
United Biotechnology 245,000 Amgen, Inc. 14,150,634 14,700,000 4.8
States 60,000 Emisphere Technologies Inc. 549,438 570,000 0.2
80,000 Gilead Sciences Inc. 2,124,875 2,840,000 0.9
80,000 Matrix Pharmaceutical Inc. 1,074,375 1,820,000 0.6
440,000 PerSeptive Biosystems, Inc. 4,331,254 3,850,000 1.2
------------ ------------- ------
22,230,576 23,780,000 7.7
Diagnostics 21,100 Diagnostic Products Corporation 769,226 780,700 0.3
100,000 Epitope Inc. 1,450,124 1,787,500 0.6
40,000 Hologic Inc. 1,060,000 1,920,000 0.6
7,500 Lunar Corporation 160,000 286,875 0.1
440,000 Meris Laboratories, Inc. 3,406,791 467,500 0.1
163,000 NeoPath, Inc. 3,915,501 4,197,250 1.4
------------ ------------- ------
10,761,642 9,439,825 3.1
<PAGE>
Health Care Cost 220,000 Caremark International, Inc. 4,254,578 5,197,500 1.7
Containment 50,000 Columbia/HCA Healthcare Corporation 2,294,250 2,781,250 0.9
200,000 Coram Healthcare Corp. 1,047,500 1,200,000 0.4
80,000 HEALTHSOUTH Corporation 2,647,016 2,580,000 0.8
310,000 Healthcare Compare Corp. 13,159,250 14,957,500 4.9
400,000 IBAH Inc. 2,570,885 2,600,000 0.8
105,000 Inphynet Medical Management, Inc. 1,740,826 2,598,750 0.8
150,000 Medaphis Corporation 3,439,375 5,962,500 1.9
20,000 Olsten Corporation (The) 801,150 795,000 0.3
70,000 OrNda HealthCorp. 1,154,875 1,767,500 0.6
25,000 Pacific Physician Services, Inc. 423,750 475,000 0.2
68,400 Pacificare Health Systems, Inc.
(Class A) 4,697,181 6,190,200 2.0
50,000 Pacificare Health Systems, Inc.
(Class B) 3,607,279 4,587,500 1.5
80,100 Parexel International Corp. 2,410,441 2,763,450 0.9
125,000 Tenet Healthcare Corp. 2,153,477 2,671,875 0.9
------------ ------------- ------
46,401,833 57,128,025 18.6
Medical 220,000 Baxter International, Inc. 8,734,343 10,010,000 3.4
Specialties 13,900 Becton, Dickinson & Company 715,989 1,200,613 0.4
75,000 Boston Scientific Corporation 1,999,113 3,843,750 1.2
180,000 Cardiometrics, Inc. 1,490,625 1,260,000 0.4
200,000 Endosonics Corp. 2,955,364 2,750,000 0.9
60,000 Fresenius USA Inc. 426,959 1,305,000 0.4
25,000 InControl, Inc. 256,250 362,500 0.1
140,000 InStent, Inc. 2,030,875 2,695,000 0.9
200,000 Integra Lifesciences Corp. 1,650,000 2,150,000 0.7
130,000 Medtronic, Inc. 4,485,863 7,426,250 2.4
35,000 Saint Jude Medical, Inc. 1,181,250 1,535,625 0.5
30,000 Target Therapeutics, Inc. 1,185,625 1,627,500 0.5
200,000 Uromed Corp. 2,095,127 2,600,000 0.8
219,467 Uromed Corp. (Restricted) 1,000,005 2,853,071 0.9
305,000 VISX, Incorporated 7,194,177 10,903,750 3.6
200,000 Ventritex, Inc. 3,590,630 3,375,000 1.1
------------ ------------- ------
40,992,195 55,898,059 18.2
Pharmaceutical-- 40,000 American Home Products Corporation 2,963,650 4,080,000 1.3
Consumer 62,300 Johnson & Johnson Co. 3,728,164 5,980,800 1.9
30,000 Warner-Lambert Co. 2,700,960 2,812,500 0.9
------------ ------------- ------
9,392,774 12,873,300 4.1
Pharmaceutical-- 100,000 Abbott Laboratories 3,962,250 4,225,000 1.4
Diversified 260,000 Collagen Corporation 5,061,254 5,200,000 1.7
64,700 IVAX Corp. 1,607,482 1,698,375 0.5
50,000 R.P. Scherer Corporation 1,999,850 1,918,750 0.6
------------ ------------- ------
12,630,836 13,042,125 4.2
<PAGE>
Pharmaceutical-- 30,000 Lilly (Eli) & Co. 1,563,761 1,725,000 0.6
Prescription 200,000 Merck & Co., Inc. 8,897,004 14,050,000 4.6
110,000 Pfizer, Inc. 4,970,911 7,562,500 2.4
300,000 Pharmacia & Upjohn Inc. 9,420,728 12,562,500 4.1
220,000 U.S. Bioscience, Inc. 1,100,723 1,471,250 0.5
------------ ------------- ------
25,953,127 37,371,250 12.2
Investments in the United States 168,362,983 209,532,584 68.1
Total Investments in North America 169,646,596 211,113,387 68.6
MIDDLE
EAST
Israel Pharmaceutical-- 50,000 Teva Pharmaceuticals Industries,
Diversified Inc. (ADR)* 2,011,251 2,237,500 0.7
Investments in Israel 2,011,251 2,237,500 0.7
Total Investments in the Middle East 2,011,251 2,237,500 0.7
PACIFIC
BASIN
Japan Pharmaceutical-- 50,000 Sankyo Company, Ltd. 1,124,094 1,183,460 0.4
Prescription
Investments in Japan 1,124,094 1,183,460 0.4
Total Investments in the
Pacific Basin 1,124,094 1,183,460 0.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
WESTERN Shares Percent of
EUROPE Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Denmark Pharmaceutical-- 10,000 Novo Nordisk A/S (Class B) $ 1,134,722 $ 1,340,045 0.4%
Diversified
Investments in Denmark 1,134,722 1,340,045 0.4
France Pharmaceutical-- 80,000 Sanofi SA 4,929,426 5,308,695 1.7
Diversified
<PAGE>
Pharmaceutical-- 60,000 Synthelabo SA 3,716,392 4,087,225 1.4
Prescription
Investments in France 8,645,818 9,395,920 3.1
Germany Pharmaceutical-- 25,000 Hoechst AG 7,442,953 7,383,576 2.4
Diversified
Investments in Germany 7,442,953 7,383,576 2.4
Ireland Pharmaceutical-- 180,000 Elan Corporation PLC (ADR)* 6,394,113 10,440,000 3.4
Diversified
Investments in Ireland 6,394,113 10,440,000 3.4
Sweden Medical Specialties 40,000 Elekta Instrument AB 'B' Free 778,438 1,515,130 0.5
Pharmaceutical-- 200,000 Astra AB 'B' Free 7,298,929 8,022,122 2.6
Prescription
Investments in Sweden 8,077,367 9,537,252 3.1
Switzerland Pharmaceutical-- 12,000 Ciba-Geigy AG (Registered) 8,638,836 10,004,958 3.3
Consumer
Pharmaceutical-- 1,000 Roche Holdings AG 6,459,518 7,321,104 2.4
Prescription 15,000 Sandoz AG (Registered) 11,874,512 13,026,772 4.2
------------ ------------- ------
18,334,030 20,347,876 6.6
Investments in Switzerland 26,972,866 30,352,834 9.9
United Pharmaceutical-- 100,000 SmithKline Beecham Corporation
Kingdom Diversified PLC (ADR)* 4,985,144 5,625,000 1.8
Investments in the United Kingdom 4,985,144 5,625,000 1.8
Total Investments in Western Europe 63,652,983 74,074,627 24.1
SHORT-TERM Face
SECURITIES Amount
<PAGE>
Commercial $ 5,256,000 Associates Corporation of
Paper** North America, 5.90% due 2/01/1996 5,256,000 5,256,000 1.7
12,000,000 Preferred Receivable Funding
Corporation, 5.50% due 2/20/1996 11,965,167 11,965,167 3.9
------------ ------------- ------
17,221,167 17,221,167 5.6
US Government Federal National Mortgage Association:
& Agency 5,000,000 5.40% due 2/01/1996 5,000,000 5,000,000 1.6
Obligations ** 13,000,000 5.37% due 2/23/1996 12,957,338 12,957,338 4.2
------------ ------------- ------
17,957,338 17,957,338 5.8
Total Investments in Short-Term
Securities 35,178,505 35,178,505 11.4
Total Investments $271,613,429 323,787,479 105.2
============
Liabilities in Excess of Other Assets (16,138,394) (5.2)
------------- ------
Net Assets $ 307,649,085 100.0%
============= ======
Net Asset Value: Class A--Based on net assets of $114,854,981 and
22,262,793 shares outstanding $ 5.16
=============
Class B--Based on net assets of $164,694,415 and
35,923,309 shares outstanding $ 4.58
=============
Class C--Based on net assets of $12,690,283 and
2,766,950 shares outstanding $ 4.59
=============
Class D--Based on net assets of $15,409,406 and
3,068,102 shares outstanding $ 5.02
=============
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Company.
</TABLE>
PORTFOLIO CHANGES
<PAGE>
For the Quarter Ended January 31, 1996
Additions
*Apria Healthcare Group, Inc.
Cardiometrics, Inc.
Coram Healthcare Corp.
Diagnostic Products Corporation
Emisphere Technologies Inc.
Endosonics Corp.
Gilead Sciences Inc.
HEALTHSOUTH Corporation
Healthcare Compare Corp.
Hoechst AG
IBAH Inc.
ISG Technologies, Inc.
Integra Lifesciences Corp.
Lilly (Eli) & Co.
Olsten Corporation (The)
Parexel International Corp.
Pharmacia & Upjohn Inc.
*Resound Corp.
Sanofi SA
Synthelabo SA
Deletions
Allergan, Inc.
*Apria Healthcare Group, Inc.
EP Technologies, Inc.
FHP International Corporation
GMIS Inc.
Metra Biosystems, Inc.
Ostex International, Inc.
Pharmacia AB (Class B)
PhyCor Inc.
*Resound Corp.
Schering-Plough Corp.
The Upjohn Co.
VIVUS, Inc.
Zeneca Group PLC
[FN]
*Added and deleted in the same quarter.
