MERRILL LYNCH
HEALTHCARE
FUND, INC.
FUND LOGO
Quarterly Report
July 31, 1997
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
Printed on post-consumer recycled paper
MERRILL LYNCH HEALTHCARE FUND, INC.
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
Philip L. Kirstein, Senior Vice President
Donald C. Burke, Vice President
Jordan C. Schreiber, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
<PAGE>
Custodian
The Chase Manhattan Bank
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
For the three months ended July 31, 1997, total returns for Merrill
Lynch Healthcare Fund, Inc.'s Class A, Class B, Class C and Class D
Shares were +18.29%, +18.07%, +17.95% and +18.40%, respectively.
(Fund results do not reflect sales charges, and would be lower if
sales charges were included. Complete performance information,
including average annual total returns, can be found on pages 3--7
of this report to shareholders.)
Portfolio Matters
In the United States, continued evidence of low inflation and slow
but steady economic growth created the backdrop for a strong stock
market. There were times, as in April, when some economic indicators
raised concerns about the continued viability of the moderate
growth, low interest rate scenario, and share prices declined.
However, following that brief stock market correction, the overall
trend for US share prices was strongly positive through July quarter-
end. There was greater volatility in the European stock markets, as
investors became concerned whether all countries would be able to
meet the economic targets required for the European Monetary Union.
For some time, the Fund's investments have been focused on large-
cap US healthcare issues, and this strategy continued to benefit the
Fund's performance during the July quarter. US-based multinational
healthcare companies remained among the stock market leaders during
the July quarter. Share valuations for pharmaceutical companies
closed the quarter at close to historically high valuation levels.
Sales growth for pharmaceutical companies is accelerating,
especially to the managed care market, primarily health maintenance
organizations (HMOs). It is now an accepted concept that compliant
use of medications lowers hospital costs.
<PAGE>
Nevertheless, late in the July quarter there was also some evidence
of greater investor interest in smaller-capitalization healthcare
issues, in areas such as biotechnology, medical technology and
diagnostics. With many small- and mid-cap healthcare issues selling
at reasonable valuations, we expect investor interest to broaden to
these issues.
Several specific developments during the July quarter benefited Fund
holdings. Warner-Lambert Co. achieved the most successful new
pharmaceutical launch in history. In just slightly more than three
months on the market, the company's Lipitor has captured more than
one-quarter of the market for cholesterol-reducing drugs. Pfizer,
Inc.'s marketing force helped market the drug, which was a strong
contributing factor to the successful Lipitor launch.
Investors also were enthusiastic about Pfizer's accelerated
development of Viagra, an oral drug for the treatment of male
impotence. We now expect Viagra to reach the market by mid-1998
rather than in 1999. Viagra has the potential to become another very
successful new pharmaceutical launch for this company which, in our
judgment, has the richest pipeline of new drugs in the global
industry.
Fund holding IDEC Pharmaceuticals Corporation also benefited during
the July quarter. A Food & Drug Administration (FDA) advisory
committee recommended approval of the antibody that the company
developed to treat lymphoma.
The FDA also authorized "fast track" approval status during the
quarter for Evista, Eli Lilly and Co.'s selective estrogen receptor
modulator for treatment of post-menopausal osteoporosis and
cardiovascular diseases. In our judgment, this drug has the
potential to generate annual revenues in excess of $1 billion for
Lilly. Evista could be on the market in early 1998.
During the July quarter, we modified our strategy to increasingly
invest in mid-cap healthcare product companies with strong
fundamentals. As a valuation disparity has widened relative to the
large-cap companies, this area is still reasonably priced, in our
view. Moreover, the strong US dollar has less of a negative impact
on the earnings of mid-cap companies, whose operations tend to be
based in the United States. Our investments specifically focus on
business niches such as orthopedics, drug distribution and
cardiology devices. Although investing in mid-cap stocks has reduced
the Fund's liquidity somewhat, we believe that this risk is
acceptable in the current benign economic climate. Specific mid-cap
additions to the portfolio during the July quarter include DePuy,
Inc., an orthopedic device company, and AmeriSource Health
Corporation, a major drug distributor.
<PAGE>
In Conclusion
The Fund's investments remain focused on those companies developing
and marketing healthcare products; we have far less exposure to
healthcare service-oriented companies. We continue to believe that
the product-oriented segment of healthcare affords more attractive
investment opportunities at this time.
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 next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Jordan C. Schreiber)
Jordan C. Schreiber
Vice President and Portfolio Manager
August 25, 1997
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:
* 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.
<PAGE>
* 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 approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* 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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the ex-dividend date. 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.
PERFORMANCE DATA (continued)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
7/31/97 4/30/97 7/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $5.42 $5.05 $4.79 +25.51%(1) +12.08%(2)
Class B Shares 4.66 4.40 4.24 +23.80(1) +11.36(2)
Class C Shares 4.66 4.40 4.24 +23.80(1) +11.36(2)
Class D Shares 5.24 4.89 4.66 +25.15(1) +12.07(2)
Class A Shares--Total Return +41.26(3) +18.29(4)
Class B Shares--Total Return +39.73(5) +18.07(6)
Class C Shares--Total Return +39.67(7) +17.95(8)
Class D Shares--Total Return +40.92(9) +18.40(10)
<PAGE>
<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 $0.542 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.242 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.657 per share ordinary
income dividends and $0.542 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.317 per share ordinary
income dividends and $0.242 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.589 per share ordinary
income dividends and $0.542 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.298 per share ordinary
income dividends and $0.242 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.586 per share ordinary
income dividends and $0.542 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.292 per share ordinary
income dividends and $0.242 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.639 per share ordinary
income dividends and $0.542 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.312 per share
ordinary income dividends and $0.242 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
1996 4.98 4.92 0.300 0.340 +11.91
1/1/97--7/31/97 4.92 5.42 0.242 0.317 +21.42
------- ------
Total $12.024 Total $4.264
<PAGE>
Cumulative total return as of 7/31/97: +417.44%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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.
</TABLE>
<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
1996 4.43 4.30 0.300 0.291 +10.69
1/1/97--7/31/97 4.30 4.66 0.242 0.298 +20.82
------- ------
Total $8.107 Total $3.557
Cumulative total return as of 7/31/97: +189.30%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 4.43 4.30 0.300 0.294 +10.76
1/1/97--7/31/97 4.30 4.66 0.242 0.292 +20.69
------ ------
Total $0.639 Total $0.685
Cumulative total return as of 7/31/97: +89.48%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
+++See Important Note on page 6.
</TABLE>
PERFORMANCE DATA (concluded)
<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
1996 4.85 4.78 0.300 0.327 +11.78
1/1/97--7/31/97 4.78 5.24 0.242 0.312 +21.12
------ ------
Total $0.639 Total $0.738
Cumulative total return as of 7/31/97: +89.60%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<PAGE>
Average Annual
Total Return+++
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/97 +26.70% +20.05%
Five Years Ended 6/30/97 +14.77 +13.54
2/01/90++ through 6/30/97 +14.32 +13.50
Ten Years Ended 6/30/97 +11.43 +10.83
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
++On February 1, 1990, Merrill Lynch Asset Management, L.P. became
the sole investment adviser.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +25.37% +21.37%
Five Years Ended 6/30/97 +13.65 +13.65
2/01/90++ through 6/30/97 +13.15 +13.15
Inception (10/21/88) through 6/30/97 +12.74 +12.74
[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, L.P. became
the sole investment adviser.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +25.20% +24.20%
Inception (10/21/94) through 6/30/97 +25.81 +25.81
[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**
<PAGE>
Year Ended 6/30/97 +26.12% +19.50%
Inception (10/21/94) through 6/30/97 +25.78 +23.28
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
+++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 3--6 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, L.P. became the sole
investment adviser.
Performance
Results*
2/01/90 to 7/31/97++
% Change
Class A Shares--Total Return 272.51%
Class B Shares--Total Return 253.35
[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.
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
2/01/90++ through 6/30/97 +19.07% +18.21%
<PAGE>
[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**
2/01/90++ through 6/30/97 +18.23% +18.23%
[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.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
MIDDLE Shares Percent of
EAST Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Israel Pharmaceutical-- 20,000 Teva Pharmaceuticals Industries,
Diversified Inc. (ADR)* $ 1,180,834 $ 1,121,250 0.3%
Total Investments in the 1,180,834 1,121,250 0.3
Middle East
NORTH
AMERICA
United Biotechnology 20,000 Affymetrix, Inc. 510,000 647,500 0.2
States 150,000 Aphton Corp. 3,184,625 1,725,000 0.5
50,000 Arris Pharmaceutical Corp. 744,061 587,500 0.2
100,000 Biochem Pharma Inc. 2,430,000 2,875,000 0.9
30,000 Centocor, Inc. 879,189 1,153,125 0.3
250,000 Coulter Pharmaceuticals, Inc. 3,000,000 2,031,250 0.6
150,000 Cytogen Corporation 845,317 675,000 0.2
280,000 Emisphere Technologies Inc. 4,511,956 5,425,000 1.6
15,000 Guilford Pharmaceuticals, Inc. 376,875 331,875 0.1
30,000 IDEC Pharmaceuticals Corporation 753,750 819,375 0.3
60,000 Protein Design Labs, Inc. 1,890,844 1,672,500 0.5
70,000 Vical, Inc. 1,265,000 761,250 0.2
------------ ------------ ------
20,391,617 18,704,375 5.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
NORTH AMERICA Shares Percent of
(concluded) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Diagnostics 60,000 Acuson Corporation $ 1,387,349 $ 1,578,750 0.5%
States 119,500 Dianon Systems, Inc. 1,169,003 1,045,625 0.3
(concluded) 75,000 Diatide, Inc. 637,500 375,000 0.1
147,000 NeoPath, Inc. 2,558,250 2,407,125 0.7
------------ ------------ ------
5,752,102 5,406,500 1.6
Health Care Cost 150,000 Allegiance Corporation 3,392,000 4,687,500 1.4
Containment 250,000 AmeriSource Health Corporation
(Class A) 12,122,319 11,750,000 3.5
110,000 Bergen Brunswig Corporation 2,756,030 3,272,500 1.0
85,000 CRA Managed Care, Inc. 3,584,552 4,356,250 1.3
170,000 Cardinal Health, Inc. 9,242,934 10,582,500 3.2
110,000 Healthcare Compare Corporation 4,781,969 6,256,250 1.9
95,000 McKesson Corporation 7,009,797 8,235,313 2.5
250,000 Medpartners, Inc. 5,703,922 5,937,500 1.8
100,000 Tenet Healthcare Corp. 2,177,660 2,993,750 0.9
200,000 Walsh International, Inc. 1,806,437 1,800,000 0.5
------------ ------------ ------
52,577,620 59,871,563 18.0
Medical Specialties 25,000 Advanced Tissue Sciences, Inc. 331,250 373,438 0.1
250,000 Baxter International, Inc. 10,084,700 14,453,125 4.3
150,000 Becton Dickinson & Company 6,713,221 8,043,750 2.4
40,000 Boston Scientific Corporation 2,022,400 2,870,000 0.9
170,000 C.R. Bard, Inc. 4,897,364 6,396,250 1.9
210,000 Conceptus, Inc. 2,442,249 1,863,750 0.6
250,000 DePuy, Inc. 6,029,341 6,109,375 1.8
200,000 Guidant Corporation 14,393,026 18,250,000 5.5
100,000 Ilex Oncology Inc. 1,200,000 1,875,000 0.6
75,000 InControl, Inc. 1,071,875 740,625 0.2
140,000 KeraVision, Inc. 2,339,380 1,225,000 0.4
80,000 Medtronic, Inc. 3,084,113 6,980,000 2.1
310,000 Optical Sensors, Incorporated 3,483,438 1,666,250 0.5
75,000 Photoelectron Corp. 637,500 506,250 0.1
110,000 ReSound Corporation 853,742 522,500 0.1
60,000 Sonus Pharmaceuticals PLC 1,724,062 1,920,000 0.6
10,000 Syncor International Corporation 105,000 137,500 0.0
185,000 VISX, Incorporated 4,509,688 3,989,062 1.2
21,000 Zonagen, Inc. 630,000 614,250 0.2
------------ ------------ ------
66,552,349 78,536,125 23.5
<PAGE>
Pharmaceutical-- 100,000 American Home Products Corporation 6,914,677 8,243,750 2.5
Consumer 60,000 Johnson & Johnson 2,850,747 3,738,750 1.1
125,000 Warner-Lambert Co. 9,151,537 17,460,937 5.2
------------ ------------ ------
18,916,961 29,443,437 8.8
Pharmaceutical-- 200,000 Bristol-Myers Squibb Company 10,968,766 15,687,500 4.7
Diversified 60,000 Schering-Plough Corp. 2,324,520 3,273,750 1.0
------------ ------------ ------
13,293,286 18,961,250 5.7
Pharmaceutical-- 140,000 Eli Lilly and Co. 9,826,362 15,820,000 4.7
Prescription 5,000 Merck & Co., Inc. 342,654 519,687 0.2
140,000 Pfizer, Inc. 6,709,288 8,347,500 2.5
202,500 SangStat Medical Corporation 6,667,346 4,885,312 1.5
255,000 Sepracor Inc. 6,085,637 6,406,875 1.9
------------ ------------ ------
29,631,287 35,979,374 10.8
Total Investments in North America 207,115,222 246,902,624 74.0
PACIFIC
BASIN
Japan Pharmaceutical-- 80,000 Daiichi Pharmaceutical Co., Ltd. 1,405,818 1,431,224 0.4
Prescription 170,000 Sankyo Company, Ltd. 4,043,277 6,068,354 1.8
50,000 Takeda Chemical Industries, Ltd. 1,111,546 1,514,768 0.5
Total Investments in the Pacific 6,560,641 9,014,346 2.7
Basin
WESTERN
EUROPE
Denmark Pharmaceutical-- 30,000 Novo Nordisk A/S (Class B) 3,102,847 3,163,716 0.9
Prescription
Investments in Denmark 3,102,847 3,163,716 0.9
Finland Pharmaceutical-- 46,450 Orion-yhtymae OY (Class B) 1,528,730 1,697,982 0.5
Diversified
Investments in Finland 1,528,730 1,697,982 0.5
<PAGE>
France Pharmaceutical-- 40,000 Synthelabo S.A. 5,071,700 4,941,701 1.5
Diversified
Investments in France 5,071,700 4,941,701 1.5
Germany Medical Specialties 40,000 Fresenius AG (Preferred) 6,847,117 8,235,743 2.5
136,600 Fresenius Medical Care AG (ADR)* 2,456,885 3,927,250 1.2
------------ ------------ ------
9,304,002 12,162,993 3.7
Pharmaceutical-- 40,000 Bayer AG 1,557,630 1,686,366 0.5
Diversified
Investments in Germany 10,861,632 13,849,359 4.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
WESTERN EUROPE Shares Percent of
(concluded) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Ireland Pharmaceutical-- 100,000 Elan Corporation PLC (ADR)* $ 4,670,925 $ 4,750,000 1.4%
Prescription
Investments in Ireland 4,670,925 4,750,000 1.4
Switzerland Pharmaceutical-- 12,500 Novartis AG (Registered) 14,275,809 20,091,060 6.0
Consumer
Pharmaceutical-- 150 Roche Holding AG 1,257,485 1,452,815 0.4
Prescription
Investments in Switzerland 15,533,294 21,543,875 6.4
United Pharmaceutical-- 350,000 Smithkline Beecham PLC 4,270,394 6,801,056 2.1
Kingdom Diversified
Pharmaceutical-- 5,000 Glaxo Wellcome PLC 60,202 105,604 0.0
Prescription 150,000 Zeneca Group PLC 3,927,368 4,969,350 1.5
------------ ------------ ------
3,987,570 5,074,954 1.5
Investments in the United Kingdom 8,257,964 11,876,010 3.6
Total Investments in Western
Europe 49,027,092 61,822,643 18.5
<PAGE>
<CAPTION>
SHORT-TERM Face
SECURITIES Amount
Commercial $12,989,000 Eureka Securitization Corp., 5.55%
Paper** due 8/08/1997 12,974,983 12,974,983 3.9
US Government 261,000 Federal Home Loan Mortgage Corp.,
Agency 5.33% due 8/13/1997 260,536 260,536 0.1
Obligations**
Total Investments in Short-Term
Securities 13,235,519 13,235,519 4.0
Total Investments $277,119,308 332,096,382 99.5
============
Other Assets Less Liabilities 1,712,526 0.5
------------
Net Assets $333,808,908 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of
$120,749,997 and 22,272,246 shares
outstanding $ 5.42
============
Class B--Based on net assets of
$178,433,358 and 38,309,992 shares
outstanding $ 4.66
============
Class C--Based on net assets of
$14,685,799 and 3,150,763 shares
outstanding $ 4.66
============
Class D--Based on net assets of
$19,939,754 and 3,807,450 shares
outstanding $ 5.24
============
<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
For the Quarter Ended July 31, 1997
<PAGE>
Additions
Acuson Corporation
Advanced Tissue Sciences, Inc.
Affymetrix, Inc.
*Alpha 1 Biomedicals Inc.
AmeriSource Health Corporation (Class A)
Bayer AG
CRA Managed Care, Inc.
Cytogen Corporation
Daiichi Pharmaceutical Co., Ltd.
DePuy, Inc.
Elan Corporation PLC (ADR)
Guilford Pharmaceuticals, Inc.
Sonus Pharmaceuticals PLC
Syncor International Corporation
Synthelabo S.A.
Zonagen, Inc.
Deletions
ALZA Corp.
Aetna Inc.
*Alpha 1 Biomedicals Inc.
Astra AB 'B' Free (Ordinary)
Biora AB
Collagen Corporation
Magainin Pharmaceuticals, Inc.
Neurex Corp.
Pacificare Health Systems Inc. (Preferred)
Pliva d.d. (GDR)
Schering AG
Stryker Corporation
Ultrafem Inc.
United Healthcare Corporation
VidaMed, Inc.
[FN]
*Added and deleted in the same quarter.
PORTFOLIO INFORMATION
Worldwide
Investments
As of 7/31/97
<PAGE>
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Novartis AG (Registered) 6.0%
Guidant Corporation 5.5
Warner-Lambert Co. 5.2
Eli Lilly and Co. 4.7
Bristol-Myers Squibb Co. 4.7
Baxter International, Inc. 4.3
AmeriSource Health Corporation
(Class A) 3.5
Cardinal Health, Inc. 3.2
Pfizer, Inc. 2.5
American Home Products
Corporation 2.5
Breakdown of Securities Percent of
By Country Net Assets
United States 74.0%
Switzerland 6.4
Germany 4.2
United Kingdom 3.6
Japan 2.7
France 1.5
Ireland 1.4
Denmark 0.9
Finland 0.5
Israel 0.3
Industries Represented Percent of
In the Portfolio Net Assets
Medical Specialties 27.2%
Health Care Cost Containment 18.0
Pharmaceutical--Prescription 17.7
Pharmaceutical--Consumer 14.8
Pharmaceutical--Diversified 10.6
Biotechnology 5.6
Diagnostics 1.6
