MERRILL LYNCH
HEALTHCARE
FUND, INC.
FUND LOGO
Semi-Annual Report
October 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 HEALTH CARE 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
Jordan C. Schreiber, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
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
<PAGE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
DEAR SHAREHOLDER
Volatility highlighted stock and bond markets worldwide during the
quarter ended October 31, 1997. The volatility was exacerbated by
events in Southeast Asia. Following the currency devaluations in
several Southeast Asian countries this summer, the Hong Kong
dollar--the value of which is pegged to the US dollar--came under
speculative attack in foreign currency markets. Monetary authorities
in Hong Kong raised interest rates to support the currency, and the
Hong Kong stock market declined sharply. This event raised investor
concerns worldwide regarding the viability of continued global
economic growth. European stock markets were also negatively im-
pacted by these developments.
At first, US stock market investors focused on the challenges that
would face US multinational corporations in the wake of the poorer
Asian economic prospects. The selloff then broadened to other stocks
as well, leading to a 554-point decline in the Dow Jones Industrial
Average on October 27, 1997. Although the decline proved to be short-
lived, investor confidence was not definitively restored, and stock
market volatility continued.
Portfolio Matters
For the three months ended October 31, 1997, total returns for
Merrill Lynch Healthcare Fund, Inc.'s Class A, Class B, Class C and
Class D Shares were +4.43%, +4.08%, +4.29% and +4.39%, 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 4--8
of this report to shareholders.)
Despite the uncertainties of the current stock market environment,
favorable fundamentals continue for large-capitalization US and UK
pharmaceutical companies. Many of these companies continue to record
strong consistent earnings growth, driven by new products. In the
case of US-based multinational pharmaceutical and medical device
companies, these earnings gains are being achieved despite the
negative impact of a strong US dollar. In contrast, continental
European and Japanese health-care stocks are relatively weak as
governments attempt to restrain healthcare costs. We chose to
liquidate our investments in Japan during the October quarter, since
we expect severe government-mandated price cuts over the next three
years to negatively impact earnings growth for healthcare companies
in that country.
<PAGE>
As large-capitalization healthcare stocks in the United States moved
to near-historic high valuations, the resultant disparity with
smaller-capitalization issues widened. This has led, as noted in our
last report to shareholders, to a broadening of investor interest in
small- and mid-capitalization issues. Therefore, we have increased
the Fund's exposure to smaller-capitalization issues while
maintaining core holdings in large-capitalization pharmaceutical
issues.
In the large-capitalization area, we have avoided companies with
mature product lines. Instead, we have focused investments in
companies with important new products, such as Eli Lilly and
Company, Pfizer, Inc. and Warner-Lambert Co. For example, Pfizer
plans three important product launches next year. The company is now
hiring and training additional salespeople to support these new
products. One of these new drugs is Viagra, a treatment for male
impotence. This potential blockbuster drug is likely to be launched
in mid-1998. Warner-Lambert's Lipitor continues to record dramatic
sales growth, and is now the second best-selling cholesterol-
reduction drug. Lilly's Evista, a unique compound for treatment of
post-menopausal conditions, is slated for final Food and Drug
Administration review shortly.
Among our smaller-capitalization investments, we are oriented toward
companies in significant growth areas, such as orthopedics. With an
aging population vulnerable to bone fractures, we expect DePuy,
Inc., a Fund holding, to find an expanding market for its hip and
knee replacements. During the October quarter, we established an
investment in Ocular Sciences Inc., a low-cost producer and marketer
of soft contact lenses. Other new positions during the October
quarter include the biotechnology companies Genelabs Technologies,
Inc. and Gilead Sciences, Inc. Genelabs is a pioneer in the creation
of therapeutic agents to treat lupus. Gilead Sciences is
collaborating with Roche Holding AG, also a Fund holding, in
development of a drug to treat influenza. During the October
quarter, we also invested in Physio-Control International Corp.
and Heartstream, Inc., two companies that manufacture external
defibrillators, devices that provide emergency aid for life-
threatening heart malfunctions.
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 next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Jordan C. Schreiber)
Jordan C. Schreiber
Senior Vice President and
Portfolio Manager
November 28, 1997
Merrill Lynch Healthcare Fund, Inc., October 31, 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.
* 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).
<PAGE>
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.
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
10/31/97 7/31/97 10/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $5.66 $5.42 $5.35 +17.35%(1) +4.43%
Class B Shares 4.85 4.66 4.72 +15.74(1) +4.08
Class C Shares 4.86 4.66 4.72 +15.98(1) +4.29
Class D Shares 5.47 5.24 5.20 +17.08(1) +4.39
Class A Shares--Total Return +32.08(2) +4.43
Class B Shares--Total Return +30.64(3) +4.08
Class C Shares--Total Return +30.85(4) +4.29
Class D Shares--Total Return +31.83(5) +4.39
<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 $0.657 per share ordinary
income dividends and $0.542 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.589 per share ordinary
income dividends and $0.542 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.586 per share ordinary
income dividends and $0.542 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.639 per share ordinary
income dividends and $0.542 per share capital gains distributions.
</TABLE>
<PAGE>
Average Annual
Total Return+++
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 9/30/97 +31.81% +24.89%
Five Years Ended 9/30/97 +16.22 +14.97
2/01/90++ through 9/30/97 +14.83 +14.03
Ten Years Ended 9/30/97 +10.96 +10.37
[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 9/30/97 +30.35% +26.35%
Five Years Ended 9/30/97 +15.00 +15.00
2/01/90++ through 9/30/97 +13.65 +13.65
Inception (10/21/88) through 9/30/97 +13.17 +13.17
[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 9/30/97 +30.29% +29.29%
Inception (10/21/94) through 9/30/97 +26.14 +26.14
[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 9/30/97 +31.31% +24.42%
Inception (10/21/94) through 9/30/97 +26.19 +23.90
<PAGE>
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
+++See Important Note on page 8.
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
PERFORMANCE DATA (continued)
<TABLE>
Performance
Summary--
Class A Shares+++
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <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--10/31/97 4.92 5.66 0.242 0.317 +26.79
------- ------
Total $12.024 Total $4.264
Cumulative total return as of 10/31/97: +440.35%**
<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>
<PAGE>
<TABLE>
Performance
Summary--
Class B Shares+++
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <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--10/31/97 4.30 4.85 0.242 0.298 +25.75
------ ------
Total $8.107 Total $3.557
Cumulative total return as of 10/31/97: +201.10%**
<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>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <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--10/31/97 4.30 4.86 0.242 0.292 +25.87
------ ------
Total $0.639 Total $0.685
Cumulative total return as of 10/31/97: +97.61%**
<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.
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <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--10/31/97 4.78 5.47 0.242 0.312 +26.44
------ ------
Total $0.639 Total $0.738
Cumulative total return as of 10/31/97: +97.92%**
<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>
+++See Important Note on page 8.
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
PERFORMANCE DATA (concluded)
+++ 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, L.P. became the sole
investment adviser.
<PAGE>
Performance
Results*
2/01/90 to 10/31/97++
% Change
Class A Shares--Total Return +289.01%
Class B Shares--Total Return +267.76
[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 9/30/97 +19.44% +18.61%
[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 9/30/97 +18.58% +18.58%
[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>
SCHEDULE OF INVESTMENTS
<CAPTION>
MIDDLE Shares Value Percent of
EAST Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Israel Pharmaceutical-- 120,000 Teva Pharmaceuticals
Diversified Industries, Inc. (ADR)* $ 6,522,500 $ 5,602,500 1.7%
Total Investments in
the Middle East 6,522,500 5,602,500 1.7
NORTH
AMERICA
United States Biotechnology 20,000 ++Affymetrix, Inc. 510,000 722,500 0.2
150,000 ++Aphton Corp. 3,184,625 1,687,500 0.5
50,000 ++Arris Pharmaceutical Corp. 744,063 581,250 0.2
100,000 ++Biochem Pharma Inc. 2,430,000 2,500,000 0.7
72,500 ++COR Therapeutics, Inc. 1,613,125 1,604,063 0.5
30,000 ++Centocor, Inc. 879,189 1,316,250 0.4
250,000 ++Coulter Pharmaceuticals, Inc. 3,000,000 3,531,250 1.1
150,000 ++Cytogen Corporation 845,318 459,375 0.1
280,000 ++Emisphere Technologies Inc. 4,511,956 5,355,000 1.6
300,000 ++Genelabs Technologies, Inc. 1,441,561 1,143,750 0.3
40,000 ++Gilead Sciences, Inc. 1,632,500 1,355,000 0.4
30,000 ++IDEC Pharmaceuticals
Corporation 753,750 1,143,750 0.3
60,000 ++Protein Design Labs, Inc. 1,890,844 2,940,000 0.9
50,000 ++Scios Inc. 487,500 406,250 0.1
30,000 ++Targeted Genetics Corporation 124,007 116,250 0.0
2,500 ++Vical, Inc. 35,625 35,000 0.0
------------ ------------ ------
24,084,063 24,897,188 7.3
Diagnostics 80,000 ++Acuson Corporation 1,930,811 1,500,000 0.4
119,500 ++Dianon Systems, Inc. 1,169,003 956,000 0.3
75,000 ++Diatide, Inc. 637,500 562,500 0.2
305,000 ++NeoPath, Inc. 5,324,107 5,413,750 1.6
------------ ------------ ------
9,061,421 8,432,250 2.5
<PAGE>
Health Care Cost 150,000 Allegiance Corporation 3,392,000 4,162,500 1.2
Containment 216,800 ++AmeriSource Health
Corporation (Class A) 10,508,673 12,872,500 3.8
110,000 Bergen Brunswig Corporation 2,756,030 4,406,875 1.3
170,000 Cardinal Health, Inc. 9,242,934 12,622,500 3.7
40,000 ++Cerner Corporation 1,254,376 965,000 0.3
151,810 ++Concentra Managed Care,
Inc. (a) 3,584,552 4,933,825 1.5
110,000 ++Healthcare Compare
Corporation 4,781,969 5,898,750 1.7
95,000 McKesson Corporation 7,009,797 10,194,688 3.0
125,000 ++Medpartners, Inc. 2,955,792 3,179,687 0.9
130,000 ++Tenet Healthcare Corp. 3,188,878 3,973,125 1.2
200,000 ++Walsh International, Inc. 1,806,437 1,950,000 0.6
------------ ------------ ------
50,481,438 65,159,450 19.2
</TABLE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
NORTH AMERICA Shares Value Percent of
(concluded) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Medical Specialties 72,500 Becton Dickinson & Company $ 3,259,962 $ 3,339,531 1.0%
(concluded) 170,000 C.R. Bard, Inc. 4,897,364 4,717,500 1.4
240,000 ++Conceptus, Inc. 2,694,124 1,680,000 0.5
250,000 DePuy, Inc. 6,029,341 6,406,250 1.9
300,000 Guidant Corporation 11,209,163 17,250,000 5.1
90,000 ++Heartstream, Inc. 960,625 922,500 0.3
100,000 ++Ilex Oncology Inc. 1,200,000 1,025,000 0.3
100,000 ++InControl, Inc. 1,316,408 775,000 0.2
20,000 ++KeraVision, Inc. 319,063 135,000 0.0
110,000 Medtronic, Inc. 2,119,670 4,785,000 1.4
50,000 ++Ocular Sciences, Inc. 1,297,500 1,075,000 0.3
380,000 ++Optical Sensors,
Incorporated 3,870,626 2,612,500 0.8
100,000 ++Physio-Control International
Corp. 1,464,530 1,593,750 0.5
150,000 ++ReSound Corporation 1,048,742 825,000 0.2
60,000 ++Sonus Pharmaceuticals, Inc. 1,724,062 2,250,000 0.6
135,000 ++VISX, Incorporated 3,322,188 3,088,125 0.9
50,000 ++Zonagen, Inc. 1,570,374 1,625,000 0.5
------------ ------------ ------
48,303,742 54,105,156 15.9
Pharmaceutical-- 100,000 American Home Products
Consumer Corporation 6,914,677 7,412,500 2.2
10,000 Johnson & Johnson 475,233 573,750 0.2
125,000 Warner-Lambert Co. 9,151,537 17,898,437 5.2
------------ ------------ ------
16,541,447 25,884,687 7.6
<PAGE>
Pharmaceutical-- 200,000 Bristol-Myers Squibb Company 10,968,766 17,550,000 5.1
Diversified 40,000 Schering-Plough Corp. 1,549,680 2,242,500 0.7
100,000 ++Viropharma Inc. 2,172,652 2,162,500 0.6
------------ ------------ ------
14,691,098 21,955,000 6.4
Pharmaceutical-- 280,000 Lilly (Eli) and Company 9,826,362 18,725,000 5.5
Prescription 50,000 ++Forest Laboratories, Inc. 2,244,500 2,312,500 0.7
260,000 Pfizer, Inc. 13,605,618 18,395,000 5.4
50,000 ++Pharmacyclics, Inc. 1,260,000 1,275,000 0.4
237,600 ++SangStat Medical Corporation 7,461,808 7,246,800 2.1
255,000 ++Sepracor Inc. 6,085,637 9,084,375 2.6
------------ ------------ ------
40,483,925 57,038,675 16.7
Total Investments in
North America 203,647,134 257,472,406 75.6
WESTERN
EUROPE
Denmark Pharmaceutical-- 30,000 Novo Nordisk A/S (Class B) 3,102,847 3,252,157 1.0
Prescription
Investments in Denmark 3,102,847 3,252,157 1.0
Finland Pharmaceutical-- 50,000 Orion-yhtymae OY (Class B) 1,687,625 1,848,984 0.5
Diversified
Investments in Finland 1,687,625 1,848,984 0.5
France Pharmaceutical-- 45,000 Synthelabo S.A. 5,673,671 5,300,087 1.6
Diversified
Investments in France 5,673,671 5,300,087 1.6
Germany Medical Specialties 40,000 Fresenius AG (Preferred) 6,847,117 6,767,048 2.0
136,600 ++Fresenius Medical Care
AG (ADR)* 2,456,885 3,218,637 0.9
------------ ------------ ------
9,304,002 9,985,685 2.9
Pharmaceutical-- 20,000 Bayer AG 778,815 703,447 0.2
Diversified 25,000 Hoechst AG 1,068,911 953,433 0.3
------------ ------------ ------
1,847,726 1,656,880 0.5
Investments in Germany 11,151,728 11,642,565 3.4
<PAGE>
Ireland Pharmaceutical-- 27,500 ++Warner Chilcott
Diversified Laboratories (ADR)* 481,250 385,000 0.1
Pharmaceutical-- 50,000 ++Elan Corporation PLC (ADR)* 2,331,095 2,493,750 0.7
Prescription
Investments in Ireland 2,812,345 2,878,750 0.8
Sweden Medical Specialties 20,000 Incentive AB (A Shares) 1,833,838 1,753,612 0.5
30,000 Incentive AB (B Shares) 2,842,876 2,646,457 0.8
Investments in Sweden 4,676,714 4,400,069 1.3
Switzerland Pharmaceutical-- 8,000 Novartis AG (Registered) 9,162,058 12,571,838 3.7
Consumer
Pharmaceutical-- 200 Roche Holding AG 1,781,478 1,763,526 0.5
Prescription
Investments in Switzerland 10,943,536 14,335,364 4.2
United Kingdom Pharmaceutical-- 201,132 Smithkline Beecham PLC 1,483,385 1,906,418 0.6
Diversified
Pharmaceutical-- 5,053 Glaxo Wellcome PLC 61,263 108,335 0.0
Prescription 75,000 Zeneca Group PLC 2,139,559 2,366,674 0.7
------------ ------------ ------
2,200,822 2,475,009 0.7
Investments in the
United Kingdom 3,684,207 4,381,427 1.3
Total Investments in
Western Europe 43,732,673 48,039,403 14.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
SHORT-TERM Face Value Percent of
SECURITIES Amount Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial $12,604,000 General Motors Acceptance
Paper** Corp., 5.75% due 11/03/1997 $ 12,599,974 $ 12,599,974 3.7%
US Government 15,000,000 Federal Home Loan Mortgage
Agency Corp., 5.52% due 11/07/1997 14,986,200 14,986,200 4.4
Obligations**
Total Investments in
Short-Term Securities 27,586,174 27,586,174 8.1
<PAGE>
Total Investments $281,488,481 338,700,483 99.5
============
Other Assets Less Liabilities 1,690,336 0.5
------------ ------
Net Assets $340,390,819 100.0%
============ ======
<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.
++Non-income producing security.
(a)CRA Managed Care, Inc. merged with Concentra Managed Care, Inc.
See Notes to Financial Statements.
</TABLE>
PORTFOLIO CHANGES
For the Quarter Ended October 31, 1997
Additions
COR Therapeutics, Inc.
Cerner Corporation
*Corixa Corp.
Forest Laboratories, Inc.
Genelabs Technologies, Inc.
Gilead Sciences, Inc.
Heartstream, Inc.
Hoechst AG
Incentive AB (A Shares)
Incentive AB (B Shares)
Ocular Sciences, Inc.
*Pacificare Health Systems, Inc.
Pharmacyclics, Inc.
Physio-Control International Corp.
*Renex Corp.
Scios Inc.
Targeted Genetics Corporation
Viropharma Inc.
Warner Chilcott Laboratories (ADR)
<PAGE>
Deletions
Advanced Tissue Sciences, Inc.
Baxter International, Inc.
Boston Scientific Corporation
*Corixa Corp.
Daiichi Pharmaceutical Co., Ltd.
Guilford Pharmaceuticals, Inc.
Merck & Co., Inc.
*Pacificare Health Systems, Inc.
Photoelectron Corp.
*Renex Corp.
Sankyo Company, Ltd.
Syncor International Corporation
Takeda Chemical Industries, Ltd.
[FN]
*Added and deleted in the same quarter.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of October 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$281,488,481) (Note 1a) $338,700,483
Cash 107
Foreign cash (Note 1b) 1,163
Receivables:
Securities sold $ 5,844,241
Capital shares sold 1,429,154
Dividends 140,174 7,413,569
------------
Prepaid registration fees and other assets (Note 1f) 30,461
------------
Total assets 346,145,783
------------
Liabilities: Payables:
Securities purchased 4,315,049
Capital shares redeemed 633,233
Investment adviser (Note 2) 298,334
Distributor (Note 2) 175,064 5,421,680
------------
Accrued expenses and other liabilities 333,284
------------
Total liabilities 5,754,964
------------
Net Assets: Net assets $340,390,819
============
<PAGE>
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 100,000,000 shares authorized $ 2,200,863
Class B Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 3,701,540
Class C Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 304,686
Class D Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 391,022
Paid-in capital in excess of par 233,765,936
Accumulated investment loss--net (1,887,620)
Undistributed realized capital gains on investments and
foreign currency transactions--net 44,703,715
Unrealized appreciation on investments and foreign currency
transactions--net 57,210,677
------------
Net assets $340,390,819
============
Net Asset Class A--Based on net assets of $124,623,144 and 22,008,628
Value: shares outstanding $ 5.66
============
Class B--Based on net assets of $179,599,395 and 37,015,398
shares outstanding $ 4.85
============
Class C--Based on net assets of $14,793,360 and 3,046,858
shares outstanding $ 4.86
============
Class D--Based on net assets of $21,374,920 and 3,910,218
shares outstanding $ 5.47
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended October 31, 1997
<S> <S> <C> <C>
Investment Dividends (net of $14,378 foreign withholding tax) $ 1,059,059
Income Interest and discount earned 533,612
(Notes 1d & 1e): ------------
Total income 1,592,671
------------
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 1,743,944
Account maintenance and distribution fees--Class B (Note 2) 925,517
Transfer agent fees--Class B (Note 2) 249,954
Transfer agent fees--Class A (Note 2) 150,850
Account maintenance and distribution fees--Class C (Note 2) 81,206
Printing and shareholder reports 67,014
Accounting services (Note 2) 51,602
Registration fees (Note 1f) 40,799
Custodian fees 36,359
Professional fees 29,562
Account maintenance fees--Class D (Note 2) 25,874
Transfer agent fees--Class D (Note 2) 24,572
Transfer agent fees--Class C (Note 2) 23,474
Directors' fees and expenses 21,007
Pricing fees 639
Other 7,918
------------
Total expenses 3,480,291
------------
Investment loss--net (1,887,620)
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 44,854,018
(Loss) on Foreign currency transactions--net (47,358) 44,806,660
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 30,992,453
(Notes 1b, 1c, Foreign currency transactions--net 10,186 31,002,639
1e & 3): ------------ ------------
Net realized and unrealized gain on investments and
foreign currency transactions 75,809,299
------------
Net Increase in Net Assets Resulting from Operations $ 73,921,679
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
October 31, April 30,
Increase (Decrease) in Net Assets: 1997 1997
<S> <S> <C> <C>
Operations: Investment loss--net $ (1,887,620) $ (1,169,690)
Realized gain on investments and foreign currency
transactions--net 44,806,660 49,178,658
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 31,002,639 (19,475,916)
------------ ------------
Net increase in net assets resulting from operations 73,921,679 28,533,052
------------ ------------
Distributions to Realized gain on investments--net:
Shareholders Class A (11,554,955) (16,194,846)
(Note 1g): Class B (18,882,239) (24,903,751)
Class C (1,541,981) (2,771,712)
Class D (1,932,137) (2,411,519)
------------ ------------
Net decrease in net assets resulting from distributions
to shareholders (33,911,312) (46,281,828)
------------ ------------
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (35,253,693) (28,438,055)
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets 4,756,674 (46,186,831)
Beginning of period 335,634,145 381,820,976
------------ ------------
End of period $340,390,819 $335,634,145
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A++
The following per share data and ratios
have been derived from information provided For the Six
in the financial statements. Months Ended
October 31, For the Year Ended April 30,
Increase (Decrease) in Net Asset Value: 1997 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 5.05 $ 5.27 $ 3.81 $ 3.87 $ 3.59
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.01) .02 (.01) (.01) (.02)
Realized and unrealized gain on investments
and foreign currency transactions--net 1.18 .40 1.67 .22 .31
-------- -------- -------- -------- --------
Total from investment operations 1.17 .42 1.66 .21 .29
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- -- -- (.01)
Realized gain on investments--net (.56) (.64) (.20) (.27) --
-------- -------- -------- -------- --------
Total dividends and distributions (.56) (.64) (.20) (.27) (.01)
-------- -------- -------- -------- --------
Net asset value, end of period $ 5.66 $ 5.05 $ 5.27 $ 3.81 $ 3.87
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 23.53%+++ 8.55% 44.01% 6.47% 8.19%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.38%* 1.40% 1.53% 1.79% 1.55%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net (.47%)* .32% (.23%) (.21%) (.48%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $124,623 $121,529 $132,083 $ 69,650 $ 70,753
Data: ======== ======== ======== ======== ========
Portfolio turnover 48.35% 125.94% 133.50% 196.91% 133.58%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0698 $ .0803 $ .0977 -- --
======== ======== ======== ======== ========
<PAGE>
<CAPTION>
Class B++
The following per share data and ratios
have been derived from information provided For the Six
in the financial statements. Months Ended
October 31, For the Year Ended April 30,
Increase (Decrease) in Net Asset Value: 1997 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.40 $ 4.67 $ 3.43 $ 3.55 $ 3.31
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net (.04) (.03) (.05) (.04) (.05)
Realized and unrealized gain on
investments and foreign currency
transactions--net 1.03 .35 1.49 .19 .29
-------- -------- -------- -------- --------
Total from investment operations .99 .32 1.44 .15 .24
-------- -------- -------- -------- --------
Less distributions from realized gain
on investments--net (.54) (.59) (.20) (.27) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 4.85 $ 4.40 $ 4.67 $ 3.43 $ 3.55
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 22.89%+++ 7.44% 42.46% 5.29% 7.25%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.42%* 2.44% 2.55% 2.85% 2.56%
Net Assets: ======== ======== ======== ======== ========
Investment loss--net (1.50%)* (.72%) (1.24%) (1.29%) (1.52%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $179,600 $178,025 $207,413 $ 79,485 $ 63,692
Data: ======== ======== ======== ======== ========
Portfolio turnover 48.35% 125.94% 133.50% 196.91% 133.58%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0698 $ .0803 $ .0977 -- --
======== ======== ======== ======== ========
<PAGE>
<CAPTION>
Class C++
For the
The following per share data and ratios For the Period
have been derived from information provided Six Months October 21,
in the financial statements. Ended For the Year 1994++++
October 31, Ended April 30, to April 30,
Increase (Decrease) in Net Asset Value: 1997 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.40 $ 4.68 $ 3.43 $ 3.27
Operating -------- -------- -------- --------
Performance: Investment loss--net (.04) (.04) (.05) (.04)
Realized and unrealized gain on investments
and foreign currency transactions--net 1.03 .35 1.50 .20
-------- -------- -------- --------
Total from investment operations .99 .31 1.45 .16
-------- -------- -------- --------
Less distributions from realized gain on
investments--net (.53) (.59) (.20) --
-------- -------- -------- --------
Net asset value, end of period $ 4.86 $ 4.40 $ 4.68 $ 3.43
======== ======== ======== ========
Total Investment Based on net asset value per share 23.01%+++ 7.28% 42.76% 4.89%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 2.44%* 2.46% 2.52% 3.28%*
Net Assets: ======== ======== ======== ========
Investment loss--net (1.51%)* (.76%) (1.19%) (2.13%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 14,793 $ 17,762 $ 20,761 $ 1,816
Data: ======== ======== ======== ========
Portfolio turnover 48.35% 125.94% 133.50% 196.91%
======== ======== ======== ========
Average commission rate paid++++++ $ .0698 $ .0803 $ .0977 --
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Calculation is based on average number of shares outstanding
during the period.
++++Commencement of operations.
++++++For fiscal years beginning on or after September 1, 1995, the
Company is required to disclose its average commission rate per
share for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class D++
For the
The following per share data and ratios For the Period
have been derived from information provided Six Months October 21,
in the financial statements. Ended For the Year 1994++++
October 31, Ended April 30, to April 30,
Increase (Decrease) in Net Asset Value: 1997 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.89 $ 5.13 $ 3.72 $ 3.61
Operating -------- -------- -------- --------
Performance: Investment loss--net (.02) --+++++ (.02) (.02)
Realized and unrealized gain on investments
and foreign currency
transactions--net 1.15 .39 1.63 .13
-------- -------- -------- --------
Total from investment operations 1.13 .39 1.61 .11
-------- -------- -------- --------
Less distributions from realized gain on
investments--net (.55) (.63) (.20) --
-------- -------- -------- --------
Net asset value, end of period $ 5.47 $ 4.89 $ 5.13 $ 3.72
======== ======== ======== ========
Total Investment Based on net asset value per share 23.60%+++ 8.11% 43.74% 3.05%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.63%* 1.65% 1.75% 2.44%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net (.73%)* .06% (.44%) (1.23%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 21,375 $ 18,318 $ 21,564 $ 4,386
Data: ======== ======== ======== ========
Portfolio turnover 48.35% 125.94% 133.50% 196.91%
======== ======== ======== ========
Average commission rate paid++++++ $ .0698 $ .0803 $ .0977 --
======== ======== ======== ========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Calculation is based on average number of shares outstanding
during the period.
++++Commencement of operations.
++++++For fiscal years beginning on or after September 1, 1995, the
Company is required to disclose its average commission rate per
share for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Healthcare Fund, Inc. (the "Company") is registered
under the Investment Company Act of 1940 as a non-diversified, open-
end management investment company. These unaudited financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Company offers four classes of shares under
the Merrill Lynch Select Pricings SM System. Shares of Class A and
Class D are sold with a front-end sales charge. Shares of Class B
and Class C may be subject to a contingent deferred sales charge.
All classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that
Class B, Class C and Class D Shares bear certain expenses related to
the account maintenance of such shares, and Class B and Class C
Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Company.
<PAGE>
(a) Valuation of securities--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market quotations are not available are valued at fair
value as determined in good faith by or under the direction of the
Company's Board of Directors.
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(c) Derivative financial instruments--The Company may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the equity, debt,
and currency markets. Losses may arise due to changes in the value
of the contract or if the counterparty does not perform under the
contract.
<PAGE>
* Financial futures contracts--The Company may also purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Company deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction
is effected. Pursuant to the contract, the Company agrees to receive
from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Company as
unrealized gains or losses. When the contract is closed, the Company
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
* Foreign currency options and futures--The Company may also
purchase or sell listed or over-the-counter foreign currency
options, foreign currency futures and related options on foreign
currency futures as a short or long hedge against possible
variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-US dollar denominated
securities owned by the Company, sold by the Company but not yet
delivered, or committed or anticipated to be purchased by the
Company.
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
NOTES TO FINANCIAL STATEMENTS (continued)
* Forward foreign exchange contracts--The Company is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Company's records. However, the effect on
operations is recorded from the date the Company enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
* Options--The Company is authorized to write covered call options
and purchase put options. When the Company writes an option, an
amount equal to the premium received by the Company is reflected as
an asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Company enters into a closing
transaction), the Company realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the
extent the cost of the closing transaction exceeds the premium paid
or received).
<PAGE>
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Company's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Company has determined the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Company are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Company has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Company has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Company's portfolio
and provides, or arranges for affiliates to provide, the
administrative services necessary for the operation of the Company.
As compensation for its services to the Company, MLAM receives
monthly compensation at the annual rate of 1.0% of the average daily
net assets of the Company.
Pursuant to the Distribution Plans adopted by the Company in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
the Company pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at
annual rates based upon the average daily net assets of the shares
as follows:
<PAGE>
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Company. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended October 31, 1997, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Company's Class A and Class D Shares as
follows:
MLFD MLPF&S
Class A $ 431 $ 5,326
Class D $1,263 $17,547
For the six months ended October 31, 1997, MLPF&S received
contingent deferred sales charges of $282,583 and $2,286 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $122,578 in commissions on the
execution of portfolio security transactions for the Company for the
six months ended October 31, 1997.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Company's transfer agent.
Accounting services are provided to the Company by MLAM at cost.
Certain officers and/or directors of the Company are officers and/or
directors of MLAM, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended October 31, 1997, were $156,399,890 and
$245,787,480, respectively.
Net realized and unrealized gains (losses) as of October 31, 1997
were as follows:
<PAGE>
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 44,853,073 $ 57,212,002
Short-term investments 945 --
Foreign currency transactions (47,358) (1,325)
------------ -------------
Total $ 44,806,660 $ 57,210,677
============ =============
As of October 31, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $57,212,002, of which $67,191,599
related to appreciated securities and $9,979,597 related to
depreciated securities. The aggregate cost of investments at October
31, 1997 for Federal income tax purposes was $281,488,481.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $35,253,693 and $28,438,055 for the six months ended October 31,
1997 and the year ended April 30, 1997, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended October 31, 1997 Shares Amount
Shares sold 2,135,968 $ 11,855,838
Shares issued to shareholders in
reinvestment of distributions 1,818,610 9,947,793
------------ -------------
Total issued 3,954,578 21,803,631
Shares redeemed (6,009,659) (34,400,939)
------------ -------------
Net decrease (2,055,081) $ (12,597,308)
============ =============
Class A Shares for the Year Dollar
Ended April 30, 1997 Shares Amount
Shares sold 10,271,437 $ 53,025,059
Shares issued to shareholders in
reinvestment of distributions 2,905,181 14,002,973
------------ -------------
Total issued 13,176,618 67,028,032
Shares redeemed (14,159,809) (72,426,600)
------------ -------------
Net decrease (983,191) $ (5,398,568)
============ =============
<PAGE>
Class B Shares for the Six Months Dollar
Ended October 31, 1997 Shares Amount
Shares sold 3,556,885 $ 17,071,426
Shares issued to shareholders in
reinvestment of distributions 3,520,445 16,546,089
------------ -------------
Total issued 7,077,330 33,617,515
Automatic conversion of shares (199,409) (954,259)
Shares redeemed (10,322,217) (51,025,469)
------------ -------------
Net decrease (3,444,296) $ (18,362,213)
============ =============
Class B Shares for the Year Dollar
Ended April 30, 1997 Shares Amount
Shares sold 10,102,582 $ 46,333,840
Shares issued to shareholders in
reinvestment of distributions 5,243,741 22,076,148
------------ -------------
Total issued 15,346,323 68,409,988
Automatic conversion of shares (183,162) (837,767)
Shares redeemed (19,079,607) (86,243,719)
------------ -------------
Net decrease (3,916,446) $ (18,671,498)
============ =============
Merrill Lynch Healthcare Fund, Inc., October 31, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the Six Months Dollar
Ended October 31, 1997 Shares Amount
Shares sold 716,312 $ 3,421,420
Shares issued to shareholders in
reinvestment of distributions 297,078 1,396,269
------------ -------------
Total issued 1,013,390 4,817,689
Shares redeemed (2,004,368) (9,867,033)
------------ -------------
Net decrease (990,978) $ (5,049,344)
============ =============
<PAGE>
Class C Shares for the Year Dollar
Ended April 30, 1997 Shares Amount
Shares sold 2,063,730 $ 9,385,246
Shares issued to shareholders in
reinvestment of distributions 595,804 2,508,333
------------ -------------
Total issued 2,659,534 11,893,579
Shares redeemed (3,061,290) (13,780,328)
------------ -------------
Net decrease (401,756) $ (1,886,749)
============ =============
Class D Shares for the Six Months Dollar
Ended October 31, 1997 Shares Amount
Shares sold 1,115,746 $ 5,924,476
Shares issued to shareholders in
reinvestment of distributions 317,331 1,675,526
Automatic conversion of shares 178,129 954,259
------------ -------------
Total issued 1,611,206 8,554,261
Shares redeemed (1,444,157) (7,799,089)
------------ -------------
Net increase 167,049 $ 755,172
============ =============
Class D Shares for the Year Dollar
Ended April 30, 1997 Shares Amount
Shares sold 4,556,042 $ 22,861,805
Shares issued to shareholders in
reinvestment of distributions 445,914 2,082,418
Automatic conversion of shares 164,859 837,767
------------ -------------
Total issued 5,166,815 25,781,990
Shares redeemed (5,626,624) (28,263,230)
------------ -------------
Net decrease (459,809) $ (2,481,240)
============ =============
5. Commitments:
At October 31, 1997, the Company had entered into foreign exchange
contracts under which it had agreed to buy and sell various foreign
currencies with an approximate value of $371,000 and $460,000,
respectively.
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PORTFOLIO INFORMATION
Worldwide
Investments
As of 10/31/97
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Lilly (Eli) and Company 5.5%
Pfizer, Inc. 5.4
Warner-Lambert Co. 5.2
Bristol-Myers Squibb Co. 5.1
Guidant Corporation 5.1
AmeriSource Health Corporation
(Class A) 3.8
Cardinal Health, Inc. 3.7
Novartis AG (Registered) 3.7
McKesson Corporation 3.0
Sepracor Inc. 2.6
Breakdown of Securities Percent of
By Country Net Assets
United States* 75.6%
Switzerland 4.2
Germany 3.4
Israel 1.7
France 1.6
Sweden 1.3
United Kingdom 1.3
Denmark 1.0
Ireland 0.8
Finland 0.5
[FN]
*Excludes short-term investments.
<PAGE>
Industries Represented Percent of
In the Portfolio Net Assets
Medical Specialties 20.1%
Pharmaceutical--Prescription 19.6
Health Care Cost Containment 19.2
Pharmaceutical--Diversified 11.4
Pharmaceutical--Consumer 11.3
Biotechnology 7.3
Diagnostics 2.5
