MERRILLLYNCH
HEALTHCARE
FUND, INC.
FUND LOGO
Semi-Annual Report
October 31, 1998
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.
Merrill Lynch
Healthcare Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH HEALTHCARE FUND, INC.
Worldwide
Iinvestments
As of 10/31/98
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Genentech, Inc. 5.3%
IMS Health Incorporated 4.9
Sepracor Inc. 4.4
McKesson Corporation 4.2
Cardinal Health, Inc. 4.0
AmeriSource Health Corporation
(Class A) 3.9
ALZA Corporation 3.1
Lilly (Eli) and Company 3.0
Becton, Dickinson and Company 2.6
Glaxo Wellcome PLC 2.3
Breakdown of Securities Percent of
By Country Net Assets
United States* 82.8%
United Kingdom 4.2
Switzerland 3.4
Ireland 2.1
Finland 0.8
France 0.5
Canada 0.2
Sweden 0.2
[FN]
*Excludes short-term investments.
Industries Represented Percent of
In the Portfolio Net Assets
Pharmaceutical--Prescription 22.6%
Health Care Cost Containment 19.4
Medical Specialties 17.3
Biotechnology 13.6
Pharmaceutical--Diversified 9.3
Healthcare--Information 8.0
Pharmaceutical--Consumer 4.0
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
DEAR SHAREHOLDER
Investment Environment
The increased volatility in US share prices during the quarter ended
October 31, 1998 reflected the deteriorating outlook for corporate
profits amid signs of a weakening US economy. The uncertain economic
picture and the resulting flight to quality by investors pushed the
30-year US Treasury bond to record low yields. In contrast,
corporate bonds, mortgage-backed securities and emerging markets
debt underperformed Treasury securities by a wide margin. The
leverage/derivatives-related problems of a major hedge fund and
possible impeachment of President Clinton further heightened
investor uncertainties, as did Russia's devaluation and effective
repudiation of its debt in August. A one-quarter point cut in the
Federal Funds rate in late September did not restore investor
confidence. When the Federal Reserve Board cut the Federal Funds
rate another quarter point in October, a rally in stock and bond
prices ensued.
However, as long as worldwide economic prospects appear fragile, it
is likely that stock and bond market volatility will continue. For
the overall global economy, the deepening recession in Japan is of
great concern as well as the difficulties in emerging economies such
as Russia and Brazil. Investors are waiting to see whether the
recently implemented reforms in Japan will be successful in
stabilizing, and ultimately resolving, the problems of the banking
system. Positive developments in Japan, combined with continued
monetary easing on the part of the Federal Reserve Board, would
likely provide an important element of stability to the volatile
investment environment.
Portfolio Matters
For the three-month period ended October 31, 1998, Merrill Lynch
Healthcare Fund, Inc.'s Class A, Class B, Class C and Class D Shares
had total returns of -1.85%, -2.24%, -2.01% and -1.93%,
respectively. (Fund performance does 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 and 5 of this report to shareholders.)
In the United States, large-capitalization pharmaceutical stocks
fared well early in the quarter ended October 31, 1998, but
subsequently declined in line with the broader market. The Fund's
performance for the quarter reflected the general decline in share
prices and the weakness in the healthcare sector. With relatively
strong and predictable rates of earnings growth, investors favor
these stocks in the flight to quality that occurs in a less-
favorable economic environment. As a result, many large-cap
pharmaceutical stocks rose to historically high valuations early in
the October quarter, but pulled back as share prices advanced to
lofty levels. This led us to alter our investment strategy by
trimming positions in large-cap US pharmaceutical shares in favor of
more reasonably valued mid-cap healthcare companies that have good
earnings prospects. Examples of additions to the portfolio during
the quarter are Allergan Inc., a specialty pharmaceutical company;
Elan Corporation PLC, a leading drug delivery company; Amerisource
Corporation, a rapidly growing drug distributor; and Bausch & Lomb,
Incorporated, an eyecare company.
We also added to our investment position in Monsanto Company during
the quarter. Monsanto, formerly a chemical company, is in the
process of restructuring into a worldwide leader in agricultural
biotechnology and as a major pharmaceutical company. Monsanto has
developed Celebrex, a product we expect to become an important new
drug intended for treatment of both rheumatoid arthritis and
osteoarthritis. Celebrex will compete directly with a similar drug,
VIOXX, now being developed by Merck and Co., Inc., another Fund
holding. Both drugs are likely to be on the market in early 1999,
pending Food and Drug Administration approval. We anticipate a
sizeable new therapeutic drug category to be created by these two
new drugs, which offer fewer side effects than current therapies for
arthritis sufferers.
In Conclusion
At this time of year, in the United States and elsewhere in the
developed world, a number of important medical meetings take place.
This year, there have been exciting developments presented at these
meetings, with reports of advances in therapies to treat cancer,
Alzheimer's disease and other presently untreatable conditions. We
believe that many of the companies in which we have invested -
companies that focus on basic research - will be at the forefront of
these developments. We look forward with much anticipation to these
scientific developments and how they will translate to commercially
important, as well as therapeutically useful, new products.
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
Senior Vice President and
Portfolio Manager
December 3, 1998
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
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
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).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the exdividend 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>
Ten Years/
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Healthcare Fund, Inc.--Class A Shares +16.08% -1.85% +282.96%
ML Healthcare Fund, Inc.--Class B Shares +14.79 -2.24 +244.96
ML Healthcare Fund, Inc.--Class C Shares +14.78 -2.01 +126.83
ML Healthcare Fund, Inc.--Class D Shares +15.62 -1.93 +128.83
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's inception periods are Class A & Class B Shares, for the ten
years ended 10/31/98 and Class C & Class D Shares, from 10/21/94 to
10/31/98.
</TABLE>
Average Annual
Total Return+++
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 9/30/98 +12.84% + 6.91%
Five Years Ended 9/30/98 +18.85 +17.57
2/01/90++ through 9/30/98 +14.60 +13.89
Ten Years Ended 9/30/98 +14.24 +13.63
[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 9/30/98 +11.70% + 8.22%
Five Years Ended 9/30/98 +17.64 +17.64
2/01/90++ through 9/30/98 +13.42 +13.42
Inception (10/21/88) through 9/30/98 +13.02 +13.02
[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 9/30/98 +11.67% +10.80%
Inception (10/21/94) through 9/30/98 +22.30 +22.30
[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 9/30/98 +12.45% + 6.55%
Inception (10/21/94) through 9/30/98 +22.56 +20.89
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
[FN]
+++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 and 5 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 10/31/98++
Total Return
ML Healthcare Fund Class A Shares +351.56%
ML Healthcare Fund Class B Shares +322.15%
[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.
*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 9/30/98 +18.66% +17.92%
[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 9/30/98 +17.76% +17.76%
[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.
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
NORTH Shares Value Percent of
AMERICA Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Medical Specialties 60,000 ++QLT PhotoTherapeutics, Inc. $ 864,224 $ 925,637 0.2%
Investments in Canada 864,224 925,637 0.2
United Biotechnology 50,000 ++Agouron Pharmaceuticals, Inc. 1,736,250 1,931,250 0.5
States 50,000 ++Amgen Inc. 3,839,065 3,928,125 1.0
150,000 ++Aphton Corp. 3,184,625 1,912,500 0.5
100,000 ++Aurora Biosciences Corp. 812,190 412,500 0.1
100,000 ++Centocor, Inc. 4,072,464 4,443,750 1.1
260,000 ++Coulter Pharmaceutical, Inc. 3,412,500 7,345,000 1.8
300,000 ++Emisphere Technologies, Inc. 4,799,613 2,212,500 0.5
50,000 ++Enzon, Inc. 322,343 300,000 0.1
300,000 ++Genentech, Inc. 20,141,504 21,487,500 5.3
40,000 ++Guilford Pharmaceuticals Inc. 866,250 655,000 0.2
20,000 ++Human Genome Sciences, Inc. 812,500 690,000 0.2
60,000 ++IDEC Pharmaceuticals Corporation 1,486,564 1,792,500 0.4
50,000 ++Immunex Corporation 3,558,373 3,450,000 0.8
35,000 ++Ligand Pharmaceuticals Incorporated
(Class B) 496,563 380,625 0.1
20,000 ++MedImmune, Inc. 1,014,625 1,345,000 0.3
60,000 ++Protein Design Labs, Inc. 1,890,844 1,440,000 0.4
50,000 ++Vertex Pharmaceuticals Incorporated 1,322,187 1,312,500 0.3
------------ ------------ ------
53,768,460 55,038,750 13.6
Health Care Cost 200,000 Allegiance Corporation 2,270,250 7,437,500 1.8
Containment 300,000 ++AmeriSource Health Corporation
(Class A) 15,946,190 15,731,250 3.9
40,000 Bergen Brunswig Corporation
(Class A) 1,830,162 1,952,500 0.5
170,000 Cardinal Health, Inc. 12,236,874 16,075,625 4.0
100,000 ++CareMatrix Corporation 2,256,000 2,462,500 0.6
120,000 Columbia/HCA Healthcare Corporation 3,549,700 2,520,000 0.6
450,000 ++Concentra Managed Care, Inc. 4,405,560 4,584,375 1.1
50,000 ++First Health Group Corp. 1,201,875 1,150,000 0.3
225,000 ++HEALTHSOUTH Corporation 4,770,013 2,728,125 0.7
220,000 McKesson Corporation 11,804,186 16,940,000 4.2
200,000 ++Tenet Healthcare Corp. 5,246,958 5,587,500 1.4
123,600 ++United Wisconsin Services, Inc. 991,331 1,050,600 0.3
------------ ------------ ------
66,509,099 78,219,975 19.4
Healthcare-- 300,000 ++Cerner Corporation 8,177,957 6,712,500 1.7
Information 295,000 IMS Health Incorporated 15,406,755 19,617,500 4.9
200,000 ++Medaphis Corporation 1,693,210 631,250 0.1
480,000 ++Pharmaceutical Marketing Services Inc. 4,230,967 5,160,000 1.3
------------ ------------ ------
29,508,889 32,121,250 8.0
Medical Specialties 200,000 Bausch & Lomb Incorporated 8,710,596 8,337,500 2.1
250,000 Becton, Dickinson & Company 8,234,430 10,531,250 2.6
200,000 C.R. Bard, Inc. 7,714,686 8,537,500 2.1
100,000 Guidant Corporation 4,984,133 7,650,000 1.9
140,000 Medtronic, Inc. 5,320,616 9,100,000 2.3
215,000 ++Novoste Corporation 4,808,751 3,708,750 0.9
85,000 ++Ocular Sciences, Inc. 2,123,125 2,114,375 0.5
100,000 ++PAREXEL International Corporation 2,937,501 2,206,250 0.6
250,000 ++SangStat Medical Corporation 8,156,517 5,171,875 1.3
80,000 Stryker Corporation 2,930,424 3,355,000 0.8
160,000 ++VISX, Incorporated 6,637,339 8,020,000 2.0
------------ ------------ ------
62,558,118 68,732,500 17.1
Pharmaceutical 50,000 Bristol-Myers Squibb Company 5,580,500 5,528,125 1.4
--Consumer 60,000 Warner-Lambert Co. 2,956,200 4,702,500 1.2
------------ ------------ ------
8,536,700 10,230,625 2.6
Pharmaceutical-- 25,000 American Home Products Corporation 1,372,487 1,218,750 0.3
Diversified 65,500 ++Barr Laboratories, Inc. 2,325,250 2,239,281 0.5
90,000 Johnson & Johnson 6,949,161 7,335,000 1.8
80,000 Monsanto Company 4,399,294 3,250,000 0.8
50,000 Schering-Plough Corp. 3,603,000 5,143,750 1.3
------------ ------------ ------
18,649,192 19,186,781 4.7
Pharmaceutical-- 260,000 ++ALZA Corporation 10,845,944 12,447,500 3.1
Prescription 80,000 Allergan, Inc. 3,941,176 4,995,000 1.2
180,000 ++Forest Laboratories, Inc. 6,319,993 7,526,250 1.9
150,000 Lilly (Eli) and Company 10,521,500 12,140,625 3.0
50,000 Merck & Co., Inc. 6,586,125 6,762,500 1.7
30,000 Pfizer Inc. 1,741,463 3,219,375 0.8
100,000 Pharmacia & Upjohn, Inc. 4,892,880 5,293,750 1.3
260,000 ++Sepracor Inc. 10,328,300 17,842,500 4.4
------------ ------------ ------
55,177,381 70,227,500 17.4
Investments in the United States 294,707,839 333,757,381 82.8
Total Investments in North America 295,572,063 334,683,018 83.0
WESTERN
EUROPE
Finland Pharmaceutical-- 136,000 Orion-Yhtyma OY (Class B) 3,565,971 3,269,296 0.8
Diversified
Investments in Finland 3,565,971 3,269,296 0.8
France Pharmaceutical-- 12,000 Sanofi S.A. 1,579,327 1,879,050 0.5
Diversified
Investments in France 1,579,327 1,879,050 0.5
Ireland Pharmaceutical-- 120,300 ++Elan Corporation PLC (ADR)* 5,944,989 8,428,519 2.1
Prescription
Investments in Ireland 5,944,989 8,428,519 2.1
</TABLE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
WESTERN EUROPE Shares Value Percent of
(concluded) Industries Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Sweden Pharmaceutical-- 185,000 ++OXiGENE, Inc. $ 2,817,390 $ 925,000 0.2%
Prescription
Investments in Sweden 2,817,390 925,000 0.2
Switzerland Pharmaceutical-- 3,000 Novartis AG (Registered) 4,783,207 5,415,804 1.4
Consumer
Pharmaceutical-- 700 Roche Holding AG 7,820,973 8,182,894 2.0
Diversified
Investments in Switzerland 12,604,180 13,598,698 3.4
United Pharmaceutical-- 680,000 ++Shire Pharmaceuticals Group PLC 4,148,056 4,850,402 1.2
Kingdom Diversified 51,201 SmithKline Beecham PLC 654,897 640,410 0.1
------------ ------------ ------
4,802,953 5,490,812 1.3
Pharmaceutical-- 302,615 Glaxo Wellcome PLC 9,216,733 9,404,312 2.3
Prescription 60,000 Zeneca Group PLC 2,278,039 2,304,644 0.6
------------ ------------ ------
11,494,772 11,708,956 2.9
Investments in the United Kingdom 16,297,725 17,199,768 4.2
Total Investments in Western Europe 42,809,582 45,300,331 11.2
SHORT-TERM Face
SECURITIES Amount
Commercial $ 8,253,000 General Motors Acceptance Corp.,
Paper** 5.69% due 11/02/1998 8,250,391 8,250,391 2.0
6,000,000 International Securitization Corp.,
5.38% due 11/04/1998 5,996,413 5,996,413 1.5
US Government 10,000,000 Federal Home Loan Mortgage Corp.,
Agency 5.15% due 11/04/1998 9,994,278 9,994,278 2.5
Obligations**
Total Investments in Short-Term
Securities 24,241,082 24,241,082 6.0
Total Investments $362,622,727 404,224,431 100.2
============
Liabilities in Excess of Other Assets (790,988) (0.2)
------------ ------
Net Assets $403,433,443 100.0%
============ ======
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid
at the time of purchase by the Company.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
PORTFOLIO CHANGES
For the Quarter Ended October 31, 1998
Additions
Agouron Pharmaceuticals, Inc.
Amgen Inc.
C.R. Bard, Inc.
CareMatrix Corporation
Enzon, Inc.
First Health Group Corp.
Merck & Co., Inc.
Pharmaceutical Marketing Services Inc.
Sanofi S.A.
Stryker Corporation
*Terumo Corporation
United Wisconsin Services, Inc.
Vertex Pharmaceuticals Incorporated
*Yoshitomi Pharmaceutical
Deletions
Abbott Laboratories
Arterial Vascular Engineering, Inc.
BASF AG
Boston Scientific Corporation
COR Therapeutics, Inc.
DePuy, Inc.
Ilex Oncology Inc.
Incyte Pharmaceuticals, Inc.
NeoPath, Inc.
Neurex Corporation
Novo Nordisk A/S (Class B)
Nycomed-Amersham PLC
Optical Sensors, Incorporated
ReSound Corporation
Scherer (R.P.) Corporation
Shire Pharmaceuticals Group PLC (ADR)
Synetic, Inc.
Synthelabo S.A.
Tamro OY
*Terumo Corporation
Watson Pharmaceuticals, Inc.
*Yoshitomi Pharmaceutical
[FN]
*Added and deleted in the same quarter.
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of October 31, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$362,622,727) (Note 1a) $404,224,431
Cash 842
Foreign cash (Note 1b) 1,415
Receivables:
Securities sold $ 5,155,005
Capital shares sold 1,000,494
Dividends 169,355 6,324,854
------------
Prepaid registration fees and other assets (Note 1f) 34,748
------------
Total assets 410,586,290
------------
Liabilities: Payables:
Securities purchased 5,626,466
Capital shares redeemed 802,818
Investment adviser (Note 2) 314,080
Distributor (Note 2) 184,920 6,928,284
------------
Accrued expenses and other liabilities 224,563
------------
Total liabilities 7,152,847
------------
Net Assets: Net assets $403,433,443
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares
Consist of: authorized $ 2,705,610
Class B Shares of Common Stock, $0.10 par value, 250,000,000 shares
authorized 4,746,548
Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares
authorized 507,245
Class D Shares of Common Stock, $0.10 par value, 100,000,000 shares
authorized 591,319
Paid-in capital in excess of par 325,522,545
Accumulated investment loss--net (2,006,520)
Undistributed realized capital gains on investments and foreign
currency transactions--net 29,759,351
Unrealized appreciation on investments and foreign currency
transactions--net 41,607,345
------------
Net assets $403,433,443
============
Net Asset Class A--Based on net assets of $143,632,185 and 27,056,104
Value: shares outstanding $ 5.31
============
Class B--Based on net assets of $207,558,380 and 47,465,479
shares outstanding $ 4.37
============
Class C--Based on net assets of $22,199,084 and 5,072,449
shares outstanding $ 4.38
============
Class D--Based on net assets of $30,043,794 and 5,913,192
shares outstanding $ 5.08
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended October 31, 1998
<S> <S> <C> <C>
Investment Dividends (net of $19,971 foreign withholding tax) $ 948,703
Income Interest and discount earned 848,331
(Notes 1d & 1e): ------------
Total income 1,797,034
------------
Expenses: Investment advisory fees (Note 2) $ 1,999,384
Account maintenance and distribution fees--Class B (Note 2) 1,037,322
Transfer agent fees--Class B (Note 2) 208,386
Transfer agent fees--Class A (Note 2) 124,638
Account maintenance and distribution fees--Class C (Note 2) 106,374
Accounting services (Note 2) 63,698
Printing and shareholder reports 43,989
Custodian fees 38,637
Professional fees 36,239
Account maintenance fees--Class D (Note 2) 35,836
Registration fees (Note 1f) 34,223
Transfer agent fees--Class D (Note 2) 25,114
Transfer agent fees--Class C (Note 2) 22,829
Directors' fees and expenses 19,375
Pricing fees 910
Other 6,600
------------
Total expenses 3,803,554
------------
Investment loss--net (2,006,520)
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 30,135,808
(Loss) on Foreign currency transactions--net (81,147) 30,054,661
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (31,994,552)
(Notes 1b, 1c, Foreign currency transactions--net 15,555 (31,978,997)
1e & 3): ------------
Net realized and unrealized loss on investments and foreign
currency transactions (1,924,336)
------------
Net Decrease in Net Assets Resulting from Operations $ (3,930,856)
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
<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: 1998 1998
<S> <S> <C> <C>
Operations: Investment loss--net $ (2,006,520) $ (3,112,493)
Realized gain on investments and foreign currency trans-
actions--net 30,054,661 84,950,278
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (31,978,997) 47,378,304
------------ ------------
Net increase (decrease) in net assets resulting from operations (3,930,856) 129,216,089
------------ ------------
Distributions to Realized gain on investments--net:
Shareholders Class A (13,251,870) (25,786,081)
(Note 1g): Class B (22,564,571) (41,357,421)
Class C (2,323,876) (3,451,735)
Class D (2,821,836) (4,384,072)
------------ ------------
Net decrease in net assets resulting from distributions
to shareholders (40,962,153) (74,979,309)
------------ ------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 48,074,372 10,381,155
(Note 4): ------------ ------------
Net Assets: Total increase in net assets 3,181,363 64,617,935
Beginning of period 400,252,080 335,634,145
------------ ------------
End of period $403,433,443 $400,252,080
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A++
The following per share data and ratios have
been derived from information provided in For the Six
the financial statements. Months Ended
October 31, For the Year Ended April 30,
Increase (Decrease) in Net Asset Value: 1998 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 5.84 $ 5.05 $ 5.27 $ 3.81 $ 3.87
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.01) (.02) .02 (.01) (.01)
Realized and unrealized gain on investments
and foreign currency transactions--net .01 2.02 .40 1.67 .22
-------- -------- -------- -------- --------
Total from investment operations -- 2.00 .42 1.66 .21
-------- -------- -------- -------- --------
Less distributions from realized gain on
investments--net (.53) (1.21) (.64) (.20) (.27)
-------- -------- -------- -------- --------
Net asset value, end of period $ 5.31 $ 5.84 $ 5.05 $ 5.27 $ 3.81
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (.47%)+++ 44.06% 8.55% 44.01% 6.47%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.30%* 1.32% 1.40% 1.53% 1.79%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net (.40%)* (.28%) .32% (.23%) (.21%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $143,632 $146,154 $121,529 $132,083 $ 69,650
Data: ======== ======== ======== ======== ========
Portfolio turnover 62.93% 115.99% 125.94% 133.50% 196.91%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class B++
The following per share data and ratios have
been derived from information provided in the For the Six
financial statements. Months Ended
October 31, For the Year Ended April 30,
Increase (Decrease) in Net Asset Value: 1998 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.91 $ 4.40 $ 4.67 $ 3.43 $ 3.55
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net (.03) (.06) (.03) (.05) (.04)
Realized and unrealized gain on investments
and foreign currency transactions--net --+++++ 1.72 .35 1.49 .19
-------- -------- -------- -------- --------
Total from investment operations (.03) 1.66 .32 1.44 .15
-------- -------- -------- -------- --------
Less distributions from realized gain on
investments--net (.51) (1.15) (.59) (.20) (.27)
-------- -------- -------- -------- --------
Net asset value, end of period $ 4.37 $ 4.91 $ 4.40 $ 4.67 $ 3.43
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (1.08%)+++ 42.60% 7.44% 42.46% 5.29%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.32%* 2.35% 2.44% 2.55% 2.85%
Net Assets: ======== ======== ======== ======== ========
Investment loss--net (1.42%)* (1.31%) (.72%) (1.24%) (1.29%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $207,558 $208,520 $178,025 $207,413 $ 79,485
Data: ======== ======== ======== ======== ========
Portfolio turnover 62.93% 115.99% 125.94% 133.50% 196.91%
======== ======== ======== ======== ========
<CAPTION>
Class C++
For the
The following per share data and ratios Period
have been derived from information provided in For the Six October 21,
the financial statements. Months Ended For the Year 1994++++ to
October 31, Ended April 30, April 30,
Increase (Decrease) in Net Asset Value: 1998 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.92 $ 4.40 $ 4.68 $ 3.43 $ 3.27
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net (.03) (.06) (.04) (.05) (.04)
Realized and unrealized gain on investments
and foreign currency transactions--net --+++++ 1.73 .35 1.50 .20
-------- -------- -------- -------- --------
Total from investment operations (.03) 1.67 .31 1.45 .16
-------- -------- -------- -------- --------
Less distributions from realized gain on
investments--net (.51) (1.15) (.59) (.20) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 4.38 $ 4.92 $ 4.40 $ 4.68 $ 3.43
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (1.03%)+++ 42.66% 7.28% 42.76% 4.89%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.34%* 2.36% 2.46% 2.52% 3.28%*
Net Assets: ======== ======== ======== ======== ========
Investment loss--net (1.44%)* (1.31%) (.76%) (1.19%) (2.13%)*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 22,199 $ 19,860 $ 17,762 $ 20,761 $ 1,816
Data: ======== ======== ======== ======== ========
Portfolio turnover 62.93% 115.99% 125.94% 133.50% 196.91%
======== ======== ======== ======== ========
<CAPTION>
Class D++
For the
The following per share data and ratios have Period
been derived from information provided in the For the Six October 21,
financial statements. Months Ended For the Year 1994++++ to
October 31, Ended April 30, April 30,
Increase (Decrease) in Net Asset Value: 1998 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 5.62 $ 4.89 $ 5.13 $ 3.72 $ 3.61
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.02) (.03) --+++++ (.02) (.02)
Realized and unrealized gain on investments
and foreign currency transactions--net --+++++ 1.95 .39 1.63 .13
-------- -------- -------- -------- --------
Total from investment operations (.02) 1.92 .39 1.61 .11
-------- -------- -------- -------- --------
Less distributions from realized gain on
investments--net (.52) (1.19) (.63) (.20) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 5.08 $ 5.62 $ 4.89 $ 5.13 $ 3.72
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (.73%)+++ 43.95% 8.11% 43.74% 3.05%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.55%* 1.56% 1.65% 1.75% 2.44%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net (.65%)* (.52%) .06% (.44%) (1.23%)*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 30,044 $ 25,718 $ 18,318 $ 21,564 $ 4,386
Data: ======== ======== ======== ======== ========
Portfolio turnover 62.93% 115.99% 125.94% 133.50% 196.91%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++Commencement of operations.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
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 Pricing 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.
(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 or
purchased are valued at the last sale price in the case of exchange-
traded options. In the case of options traded in the over-the-
counter market, valuation is the last asked price (options written)
or the last bid price (options purchased). 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.
* Financial futures contracts--The Company may also purchase or sell
financial 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.
* 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 and call 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).
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 ("MLFD" or "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is 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 admin-
istrative 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:
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, 1998, 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 $ 517 $ 6,748
Class D $4,468 $65,128
For the six months ended October 31, 1998, MLPF&S received
contingent deferred sales charges of $158,608 and $4,007 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $70,621 in commissions on the execution
of portfolio security transactions for the Company for the six
months ended October 31, 1998.
Merrill Lynch Healthcare Fund, Inc., October 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
Financial Data Services, Inc. ("FDS"), 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, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended October 31, 1998, were $233,186,158 and
$232,004,926, respectively.
Net realized gains (losses) for the six months ended October 31,
1998 and net unrealized gains as of October 31, 1998 were as
follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $ 30,135,808 $ 41,601,704
Foreign currency transactions (81,147) 5,641
------------ ------------
Total $ 30,054,661 $ 41,607,345
============ ============
As of October 31, 1998, net unrealized appreciation for Federal
income tax purposes aggregated $41,601,704, of which $61,645,514
related to appreciated securities and $20,043,810 related to
depreciated securities. The aggregate cost of investments at October
31, 1998 for Federal income tax purposes was $362,622,727.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $48,074,372 and $10,381,155 for the six months ended October 31,
1998 and for the year ended April 30, 1998, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares
For the Six Months Dollar
Ended October 31, 1998 Shares Amount
Shares sold 2,281,494 $ 12,367,408
Shares issued to shareholders in
reinvestment of distributions 2,143,028 11,936,667
------------- -------------
Total issued 4,424,522 24,304,075
Shares redeemed (2,385,643) (12,691,496)
------------- -------------
Net increase 2,038,879 $ 11,612,579
============= =============
Class A Shares
For the Year Dollar
Ended April 30, 1998 Shares Amount
Shares sold 4,839,861 $ 26,553,000
Shares issued to shareholders in
reinvestment of distributions 4,346,016 22,534,271
------------- -------------
Total issued 9,185,877 49,087,271
Shares redeemed (8,232,361) (46,621,917)
------------- -------------
Net increase 953,516 $ 2,465,354
============= =============
Class B Shares
For the Six Months Dollar
Ended October 31, 1998 Shares Amount
Shares sold 7,491,826 $ 34,395,279
Shares issued to shareholders in
reinvestment of distributions 4,369,412 20,099,294
------------- -------------
Total issued 11,861,238 54,494,573
Automatic conversion of shares (450,902) (2,034,103)
Shares redeemed (6,402,201) (28,248,544)
------------- -------------
Net increase 5,008,135 $ 24,211,926
============= =============
Class B Shares
For the Year Dollar
Ended April 30, 1998 Shares Amount
Shares sold 9,581,322 $ 44,669,370
Shares issued to shareholders in
reinvestment of distributions 8,250,682 36,413,087
------------- -------------
Total issued 17,832,004 81,082,457
Automatic conversion of shares (436,440) (2,043,674)
Shares redeemed (15,397,914) (74,477,766)
------------- -------------
Net increase 1,997,650 $ 4,561,017
============= =============
Class C Shares
For the Six Months Dollar
Ended October 31, 1998 Shares Amount
Shares sold 1,293,426 $ 5,950,023
Shares issued to shareholders in
reinvestment of distributions 461,198 2,121,512
------------- -------------
Total issued 1,754,624 8,071,535
Shares redeemed (721,293) (3,174,339)
------------- -------------
Net increase 1,033,331 $ 4,897,196
============= =============
Class C Shares
For the Year Dollar
Ended April 30, 1998 Shares Amount
Shares sold 3,104,019 $ 14,240,150
Shares issued to shareholders in
reinvestment of distributions 707,594 3,124,538
------------- -------------
Total issued 3,811,613 17,364,688
Shares redeemed (3,810,331) (17,967,749)
------------- -------------
Net increase (decrease) 1,282 $ (603,061)
============= =============
Class D Shares
For the Six Months Dollar
Ended October 31, 1998 Shares Amount
Shares sold 1,655,052 $ 8,839,545
Automatic conversion of shares 391,080 2,034,103
Shares issued to shareholders in
reinvestment of distributions 475,044 2,531,982
------------- -------------
Total issued 2,521,176 13,405,630
Shares redeemed (1,186,724) (6,052,959)
------------- -------------
Net increase 1,334,452 $ 7,352,671
============= =============
Class D Shares
For the Year Dollar
Ended April 30, 1998 Shares Amount
Shares sold 2,747,909 $ 14,310,519
Automatic conversion of shares 386,266 2,043,674
Shares issued to shareholders in
reinvestment of distributions 765,310 3,821,348
------------- -------------
Total issued 3,899,485 20,175,541
Shares redeemed (3,063,914) (16,217,696)
------------- -------------
Net increase 835,571 $ 3,957,845
============= =============
5. Commitments:
At October 31, 1998, the Company had entered into foreign exchange
contracts under which it had agreed to sell various foreign
currencies with an approximate value of $1,136,000.
