MERRILL LYNCH
HEALTHCARE
FUND, INC.
FUND LOGO
Quarterly Report
January 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
<PAGE>
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
Merrill Lynch Healthcare Fund, Inc., January 31, 1998
DEAR SHAREHOLDER
For the three-month period ended January 31, 1998, Merrill Lynch
Healthcare Fund, Inc.'s Class A, Class B, Class C and Class D Shares
had total investment returns of +4.44%, +3.99%, +3.95% and +4.24%,
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 3--7 of this report to shareholders.)
<PAGE>
Investment Environment
Volatility continued to highlight stock and bond markets worldwide
during the quarter ended January 31, 1998. Following a series of
currency devaluations, many emerging Asian economies are facing the
challenges of higher interest rates, slowing economic growth and
declining corporate earnings. Although the announcement of
International Monetary Fund (IMF) loan packages to Thailand,
Indonesia and South Korea initially reassured investors, the
stringent terms of the loans and their potential negative impact on
these already beleaguered economies are now being called into
question. In Japan, the failure of several major financial
institutions has underscored persistent economic problems.
As developments in Asia continue to unfold, US equity investors are
trying to gauge the impact of poorer Asian economic prospects on
future US economic growth. Although there have been periods of
rising share prices, investor confidence has not been definitively
restored. Investor interest has largely focused on areas that are
perceived as safe havens in uncertain times, such as the healthcare
sector.
Portfolio Matters
Our focus on large-capitalization US pharmaceutical and hospital
supply stocks benefited Fund performance in the January quarter. In
contrast to concerns over future earnings growth for US corporations
in general, earnings in the healthcare sector continue to grow and,
in some cases, are exceeding expectations.
The Food & Drug Administration (FDA) continues to expedite the new
drug approval process. This has enabled US pharmaceutical companies
to minimize their development costs and realize revenues from new
products more quickly. With the favorable regulatory climate,
earnings growth is especially robust for companies with new
products. For example, during the January quarter, Fund holding
Merck & Co., Inc. received FDA approval for Propecia, a prescription
hair growth drug. Bristol-Myers Squibb Company, another Fund
holding, received the go-ahead for Avapro, which controls high blood
pressure. Finally, Eli Lilly and Company (also owned by the Fund)
received approval to market Evista, a drug for menopausal women that
combats osteoporosis while lowering the cancer risk posed by
estrogens.
For those companies with less-significant drug discovery and
development activity, mergers or acquisitions provide the means to
sustain earnings growth through cost-cutting and greater economies
of scale. The trend of pharmaceutical industry consolidation
resurfaced in January and continued into early February. First,
American Home Products Corporation announced that it had entered
into merger discussions with SmithKline Beecham PLC. Subsequently,
Glaxo Wellcome PLC and SmithKline Beecham PLC announced that they
would merge. This tentative agreement was later rescinded because of
disagreement over management alignment. The possibility of other
mergers and acquisitions among pharmaceutical companies further
advanced share prices of a number of companies during the January
quarter.
<PAGE>
In addition to large-capitalization healthcare companies, the Fund
also has holdings in an array of mid- and small-capitalization
biotechnology, medical device, and healthcare specialty companies.
Within this area, we are focusing on companies with new products to
treat life-threatening conditions, such as cancer. Significant
holdings included Coulter Pharmaceuticals, Inc., a late-stage
biotechnology company that has discovered and is developing a novel
cancer treatment based on the linkage of monoclonal antibodies to
radioactive isotopes. Early clinical trials have indicated highly
impressive tumor reduction response rates in the treatment of a form
of lymphoma. At the same time, the treatment presents a quality-of-
life advantage over chemotherapy. Emisphere Technologies Inc.,
another small company Fund holding, has developed the oral delivery
of Heparin, an anticoagulant prescribed for a number of
cardiovascular conditions. The company is also developing oral
delivery forms of other drugs that are presently injectable. These
scientific discoveries have led to product development license
arrangements with Eli Lilly and Company, Novartis AG and Elan
Corporation PLC, all of which are Fund investments.
In Conclusion
We view the scientific developments of companies in which we invest
as more durable than the current economic and political turbulence
that is evident worldwide. As the developed world's population ages,
demographic patterns should increase demand for healthcare,
especially for the advances in treatment for degenerative or life-
threatening diseases such as we have discussed in this letter to
shareholders. This evolving trend supports our belief in the long-
term investment potential of the healthcare sector.
We thank you for your continued investment in Merrill Lynch
Healthcare Fund, Inc., and we look forward to reviewing our outlook
and strategy with you in our upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Jordan C. Schreiber)
Jordan C. Schreiber
Senior Vice President and
Portfolio Manager
<PAGE>
February 26, 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 "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.
<PAGE>
Merrill Lynch Healthcare Fund, Inc., January 31, 1998
PERFORMANCE DATA (continued)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
1/31/98 10/31/97 1/31/97 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Healthcare Fund Class A Shares $5.23 $5.66 $5.15 +14.06%(1) -0.61%(2)
ML Healthcare Fund Class B Shares 4.40 4.85 4.50 +12.03(1) -1.15(2)
ML Healthcare Fund Class C Shares 4.41 4.86 4.50 +12.26(1) -1.15(2)
ML Healthcare Fund Class D Shares 5.03 5.47 5.00 +13.48(1) -0.82(2)
ML Healthcare Fund Class A Shares--Total Return +26.51(3) +4.44(4)
ML Healthcare Fund Class B Shares--Total Return +24.95(5) +3.99(6)
ML Healthcare Fund Class C Shares--Total Return +25.03(7) +3.95(8)
ML Healthcare Fund Class D Shares--Total Return +26.00(9) +4.24(10)
<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 $0.618 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.376 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.589 per share ordinary
income dividends and $0.618 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.273 per share ordinary
income dividends and $0.376 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.536 per share ordinary
income dividends and $0.618 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.238 per share ordinary
income dividends and $0.376 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.529 per share ordinary
income dividends and $0.618 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.237 per share ordinary
income dividends and $0.376 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.575 per share ordinary
income dividends and $0.618 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.263 per share
ordinary income dividends and $0.376 per share capital gains
distributions.
</TABLE>
<PAGE>
<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
1997 4.92 5.11 0.618 0.589 +29.39
1/1/98--1/31/98 5.11 5.23 -- -- + 2.35
------- ------
Total $12.400 Total $4.536
Cumulative total return as of 1/31/98: +464.36%**
<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
1997 4.30 4.31 0.618 0.536 +28.09
1/1/98--1/31/98 4.31 4.40 -- -- + 2.09
------ ------
Total $8.483 Total $3.795
Cumulative total return as of 1/31/98: +213.11%**
<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
1997 4.30 4.31 0.618 0.529 +27.88
1/1/98--1/31/98 4.31 4.41 -- -- + 2.32
------ ------
Total $1.015 Total $0.922
Cumulative total return as of 1/31/98: +105.42%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
+++See Important Note on page 6.
</TABLE>
<PAGE>
Merrill Lynch Healthcare Fund, Inc., January 31, 1998
PERFORMANCE DATA (concluded)
<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
1997 4.78 4.91 0.618 0.575 +28.65
1/1/98--1/31/98 4.91 5.03 -- -- + 2.44
------ ------
Total $1.015 Total $1.001
Cumulative total return as of 1/31/98: +106.31%**
<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>
Average Annual
Total Return+++
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/97 +29.39% +22.59%
Five Years Ended 12/31/97 +15.12 +13.89
2/01/90++ through 12/31/97 +14.57 +13.79
Ten Years Ended 12/31/97 +13.36 +12.75
[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.
<PAGE>
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/97 +28.09% +24.10%
Five Years Ended 12/31/97 +14.00 +14.00
2/01/90++ through 12/31/97 +13.39 +13.39
Inception (10/21/88) through 12/31/97 +12.96 +12.96
[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 soleinvestment adviser.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 12/31/97 +27.88% +26.88%
Inception (10/21/94) through 12/31/97 +24.38 +24.38
[FN]
*Maximum contingent sales charge is 1% and is reduced to 0% after 1
year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 12/31/97 +28.65% +21.90%
Inception (10/21/94) through 12/31/97 +24.50 +22.42
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
+++Important Note:
Prior to April 27, 1992, Merrill Lynch Healthcare Fund, Inc. was
known as Sci/Tech Holdings, Inc. and contained, in addition to a
healthcare portfolio, a portfolio of technology securities. The data
on pages 4--6 include the performance of the technology portfolio
which is no longer part of the Fund. Set forth below are performance
data which, for the period before April 27, 1992, include only the
performance of the healthcare portfolio and a pro rata allocated
portion of Sci/Tech Holdings, Inc.'s cash reserves. On February 1,
1990, Merrill Lynch Asset Management, L.P. became the sole
investment adviser.
<PAGE>
Performance
Results*
2/01/90 to 1/31/98++
% Change
ML Healthcare Fund Class A Shares--Total Return +306.29%
ML Healthcare Fund Class B Shares--Total Return +282.42
[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 12/31/97 +19.02% +18.21%
[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 12/31/97 +18.15% +18.15%
[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>
NORTH Shares Percent of
AMERICA Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Biotechnology 10,000 AXYS Pharmaceuticals, Inc. (a) $ 141,875 $ 83,125 0.0%
20,000 Affymetrix, Inc. 510,000 555,000 0.2
150,000 Aphton Corp. 3,184,625 1,856,250 0.5
25,000 Biochem Pharma Inc. 565,000 509,375 0.1
255,000 Coulter Pharmaceuticals, Inc. 3,092,500 5,163,750 1.5
280,000 Emisphere Technologies Inc. 4,511,956 4,357,500 1.2
72,400 Genentech, Inc. (c) 4,210,719 4,706,000 1.3
40,000 Gilead Sciences, Inc. 1,585,000 1,620,000 0.5
30,000 Human Genome Sciences, Inc. 1,222,500 1,136,250 0.3
30,000 IDEC Pharmaceuticals Corporation 753,750 1,252,500 0.4
35,000 ONYX Pharmaceuticals, Inc. 275,625 245,000 0.1
60,000 Protein Design Labs, Inc. 1,890,844 2,220,000 0.6
20,000 Vical, Inc. 311,251 310,000 0.1
------------ ------------ ------
22,255,645 24,014,750 6.8
Diagnostics 60,000 Acuson Corporation 1,429,611 1,012,500 0.3
100,000 Dianon Systems, Inc. 979,182 912,500 0.3
67,500 Diatide, Inc. 573,750 641,250 0.2
375,000 NeoPath, Inc. 6,406,907 5,554,687 1.5
------------ ------------ ------
9,389,450 8,120,937 2.3
</TABLE>
Merrill Lynch Healthcare Fund, Inc., January 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
NORTH AMERICA Shares Percent of
(concluded) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Health Care Cost 150,000 Allegiance Corporation $ 3,392,000 $ 4,809,375 1.4%
(concluded) Containment 216,800 AmeriSource Health Corporation
(Class A) 10,508,673 12,276,300 3.5
110,000 Bergen Brunswig Corporation 2,756,030 5,011,875 1.4
180,000 Cardinal Health, Inc. 9,980,797 13,938,750 4.0
40,000 Cerner Corporation 1,254,376 832,500 0.2
100,000 Concentra Managed Care, Inc. 2,443,879 3,187,500 0.9
95,000 First Health Group Corp. (b) 4,080,281 4,524,375 1.3
190,000 McKesson Corporation 7,009,797 9,096,250 2.6
75,000 Medaphis Corporation 482,500 597,656 0.2
130,000 Tenet Healthcare Corp. 3,188,878 4,485,000 1.3
200,000 Walsh International, Inc. 1,806,437 1,950,000 0.5
------------ ------------ ------
46,903,648 60,709,581 17.3
<PAGE>
Medical 80,000 Baxter International Inc. 3,772,048 4,455,000 1.3
Specialties 125,000 Becton Dickinson & Company 5,775,244 7,890,625 2.3
50,000 Boston Scientific Corporation 2,543,131 2,537,500 0.7
150,000 C.R. Bard, Inc. 4,318,752 4,650,000 1.3
240,000 Conceptus, Inc. 2,694,124 1,080,000 0.3
250,000 DePuy, Inc. 6,029,341 6,781,250 1.9
200,000 Guidant Corporation 7,662,998 12,850,000 3.7
100,000 Ilex Oncology Inc. 1,200,000 950,000 0.3
90,000 InControl, Inc. 1,213,908 427,500 0.1
70,000 Medtronic, Inc. 1,348,116 3,574,375 1.0
50,000 Ocular Sciences, Inc. 1,297,500 1,331,250 0.4
400,000 Optical Sensors, Incorporated 3,984,376 2,100,000 0.6
235,000 ReSound Corporation 1,525,147 1,204,375 0.3
40,000 Sonus Pharmaceuticals, Inc. 1,163,438 1,330,000 0.4
127,500 VISX, Incorporated 3,144,063 2,709,375 0.8
------------ ------------ ------
47,672,186 53,871,250 15.4
Pharmaceutical-- 150,000 American Home Products Corporation 13,552,005 14,315,625 4.1
Consumer 135,000 Warner-Lambert Co. 10,496,837 20,317,500 5.8
------------ ------------ ------
24,048,842 34,633,125 9.9
Pharmaceutical-- 200,000 Bristol-Myers Squibb Company 10,968,766 19,937,500 5.7
Diversified 150,000 Schering-Plough Corp. 8,806,480 10,856,250 3.1
57,000 Viropharma Inc. 1,231,748 1,068,750 0.3
------------ ------------ ------
21,006,994 31,862,500 9.1
Pharmaceutical-- 40,000 ALZA Corp. 1,466,868 1,425,000 0.4
Prescription 50,000 Forest Laboratories, Inc. 2,244,500 2,968,750 0.8
260,000 Lilly (Eli) and Company 12,629,930 17,550,000 5.0
30,000 Merck & Co., Inc. 3,194,988 3,517,500 1.0
260,000 Pfizer, Inc. 13,605,618 21,303,750 6.1
250,000 SangStat Medical Corporation 8,156,517 7,000,000 2.0
280,000 Sepracor Inc. 7,211,913 9,765,000 2.8
------------ ------------ ------
48,510,334 63,530,000 18.1
Total Investments in
North America 219,787,099 276,742,143 78.9
WESTERN
EUROPE
Denmark Pharmaceutical-- 40,000 Novo Nordisk A/S (Class B) 4,432,649 5,736,247 1.6
Prescription
Investments in Denmark 4,432,649 5,736,247 1.6
<PAGE>
Finland Pharmaceutical-- 140,000 Orion-yhtymae OY (Class B) 3,660,185 4,215,238 1.2
Diversified
Investments in Finland 3,660,185 4,215,238 1.2
France Pharmaceutical-- 45,000 Synthelabo S.A. 5,673,671 5,934,953 1.7
Diversified
Investments in France 5,673,671 5,934,953 1.7
Germany Medical 20,000 Fresenius AG (Preferred) 3,503,625 4,262,295 1.2
Specialties 75,000 Fresenius Medical Care AG (ADR)* 1,562,171 1,889,062 0.6
Investments in Germany 5,065,796 6,151,357 1.8
Ireland Pharmaceutical-- 70,000 Elan Corporation PLC (ADR)* 3,328,763 3,635,625 1.0
Prescription
Investments in Ireland 3,328,763 3,635,625 1.0
Switzerland Pharmaceutical-- 10,000 Novartis AG (Registered) 13,270,363 17,115,411 4.9
Consumer
Pharmaceutical-- 600 Roche Holding AG 5,586,318 6,226,492 1.8
Prescription
Investments in Switzerland 18,856,681 23,341,903 6.7
United Kingdom Pharmaceutical-- 350,000 SmithKline Beecham PLC 3,997,984 4,461,366 1.3
Diversified
Pharmaceutical-- 25,000 Glaxo Wellcome PLC 507,558 671,248 0.2
Prescription 100,000 Zeneca Group PLC 2,874,343 4,003,790 1.1
------------ ------------ ------
3,381,901 4,675,038 1.3
Investments in the United Kingdom 7,379,885 9,136,404 2.6
Total Investments in Western Europe 48,397,630 58,151,727 16.6
</TABLE>
Merrill Lynch Healthcare Fund, Inc., January 31, 1998
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
SHORT-TERM Face Percent of
SECURITIES Amount Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Commercial Atlantic Asset Securitization Corp.:
Paper** $3,000,000 5.49% due 2/12/1998 $ 2,994,510 $ 2,994,510 0.9%
5,000,000 5.48% due 2/17/1998 4,987,061 4,987,061 1.4
6,901,000 General Motors Acceptance Corp.,
5.63% due 2/02/1998 6,898,842 6,898,842 2.0
US Government 5,000,000 Federal Home Loan Mortgage Corp.,
Agency 5.33% due 2/04/1998 4,997,039 4,997,039 1.4
Obligations**
Total Investments in
Short-Term Securities 19,877,452 19,877,452 5.7
Total Investments $288,062,181 354,771,322 101.2
============
Liabilities in Excess of Other Assets (4,085,081) (1.2)
------------ ------
Net Assets $350,686,241 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $128,835,672
and 24,651,314 shares outstanding $ 5.23
============
Class B--Based on net assets of $183,412,575
and 41,640,336 shares outstanding $ 4.40
============
Class C--Based on net assets of $16,525,070
and 3,747,400 shares outstanding $ 4.41
============
Class D--Based on net assets of $21,912,924
and 4,358,369 shares outstanding $ 5.03
============
<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.
(a)Formerly Arris Pharmaceuticals Corp.
(b)Formerly Healthcare Compare Corporation.
(c)Genentech, Inc. merged with Roche Holding AG.
</TABLE>
<PAGE>
PORTFOLIO CHANGES
For the Quarter Ended January 31, 1998
Additions
ALZA Corp.
Baxter International Inc.
Boston Scientific Corporation
*Fresenius AG
Human Genome Sciences, Inc.
Medaphis Corporation
Merck & Co., Inc.
ONYX Pharmaceuticals, Inc.
Deletions
Bayer AG
COR Therapeutics, Inc.
Centocor, Inc.
Cytogen Corporation
*Fresenius AG
Genelabs Technologies, Inc.
Heartstream, Inc.
Hoechst AG
Incentive AB (A Shares)
Incentive AB (B Shares)
Johnson & Johnson
KeraVision, Inc.
Medpartners, Inc.
Pharmacyclics, Inc.
Physio-Control International Corp.
Scios Inc.
Targeted Genetics Corporation
Teva Pharmaceuticals Industries, Inc. (ADR)
Warner Chilcott Laboratories (ADR)
Zonagen, Inc.
[FN]
*Added and deleted in the same quarter.
PORTFOLIO INFORMATION
<PAGE>
Worldwide
Investments
As of 1/31/98
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Pfizer, Inc. 6.1%
Warner-Lambert Co. 5.8
Bristol-Myers Squibb Company 5.7
Lilly (Eli) and Company 5.0
Novartis AG (Registered) 4.9
American Home Products
Corporation 4.1
Cardinal Health, Inc. 4.0
Guidant Corporation 3.7
AmeriSource Health Corporation
(Class A) 3.5
Schering-Plough Corp 3.1
Breakdown of Securities Percent of
By Country Net Assets
United States* 78.9%
Switzerland 6.7
United Kingdom 2.6
Germany 1.8
France 1.7
Denmark 1.6
Finland 1.2
Ireland 1.0
[FN]
*Excludes short-term investments.
Industries Represented Percent of
In the Portfolio Net Assets
Pharmaceutical--Prescription 23.8%
Health Care Cost Containment 17.3
Medical Specialties 17.2
Pharmaceutical--Consumer 14.8
Pharmaceutical--Diversified 13.3
Biotechnology 6.8
Diagnostics 2.3
