UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-03595
Name of Fund: BlackRock Healthcare Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, BlackRock Healthcare Fund, Inc., 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 04/30/07
Date of reporting period: 05/01/06 - 10/31/06
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY
REAL ESTATE
BlackRock
Healthcare Fund, Inc.
SEMI-ANNUAL REPORT OCTOBER 31, 2006
(BLACKROCK logo)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
This report is transmitted to shareholders only. It is not authorized for use
as an offer of sale or a solicitation of an offer to buy shares of the Fund
unless accompanied or preceded by the Fund'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.
BlackRock Healthcare Fund, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS...logo)
It's Fast, Convenient, & Timely!
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BlackRock Healthcare Fund, Inc.
Portfolio Information as of October 31, 2006
Percent of
Ten Largest Equity Holdings Net Assets
Novartis AG Registered Shares 5.8%
Hologic, Inc. 5.1
Celgene Corp. 5.1
Bayer AG 4.9
Genentech, Inc. 4.8
Roche Holding AG 4.7
Cerner Corp. 4.2
Intuitive Surgical, Inc. 4.2
UnitedHealth Group, Inc. 3.9
Vertex Pharmaceuticals, Inc. 3.7
Percent of
Total
Geographic Allocation Investments
United States 58.6%
Switzerland 9.1
Germany 4.2
Denmark 1.9
India 1.5
United Kindgom 1.1
France 1.1
Sweden 1.0
Japan 0.9
Austria 0.4
Netherlands 0.3
Bermuda 0.1
China 0.1
Other* 19.7
* Includes portfolio holdings in short-term investments.
Proxy Results
During the six-month period ended October 31, 2006, BlackRock Healthcare Fund,
Inc.'s shareholders voted on the following proposals. Proposals 1, 3 and 4
were approved at a special shareholders' meeting on August 15, 2006. A
description of the proposals and number of shares voted were as follows:
Shares Voted Shares Voted Shares Voted
For Against Abstain
1. To approve a new investment advisory agreement with
BlackRock Advisors, Inc. 41,225,035 1,191,288 1,136,358
3. To approve a contingent subadvisory agreement with
BlackRock Advisors, Inc. 41,118,172 1,248,341 1,186,169
4. To approve a change in fundamental investment restriction. 40,825,695 1,474,889 1,252,098
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
A Letter to Shareholders
Dear Shareholder
Ten months into 2006, we are able to say it has been an interesting year for
investors. After a volatile start and far-reaching mid-year correction, the
financial markets regained some positive momentum through late summer and
fall. For the six- and 12-month periods ended October 31, 2006, most major
market indexes managed to post positive returns:
Total Returns as of October 31, 2006 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) +6.11% +16.34%
Small cap U.S. equities (Russell 2000 Index) +0.90 +19.98
International equities (MSCI Europe, Australasia, Far East Index) +3.77 +27.52
Fixed income (Lehman Brothers Aggregate Bond Index) +4.60 + 5.19
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +4.12 + 5.75
High yield bonds (Credit Suisse High Yield Index) +4.66 +10.29
The Federal Reserve Board (the Fed), after raising the target short-term
interest rate 17 times between June 2004 and June 2006, finally opted to pause
on August 8, 2006. This left the federal funds rate at 5.25%, where it
remained through the September and October Fed meetings. In interrupting its
two-year rate-hiking campaign, the Fed acknowledged that economic growth is
slowing, led by softness in the housing market. However, the central bankers
continue to take a cautionary position on inflation, despite a decline in
energy prices in recent months. At the time of this writing, the price of oil
had settled into the $60-per-barrel range after reaching nearly $78 per barrel
earlier in the year.
Notwithstanding the mid-year correction, equity markets generally found support
in solid corporate earnings reports in the first three quarters of the year.
Overall corporate health, including strong company balance sheets, helped to
sustain robust dividend-distribution, share-buyback and merger-and-acquisition
activity. Many international equity markets fared equally well or better,
thanks in part to higher economic growth rates and low inflation.
In the U.S. bond market, prices declined for much of the year as investors
focused on decent economic activity and inflation concerns. Bond prices began
to improve in late June as the economy showed signs of weakening and inflation
pressures subsided. Notably, the Treasury curve inverted periodically, a
phenomenon typically associated with periods of economic weakness. At the end
of October, the one-month Treasury bill offered the highest yield on the curve
at 5.18%, while the 30-year Treasury bond had a yield of 4.72%.
Amid the uncertainty inherent in the financial markets, we encourage you to
review your goals periodically with your financial professional and to make
portfolio changes, as needed. For additional insight and timely "food for
thought" for investors, we also invite you to visit Shareholder magazine at
www.blackrock.com/shareholdermagazine. We are pleased to make our investor-
friendly magazine available to you online. We thank you for trusting BlackRock
with your investment assets, and we look forward to continuing to serve your
investment needs.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Director
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
A Discussion With Your Fund's Portfolio Manager
Amid a challenging period for the health care sector, we continued to use our
bottom-up stock-selection process to guide us to the most compelling
opportunities available in the healthcare industry.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended October 31, 2006, BlackRock Healthcare Fund,
Inc.'s (formerly Merrill Lynch Healthcare Fund, Inc.) Institutional, Investor
A, Investor B, Investor C and Class R Shares had total returns of -1.42%,
- -1.65%, -1.95%, -1.92% and -1.83%, respectively. (Fund results shown do not
reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 6 and 7 of this report
to shareholders.) Fund performance lagged the broader stock market, as
represented by the Standard and Poor's (S&P) 500 Index, and its composite
benchmark, which comprises four Morgan Stanley Capital International (MSCI)
industries.* The S&P 500 returned +6.11% for the six-month period while the
composite benchmark returned +5.75%. For the same period, the Lipper Health/
Biotechnology Funds category posted an average return of +4.30%. (Funds in
this Lipper group focus their investment on companies engaged in healthcare
and biotechnology.)
The semi-annual period began in May, with the broad equity market in an
upswing based on expectations that the Federal Reserve Board (the Fed) would
suspend its two-year string of interest rate hikes. Interest-rate-sensitive
stocks led the rally. The health care sector ranked at the bottom of all U.S.
industries in terms of performance at this time.
The market rally ended shortly after as oil prices soared, strife broke out in
the Middle East and gasoline prices climbed. Signs of an economic slowdown and
heightened inflation concerns sparked by the elevated energy prices exacerbated
investor worries. Taken together, these developments led to a far-reaching
market decline. The large cap drug stocks performed relatively well against
this difficult backdrop, given their more defensive characteristics and
historical resistance to economic recession. However, the balance of the health
care sector underperformed. The biotechnology industry had just entered its
seasonally soft summer period, when scientific meetings take a hiatus. The
smaller-cap biotechnology and medical technology companies were particularly
hard hit amid the climate of investor risk aversion. Conversely, oil and
commodity issues were the market leaders.
* The Fund's composite benchmark comprises the following four
MSCI industries: healthcare equipment and supplies (15%),
healthcare providers and services (25%), biotechnology (25%)
and pharmaceuticals (35%).
In August, the Fed finally opted to pause in its interest rate-hiking campaign,
and remained on hold through its September and October meetings. In September,
equity markets rallied as the aforementioned concerns dissipated. The
technology sector took the lead as the market correction turned to strength.
Health care remained near the bottom of the pack, although the smaller-cap
biotechnology stocks enjoyed a strong advance. Polls indicating a Democratic
lead in the impending Congressional election were a key reason for the
continued low rank of the health care sector, as pharmaceutical price cuts
have been declared a top priority in the Democratic agenda.
Overall, the six-month period saw fairly robust performance on the part of
pharmaceuticals and an absolute decline or relative underperformance by all
other health care subsectors (notwithstanding the small-cap biotechnology
advance in September and October). Pharmaceuticals especially benefited from
increased revenues derived from the Medicare program.
The Fund's underperformance of the broad-market S&P 500 Index is understandable
given the low ranking of the industry within the Index as a whole. The major
reason for the decline versus the composite benchmark was the Fund's
diversification within the health care universe. Given the prevailing market
backdrop, a concentration in large cap pharmaceuticals would have been more
advantageous during this particular period. However, we believe that a more
diversified mix of stocks is the better strategy, as it allows us to spread
risk within the portfolio.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
What changes were made to the portfolio during the period?
During the period, we increased the Fund's position in pharmaceuticals with the
addition of Bayer AG, a major Germany-based multinational drug company that
co-shares a recently approved and promising drug for the treatment of kidney
cancer. We also increased the Fund's position in Hologic, Inc., the worldwide
leader in digital mammography. Significant sales during the period included
Japanese drug company Astellas Pharma Inc., as the company's sales slowed
below our target; Renovis, Inc., a research-based biotechnology company that
suffered an important product development failure; and Nektar Therapeutics,
whose inhalation drug delivery system we believe will present less potential
given that the Federal Drug Administration has limited the device's market
opportunity.
We remained focused on our long-term strategy of balancing the upside
potential of growth-oriented subsectors with the downside support offered by
more defensive health care areas. However, for the most part, portfolio
changes were based on our bottom-up stock-selection process rather than
centered on particular subsector themes. In all, the portfolio's total number
of holdings was reduced from 78 six months ago to 67 on October 31, 2006. At
period-end, non-U.S. holdings comprised 25% of the portfolio's net assets,
similar to our allocation of 27% six months ago.
How would you characterize the Fund's position at the close of the period?
On October 31, 2006, the Fund was less diversified than six months ago and
more heavily weighted toward large- and mid-cap companies. Again, this
positioning is based primarily on stock-specific factors. The Fund's emphasis
at period-end was primarily on pharmaceutical and biotechnology companies.
This included European, Japanese and Indian drug companies. Overall, the Fund
is more aggressively positioned than it was at the start of the period,
although we remain focused on prudent management of risk.
Jordan C. Schreiber
Vice President and Portfolio Manager
November 13, 2006
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. Class R Shares did not change their designation.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Performance Data
About Fund Performance
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. Class R Shares did not change their designation. As
previously communicated to shareholders, new sales charge schedules came into
effect at the same time for certain of these classes.
The Fund has multiple classes of shares:
* Institutional Shares are not subject to any front-end sales charge.
Institutional Shares bear no ongoing distribution or service fees and are
available only to eligible investors.
* Investor A Shares incur a maximum initial sales charge (front-end load) of
5.25% and a service fee of 0.25% per year (but no distribution fee).
* Investor B Shares are subject to a maximum contingent deferred sales charge
of 4.50% declining to 0% after six years. In addition, Investor B Shares are
subject to a distribution fee of 0.75% per year and a service fee of 0.25%
per year. These shares automatically convert to Investor A Shares after
approximately eight years. (There is no initial sales charge for automatic
share conversions.) All returns for periods greater than eight years reflect
this conversion.
* Investor C Shares are subject to a distribution fee of 0.75% per year and a
service fee of 0.25% per year. In addition, Investor C Shares are subject to a
1% contingent deferred sales charge if redeemed within one year of purchase.
* Class R Shares do not incur a maximum sales charge (front-end load) or
deferred sales charge. These shares are subject to a distribution fee of 0.25%
per year and a service fee of 0.25% per year. Class R Shares are available only
to certain retirement plans. Prior to inception, Class R Share performance
results are those of Institutional Shares (which have no distribution or
service fees) restated for Class R Share fees.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.blackrock.com to obtain performance data current to
the most recent month-end. Performance results do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Figures shown in each of the following tables assume reinvestment
of all dividends and capital gain distributions, if any, 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 service, distribution and transfer agency fees applicable
to each class, which are deducted from the income available to be paid to
shareholders.
Recent Performance Results
6-Month 12-Month 10-Year
As of October 31, 2006 Total Return Total Return Total Return
Institutional Shares* -1.42% + 2.88% +217.55%
Investor A Shares* -1.65 + 2.56 +209.40
Investor B Shares* -1.95 + 1.98 +191.18
Investor C Shares* -1.92 + 1.88 +186.16
Class R Shares* -1.83 + 2.26 +203.63
S&P 500 (R) Index** +6.11 +16.34 +129.03
* Investment results shown do not reflect sales charges; results shown would be lower if
a sales charge was included. Cumulative 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.
** This unmanaged Index covers 500 industrial, utility, transportation and financial companies
of the U.S. markets (mostly NYSE issues) representing about 75% of NYSE market capitalization
and 30% of NYSE issues.
S&P 500 is a registered trademark of the McGraw-Hill companies.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph illustrating the growth of a $10,000 investment in Institutional
Shares*++, Investor A Shares*++, Investor B Shares*++, Investor C Shares*++
and Class R Shares*++ compared to a similar investment in Standard & Poor's
500 Index++++. Values illustrated are as follows:
Institutional Shares*++
Date Value
October 1996 $10,000.00
October 1997 $13,208.00
October 1998 $15,331.00
October 1999 $17,156.00
October 2000 $27,223.00
October 2001 $25,600.00
October 2002 $21,591.00
October 2003 $24,485.00
October 2004 $25,088.00
October 2005 $30,865.00
October 2006 $31,755.00
Investor A Shares*++
Date Value
October 1996 $ 9,475.00
October 1997 $12,491.00
October 1998 $14,441.00
October 1999 $16,120.00
October 2000 $25,530.00
October 2001 $23,949.00
October 2002 $20,137.00
October 2003 $22,796.00
October 2004 $23,280.00
October 2005 $28,583.00
October 2006 $29,315.00
Investor B Shares*++
Date Value
October 1996 $10,000.00
October 1997 $13,064.00
October 1998 $14,996.00
October 1999 $16,601.00
October 2000 $26,145.00
October 2001 $24,330.00
October 2002 $20,297.00
October 2003 $22,753.00
October 2004 $23,123.00
October 2005 $28,390.00
October 2006 $29,118.00
Investor C Shares*++
Date Value
October 1996 $10,000.00
October 1997 $13,085.00
October 1998 $15,019.00
October 1999 $16,624.00
October 2000 $26,142.00
October 2001 $24,327.00
October 2002 $20,244.00
October 2003 $22,750.00
October 2004 $23,068.00
October 2005 $28,088.00
October 2006 $28,616.00
Class R Shares*++
Date Value
October 1996 $10,000.00
October 1997 $13,142.00
October 1998 $15,180.00
October 1999 $16,901.00
October 2000 $26,687.00
October 2001 $24,972.00
October 2002 $20,957.00
October 2003 $23,789.00
October 2004 $24,277.00
October 2005 $29,693.00
October 2006 $30,363.00
Standard & Poor's 500 Index++++
Date Value
October 1996 $10,000.00
October 1997 $13,211.00
October 1998 $16,117.00
October 1999 $20,253.00
October 2000 $21,487.00
October 2001 $16,136.00
October 2002 $13,698.00
October 2003 $16,548.00
October 2004 $18,107.00
October 2005 $19,686.00
October 2006 $22,903.00
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
++ The Fund invests worldwide primarily in equity securities of companies
that, in the opinion of management, derive or are expected to derive a
substantial portion of their sales from products or services in health
care.
++++ This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues) representing
about 75% of NYSE market capitalization and 30% of NYSE issues.
Past performance is not indicative of future results.
Average Annual Total Return
Institutional Shares Return
One Year Ended 10/31/06 + 2.88%
Five Years Ended 10/31/06 + 4.40
Ten Years Ended 10/31/06 +12.25
Return Without Return With
Sales Charge Sales Charge*
Investor A Shares
One Year Ended 10/31/06 + 2.56% - 2.82%
Five Years Ended 10/31/06 + 4.13 + 3.01
Ten Years Ended 10/31/06 +11.96 +11.35
Return Return
Without CDSC With CDSC++++++
Investor B Shares++
One Year Ended 10/31/06 + 1.98% - 1.65%
Five Years Ended 10/31/06 + 3.32 + 3.03
Ten Years Ended 10/31/06 +11.28 +11.28
Return Return
Without CDSC With CDSC++++++
Investor C Shares++++
One Year Ended 10/31/06 + 1.88% + 1.07%
Five Years Ended 10/31/06 + 3.30 + 3.30
Ten Years Ended 10/31/06 +11.09 +11.09
Class R Shares Return
One Year Ended 10/31/06 + 2.26%
Five Years Ended 10/31/06 + 3.99
Ten Years Ended 10/31/06 +11.75
* Assuming maximum sales charge of 5.25%.
++ Maximum contingent deferred sales charge is 4.5% and is
reduced to 0% after six years.
++++ Maximum contingent deferred sales charge is 1% and is reduced
to 0% after one year.
++++++ Assuming payment of applicable contingent deferred sales
charge.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses
related to transactions, including sales charges, redemption fees and exchange
fees; and (b) operating expenses including advisory fees, distribution fees
including 12b-1 fees, and other Fund expenses. The following example (which
is based on a hypothetical investment of $1,000 invested on May 1, 2006 and
held through October 31, 2006) is intended to assist shareholders both in
calculating expenses based on an investment in the Fund and in comparing these
expenses with similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during
the period covered by this report, shareholders can divide their account value
by $1,000 and then multiply the result by the number in the first line under
the heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders'
ongoing costs only and do not reflect any transactional expenses, such as
sales charges, redemption fees or exchange fees. Therefore, the second table
is useful in comparing ongoing expenses only, and will not help shareholders
determine the relative total expenses of owning different funds. If these
transactional expenses were included, shareholder expenses would have been
higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value May 1, 2006
May 1, October 31, to October 31,
2006 2006 2006
Actual
Institutional $1,000 $ 985.80 $ 6.68
Investor A $1,000 $ 983.50 $ 7.93
Investor B $1,000 $ 980.50 $11.86
Investor C $1,000 $ 980.80 $11.86
Class R $1,000 $ 981.70 $ 9.14
Hypothetical (5% annual return before expenses)**
Institutional $1,000 $1,018.77 $ 6.79
Investor A $1,000 $1,017.50 $ 8.07
Investor B $1,000 $1,013.52 $12.06
Investor C $1,000 $1,013.52 $12.06
Class R $1,000 $1,016.28 $ 9.30
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(1.32% for Institutional, 1.57% for Investor A, 2.35% for Investor B, 2.35% for Investor C and
1.81% for Class R), multiplied by the average account value over the period, multiplied by 186/365
(to reflect the one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the
most recent fiscal half year divided by 365.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Schedule of Investments (in U.S. dollars)
Shares
Industry Common Stocks Held Value
Europe
Austria--0.5%
Biotechnology Products--0.5%
Intercell AG (a) 120,000 $ 2,358,617
Total Common Stocks in Austria 2,358,617
Denmark--2.3%
Biotechnology Products--2.3%
Genmab A/S (a) 235,000 10,502,479
Total Common Stocks in Denmark 10,502,479
France--1.2%
Pharmaceutical--
Prescription--0.9%
Sanofi-Aventis 50,000 4,250,105
Pharmaceutical--
Specialty--0.3%
Flamel Technologies SA (a)(b) 62,100 1,541,322
Total Common Stocks in France 5,791,427
Germany--4.9%
Biotechnology Products--0.0%
GPC Biotech AG (a) 8,400 171,857
Pharmaceutical--
Prescription--4.9%
Bayer AG 450,100 22,662,691
Total Common Stocks in Germany 22,834,548
Netherlands--0.4%
Biotechnology Products--0.4%
Pharming Group NV (a) 400,000 1,873,620
Total Common Stocks in
the Netherlands 1,873,620
Sweden--1.2%
Medical Devices--1.2%
Elekta AB 260,000 5,399,867
Total Common Stocks in Sweden 5,399,867
Switzerland--10.8%
Biotechnology Products--0.3%
Speedel Holding AG (a) 7,000 1,124,794
Pharmaceutical--
Prescription--10.5%
Novartis AG Registered Shares 439,000 26,642,418
Roche Holding AG 125,000 21,874,121
------------
48,516,539
Total Common Stocks in
Switzerland 49,641,333
United Kingdom--1.3%
Pharmaceutical--
Specialty--1.3%
Shire Plc 320,000 5,838,659
Total Common Stocks in the
United Kingdom 5,838,659
Total Common Stocks in
Europe--22.6% 104,240,550
Shares
Industry Common Stocks Held Value
North America
Bermuda--0.1%
Pharmaceutical--
Specialty--0.1%
Warner Chilcott Ltd. (a) 47,814 $ 631,145
Total Common Stocks in Bermuda 631,145
United States--69.1%
Biotechnology Discovery Tools
& Platform Technologies--5.2%
Covance, Inc. (a)(f) 247,200 14,461,200
Exelixis, Inc. (a) 380,000 3,686,000
Lexicon Genetics, Inc. (a) 169,982 678,228
Medarex, Inc. (a)(f) 322,000 4,160,240
Varian, Inc. (a) 22,000 1,031,580
------------
24,017,248
Biotechnology Products--11.9%
Dendreon Corp. (a)(f) 221,100 1,114,344
Genentech, Inc. (a)(f) 268,000 22,324,400
Gilead Sciences, Inc. (a) 37,000 2,549,300
MedImmune, Inc. (a) 100,000 3,204,000
NeuroMetrix, Inc. (a)(f) 115,000 1,873,350
PDL BioPharma, Inc. (a) 24,000 507,120
Progenics Pharmaceuticals, Inc. (a) 220,274 5,753,557
Seattle Genetics, Inc. (a) 20,000 106,000
Vertex Pharmaceuticals, Inc. (a)(f) 415,000 16,849,000
Vical, Inc. (a) 120,000 766,800
------------
55,047,871
Health Care Information
& Technology--9.8%
Cerner Corp. (a)(f) 400,000 19,324,000
Emageon, Inc. (a) 177,000 2,823,150
Emdeon Corp. (a) 1,400,000 16,310,000
WebMD Health Corp. Class A (a)(f) 185,700 6,770,622
------------
45,227,772
Health Care Providers
& Services--1.9%
AmerisourceBergen Corp. 54,000 2,548,800
Cardinal Health, Inc. 29,000 1,898,050
Cytyc Corp. (a) 160,000 4,227,200
------------
8,674,050
Insurance--0.3%
eHealth, Inc. (a)(f) 57,200 1,265,264
Managed Health Care--
Multi-line--6.6%
Aetna, Inc. 230,000 9,480,600
UnitedHealth Group, Inc. 370,000 18,048,600
WellPoint, Inc. (a) 41,500 3,167,280
------------
30,696,480
Managed Health Care--
Regional--3.5%
Humana, Inc. (a) 270,500 16,230,000
Medical Devices--15.4%
ArthroCare Corp. (a) 24,000 969,840
Aspect Medical Systems, Inc. (a) 40,000 714,800
Boston Scientific Corp. (a) 33,000 525,030
Conor Medsystems, Inc. (a) 124,300 3,052,808
DexCom, Inc. (a) 230,000 2,024,000
HemoSense, Inc. (a) 202,600 780,010
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Schedule of Investments (continued) (in U.S. dollars)
Shares
Industry Common Stocks Held Value
North America (concluded)
United States (concluded)
Medical Devices (concluded)
Hologic, Inc. (a)(f) 489,000 $ 23,545,350
Intuitive Surgical, Inc. (a) 193,000 19,141,740
SonoSite, Inc. (a)(f) 467,631 13,327,484
Thermo Electron Corp. (a)(f) 146,000 6,259,020
Ventana Medical Systems, Inc. (a) 25,000 1,009,750
------------
71,349,832
Pharmaceutical--
Diversified--2.0%
Abbott Laboratories 191,300 9,088,663
Pharmaceutical--
Generic--0.6%
Barr Pharmaceuticals, Inc. (a) 50,000 2,618,500
Pharmaceutical--
Prescription--3.6%
Pfizer, Inc. 50,000 1,332,500
Schering-Plough Corp. 200,000 4,428,000
Wyeth 210,000 10,716,300
------------
16,476,800
Pharmaceutical--
Specialty--7.3%
Baxter International, Inc. 27,000 1,241,190
Celgene Corp. (a)(f) 437,000 23,353,280
Cephalon, Inc. (a) 100,000 7,018,000
Theravance, Inc. (a) 60,000 1,887,600
------------
33,500,070
Pharmacy Benefit
Managers--1.0%
Caremark Rx, Inc. 50,000 2,461,500
Medco Health Solutions, Inc. (a) 38,000 2,033,000
------------
4,494,500
Total Common Stocks in the
United States 318,687,050
Total Common Stocks in
North America--69.2% 319,318,195
Shares
Industry Common Stocks Held Value
Pacific Basin/Asia
China--0.1%
Medical Devices--0.1%
Mindray Medical International Ltd. (a)(b) 19,800 $ 358,380
Total Common Stocks in China 358,380
India--1.7%
Pharmaceutical--Generic--1.7%
Sun Pharmaceuticals Industries Ltd. 400,000 8,045,747
Total Common Stocks in India 8,045,747
Japan--1.1%
Pharmaceutical--
Prescription--1.1%
Chugai Pharmaceutical Co., Ltd. 80,000 1,641,657
Eisai Co., Ltd. 44,100 2,258,638
Kyorin Co. Ltd. 92,000 1,124,090
Total Common Stocks in Japan 5,024,385
Total Common Stocks in the
Pacific Basin/Asia--2.9% 13,428,512
Total Common Stocks
(Cost--$348,835,198)--94.7% 436,987,257
Beneficial
Short-Term Securities Interest
BlackRock Liquidity Series, LLC
Cash Sweep Series I,
5.22% (c)(d) $19,721,795 19,721,795
BlackRock Liquidity Series, LLC
Money Market Series,
5.29% (c)(d)(e) 87,589,050 87,589,050
Total Short-Term Securities
(Cost--$107,310,845)--23.3% 107,310,845
Total Investments (Cost--$456,146,043*)--118.0% 544,298,102
Liabilities in Excess of Other Assets--(18.0%) (83,124,417)
------------
Net Assets--100.0% $461,173,685
============
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Schedule of Investments (concluded) (in U.S. dollars)
* The cost and unrealized appreciation/depreciation of investments
as of October 31, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 457,535,665
================
Gross unrealized appreciation $ 91,241,402
Gross unrealized depreciation (4,478,965)
----------------
Net unrealized appreciation $ 86,762,437
================
(a) Non-income producing security.
(b) Depositary receipts.
(c) Investments in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
Net Interest
Affiliate Activity Income
BlackRock Liquidity Series, LLC
Cash Sweep Series I $ 5,826,176 $333,702
BlackRock Liquidity Series, LLC
Money Market Series $23,295,400 $ 98,762
(d) Represents the current yield as of October 31, 2006.
(e) Security was purchased with the cash proceeds from securities loans.
(f) Security, or a portion of security, is on loan.
o For Fund compliance purposes, the Fund's industry classifications refer
to any one or more of the industry sub-classifications used by one or
more widely recognized market indexes or ratings group indexes, and/or
as defined by Fund management. This definition may not apply for purposes
of this report, which may combine such industry sub-classifications for
reporting ease. Industries are shown as a percent of net assets.
o Forward foreign exchange contracts purchased as of October 31, 2006
were as follows:
Settlement Unrealized
Foreign Currency Purchased Date Appreciation
EUR 457,530 November 2006 $ 678
GBP 3,126,556 November 2006 26,815
JPY 82,165,308 November 2006 2,028
-----------
Total Unrealized Appreciation on
Forward Foreign Exchange Contracts--Net
(USD Commitment--$7,221,546) $ 29,521
===========
o Forward foreign exchange contracts sold as of October 31, 2006
were as follows:
Settlement Unrealized
Foreign Currency Sold Date Depreciation
CHF 649,698 November 2006 $ (2,346)
EUR 6,873,913 November 2006 (12,061)
GBP 6,271,646 November 2006 (80,131)
-----------
Total Unrealized Depreciation on
Forward Foreign Exchange Contracts--Net
(USD Commitment--$21,166,156) $ (94,538)
===========
o Currency Abbreviations:
CHF Swiss Franc
EUR Euro
GBP British Pound
JPY Japanese Yen
USD U.S. Dollar
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Statement of Assets and Liabilities
As of October 31, 2006
Assets
Investments in unaffiliated securities, at value (including securities loaned
of $86,269,311)(identified cost--$348,835,198) $ 436,987,257
Investments in affiliated securities, at value (identified cost--$107,310,845) 107,310,845
Cash 3,481,221
Foreign cash (Cost--$33,507) 34,038
Unrealized appreciation on forward foreign exchange contracts 29,521
Receivables:
Securities sold $ 36,850,737
Capital shares sold 1,906,341
Dividends 294,978
Securities lending 15,516 39,067,572
---------------
Prepaid expenses 21,221
---------------
Total assets 586,931,675
---------------
Liabilities
Collateral on securities loaned, at value 87,589,050
Unrealized depreciation on forward foreign exchange contracts 94,538
Payables:
Securities purchased 34,243,077
Capital shares redeemed 2,979,616
Investment adviser 411,827
Distributor 175,508
Other affiliates 14,139 37,824,167
---------------
Accrued expenses and other liabilities 250,235
---------------
Total liabilities 125,757,990
---------------
Net Assets
Net assets $ 461,173,685
===============
Net Assets Consist of
Institutional Shares of Common Stock, $.10 par value, 200,000,000 shares authorized $ 2,264,030
Investor A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 2,759,002
Investor B Shares of Common Stock, $.10 par value, 250,000,000 shares authorized 1,986,276
Investor C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 1,800,971
Class R Shares of Common Stock, $.10 par value, 250,000,000 shares authorized 120,177
Paid-in capital in excess of par 364,199,689
Accumulated investment loss--net $ (2,485,469)
Undistributed realized capital gains--net 2,408,133
Unrealized appreciation--net 88,120,876
---------------
Total accumulated earnings--net 88,043,540
---------------
Net Assets $ 461,173,685
===============
Net Asset Value
Institutional--Based on net assets of $144,214,820 and 22,640,299 shares outstanding $ 6.37
===============
Investor A--Based on net assets of $159,260,118 and 27,590,023 shares outstanding $ 5.77
===============
Investor B--Based on net assets of $80,159,161 and 19,862,755 shares outstanding $ 4.04
===============
Investor C--Based on net assets of $72,560,308 and 18,009,714 shares outstanding $ 4.03
===============
Class R--Based on net assets of $4,979,278 and 1,201,772 shares outstanding $ 4.14
===============
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Statement of Operations
For the Six Months Ended October 31, 2006
Investment Income
Dividends (net of $98,189 foreign withholding tax) $ 1,414,949
Interest from affiliates 333,702
Securities lending--net 98,762
---------------
Total income 1,847,413
---------------
Expenses
Investment advisory fees $ 2,457,580
Service and distribution fees--Investor B 463,350
Service and distribution fees--Investor C 390,185
Service fees--Investor A 206,374
Transfer agent fees--Investor A 153,523
Transfer agent fees--Institutional 140,107
Accounting services 100,248
Transfer agent fees--Investor B 99,821
Transfer agent fees--Investor C 85,454
Custodian fees 81,652
Professional fees 37,644
Registration fees 30,369
Printing and shareholder reports 27,713
Directors' fees and expenses 23,552
Service and distribution fees--Class R 12,383
Transfer agent fees--Class R 4,567
Pricing fees 2,643
Other 18,624
---------------
Total expenses 4,335,789
---------------
Investment loss--net (2,488,376)
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net (including $8,325 foreign capital gain tax) 4,042,656
Foreign currency transactions--net (244,840) 3,797,816
---------------
Change in unrealized appreciation/depreciation on:
Investments--net (including $80,563 deferred foreign capital gain credit) (11,201,590)
Foreign currency transactions--net 8,428 (11,193,162)
--------------- ---------------
Total realized and unrealized loss--net (7,395,346)
---------------
Net Decrease in Net Assets Resulting from Operations $ (9,883,722)
===============
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
October 31, April 30,
Increase (Decrease) in Net Assets: 2006 2006
Operations
Investment loss--net $ (2,488,376) $ (6,432,988)
Realized gain--net 3,797,816 97,645,714
Change in unrealized appreciation/depreciation--net (11,193,162) (5,800,436)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations (9,883,722) 85,412,290
--------------- ---------------
Distributions to Shareholders
Realized gain--net:
Institutional (16,664,508) (10,315,668)
Investor A (19,834,620) (11,287,434)
Investor B (15,023,567) (10,211,998)
Investor C (12,519,483) (6,879,317)
Class R (795,318) (286,716)
--------------- ---------------
Net decrease in net assets resulting from distributions to shareholders (64,837,496) (38,981,133)
--------------- ---------------
Capital Share Transactions
Net increase in net assets derived from capital share transactions 8,252,704 3,436,185
--------------- ---------------
Net Assets
Total increase (decrease) in net assets (66,468,514) 49,867,342
Beginning of period 527,642,199 477,774,857
--------------- ---------------
End of period* $ 461,173,685 $ 527,642,199
=============== ===============
* Undistributed (accumulated) investment income (loss)--net $ (2,485,469) $ 2,907
=============== ===============
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Financial Highlights
Institutional
For the Six
The following per share data and ratios Months Ended
have been derived from information October 31, For the Year Ended April 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 7.29 $ 6.55 $ 6.87 $ 5.59 $ 6.66 $ 6.70
----------- ----------- ----------- ----------- ----------- -----------
Investment loss--net*** (.02) (.05) (.06) (.05) (.04) (.06)
Realized and unrealized gain (loss)--net (.12) 1.27 .11 1.33 (1.03) .25
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (.14) 1.22 .05 1.28 (1.07) .19
----------- ----------- ----------- ----------- ----------- -----------
Less distributions from realized gain--net (.78) (.48) (.37) -- -- (.23)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 6.37 $ 7.29 $ 6.55 $ 6.87 $ 5.59 $ 6.66
=========== =========== =========== =========== =========== ===========
Total Investment Return**
Based on net asset value per share (1.42%)+++ 18.70%++ .99% 22.90% (16.07%) 2.91%
=========== =========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 1.32%* 1.30% 1.33% 1.29% 1.33% 1.27%
=========== =========== =========== =========== =========== ===========
Investment loss--net (.57%)* (.75%) (.88%) (.75%) (.79%) (.95%)
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 144,215 $ 159,116 $ 146,922 $ 275,570 $ 244,217 $ 311,288
=========== =========== =========== =========== =========== ===========
Portfolio turnover 67.30% 120.32% 126.81% 141.46% 128.24% 81.36%
=========== =========== =========== =========== =========== ===========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ In 2006, there was no impact to the Fund's total investment return as a result of a payment by
Merrill Lynch Investment Managers, L.P. (an affiliate).
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Financial Highlights (continued)
Investor A
For the Six
The following per share data and ratios Months Ended
have been derived from information October 31, For the Year Ended April 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 6.69 $ 6.04 $ 6.38 $ 5.21 $ 6.23 $ 6.29
----------- ----------- ----------- ----------- ----------- -----------
Investment loss--net*** (.03) (.07) (.07) (.06) (.05) (.07)
Realized and unrealized gain (loss)--net (.11) 1.19 .10 1.23 (.97) .24
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (.14) 1.12 .03 1.17 (1.02) .17
----------- ----------- ----------- ----------- ----------- -----------
Less distributions from realized gain--net (.78) (.47) (.37) -- -- (.23)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 5.77 $ 6.69 $ 6.04 $ 6.38 $ 5.21 $ 6.23
=========== =========== =========== =========== =========== ===========
Total Investment Return**
Based on net asset value per share (1.65%)+++ 18.61%++ .74% 22.46% (16.37%) 2.78%
=========== =========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 1.57%* 1.55% 1.58% 1.55% 1.58% 1.52%
=========== =========== =========== =========== =========== ===========
Investment loss--net (.82%)* (.99%) (1.13%) (1.00%) (1.04%) (1.20%)
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 159,260 $ 172,585 $ 142,774 $ 160,443 $ 119,375 $ 146,714
=========== =========== =========== =========== =========== ===========
Portfolio turnover 67.30% 120.32% 126.81% 141.46% 128.24% 81.36%
=========== =========== =========== =========== =========== ===========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ In 2006, there was no impact to the Fund's total investment return as a result of a payment by
Merrill Lynch Investment Managers, L.P. (an affiliate).
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Financial Highlights (continued)
Investor B
For the Six
The following per share data and ratios Months Ended
have been derived from information October 31, For the Year Ended April 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 4.93 $ 4.57 $ 4.96 $ 4.08 $ 4.91 $ 5.05
----------- ----------- ----------- ----------- ----------- -----------
Investment loss--net*** (.03) (.09) (.09) (.08) (.08) (.10)
Realized and unrealized gain (loss)--net (.10) .89 .07 .96 (.75) .19
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (.13) .80 (.02) .88 (.83) .09
----------- ----------- ----------- ----------- ----------- -----------
Less distributions from realized gain--net (.76) (.44) (.37) -- -- (.23)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 4.04 $ 4.93 $ 4.57 $ 4.96 $ 4.08 $ 4.91
=========== =========== =========== =========== =========== ===========
Total Investment Return**
Based on net asset value per share (1.95%)+++ 17.64%++ (.09%) 21.57% (16.90%) 1.85%
=========== =========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 2.35%* 2.33% 2.36% 2.32% 2.36% 2.29%
=========== =========== =========== =========== =========== ===========
Investment loss--net (1.59%)* (1.79%) (1.91%) (1.78%) (1.83%) (1.97%)
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 80,159 $ 105,503 $ 117,482 $ 177,952 $ 194,543 $ 310,916
=========== =========== =========== =========== =========== ===========
Portfolio turnover 67.30% 120.32% 126.81% 141.46% 128.24% 81.36%
=========== =========== =========== =========== =========== ===========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ In 2006, there was no impact to the Fund's total investment return as a result of a payment by
Merrill Lynch Investment Managers, L.P. (an affiliate).
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Financial Highlights (continued)
Investor C
For the Six
The following per share data and ratios Months Ended
have been derived from information October 31, For the Year Ended April 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 4.92 $ 4.57 $ 4.96 $ 4.07 $ 4.91 $ 5.05
----------- ----------- ----------- ----------- ----------- -----------
Investment loss--net*** (.03) (.09) (.09) (.08) (.08) (.10)
Realized and unrealized gain (loss)--net (.10) .88 .07 .97 (.76) .19
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (.13) .79 (.02) .89 (.84) .09
----------- ----------- ----------- ----------- ----------- -----------
Less distributions from realized gain--net (.76) (.44) (.37) -- -- (.23)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 4.03 $ 4.92 $ 4.57 $ 4.96 $ 4.07 $ 4.91
=========== =========== =========== =========== =========== ===========
Total Investment Return**
Based on net asset value per share (1.92%)+++ 17.50%++ (.09%) 21.87% (17.11%) 1.85%
=========== =========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 2.35%* 2.33% 2.37% 2.33% 2.37% 2.30%
=========== =========== =========== =========== =========== ===========
Investment loss--net (1.60%)* (1.77%) (1.92%) (1.79%) (1.84%) (1.99%)
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 72,560 $ 85,553 $ 68,743 $ 85,753 $ 76,606 $ 98,994
=========== =========== =========== =========== =========== ===========
Portfolio turnover 67.30% 120.32% 126.81% 141.46% 128.24% 81.36%
=========== =========== =========== =========== =========== ===========
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ In 2006, there was no impact to the Fund's total investment return as a result of a payment by
Merrill Lynch Investment Managers, L.P. (an affiliate).
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Financial Highlights (concluded)
Class R
For the Six For the Period
Months Ended For the Year Ended January 3, 2003++++
The following per share data and ratios have been derived October 31, April 30, to April 30,
from information provided in the financial statements. 2006 2006 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 5.04 $ 4.66 $ 5.02 $ 4.09 $ 4.04
----------- ----------- ----------- ----------- -----------
Investment loss--net*** (.02) (.06) (.06) (.02) (.01)
Realized and unrealized gain (loss)--net (.11) .90 .07 .95 .06
----------- ----------- ----------- ----------- -----------
Total from investment operations (.13) .84 .01 .93 .05
----------- ----------- ----------- ----------- -----------
Less distributions from realized gain--net (.77) (.46) (.37) -- --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 4.14 $ 5.04 $ 4.66 $ 5.02 $ 4.09
=========== =========== =========== =========== ===========
Total Investment Return
Based on net asset value per share (1.83%)+++ 18.25%++ .54% 22.74% 1.24%+++
=========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 1.81%* 1.80% 1.83% 1.73% 1.84%*
=========== =========== =========== =========== ===========
Investment loss--net (1.08%)* (1.20%) (1.37%) (1.15%) (.36%)*
=========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 4,979 $ 4,885 $ 1,853 $ 473 --**
=========== =========== =========== =========== ===========
Portfolio turnover 67.30% 120.32% 126.81% 141.46% 128.24%
=========== =========== =========== =========== ===========
* Annualized.
** Amount is less than $1,000.
*** Based on average shares outstanding.
++ In 2006, there was no impact to the Fund's total investment return as a result of a payment by
Merrill Lynch Investment Managers, L.P. (an affiliate).
++++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch Healthcare Fund, Inc. was renamed
BlackRock Healthcare Fund, Inc. (the "Fund"). The Fund is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may
require the use of management accruals and estimates. Actual results may
differ from these estimates. These unaudited financial statements reflect all
adjustments, which are, in the opinion of management, necessary to present a
fair statement of the results for the interim period. All such adjustments are
of a normal, recurring nature. The Fund offers multiple classes of shares.
Effective October 2, 2006, Class I, Class A, Class B and Class C Shares were
redesignated Institutional, Investor A, Investor B and Investor C Shares,
respectively. Class R Shares did not change their designation. Institutional
Shares are sold without a sales charge and only to certain eligible investors.
Investor A Shares are sold with a front-end sales charge. Shares of Investor B
and Investor C may be subject to a contingent deferred sales charge. Class R
Shares are sold only to certain retirement plans. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms
and conditions, except that Investor A, Investor B, Investor C and Class R
Shares bear certain expenses related to the account maintenance of such
shares, and Investor B, Investor C and Class R 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 (except that Investor B shareholders may vote on
material changes to the Investor A distribution plan). Income, expenses (other
than expenses attributable to a specific class) and realized and unrealized
gains and losses are allocated daily to each class based on its relative net
assets. The following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Equity securities held by the Fund that are
traded on stock exchanges or the Nasdaq National Market are valued at the last
sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available
asked price for short positions. In cases where equity securities are traded
on more than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of the Board of
Directors of the Fund. Long positions traded in the over-the-counter ("OTC")
markets, Nasdaq Small Cap or Bulletin Board are valued at the last available
bid price or yield equivalent obtained from one or more dealers or pricing
services approved by the Board of Directors of the Fund. Short positions
traded in OTC markets are valued at the last available asked price. Portfolio
securities that are traded both in OTC markets 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 OTC market, the last
asked price. Options purchased are valued at their last sale price in the case
of exchange-traded options or, in the case of options traded in the OTC
market, the last bid price. Swap agreements are valued based upon fair
valuations received daily by the Fund from a pricing service or counterparty.
Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Manager believes that this method no longer
produces fair valuations. Valuation of other short-term investment vehicles is
generally based on the net asset value of the underlying investment vehicle or
amortized cost.
Repurchase agreements are valued at cost plus accrued interest. The Fund
employs pricing services to provide certain securities prices for the Fund.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Directors of the Fund, including valuations furnished by the
pricing services retained by the Fund, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are
reviewed by the officers of the Fund under the general supervision of the
Fund's Board of Directors. Such valuations and procedures will be reviewed
periodically by the Board of Directors of the Fund.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Notes to Financial Statements (continued)
Generally, trading in foreign securities, as well as U.S. government
securities, money market instruments and certain fixed income securities, is
substantially completed each day at various times prior to the close of
business on the New York Stock Exchange ("NYSE"). The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates will be
determined as of the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on
the NYSE that may not be reflected in the computation of the Fund's net asset
value. If events (for example, a company announcement, market volatility or a
natural disaster) occur during such periods that are expected to materially
affect the value of such securities, those securities may be valued at their
fair value as determined in good faith by the Fund's Board of Directors or by
the Manager using a pricing service and/or procedures approved by the Fund'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 U.S. dollars. Realized and unrealized
gains or losses from investments include the effects of foreign exchange rates
on investments. The Fund invests in foreign securities, which may involve a
number of risk factors and special considerations not present with investments
in securities of U.S. corporations.
(c) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the
securities 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 Fund may purchase or sell financial futures
contracts and options on such financial futures contracts. Financial 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 Fund deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund 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 Fund as
unrealized gains or losses. When the contract is closed, the Fund 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 Fund may also purchase or sell
listed or OTC 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-U.S. dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund.
* Forward foreign exchange contracts--The Fund may enter into forward foreign
exchange contracts as a hedge against either specific transactions or
portfolio positions. The contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value at the time it was opened and the value at the
time it was closed.
* Options--The Fund may purchase and write call and put options. When the Fund
writes an option, an amount equal to the premium received by the Fund 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 Fund enters into a
closing transaction), the Fund 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 Fund'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.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Notes to Financial Statements (continued)
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. 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 Fund has determined the ex-dividend date.
Interest income is recognized on the accrual 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 Fund
are recorded on the ex-dividend dates.
(h) Securities lending--The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. The market
value of the loaned securities is determined at the close of business of the
Fund and any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral for the
loaned securities, the Fund typically receives the income on both the loaned
securities and the collateral and, as a result, the Fund's yield may increase.
Where the Fund receives cash collateral, it may invest such collateral and
retain the amount earned on such investment, net of any amount rebated to the
borrower. The Fund may receive a flat fee for its loans. Loans of securities
are terminable at any time and the borrower, after notice, is required to
return borrowed securities within five business days. The Fund may pay
reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any
other reason, the Fund could experience delays and costs in gaining access to
the collateral. The Fund also could suffer a loss where the value of the
collateral falls below the market value of the borrowed securities, in the
event of borrower default or in the event of losses on investments made with
cash collateral.
(i) Recent accounting pronouncements--In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109." FIN 48 prescribes the minimum recognition threshold a tax position must
meet in connection with accounting for uncertainties in income tax positions
taken or expected to be taken by an entity including mutual funds before being
measured and recognized in the financial statements. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006. The impact on the
Fund's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" ("FAS 157"), was issued and is effective
for fiscal years beginning after November 15, 2007. FAS 157 defines fair
value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. Management is currently evaluating
the implication of FAS 157. At this time its impact on the Fund's financial
statements has not been determined.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM") and its affiliates, with BlackRock, Inc. to
create a new independent company. Merrill Lynch has a 49.8% economic interest
and a 45% voting interest in the combined company and The PNC Financial
Services Group, Inc. ("PNC"), has approximately a 34% economic and voting
interest. The new company operates under the BlackRock name and is governed by
a board of directors with a majority of independent members.
On August 15, 2006, shareholders of the Fund approved a new Investment
Advisory Agreement with BlackRock Advisors, Inc. (the "Manager"), an indirect,
wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was
recently reorganized into a limited liability company and renamed BlackRock
Advisors, LLC. The new Investment Advisory Agreement between the Fund and the
Manager became effective on September 29, 2006. Prior to September 29, 2006,
MLIM was the Investment Adviser. The general partner of MLIM is Princeton
Services, Inc. ("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch,
which is the limited partner. The Fund also has entered into a separate
Distribution Agreement and Distribution Plans with FAM Distributors, Inc.
("FAMD") and BlackRock Distributors, Inc. ("BDI") (collectively, the
"Distributor"). FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc.
and BDI is an affiliate of BlackRock, Inc.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Notes to Financial Statements (continued)
The Manager is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the Fund
pays a monthly fee of 1.0% on an annual basis of the average daily value of
the Fund's net assets. In addition, the Manager has entered into a sub-
advisory agreement with BlackRock Investment Management, LLC ("BIM"), an
affiliate of the Manager, under which the Manager pays the Sub-Adviser for
services it provides a fee equal to 74% of the management fee paid by the Fund
to the Manager. Prior to September 29, 2006, MLIM had a Sub-Advisory Agreement
with Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an affiliate
of MLIM.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance fees ("service fees") 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:
Service Distribution
Fee Fee
Investor A .25% --
Investor B .25% .75%
Investor C .25% .75%
Class R .25% .25%
Pursuant to sub-agreements with each Distributor, broker-dealers, including
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned
subsidiary of Merrill Lynch, and an affiliate of each of the Distributors,
also provide account maintenance and distribution services to the Fund. The
ongoing service fee compensates the Distributors and each broker-dealer
(including MLPF&S) for providing account maintenance services to Investor A,
Investor B, Investor C and Class R shareholders. The ongoing distribution fee
compensates the Distributors and the broker-dealers for providing shareholder
and distribution-related services to Investor B, Investor C and Class R
shareholders.
For the six months ended October 31, 2006, FAMD, the Fund's sole Distributor
until September 29, 2006, and BDI earned underwriting discounts and direct
commissions and MLPF&S earned dealer concessions on sales of the Fund's
Investor A Shares as follows:
FAMD MLPF&S BDI
Investor A $ 1,560 $ 85,202 $ 3
For the six months ended October 31, 2006, MLPF&S received contingent deferred
sales charges of $46,483 and $37,279 relating to transactions in Investor B
and Investor C Shares, respectively.
BlackRock maintains a call center, which is responsible for providing certain
shareholder services to the Fund, such as responding to shareholder inquiries
and processing transactions based upon instructions from shareholders with
respect to the subscription and redemption of Fund shares. During the period
September 29, 2006 to October 31, 2006, the following amounts have been
accrued by the Fund to reimburse BlackRock for costs incurred running the call
center, which are a component of the transfer agent fees in the accompanying
Statement of Operations.
Call Center
Fees
Institutional $840
Investor A $392
Investor B $251
Investor C $214
Class R $ 8
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to MLPF&S or its
affiliates. As of October 31, 2006, the Fund lent securities with a value of
$25,093,785 to MLPF&S or its affiliates. Pursuant to that order, the Fund has
retained BIM as the securities lending agent for a fee based on a share of the
returns on investment of cash collateral. Prior to September 29, 2006, BIM was
organized as Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an
affiliate of MLIM, and MLIM, LLC was the security lending agent. BIM may, on
behalf of the Fund, invest cash collateral received by the Fund for such
loans, among other things, in a private investment company managed by the
Manager or in registered money market funds advised by the Manager or its
affiliates. For the six months ended October 31, 2006, BIM received $41,225 in
securities lending agent fees.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Notes to Financial Statements (continued)
In addition, MLPF&S received $221,913 in commissions on the execution of
portfolio security transactions for the Fund for six months ended October 31,
2006.
Effective September 29, 2006, PFPC, Inc., an indirect, wholly owned subsidiary
of PNC and an affiliate of the Manager, became the Fund's transfer agent.
Prior to September 29, 2006, the Fund's transfer agent was Financial Data
Services, Inc. ("FDS"), a wholly owned subsidiary of Merrill Lynch.
For the six months ended October 31, 2006, the Fund reimbursed MLIM and the
Manager $2,552 and $2,997 respectively, for certain accounting services.
Prior to September 29, 2006, certain officers and/or directors of the Fund
were officers and/or directors of MLIM, PSI, MLAM U.K., FDS, FAMD, Merrill
Lynch, and/or MLIM, LLC.
Commencing September 29, 2006, certain officers and/or directors of the Fund
are officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended October 31, 2006, were $313,522,074 and $393,347,960,
respectively.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$8,252,704 and $3,436,185 for the six months ended October 31, 2006 and the
year ended April 30, 2006, respectively.
Transactions in capital shares for each class were as follows:
Institutional Shares for the
Six Months Ended Dollar
October 31, 2006 Shares Amount
Shares sold 793,820 $ 5,209,733
Shares issued to shareholders in
reinvestment of distributions 2,385,963 14,554,374
--------------- ---------------
Total issued 3,179,783 19,764,107
Shares redeemed (2,361,797) (15,470,901)
--------------- ---------------
Net increase 817,986 $ 4,293,206
=============== ===============
Institutional Shares for the Year Dollar
Ended April 30, 2006 Shares Amount
Shares sold 1,980,252 $ 14,623,037
Shares issued to shareholders in
reinvestment of distributions 1,238,017 8,995,171
--------------- ---------------
Total issued 3,218,269 23,618,208
Shares redeemed (3,840,068) (28,130,597)
--------------- ---------------
Net decrease (621,799) $ (4,512,389)
=============== ===============
Investor A Shares for the
Six Months Ended Dollar
October 31, 2006 Shares Amount
Shares sold 1,932,184 $ 11,492,405*
Automatic conversion of shares 853,818 5,264,609
Shares issued to shareholders in
reinvestment of distributions 3,152,009 17,430,608
--------------- ---------------
Total issued 5,938,011 34,187,622
Shares redeemed (4,155,582) (24,710,302)
--------------- ---------------
Net increase 1,782,429 $ 9,477,320
=============== ===============
* In September 2006, certain brokerages, including a
wholly owned subsidiary of Merrill Lynch, entered into a
remediation agreement with a regulatory organization,
which among other things, permitted certain shareholders
of Investor B Shares to convert their shares into the Fund's
Investor A Shares. As a result, a wholly owned subsidiary of
Merrill Lynch supplemented the Investor A Share purchase
by approximately $61,000.
Investor A Shares for the Year Dollar
Ended April 30, 2006 Shares Amount
Shares sold 5,209,230 $ 35,351,422
Automatic conversion of shares 1,865,830 12,619,876
Shares issued to shareholders in
reinvestment of distributions 1,482,227 9,897,213
--------------- ---------------
Total issued 8,557,287 57,868,511
Shares redeemed (6,376,078) (43,135,276)
--------------- ---------------
Net increase 2,181,209 $ 14,733,235
=============== ===============
Investor B Shares for the
Six Months Ended Dollar
October 31, 2006 Shares Amount
Shares sold 656,128 $ 2,849,237
Shares issued to shareholders in
reinvestment of distributions 3,435,416 13,329,414
--------------- ---------------
Total issued 4,091,544 16,178,651
--------------- ---------------
Shares redeemed or converted (4,468,470) (18,803,974)
Automatic conversion of shares (1,181,422) (5,264,609)
--------------- ---------------
Total redeemed (5,649,892) (24,068,583)
--------------- ---------------
Net decrease (1,558,348) $ (7,889,932)
=============== ===============
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Notes to Financial Statements (concluded)
Investor B Shares for the Year Dollar
Ended April 30, 2006 Shares Amount
Shares sold 2,540,095 $ 12,808,840
Shares issued to shareholders in
reinvestment of distributions 1,823,121 9,031,488
--------------- ---------------
Total issued 4,363,216 21,840,328
--------------- ---------------
Shares redeemed (6,145,786) (30,792,636)
Automatic conversion of shares (2,504,306) (12,619,876)
--------------- ---------------
Total redeemed (8,650,092) (43,412,512)
--------------- ---------------
Net decrease (4,286,876) $ (21,572,184)
=============== ===============
Investor C Shares for the
Six Months Ended Dollar
October 31, 2006 Shares Amount
Shares sold 924,475 $ 3,955,888
Shares issued to shareholders in
reinvestment of distributions 2,847,180 11,018,587
--------------- ---------------
Total issued 3,771,655 14,974,475
Shares redeemed (3,149,083) (13,556,644)
--------------- ---------------
Net increase 622,572 $ 1,417,831
=============== ===============
Investor C Shares for the Year Dollar
Ended April 30, 2006 Shares Amount
Shares sold 4,355,082 $ 22,039,665
Shares issued to shareholders in
reinvestment of distributions 1,208,718 5,982,447
--------------- ---------------
Total issued 5,563,800 28,022,112
Shares redeemed (3,227,561) (16,165,790)
--------------- ---------------
Net increase 2,336,239 $ 11,856,322
=============== ===============
Class R Shares for the
Six Months Ended Dollar
October 31, 2006 Shares Amount
Shares sold 379,815 $ 1,670,898
Shares issued to shareholders in
reinvestment of distributions 192,675 764,920
--------------- ---------------
Total issued 572,490 2,435,818
Shares redeemed (340,718) (1,481,539)
--------------- ---------------
Net increase 231,772 $ 954,279
=============== ===============
Class R Shares for the Year Dollar
Ended April 30, 2006 Shares Amount
Shares sold 813,812 $ 4,173,316
Shares issued to shareholders in
reinvestment of distributions 56,656 286,716
--------------- ---------------
Total issued 870,468 4,460,032
Shares redeemed (298,389) (1,528,831)
--------------- ---------------
Net increase 572,079 $ 2,931,201
=============== ===============
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by the Manager and its
affiliates (or MLIM and its affiliates), is a party to a $500,000,000 credit
agreement with a group of lenders, which expires November 2006 and was
subsequently renewed for one year under substantially the same terms. The Fund
may borrow under the credit agreement to fund shareholder redemptions and for
other lawful purposes other than for leverage. The Fund may borrow up to the
maximum amount allowable under the Fund's current prospectus and statement of
additional information, subject to various other legal, regulatory or
contractual limits. The Fund pays a commitment fee of .07% per annum based on
the Fund's pro rata share of the unused portion of the credit agreement.
Amounts borrowed under the credit agreement bear interest at a rate equal to,
at each Fund's election, the federal funds rate plus .50% or a base rate as
defined in the credit agreement. The Fund did not borrow under the credit
agreement during the six months ended October 31, 2006.
6. Commitments:
At October 31, 2006, the Fund had entered into foreign exchange contracts in
addition to the contracts listed on the schedule of investments, under which
it had agreed to purchase and sell various foreign currencies with approximate
values of $170,000 and $4,529,000, respectively.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Disclosure of New Investment Advisory Agreement
New BlackRock Investment Advisory Agreement--Matters Considered by the Board
In connection with the combination of Merrill Lynch's investment advisory
business, including Merrill Lynch Investment Managers, L.P. (the "Previous
Investment Adviser"), with that of BlackRock, Inc. ("BlackRock") to create a
new independent company ("New BlackRock") (the "Transaction"), the Fund's
Board of Directors considered and approved a new investment advisory agreement
(the "BlackRock Investment Advisory Agreement") between the Fund and BlackRock
Advisors, LLC ("BlackRock Advisors"). The Fund's shareholders subsequently
approved the BlackRock Investment Advisory Agreement and it became effective
on September 29, 2006, replacing the investment advisory agreement with the
Previous Investment Adviser (the "Previous Investment Advisory Agreement").
The Board discussed the BlackRock Investment Advisory Agreement at telephonic
and in-person meetings held during April and May 2006. The Board, including
the independent directors, approved the BlackRock Investment Advisory
Agreement at an in-person meeting held on May 12, 2006.
To assist the Board in its consideration of the BlackRock Investment Advisory
Agreement, BlackRock provided materials and information about BlackRock,
including its financial condition and asset management capabilities and
organization, and Merrill Lynch provided materials and information about the
Transaction. The independent directors, through their independent legal
counsel, also requested and received additional information from Merrill Lynch
and BlackRock in connection with their consideration of the BlackRock
Investment Advisory Agreement. The additional information was provided in
advance of the May 12, 2006 meeting. In addition, the independent directors
consulted with their counsel and Fund counsel on numerous occasions,
discussing, among other things, the legal standards and certain other
considerations relevant to the directors' deliberations.
At the Board meetings, the directors discussed with Merrill Lynch management
and certain BlackRock representatives the Transaction, its strategic rationale
and BlackRock's general plans and intentions regarding the Fund. At these
Board meetings, representatives of Merrill Lynch and BlackRock made
presentations to and responded to questions from the Board. The directors also
inquired about the plans for and anticipated roles and responsibilities of
certain employees and officers of the Previous Investment Adviser, and of its
affiliates, to be transferred to BlackRock in connection with the Transaction.
The independent directors of the Board also conferred separately and with
their counsel about the Transaction and other matters related to the
Transaction on a number of occasions, including in connection with the April
and May 2006 meetings. After the presentations and after reviewing the written
materials provided, the independent directors met in executive sessions with
their counsel to consider the BlackRock Investment Advisory Agreement.
In connection with the Board's review of the BlackRock Investment Advisory
Agreement, Merrill Lynch and/or BlackRock advised the directors about a
variety of matters. The advice included the following, among other matters:
* that there was not expected to be any diminution in the nature, quality and
extent of services provided to the Fund and its shareholders by BlackRock
Advisors, including compliance services;
* that operation of New BlackRock as an independent investment management
firm would enhance its ability to attract and retain talented
professionals;
* that the Fund was expected to benefit from having access to BlackRock's
state of the art technology and risk management analytic tools, including
investment tools, provided under the BlackRock Solutions (R) brand name;
* that BlackRock had no present intention to alter any applicable expense
waivers or reimbursements that were currently in effect and, while it
reserved the right to do so in the future, it would seek the approval of
the Board before making any changes;
* that BlackRock and Merrill Lynch would enter into an agreement, for an
initial three-year period and automatically renewable from year to year
thereafter, in connection with the Transaction under which Merrill Lynch-
affiliated broker-dealers would continue to offer the Fund as an investment
product;
* that BlackRock Advisors would have substantially the same access to the
Merrill Lynch sales force when distributing shares of the Fund as was
currently being provided to the Previous Investment Adviser and that other
arrangements between the Previous Investment Adviser and Merrill Lynch
sales channels would be preserved;
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
* that the Fund would have access to BlackRock's network of third party
brokers, retirement plan platforms and registered investment advisers;
* that in connection with the Transaction, Merrill Lynch and BlackRock had
agreed to conduct, and use reasonable best efforts to cause their
respective affiliates to conduct, their respective businesses in compliance
with the conditions of Section 15(f) of the Investment Company Act of 1940
(the "1940 Act") in relation to any public funds advised by BlackRock or
the Previous Investment Adviser (or affiliates), respectively; and
* that Merrill Lynch and BlackRock would derive benefits from the Transaction
and that, as a result, they had a financial interest in the matters being
considered that was different from that of Fund shareholders.
The directors considered the information provided by Merrill Lynch and
BlackRock above, and, among other factors, the following:
* the potential benefits to Fund shareholders from being part of a combined
fund family with BlackRock-sponsored funds, including possible economies of
scale and access to investment opportunities;
* the potential for expanding distribution of Fund shares through improved
access to third party distribution;
* the reputation, financial strength and resources of BlackRock and its
investment advisory subsidiaries and the anticipated financial strength and
resources of New BlackRock;
* the compliance policies and procedures of BlackRock Advisors;
* the terms and conditions of the BlackRock Investment Advisory Agreement,
including the fact that the schedule of the Fund's total advisory fees
would not increase under the BlackRock Investment Advisory Agreement, but
would remain the same;
* that in November 2005, the Board had performed a full annual review of the
Previous Investment Advisory Agreement, as required by the 1940 Act, and
had determined that the Previous Investment Adviser had the capabilities,
resources and personnel necessary to provide the advisory and
administrative services that were then being provided to the Fund; and that
the advisory and/or management fees paid by the Fund, taking into account
any applicable agreed-upon fee waivers and breakpoints, had represented
reasonable compensation to the Previous Investment Adviser in light of the
services provided, the costs to the Previous Investment Adviser of
providing those services, economies of scale, the fees and other expenses
paid by similar funds (including information provided by Lipper Inc.
["Lipper"]), and such other matters as the directors had considered
relevant in the exercise of their reasonable judgment; and
* that Merrill Lynch had agreed to pay all expenses of the Fund in connection
with the Board's consideration of the BlackRock Investment Advisory
Agreement and related agreements and all costs of shareholder approval of
the BlackRock Investment Advisory Agreement and, as a result, the Fund
would bear no costs in obtaining shareholder approval of the BlackRock
Investment Advisory Agreement.
Certain of these considerations are discussed in more detail below.
In its review of the BlackRock Investment Advisory Agreement, the Board
assessed the nature, quality and scope of the services to be provided to the
Fund by the personnel of BlackRock Advisors and its affiliates, including
administrative services, shareholder services, oversight of fund accounting,
marketing services and assistance in meeting legal and regulatory
requirements. In its review of the BlackRock Investment Advisory Agreement,
the Board also considered a range of information in connection with its
oversight of the services to be provided by BlackRock Advisors and its
affiliates. Among the matters considered were: (a) fees (in addition to
management fees) to be paid to BlackRock Advisors and its affiliates by the
Fund; (b) Fund operating expenses paid to third parties; (c) the resources
devoted to and compliance reports relating to the Fund's investment objective,
policies and restrictions, and its compliance with its Code of Ethics and
BlackRock Advisors' compliance policies and procedures; and (d) the nature,
cost and character of non-investment management services to be provided by
BlackRock Advisors and its affiliates.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Disclosure of New Investment Advisory Agreement (continued)
In the period prior to the Board meetings to consider renewal of the Previous
Investment Advisory Agreement, the Board had requested and received materials
specifically relating to the Previous Investment Advisory Agreement. These
materials included (a) information compiled by Lipper on the fees and expenses
and the investment performance of the Fund as compared to a comparable group
of funds as classified by Lipper; (b) a discussion by the Fund's portfolio
management team on investment strategies used by the Fund during its most
recent fiscal year; (c) information on the profitability to the Previous
Investment Adviser of the Previous Investment Advisory Agreement and other
payments received by the Previous Investment Adviser and its affiliates from
the Fund; and (d) information provided by the Previous Investment Adviser
concerning services related to the valuation and pricing of the Fund's
portfolio holdings, allocation of Fund brokerage fees, the Fund's portfolio
turnover statistics, and direct and indirect benefits to the Previous
Investment Adviser and its affiliates from their relationship with the Fund.
In their deliberations, the directors considered information received in
connection with their most recent approval of the continuance of the Previous
Investment Advisory Agreement, in addition to information provided by
BlackRock and BlackRock Advisors in connection with their evaluation of the
terms and conditions of the BlackRock Investment Advisory Agreement. The
directors did not identify any particular information that was all-important
or controlling, and each director attributed different weights to the various
factors. The directors, including a majority of the independent directors,
concluded that the terms of the BlackRock Investment Advisory Agreement are
appropriate, that the fees to be paid are reasonable in light of the services
to be provided to the Fund, and that the BlackRock Investment Advisory
Agreement should be approved and recommended to Fund shareholders.
Nature, Quality and Extent of Services Provided--The Board reviewed the
nature, quality and extent of services provided by the Previous Investment
Adviser, including the investment advisory services and the resulting
performance of the Fund, as well as the nature, quality and extent of services
expected to be provided by BlackRock Advisors. The Board focused primarily on
the Previous Investment Adviser's investment advisory services and the Fund's
investment performance, but also considered certain areas in which both the
Previous Investment Adviser and the Fund received services as part of the
Merrill Lynch complex. The Board compared the Fund's performance - both
including and excluding the effects of fees and expenses - to the performance
of a comparable group of mutual funds, and the performance of a relevant index
or combination of indexes. While the Board reviews performance data at least
quarterly, consistent with the Previous Investment Adviser's investment goals,
the Board attaches more importance to performance over relatively long periods
of time, typically three to five years.
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under the BlackRock Investment Advisory Agreement, the
directors considered, among other things, the expected impact of the
Transaction on the operations, facilities, organization and personnel of New
BlackRock and how it would affect the Fund; the ability of BlackRock Advisors
to perform its duties after the Transaction; and any anticipated changes to
the investment and other practices of the Fund.
The directors were given information with respect to the potential benefits to
the Fund and its shareholders from having access to BlackRock's state of the
art technology and risk management analytic tools, including the investment
tools provided under the BlackRock Solutions brand name.
The directors were advised that, as a result of Merrill Lynch's equity
interest in BlackRock after the Transaction, the Fund would continue to be
subject to restrictions concerning certain transactions involving Merrill
Lynch affiliates (for example, transactions with a Merrill Lynch broker-dealer
acting as principal) absent revised or new regulatory relief. The directors
were advised that a revision of existing regulatory relief with respect to
these restrictions was being sought from the Securities and Exchange
Commission and were advised of the possibility of receipt of such revised
regulatory relief.
Based on their review of the materials provided and the assurances they had
received from the management of Merrill Lynch and of BlackRock, the directors
determined that the nature and quality of services to be provided to the Fund
under the BlackRock Investment Advisory Agreement were expected to be as good
as or better than that provided under the Previous Investment Advisory
Agreement. The directors were advised that BlackRock Advisors did not plan to
change the Fund's portfolio management team upon the closing of the
Transaction. It was noted, however, that other changes in personnel were
expected to follow the Transaction and the combination of the operations of
the Previous Investment Adviser and its affiliates with those of BlackRock.
The directors noted that if portfolio managers or other personnel were to
cease to be available prior to the closing of the Transaction, the Board would
consider all available options, including seeking the investment advisory or
other services of BlackRock affiliates. Accordingly, the directors concluded
that, overall, they were satisfied at the present time with assurances from
BlackRock and BlackRock Advisors as to the expected nature, quality and extent
of the services to be provided to the Fund under the BlackRock Investment
Advisory Agreement.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Costs of Services Provided and Profitability--It was noted that, in
conjunction with the recent review of the Previous Investment Advisory
Agreement, the directors had received, among other things, a report from
Lipper comparing the Fund's fees and expenses to those of a peer group
selected by Lipper, and information as to the fees charged by the Previous
Investment Adviser or its affiliates to other registered investment company
clients for investment management services. The Board reviewed the Fund's
contractual management fee rate and actual management fee rate as a percentage
of total assets at common asset levels - the actual rate includes advisory
fees and the effects of any fee waivers - compared to the other funds in its
Lipper category. They also compared the Fund's total expenses to those of
other comparable funds. The information showed that the Fund had fees and
expenses within the range of fees and expenses of comparable funds. The Board
considered the services to be provided by and the fees to be charged by
BlackRock Advisors to other funds with similar investment mandates and noted
that the fees charged by BlackRock Advisors in those cases, including fee
waivers and expense reimbursements, were generally comparable to those being
charged to the Fund. The Board also noted that, as a general matter, according
to the information provided by BlackRock, fees charged to institutional
clients were lower than the fees charged to the Fund, but BlackRock Advisors
provided less extensive services to such clients. The Board concluded that the
Fund's management fee rate and overall expense ratio were reasonable compared
to those of other comparable funds.
In evaluating the costs of the services to be provided by BlackRock Advisors
under the BlackRock Investment Advisory Agreement, the directors considered,
among other things, whether advisory fees or other expenses would change as a
result of the Transaction. Based on their review of the materials provided and
the fact that the BlackRock Investment Advisory Agreement is substantially
similar to the Previous Investment Advisory Agreement in all material
respects, including the rate of compensation, the directors determined that
the Transaction should not increase the total fees payable, including any fee
waivers and expense reimbursements, for advisory and administrative services.
The directors noted that it was not possible to predict how the Transaction
would affect BlackRock Advisors' profitability from its relationship with the
Fund.
The directors discussed with BlackRock Advisors its general methodology to be
used in determining New BlackRock's profitability with respect to its
relationship with the Fund. The directors noted that they expect to receive
profitability information from New BlackRock on at least an annual basis and
thus be in a position to evaluate whether any adjustments in the Fund's fees
and/or fee breakpoints would be appropriate.
Fees and Economies of Scale--The Board considered the extent to which
economies of scale might be realized as the assets of the Fund increase and
whether there should be changes in the management fee rate or structure in
order to enable the Fund to participate in these economies of scale. The Board
determined that changes were not currently necessary.
In reviewing the Transaction, the directors considered, among other things,
whether advisory fees or other expenses would change as a result of the
Transaction. Based on the fact that the BlackRock Investment Advisory
Agreement is substantially similar to the Previous Investment Advisory
Agreement in all material respects, including the rate of compensation, the
directors determined that as a result of the Transaction, the Fund's total
advisory fees would be no higher than the fees under the Previous Investment
Advisory Agreement. The directors noted that in conjunction with their most
recent deliberations concerning the Previous Investment Advisory Agreement,
the directors had determined that the total fees for advisory and
administrative services for the Fund were reasonable in light of the services
provided. It was noted that in conjunction with the recent review of the
Previous Investment Advisory Agreement, the directors had received, among
other things, a report from Lipper comparing the Fund's fees, expenses and
performance to those of a peer group selected by Lipper, and information as to
the fees charged by the Previous Investment Adviser to other registered
investment company clients for investment management services. The directors
concluded that because the rates for advisory fees for the Fund would be no
higher than the fee rates in effect at the time, the proposed management fee
structure, including any fee waivers, was reasonable in relation to the
services provided and that no changes were currently necessary.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Disclosure of New Investment Advisory Agreement (concluded)
Fall-Out Benefits--In evaluating the fall-out benefits to be received by
BlackRock Advisors under the BlackRock Investment Advisory Agreement, the
directors considered whether BlackRock Advisors would experience such benefits
to the same extent that the Previous Investment Adviser was experiencing such
benefits under the Previous Investment Advisory Agreement. Based on their
review of the materials provided, including materials received in connection
with their most recent approval of the continuance of the Previous Investment
Advisory Agreement, and their discussions with management of the Previous
Investment Adviser and BlackRock, the directors determined that BlackRock
Advisors' fall-out benefits could include increased ability for BlackRock to
distribute shares of its funds and other investment products and to obtain
research services using the Fund's portfolio transaction brokerage
commissions. The directors noted that fall-out benefits were difficult to
quantify with certainty at this time, and indicated that they would continue
to evaluate them going forward.
Investment Performance--The directors considered investment performance for
the Fund. The directors compared the Fund's performance - both including and
excluding the effects of fees and expenses - to the performance of a
comparable group of mutual funds, and the performance of a relevant index or
combination of indexes. The comparative information received from Lipper
showed Fund performance at various levels within the range of performance of
comparable funds over different time periods. While the Board reviews
performance data at least quarterly, consistent with the Previous Investment
Adviser's investment goals, the Board attaches more importance over relatively
long periods of time, typically three to five years. The directors believed
the Fund's performance was satisfactory. Also, the directors took into account
the investment performance of funds advised by BlackRock Advisors. The Board
considered comparative information from Lipper which showed that the
performance of the funds advised by BlackRock Advisors was within the range of
performance of comparable funds over different time periods. The Board noted
BlackRock's considerable investment management experience and capabilities,
but was unable to predict what effect, if any, consummation of the Transaction
would have on the future performance of the Fund.
Conclusion--After the independent directors of the Fund deliberated in
executive session, the entire Board, including the independent directors,
approved the BlackRock Investment Advisory Agreement, concluding that the
management fee rate was reasonable in relation to the services provided and
that the BlackRock Investment Advisory Agreement was in the best interests of
the shareholders. In approving the BlackRock Investment Advisory Agreement,
the Board noted that it anticipated reviewing the continuance of the agreement
in advance of the expiration of the initial two-year period.
New BlackRock Sub-Advisory Agreement--Matters Considered by the Board
At an in-person meeting held on August 14 - 16, 2006, the Board of Directors,
including the independent directors, discussed and approved the sub-advisory
agreement (the "BlackRock Sub-Advisory Agreement") between BlackRock Advisors
and its affiliate, BlackRock Investment Management, LLC (the "Sub-Adviser").
The BlackRock Sub-Advisory Agreement became effective on September 29, 2006,
at the same time the BlackRock Investment Advisory Agreement became effective.
Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a
monthly fee from BlackRock Advisors equal to 74% of the advisory fee received
by BlackRock Advisors from the Fund. BlackRock Advisors pays the Sub-Adviser
out of its own resources, and there is no increase in Fund expenses as a
result of the BlackRock Sub-Advisory Agreement.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
In approving the BlackRock Sub-Advisory Agreement at the August in-person
meeting, the Board reviewed its considerations in connection with its approval
of the BlackRock Investment Advisory Agreement in May 2006. The Board relied
on the same information and considered the same factors as those discussed
above in connection with the approval of the BlackRock Investment Advisory
Agreement and came to the same conclusion. In reviewing the sub-advisory fee
rate provided in the BlackRock Sub-Advisory Agreement, the Board noted the
fact that both BlackRock Advisors and the Sub-Adviser have significant
responsibilities under their respective advisory agreements. BlackRock
Advisors remains responsible for oversight of the Fund's operations and
administration, and the Sub-Adviser provides advisory services to the Fund and
is responsible for the day-to-day management of the Fund's portfolio under the
BlackRock Sub-Advisory Agreement. The Board also took into account the fact
that there is no increase in total advisory fees paid by the Fund as a result
of the BlackRock Sub-Advisory Agreement. Under all of the circumstances, the
Board concluded that it was a reasonable allocation of fees for the Sub-
Adviser to receive 74% of the advisory fee paid by the Fund to BlackRock
Advisors.
After the independent directors deliberated in executive session, the entire
Board, including the independent directors, approved the BlackRock Sub-
Advisory Agreement, concluding that the sub-advisory fee was reasonable in
relation to the services provided and that the BlackRock Sub-Advisory
Agreement was in the best interests of shareholders.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Officers and Directors
Robert C. Doll, Jr., President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Jean Margo Reid, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg*, Director
Donald C. Burke, Vice President and Treasurer
Jordan C. Schreiber, Vice President and
Portfolio Manager
Jeffrey Hiller, Fund Chief Compliance Officer
Alice A. Pellegrino, Secretary
* Mr. Zinbarg is expected to retire from the Board of Directors
effective January 1, 2007.
Custodian
JPMorgan Chase Bank, N.A.
3 Chase Metrotech Center
Brooklyn, NY 11245
Transfer Agent
PFPC Inc.
Wilmington, DE 19809
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
BlackRock Funds
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former
fund investors and individual clients (collectively, "Clients") and to
safeguarding their nonpublic personal information. The following information
is provided to help you understand what personal information BlackRock
collects, how we protect that information and why in certain cases we share
such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal nonpublic information from and about
you from different sources, including the following: (i) information we
receive from you or, if applicable, your financial intermediary, on
applications, forms or other documents; (ii) information about your
transactions with us, our affiliates, or others; (iii) information we receive
from a consumer reporting agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to nonaffiliated third parties any
nonpublic personal information about its Clients, except as permitted by law
or as is necessary to service Client accounts. These nonaffiliated third
parties are required to protect the confidentiality and security of this
information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that
may be of interest to you. In addition, BlackRock restricts access to
nonpublic personal information about its Clients to those BlackRock employees
with a legitimate business need for the information. BlackRock maintains
physical, electronic and procedural safeguards that are designed to protect
the nonpublic personal information of its Clients, including procedures
relating to the proper storage and disposal of such information.
Availability of Additional Information
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site or shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial adviser. Please note that not all investment
advisers, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock Web site at
http://www.blackrock.com/edelivery
2) Select eDelivery under the More Information section
3) Log into your account
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Fund at
(800) 441-7762.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
BlackRock Funds (concluded)
Availability of Additional Information (concluded)
Availability of Proxy Voting Policies and Procedures
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Directors.
A description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, on our Web site at www.blackrock.com,
by calling (800) 441-7762, or on the Web site of the Securities and Exchange
Commission (the "Commission") at http://www.sec.gov.
Availability of Proxy Voting Record
Information on how proxies relating to the Fund's voting securities were
voted (if any) by BlackRock during the most recent 12-month period ended
June 30 is available, upon request and without charge, on our Web site at
www.blackrock.com, by calling (800) 441-7762 or on the Web site of the
Commission at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Form N-Q is available on the Commission's Web site at http://www.sec.gov and
may be reviewed and copied at the Commission's Public Reference Room in
Washington, D.C. Information regarding the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also
be obtained upon request, without charge, by calling (800) 441-7762.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information about your
account balances, recent transactions and share prices. You can also reach us
on the web at www.blackrock.com.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have
$50 or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
A World-Class Mutual Fund Family
BlackRock now offers an expanded lineup of open-end mutual funds. Our range
includes more than 85 funds crossing all investment styles and managed by
experts in equity, fixed income and tax-exempt investing.
Equity Portfolios
BlackRock All-Cap Global Resources Portfolio
BlackRock Aurora Portfolio
BlackRock Asset Allocation Portfolio++
BlackRock Balanced Capital Fund++
BlackRock Basic Value Fund
BlackRock Developing Capital Markets Fund
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Twenty Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund++
BlackRock Global Dynamic Equity Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio*
BlackRock Global Science & Technology
Opportunities Portfolio
BlackRock Global SmallCap Fund
BlackRock Global Technology Fund
BlackRock Global Value Fund
BlackRock Healthcare Fund
BlackRock Health Sciences Opportunities Portfolio
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio*
BlackRock International Value Fund
BlackRock Investment Trust
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Legacy Portfolio
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Portfolios
BlackRock Bond Fund
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government
Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Real Investment Fund
BlackRock Short-Term Bond Fund
BlackRock Total Return Portfolio
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Portfolios
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Money Market Portfolios
BlackRock Money Market Portfolio
BlackRock Municipal Money Market Portfolio+++
BlackRock NC Municipal MM Portfolio+++
BlackRock NJ Municipal MM Portfolio+++
BlackRock OH Municipal MM Portfolio+++
BlackRock PA Municipal MM Portfolio+++
BlackRock Summit Cash Reserves Fund*
BlackRock U.S. Treasury MM Portfolio
BlackRock VA Municipal MM Portfolio+++
* See the prospectus for information on specific limitations on investments
in the fund.
++ Mixed asset fund.
+++ Tax-exempt fund.
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. You
should consider the investment objectives, risks, charges and expenses of the
funds under consideration carefully before investing. Each fund's prospectus
contains this and other information and is available at www.blackrock.com or
by calling 800-882-0052 or from your financial advisor. The prospectus should
be read carefully before investing.
BLACKROCK HEALTHCARE FUND, INC. OCTOBER 31, 2006
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-
annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
11(b) - As of September 29, 2006, with the conclusion of the combination of
Merrill Lynch's asset management business with BlackRock, the
registrant was migrated to BlackRock's trading and compliance
monitoring systems, and various personnel changes occurred. In
conjunction with these business improvements, there were no changes
in the registrants internal control over financial reporting (as
defined in Rule 30a-3(d) under Act (17 CFR 270.30a-3(d)) that
occurred during the last fiscal half-year of the period covered by
this report that has materially affected, or is reasonably likely to
affect, the registrant's internal control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Healthcare Fund, Inc.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Healthcare Fund, Inc.
Date: January 3, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Healthcare Fund, Inc.
Date: January 3, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Healthcare Fund, Inc.
Date: January 3, 2007