<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1998
SECURITIES ACT FILE NO. 333-66637
INVESTMENT COMPANY ACT FILE NO. 811-8721
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
[X] PRE-EFFECTIVE AMENDMENT NO. 1 [ ] POST-EFFECTIVE AMENDMENT NO.
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
(609) 282-2800
(AREA CODE AND TELEPHONE NUMBER)
------------------------
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:
NUMBER, STREET, CITY, STATE, ZIP CODE)
------------------------
ARTHUR ZEIKEL
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC.
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY 08536
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
FRANK P. BRUNO, ESQ. MICHAEL J. HENNEWINKEL, ESQ.
BROWN & WOOD LLP MERRILL LYNCH ASSET MANAGEMENT
ONE WORLD TRADE CENTER 800 SCUDDERS MILL ROAD
NEW YORK, NY 10048-0557 PLAINSBORO, NJ 08536
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the Registration Statement becomes effective under the Securities Act of 1933.
------------------------
TITLE OF SECURITIES BEING REGISTERED: COMMON STOCK, PAR VALUE $.10 PER
SHARE.
No filing fee is required because of reliance on Section 24(f) under the
Investment Company Act of 1940, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE> 2
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a) UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
FORM N-14 PROXY STATEMENT AND
ITEM NO. PROSPECTUS CAPTION
- --------- -------------------
<S> <C> <C>
PART A
- ---------
Item 1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus Registration Statement Cover Page;
Proxy Statement and Prospectus Cover
Page
Item 2. Beginning and Outside Back Cover Page
of Prospectus Table of Contents
Item 3. Fee Table, Synopsis Information and
Risk Factors Summary; Risk Factors and Special
Considerations
Item 4. Information about the Transaction Summary; The Reorganization--Agreement
and Plan of Reorganization
Item 5. Information about the Registrant Proxy Statement and Prospectus Cover
Page; Summary; Comparison of the Funds;
Additional Information
Item 6. Information about the Company Being
Acquired Proxy Statement and Prospectus Cover
Page; Summary; Comparison of the Funds;
Additional Information
Item 7. Voting Information Notice of Special Meeting of
Stockholders; Introduction; Summary;
Comparison of the Funds; Information
Concerning the Special Meeting;
Additional Information
Item 8. Interest of Certain Persons and Experts Not Applicable
Item 9. Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters Not Applicable
PART B
- ---------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. Additional Information about the
Registrant General Information
Item 13. Additional Information about the
Company Being Acquired General Information
Item 14. Financial Statements Financial Statements
PART C
- ---------
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE> 3
MERRILL LYNCH TECHNOLOGY FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 12, 1999
TO THE STOCKHOLDERS OF
MERRILL LYNCH TECHNOLOGY FUND, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the
"Meeting") of Merrill Lynch Technology Fund, Inc. ("Technology Fund") will be
held at the offices of Merrill Lynch Asset Management, L.P., 800 Scudders Mill
Road, Plainsboro, New Jersey on Tuesday, January 12, 1999 at 9:00 a.m., New York
time, for the following purposes:
(1) To approve or disapprove an Agreement and Plan of Reorganization
(the "Agreement and Plan of Reorganization") providing for the acquisition
of substantially all of the assets of Technology Fund by Merrill Lynch
Global Technology Fund, Inc. ("Global Technology Fund"), and the assumption
of substantially all of the liabilities of Technology Fund by Global
Technology Fund, in exchange solely for an equal aggregate value of
newly-issued shares of Global Technology Fund. The Agreement and Plan of
Reorganization also provides for distribution of such shares of Global
Technology Fund to stockholders of Technology Fund in liquidation of
Technology Fund. A vote in favor of this proposal will constitute a vote in
favor of the liquidation and dissolution of Technology Fund and the
termination of its registration under the Investment Company Act of 1940,
as amended; and
(2) To transact such other business as properly may come before the
Meeting or any adjournment thereof.
The Board of Directors of Technology Fund has fixed the close of business
on November 18, 1998 as the record date for the determination of stockholders
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
A complete list of the stockholders of Technology Fund entitled to vote at
the Meeting will be available and open to the examination of any stockholders of
Technology Fund for any purpose germane to the Meeting during ordinary business
hours from and after December 29, 1998 at the offices of Technology Fund, 800
Scudders Mill Road, Plainsboro, New Jersey.
You are cordially invited to attend the Meeting. Stockholders who do not
expect to attend the Meeting in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the envelope provided for
that purpose. The enclosed proxy is being solicited on behalf of the Board of
Directors of Technology Fund.
By Order of the Board of Directors,
PHILIP M. MANDEL
Secretary
Plainsboro, New Jersey
Dated: December 10, 1998
<PAGE> 4
MERRILL LYNCH TECHNOLOGY FUND, INC.
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(609) 282-2800
SPECIAL MEETING OF STOCKHOLDERS OF
MERRILL LYNCH TECHNOLOGY FUND, INC.
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Merrill Lynch
Technology Fund, Inc., a Maryland corporation ("Technology Fund"), for use at
the Special Meeting of Stockholders of Technology Fund (the "Meeting") called to
approve or disapprove the proposed reorganization whereby Merrill Lynch Global
Technology Fund, Inc., a Maryland corporation ("Global Technology Fund"), will
acquire substantially all of the assets, and will assume substantially all of
the liabilities, of Technology Fund, in exchange solely for an equal aggregate
value of newly-issued shares of Global Technology Fund (the "Reorganization").
Immediately upon the receipt by Global Technology Fund of the assets of
Technology Fund and the assumption by Global Technology Fund of the liabilities
of Technology Fund, as described in the preceding sentence, Technology Fund will
distribute the shares of Global Technology Fund received in the Reorganization
to the stockholders of Technology Fund. Thereafter, Technology Fund will
terminate its registration under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and will dissolve in accordance with the laws of
the State of Maryland.
Holders of shares in Technology Fund will receive that class of shares of
Global Technology Fund having the same letter designation (i.e., Class A, Class
B, Class C or Class D) and the same distribution fees, account maintenance fees
and sales charges (including contingent deferred sales charges ("CDSCs")), if
any (the "Corresponding Shares"), as the shares of Technology Fund held by them
immediately prior to the Reorganization. The aggregate net asset value of the
Corresponding Shares of Global Technology Fund to be issued to the stockholders
of Technology Fund will equal the aggregate net asset value of the outstanding
shares of Technology Fund as set forth in the Agreement and Plan of
Reorganization. Technology Fund and Global Technology Fund sometimes are
referred to herein collectively as the "Funds" and individually as a "Fund," as
the context requires. The fund resulting from the reorganization is sometimes
referred to herein as the "Combined Fund."
This Proxy Statement and Prospectus serves as a prospectus of Global
Technology Fund under the Securities Act of 1933, as amended (the "Securities
Act"), in connection with the issuance of shares of Global Technology Fund to
Technology Fund pursuant to the terms of the Reorganization.
Both Technology Fund and Global Technology Fund are open-end management
investment companies with substantially identical investment objectives. Each
Fund seeks long-term capital appreciation through worldwide investment in equity
securities of issuers that, in the opinion of Merrill Lynch Asset Management,
L.P. ("MLAM" or the "Manager"), the investment adviser to both Funds, derive a
substantial portion of their income from technology related industries. There
can be no assurance that, after the Reorganization, Global Technology Fund will
achieve its investment objective.
The current prospectus relating to Global Technology Fund, dated May 20,
1998 (the "Global Technology Fund Prospectus"), accompanies this Proxy Statement
and Prospectus and is incorporated herein by reference. The Semi-Annual Report
to Stockholders of Global Technology Fund dated September 30, 1998 also
accompanies this Proxy Statement and Prospectus. A statement of additional
information relating to Global Technology Fund, dated May 20, 1998 (the "Global
Technology Fund Statement"), a prospectus of Technology Fund dated June 30, 1998
(the "Technology Fund Prospectus") and a statement of additional information
relating to Technology Fund, dated June 30, 1998 (the "Technology Fund
Statement"), have been filed with the Securities and Exchange Commission (the
"Commission"). Such documents may be obtained, without charge, by writing either
Technology Fund or Global Technology Fund at the address above, or by calling
1-800-456-4587, ext. 123.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Proxy Statement and Prospectus sets forth concisely the information
about Global Technology Fund that stockholders of Technology Fund should know
before considering the Reorganization and should be retained for future
reference. Technology Fund has authorized the solicitation of proxies in
connection with the Reorganization solely on the basis of this Proxy Statement
and Prospectus and the accompanying documents.
A statement of additional information relating to the Reorganization (the
"Statement of Additional Information"), including pro forma financial statements
of Technology Fund and Global Technology Fund, is on file with the Commission.
It is available from Global Technology Fund without charge, upon oral request by
calling the toll free telephone number set forth above or upon written request
by writing Global Technology Fund at its principal executive offices. The
Statement of Additional Information, dated December 10, 1998 is incorporated by
reference into this Proxy Statement and Prospectus. The Commission maintains a
web site (http://www.sec.gov) that contains the Statement of Additional
Information, the Global Technology Fund Prospectus, the Technology Fund
Prospectus, the Global Technology Fund Statement, the Technology Fund Statement,
other material incorporated by reference and other information regarding the
Funds.
The address of the principal executive offices of both Technology Fund and
Global Technology Fund is 800 Scudders Mill Road, Plainsboro, New Jersey 08536,
and the telephone number is (609) 282-2800.
------------------------
THE DATE OF THIS PROXY STATEMENT AND PROSPECTUS IS DECEMBER 10, 1998.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION 3
SUMMARY 3
The Reorganization 3
Pro Forma Fee Table for Class A and Class B Stockholders
of Technology Fund, Global Technology Fund and the
Combined Fund as of September 30, 1998 (unaudited) 5
Pro Forma Fee Table for Class C and Class D Stockholders
of Technology Fund, Global Technology Fund and the
Combined Fund as of September 30, 1998 (unaudited) 6
RISK FACTORS AND SPECIAL CONSIDERATIONS 11
COMPARISON OF THE FUNDS 14
Financial Highlights 14
Investment Objectives and Policies 17
Other Investment Policies 20
Information Regarding Options, Futures and Foreign
Exchange Transactions 21
Investment Restrictions 21
Management 21
Purchase of Shares 22
Redemption of Shares 22
Performance 22
Stockholder Rights 23
Dividends and Distributions 23
Tax Information 24
Portfolio Transactions 24
Portfolio Turnover 24
Additional Information 24
THE REORGANIZATION 25
General 25
Procedure 26
Terms of the Agreement and Plan of Reorganization 26
Potential Benefits to Stockholders as a Result of the
Reorganization 27
Tax Consequences of the Reorganization 28
Capitalization 29
INFORMATION CONCERNING THE SPECIAL MEETING 29
Date, Time and Place of Meeting 29
Solicitation, Revocation and Use of Proxies 29
Record Date and Outstanding Shares 30
Security Ownership of Certain Beneficial Owners and
Management of Technology Fund and Global Technology
Fund 30
Voting Rights and Required Vote 31
ADDITIONAL INFORMATION 31
LEGAL PROCEEDINGS 32
LEGAL OPINIONS 32
EXPERTS 32
STOCKHOLDER PROPOSALS 33
EXHIBIT I--AGREEMENT AND PLAN OF REORGANIZATION I-1
</TABLE>
2
<PAGE> 6
INTRODUCTION
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Technology Fund
for use at the Meeting to be held at the offices of MLAM, 800 Scudders Mill
Road, Plainsboro, New Jersey on January 12, 1999, at 9:00 a.m., New York time.
The mailing address for Technology Fund is P.O. Box 9011, Princeton, New Jersey
08543-9011. The approximate mailing date of this Proxy Statement and Prospectus
is December 14, 1998.
Any person giving a proxy may revoke it at any time prior to its exercise
by executing a superseding proxy, by giving written notice of the revocation to
the Secretary of Technology Fund at the address indicated above or by voting in
person at the Meeting. All properly executed proxies received prior to the
Meeting will be voted at the Meeting in accordance with the instructions marked
thereon or otherwise as provided therein. Unless instructions to the contrary
are marked, properly executed proxies will be voted "FOR" the proposal to
approve the Agreement and Plan of Reorganization between Technology Fund and
Global Technology Fund (the "Agreement and Plan of Reorganization").
Approval of the Agreement and Plan of Reorganization will require the
affirmative vote of Technology Fund stockholders representing a majority of the
total number of votes entitled to be cast thereon. Stockholders will vote as a
single class on the proposal to approve the Agreement and Plan of
Reorganization. See "Information Concerning the Special Meeting."
The Board of Directors of Technology Fund knows of no business other than
that discussed above which will be presented for consideration at the Meeting.
If any other matter is properly presented, it is the intention of the persons
named in the enclosed proxy to vote in accordance with their best judgment.
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus (including documents incorporated by
reference) and is qualified in its entirety by reference to the more complete
information contained in this Proxy Statement and Prospectus and in the
Agreement and Plan of Reorganization, attached hereto as Exhibit I.
In this Proxy Statement and Prospectus, the term "Reorganization" refers
collectively to (i) the acquisition of substantially all of the assets and the
assumption of substantially all of the liabilities of Technology Fund by Global
Technology Fund in exchange for the Corresponding Shares and the subsequent
distribution of Corresponding Shares of Global Technology Fund to the
stockholders of Technology Fund; and (ii) the subsequent deregistration and
dissolution of Technology Fund.
THE REORGANIZATION
At a meeting of the Board of Directors of Technology Fund held on October
21, 1998, the Board of Directors of Technology Fund approved a proposal that
Global Technology Fund acquire substantially all of the assets, and assume
substantially all of the liabilities, of Technology Fund in exchange solely for
shares of Global Technology Fund to be distributed to the stockholders of
Technology Fund.
Based upon their evaluation of all relevant information, the Directors of
Technology Fund have determined that the Reorganization will potentially benefit
the stockholders of Technology Fund. Specifically, after the Reorganization,
Technology Fund stockholders will remain invested in an open-end fund that has a
substantially identical investment objective to that of Technology Fund. Since
the net assets of Global Technology Fund as of September 30, 1998 were
approximately $481.1 million and will increase by approximately $340.6 million
(the net asset value of Technology Fund as of September 30, 1998) as a result of
the Reorganization, Technology Fund stockholders are likely to experience
certain benefits, including, without limitation, lower expenses per share,
economies of scale and greater flexibility in portfolio management. See "The
Reorganization--Potential Benefits to Stockholders as a Result of the
Reorganization."
The Board of Directors of Technology Fund, including all of the Directors
who are not "interested persons," as defined in the Investment Company Act, has
determined that the Reorganization is in the best
3
<PAGE> 7
interests of Technology Fund and that the interests of existing Technology Fund
stockholders will not be diluted as a result of effecting the Reorganization.
If all of the requisite approvals are obtained, it is anticipated that the
Reorganization will occur as soon as practicable after such approval, provided
that Technology Fund and Global Technology Fund have obtained prior to that time
either (a) a favorable private letter ruling from the Internal Revenue Service
(the "IRS") or (b) an opinion of counsel concerning the tax consequences of the
Reorganization as set forth in the Agreement and Plan of Reorganization. The
Agreement and Plan of Reorganization may be terminated, and the Reorganization
abandoned, whether before or after approval by the stockholders of Technology
Fund, at any time prior to the Exchange Date (as defined below), (i) by mutual
consent of the Board of Directors of Technology Fund and the Board of Directors
of Global Technology Fund; (ii) by the Board of Directors of Technology Fund if
any condition to Technology Fund's obligations has not been fulfilled or waived
by such Board; or (iii) by the Board of Directors of Global Technology Fund if
any condition to Global Technology Fund's obligations has not been fulfilled or
waived by such Board.
4
<PAGE> 8
PRO FORMA FEE TABLE FOR CLASS A AND CLASS B STOCKHOLDERS OF TECHNOLOGY FUND,
GLOBAL TECHNOLOGY FUND
AND THE COMBINED FUND AS OF SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CLASS A SHARES(a)
----------------------------------------------------
ACTUAL
------------------------------------
TECHNOLOGY GLOBAL PRO FORMA
FUND TECHNOLOGY FUND COMBINED
-------------- ------------------ ------------
<S> <C> <C> <C>
STOCKHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.25%(c) 5.25%(c) 5.25%(c)
Sales Charge Imposed on Dividend
Reinvestments None None None
Deferred Sales Charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) None(d) None(d) None(d)
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees(f) 1.00% 1.00% 1.00%
12b-1 Fees(g):
Account Maintenance Fees None None None
Distribution Fees None None None
Other Expenses:
Stockholder Servicing Costs(h) 0.31% 0.12% 0.16%
Other 0.11% 0.21% 0.11%
-------- ---------- -------
Total Other Expenses 0.42% 0.33% 0.27%
-------- ---------- -------
Total Fund Operating Expenses 1.42% 1.33% 1.27%
======== ========== =======
<CAPTION>
CLASS B SHARES(b)
----------------------------------------------------------------
ACTUAL
------------------------------------------
TECHNOLOGY GLOBAL PRO FORMA
FUND TECHNOLOGY FUND COMBINED
-------------------- -------------------- --------------------
<S> <C> <C> <C>
STOCKHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None None None
Sales Charge Imposed on Dividend
Reinvestments None None None
Deferred Sales Charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) 4.0% during the 4.0% during the 4.0% during the
first year, first year, first year,
decreasing 1.0% decreasing 1.0% decreasing 1.0%
annually thereafter annually thereafter annually thereafter
to 0.0% after the to 0.0% after the to 0.0% after the
fourth year(e) fourth year(e) fourth year(e)
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees(f) 1.00% 1.00% 1.00%
12b-1 Fees(g):
Account Maintenance Fees 0.25% 0.25% 0.25%
Distribution Fees 0.75% 0.75% 0.75%
(Class B shares convert to Class D shares automatically after
approximately
Other Expenses: eight years and cease being subject to distribution fees)
Stockholder Servicing Costs(h) 0.35% 0.14% 0.16%
Other 0.11% 0.21% 0.11%
-------- ---------- -------
Total Other Expenses 0.46% 0.35% 0.27%
-------- ---------- -------
Total Fund Operating Expenses 2.46% 2.35% 2.27%
======== ========== =======
</TABLE>
- ---------------
(a) Class A shares are sold to a limited group of investors including existing
Class A stockholders, certain retirement plans and participants in certain
fee-based programs. See "Comparison of the Funds--Purchase of Shares."
(b) Class B shares convert to Class D shares automatically approximately eight
years after initial purchase. See "Comparison of the Funds--Purchase of
Shares."
(c) Reduced for Class A purchases of $25,000 and over, and waived for purchases
by certain retirement plans and in connection with certain fee-based
programs. Purchases of $1,000,000 or more may not be subject to an initial
sales charge. See "Comparison of the Funds--Purchase of Shares."
(d) Class A shares are not subject to a CDSC, except that certain purchases of
$1,000,000 or more that are not subject to an initial sales charge may
instead be subject to a CDSC of 1.0% of amounts redeemed within the first
year of purchase. Such CDSC may be waived in connection with certain
fee-based programs.
(e) The CDSC may be modified in connection with certain fee-based programs.
(f) See "Comparison of the Funds--Management."
(g) See "Comparison of the Funds--Purchase of Shares."
(h) See "Comparison of the Funds--Additional Information--Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent."
5
<PAGE> 9
PRO FORMA FEE TABLE FOR CLASS C AND CLASS D STOCKHOLDERS OF TECHNOLOGY FUND,
GLOBAL TECHNOLOGY FUND
AND THE COMBINED FUND AS OF SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CLASS C SHARES CLASS D SHARES
------------------------------------------------ ----------------------------------------
ACTUAL ACTUAL
--------------------------------- ----------------------------
GLOBAL PRO FORMA TECHNOLOGY GLOBAL PRO FORMA
TECHNOLOGY FUND TECHNOLOGY FUND COMBINED FUND TECHNOLOGY FUND COMBINED
--------------- --------------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCKHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) None None None 5.25% (a) 5.25% (a) 5.25% (a)
Sales Charge Imposed on Dividend
Reinvestments None None None None None None
Deferred Sales Charge (as a
percentage of original
purchase price or redemption
proceeds, whichever is lower) 1.0% for one 1.0% for one 1.0% for one None (c) None (c) None (c)
year(b) year(b) year(b)
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES (AS
A PERCENTAGE OF AVERAGE NET
ASSETS):
Management Fees(d) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Fees(e):
Account Maintenance Fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Distribution Fees 0.75% 0.75% 0.75% None None None
Other Expenses:
Stockholder Servicing Costs(f) 0.38% 0.15% 0.16% 0.31% 0.12% 0.16%
Other 0.11% 0.21% 0.11% 0.11% 0.21% 0.11%
----- ----- --- ------ -------- -----
Total Other Expenses 0.49% 0.36% 0.27% 0.42% 0.33% 0.27%
----- ----- --- ------ -------- -----
Total Fund Operating Expenses 2.49% 2.36% 2.27% 1.67% 1.58% 1.52%
----- ----- --- ------ -------- -----
----- ----- --- ------ -------- -----
</TABLE>
- ---------------
(a) Reduced for Class D purchases of $25,000 and over. Like Class A purchases,
certain Class D purchases of $1,000,000 or more may not be subject to an
initial sales charge. See "Comparison of the Funds--Purchase of Shares."
(b) The CDSC may be waived in connection with certain fee-based programs.
(c) Like Class A shares, Class D shares are not subject to a CDSC, except that
purchases of $1,000,000 or more that are not subject to an initial sales
charge may instead be subject to a CDSC of 1.0% of amounts redeemed within
the first year after purchase. Such CDSC may be waived in connection with
certain fee-based programs.
(d) See "Comparison of the Funds--Management."
(e) See "Comparison of the Funds--Purchase of Shares."
(f) See "Comparison of the Funds--Additional Information--Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent."
6
<PAGE> 10
EXAMPLES:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID ON CLASS A AND CLASS B SHARES FOR THE PERIOD OF:
-----------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
------------------------------------- -------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, including the
maximum sales load of $52.50 (Class A
shares only) and assuming (1) the Total
Fund Operating Expenses set forth on page
5 for the relevant Fund, (2) a 5% annual
return throughout the periods and (3)
redemption at the end of the period
(including any applicable
CDSC for Class B shares):
Technology Fund $66 $95 $126 $214 $65 $97 $131 $261*
Global Technology Fund 65 92 122 204 64 93 126 250*
Combined Fund+ 65 91 119 198 63 91 122 242*
An investor would pay the following expenses
on the same $1,000 investment assuming no
redemption at the end of the period:
Technology Fund $66 $95 $126 $214 $25 $77 $131 $261*
Global Technology Fund 65 92 122 204 24 73 126 250*
Combined Fund+ 65 91 119 198 23 71 122 242*
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID ON CLASS C AND CLASS D SHARES FOR THE PERIOD OF:
-----------------------------------------------------------------------------
CLASS C SHARES CLASS D SHARES
------------------------------------- -------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, including the
maximum sales load of $52.50 (Class D
shares only) and assuming (1) the Total
Fund Operating Expenses set forth on page
6 for the relevant Fund, (2) a 5% annual
return throughout the periods and (3)
redemption at the end of the period
(including any applicable
CDSC for Class C shares):
Technology Fund $35 $78 $133 $283 $69 $102 $138 $240
Global Technology Fund 34 74 126 270 68 100 134 230
Combined Fund+ 33 71 122 261 67 98 131 224
An investor would pay the following expenses
on the same $1,000 investment assuming no
redemption at the end of the period:
Technology Fund $25 $78 $133 $283 $69 $102 $138 $240
Global Technology Fund 24 74 126 270 68 100 134 230
Combined Fund+ 23 71 122 261 67 98 131 224
</TABLE>
- ---------------
* Assumes conversion of Class B shares to Class D shares approximately eight
years after initial purchase.
+ Assuming the Reorganization had taken place on September 30, 1998.
7
<PAGE> 11
The foregoing Fee Tables are intended to assist investors in understanding
the costs and expenses that a Technology Fund or Global Technology Fund
stockholder bears directly or indirectly as compared to the costs and expenses
that would be borne by such investors taking into account the Reorganization.
The Examples set forth above assume reinvestment of all dividends and
distributions and utilize a 5% annual rate of return as mandated by Commission
regulations. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RATES OF RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLES.
See "Summary," "The Reorganization--Potential Benefits to Stockholders as a
Result of the Reorganization" and "Comparison of the Funds--Management,"
"--Purchase of Shares" and "--Redemption of Shares."
BUSINESS OF TECHNOLOGY FUND Technology Fund was incorporated under the laws of
the State of Maryland on August 27, 1991 and
commenced operations on April 27, 1992. Technology
Fund is a non-diversified, open-end management
investment company.
As of September 30, 1998, Technology Fund had net
assets of $340,636,926.
BUSINESS OF GLOBAL Global Technology Fund was incorporated under the
TECHNOLOGY FUND laws of the State of Maryland on March 24, 1998 and
commenced operations on June 26, 1998. Global
Technology Fund is a diversified, open-end
management investment company.
As of September 30, 1998, Global Technology Fund
had net assets of $481,060,840.
COMPARISON OF THE FUNDS Investment Objectives. The investment objectives
of Global Technology Fund and Technology Fund are
substantially identical, although Global Technology
Fund is a diversified investment company and
Technology Fund is nondiversified. Each Fund seeks
long-term capital appreciation through worldwide
investment in equity securities of issuers that, in
the opinion of the Manager, derive a substantial
portion of their income from technology related
industries.
Investment Policies. Global Technology Fund
invests, under normal circumstances, at least 65%
of its total assets in equity securities of issuers
from at least three different countries. To a
lesser extent, Global Technology Fund may invest in
securities convertible into common stock, preferred
stock, rights to subscribe for common stock and
other investments the return on which is determined
by the performance of a particular common stock or
a basket or index of common stocks.
Technology Fund's investment policy permits the
management of Technology Fund to vary its policies
as to geographic diversification and types of
securities; it is expected, however, that its
assets will be invested in several countries,
primarily the United States, Japan and Western
European nations. Technology Fund's current
emphasis is placed on equity securities, but
substantial portions of its assets may be invested
in debt, convertible securities or non-convertible
preferred stocks.
Both Global Technology Fund and Technology Fund may
invest heavily in securities denominated in
currencies other than the United States dollar.
Each Fund may engage in various portfolio
strategies to seek to increase its return through
the use of options on portfolio securities and to
hedge its portfolio against movements in the equity
markets, interest rates and exchange rates between
currencies.
8
<PAGE> 12
Global Technology Fund and Technology Fund are each
subject to a fundamental investment restriction,
which provides that the Fund may borrow from banks
in amounts up to 33 1/3% of its total assets taken
at market value and may borrow an additional 5% of
its total assets for temporary purposes.
Advisory Fees. The investment adviser for both
Technology Fund and Global Technology Fund is MLAM.
MLAM is responsible for the management of each
Fund's investment portfolio and for providing
administrative services to each Fund.
Paul G. Meeks serves as portfolio manager for both
Funds. Mr. Meeks has served as Portfolio Manager of
Global Technology Fund since its inception (June
26, 1998) and was appointed Portfolio Manager of
Technology Fund in August 1998.
Pursuant to a management agreement between Global
Technology Fund and MLAM, Global Technology Fund
pays MLAM a monthly fee at the annual rate of 1.00%
of the average daily net assets of the Fund not
exceeding $1.0 billion and 0.95% of the average
daily net assets of the Fund in excess of $1.0
billion; pursuant to a management agreement between
Technology Fund and MLAM, Technology Fund pays MLAM
a monthly fee at the annual rate of 1.00% of the
average daily net assets of the Fund. After the
Reorganization, the advisory fee paid by the
Combined Fund would be at Global Technology Fund's
rate. See "Summary--Pro Forma Fee Tables" and
"Comparison of the Funds--Management."
MLAM has retained Merrill Lynch Asset Management
U.K. Limited ("MLAM U.K.") as sub-adviser to each
of the Funds. Pursuant to a separate sub-advisory
agreement between MLAM and MLAM U.K. with respect
to each Fund, MLAM pays MLAM U.K. a fee for
providing investment advisory services to MLAM with
respect to each Fund, in an amount to be determined
from time to time by MLAM and MLAM U.K. but in no
event in excess of the amount MLAM actually
receives for providing services to each Fund
pursuant to each management agreement.
Class Structure. Each Fund offers four classes of
shares under the Merrill Lynch Select Pricing(SM)
System. The Class A, Class B, Class C and Class D
shares issued by Global Technology Fund are
identical in all respects to the Class A, Class B,
Class C and Class D shares issued by Technology
Fund, except that they represent ownership
interests in a different investment portfolio. See
"Comparison of the Funds--Purchase of Shares."
Overall Expense Ratio. The overall operating
expense ratio for Class A shares as of September
30, 1998 was 1.42% for Technology Fund and 1.33%
for Global Technology Fund. If the Reorganization
had taken place on that date, the overall operating
expense ratio for Class A shares of the Combined
Fund on a pro forma basis would have been 1.27%.
The foregoing expense ratios are for Class A
shares. Such ratios would differ for Class B, Class
C and Class D shares as a result of class specific
distribution and account maintenance expenditures.
See "Summary--Pro Forma Fee Tables."
Purchase of Shares. Shares of Global Technology
Fund are offered continuously for sale to the
public in substantially the same manner as
9
<PAGE> 13
shares of Technology Fund. See "Comparison of the
Funds--Purchase of Shares."
Redemption of Shares. The redemption procedures
for shares of Global Technology Fund are
substantially the same as the redemption procedures
for shares of Technology Fund. For purposes of
computing any CDSC that may be payable upon
disposition of Corresponding Shares of Global
Technology Fund acquired by Technology Fund
stockholders in the Reorganization, the holding
period of Technology Fund shares outstanding on the
date the Reorganization takes place will be
"tacked" onto the holding period of the
Corresponding Shares of Global Technology Fund
acquired in the Reorganization. See "Comparison of
the Funds--Redemption of Shares."
Dividends and Distributions. Technology Fund's
policies with respect to dividends and
distributions are substantially the same as those
of Global Technology Fund. See "Comparison of the
Funds--Dividends and Distributions."
Net Asset Value. Both Technology Fund and Global
Technology Fund determine net asset value of each
class of shares once daily 15 minutes after the
close of business on the New York Stock Exchange
(the "NYSE") (generally, 4:00 p.m. New York time),
on each day during which the NYSE is open for
trading. Both Funds compute net asset value per
share in the same manner. See "Comparison of the
Funds--Additional Information--Net Asset Value."
Voting Rights. The corresponding voting rights of
the holders of shares of common stock of each Fund
are substantially the same. See "The
Reorganization--Comparison of the Funds--Capital
Stock."
Other Significant Considerations. Stockholder
services, including exchange privileges, available
to Technology Fund and Global Technology Fund
stockholders are substantially the same. See
"Comparison of the Funds--Additional
Information--Stockholder Services." An automatic
dividend reinvestment plan is available to
stockholders of each Fund. The plans are identical.
See "Comparison of the Funds--Automatic Dividend
Reinvestment Plan." Other stockholder services,
including the provision of annual and semi-annual
reports, are the same for both Funds. See
"Comparison of the Funds--Stockholder Services."
TAX CONSIDERATIONS Technology Fund and Global Technology Fund jointly
have requested a private letter ruling from the IRS
with respect to the Reorganization to the effect
that, among other things, neither Technology Fund
nor Global Technology Fund will recognize gain or
loss on the transaction, and Technology Fund
stockholders will not recognize gain or loss on the
exchange of their shares of Technology Fund stock
for Corresponding Shares of Global Technology Fund.
The consummation of the Reorganization is subject
to the receipt of such ruling or receipt of an
opinion of counsel to the same effect. The
Reorganization will not affect the status of Global
Technology Fund as a regulated investment company.
Technology Fund has significant net realized
capital losses. After the Reorganization, Global
Technology Fund stockholders will benefit from the
ability of Global Technology Fund to offset these
capital losses against its realized capital gains
subject to certain limitations. Conversely, the
benefit of these losses to Technology Fund
stockholders will be diluted.
10
<PAGE> 14
RISK FACTORS AND SPECIAL CONSIDERATIONS
Many of the investment risks associated with an investment in Global
Technology Fund are substantially the same as those of Technology Fund. Such
risks include investing in derivative instruments, illiquid securities and
unrated debt securities as well as investing on an international basis and in
the technology sector. As a result of the Reorganization, the risk factors
applicable to Technology Fund will be modified by (i) the elimination of the
risks associated with non-diversification currently applicable to Technology
Fund and (ii) the short operating history of Global Technology Fund, which
commenced operations on June 26, 1998.
Investments in Technology. Technology oriented investment companies such
as the Funds, as with other sector funds, may be subject to rapidly changing
asset inflows and outflows, which could affect portfolio management and
investment decisions. Moreover, the Funds' investments in securities of
technology related issuers present certain risks that may not exist to the same
degree in other types of investments. Technology securities, in general, tend to
be relatively volatile as compared to other types of investments. Any such
volatility will be reflected in changes in the Funds' net asset value. While
volatility may create investment opportunities, it does entail risk.
While the Funds will invest in the securities of entities in a variety of
different industries considered by MLAM to be technology related, many of those
entities share common characteristics which may affect an investment in the
Funds. For example, industries throughout the technology field include many
smaller and less seasoned issuers. Although the Funds will seek to invest
primarily in well established companies that are typically large and mid-cap
issuers, the Funds also may invest in smaller issuers. These types of issuers
may present greater opportunities for capital appreciation, but may also involve
greater risks. Such small-cap issuers may have limited product lines, markets,
or financial resources, or may depend on a limited management group. In
addition, the securities of smaller issuers trade less frequently and in smaller
volume, and may be subject to more abrupt or erratic price movements or may be
more sensitive to market fluctuations than the securities of larger, more
established companies. The issuers in which the Funds invest are also strongly
affected by worldwide scientific or technological developments, and their
products may rapidly fall into obsolescence. Certain of such issuers also offer
products or services that are subject to governmental regulations and may,
therefore, be affected adversely by governmental policies.
Investing on an International Basis. Because a substantial portion of each
Fund's assets may be invested in securities of non-U.S. issuers, investors
should be aware of certain risk factors and special considerations relating to
international investing, which may involve risks that are not typically
associated with investments in securities of U.S. issuers, including
fluctuations in foreign exchange rates, future political and economic
developments, different legal systems and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. Securities prices
in different countries are subject to different economic, financial, political
and social factors. Since both Funds invest heavily in securities denominated or
quoted in currencies other than the U.S. dollar, changes in foreign currency
exchange rates may affect the value of securities in each Fund and the
unrealized appreciation or depreciation of investments so far as U.S. investors
are concerned. Currencies of certain countries may be volatile and, therefore,
may affect the value of securities denominated in such currencies. In addition,
with respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, difficulty in obtaining or
enforcing a court judgment, economic, political or social instability or
diplomatic developments that could affect investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross domestic product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. Certain foreign investments also may be subject to foreign
withholding taxes. These risks often are heightened for investments in smaller,
emerging capital markets.
As a result of these potential risks, MLAM may determine that,
notwithstanding otherwise favorable investment criteria, it may not be
practicable or appropriate to invest in a particular country. Both Funds may
invest in countries in which foreign investors, including MLAM, have had no or
limited prior experience.
Many of the foreign securities held by the Funds will not be registered
with the Commission, nor will the issuers thereof be subject to the reporting
requirements of such agency. Accordingly, there may be less
11
<PAGE> 15
publicly available information about a foreign issuer than about a U.S. issuer
and such foreign issuers may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those of U.S.
issuers. As a result, traditional investment measurements, such as
price/earnings ratios, as used in the United States, may not be applicable to
certain smaller, emerging foreign capital markets. Foreign issuers, and issuers
in smaller, emerging capital markets in particular, may not be subject to
uniform accounting, auditing and financial reporting standards or to practices
and requirements comparable to those applicable to domestic issuers.
Foreign financial markets, while often growing in trading volume, have, for
the most part, substantially less volume than U.S. markets, and securities of
many foreign companies are less liquid and their prices may be more volatile
than securities of comparable domestic companies. Foreign markets also have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have failed to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Further, satisfactory custodial services for investment securities may not be
available in some countries that have smaller, emerging capital markets, which
may result in the Funds incurring additional costs and delays in transporting
and custodying such securities outside such countries. Delays in settlement
could result in periods when assets of the Funds are uninvested and no return is
earned thereon. The inability of the Funds to make intended security purchases
due to settlement problems or the risk of intermediary counterparty failures
could cause the Funds to miss attractive investment opportunities. The inability
to dispose of a portfolio security due to settlement problems could result
either in losses to the Funds due to subsequent declines in the value of such
portfolio security or, if a contract to sell the security has been entered,
could result in possible liability to the purchaser.
There generally is less governmental supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the United
States. For example, there may be no comparable provisions under certain foreign
laws to insider trading and similar investor protection securities laws that
apply with respect to securities transactions consummated in the United States.
Further, brokerage commissions and other transaction costs on foreign securities
exchanges generally are higher than in the United States.
Some countries prohibit or impose substantial restrictions on investments
in their capital markets, particularly their equity markets, by foreign entities
such as Global Technology Fund. As illustrations, certain countries require
governmental approval prior to investments by foreign persons, or limit the
amount of investment by foreign persons in a company to only a specific class of
securities that may have less advantageous terms than securities of the company
available for purchase by nationals. Certain countries may restrict investment
opportunities in issuers or industries deemed important to national interests.
Borrowing. Each Fund may borrow up to 33 1/3% of its total assets
(including the amount borrowed), taken at market value, but only from banks as a
temporary measure for extraordinary or emergency purposes, including to meet
redemptions (so as not to force a Fund to liquidate securities at a
disadvantageous time) or to settle securities transactions. Neither Fund will
purchase securities at any time when borrowings exceed 5% of its total assets,
except (a) to honor prior commitments or (b) to exercise subscription rights
when outstanding borrowings have been obtained exclusively for settlements of
other securities transactions. The purchase of securities while borrowings are
outstanding will have the effect of leveraging the Funds. Such leveraging
increases the Funds' exposure to capital risk, and borrowed funds are subject to
interest costs that will reduce net income.
Derivative Investments. Each Fund may engage in transactions in certain
instruments that may be characterized as derivatives. These instruments include
various types of options, futures and options thereon. The Funds may engage in
these transactions for hedging purposes to enhance total return or to gain
exposure to equity markets.
Transactions involving options, futures, options on futures or currencies
may involve the loss of an opportunity to profit from a price movement in the
underlying asset beyond certain levels or a price increase on other portfolio
assets (in the case of transactions for hedging purposes) or expose the Funds to
potential losses that exceed the amount originally invested by each respective
Fund in such instruments.
12
<PAGE> 16
Illiquid Securities. Global Technology Fund may invest up to 15% of its
net assets and Technology Fund may invest up to 15% of its total assets in
securities that lack an established secondary trading market or otherwise are
considered illiquid (including, in the case of Technology Fund, venture capital
investments). Liquidity of a security relates to the ability to dispose easily
of the security and the price to be obtained upon disposition of the security,
which may be less than would be obtained for a comparable more liquid security.
Investment of a Fund's assets in illiquid securities may restrict the ability of
a Fund to dispose of its investments in a timely fashion and for a fair price as
well as its ability to take advantage of market opportunities. The risks
associated with illiquidity will be particularly acute in situations in which a
Fund's operations require cash, such as when a Fund redeems shares or pays
dividends, and could result in a Fund borrowing to meet short-term cash
requirements or incurring capital losses on the sale of illiquid investments.
Further, issuers whose securities are not publicly traded are not subject to the
disclosure and other investor protection requirements that would be applicable
if their securities were publicly traded. In making investments in such
securities, a Fund may obtain access to material nonpublic information which may
restrict the Fund's ability to conduct portfolio transactions in such
securities. In addition, each of the Funds may invest in privately placed
securities that may or may not be freely transferable under the laws of the
applicable jurisdiction or due to contractual restrictions on resale.
Withholding and Other Taxes. Income and capital gains on securities held
by the Funds may be subject to withholding and other taxes imposed by certain
jurisdictions, which would reduce the return to the respective Fund on those
securities. The Funds intend, unless ineligible, to elect to "pass-through" to
their respective stockholders the amount of foreign taxes paid by that Fund. If
certain holding period requirements are met, the taxes passed through to
stockholders will be included in each stockholder's income and could potentially
be offset by either a deduction or a credit. Certain stockholders, including
non-U.S. stockholders, will not be entitled to the benefit of a deduction or
credit with respect to foreign taxes paid at the Fund level. Non-U.S.
stockholders may nevertheless be subject to withholding tax on the foreign taxes
included in their income. Other taxes, such as transfer taxes, may be imposed on
the Funds, but would not give rise to a credit or deduction for stockholders.
13
<PAGE> 17
COMPARISON OF THE FUNDS
FINANCIAL HIGHLIGHTS
Global Technology Fund. The financial information in the table below is
unaudited and has been provided by MLAM. Financial information is not presented
prior to June 26, 1998 since no shares were publicly issued prior to that date.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 26, 1998+ TO SEPTEMBER 30, 1998
--------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
------- -------- ------- -------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- -------- ------- -------
Investment loss--net (.01) (.03) (.03) (.01)
Realized and unrealized loss on investments--net (1.11) (1.11) (1.11) (1.11)
------- -------- ------- -------
Total from investment operations (1.12) (1.14) (1.14) (1.12)
------- -------- ------- -------
Net asset value, end of period $ 8.88 $ 8.86 $ 8.86 $ 8.88
======= ======== ======= =======
TOTAL INVESTMENT RETURN:**
Based on net asset value per share (11.20)%# (11.40)%# (11.40)%# (11.20)%#
======= ======== ======= =======
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.33%* 2.35%* 2.36%* 1.58%*
======= ======== ======= =======
Investment loss--net (.23)%* (1.25)%* (1.25)%* (.50)%*
======= ======== ======= =======
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $18,985 $322,609 $76,745 $62,722
======= ======== ======= =======
Portfolio turnover 9.98% 9.98% 9.98% 9.98%
======= ======== ======= =======
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ Commencement of operations.
* Annualized.
** Total investment returns exclude the effects of sales loads.
# Aggregate total investment return.
</TABLE>
Technology Fund. The financial information in the table below, except for
the six months ended September 30, 1998, which is unaudited, has been audited in
conjunction with the annual audits of the financial statements of Technology
Fund by Deloitte & Touche LLP, independent auditors.
14
<PAGE> 18
The following per share data and ratios have been derived from information
provided in the financial statements:
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEAR ENDED MARCH 31, APRIL 27, 1992++
SEPTEMBER 30, ---------------------------------------------------- TO MARCH 31,
1998 1998 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period $ 4.27 $ 5.07 $ 4.82 $ 4.89 $ 5.17 $ 5.08 $ 3.83
-------- -------- -------- -------- -------- -------- --------
Investment income
(loss)--net (.02) (.04) (.03) (.03) .05 (.01) --
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net (.73) .46 .72 .28 .11 1.51 1.59
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations (.75) .42 .69 .25 .16 1.50 1.59
-------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Investment income--net -- -- -- -- (.02) -- --
In excess of investment
income--net -- -- -- -- (.01) -- --
Realized gain on
investments--net -- (1.06) (.44) (.17) (.05) (1.41) (.34)
In excess of realized gain
on investments--net -- (.16) -- (.15) (.36) -- --
-------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions -- (1.22) (.44) (.32) (.44) (1.41) (.34)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 3.52 $ 4.27 $ 5.07 $ 4.82 $ 4.89 $ 5.17 $ 5.08
======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share (17.56)%# 3.96% 14.60% 5.15% 2.86% 35.68% 42.09%#
======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.42%* 1.27% 1.30% 1.31% 1.33% 1.35% 1.59%*
======== ======== ======== ======== ======== ======== ========
Investment income
(loss)--net (.92)%* (.82)% (.63)% (.62)% .87% (.11)% .04%*
======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $148,646 $211,443 $222,118 $246,909 $254,188 $174,809 $100,830
======== ======== ======== ======== ======== ======== ========
Portfolio turnover 102.21% 206.40% 176.51% 108.36% 175.57% 350.64% 482.79%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
CLASS B+
------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEAR ENDED MARCH 31, APRIL 27, 1992++
SEPTEMBER 30, ---------------------------------------------------- TO MARCH 31,
1998 1998 1997 1996 1995 1994 1993
------------------ -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period $ 4.06 $ 4.89 $ 4.66 $ 4.78 $ 5.08 $ 5.03 $ 3.83
-------- -------- -------- -------- -------- -------- -------
Investment income
(loss)--net (.04) (.09) (.08) (.09) (.01) (.05) (.04)
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net (.69) .46 .69 .29 .11 1.48 1.58
-------- -------- -------- -------- -------- -------- -------
Total from investment
operations (.73) .37 .61 .20 .10 1.43 1.54
-------- -------- -------- -------- -------- -------- -------
Less dividends and
distributions:
Investment income--net -- -- -- -- --+++ -- --
In excess of investment
income--net -- -- -- -- --+++ -- --
Realized gain on
investments--net -- (1.05) (.38) (.17) (.05) (1.38) (.34)
In excess of realized gain
on investments--net -- (.15) -- (.15) (.35) -- --
-------- -------- -------- -------- -------- -------- -------
Total dividends and
distributions -- (1.20) (.38) (.32) (.40) (1.38) (.34)
-------- -------- -------- -------- -------- -------- -------
Net asset value, end of
period $ 3.33 $ 4.06 $ 4.89 $ 4.66 $ 4.78 $ 5.08 $ 5.03
======== ======== ======== ======== ======== ======== =======
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share (17.98)%# 3.09% 13.20% 4.21% 1.78% 34.22% 40.77%#
======== ======== ======== ======== ======== ======== =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses 2.46%* 2.31% 2.35% 2.34% 2.38% 2.36% 2.53%*
======== ======== ======== ======== ======== ======== =======
Investment income
(loss)--net (1.96)%* (1.85)% (1.66)% (1.65)% (.10)% (1.08)% .93%*
======== ======== ======== ======== ======== ======== =======
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $161,608 $285,193 $375,630 $553,819 $614,935 $224,330 $57,592
======== ======== ======== ======== ======== ======== =======
Portfolio turnover 102.21% 206.40% 176.51% 108.36% 175.57% 350.64% 482.79%
======== ======== ======== ======== ======== ======== =======
</TABLE>
- ---------------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Based on average shares outstanding.
++ Commencement of operations.
+++ Amount is less than $.01 per share.
# Aggregate total investment return.
15
<PAGE> 19
TECHNOLOGY FUND--FINANCIAL HIGHLIGHTS (CONCLUDED)
<TABLE>
<CAPTION>
CLASS C++ CLASS D++
--------------------------------------------------------------------- -------------------
FOR THE SIX FOR THE YEAR ENDED FOR THE PERIOD FOR THE SIX
MONTHS ENDED MARCH 31, OCTOBER 21, 1994+ MONTHS ENDED
SEPTEMBER 30, --------------------------- TO MARCH 31 SEPTEMBER 30,
1998 1998 1997 1996 1995 1998
------------------- ------- ------- ------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $ 4.03 $ 4.87 $ 4.64 $ 4.76 $ 5.75 $ 4.25
------- ------- ------- ------- ------- -------
Investment loss--net (.04) (.09) (.08) (.09) -- (.02)
Realized and unrealized gain
(loss) on investments
and foreign currency
transactions--net (.68) .45 .68 .29 (.62) (.73)
------- ------- ------- ------- ------- -------
Total from investment operations (.72) .36 .60 .20 (.62) (.75)
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net -- -- -- -- (.02) --
In excess of investment
income--net -- -- -- -- (.01) --
Realized gain on
investments--net -- (1.05) (.37) (.17) (.04) --
In excess of realized gain on
investments--net -- (.15) -- (.15) (.30) --
------- ------- ------- ------- ------- -------
Total dividends and distributions -- (1.20) (.37) (.32) (.37) --
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 3.31 $ 4.03 $ 4.87 $ 4.64 $ 4.76 $ 3.50
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN:**
Based on net asset value per share (17.87)%# 2.87% 13.19% 4.22% (11.11)%# (17.65)%#
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Expenses 2.49%* 2.33% 2.37% 2.36% 2.59%* 1.67%*
======= ======= ======= ======= ======= =======
Investment loss--net (1.99)%* (1.87)% (1.68)% (1.69)% (.02)%* (1.18)%*
======= ======= ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $ 8,525 $15,424 $19,015 $31,090 $23,259 $21,858
======= ======= ======= ======= ======= =======
Portfolio turnover 102.21% 206.40% 176.51% 108.36% 175.57% 102.21%
======= ======= ======= ======= ======= =======
<CAPTION>
CLASS D++
-----------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD
MARCH 31, OCTOBER 21, 1994+
--------------------------- TO MARCH 31
1998 1997 1996 1995
------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $ 5.05 $ 4.81 $ 4.89 $ 5.88
------- ------- ------- -------
Investment loss--net (.05) (.04) (.05) (.02)
Realized and unrealized gain
(loss) on investments
and foreign currency
transactions--net .46 .71 .29 (.60)
------- ------- ------- -------
Total from investment operations .41 .67 .24 (.62)
------- ------- ------- -------
Less dividends and distributions:
Investment income--net -- -- -- (.02)
In excess of investment
income--net -- -- -- (.01)
Realized gain on
investments--net (1.05) (.43) (.17) (.04)
In excess of realized gain on
investments--net (.16) -- (.15) (.30)
------- ------- ------- -------
Total dividends and distributions (1.21) (.43) (.32) (.37)
------- ------- ------- -------
Net asset value, end of period $ 4.25 $ 5.05 $ 4.81 $ 4.89
======= ======= ======= =======
TOTAL INVESTMENT RETURN:**
Based on net asset value per share 3.90% 14.09% 4.94% (10.76)%#
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.52% 1.55% 1.56% 1.80%*
======= ======= ======= =======
Investment loss--net (1.07)% (.88)% (.89)% (.81)%*
======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $34,712 $35,372 $43,858 $32,646
======= ======= ======= =======
Portfolio turnover 206.40% 176.51% 108.36% 175.57%
======= ======= ======= =======
</TABLE>
- ---------------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on the average shares outstanding.
# Aggregate total investment return.
16
<PAGE> 20
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of Global Technology Fund and Technology Fund are
substantially identical, although Global Technology Fund is a diversified
investment company and Technology Fund is non-diversified. Each Fund seeks
long-term capital appreciation through worldwide investment in equity securities
of issuers that, in the opinion of MLAM, derive a substantial portion of their
income from technology related industries. Global Technology Fund will pursue
this objective by investing in a global portfolio of securities of issuers that
are, and are expected to remain, leaders in their product or service niches as
measured by market share and superiority in technology. In addition, part of
Global Technology Fund's portfolio will be invested in issuers which management
believes are likely to develop leadership positions. Technology Fund pursues
this objective by investing in a global portfolio of securities of companies in
various stages of development. Current income from dividends and interest will
not be an important consideration for either Fund in selecting portfolio
securities. The investment objective of each Fund described in the second
sentence of this paragraph is a fundamental policy of each Fund and may not be
changed without the approval of the holders of a majority of each Fund's
outstanding voting securities.
There can be no assurance that, after the Reorganization, Global Technology
Fund will achieve its investment objective.
The investment objective of the Funds is based upon the belief that
continuing advances in technology are providing issuers throughout the world
with opportunities to develop innovative products and services and that
investment in such issuers offers significant long-term growth possibilities.
Global Technology Fund invests in issuers offering products and services in
telecommunications equipment, computers, semiconductors, networking, internet
and on-line service companies, office automation, server hardware producers and
software companies (e.g., design, consumer and industrial). Technology Fund
invests in similar industries in addition to other companies substantially
involved in the more general field of technology. Technology Fund also invests
in energy conservation and development, new materials, specialty chemicals,
aerospace and military technology. Neither Fund invests more than 25% of its
total assets in any one industry.
Both Funds invest in a portfolio of securities of issuers located
throughout the world. There are no prescribed limits on geographic asset
distribution, based upon the public market values in the world equity markets
and anticipated technological innovations. A majority of each Fund's assets will
be invested in the securities of issuers domiciled in the United States, Japan
and Western Europe. Western European countries include, among others, the United
Kingdom, Germany, The Netherlands, Switzerland, Sweden, France, Italy, Belgium,
Norway, Denmark, Finland, Portugal, Austria and Spain. Each Fund may restrict
the securities markets in which its assets will be invested and may increase the
proportion of assets invested in U.S. securities markets. As a result, when MLAM
believes it is in the best interests of the shareholders of either Fund, that
Fund may have few investments outside the United States.
Securities. Since Global Technology Fund will invest primarily in issuers
that are, and are expected to remain, leaders in their product or service
niches, it is expected that investment emphasis will be given to issuers having
large stock market capitalizations ($5 billion or more). It is contemplated,
however, that a portion of Global Technology Fund's assets will be invested in
issuers Global Technology Fund has identified as emerging leaders in their
industries that would be considered mid-cap issuers (capitalization between $1
and $5 billion) or small-cap issuers (capitalization below $1 billion).
Investments in issuers with lower market capitalization may involve special
risks. See "Risk Factors and Special Considerations--Investments in Technology."
There is no assurance that MLAM will be able to generate positive returns
for Global Technology Fund, especially in light of the inherently volatile
nature of the stock sector in which its assets are invested. While volatility
may create investment opportunities, it does entail risk and may result in a
high rate of portfolio turnover.
Each Fund's investment emphasis is on equity securities, primarily common
stocks and, to a lesser extent, securities convertible into common stocks,
rights to subscribe for common stock, and in the case of Global Technology Fund,
preferred stocks and other investments the return on which is determined by the
17
<PAGE> 21
performance of a common stock or a basket or index of common stocks. Under
normal conditions at least 65% of Global Technology Fund's assets will be
invested in equity securities of technology related issuers from at least three
different countries, including the United States. Technology Fund also invests
at least 65% of its total assets in technology companies under normal
conditions, but is not required to be diversified among different countries.
Because of the inherently volatile nature of stocks in the technology sector,
MLAM may be more likely to sell particular stocks and hold a large cash position
in Technology Fund than it would in a mutual fund that invests in stocks of
companies in a variety of other industries.
Temporary Investments. Global Technology Fund reserves the right, as a
temporary defensive measure, to hold in excess of 35% of its total assets in
cash or cash equivalents in U.S. dollars or foreign currencies and investment
grade, short-term securities including money market securities denominated in
U.S. dollars or foreign currencies ("Temporary Investments"), the issuers of
which may not be involved in technology. Under certain adverse investment
conditions, Global Technology Fund may restrict the markets in which its assets
will be invested and may increase the proportion of assets invested in Temporary
Investments. Investments made for defensive purposes will be maintained only
during periods in which MLAM determines that economic or financial conditions
are adverse for holding or being fully invested in equity securities. A portion
of the Global Technology Fund normally would be held in Temporary Investments in
anticipation of investment in equity securities or to provide for possible
redemptions. Technology Fund also reserves the right, as a temporary defensive
measure and to provide for redemptions, to hold cash or cash equivalents (in
U.S. dollars or foreign currencies) and other types of securities, the issuers
of which may not be involved in technology, including non-convertible preferred
stocks and investment grade debt securities and government and money market
securities, in such proportions as, in the opinion of MLAM, prevailing market or
economic conditions warrant. In the case of Technology Fund, no limit is stated
as to the percentage of assets which may be invested in such Temporary
Investments.
Depositary Receipts. Both Global Technology Fund and Technology Fund may
invest in the securities of foreign issuers in the form of Depositary Receipts
or other securities convertible into securities of foreign issuers. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. American Depositary
Receipts ("ADRs") are receipts typically issued by an American bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. European Depositary Receipts ("EDRs") are receipts issued in Europe
that evidence a similar ownership arrangement. Global Depositary Receipts
("GDRs") are receipts issued throughout the world that evidence a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets, and EDRs, in bearer form, are designed for use in
European securities markets. GDRs are tradable both in the U.S. and in Europe
and are designed for use throughout the world. Global Technology Fund may invest
in unsponsored Depositary Receipts. Technology Fund may invest in unsponsored
ADRs only. The issuers of unsponsored Depositary Receipts are not obligated to
disclose material information in the United States, and therefore, there may be
less information available regarding such issuers and there may not be a
correlation between such information and the market value of the Depositary
Receipts.
Warrants. Global Technology Fund may invest in warrants. Warrants do not
carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holders to purchase, and they do not
represent any rights in the assets of the issuer. In addition, warrants involve
the risk that the price of the security underlying the warrant may not exceed
the exercise price of the warrant and the warrant may expire without any value.
Convertible Securities. Each of the Funds may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. A convertible security entitles
the holder to receive interest generally paid or accrued on debt or the dividend
paid on preferred stock until the convertible security matures or is redeemed,
converted or exchanged. Convertible securities have several unique investment
characteristics such as (i) higher yields than common stocks, but lower yields
than comparable nonconvertible securities, (ii) a lesser degree of fluctuation
in value than the underlying stock since they have fixed-income characteristics
and (iii) the potential for capital appreciation if the market price of the
underlying common stock increases. A
18
<PAGE> 22
convertible security might be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by one of the Funds is called for redemption, the Fund
may be required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
Illiquid Securities. Global Technology Fund may invest up to 15% of its
net assets and Technology Fund may invest up to 15% of its total assets in
securities that lack an established secondary trading market or otherwise are
considered illiquid. Liquidity of a security relates to the ability to dispose
easily of the security and the price to be obtained upon disposition of the
security, which may be less than would be obtained for a comparable more liquid
security. Investment of a Fund's assets in illiquid securities may restrict the
ability of that Fund to dispose of its investments in a timely fashion and for a
fair price as well as its ability to take advantage of market opportunities.
Global Technology Fund may invest in securities of issuers that are sold in
private placement transactions between the issuers and their purchasers and that
are neither listed on an exchange nor traded in other established markets. In
many cases, privately placed securities will be subject to contractual or legal
restrictions on transfer.
Swap Agreements. Global Technology Fund is authorized to enter into equity
swap agreements, which are contracts in which one party agrees to make periodic
payments based on the change in market value of a specified equity security,
basket of equity securities or equity index in return for periodic payments
based on a fixed or variable interest rate or the change in market value of a
different equity security, basket of equity securities or equity index. For
example, swap agreements may be used to invest in a market without owning or
taking physical custody of securities in circumstances in which direct
investment is restricted for legal reasons or is otherwise impractical. The swap
agreement will be structured to provide for early termination in the event, for
example, that the Global Technology Fund desires to lock in appreciation.
Swap agreements entail the risk that a party will default on its payment
obligations to the Fund thereunder. Global Technology Fund will seek to lessen
the risk to some extent by entering into a transaction only with financial
institutions that have capital of at least $50 million or whose obligations are
guaranteed by an entity having capital of at least $50 million. Swap agreements
also bear the risk that Global Technology Fund will not be able to meet its
obligation to the counterparty. Global Technology Fund, however, will deposit in
a segregated account with its custodian liquid securities, cash or cash
equivalents or other assets permitted to be so segregated by the Commission in
an amount equal to or greater than the market value of the liabilities under the
swap agreement or the amount it would have cost Global Technology Fund initially
to make an equivalent direct investment, plus or minus any amount the Fund is
obligated to pay or is to receive under the swap agreement. The Fund will enter
into a swap transaction only if, immediately following the time Global
Technology Fund enters into the transaction, the aggregate notional principal
amount of swap transactions to which Global Technology Fund is a party would not
exceed 5% of Global Technology Fund's total assets.
Indexed and Inverse Securities. Global Technology Fund may invest in
securities the potential return of which is based on the change in particular
measurements of value or rate (an "index"). As an illustration, Global
Technology Fund may invest in a debt security that pays interest and returns
principal based on the change in the value of a securities index or a basket of
securities, or based on the relative changes of two indices. In addition, Global
Technology Fund may invest in securities the potential return on which is based
inversely on the change in an index. For example, Global Technology Fund may
invest in securities that pay a higher rate of interest when a particular index
decreases and pay a lower rate of interest (or do not fully return principal)
when the value of the index increases. If Global Technology Fund invests in such
securities, it may be subject to reduced or eliminated interest payments or loss
of principal in the event of an adverse movement in the relevant index or
indices.
Certain indexed and inverse securities may have the effect of providing
investment leverage because the rate of interest or amount of principal payable
increases or decreases at a rate that is a multiple of the changes in the
relevant index. As a consequence, the market value of such securities may be
substantially more volatile than the market values of other debt securities.
Global Technology Fund believes that indexed and inverse securities may provide
portfolio management flexibility that permits Global Technology Fund to seek
19
<PAGE> 23
enhanced returns, hedge other portfolio positions or vary the degree of
portfolio leverage with greater efficiency than would otherwise be possible
under certain market conditions.
Investment in Other Investment Companies. Global Technology Fund may
invest in other investment companies whose investment objectives and policies
are consistent with those of Global Technology Fund. In accordance with the
Investment Company Act, Global Technology Fund may invest up to 10% of its total
assets in securities of other investment companies. In addition, under the
Investment Company Act, Global Technology Fund may not own more than 3% of the
total outstanding voting stock of any investment company and not more than 5% of
the value of the Fund's total assets may be invested in the securities of any
investment company. If Global Technology Fund acquires shares in investment
companies, stockholders would bear both their proportionate share of expenses in
Global Technology Fund (including management and advisory fees) and, indirectly,
the expenses of such investment companies (including management and advisory
fees). Investments by Global Technology Fund in wholly owned investment entities
created under the laws of certain countries will not be deemed an investment in
other investment companies. Technology Fund is subject to a non-fundamental
restriction by which it may invest in other investment companies to the extent
permitted by applicable law, as described above.
OTHER INVESTMENT POLICIES
Both Global Technology Fund and Technology Fund have adopted certain other
investment policies as set forth below:
Borrowings. Global Technology Fund and Technology Fund are each subject to
a fundamental investment restriction, which provides that the Fund may borrow
from banks in amounts up to 33 1/3% of its total assets taken at market value
and may borrow an additional 5% of its total assets for temporary purposes. As a
non-fundamental restriction, each Fund is further limited and may not borrow
money or pledge its assets, except that either Fund may borrow from banks as a
temporary measure for extraordinary or emergency purposes or to meet
redemptions. See "Summary--Comparison of the Funds--Investment Policies."
Hedging Techniques. Both Global Technology Fund and Technology Fund may
engage in various portfolio strategies to hedge their respective portfolios
against investment, interest rate and currency risks. For a description of
hedging instruments and risks associated with investment in such instruments,
see the Appendix titled "Investment Practices Involving the Use of Options,
Futures and Foreign Exchange" in the Global Technology Fund Prospectus, and
"Investment Objective and Policies--Hedging Techniques" in the Technology Fund
Prospectus.
Standby Commitment Agreements. Global Technology Fund may from time to
time enter into standby commitment agreements. For a description of standby
commitment agreements and the risks associated with investment in such
agreements, see "Investment Objective and Policies--Other Investment Policies
and Practices" in the Global Technology Fund Prospectus.
Repurchase Agreements and Purchase and Sale Contracts. Global Technology
Fund may enter into repurchase agreements and purchase and sale contracts. For a
description of repurchase agreements and the risks associated with investment in
such agreements, see "Investment Objective and Policies--Other Investment
Policies and Practices" in the Global Technology Fund Prospectus.
When-Issued Securities and Delayed Delivery Transactions. Global
Technology Fund may purchase or sell securities on a delayed delivery basis or
on a when-issued basis at fixed purchase or sale terms. For a description of
when-issued securities and delayed delivery transactions, including the risks
associated with investment therein, see "Investment Objective and
Policies--Other Investment Policies and Practices" in the Global Technology Fund
Prospectus.
Lending of Portfolio Securities. Each Fund may from time to time lend
securities from its portfolio with a value not exceeding 10% of its total assets
in the case of Technology Fund, or 33 1/3% of total assets in the case of Global
Technology Fund, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S. Government.
20
<PAGE> 24
INFORMATION REGARDING OPTIONS, FUTURES AND FOREIGN EXCHANGE TRANSACTIONS
Each Fund may engage in certain investment practices including the use of
options, futures and foreign exchange. Global Technology Fund may utilize these
strategies for hedging purposes, to enhance total return or to gain exposure to
equity markets. Technology Fund may engage in such transactions to hedge its
portfolio against investment, interest rate and currency risks. Each Fund has
authority to write (i.e., sell) covered call options on its portfolio
securities, purchase put options on securities and engage in transactions in
stock index options, stock index futures and financial futures, and related
options on such futures. Each Fund may also deal in forward foreign exchange
transactions and foreign currency options and futures, and related options on
such futures.
The investment policies of each Fund with respect to futures and options
transactions are not fundamental policies and may be modified by the Board of
Directors of each Fund without the approval of the Fund's stockholders. Each
Fund is subject to the restrictions of the Commodity Futures Trading Commission
with respect to its investments in futures and options thereon.
For a detailed discussion of the Funds' investment policies regarding
futures and options, including the risks associated therewith, see the Appendix
titled "Investment Practices Involving the Use of Options, Futures and Foreign
Exchange," in the Global Technology Fund Prospectus and "Investment Objective
and Policies--Hedging Techniques" in the Technology Fund Prospectus.
INVESTMENT RESTRICTIONS
Other than as noted above under "Comparison of the Funds--Investment
Objectives and Policies," Global Technology Fund and Technology Fund have
identical investment restrictions. See "Investment Objective and
Policies--Investment Restrictions" in the Global Technology Fund Statement and
"Investment Objective and Policies--Investment Restrictions" in the Technology
Fund Statement.
MANAGEMENT
Directors. The Boards of Directors of Global Technology Fund and
Technology Fund consist of seven individuals, six of whom are not "interested
persons" as defined in the Investment Company Act. The same seven individuals
serve on both Boards. After the Reorganization, the Board of Directors of Global
Technology Fund will serve as the Board of Directors of the Combined Fund. The
Directors are responsible for the overall supervision of the operation of each
Fund and perform the various duties imposed on the directors of investment
companies by the Investment Company Act.
The Directors of Global Technology Fund are:
ARTHUR ZEIKEL*--Chairman of MLAM and its affiliate, FAM; Chairman and
Director of Princeton Services, Inc. ("Princeton Services"); and Executive Vice
President of ML & Co.
DONALD CECIL--Special Limited Partner of Cumberland Associates (an
investment partnership).
ROLAND M. MACHOLD--Retired Director of the Division of Investment of the
State of New Jersey.
EDWARD H. MEYER--Chairman of the Board, President and Chief Executive
Officer of Grey Advertising Inc.
CHARLES C. REILLY--Self-employed financial consultant; former President and
Chief Investment Officer of Verus Capital, Inc.; former Senior Vice President of
Arnhold and S. Bleichroeder, Inc.
RICHARD R. WEST--Dean Emeritus, New York University Leonard N. Stern School
of Business Administration.
EDWARD D. ZINBARG--Former Executive Vice President of The Prudential
Insurance Company of America.
- ---------------
* Interested person, as defined by the Investment Company Act, of each of the
Funds.
21
<PAGE> 25
Management and Advisory Arrangements. MLAM serves as the manager for both
Global Technology Fund and Technology Fund pursuant to separate management
agreements (each, a "Management Agreement") that, except for their fee
structures and certain minor differences, are identical.
Pursuant to the Management Agreement between Global Technology Fund and
MLAM, Global Technology Fund pays MLAM a monthly fee at the annual rate of 1.00%
of the average daily net assets of the Fund not exceeding $1.0 billion and 0.95%
of the average daily net assets of the Fund in excess of $1.0 billion. After the
Reorganization, the Combined Fund will pay the management fee rate paid by
Global Technology Fund. Pursuant to the Management Agreement between Technology
Fund and MLAM, the Fund pays MLAM a monthly fee at the annual rate of 1.00% of
the average daily net assets of the Fund.
MLAM has retained MLAM U.K. as sub-adviser to each of Technology Fund and
Global Technology Fund. Pursuant to a separate sub-advisory agreement between
MLAM and MLAM U.K. with respect to each Fund, MLAM pays MLAM U.K. a fee for
providing investment advisory services to MLAM with respect to each Fund, in an
amount to be determined from time to time by MLAM and MLAM U.K. but in no event
in excess of the amount MLAM actually receives for providing services to each
Fund pursuant to each Management Agreement. The address of MLAM U.K. is Milton
Gate, 1 Moor Lane, London EC2Y 9HA, England.
After the Reorganization, on a pro forma combined basis, the total
operating expenses of Global Technology Fund, as a percent of net assets, would
be less than the current operating expenses of Technology Fund. In addition,
certain fixed costs, such as costs of printing stockholder reports and proxy
statements, legal expenses, audit fees, registration fees, mailing costs and
other expenses would be spread across a larger asset base, thereby lowering the
expense ratio borne by Technology Fund stockholders. The Board of Directors of
each of the Funds has determined that the Reorganization would be potentially
beneficial to that Fund and the Fund's stockholders. See "The
Reorganization--Potential Benefits to Stockholders as a Result of the
Reorganization" and "Summary--Pro Forma Fee Tables."
PURCHASE OF SHARES
The class structure and purchase and distribution procedures for shares of
Technology Fund are substantially the same as those of Global Technology Fund.
For a complete discussion of the four classes of shares and the purchase and
distribution procedures related thereto, see "Merrill Lynch Select Pricing(SM)
System" and "Purchase of Shares" in either the Global Technology Fund Prospectus
or the Technology Fund Prospectus.
REDEMPTION OF SHARES
The procedure for redeeming shares of Global Technology Fund is
substantially the same as the procedure for redeeming shares of Technology Fund.
For purposes of computing any CDSC that may be payable upon disposition of
Corresponding Shares of Global Technology Fund acquired by Technology Fund
stockholders in the Reorganization, the holding period of Technology Fund shares
outstanding on the date the Reorganization takes place will be tacked onto the
holding period of the Corresponding Shares of Global Technology Fund acquired in
the Reorganization. See "Redemption of Shares" in either the Global Technology
Fund Prospectus or the Technology Fund Prospectus.
PERFORMANCE
General. The following tables provide performance information for each
class of shares of Technology Fund and Global Technology Fund, including and
excluding maximum applicable sales charges, for the periods indicated. Past
performance is not indicative of future performance.
22
<PAGE> 26
GLOBAL TECHNOLOGY FUND
AGGREGATE TOTAL RETURN
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES
---------------------- ---------------------- ---------------------- ----------------------
WITHOUT WITHOUT WITHOUT WITHOUT
SALES WITH SALES SALES WITH SALES SALES WITH SALES SALES WITH SALES
PERIOD CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%)
------ --------- ---------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inception through 9/30/98+ (11.20) (15.86) (11.40) (14.94) (11.40) (12.29) (11.20) (15.86)
</TABLE>
- ---------------
* Assumes the maximum applicable sales charge. The maximum initial sales charge
on Class A and Class D shares is 5.25%. The maximum contingent deferred sales
charge ("CDSC") on Class B shares is 4.0% and is reduced to 0% after four
years. Class C shares are subject to a 1.0% CDSC for one year.
+ Figures are since inception (June 26, 1998).
TECHNOLOGY FUND
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES
---------------------- ---------------------- ---------------------- ----------------------
WITHOUT WITHOUT WITHOUT WITHOUT
SALES WITH SALES SALES WITH SALES SALES WITH SALES SALES WITH SALES
PERIOD CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%)
------ --------- ---------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months ended 9/30/98+ (31.97) (38.91) (32.65) (37.92) (32.47) (33.81) (32.11) (39.03)
Year Ended 3/31/98 3.96 (1.50) 3.09 (0.06) 2.87 2.08 3.90 (1.55)
Five Years Ended 3/31/98 11.82 10.62 10.68 10.68 -- -- -- --
Inception** through 3/31/98 16.60 15.54 15.41 15.41 2.22 2.22 3.08 1.48
</TABLE>
- ---------------
* Assumes the maximum applicable sales charge. The maximum initial sales charge
on Class A and Class D shares is 5.25%. The maximum CDSC on Class B shares is
4.0% and is reduced to 0% after four years. Class C shares are subject to a
1.0% CDSC for one year.
** Class A and Class B shares commenced operations on April 27, 1992. Class C
and Class D shares commenced operations on October 21, 1994.
+ Aggregate total returns.
STOCKHOLDER RIGHTS
Stockholders of Global Technology Fund are entitled to one vote for each
share held and fractional votes for fractional shares held and will vote on the
election of Directors and any other matter submitted to a stockholder vote.
Global Technology Fund does not intend to hold meetings of stockholders in any
year in which the Investment Company Act does not require stockholders to act
upon any of the following matters: (i) election of Directors; (ii) approval of
an investment advisory agreement; (iii) approval of distribution arrangements;
and (iv) ratification of selection of independent accountants. Voting rights for
Directors are not cumulative. Shares of Global Technology Fund to be issued to
Technology Fund stockholders in the Reorganization will be fully paid and
non-assessable, will have no preemptive rights and will have the conversion
rights described in this Prospectus and Proxy Statement and in the Global
Technology Fund Prospectus. Each share of Global Technology Fund common stock is
entitled to participate equally in dividends and distributions declared by the
Fund and in the net assets of the Fund on liquidation or dissolution after
satisfaction of outstanding liabilities, except that Class B, Class C and Class
D shares bear certain additional expenses. Rights attributable to shares of
Technology Fund are substantially identical to those described above.
DIVIDENDS AND DISTRIBUTIONS
The current policy of Technology Fund with respect to dividends and
distributions is substantially identical to the policy of Global Technology
Fund. It is each Fund's intention to distribute all of its net investment
income, if any. In addition, each Fund distributes all net realized capital
gains, if any, to stockholders at least annually.
23
<PAGE> 27
TAX INFORMATION
The tax consequences associated with investment in shares of Technology
Fund are substantially identical to the tax consequences associated with
investment in shares of Global Technology Fund. See "Taxes" in the Global
Technology Fund Prospectus.
PORTFOLIO TRANSACTIONS
The procedures for engaging in portfolio transactions are generally the
same for both Technology Fund and Global Technology Fund. For a discussion of
these procedures, see "Investment Objective and Policies--Other Investment
Policies and Practices" in the Global Technology Fund Prospectus and "Portfolio
Transactions and Brokerage" in the Global Technology Fund Statement.
Each Fund may effect portfolio transactions on foreign securities exchanges
and may incur settlement delays on certain of such exchanges. In addition, costs
associated with transactions in foreign securities are generally higher than
such costs associated with transactions in U.S. securities.
PORTFOLIO TURNOVER
Generally, neither Technology Fund nor Global Technology Fund purchases
securities for short-term trading profits. However, either Fund may dispose of
securities without regard to the time that they have been held when such action,
for defensive or other reasons, appears advisable to MLAM. Neither Fund has any
limit on its rate of portfolio turnover. The portfolio turnover rates for
Technology Fund for its fiscal years ended March 31, 1996, 1997 and 1998 were
108.36%, 176.51% and 206.40% respectively. The portfolio turnover rate for
Global Technology Fund for the period June 26, 1998 (commencement of operations)
to September 30, 1998 was 9.98%. Higher portfolio turnover may contribute to
higher transactional costs and negative tax consequences, such as an increase in
capital gain dividends or in ordinary income dividends of accrued market
discount.
ADDITIONAL INFORMATION
Net Asset Value. Both Global Technology Fund and Technology Fund determine
net asset value of each class of its shares once daily 15 minutes after the
close of business on the NYSE (generally, 4:00 p.m. New York time), on each day
during which the NYSE is open for trading. Net asset value is computed by
dividing the market value of the securities held by the Fund plus any cash or
other assets (including interest and dividends accrued but not yet received)
minus all liabilities (including accrued expenses) by the total number of shares
outstanding at such time.
Stockholder Services. Global Technology Fund offers a number of
stockholder services and investment plans designed to facilitate investment in
shares of the Fund. In addition, U.S. stockholders of each class of shares of
Global Technology Fund have an exchange privilege with certain other
MLAM-advised mutual funds. Stockholder services, including exchange privileges,
available to stockholders of Technology Fund and Global Technology Fund are
substantially identical. For a description of these services, see "Stockholder
Services" in the Global Technology Fund Prospectus.
Custodian. Brown Brothers Harriman & Co. ("Brown Brothers") acts as
custodian of the cash and securities of Global Technology Fund. The principal
business address of Brown Brothers is 40 Water Street, Boston, MA 02109. The
Chase Manhattan Bank ("Chase") acts as custodian for Technology Fund. Chase's
principal business address is 4 Chase MetroTech Center, Brooklyn, New York
11245. It is presently anticipated that Brown Brothers will serve as the
custodian of the Combined Fund.
Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing
Agent. Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484, serves as the transfer agent, dividend disbursing agent and
shareholder servicing agent with respect to each Fund (the "Transfer Agent"), at
the same fee schedule, pursuant to separate transfer agency, dividend disbursing
and service agreements with each of the Funds.
24
<PAGE> 28
Capital Stock. Technology Fund has an authorized capital of 800,000,000
shares of common stock, par value $.10 per share, divided into four classes,
designated Class A, Class B, Class C and Class D common stock. Class A and Class
C each consists of 100,000,000 shares and Class B and Class D each consists of
300,000,000 shares. Global Technology Fund has an authorized capital of
500,000,000 shares of common stock, par value $0.10 per share, divided into four
classes, also designated Class A, Class B, Class C and Class D common stock.
Class A, Class C and Class D each consists of 100,000,000 shares and Class B
consists of 200,000,000 shares. The rights, preferences and expenses
attributable to the Class A, Class B, Class C and Class D shares of Technology
Fund are identical in all respects to those of the Class A, Class B, Class C and
Class D shares of Global Technology Fund.
Stockholder Inquiries. Stockholder inquiries with respect to Technology
Fund and Global Technology Fund may be addressed to either Fund by telephone at
(609) 282-2800 or at the address set forth on the cover page of this Proxy
Statement and Prospectus.
THE REORGANIZATION
GENERAL
Under the Agreement and Plan of Reorganization (attached hereto as Exhibit
I), Global Technology Fund will acquire substantially all of the assets, and
will assume substantially all of the liabilities, of Technology Fund, in
exchange solely for an equal aggregate value of shares to be issued by Global
Technology Fund. Upon receipt by Technology Fund of such shares, Technology Fund
will distribute the shares to the holders of shares of Technology Fund, as
described below.
Generally, the assets transferred by Technology Fund to Global Technology
Fund will equal all investments of Technology Fund held in its portfolio as of
the Valuation Time (as defined in the Agreement and Plan of Reorganization) and
all other assets of Technology Fund as of such time.
Technology Fund will distribute the shares of Global Technology Fund
received by it pro rata to its stockholders in exchange for such stockholders'
proportional interests in Technology Fund. The shares of Global Technology Fund
received by Technology Fund stockholders will be of the same class and have the
same aggregate net asset value as each such stockholder's interest in Technology
Fund as of the Valuation Time (previously defined as the "Corresponding
Shares"). (See "The Agreement and Plan of Reorganization--Valuation of Assets
and Liabilities" for information concerning the calculation of net asset value.)
The distribution will be accomplished by opening new accounts on the books of
Global Technology Fund in the names of all stockholders of Technology Fund,
including stockholders holding Technology Fund shares in certificate form, and
transferring to each stockholder's account the Corresponding Shares of Global
Technology Fund representing such stockholder's interest previously credited to
the account of Technology Fund. Stockholders holding Technology Fund shares in
certificate form may receive certificates representing the Corresponding Shares
of Global Technology Fund credited to their account in respect of such
Technology Fund shares by sending the certificates to the Transfer Agent
accompanied by a written request for such exchange.
Since the Corresponding Shares of Global Technology Fund would be issued at
net asset value in exchange for the net assets of Technology Fund having a value
equal to the aggregate net asset value of those shares of Technology Fund, the
net asset value per share of Global Technology Fund should remain virtually
unchanged solely as a result of the Reorganization. Thus, the Reorganization
should result in virtually no dilution of net asset value of Global Technology
Fund immediately following consummation of the Reorganization. However, as a
result of the Reorganization, a stockholder of Technology Fund likely would hold
a smaller percentage of ownership in Global Technology Fund than he or she did
in Technology Fund prior to the Reorganization.
25
<PAGE> 29
PROCEDURE
On October 21, 1998, the Board of Directors of Technology Fund, including
all of the Directors who are not "interested persons," as defined by the
Investment Company Act, approved the Agreement and Plan of Reorganization and
the submission of such Agreement and Plan to Technology Fund stockholders for
approval. The Board of Directors of Global Technology Fund, including all of the
Directors who are not interested persons, also approved the Agreement and Plan
of Reorganization on October 21, 1998.
If the stockholders of Technology Fund approve the Reorganization at the
Meeting, all required regulatory approvals are obtained and certain conditions
are either met or waived, it is presently anticipated that the Reorganization
will take place during the first calendar quarter of 1999.
THE BOARD OF DIRECTORS OF TECHNOLOGY FUND RECOMMENDS THAT TECHNOLOGY FUND
STOCKHOLDERS APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION.
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
The following is a summary of the significant terms of the Agreement and
Plan of Reorganization. This summary is qualified in its entirety by reference
to the Agreement and Plan of Reorganization, attached hereto as Exhibit I.
Valuation of Assets and Liabilities. The respective assets of Technology
Fund and Global Technology Fund will be valued as of the Valuation Time. The
assets in each Fund will be valued according to the procedures set forth under
"Additional Information--Determination of Net Asset Value" in the Global
Technology Fund Prospectus. Purchase orders for Technology Fund shares which
have not been confirmed as of the Valuation Time will be treated as assets of
Technology Fund for purposes of the Reorganization; redemption requests with
respect to Technology Fund shares which have not settled as of the Valuation
Time will be treated as liabilities of Technology Fund for purposes of the
Reorganization.
Distribution of Global Technology Fund Shares. On the next full business
day following the Valuation Time (the "Exchange Date"), Global Technology Fund
will issue to Technology Fund a number of shares the aggregate net asset value
of which will equal the aggregate net asset value of shares of Technology Fund
as of the Valuation Time. Each holder of Technology Fund shares will receive, in
exchange for his or her proportionate interest in Technology Fund, Corresponding
Shares of Global Technology Fund of the same class and having the same aggregate
net asset value as the Technology Fund shares held by such stockholder as of the
Valuation Time.
Expenses. The expenses of the Reorganization that are directly
attributable to each Fund and the conduct of its business will be deducted from
the assets of that Fund as of the Valuation Time. These expenses are expected to
include the expenses incurred in preparing materials to be distributed to each
Fund's board, legal fees incurred in preparing each Fund's board materials,
attending each Fund's board meetings and preparing the minutes, and accounting
fees associated with each Fund's financial statements. The expenses of the
Reorganization that are attributable to the transaction itself, including
expenses in connection with obtaining the IRS private letter ruling, will be
borne pro rata by each Fund according to its net assets as of the Valuation
Time. These expenses are expected to include expenses incurred in connection
with the preparation of the Agreement and Plan of Reorganization and the
Registration Statement on Form N-14 (including the Prospectus and Proxy
Statement), Commission and other filing fees and legal and audit fees in
connection with the Reorganization.
Required Approvals. Under Technology Fund's Articles of Incorporation (as
amended to date) and relevant Maryland law, stockholder approval of the
Agreement and Plan of Reorganization requires the affirmative vote of Technology
Fund stockholders representing a majority of the total number of votes entitled
to be cast thereon.
Deregistration and Dissolution. Following the transfer of the assets and
liabilities of Technology Fund to Global Technology Fund and the distribution of
Corresponding Shares of Global Technology Fund to Technology Fund stockholders,
Technology Fund will terminate its registration under the Investment
26
<PAGE> 30
Company Act and its incorporation under Maryland law and will withdraw its
authority to do business in any state where it is required to do so.
Amendments and Conditions. The Agreement and Plan of Reorganization may be
amended at any time prior to the Exchange Date with respect to any of the terms
therein. The obligations of Technology Fund and Global Technology Fund pursuant
to the Agreement and Plan of Reorganization are subject to various conditions,
including a registration statement on Form N-14 being declared effective by the
Commission, approval of the Reorganization by Technology Fund stockholders, a
favorable IRS ruling or an opinion of counsel being received as to tax matters,
an opinion of counsel being received as to securities matters and the continuing
accuracy of various representations and warranties of Technology Fund and Global
Technology Fund being confirmed by the respective parties.
Termination, Postponement and Waivers. The Agreement and Plan of
Reorganization may be terminated, and the Reorganization abandoned at any time,
whether before or after adoption thereof by the Technology Fund stockholders,
prior to the Exchange Date, or the Exchange Date may be postponed: (i) by mutual
consent of the Boards of Directors of Technology Fund and Global Technology
Fund; (ii) by the Board of Directors of Technology Fund if any condition to
Technology Fund's obligations has not been fulfilled or waived by such Board; or
(iii) by the Board of Directors of Global Technology Fund if any condition to
Global Technology Fund's obligations has not been fulfilled or waived by such
Board.
POTENTIAL BENEFITS TO STOCKHOLDERS AS A RESULT OF THE REORGANIZATION
MLAM and the Board of Directors of Technology Fund have identified certain
potential benefits to stockholders that are likely to result from the
Reorganization. First, following the Reorganization, Technology Fund
stockholders will remain invested in an open-end fund that has an investment
objective substantially identical to that of Technology Fund. In addition,
Technology Fund stockholders are likely to experience certain additional
benefits, including lower expenses per share, economies of scale and greater
flexibility in portfolio management.
Specifically, as described above under "Comparison of the
Funds--Management--Management and Advisory Fees," after the Reorganization, on a
pro forma basis, the total operating expenses of Global Technology Fund, as a
percent of net assets, would be less than the current operating expenses for
Technology Fund. See "Summary--Pro Forma Fee Tables." In addition, certain fixed
costs, such as costs of printing stockholder reports and proxy statements, legal
expenses, audit fees, registration fees, mailing costs and other expenses would
be spread across a larger asset base, thereby lowering the expense ratio borne
by Technology Fund stockholders. To illustrate the potential economies of scale
for Technology Fund, on September 30, 1998, the total operating expense ratio
for Technology Fund Class A shares was 1.42% (based on average fund net assets
of approximately $450.2 million) and the total operating expense ratio for
Global Technology Fund Class A shares was 1.33% (based on average fund net
assets of approximately $487.8 million). If the Reorganization had taken place
on that date, the total operating expense ratio for Global Technology Fund Class
A shares on a pro forma basis would have been 1.27% (based on average fund net
assets of approximately $938.0 million).
The following table sets forth (i) the net assets of Technology Fund for
the last three fiscal year ends and as of September 30, 1998 and (ii) the net
assets of Global Technology Fund as of June 30, 1998 and as of September 30,
1998.
<TABLE>
<CAPTION>
GLOBAL TECHNOLOGY FUND TECHNOLOGY FUND
- ---------------------------- ---------------------------
PERIOD NET ASSETS PERIOD NET ASSETS
- -------------- ------------ ------------- ------------
<S> <C> <C> <C>
As of 6/30/98* $439,392,080 As of 3/31/96 $875,675,953
As of 9/30/98 $481,060,840 As of 3/31/97 $652,135,210
As of 3/31/98 $546,772,119
As of 9/30/98 $340,636,926
</TABLE>
- ---------------
* Global Technology Fund commenced operations on June 26, 1998.
27
<PAGE> 31
The net assets of Technology Fund as of September 30, 1998 are below the
level reached at fiscal year end March 31, 1996 and have been steadily
decreasing since that date. MLAM believes that the economies of scale that may
be realized as a result of the Reorganization would be beneficial to Technology
Fund stockholders.
Based on the foregoing, the Board of Directors of Technology Fund concluded
that the Reorganization presents no significant risks or costs (including legal,
accounting and administrative costs) that would outweigh the benefits discussed
above. In approving the Reorganization, the Board of Directors of each Fund
determined that the interests of existing stockholders of that Fund would not be
diluted as a result of the Reorganization.
TAX CONSEQUENCES OF THE REORGANIZATION
General. The Reorganization has been structured with the intention that it
qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1)(C) of the Code. Technology Fund and Global Technology Fund
have elected and qualified for the special tax treatment afforded "regulated
investment companies" under the Code, and Global Technology Fund intends to
continue to so qualify after the Reorganization. Technology Fund and Global
Technology Fund have jointly requested a private letter ruling from the IRS to
the effect that for Federal income tax purposes: (i) the Reorganization, as
described, will constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Code and Technology Fund and Global Technology Fund will
each be deemed a "party" to the Reorganization within the meaning of Section
368(b); (ii) in accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by the stockholders of Technology Fund upon the receipt of
Corresponding Shares of Global Technology Fund in the Reorganization solely in
exchange for their shares of Technology Fund; (iii) in accordance with Section
358 of the Code, immediately after the Reorganization, the tax basis of the
Corresponding Shares of Global Technology Fund received by the stockholders of
Technology Fund in the Reorganization will be equal, in the aggregate, to the
tax basis of the shares of Technology Fund surrendered in exchange; (iv) in
accordance with Section 1223 of the Code, the holding period of the
Corresponding Shares of Global Technology Fund received by stockholders of
Technology Fund in the Reorganization will include the holding period of the
shares of Technology Fund immediately prior to the liquidation of Technology
Fund (provided that at the time of the Reorganization the shares of Technology
Fund were held as capital assets); (v) in accordance with Section 361(a) of the
Code, no gain or loss will be recognized by Technology Fund on the asset
transfer solely in exchange for Global Technology Fund shares or on the
distribution of Global Technology Fund shares to Technology Fund stockholders
under Section 361(c)(1); (vi) under Section 1032 of the Code, no gain or loss
will be recognized by Global Technology Fund on the exchange of its shares for
Technology Fund assets; (vii) in accordance with Section 362(b) of the Code, the
tax basis of the assets of Technology Fund in the hands of Global Technology
Fund will be the same as the tax basis of such assets in the hands of Technology
Fund immediately prior to the Reorganization; (viii) in accordance with Section
1223 of the Code, the holding period of the transferred assets in the hands of
Global Technology Fund will include the holding period of such assets in the
hands of Technology Fund; and (ix) the taxable year of Technology Fund will end
on the effective date of the Reorganization and pursuant to Section 381(a) of
the Code and regulations thereunder, Global Technology Fund will succeed to and
take into account certain tax attributes of Technology Fund, such as earnings
and profits, capital loss carryovers and method of accounting. If the IRS does
not issue a favorable private letter ruling in advance of the selected closing
date, the Funds may proceed with the closing of the Reorganization upon receipt
of an opinion of counsel regarding the tax matters covered by the ruling
request.
Technology Fund has significant net realized capital losses. After the
Reorganization, Global Technology Fund shareholders will benefit from the
ability of Global Technology Fund to offset these capital losses against its
realized capital gains subject to certain limitations. Conversely, the benefit
of these losses to Technology Fund shareholders will be diluted. Stockholders
should consult their tax advisers regarding the effect of the Reorganization in
light of their individual circumstances. As the foregoing relates only to
Federal income tax consequences, stockholders also should consult their tax
advisers as to the foreign, state and local tax consequences of the
Reorganization.
Status as a Regulated Investment Company. Both Technology Fund and Global
Technology Fund have elected and qualified to be taxed as regulated investment
companies under Sections 851-855 of the Code, and
28
<PAGE> 32
after the Reorganization, Global Technology Fund intends to continue to operate
so as to qualify as a regulated investment company. Following the liquidation
and dissolution of Technology Fund and distribution of shares of Global
Technology Fund to Technology Fund stockholders, Technology Fund will terminate
its registration under the Investment Company Act and its incorporation under
Maryland law.
CAPITALIZATION
The following table sets forth as of September 30, 1998: (i) the
capitalization of Technology Fund, (ii) the capitalization of Global Technology
Fund and (iii) the pro forma capitalization of the Combined Fund as adjusted to
give effect to the Reorganization.
PRO FORMA CAPITALIZATION OF GLOBAL TECHNOLOGY FUND, TECHNOLOGY FUND AND
COMBINED FUND AS OF SEPTEMBER 30, 1998
GLOBAL TECHNOLOGY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Total Net Assets: $ 18,985,279 $322,608,932 $76,745,116 $62,721,513
Shares Outstanding: 2,137,528 36,422,048 8,664,536 7,066,275
Net Asset Value Per Share: $ 8.88 $ 8.86 $ 8.86 $ 8.88
</TABLE>
TECHNOLOGY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Total Net Assets: $148,645,908 $161,608,329 $ 8,525,015 $21,857,674
Shares Outstanding: 42,207,121 48,550,329 2,579,080 6,247,508
Net Asset Value Per Share: $ 3.52 $ 3.33 $ 3.31 $ 3.50
</TABLE>
COMBINED FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Total Net Assets:* $167,566,383 $484,030,067 $85,237,167 $84,546,490
Shares Outstanding: 18,873,242 54,667,553 9,626,994 9,528,762
Net Asset Value Per Share:* $ 8.88 $ 8.85 $ 8.85 $ 8.87
</TABLE>
- ---------------
* Total Net Assets and Net Asset Value Per Share include the aggregate value of
Technology Fund's net assets which would have been transferred to Global
Technology Fund had the Reorganization been consummated on September 30, 1998.
The data includes an accrual of estimated Reorganization expenses of $375,000.
No assurance can be given as to how many shares of Global Technology Fund the
Technology Fund stockholders will receive on the date the Reorganization takes
place, and the foregoing should not be relied upon to reflect the number of
shares of Global Technology Fund that actually will be received on or after
such date.
INFORMATION CONCERNING THE SPECIAL MEETING
DATE, TIME AND PLACE OF MEETING
The Meeting will be held on January 12, 1999, at the offices of Merrill
Lynch Asset Management, L.P., 800 Scudders Mill Road, Plainsboro, New Jersey at
9:00 a.m., New York time.
SOLICITATION, REVOCATION AND USE OF PROXIES
A stockholder executing and returning a proxy has the power to revoke it at
any time prior to its exercise by executing a superseding proxy or by submitting
a notice of revocation to the Secretary of Technology Fund. Although mere
attendance at the Meeting will not revoke a proxy, a stockholder present at the
Meeting may withdraw his proxy and vote in person.
29
<PAGE> 33
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Meeting in accordance with
the directions on the proxies; if no direction is indicated on a properly
executed proxy, such shares will be voted "FOR" approval of the Agreement and
Plan of Reorganization.
It is not anticipated that any matters other than the adoption of the
Agreement and Plan of Reorganization will be brought before the Meeting. If,
however, any other business properly is brought before the Meeting, proxies will
be voted in accordance with the judgment of the persons designated on such
proxies.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of shares of Technology Fund at the close of
business on November 18, 1998 (the "Record Date") are entitled to vote at the
Meeting or any adjournment thereof. At the close of business on the Record Date,
there were 95,496,335 shares of Technology Fund common stock issued and
outstanding and entitled to vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TECHNOLOGY
FUND
AND GLOBAL TECHNOLOGY FUND
Except as set forth below, to the knowledge of Technology Fund, no person
or entity owned beneficially or of record 5% or more of any class of shares of
Technology Fund outstanding on the Record Date.
<TABLE>
<CAPTION>
NAME AND ADDRESS CLASS OF SHARES PERCENT OF CLASS(1)
- ---------------- --------------- -------------------
<S> <C> <C>
Merrill Lynch Trust Company(2).............................. Class A 49.23%
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Company(2).............................. Class D 14.53%
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Company(3).............................. Class A 22.23%
Trustee FBO Chrysler Salaried
Employees' Savings Plan
265 Davidson Ave #4
Somerset, NJ 08873
Merrill Lynch Trust Company(3).............................. Class A 13.45%
Trustee FBO Chrysler Hourly
Employees Deferred Pay Plan
265 Davidson Ave #4
Somerset, NJ 08873
Merrill Lynch Trust Company(3).............................. Class A 9.15%
Trustee FBO MLSIP
Investment Account
P.O. Box 30532
New Brunswick, NJ 08873
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
NAME AND ADDRESS CLASS OF SHARES PERCENT OF CLASS(1)
- ---------------- --------------- -------------------
<S> <C> <C>
James H Goodnight and....................................... Class D 5.6%
Ann B Goodnight JTWROS
900 Appletree Ln
Cary, NC 27513
</TABLE>
- ---------------
(1) Assuming the Reorganization is consummated, such ownership percentages would
be: Merrill Lynch Trust Company 42.6% (Class A) and 3.6% (Class D); FBO
Chrysler Salaried Employees' Savings Plan, 19.3%; FBO Chrysler Hourly
Employees Deferred Pay Plan, 11.6%; FBO MLSIP Investment Account, 7.9%; and
James H. Goodnight and Ann B. Goodnight JTWROS, 1.4%. These percentages are
based on the pro forma capitalization of the Combined Fund as of September
30, 1998. See "The Reorganization--Capitalization."
(2) Merrill Lynch Trust Company is the record holder on behalf of certain
employee retirement, personal trust or savings plan accounts for which it
acts as trustee.
(3) These shares are included in the Class A share ownership of Merrill Lynch
Trust Company reported above in this table.
At the Record Date, the Directors and officers of Technology Fund as a
group (13 persons) owned an aggregate of less than 1% of the outstanding shares
of Technology Fund and owned an aggregate of less than 1% of the outstanding
shares of common stock of ML & Co.
To the knowledge of Global Technology Fund, as of the Record Date, no
person or entity owned beneficially or of record 5% or more of any class of
shares of Global Technology Fund or of all classes of Global Technology Fund
shares in the aggregate.
At the Record Date, the Directors and officers of Global Technology Fund as
a group (13 persons) owned an aggregate of less than 1% of the outstanding
shares of Global Technology Fund and owned less than 1% of the outstanding
shares of common stock of ML & Co.
VOTING RIGHTS AND REQUIRED VOTE
For purposes of this Proxy Statement and Prospectus, each share of each
class of Technology Fund is entitled to one vote. Approval of the Agreement and
Plan of Reorganization requires the affirmative vote of Technology Fund
stockholders representing a majority of the total votes entitled to be cast
thereon, with all shares voting as a single class.
Under Maryland law, stockholders of a registered open-end investment
company such as Technology Fund are not entitled to demand the fair value of
their shares upon a transfer of assets and will be bound by the terms of the
Reorganization if approved at the Meeting. However, any stockholder of
Technology Fund may redeem his or her Technology Fund shares prior to the
Reorganization.
A quorum for purposes of the Meeting consists of a majority of the shares
entitled to vote at the Meeting, present in person or by proxy. If, by the time
scheduled for the Meeting, a quorum of Technology Fund's stockholders is not
present or if a quorum is present but sufficient votes in favor of the Agreement
and Plan of Reorganization are not received from the stockholders of Technology
Fund, the persons named as proxies may propose one or more adjournments of the
Meeting to permit further solicitation of proxies from stockholders. Any such
adjournment will require the affirmative vote of a majority of the shares of
Technology Fund present in person or by proxy and entitled to vote at the
session of the Meeting to be adjourned. The persons named as proxies will vote
in favor of any such adjournment if they determine that adjournment and
additional solicitation are reasonable and in the interests of the stockholders
of Technology Fund.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy, the accompanying Notice and this Proxy Statement and Prospectus will be
borne by Global Technology Fund and Technology
31
<PAGE> 35
Fund pro rata according to the aggregate net assets of each Fund's portfolio at
the Valuation Time. Such expenses are currently estimated to be $375,000.
Technology Fund will reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation materials to the beneficial
owners of shares of Technology Fund and will reimburse certain persons that
Technology Fund may employ for their reasonable expenses in assisting in the
solicitation of proxies from such beneficial owners of shares of Technology
Fund.
In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview by
officers of Technology Fund. Technology Fund has retained D.F. King & Co., Inc.,
77 Water Street, New York, New York 10005, to aid in the solicitation of
proxies, at a cost to be borne by Technology Fund of approximately $5,000, plus
out-of-pocket expenses.
Broker-dealer firms, including Merrill Lynch, holding shares of Technology
Fund in "street name" for the benefit of their customers and clients will
request the instructions of such customers and clients on how to vote their
shares before the Meeting. Broker-dealer firms, including Merrill Lynch, will
not be permitted to vote without instructions with respect to the approval of
the Agreement and Plan of Reorganization. Properly executed proxies that are
returned but that are marked "abstain" or with respect to which a broker-dealer
has received no instructions and therefore has declined to vote on the proposal
("broker non-votes") will be counted as present for the purposes of determining
a quorum. However, abstentions and broker non-votes will have the same effect as
a vote against approval of the Agreement and Plan of Reorganization.
This Proxy Statement and Prospectus does not contain all of the information
set forth in the registration statements and the exhibits relating thereto which
Technology Fund and Global Technology Fund, respectively, have filed with the
Commission under the Securities Act and the Investment Company Act, to which
reference is hereby made.
Technology Fund and Global Technology Fund both file reports and other
information with the Commission. Reports, proxy statements, registration
statements and other information filed by Technology Fund and Global Technology
Fund can be inspected and copied at the public reference facilities of the
Commission in Washington, D.C. and at the New York Regional Office of the
Commission at Seven World Trade Center, New York, New York 10048. Copies of such
materials also can be obtained by mail from the Public Reference Branch, Office
of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) that contains the Statement of
Additional Information, the Global Technology Fund Prospectus, the Technology
Fund Prospectus, the Global Technology Fund Statement, the Technology Fund
Statement, other material incorporated by reference and other information
regarding the Funds.
LEGAL PROCEEDINGS
There are no material legal proceedings to which Technology Fund or Global
Technology Fund is a party.
LEGAL OPINIONS
Certain legal matters in connection with the Reorganization will be passed
upon for Technology Fund and Global Technology Fund by Brown & Wood LLP, One
World Trade Center, New York, New York 10048.
EXPERTS
The financial highlights of Technology Fund included in this Proxy
Statement and Prospectus have been so included in reliance on the report of
Deloitte & Touche LLP ("D&T"), independent auditors, given on their authority as
experts in auditing and accounting. The principal business address of D&T is 117
Campus Drive, Princeton, New Jersey 08540. D&T are also the independent auditors
for Global Technology Fund. D&T will serve as the independent auditors for the
Combined Fund after the Reorganization.
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STOCKHOLDER PROPOSALS
A stockholder proposal intended to be presented at any subsequent meeting
of stockholders of Technology Fund must be received by Technology Fund in a
reasonable time before Technology Fund begins to print and mail the proxy
solicitation materials to be utilized in connection with such meeting in order
to be considered in Technology Fund's proxy statement and form of proxy relating
to the meeting.
By Order of the Board of Directors,
Philip M. Mandel
Secretary, Merrill Lynch Technology
Fund, Inc.
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the 9th day of December, 1998, by and between Merrill Lynch Global Technology
Fund, Inc., a Maryland corporation ("Global Technology"), and Merrill Lynch
Technology Fund, Inc., a Maryland corporation ("Technology").
PLAN OF REORGANIZATION
The reorganization will comprise the acquisition by Global Technology of
substantially all of the assets, and the assumption of substantially all of the
liabilities, of Technology in exchange solely for an equal aggregate value of
newly issued shares of Global Technology's common stock, with a par value of
$.10 per share, and the subsequent distribution of Corresponding Shares (defined
below) of Global Technology to the stockholders of Technology in exchange for
their shares of common stock of Technology, each with a par value of $.10 per
share, in liquidation of Technology, all upon and subject to the terms
hereinafter set forth (the "Reorganization").
In the course of the Reorganization, shares of Global Technology will be
distributed to Technology stockholders as follows: each holder of Technology
shares will be entitled to receive that class of shares of Global Technology
having the same letter designation (e.g., Class A, Class B, Class C or Class D),
and the same distribution fees, account maintenance fees and sales charges
(including contingent deferred sales charges), if any ("Corresponding Shares"),
as the shares of Technology owned by such stockholder on the Exchange Date (as
defined in Section 7 of this Agreement). The aggregate net asset value of the
Corresponding Shares of Global Technology to be received by each stockholder of
Technology will equal the aggregate net asset value of the Technology shares
owned by such stockholder on the Exchange Date. In consideration therefor, on
the Exchange Date, Global Technology shall acquire substantially all of
Technology's assets and assume substantially all of Technology's obligations and
liabilities then existing, whether absolute, accrued, contingent or otherwise.
It is intended that the Reorganization described in this Plan shall be a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and any successor provision.
As promptly as practicable after the consummation of the Reorganization,
Technology shall be dissolved in accordance with the laws of the State of
Maryland and will terminate its registration under the Investment Company Act of
1940, as amended (the "1940 Act").
AGREEMENT
In order to consummate the Reorganization and in consideration of the
promises and the covenants and agreements hereinafter set forth, and intending
to be legally bound, Global Technology and Technology hereby agree as follows:
1. Representations and Warranties of Global Technology.
Global Technology represents and warrants to, and agrees with, Technology
that:
(a) Global Technology is a corporation duly organized, validly existing and
in good standing in conformity with the laws of the State of Maryland, and has
the power to own all of its assets and to carry out this Agreement. Global
Technology has all necessary Federal, state and local authorizations to carry on
its business as it is now being conducted and to carry out this Agreement.
(b) Global Technology is duly registered under the 1940 Act as a
diversified, open-end management investment company (File No. 811-8721), and
such registration has not been revoked or rescinded and is in full force and
effect. Global Technology has elected and qualified for the special tax
treatment afforded regulated investment companies ("RICs") under Sections
851-855 of the Code at all times since its inception and intends to continue to
so qualify until consummation of the Reorganization and thereafter.
<PAGE> 38
(c) Technology has been furnished with an unaudited statement of assets and
liabilities and an unaudited schedule of investments of Global Technology, each
as of September 30, 1998. An unaudited statement of assets and liabilities of
Global Technology and an unaudited schedule of investments of Global Technology,
each as of the Valuation Time, will be furnished to Technology at or prior to
the Exchange Date for the purpose of determining the number of shares of Global
Technology to be issued pursuant to Section 4 of this Agreement; and each will
fairly present the financial position of Global Technology as of the Valuation
Time in conformity with generally accepted accounting principles applied on a
consistent basis.
(d) Technology has been furnished with the prospectus and statement of
additional information of Global Technology, each dated May 20, 1998, and said
prospectus and statement of additional information do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(e) Global Technology has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its Board of Directors, and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.
(f) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Global Technology, threatened against it which
assert liability on the part of Global Technology or which materially affect its
financial condition or its ability to consummate the Reorganization. Global
Technology is not charged with or, to the best of its knowledge, threatened with
any violation or investigation of any possible violation of any provisions of
any Federal, state or local law or regulation or administrative ruling relating
to any aspect of its business.
(g) Global Technology is not a party to or obligated under any provision of
its Articles of Incorporation, or its by-laws, or any contract or other
commitment or obligation, and is not subject to any order or decree which would
be violated by its execution of or performance under this Agreement.
(h) There are no material contracts outstanding to which Global Technology
is a party that have not been disclosed in the N-14 Registration Statement (as
defined in subsection (k) below) or will not otherwise be disclosed to
Technology prior to the Valuation Time.
(i) Global Technology has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of assets and
liabilities referred to above, those incurred in the ordinary course of its
business as an investment company since September 30, 1998, and those incurred
in connection with the Reorganization. As of the Valuation Time, Global
Technology will advise Technology in writing of all known liabilities,
contingent or otherwise, whether or not incurred in the ordinary course of
business, existing or accrued as of such time.
(j) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Global Technology of
the Reorganization, except such as may be required under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act") and the 1940 Act or state securities laws (which term
as used herein shall include the laws of the District of Columbia and Puerto
Rico).
(k) The registration statement filed by Global Technology on Form N-14
relating to the shares of Global Technology to be issued pursuant to this
Agreement which includes the proxy statement of Technology and the prospectus of
Global Technology with respect to the transaction contemplated herein, and any
supplement or amendment thereto or to the documents therein (as amended, the
"N-14 Registration Statement"), on its effective date, at the time of the
stockholders' meeting referred to in Section 6(a) of this Agreement and at the
Exchange Date, insofar as it relates to Global Technology (i) complied or will
comply in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder and (ii) did not
or will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the
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prospectus included therein did not or will not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and warranties
in this subsection only shall apply to statements in or omissions from the N-14
Registration Statement made in reliance upon and in conformity with information
furnished by Global Technology for use in the N-14 Registration Statement as
provided in Section 6(e) of this Agreement.
(l) Global Technology is authorized to issue 500,000,000 shares of common
stock, par value $.10 per share, divided into four classes, designated Class A,
Class B, Class C and Class D Common Stock; Class A, Class C and Class D each
consists of 100,000,000 shares and Class B consists of 200,000,000 shares; each
outstanding share is fully paid and nonassessable and has full voting rights.
(m) Global Technology shares to be issued to Technology pursuant to this
Agreement will have been duly authorized and, when issued and delivered pursuant
to this Agreement, will be legally and validly issued and will be fully paid and
nonassessable and will have full voting rights, and no stockholder of Global
Technology will have any preemptive right of subscription or purchase in respect
thereof.
(n) At or prior to the Exchange Date, Global Technology shares to be
transferred to Technology for distribution to the stockholders of Technology on
the Exchange Date will be duly qualified for offering to the public in all
states of the United States in which the sale of shares of Global Technology
presently are qualified, and there are a sufficient number of such shares
registered under the 1933 Act and, as may be necessary, with each pertinent
state securities commission to permit the transfers contemplated by this
Agreement to be consummated.
(o) At or prior to the Exchange Date, Global Technology will have obtained
any and all regulatory, Director and stockholder approvals necessary to issue
the shares of Global Technology to Technology.
2. Representations and Warranties of Technology.
Technology represents and warrants to, and agrees with, Global Technology
that:
(a) Technology is a corporation duly organized, validly existing and in
good standing in conformity with the laws of the State of Maryland, and has the
power to own all of its assets and to carry out this Agreement. Technology has
all necessary Federal, state and local authorizations to carry on its business
as it is now being conducted and to carry out this Agreement.
(b) Technology is duly registered under the 1940 Act as a non-diversified,
open-end management investment company (File No. 811-6407), and such
registration has not been revoked or rescinded and is in full force and effect.
Technology has elected and qualified for the special tax treatment afforded RICs
under Sections 851-855 of the Code at all times since its inception, and intends
to continue to so qualify for its taxable year ending upon liquidation.
(c) As used in this Agreement, the term "Investments" shall mean (i) the
investments of Technology shown on the schedule of its investments as of the
Valuation Time (as defined in Section 3(c) of this Agreement) furnished to
Global Technology, with such additions thereto and deletions therefrom as may
have arisen in the course of Technology's business up to the Valuation Time; and
(ii) all other assets owned by Technology or liabilities incurred as of the
Valuation Time.
(d) Technology has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary action of its Board of
Directors and this Agreement constitutes a valid and binding contract
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto.
(e) Global Technology has been furnished with a statement of assets and
liabilities and a schedule of investments of Technology, each as of March 31,
1998, said financial statements having been examined by Deloitte & Touche LLP,
independent public accountants. An unaudited statement of assets and liabilities
of
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Technology and an unaudited schedule of investments of Technology, each as of
the Valuation Time, will be furnished to Global Technology at or prior to the
Exchange Date for the purpose of determining the number of shares of Global
Technology to be issued pursuant to Section 4 of this Agreement; and each will
fairly present the financial position of Technology as of the Valuation Time in
conformity with generally accepted accounting principles applied on a consistent
basis.
(f) Global Technology has been furnished with Technology's Annual Report to
Stockholders for the year ended March 31, 1998 and the financial statements
appearing therein fairly present the financial position of Technology as of the
dates indicated, in conformity with generally accepted accounting principles
applied on a consistent basis.
(g) Global Technology has been furnished with the prospectus and statement
of additional information of Technology, each dated June 30, 1998, and said
prospectus and statement of additional information do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(h) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Technology, threatened against it which assert
liability on the part of Technology or which materially affect its financial
condition or its ability to consummate the Reorganization. Technology is not
charged with or, to the best of its knowledge, threatened with any violation or
investigation of any possible violation of any provisions of any Federal, state
or local law or regulation or administrative ruling relating to any aspect of
its business.
(i) There are no material contracts outstanding to which Technology is a
party that have not been disclosed in the N-14 Registration Statement or will
not otherwise be disclosed to Global Technology prior to the Valuation Time.
(j) Technology is not a party to or obligated under any provision of its
Articles of Incorporation, as amended, or its by-laws, as amended, or any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement.
(k) Technology has no known liabilities of a material amount, contingent or
otherwise, other than those shown on its statements of assets and liabilities
referred to above, those incurred in the ordinary course of its business as an
investment company since March 31, 1998 and those incurred in connection with
the Reorganization. As of the Valuation Time, Technology will advise Global
Technology in writing of all known liabilities, contingent or otherwise, whether
or not incurred in the ordinary course of business, existing or accrued as of
such time.
(l) Technology has filed, or has obtained extensions to file, all Federal,
state and local tax returns which are required to be filed by it, and has paid
or has obtained extensions to pay, all Federal, state and local taxes shown on
said returns to be due and owing and all assessments received by it, up to and
including the taxable year in which the Exchange Date occurs. All tax
liabilities of Technology have been adequately provided for on its books, and no
tax deficiency or liability of Technology has been asserted and no question with
respect thereto has been raised by the Internal Revenue Service or by any state
or local tax authority for taxes in excess of those already paid, up to and
including the taxable year in which the Exchange Date occurs.
(m) At both the Valuation Time and the Exchange Date, Technology will have
full right, power and authority to sell, assign, transfer and deliver the
Investments. At the Exchange Date, subject only to the delivery of the
Investments as contemplated by this Agreement, Technology will have good and
marketable title to all of the Investments, and Global Technology will acquire
all of the Investments free and clear of any encumbrances, liens or security
interests and without any restrictions upon the transfer thereof (except those
imposed by the Federal or state securities laws and those imperfections of title
or encumbrances as do not materially detract from the value or use of the
Investments or materially affect title thereto).
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Technology of the
Reorganization, except such as may be required under the 1933 Act, the 1934 Act,
the 1940 Act or state securities laws.
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<PAGE> 41
(o) The N-14 Registration Statement, on its effective date, at the time of
the stockholders' meeting referred to in Section 6(a) of this Agreement and on
the Exchange Date, insofar as it relates to Technology (i) complied or will
comply in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder, and (ii) did not
or will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the prospectus included therein did not or will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to statements
in or omissions from the N-14 Registration Statement made in reliance upon and
in conformity with information furnished by Technology for use in the N-14
Registration Statement as provided in Section 6(e) of this Agreement.
(p) Technology is authorized to issue 800,000,000 shares of common stock,
par value $.10 per share, divided into four classes, designated Class A and
Class C Common Stock, each of which consists of 100,000,000 shares, and Class B
and Class D Common Stock, each of which consists of 300,000,000 shares, each
outstanding share of which is fully paid and nonassessable and has full voting
rights.
(q) The books and records of Technology made available to Global Technology
and/or its counsel are substantially true and correct and contain no material
misstatements or omissions with respect to the operations of Technology.
(r) Technology will not sell or otherwise dispose of any of the shares of
Global Technology to be received in the Reorganization, except in distribution
to the stockholders of Technology.
3. The Reorganization.
(a) Subject to receiving the requisite approval of the stockholders of
Technology, and to the other terms and conditions contained herein, Technology
agrees to convey, transfer and deliver to Global Technology and Global
Technology agrees to acquire from Technology, on the Exchange Date, all of the
Investments (including interest accrued as of the Valuation Time on debt
instruments) of Technology, and assume substantially all of the liabilities of
Technology, in exchange solely for that number of shares of Global Technology
provided in Section 4 of this Agreement. Pursuant to this Agreement, as soon as
practicable Technology will distribute all shares of Global Technology received
by it to its stockholders in exchange for their corresponding Technology shares.
Such distribution shall be accomplished by the opening of stockholder accounts
on the stock ledger records of Global Technology in the amounts due the
stockholders of Technology based on their respective holdings in Technology as
of the Valuation Time.
(b) Technology will pay or cause to be paid to Global Technology any
interest it receives on or after the Exchange Date with respect to the
Investments transferred to Technology hereunder.
(c) The Valuation Time shall be 4:00 P.M., New York time, on March 19,
1999, or such earlier or later day and time as may be mutually agreed upon in
writing (the "Valuation Time").
(d) Global Technology will acquire substantially all of the assets of, and
assume substantially all of the known liabilities of, Technology, except that
recourse for such liabilities will be limited to the net assets of Technology
acquired by Global Technology. The known liabilities of Technology as of the
Valuation Time shall be confirmed in writing to Global Technology by Technology
pursuant to Section 2(k) of this Agreement.
(e) Global Technology and Technology will jointly file Articles of Transfer
with the State Department of Assessments and Taxation of Maryland and any other
such instrument as may be required by the State of Maryland to effect the
transfer of the Investments of Technology to Global Technology.
(f) Technology will be dissolved following the Exchange Date by filing
Articles of Dissolution with the State Department of Assessments and Taxation of
Maryland.
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4. Issuance and Valuation of Shares of Global Technology in the
Reorganization.
Full shares of Global Technology, and to the extent necessary, fractional
shares of Global Technology, of an aggregate net asset value equal to the net
asset value of the assets of Technology acquired, determined as hereinafter
provided, reduced by the amount of liabilities of Technology assumed by Global
Technology, shall be issued by Global Technology in exchange for such assets of
Technology. The net asset value of Technology and Global Technology shall be
determined in accordance with the procedures described in the prospectus of
Global Technology as of the Valuation Time. Such valuation and determination
shall be made by Global Technology in cooperation with Technology. Global
Technology shall issue its Class A, Class B, Class C and Class D shares to
Technology in certificates or share deposit receipts (one in respect of each
class) registered in the name of Technology. Technology shall distribute
Corresponding Shares of Global Technology to its stockholders by redelivering
such certificates to Financial Data Services, Inc.
5. Payment of Expenses.
(a) With respect to expenses incurred in connection with the
Reorganization, (i) Global Technology shall pay all expenses incurred which are
attributable solely to Global Technology and the conduct of its business, (ii)
Technology shall pay all expenses incurred which are attributable solely to
Technology and the conduct of its business and (iii) Global Technology and
Technology shall bear pro rata according to each Fund's net assets at the
Valuation Time, all expenses incurred in connection with the Reorganization,
including, but not limited to, all costs related to the preparation of the N-14
Registration Statement and the distribution of the Proxy Statement and
Prospectus. Such fees and expenses shall include the cost of preparing and
filing a ruling request with the Internal Revenue Service, legal and accounting
fees, printing costs, filing fees, portfolio transfer taxes (if any) and any
similar expenses incurred in connection with the Reorganization. All expenses
associated with Technology's dissolution under Maryland law and the termination
of Technology's registration as an investment company under the 1940 Act shall
be paid by Global Technology following the Reorganization.
(b) If for any reason the Reorganization is not consummated, no party shall
be liable to any other party for any damages resulting therefrom, including,
without limitation, consequential damages.
6. Covenants of Global Technology and Technology.
(a) Technology agrees to call a special meeting of the stockholders of
Technology as soon as is practicable after the effective date of the N-14
Registration Statement for the purpose of considering the Reorganization as
described in this Agreement, and it shall be a condition to the obligations of
each of the parties hereto that the holders of a majority of the shares of
Technology issued and outstanding and entitled to vote thereon, shall have
approved this Agreement at such a meeting at or prior to the Valuation Time.
(b) Global Technology and Technology each covenants to operate the business
of Global Technology and Technology, respectively, as presently conducted
between the date hereof and the Exchange Date.
(c) Technology agrees that following the consummation of the
Reorganization, it will dissolve in accordance with the laws of the State of
Maryland and any other applicable law, it will not make any distributions of any
Global Technology shares other than to the stockholders of Technology and
without first paying or adequately providing for the payment of all of
Technology's liabilities not assumed by Global Technology, if any, and on and
after the Exchange Date it shall not conduct any business except in connection
with its dissolution.
(d) Technology undertakes that if the Reorganization is consummated, it
will file an application pursuant to Section 8(f) of the 1940 Act for an order
declaring that Technology has ceased to be a registered investment company.
(e) Global Technology will file the N-14 Registration Statement with the
Securities and Exchange Commission (the "Commission") and will use its best
efforts to provide that the N-14 Registration Statement becomes effective as
promptly as practicable. Global Technology and Technology agree to cooperate
fully with each other, and each will furnish to the other the information
relating to itself to be set forth in the N-14
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Registration Statement as required by the 1933 Act, the 1934 Act the 1940 Act,
and the rules and regulations thereunder and the state securities laws.
(f) Global Technology has no plan or intention to sell or otherwise dispose
of the assets of Technology to be acquired in the Reorganization, except for
dispositions made in the ordinary course of business.
(g) Technology and Global Technology each agrees that by the Exchange Date
all of its Federal and other tax returns and reports required to be filed on or
before such date shall have been filed and all taxes shown as due on said
returns either have been paid or adequate liability reserves have been provided
for the payment of such taxes. In connection with this covenant, the Funds agree
to cooperate with each other in filing any tax return, amended return or claim
for refund, determining a liability for taxes or a right to a refund of taxes or
participating in or conducting any audit or other proceeding in respect of
taxes. Global Technology agrees to retain for a period of ten (10) years
following the Exchange Date all returns, schedules and work papers and all
material records or other documents relating to tax matters of Technology for
its taxable period first ending after the Exchange Date and for all prior
taxable periods. Any information obtained under this subsection shall be kept
confidential except as otherwise may be necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
After the Exchange Date, Technology shall prepare, or cause its agents to
prepare, any Federal, state or local tax returns, including any Forms 1099,
required to be filed by Technology with respect to Technology's final taxable
year ending with its complete liquidation and for any prior periods or taxable
years and further shall cause such tax returns and Forms 1099 to be duly filed
with the appropriate taxing authorities. Notwithstanding the aforementioned
provisions of this subsection, any expenses incurred by Technology (other than
for payment of taxes) in connection with the preparation and filing of said tax
returns and Forms 1099 after the Exchange Date shall be borne by Technology to
the extent such expenses have been accrued by Technology in the ordinary course
without regard to the Reorganization; any excess expenses shall be borne by
Merrill Lynch Asset Management, L.P. ("MLAM") at the time such tax returns and
Forms 1099 are prepared.
(h) Technology agrees to mail to its stockholders of record entitled to
vote at the special meeting of stockholders at which action is to be considered
regarding this Agreement, in sufficient time to comply with requirements as to
notice thereof, a combined Proxy Statement and Prospectus which complies in all
material respects with the applicable provisions of Section 14(a) of the 1934
Act and Section 20(a) of the 1940 Act, and the rules and regulations,
respectively, thereunder.
(i) Following the consummation of the Reorganization, Global Technology
expects to stay in existence and continue its business as a diversified,
open-end management investment company registered under the 1940 Act.
7. Exchange Date.
(a) Delivery of the assets of Technology to be transferred, together with
any other Investments, and the Global Technology shares to be issued, shall be
made at the offices of Brown & Wood LLP, One World Trade Center, New York, New
York 10048, at 10:00 A.M. on the next full business day following the Valuation
Time, or at such other place, time and date agreed to by Technology and Global
Technology, the date and time upon which such delivery is to take place being
referred to herein as the "Exchange Date." To the extent that any Investments,
for any reason, are not transferable on the Exchange Date, Technology shall
cause such Investments to be transferred to Global Technology's account with
Brown Brothers Harriman & Co. at the earliest practicable date thereafter.
(b) Technology will deliver to Global Technology on the Exchange Date
confirmations or other adequate evidence as to the tax basis of each of the
Investments delivered to Global Technology hereunder, certified by Deloitte &
Touche LLP.
(c) As soon as practicable after the close of business on the Exchange
Date, Technology shall deliver to Global Technology a list of the names and
addresses of all of the stockholders of record of Technology on the Exchange
Date and the number of shares of Technology owned by each such stockholder,
certified to the best of their knowledge and belief by the transfer agent for
Technology or by its President.
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8. Technology Conditions.
The obligations of Technology hereunder shall be subject to the following
conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the affirmative vote of the holders of a majority
of the shares of Technology, issued and outstanding and entitled to vote
thereon, voting together as a single class, and by the Board of Directors of
Global Technology; and that Global Technology shall have delivered to Technology
a copy of the resolution approving this Agreement adopted by Global Technology's
Board of Directors, certified by the Secretary of Global Technology.
(b) That Global Technology shall have furnished to Technology a statement
of Global Technology's assets and liabilities, with values determined as
provided in Section 4 of this Agreement, together with a schedule of its
investments, all as of the Valuation Time, certified on Global Technology's
behalf by its President (or any Vice President) and its Treasurer, and a
certificate signed by Global Technology's President (or any Vice President) and
its Treasurer, dated as of the Exchange Date, certifying that as of the
Valuation Time and as of the Exchange Date there has been no material adverse
change in the financial position of Global Technology since September 30, 1998,
other than changes in its portfolio securities since that date or changes in the
market value of its portfolio securities.
(c) That Global Technology shall have furnished to Technology a certificate
signed by Global Technology's President (or any Vice President) and its
Treasurer, dated as of the Exchange Date, certifying that, as of the Valuation
Time and as of the Exchange Date all representations and warranties of Global
Technology made in this Agreement are true and correct in all material respects
with the same effect as if made at and as of such dates, and that Global
Technology has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to each of such
dates.
(d) That there shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(e) That Technology shall have received an opinion of Brown & Wood LLP, as
counsel to both Global Technology and Technology, in form and substance
satisfactory to Technology and dated the Exchange Date, to the effect that (i)
each of Global Technology and Technology is a corporation duly organized,
validly existing and in good standing in conformity with the laws of the State
of Maryland; (ii) the Corresponding Shares of Global Technology to be issued
pursuant to this Agreement are duly authorized and, upon delivery, will be
validly issued and fully paid and nonassessable by Global Technology, and no
stockholder of Global Technology has any preemptive right to subscription or
purchase in respect thereof (pursuant to the Articles of Incorporation, as
amended and supplemented, or the by-laws of Global Technology or, to the best of
such counsel's knowledge, otherwise); (iii) this Agreement has been duly
authorized, executed and delivered by each of Global Technology and Technology,
and represents a valid and binding contract, enforceable in accordance with its
terms subject to applicable bankruptcy, insolvency, reorganization or other
similar laws relating to or affecting creditors' rights generally and to general
principles of equity; (iv) the execution and delivery of this Agreement does
not, and the consummation of the Reorganization will not, violate any material
provisions of the Articles of Incorporation, as amended, the by-laws, as
amended, or any agreement (known to such counsel) to which either Global
Technology or Technology is a party or by which either Global Technology or
Technology is bound, except insofar as the parties have agreed to amend such
provision as a condition precedent to the Reorganization or Maryland law; (v)
Technology has the power to sell, assign, transfer and deliver the assets
transferred by it hereunder and, upon consummation of the Reorganization in
accordance with the terms of this Agreement, Technology will have duly
transferred such assets and liabilities in accordance with this Agreement; (vi)
to the best of such counsel's knowledge, no consent, approval, authorization or
order of any United States federal court, Maryland state court or governmental
authority is required for the consummation by Global Technology and Technology
of the Reorganization, except such as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act and the published rules and regulations of the
Commission thereunder and under Maryland law and such as may be required under
state securities laws; (vii) the N-14 Registration Statement has become
effective under the 1933 Act, no stop order suspending the effectiveness of the
N-14 Registration Statement has been issued and no proceedings for that
I-8
<PAGE> 45
purpose have been instituted or are pending or contemplated under the 1933 Act,
and the N-14 Registration Statement, and each amendment or supplement thereto,
as of their respective effective dates, appear on their face to be appropriately
responsive in all material respects to the requirements of the 1933 Act, the
1934 Act and the 1940 Act and the published rules and regulations of the
Commission thereunder; (viii) the descriptions in the N-14 Registration
Statement of statutes, legal and governmental proceedings and contracts and
other documents are accurate and fairly present the information required to be
shown; (ix) such counsel does not know of any statutes, legal or governmental
proceedings or contracts or other documents related to the Reorganization of a
character required to be described in the N-14 Registration Statement which are
not described therein or, if required to be filed, filed as required; (x)
neither Global Technology nor Technology, to the knowledge of such counsel, is
required to qualify to do business as a foreign corporation in any jurisdiction
except as may be required by state securities laws, and except where each has so
qualified or the failure so to qualify would not have a material adverse effect
on Global Technology, Technology or their respective stockholders; (xi) such
counsel does not have actual knowledge of any material suit, action or legal or
administrative proceeding pending or threatened against Global Technology or
Technology, the unfavorable outcome of which would materially and adversely
affect Global Technology or Technology; (xii) all corporate actions required to
be taken by Global Technology and Technology to authorize this Agreement and to
effect the Reorganization have been duly authorized by all necessary corporate
actions on the part of Global Technology and Technology; and (xiii) such opinion
is solely for the benefit of Global Technology and Technology and their
Directors and officers. Such opinion also shall state that (x) while such
counsel cannot make any representation as to the accuracy or completeness of
statements of fact in the N-14 Registration Statement or any amendment or
supplement thereto, nothing has come to their attention that would lead them to
believe that, on the respective effective dates of the N-14 Registration
Statement and any amendment or supplement thereto, (1) the N-14 Registration
Statement or any amendment or supplement thereto contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and (2) the
prospectus included in the N-14 Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and (y) such counsel does not express any opinion or
belief as to the financial statements or other financial or statistical data
relating to Global Technology or Technology contained or incorporated by
reference in the N-14 Registration Statement. In giving the opinion set forth
above, Brown & Wood LLP may state that it is relying on certificates of officers
of Global Technology and Technology with regard to matters of fact and certain
certificates and written statements of governmental officials with respect to
the good standing of Global Technology and Technology.
(f) That Technology shall have received either (a) a private letter ruling
from the Internal Revenue Service or (b) an opinion of Brown & Wood LLP, to the
effect that for Federal income tax purposes (i) the transfer of substantially
all of the Investments of Technology to Global Technology in exchange solely for
shares of Global Technology as provided in this Agreement will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and
Technology and Global Technology will each be deemed to be a "party" to the
Reorganization within the meaning of Section 368(b); (ii) in accordance with
Section 361(a) of the Code, no gain or loss will be recognized to Technology as
a result of the asset transfer solely in exchange for Global Technology shares
or on the distribution of the Global Technology stock to Technology stockholders
under Section 361(c)(1); (iii) under Section 1032 of the Code, no gain or loss
will be recognized to Global Technology on the receipt of assets of Technology
in exchange for Global Technology shares; (iv) in accordance with Section
354(a)(1) of the Code, no gain or loss will be recognized to the stockholders of
Technology on the receipt of Corresponding Shares of Global Technology in
exchange for their shares of Technology; (v) in accordance with Section 362(b)
of the Code, the tax basis of the Technology assets in the hands of Global
Technology will be the same as the tax basis of such assets in the hands of
Technology immediately prior to the consummation of the Reorganization; (vi) in
accordance with Section 358 of the Code, immediately after the Reorganization,
the tax basis of the Corresponding Shares of Global Technology received by the
stockholders of Technology in the Reorganization will be equal, in the
aggregate, to the tax basis of the shares of Technology surrendered in exchange;
(vii) in accordance with Section 1223 of the Code, a stockholder's holding
period for the Corresponding Shares of Global Technology will be determined by
I-9
<PAGE> 46
including the period for which such stockholder held the shares of Technology
exchanged therefor, provided, that such Technology shares were held as a capital
asset; (viii) in accordance with Section 1223 of the Code, Global Technology's
holding period with respect to the Technology assets transferred will include
the period for which such assets were held by Technology; and (ix) the taxable
year of Technology will end on the effective date of the Reorganization and
pursuant to Section 381(a) of the Code and regulations thereunder, Global
Technology will succeed to and take into account certain tax attributes of
Technology, such as earnings and profits, capital loss carryovers and method of
accounting.
(g) That all proceedings taken by Global Technology and its counsel in
connection with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to Technology.
(h) That the N-14 Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Global Technology, be contemplated by the
Commission.
(i) That Technology shall have received from Deloitte & Touche LLP a letter
dated as of the effective date of the N-14 Registration Statement and a similar
letter dated within five days prior to the Exchange Date, in form and substance
satisfactory to Technology, to the effect that (i) they are independent public
accountants with respect to Global Technology within the meaning of the 1933 Act
and the applicable published rules and regulations thereunder, (ii) in their
opinion, the financial statements and supplementary information of Global
Technology included or incorporated by reference in the N-14 Registration
Statement and reported on by them comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the published
rules and regulations thereunder; and (iii) on the basis of limited procedures
agreed upon by Technology and Global Technology and described in such letter
(but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited interim financial statements
and unaudited supplementary information of Global Technology included in the
N-14 Registration Statement, and inquiries of certain officials of Global
Technology responsible for financial and accounting matters, nothing came to
their attention that caused them to believe that (a) such unaudited financial
statements and related unaudited supplementary information do not comply as to
form in all material respects with the applicable accounting requirements of the
1933 Act and the published rules and regulations thereunder, (b) such unaudited
financial statements are not fairly presented in conformity with generally
accepted accounting principles, applied on a basis substantially consistent with
that of the audited financial statements, or (c) such unaudited supplementary
information is not fairly stated in all material respects in relation to the
unaudited financial statements taken as a whole; and (iv) on the basis of
limited procedures agreed upon by Technology and Global Technology and described
in such letter (but not an examination in accordance with generally accepted
auditing standards), the information relating to Global Technology appearing in
the N-14 Registration Statement, which information is expressed in dollars (or
percentages derived from such dollars) (with the exception of performance
comparisons, if any), if any, has been obtained from the accounting records of
Global Technology or from schedules prepared by officials of Global Technology
having responsibility for financial and reporting matters and such information
is in agreement with such records, schedules or computations made therefrom.
(j) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act, and no other legal, administrative or other
proceeding shall be instituted or threatened which would materially affect the
financial condition of Global Technology or would prohibit the Reorganization.
(k) That Technology shall have received from the Commission such orders or
interpretations as Brown & Wood LLP, as counsel to Technology, deems reasonably
necessary or desirable under the 1933 Act and the 1940 Act in connection with
the Reorganization, provided, that such counsel shall have requested such orders
as promptly as practicable, and all such orders shall be in full force and
effect.
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<PAGE> 47
9. Global Technology Conditions.
The obligations of Global Technology hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the Board of Directors of Technology and by the
affirmative vote of the holders of a majority of the shares of common stock of
Technology issued and outstanding and entitled to vote thereon, voting together
as a single class; and that Technology shall have delivered to Global Technology
a copy of the resolution approving this Agreement adopted by Technology's Board
of Directors, and a certificate setting forth the vote Technology stockholders
obtained, each certified by the Secretary of Technology.
(b) That Technology shall have furnished to Global Technology a statement
of Technology's assets and liabilities, with values determined as provided in
Section 4 of this Agreement, together with a schedule of investments with their
respective dates of acquisition and tax costs, all as of the Valuation Time,
certified on Technology's behalf by its President (or any Vice President) and
its Treasurer, and a certificate signed by Technology's President (or any Vice
President) and its Treasurer, dated as of the Exchange Date, certifying that as
of the Valuation Time and as of the Exchange Date there has been no material
adverse change in the financial position of Technology since March 31, 1998,
other than changes in the Investments since that date or changes in the market
value of the Investments.
(c) That Technology shall have furnished to Global Technology a certificate
signed by Technology's President (or any Vice President) and its Treasurer,
dated the Exchange Date, certifying that as of the Valuation Time and as of the
Exchange Date all representations and warranties of Technology made in this
Agreement are true and correct in all material respects with the same effect as
if made at and as of such dates and Technology has complied with all of the
agreements and satisfied all of the conditions on its part to be performed or
satisfied at or prior to such dates.
(d) That Technology shall have delivered to Global Technology a letter from
Deloitte & Touche LLP, dated the Exchange Date, stating that such firm has
performed a limited review of the Federal, state and local income tax returns of
Technology for the period ended March 31, 1998 (which returns originally were
prepared and filed by Technology), and that based on such limited review,
nothing came to their attention which caused them to believe that such returns
did not properly reflect, in all material respects, the Federal, state and local
income taxes of Technology for the period covered thereby; and that for the
period from April 1, 1998, to and including the Exchange Date and for any
taxable year of Technology ending upon the liquidation of Technology, such firm
has performed a limited review to ascertain the amount of applicable Federal,
state and local taxes, and has determined that either such amount has been paid
or reserves have been established for payment of such taxes, this review to be
based on unaudited financial data; and that based on such limited review,
nothing has come to their attention which caused them to believe that the taxes
paid or reserves set aside for payment of such taxes were not adequate in all
material respects for the satisfaction of Federal, state and local taxes for the
period from April 1, 1998, to and including the Exchange Date and for any
taxable year of Technology ending upon the liquidation of Technology or that
Technology would not continue to qualify as a regulated investment company for
Federal income tax purposes for the tax years in question.
(e) That there shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) That Global Technology shall have received an opinion of Brown & Wood
LLP, as counsel to both Global Technology and Technology, in form and substance
satisfactory to Global Technology and dated the Exchange Date, with respect to
the matters specified in Section 8(e) of this Agreement and such other matters
as Global Technology reasonably may deem necessary or desirable.
(g) That Global Technology shall have received a private letter ruling from
the Internal Revenue Service or an opinion of Brown & Wood LLP with respect to
the matters specified in Section 8(f) of this Agreement.
(h) That Global Technology shall have received from Deloitte & Touche LLP a
letter dated as of the effective date of the N-14 Registration Statement and a
similar letter dated within five days prior to the
I-11
<PAGE> 48
Exchange Date, in form and substance satisfactory to Global Technology, to the
effect that (i) they are independent public accountants with respect to
Technology within the meaning of the 1933 Act and the applicable published rules
and regulations thereunder; (ii) in their opinion, the financial statements and
supplementary information of Technology included or incorporated by reference in
the N-14 Registration Statement and reported on by them comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act
and the published rules and regulations thereunder; (iii) on the basis of
limited procedures agreed upon by Technology and Global Technology and described
in such letter (but not an examination in accordance with generally accepted
auditing standards) consisting of a reading of any unaudited interim financial
statements and unaudited supplementary information of Technology included in the
N-14 Registration Statement, and inquiries of certain officials of Technology
responsible for financial and accounting matters, nothing came to their
attention that caused them to believe that (a) such unaudited financial
statements and related unaudited supplementary information do not comply as to
form in all material respects with the applicable accounting requirements of the
1933 Act and the published rules and regulations thereunder, (b) such unaudited
financial statements are not fairly presented in conformity with generally
accepted accounting principles, applied on a basis substantially consistent with
that of the audited financial statements, or (c) such unaudited supplementary
information is not fairly stated in all material respects in relation to the
unaudited financial statements taken as a whole; and (iv) on the basis of
limited procedures agreed upon by Global Technology and Technology and described
in such letter (but not an examination in accordance with generally accepted
auditing standards), the information relating to Technology appearing in the
N-14 Registration Statement, which information is expressed in dollars (or
percentages derived from such dollars) (with the exception of performance
comparisons, if any), if any, has been obtained from the accounting records of
Technology or from schedules prepared by officials of Technology having
responsibility for financial and reporting matters and such information is in
agreement with such records, schedules or computations made therefrom.
(i) That the Investments to be transferred to Global Technology shall not
include any assets or liabilities which Global Technology, by reason of charter
limitations or otherwise, may not properly acquire or assume.
(j) That the N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Technology, be contemplated by the
Commission.
(k) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act, and no other legal, administrative or other
proceeding shall be instituted or threatened which would materially affect the
financial condition of Technology or would prohibit the Reorganization.
(l) That Global Technology shall have received from the Commission such
orders or interpretations as Brown & Wood LLP, as counsel to Global Technology,
deems reasonably necessary or desirable under the 1933 Act and the 1940 Act in
connection with the Reorganization, provided, that such counsel shall have
requested such orders as promptly as practicable, and all such orders shall be
in full force and effect.
(m) That all proceedings taken by Technology and its counsel in connection
with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to Global Technology.
(n) That prior to the Exchange Date, Technology shall have declared a
dividend or dividends which, together with all such previous dividends, shall
have the effect of distributing to its stockholders all of its investment
company taxable income for the period from March 31, 1998 to and including the
Exchange Date, if any (computed without regard to any deduction for dividends
paid), and all of its net capital gain, if any, realized for the period from
March 31, 1998 to and including the Exchange Date.
10. Termination, Postponement and Waivers.
(a) Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Reorganization abandoned at any time
(whether before or after adoption thereof by the stockholders of Technology)
prior to the Exchange Date, or the Exchange Date may be postponed, (i) by
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<PAGE> 49
mutual consent of the Boards of Directors of Technology and Global Technology;
(ii) by the Board of Directors of Technology if any condition of Technology's
obligations set forth in Section 8 of this Agreement has not been fulfilled or
waived by such Board; or (iii) by the Board of Directors of Global Technology if
any condition of Global Technology's obligations set forth in Section 9 of this
Agreement has not been fulfilled or waived by such Board.
(b) If the transactions contemplated by this Agreement have not been
consummated by September 30, 1999, this Agreement automatically shall terminate
on that date, unless a later date is mutually agreed to by the Boards of
Directors of Technology and Global Technology.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
there shall not be any liability on the part of either Technology or Global
Technology or persons who are their directors, trustees, officers, agents or
stockholders in respect of this Agreement.
(d) At any time prior to the Exchange Date, any of the terms or conditions
of this Agreement may be waived by the Board of Directors of either Technology
or Global Technology, respectively (whichever is entitled to the benefit
thereof), if, in the judgment of such Board after consultation with its counsel,
such action or waiver will not have a material adverse effect on the benefits
intended under this Agreement to the stockholders of their respective fund, on
behalf of which such action is taken. In addition, the Boards of Directors of
Technology and Global Technology have delegated to MLAM the ability to make
non-material changes to the transaction if it deems it to be in the best
interests of Technology and Global Technology to do so.
(e) The respective representations and warranties contained in Sections 1
and 2 of this Agreement shall expire with, and be terminated by, the
consummation of the Reorganization, and neither Technology nor Global Technology
nor any of their officers, directors or trustees, agents or stockholders shall
have any liability with respect to such representations or warranties after the
Exchange Date. This provision shall not protect any officer, director or
trustee, agent or stockholder of Technology or Global Technology against any
liability to the entity for which that officer, director or trustee, agent or
stockholder so acts or to its stockholders, to which that officer, director or
trustee, agent or stockholder otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties in
the conduct of such office.
(f) If any order or orders of the Commission with respect to this Agreement
shall be issued prior to the Exchange Date and shall impose any terms or
conditions which are determined by action of the Boards of Directors of
Technology and Global Technology to be acceptable, such terms and conditions
shall be binding as if a part of this Agreement without further vote or approval
of the stockholders of Technology unless such terms and conditions shall result
in a change in the method of computing the number of shares of Global Technology
to be issued to Technology in which event, unless such terms and conditions
shall have been included in the proxy solicitation materials furnished to the
stockholders of Technology prior to the meeting at which the Reorganization
shall have been approved, this Agreement shall not be consummated and shall
terminate unless Technology promptly shall call a special meeting of
stockholders at which such conditions so imposed shall be submitted for
approval.
11. Indemnification.
(a) Technology hereby agrees to indemnify and hold Global Technology
harmless from all loss, liability and expense (including reasonable counsel fees
and expenses in connection with the contest of any claim) which Global
Technology may incur or sustain by reason of the fact that (i) Global Technology
shall be required to pay any corporate obligation of Technology, whether
consisting of tax deficiencies or otherwise, based upon a claim or claims
against Technology which were omitted or not fairly reflected in the financial
statements to be delivered to Global Technology in connection with the
Reorganization; (ii) any representations or warranties made by Technology in
this Agreement should prove to be false or erroneous in any material respect;
(iii) any covenant of Technology has been breached in any material respect; or
(iv) any claim is made alleging that (a) the N-14 Registration Statement
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
I-13
<PAGE> 50
therein not misleading or (b) the Proxy Statement and Prospectus delivered to
the stockholders of Technology and forming a part of the N-14 Registration
Statement included any untrue statement of a material fact or omitted to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
claim is based on written information furnished to Technology by Global
Technology.
(b) Global Technology hereby agrees to indemnify and hold Technology
harmless from all loss, liability and expenses (including reasonable counsel
fees and expenses in connection with the contest of any claim) which Technology
may incur or sustain by reason of the fact that (i) any representations or
warranties made by Global Technology in this Agreement should prove false or
erroneous in any material respect, (ii) any covenant of Global Technology has
been breached in any material respect, or (iii) any claim is made alleging that
(a) the N-14 Registration Statement included any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, not misleading or (b) the Proxy
Statement and Prospectus delivered to stockholders of Technology and forming a
part of the N-14 Registration Statement included any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such claim is based on written
information furnished to Global Technology by Technology.
(c) In the event that any claim is made against Global Technology in
respect of which indemnity may be sought by Global Technology from Technology
under Section 11(a) of this Agreement, or in the event that any claim is made
against Technology in respect of which indemnity may be sought by Technology
from Global Technology under Section 11(b) of this Agreement, then the party
seeking indemnification (the "Indemnified Party"), with reasonable promptness
and before payment of such claim, shall give written notice of such claim to the
other party (the "Indemnifying Party"). If no objection as to the validity of
the claim is made in writing to the Indemnified Party by the Indemnifying Party
within thirty (30) days after the giving of notice hereunder, then the
Indemnified Party may pay such claim and shall be entitled to reimbursement
therefor, pursuant to this Agreement. If, prior to the termination of such
thirty-day period, objection in writing as to the validity of such claim is made
to the Indemnified Party, the Indemnified Party shall withhold payment thereof
until the validity of such claim is established (i) to the satisfaction of the
Indemnifying Party, or (ii) by a final determination of a court of competent
jurisdiction, whereupon the Indemnified Party may pay such claim and shall be
entitled to reimbursement thereof, pursuant to this Agreement, or (iii) with
respect to any tax claims, within seven (7) calendar days following the earlier
of (A) an agreement between Technology and Global Technology that an indemnity
amount is payable, (B) an assessment of a tax by a taxing authority, or (C) a
"determination" as defined in Section 1313(a) of the Code. For purposes of this
Section 11, the term "assessment" shall have the same meaning as used in Chapter
63 of the Code and Treasury Regulations thereunder, or any comparable provision
under the laws of the appropriate taxing authority. In the event of any
objection by the Indemnifying Party, the Indemnifying Party promptly shall
investigate the claim, and if it is not satisfied with the validity thereof, the
Indemnifying Party shall conduct the defense against such claim. All costs and
expenses incurred by the Indemnifying Party in connection with such
investigation and defense of such claim shall be borne by it. These
indemnification provisions are in addition to, and not in limitation of, any
other rights the parties may have under applicable law.
12. Other Matters.
(a) Pursuant to Rule 145 under the 1933 Act, and in connection with the
issuance of any shares to any person who at the time of the Reorganization is,
to its knowledge, an affiliate of a party to the Reorganization pursuant to Rule
145(c), Global Technology will cause to be affixed upon the certificate(s)
issued to such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO MERRILL
LYNCH GLOBAL TECHNOLOGY FUND, INC. (OR ITS STATUTORY SUCCESSOR) OR ITS
PRINCIPAL UNDERWRITER UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933
I-14
<PAGE> 51
OR (II) IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE FUND, SUCH
REGISTRATION IS NOT REQUIRED.
and, further, that stop transfer instructions will be issued to Global
Technology's transfer agent with respect to such shares. Technology will provide
Global Technology on the Exchange Date with the name of any Technology
stockholder who is to the knowledge of Technology an affiliate of Technology on
such date.
(b) All covenants, agreements, representations and warranties made under
this Agreement and any certificates delivered pursuant to this Agreement shall
be deemed to have been material and relied upon by each of the parties,
notwithstanding any investigation made by them or on their behalf.
(c) Any notice, report or demand required or permitted by any provision of
this Agreement shall be in writing and shall be made by hand delivery, prepaid
certified mail or overnight service, addressed to Technology or Global
Technology, in either case at 800 Scudders Mill Road, Plainsboro, New Jersey
08536, Attn: Arthur Zeikel, President.
(d) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Reorganization, constitutes the
only understanding with respect to the Reorganization, may not be changed except
by a letter of agreement signed by each party and shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said state.
(e) Copies of the Articles of Incorporation, as amended, of Technology and
Global Technology are on file with the Department of Assessments and Taxation of
the State of Maryland and notice is hereby given that this instrument is
executed on behalf of the Directors of each fund.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original but all
such counterparts together shall constitute but one instrument.
MERRILL LYNCH GLOBAL TECHNOLOGY FUND,
INC.
BY:
------------------------------------
(ARTHUR ZEIKEL, PRESIDENT)
ATTEST:
/s/ PHILIP M. MANDEL
- --------------------------------------
(PHILIP M. MANDEL, SECRETARY)
MERRILL LYNCH TECHNOLOGY FUND, INC.
BY:
------------------------------------
(GERALD RICHARD, TREASURER)
ATTEST:
/s/ PHILIP M. MANDEL
- --------------------------------------
(PHILIP M. MANDEL, SECRETARY)
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<PAGE> 52
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH TECHNOLOGY FUND, INC.
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(609) 282-2800
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Proxy Statement and Prospectus of Merrill Lynch
Technology Fund, Inc. ("Technology Fund") and Merrill Lynch Global Technology
Fund, Inc. ("Global Technology Fund") dated December 10, 1998 (the "Proxy
Statement and Prospectus"), which has been filed with the Securities and
Exchange Commission and can be obtained, without charge, by calling Global
Technology Fund at 1-800-456-4587, ext. 123, or by writing to Global Technology
Fund at the above address. This Statement of Additional Information has been
incorporated by reference into the Proxy Statement and Prospectus.
Further information about Global Technology Fund is contained in and
incorporated by reference to its Prospectus, dated May 20, 1998, and its
Statement of Additional Information, dated May 20, 1998, which are incorporated
by reference into this Statement of Additional Information. Global Technology
Fund's Statement of Additional Information accompanies this Statement of
Additional Information.
Further information about Technology Fund is contained in and incorporated
by reference to its Prospectus, dated June 30, 1998, and its Statement of
Additional Information, dated June 30, 1998, which are incorporated by reference
into this Statement of Additional Information. The Technology Fund Statement of
Additional Information accompanies this Statement of Additional Information.
The Commission maintains a web site (http://www.sec.gov) that contains the
prospectus and statement of additional information of each of Technology Fund
and Global Technology Fund, other material incorporated by reference and other
information regarding Technology Fund and Global Technology Fund.
The date of this Statement of Additional Information is December 10, 1998.
<PAGE> 53
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information 2
Financial Statements 2
Pro Forma Combined Schedule of Investments for Global
Technology Fund and Technology Fund as of September 30,
1998 (unaudited) F-1
Pro Forma Combined Statement of Assets and Liabilities for
Global Technology Fund and Technology Fund as of
September 30, 1998 (unaudited) F-4
Pro Forma Combined Statement of Operations for Global
Technology Fund and Technology Fund as of September 30,
1998 (unaudited) F-6
</TABLE>
GENERAL INFORMATION
The stockholders of Technology Fund are being asked to approve the
acquisition of substantially all of the assets of Technology Fund, and the
assumption of substantially all of the liabilities of Technology Fund, by Global
Technology Fund in exchange solely for an equal aggregate value of shares of
Global Technology Fund (the "Reorganization"). Global Technology Fund is an
open-end management investment company organized as a Maryland corporation. A
Special Meeting of Stockholders of Technology Fund to consider the
Reorganization will be held at 800 Scudders Mill Road, Plainsboro, New Jersey,
on January 12, 1999, at 9:00 a.m., New York time.
For detailed information about the Reorganization, stockholders of
Technology Fund should refer to the Proxy Statement and Prospectus. For further
information about Global Technology Fund, stockholders should refer to Global
Technology Fund's Statement of Additional Information, dated May 20, 1998, which
accompanies this Statement of Additional Information and is incorporated by
reference herein. For further information about Technology Fund, stockholders
should refer to Technology Fund's Statement of Additional Information, dated
June 30, 1998, which accompanies this Statement of Additional Information and is
incorporated by reference herein.
FINANCIAL STATEMENTS
Pro forma financial statements reflecting consummation of the
Reorganization are included herein.
GLOBAL TECHNOLOGY FUND
An audited statement of assets and liabilities and accompanying notes as of
May 18, 1998, and report of independent auditors thereon, dated May 18, 1998, of
Global Technology Fund are incorporated by reference from Global Technology
Fund's Statement of Additional Information, dated May 20, 1998. Unaudited
financial statements and accompanying notes for the period June 26, 1998 through
September 30, 1998 of Global Technology Fund are incorporated by reference from
Global Technology Fund's Semi-Annual Report to Shareholders.
TECHNOLOGY FUND
Audited financial statements and accompanying notes for the fiscal year
ended March 31, 1998, and the independent auditor's report thereon, dated May 6,
1998, of Technology Fund are incorporated by reference from Technology Fund's
Statement of Additional Information, dated June 30, 1998. Unaudited financial
statements and accompanying notes for the six months ended September 30, 1998 of
Technology Fund are incorporated by reference from Technology Fund's Semi-Annual
Report to Shareholders.
2
<PAGE> 54
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR COMBINED
COUNTRY INDUSTRIES SHARES HELD STOCKS FUND FUND FUND
- ------------- ---------------------- ----------- ------------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CANADA TELECOMMUNICATION 121,000 Northern Telecom Limited....... $ 3,872,000 $ -- $ 3,872,000
EQUIPMENT ------------ ------------ ------------
TOTAL INVESTMENTS IN CANADA.... 3,872,000 -- 3,872,000
============ ============ ============
FINLAND TELECOMMUNICATION 62,600 Nokia Oyj (ADR)**.............. 4,910,188 -- 4,910,188
EQUIPMENT ------------ ------------ ------------
TOTAL INVESTMENTS IN FINLAND... 4,910,188 -- 4,910,188
============ ============ ============
GERMANY SOFTWARE 181,200 SAP AG (Systeme, Anwendungen,
Produkte in der
Datenverarbeitung) (ADR)**... 3,628,975 3,426,500 7,055,475
------------ ------------ ------------
TOTAL INVESTMENTS IN GERMANY... 3,628,975 3,426,500 7,055,475
============ ============ ============
ISRAEL TELECOMMUNICATION 354,400 ECI Telecommunications
EQUIPMENT Limited...................... 5,228,300 3,454,500 8,682,800
------------ ------------ ------------
TOTAL INVESTMENTS IN ISRAEL.... 5,228,300 3,454,500 8,682,800
============ ============ ============
SINGAPORE COMPUTER PERIPHERALS 4,216,950 +Creative Technology Ltd. ..... -- 37,952,550 37,952,550
------------ ------------ ------------
TOTAL INVESTMENTS IN
SINGAPORE.................... -- 37,952,550 37,952,550
============ ============ ============
UNITED STATES COMPONENTS 322,000 +American Power Conversion 12,115,250 -- 12,115,250
Corporation..................
545,000 General Cable Corporation...... 5,753,500 4,329,000 10,082,500
------------ ------------ ------------
17,868,750 4,329,000 22,197,750
------------ ------------ ------------
COMPUTER PERIPHERALS 904,100 +Seagate Technology, Inc....... 5,115,256 17,543,750 22,659,006
------------ ------------ ------------
28,536,563 -- 28,536,563
COMPUTER SYSTEMS 499,000 +EMC Corporation...............
618,800 +Electronics for Imaging, 13,072,150 -- 13,072,150
Inc..........................
45,000 International Business Machines 5,760,000 -- 5,760,000
Corporation..................
178,000 +Sun Microsystems, Inc......... 4,931,438 3,935,188 8,866,626
------------ ------------ ------------
52,300,151 3,935,188 56,235,339
------------ ------------ ------------
CONTRACT MANUFACTURERS 423,200 +Flextronics International 11,392,800 3,525,000 14,917,800
Ltd..........................
11,554,375 3,544,500 15,098,875
434,500 +Jabil Circuit, Inc............
11,348,769 3,313,313 14,662,082
544,300 +SCI Systems, Inc..............
669,000 +Sanmina Corporation........... 10,355,063 8,418,750 18,773,813
------------ ------------ ------------
44,651,007 18,801,563 63,452,570
------------ ------------ ------------
5,862,000 -- 5,862,000
DATA COMMUNICATIONS 195,400 +3Com Corporation..............
4,550,000 3,899,350 8,449,350
185,700 +Ascend Communications, Inc....
348,750 +Cisco Systems, Inc............ 4,867,734 16,689,375 21,557,109
------------ ------------ ------------
15,279,734 20,588,725 35,868,459
------------ ------------ ------------
DISTRIBUTION 93,300 +Ingram Micro Inc.............. 4,997,381 -- 4,997,381
------------ ------------ ------------
5,091,031 -- 5,091,031
DIVERSIFIED TECHNOLOGY 50,500 Lockheed Martin Corporation....
763,200 +Thermo Electron Corporation... 11,495,700 -- 11,495,700
------------ ------------ ------------
16,586,731 -- 16,586,731
------------ ------------ ------------
ELECTRONIC DESIGN 874,300 +Cadence Design Systems, 18,463,794 3,885,500 22,349,294
Inc..........................
AUTOMATION 442,000 +Synopsys, Inc................. 11,026,438 3,697,688 14,724,126
------------ ------------ ------------
29,490,232 7,583,188 37,073,420
------------ ------------ ------------
</TABLE>
F-1
<PAGE> 55
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR COMBINED
COUNTRY INDUSTRIES SHARES HELD STOCKS FUND FUND FUND
- ------------- ---------------------- ----------- ------------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INTERNET 86,300 +America Online, Inc. 9,600,875 -- 9,600,875
39,000 +Yahoo! Inc. .................. 5,048,063 -- 5,048,063
------------ ------------ ------------
14,648,938 -- 14,648,938
------------ ------------ ------------
MEDICAL TECHNOLOGY 65,000 +Boston Scientific 3,339,375 -- 3,339,375
Corporation..................
5,462,500 -- 5,462,500
76,000 +Genentech, Inc................
919,700 HBO and Company................ 26,556,338 -- 26,556,338
------------ ------------ ------------
35,358,213 -- 35,358,213
------------ ------------ ------------
MISCELLANEOUS 4,345 Iwerks Entertainment, Inc.
(Warrants)(a)................ -- -- --
------------ ------------ ------------
13,662,000 17,393,750 31,055,750
PERSONAL COMPUTERS 982,000 COMPAQ Computer Corporation....
4,865,500 -- 4,865,500
74,000 +Dell Computer Corporation.....
165,200 +Gateway 2000, Inc............. 562,950 8,048,100 8,611,050
------------ ------------ ------------
19,090,450 25,441,850 44,532,300
------------ ------------ ------------
-- 14,375,625 14,375,625
SEMICONDUCTOR 410,000 +Altera Corporation............
12,065,025 14,448,875 26,513,900
309,200 Intel Corporation..............
-- 15,750,000 15,750,000
315,000 Linear Technology Corporation
670,200 +Maxim Integrated Products, 5,017,500 13,664,325 18,681,825
Inc..........................
-- 8,157,250 8,157,250
268,000 +Micron Technology, Inc........
-- 13,633,200 13,633,200
432,800 +PMC-Sierra, Inc...............
9,690,175 16,088,750 25,778,925
488,700 Texas Instruments Inc..........
485,000 +Vitesse Semiconductor -- 11,397,500 11,397,500
Corporation..................
506,000 +Xilinx, Inc................... 4,227,437 13,450,937 17,678,374
------------ ------------ ------------
31,000,137 120,966,462 151,966,599
------------ ------------ ------------
SEMICONDUCTOR 166,500
EQUIPMENT +Applied Materials, Inc........ 4,204,125 -- 4,204,125
------------ ------------ ------------
9,499,875 4,068,750 13,568,625
SOFTWARE 516,900 Autodesk, Inc..................
5,502,000 12,642,000 18,144,000
302,400 +BMC Software, Inc.............
16,876,700 -- 16,876,700
237,700 +Citrix Systems, Inc...........
5,334,075 -- 5,334,075
90,600 +Compuware Corporation.........
12,448,069 16,399,312 28,847,381
262,100 +Microsoft Corporation.........
11,981,250 3,266,000 15,247,250
429,500 +Network Associates, Inc.......
24,295,837 -- 24,295,837
744,700 +PeopleSoft, Inc...............
370,100 +Symantec Corporation.......... 2,547,562 2,310,000 4,857,562
------------ ------------ ------------
88,485,368 38,686,062 127,171,430
------------ ------------ ------------
5,249,281 -- 5,249,281
TECHNOLOGY SERVICES 120,500 +BISYS Group, Inc. (The).......
8,134,050 3,428,750 11,562,800
219,200 +DST Systems, Inc..............
421,100 +Keane, Inc.................... 12,121,637 2,669,500 14,791,137
------------ ------------ ------------
25,504,968 6,098,250 31,603,218
------------ ------------ ------------
TELECOMMUNICATION 480,000 +ADC Telecommunications, 7,477,187 2,632,812 10,109,999
Inc..........................
3,770,812 15,677,187 19,447,999
EQUIPMENT 281,600 Lucent Technologies, Inc.......
11,684,969 3,065,563 14,750,532
370,500 +Tellabs, Inc..................
184,000 +Uniphase Corporation.......... 3,993,500 3,504,500 7,498,000
------------ ------------ ------------
26,926,468 24,880,062 51,806,530
------------ ------------ ------------
</TABLE>
F-2
<PAGE> 56
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR COMBINED
COUNTRY INDUSTRIES SHARES HELD STOCKS FUND FUND FUND
- ------------- ---------------------- ----------- ------------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
TELECOMMUNICATIONS 415,100 +MCI WorldCom, Inc............. 16,231,387 4,056,625 20,288,012
------------ ------------ ------------
TOTAL INVESTMENTS IN THE
UNITED STATES................ 447,739,296 292,910,725 740,650,021
============ ============ ============
TOTAL INVESTMENTS IN STOCKS.... 465,378,759 337,744,275 803,123,034
============ ============ ============
SHORT-TERM
SECURITIES FACE AMOUNT ISSUE
- ------------- ------------ -------------------------------
COMMERCIAL PAPER* 19,021,000 General Motors Acceptance
Corp., 5.88% due
10/01/1998................... 13,393,000 5,628,000 19,021,000
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES................... 13,393,000 5,628,000 19,021,000
------------ ------------ ------------
TOTAL INVESTMENTS.............. 478,771,759 343,372,275 822,144,034
OTHER ASSETS LESS
LIABILITIES.................. 2,289,081 (2,735,349) (446,268)
------------ ------------ ------------
NET ASSETS..................... $481,060,840 $340,636,926 $821,697,766
============ ============ ============
</TABLE>
- ---------------
* Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rate paid at the time of purchase by the Fund.
** American Depositary Receipts (ADR).
+ Non-income producing security.
(a) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number of
shares are subject to adjustment under certain conditions until the
expiration date.
See Notes to Financial Statements.
F-3
<PAGE> 57
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
FOR MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
AS OF SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR
FUND FUND ADJUSTMENTS COMBINED FUND
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (Note 1a)........... $478,771,759 $ 343,372,275 $ 822,144,034
Receivables:
Capital shares sold.................... 663,115 469,176 1,132,291
Securities sold........................ 9,596,470 0 9,596,470
Dividends.............................. 24,874 8,250 33,124
Deferred organization expenses (Note
1f).................................... 108,600 0 108,600
Prepaid registration fees and other
assets (Note 1f)....................... 200,000 17,757 217,757
------------ ------------- ------------ --------------
Total assets............................. 489,364,818 343,867,458 833,232,276
------------ ------------- ------------ --------------
LIABILITIES:
Payables:
Securities purchased................... 4,969,470 0 4,969,470
Capital shares redeemed................ 777,439 1,253,889 2,031,328
Distributor (Note 2)................... 333,300 148,686 481,986
Investment adviser (Note 2)............ 386,499 287,066 673,565
Custodian bank (Note 1h)............... 1,341,821 1,209,095 2,550,916
Accrued expenses and other liabilities... 495,449 331,796 317,659(1) 1,144,904
------------ ------------- ------------ --------------
Total liabilities........................ 8,303,978 3,230,532 317,659 11,852,169
------------ ------------- ------------ --------------
NET ASSETS:
Net Assets............................... $481,060,840 $ 340,636,926 $ (317,659) $ 821,380,107
============ ============= ============ ==============
NET ASSETS CONSIST OF:
Class A Common Stock, $0.10 par value,
100,000,000 shares authorized.......... $ 213,753 $ 4,220,712 (2,547,141) $ 1,887,324
Class B Common Stock, $0.10 par value,
200,000,000 shares authorized.......... 3,642,205 4,855,033 (3,030,483) 5,466,755
Class C Common Stock, $0.10 par value,
100,000,000 shares authorized.......... 866,454 257,908 (161,663) 962,699
Class D Common Stock, $0.10 par value,
100,000,000 shares authorized.......... 706,628 624,751 (378,503) 952,876
Paid-in capital in excess of par......... 538,429,124 531,660,385 5,800,131 1,075,889,640
Accumulated investment loss -- net....... (1,443,252) (3,356,813) (4,800,065)
Accumulated realized capital losses on
investments and foreign currency
transactions -- net.................... (4,007,784) (147,911,977) (151,919,761)
Accumulated distributions in excess of
realized capital gains on investments
-- net (Note 1g)....................... 0 (19,019,891) (19,019,891)
Unrealized depreciation on investments
and foreign currency transactions --
net.................................... (57,346,288) (30,693,182) (88,039,470)
------------ ------------- ------------ --------------
Net assets............................... $481,060,840 $ 340,636,926 $ (317,659) $ 821,380,107
============ ============= ============ ==============
NET ASSET VALUE:
Class A:
Net assets............................. $ 18,985,279 $ 148,645,908 (64,804) $ 167,566,383
Shares outstanding..................... 2,137,528 42,207,121 (25,471,407) 17,873,242
Net Asset Value........................ $ 8.88 $ 3.52 -- $ 8.88
</TABLE>
F-4
<PAGE> 58
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR
FUND FUND ADJUSTMENTS COMBINED FUND
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Class B:
Net assets............................. $322,608,932 $ 161,608,329 (187,194) $ 484,030,067
Shares outstanding..................... 36,422,048 48,550,329 (30,304,824) 54,667,553
Net Asset Value........................ $ 8.86 $ 3.33 -- $ 8.85
Class C:
Net Assets............................. $ 76,745,116 $ 8,525,015 (32,964) $ 85,237,167
Shares outstanding..................... 8,664,536 2,579,080 (1,616,622) 9,626,994
Net Asset Value........................ $ 8.86 $ 3.31 $ 8.85
Class D:
Net Assets............................. $ 62,721,513 $ 21,857,674 (32,697) $ 84,546,490
Shares outstanding..................... 7,066,275 6,247,508 (3,785,021) 9,528,762
Net Asset Value........................ $ 8.88 $ 3.50 $ 8.87
*Identified cost......................... $536,118,047 $ 374,065,457 $ 910,183,504
</TABLE>
- ---------------
(1) Reflects the charge for estimated Reorganization expenses of $375,000 and
anticipated savings of the Reorganization.
See Notes to Financial Statements.
F-5
<PAGE> 59
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
FOR THE PERIOD APRIL 1, 1998 TO SEPTEMBER 30, 1988
(UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR
FUND+ FUND ADJUSTMENTS COMBINED FUND
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTES 1D & 1E):
Dividends**.......................... $ 104,652 $ 154,136 $ 258,788
Interest and discount earned......... 1,317,528 976,544 2,294,072
------------ ------------ -------------
Total income......................... 1,422,180 1,130,680 2,552,860
------------ ------------ -------------
EXPENSES:
Investment advisory fees............. 1,296,405 2,257,240 3,553,645
Account maintenance and distribution
fees -- Class B (Note 2).......... 866,949 1,127,750 1,994,699
Account maintenance and distribution
fees -- Class C (Note 2).......... 209,762 60,526 270,288
Transfer agent fees -- Class B....... 120,649 397,655 518,304
Registration fees (Note 1f).......... 100,553 39,764 140,317
Account maintenance fees -- Class D
(Note 2).......................... 42,087 35,657 77,744
Custodian fees....................... 72,939 17,792 90,731
Transfer agent fees -- Class C....... 30,383 23,205 53,588
Transfer agent fees -- Class D....... 19,663 44,033 63,696
Printing and shareholder reports..... 35,839 69,371 105,210
Accounting services (Note 2)......... 32,633 63,804 (33,314)(2) 63,123
Directors' fees and expenses......... 12,120 19,820 (12,756)(2) 19,184
Transfer agent fees -- Class A (Note
2)................................ 6,002 286,831 292,833
Professional fees.................... 10,265 38,140 (11,271)(2) 37,134
Amortization of organization
expenses.......................... 5,867 0 5,867
Pricing fees......................... 1,297 198 1,495
Other................................ 2,019 5,707 375,000(1) 382,726
------------ ------------ --------- -------------
Total expenses....................... 2,865,432 4,487,493 317,659 7,670,584
------------ ------------ --------- -------------
Investment income (loss) -- net...... (1,443,252) (3,356,813) (317,659) (5,117,724)
------------ ------------ --------- -------------
</TABLE>
F-6
<PAGE> 60
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR
FUND+ FUND ADJUSTMENTS COMBINED FUND
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS & FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES 1B, 1C &
1E):
Realized gain (loss) from:
Investments -- net................ (4,007,784) 10,007,159 5,999,375
Foreign currency
transactions -- net............. 0 0 0
Change in unrealized
appreciation/depreciation on:
Investments -- net................ (57,346,288) (85,531,968) (142,878,256)
Foreign currency
transactions -- net............. 0 0 0
Net realized and unrealized loss on
investments and foreign currency
transactions...................... (61,354,072) (75,524,809) (136,878,881)
------------ ------------ --------- -------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $(62,797,324) $(78,881,622) $(317,659) $(141,996,605)
============ ============ ========= =============
**Net foreign withholding tax on
dividends............................ $ 1,771 $ 1,771
</TABLE>
- ---------------
(1) Reflects the charge for estimated Reorganization expenses of $375,000.
(2) Reflects the anticipated savings of the Reorganization.
+ The Fund commenced operations on June 26, 1998.
F-7
<PAGE> 61
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Global Technology Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. These unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are of a normal
recurring nature. The Fund offers four classes of shares under the Merrill Lynch
Select Pricing(SM) System. Shares of Class A and Class D are sold with a
front-end sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have identical voting,
dividend, liquidation, and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain expenses related to
the account maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its account
maintenance and distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of securities -- Portfolio securities which are traded on
stock exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by or
under the authority of the Board of Directors as the primary market. Securities
which are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market. Options written
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Short-term securities are valued at amortized cost, which
approximates market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors.
(b) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the equity, debt and currency markets. Losses may
arise due to changes in the value of the contract or if the counterparty does
not perform under the contract.
- Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts for the purpose
of hedging the market risk on existing securities or the intended
purchase of securities. Futures contracts are contracts for delayed
delivery of securities at a specific future date and at a specific price
or yield. Upon entering into a contract, the 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.
- Options -- The Fund is authorized to write and purchase 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.
F-8
<PAGE> 62
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.
- Forward foreign exchange contracts -- The Fund is authorized to enter
into forward foreign exchange contracts as a hedge against either
specific transactions or portfolio positions. Such contracts are not
entered on the Fund's records. However, the effect on operations is
recorded from the date the Fund enters into such contracts. Premium or
discount is amortized over the life of the contracts.
- Foreign currency options and futures -- The Fund may also purchase or
sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as a
short or long hedge against possible variations in foreign exchange
rates. Such transactions may be effected with respect to hedges on non-US
dollar denominated securities owned by the Fund, sold by the Fund but not
yet delivered, or committed or anticipated to be purchased by the Fund.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(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.
(e) Security transactions and investment income -- Security transactions
are recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently recorded
when the Fund has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost basis.
(f) Deferred organization expenses and prepaid registration
fees -- Deferred organization expenses are charged to expense on a straight-line
basis over a period not exceeding five years. Prepaid registration fees are
charged to expense as the related shares are issued.
(g) Dividends and distributions to shareholders -- Dividends and
distributions paid by the Fund are recorded on the ex-dividend dates.
(h) Custodian bank -- The Fund recorded an amount payable to the Custodian
Bank resulting from a timing difference of security transaction settlements.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Fund has entered into an Investment Advisory Agreement with Merrill
Lynch Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered
into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
F-9
<PAGE> 63
MLAM is responsible for the management of the Fund's portfolio and provides
the administrative services necessary for the operation of the Fund. As
compensation for its services to the Fund, MLAM receives monthly compensation at
the annual rate of 1.0% of the average daily net assets of the Fund.
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 an ongoing account maintenance fee and distribution fee. The fees
are accrued daily and paid monthly at annual rates based upon the average daily
net assets of the shares as follows:
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
FEE FEE
----------- ------------
<S> <C> <C>
Class B............................................. 0.25% 0.75%
Class C............................................. 0.25% 0.75%
Class D............................................. 0.25% --
</TABLE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the period April 1, 1998 to September 30, 1998, MLFD earned
underwriting discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class D Shares as follows:
<TABLE>
<CAPTION>
MERRILL LYNCH
GLOBAL MERRILL LYNCH
TECHNOLOGY TECHNOLOGY
FUND, INC.+ FUND, INC.
------------- -------------
<S> <C> <C>
Class A:
MLFD............................................ $ 29 $ 332
MLPF&S.......................................... $ 445 $ 4,361
Class D:
MLFD............................................ $ 13,871 $ 905
MLPF&S.......................................... $1,836,945 $12,341
</TABLE>
For the period April 1, 1998 to September 30, 1998, MLPF&S received
contingent deferred sales charges relating to transactions in Class B and Class
C Shares, as follows:
<TABLE>
<CAPTION>
MERRILL LYNCH
GLOBAL MERRILL LYNCH
TECHNOLOGY TECHNOLOGY
FUND, INC.+ FUND, INC.
------------- -------------
<S> <C> <C>
Class B........................................... $83,190 $404,920
Class C........................................... $11,638 $ 5,523
</TABLE>
Furthermore, MLPF&S received contingent deferred sales charges of $100,994
relating to transactions subject to front-end sales charge waivers in Class A
Shares for Merrill Lynch Technology Fund, Inc.
In addition, MLPF&S received $79,512 in commissions on the execution of
portfolio security transactions for the Fund for the period April 1, 1998 to
September 30, 1998.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML &
Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors
of MLAM, PSI, FDS, PFD, and/or ML & Co.
- ---------------
+ The Fund commenced operations on June 26, 1998.
F-10
<PAGE> 64
MERRILL LYNCH TECHNOLOGY FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn
and Philip M. Mandel as proxies, each with the power to appoint his substitute,
and hereby authorizes each of them to represent and to vote, as designated
below, all of the shares of common stock of Merrill Lynch Technology Fund, Inc.
(the "Fund") held of record by the undersigned on November 18, 1998, at a
Special Meeting of Stockholders of the Fund to be held on January 12, 1999 or
any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" PROPOSAL 1.
By signing and dating this card, you authorize the proxies to
vote each proposal as marked, or if not marked, to vote "FOR" each proposal, and
to use their discretion to vote for any other matter as may properly come before
the meeting or any adjournment thereof. If you do not intend to personally
attend the meeting, please complete and return this card at once in the enclosed
envelope.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
persons.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION
FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN
THIS PORTION ONLY
Vote on Proposal
1. To approve the Agreement and Plan of Reorganization between
Merrill Lynch Technology Fund, Inc. and Merrill Lynch Global
Technology Fund, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
Signature (PLEASE Date Signature (Joint Owners) Date
SIGN WITHIN BOX)
<PAGE> 65
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
Reference is made to Article V of Registrant's Articles of Incorporation,
Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General
Corporation Law and Section 9 of the Class A, Class B, Class C and Class D
Distribution Agreements.
Article VI of the By-Laws provides that each officer and director of the
Registrant shall be indemnified by the Registrant to the full extent permitted
under the General Laws of the State of Maryland, except that such indemnity
shall not protect any such person against any liability to the Registrant or any
stockholder thereof to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. Absent a court determination that
an officer or director seeking indemnification was not liable on the merits or
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office, the decision by the
Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent directors, after
review of the facts, that such officer or director is not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Each officer and director of the Registrant claiming indemnification within
the scope of Article VI of the By-Laws shall be entitled to advances from the
Registrant for payment of the reasonable expenses incurred by him in connection
with proceedings to which he is a party in the manner and to the full extent
permitted under the General Laws of the State of Maryland; provided, however,
that the person seeking indemnification shall provide to the Registrant a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Registrant has been met and a written
undertaking to repay any such advance, if it should ultimately be determined
that the standard of conduct has not been met, and provided further that at
least one of the following additional conditions is met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to the
Registrant for his undertaking; (b) the Registrant is insured against losses
arising by reason of the advance; (c) a majority of a quorum of non-party
independent directors, or independent legal counsel in a written opinion, shall
determine, based on a review of facts readily available to the Registrant at the
time the advance is proposed to be made, that there is reason to believe that
the person seeking indemnification will ultimately be found to be entitled to
indemnification.
The Registrant may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland from liability arising from his or her activities as an
officer or director of the Registrant. The Registrant, however, may not purchase
insurance on behalf of any officer or director of the Registrant that protects
or purports to protect such person from liability to the Registrant or to its
stockholders to which such officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his or her office.
The Registrant may indemnify, make advances or purchase insurance to the
extent provided in Article VI of the By-Laws on behalf of an employee or agent
who is not an officer or director of the Registrant.
In Section 9 of the Class A, Class B, Class C and Class D Distribution
Agreements relating to the securities being offered hereby, the Registrant
agrees to indemnify the Distributor and each person, if any, who controls the
Distributor within the meaning of the Securities Act of 1933 (the "1933 Act"),
against certain types of civil liabilities arising in connection with the
Registration Statement or Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to Directors, officers and controlling persons of the Registrant
and the principal underwriter pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In
C-1
<PAGE> 66
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a Director,
officer, or controlling person of the Registrant and the principal underwriter
in connection with the successful defense of any action, suit or proceeding) is
asserted by such Director, officer or controlling person or the principal
underwriter in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <C>
(1)(a) -- Articles of Incorporation of the Registrant, dated March 24,
1998.(a)
(1)(b) -- Articles of Amendment to Articles of Incorporation of the
Registrant, dated May 6, 1998.(b)
(2) -- Amended and Restated By-Laws of the Registrant.(b)
(3) -- Not applicable.
(4) -- Form of Agreement and Plan of Reorganization between the
Registrant and Merrill Lynch Technology Fund, Inc.(c)
(5) -- Copies of instruments defining the rights of stockholders,
including the relevant portions of the Articles of
Incorporation, and the By-Laws of the Registrant.(d)
(6)(a) -- Form of Management Agreement between the Registrant and
Merrill Lynch Asset Management, L.P. ("MLAM").(b)
(6)(b) -- Form of Sub-Advisory Agreement between MLAM and Merrill
Lynch Asset Management U.K. Limited.(b)
(7)(a) -- Form of Class A Shares Distribution Agreement between the
Registrant and Merrill Lynch Funds Distributor, Inc. (now
known as Princeton Funds Distributor, Inc.) (the
"Distributor").(b)
(7)(b) -- Form of Class B Shares Distribution Agreement between the
Registrant and the Distributor.(b)
(7)(c) -- Form of Class C Shares Distribution Agreement between the
Registrant and the Distributor.(b)
(7)(d) -- Form of Class D Shares Distribution Agreement between the
Registrant and the Distributor.(b)
(8) -- None.
(9) -- Form of Custody Agreement between the Registrant and Brown
Brothers Harriman & Co.(b)
(10)(a) -- Form of Class B Shares Distribution Plan and Class B Shares
Distribution Plan Sub-Agreement of the Registrant.(b)
(10)(b) -- Form of Class C Shares Distribution Plan and Class C Shares
Distribution Plan Sub-Agreement of the Registrant.(b)
(10)(c) -- Form of Class D Shares Distribution Plan and Class D Shares
Distribution Plan Sub-Agreement of the Registrant.(b)
(10)(d) -- Merrill Lynch Select Pricing(SM)System Plan pursuant to Rule
18f-3.(e)
(11) -- Opinion and Consent of Brown & Wood LLP, counsel for the
Registrant.
(12) -- Private Letter Ruling from the Internal Revenue Service.(f)
(13) -- Not applicable.
(14)(a) -- Consent of Deloitte & Touche LLP, independent auditors for
the Registrant.
(14)(b) -- Consent of Deloitte & Touche LLP, independent auditors for
Merrill Lynch Technology Fund, Inc.
(15) -- Not applicable.
(16) -- Power of Attorney (included on the signature page of this
Registration Statement).(g)
(17)(a) -- Prospectus dated May 20, 1998, and Statement of Additional
Information dated May 20, 1998, of the Registrant.(h)
(17)(b) -- Semi-Annual Report to Shareholders of the Registrant.
</TABLE>
C-2
<PAGE> 67
<TABLE>
<S> <C> <C>
(17)(c) -- Prospectus dated June 30, 1998, and Statement of Additional
Information dated June 30, 1998, of Merrill Lynch Technology
Fund, Inc.(h)
(17)(d) -- Semi-Annual Report to Shareholders of Merrill Lynch
Technology Fund, Inc.
</TABLE>
- ---------------
(a) Filed on March 31, 1998, as an Exhibit to the Registrant's Registration
Statement on Form N-1A (File No. 333-48929) under the Securities Act of
1933 (the "Registration Statement").
(b) Filed on May 20, 1998 as an Exhibit to Pre-Effective Amendment No. 1 to the
Registration Statement.
(c) Included as Exhibit I to the Proxy Statement and Prospectus contained in
this Registration Statement.
(d) Reference is made to Articles IV, V (Sections 3, 5, 6 and 7), VI, VII and IX
of the Registrant's Articles of Incorporation, as amended, filed as Exhibits
1(a) and 1(b) to the Registration Statement; and to Articles II, III
(Sections 1, 3, 5 and 6), VI, VII, XIII and XIV of the Registrant's By-Laws,
filed as Exhibit 2 to the Registration Statement.
(e) Incorporated by reference to Exhibit 18 to Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A under the Securities Act of
1933, as amended, filed on January 25, 1996, relating to shares of Merrill
Lynch New York Municipal Bond Fund series of Merrill Lynch Multi-State
Municipal Series Trust (File No. 2-99473).
(f) To be filed by post-effective amendment.
(g) Included on the signature page of the Registrant's Registration Statement on
Form N-14 (File No. 333-66637) under the Securities Act of 1933 (the
"Registration Statement on Form N-14") filed on November 2, 1998 and
incorporated by reference herein.
(h) Filed on November 2, 1998, as an Exhibit to the Registration Statement on
Form N-14.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through use of a prospectus which is part of this
Registration Statement by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act of 1933, as amended, the
reoffering prospectus will contain information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, as
amended, each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of securities at
that time shall be deemed to be the initial bona fide offering of them.
(3) The Registrant undertakes to file, by post-effective amendment, either
a copy of the Internal Revenue Service private letter ruling applied for or an
opinion of counsel as to certain tax matters, within a reasonable time after
receipt of such ruling or opinion.
C-3
<PAGE> 68
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the Township of Plainsboro and State
of New Jersey, on the 10th day of December, 1998.
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC.
(Registrant)
/s/ GERALD M. RICHARD
---------------------------------------
(GERALD M. RICHARD, TREASURER)
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
ARTHUR ZEIKEL* President (Principal
--------------------------------------------------- Executive Officer) and
(ARTHUR ZEIKEL) Director
GERALD M. RICHARD* Treasurer (Principal
--------------------------------------------------- Financial and Accounting
(GERALD M. RICHARD) Officer)
DONALD CECIL* Director
---------------------------------------------------
(DONALD CECIL)
EDWARD H. MEYER* Director
---------------------------------------------------
(EDWARD H. MEYER)
CHARLES C. REILLY* Director
---------------------------------------------------
(CHARLES C. REILLY)
RICHARD R. WEST* Director
---------------------------------------------------
(RICHARD R. WEST)
EDWARD D. ZINBARG* Director
---------------------------------------------------
(EDWARD D. ZINBARG)
ROLAND M. MACHOLD* Director
---------------------------------------------------
(ROLAND M. MACHOLD)
*By: /s/ GERALD M. RICHARD December 10, 1998
----------------------------------------------
(GERALD M. RICHARD, ATTORNEY-IN-FACT)
</TABLE>
C-4
<PAGE> 69
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
11 -- Opinion and Consent of Brown & Wood LLP, counsel for the
Registrant
14(a) -- Consent of Deloitte & Touche LLP, independent auditors for
the Registrant
14(b) -- Consent of Deloitte & Touche LLP, independent auditors for
Merrill Lynch Technology Fund, Inc.
17(b) -- Semi-Annual Report to Shareholders of the Registrant
17(d) -- Semi-Annual Report to Shareholders of Merrill Lynch
Technology Fund, Inc.
</TABLE>
<PAGE> 1
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
TELEPHONE: 212-839-5300
FACSIMILE: 212-839-5599
December 10, 1998
Merrill Lynch Global Technology Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Ladies and Gentlemen:
We have acted as counsel for Merrill Lynch Global Technology Fund, Inc.
(the "Fund") in connection with the proposed acquisition by the Fund of
substantially all of the assets and the assumption of substantially all of the
liabilities of Merrill Lynch Technology Fund, Inc. ("Technology Fund"), in
exchange for newly-issued shares of common stock of the Fund (the
"Reorganization"). This opinion is furnished in connection with the Fund's
Registration Statement on Form N-14 under the Securities Act of 1933, as
amended (the "Registration Statement"), relating to shares of common stock, par
value $0.10 per share, of the Fund (the "Shares"), to be issued in the
Reorganization.
As counsel for the Fund, we are familiar with the proceedings taken by it
and to be taken by it in connection with the authorization, issuance and sale of
the Shares. In addition, we have examined and are familiar with the Articles of
Incorporation of the Fund, as amended and restated, the By-Laws of the Fund and
such other documents as we have deemed relevant to the matters referred to in
this opinion.
Based upon the foregoing, we are of the opinion that subsequent to the
approval of the Agreement and Plan of Reorganization between the Fund and
Technology Fund set forth in the proxy statement and prospectus constituting a
part of the Registration Statement (the "Proxy Statement and Prospectus"), the
Shares, upon issuance in the manner referred to in the Registration Statement,
for consideration not less than the par value thereof, will be legally issued,
fully paid and non-assessable shares of common stock of the Fund.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Proxy Statement and
Prospectus constituting parts thereof.
Very truly yours,
/s/ Brown & Wood LLP
------------------------------
<PAGE> 1
Exhibit 14(a)
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Global Technology Fund, Inc.:
We consent to the incorporation by reference in this Registration Statement on
Form N-14 of our report dated May 18, 1998 appearing in the Statement of
Additional Information dated May 20, 1998 of Merrill Lynch Global Technology
Fund Inc., and to the reference to us under the caption "Experts" appearing in
the Proxy Statement and Prospectus, which is part of such Registration
Statement.
Deloitte & Touche LLP
Princeton, New Jersey
December 9, 1998
<PAGE> 1
Exhibit 14(b)
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Technology Fund, Inc:
We consent to the incorporation by reference in this Registration Statement on
Form N-14 of our report dated May 6, 1998 appearing in the Statement of
Additional Information dated June 30, 1998 of Merrill Lynch Technology Fund,
Inc., and to the references to us under the captions "Comparison of the
Funds - Financial Highlights" and "Experts" appearing in the Proxy Statement
and Prospectus, which is part of such Registration Statement.
Deloitte & Touche LLP
Princeton, New Jersey
December 9, 1998
<PAGE> 1
MERRILL LYNCH
GLOBAL
TECHNOLOGY
FUND, INC.
[FUND LOGO]
Semi-Annual Report
September 30, 1998
This report is not authorized for use as an offer of sale or 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.
Merrill Lynch
Global Technology Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#GTECH-9/98
[RECYCLE LOGO]
Printed on post-consumer recycled paper
<PAGE> 2
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC.
Portfolio
Information
As of 9/30/98
<TABLE>
<CAPTION>
TEN LARGEST INDUSTRIES PERCENT OF
REPRESENTED IN THE PORTFOLIO NET ASSETS
- ---------------------------- ----------
<S> <C>
Software 19.1%
Computer Systems 10.9
Contract Manufacturers 9.3
Telecommunication Equipment 8.5
Medical Technology 7.4
Semiconductor 6.4
Electronic Design Automation 6.1
Technology Services 5.3
Personal Computers 4.0
Components 3.7
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS PERCENT OF
REPRESENTED IN THE PORTFOLIO NET ASSETS
- ---------------------------- ----------
<S> <C>
EMC Corporation 6.0%
HBO & Company 5.5
PeopleSoft, Inc. 5.1
Cadence Design Systems, Inc. 3.8
Citrix Systems, Inc. 3.5
MCI WorldCom, Inc. 3.4
COMPAQ Computer Corporation 2.9
Electronics for Imaging, Inc. 2.7
Microsoft Corporation 2.6
Keane, Inc. 2.5
</TABLE>
1
<PAGE> 3
Merrill Lynch Global Technology Fund, Inc., September 30, 1998
DEAR SHAREHOLDER
We are pleased to provide you with this first shareholder report for Merrill
Lynch Global Technology Fund, Inc. The Fund seeks long-term capital appreciation
through worldwide investment in equity securities of issuers that we believe
derive a substantial portion of their income from products and services in
technology-related industries. In this and future reports to shareholders, we
will provide information on the Fund's performance, discuss our investment
strategies, list current portfolio investments, and highlight some of the Fund's
holdings.
Merrill Lynch Global Technology Fund, Inc. commenced operations on June 26, 1998
with $427 million in net assets. The Fund, and technology stocks in general, as
measured by the unmanaged Merrill Lynch 100 Technology Index (MLO), an index of
the world's 100 largest technology companies, peaked on July 20, 1998.
Throughout the remainder of the period ended September 30, 1998, the world's
equity markets and technology stocks tumbled, culminating with a sharp decline
on August 31, 1998. For the quarter ended September 30, 1998, the Fund's total
returns for Class A, Class B, Class C and Class D Shares were -11.64%, -11.84%,
- -11.84% and -11.64%, respectively, while the MLO dropped 11.04%. The Fund also
performed in line with the average technology fund over the September quarter as
measured by the Lipper Science and Technology Funds Average, whose total return
was -10.88%. Fortunately, technology stocks have recovered somewhat since the
end of September after reaching a new low on October 8, 1998, which was below
the low mark set on August 31, 1998.
Over the past few years, large-capitalization stocks have outperformed
smaller-capitalization issues. In fact, the media have extensively reported that
investors could not go wrong by owning large-capitalization companies such as
Microsoft Corporation, Intel Corporation, International Business Machines
Corporation, Cisco Systems, Inc., Lucent Technologies Inc. and Dell Computer
Corporation (the top six companies in the MLO). However, during the period ended
September 30, 1998, these stocks underperformed the broader averages, as
investors took profits in these higher-valued stocks.
PORTFOLIO MATTERS
During the quarter ended September 30, 1998, the Fund was essentially fully
invested in equities that we believed were reasonably priced current or future
technology leaders. Our long-term strategy is to focus on leadership companies
as defined by top market shares and superior technology or business processes. A
superior business process may be best described by an example of one of our
holdings, Dell Computer Corporation. Although Dell has been growing at an
accelerated rate in the personal computer industry, it still lags COMPAQ
Computer Corporation in worldwide market share by a small amount. Since Dell
spent less than 2% of its sales last fiscal year on research and development,
the company cannot be described as a technology leader. However, we believe the
company's direct distribution of personal computers is truly superior and has
made Dell one of the best investments in its industry for several years.
We believe that the strong get stronger, especially in the technology sector.
Once a company gains substantial market share, it achieves critical economies of
scale. Economies of scale allow these market leaders to fund powerhouse research
and development efforts and to lock up the best modes of distribution. Many of
these industry leaders also offer "one-stop shopping" (that is, the critical
broad product line of hardware, software and services that are appealing to
customers). Finally, these leaders have access to low-cost capital and skilled
labor in order to continue to grow their businesses.
2
<PAGE> 4
During the September quarter, the Fund's holdings were comprised of many of the
"who's who" in the fastest-growing and most important technology industries,
such as: Applied Materials, Inc. (semiconductor capital equipment); America
Online, Inc. (Internet); Cisco Systems, Inc. (data networking); Dell Computer
Corporation (personal computers); EMC Corporation (data storage); Genentech,
Inc. (biotechnology); HBO & Company (healthcare software and services); Ingram
Micro Inc. (wholesale distribution); Intel Corporation (microprocessors);
Lucent Technologies Inc. (telecommunications equipment); Microsoft Corporation
(desktop operating system software); Nokia Oyj (wireless handsets and
infrastructure); SAP AG (Systeme, Anwendungen, Produkte in der
Datenverarbeitung) (enterprise resource planning software); SCI Systems, Inc.
(contract manufacturing); Sun Microsystems, Inc. (UNIX servers and
workstations); and MCI Worldcom, Inc. (telecommunications).
Because of our focus on technology leaders, we typically invest in
large-capitalization stocks. Few of the Fund's holdings have market values of
less than $2 billion, and the Fund's weighted average market capitalization was
$25.6 billion at September 30, 1998. Further, we expect to maintain a
diversified portfolio with no more than 5% in any single equity at the time of
purchase. As specified in the Fund's prospectus, we also will not exceed 25% of
total assets in any industry. In fact, the only stocks that accounted for 5% or
more of the Fund's net assets on September 30, 1998 were EMC Corporation (6.0%),
HBO & Company (5.5%) and Peoplesoft, Inc. (5.1%). Each position was purchased up
to the 5% limit. Relative portfolio movements since their purchase accounted for
the EMC and HBO holdings being significantly above 5% at the end of September.
In keeping with our strategy of diversification, we plan to reduce any position,
regardless of how positively we view the company's outlook, if it were to
appreciate to 7.5% of net assets, to ensure broad diversification. Also, the
Fund's largest industry positions were in software and computer systems,
comprising 19.1% and 10.9% of the Fund's net assets, respectively, at September
30, 1998. See page 1 of this report to shareholders for complete listings of the
Fund's ten largest industries and ten largest holdings represented in the
portfolio.
Currently, the world's equity markets are the most volatile they have been in
years, and technology stocks typically exaggerate the market's movements.
Furthermore, we have only recently completed the portfolio's initial investment
process. However, we plan to hold core positions in technology leaders for an
extended period, provided no radical changes occur in their fundamental
outlooks. We may add to these positions on market dips, or we may reduce these
holdings when they appreciate beyond what fundamentals dictate. Also, we intend
to use a two-year price target for any investment. Over a reasonable investment
horizon, we expect to adhere to a 100% annual turnover limit.
It is our intention to keep the Fund essentially fully invested at all times in
an attempt to avoid market timing and focus primarily on long-term stock
selection. At September 30, 1998, the Fund was 96.7% invested. Although our
intent is to increase our foreign holdings in technology leaders around the
world, we do not believe that valuations have been attractive enough to warrant
purchase given the obvious macroeconomic risks. Therefore, as of September 30,
1998, we were not significantly invested in companies that are not domiciled in
the United States. Our only foreign holdings on September 30, 1998 were ECI
Telecommunications Limited (Israel), Nokia Oyj (Finland), Northern Telecom
Limited (Canada) and SAP AG (Systeme, Anwendungen, Produkte in der
Datenverarbeitung) (Germany). Combined, they accounted for 3.6% of the Fund's
net assets at the close of the September quarter. During the quarter, we had few
investments in Japan or the Asia/Pacific region, essentially because of the
negative macroeconomic conditions that bring a multitude of risks, and because
of our doubts about the quick recovery of the semiconductor and semiconductor
capital equipment industries, which are heavily represented in those regions.
In addition to focusing on US companies, we are attracted to organizations that
are less dependent on sales to regions in crisis. We will continue to seek
companies that may be less affected by foreign competitors that are funded by
undervalued currencies relative to the US dollar, and that may be in such poor
financial condition that they may compete desperately and irrationally (for
example, sell products below cost). Therefore, we were overweighted in less
cyclical, more domestically oriented software and computer service industries,
such as: The BISYS Group, Inc.; BMC Software, Inc.; Cadence Design Systems,
Inc.; Citrix Systems, Inc.; Compuware Corporation; DST Systems, Inc.; HBO &
Company; Keane, Inc.; Microsoft Corporation; Network Associates, Inc.;
Peoplesoft, Inc.; Symantec Corporation and Synopsys, Inc. Conversely, we were
underweighted in export-oriented, more cyclical hardware, semiconductor and
semiconductor capital equipment industries. Although we maintained small
positions in these industries, we are invested in industry leaders such as
Applied Materials, Inc.; COMPAQ Computer Corporation; Dell Computer Corporation;
International Business Machines Corporation; Seagate Technology, Inc.; Sun
Microsystems, Inc.; and Texas Instruments, Incorporated.
3
<PAGE> 5
Merrill Lynch Global Technology Fund, Inc., September 30, 1998
Our long-term outlook for the technology sector remains positive, but we are
cautious about the US equity market in the short term and on the fundamentals of
many foreign companies. While we continue to be fully invested, our domestic
focus was reflected in our overall portfolio allocation at September 30, 1998:
93.1% of net assets in US equities, 3.6% in foreign equities, and 3.3% in cash.
Despite some European companies' recent disappointing earnings results, we
continue to find opportunities in Europe to be much more attractive than those
in Asia. Our non-US investments are predominantly European companies with global
franchises and limited reliance on Asian markets. We do not foresee any drastic
change in the recent economic strength exhibited by Europe.
Also, we will continue to monitor opportunities in Japan, Taiwan and South
Korea, all significant technology producers, but we are wary of the pace of
recovery in Southeast Asia, Latin America, and other emerging markets and the
prospects for meaningful economic reform in Japan. Over the long term, we
anticipate some recovery in these markets, possibly as early as 1999.
Within the technology sector, we remained overweighted in industries that we
believed are less reliant on the weak markets of Asia and Latin America, or have
secular growth drivers that more than offset geographical weakness. We believe
that select software and computer service companies should continue to post
strong, visible earnings in this environment. Contract manufacturers are riding
the global wave of outsourcing and, as such, we believe that they will continue
to exhibit above-trend earnings growth. In addition, these companies possess
reasonable valuations. We will remain underweighted in the shares of
semiconductor, semiconductor equipment and disk drive companies as we wait for
evidence that supply and demand in these sectors are balanced.
Our outlook for technology stocks in 1999 is more positive than for the balance
of 1998, both in absolute terms and relative to the broader market. We continue
to believe that a portfolio of technology leaders, trading below a market
multiple but growing earnings many times faster, should produce superior returns
for investors over the long term.
IN CONCLUSION
On October 21, 1998, the Fund's Board of Directors approved a plan of
reorganization whereby the Fund would acquire substantially all of the net
assets and assume substantially all of the liabilities of Merrill Lynch
Technology Fund, Inc. in exchange for newly issued shares of the Fund. The plan
of reorganization is subject to shareholder approval. Merrill Lynch Technology
Fund, Inc. is a registered, non-diversified open-end management investment
company. Both entities have a similar investment objective and are managed by
Merrill Lynch Asset Management, L.P.
We thank you for your investment in Merrill Lynch Global Technology Fund, Inc.,
and we look forward to reporting to you again in our next report to
shareholders.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Paul G. Meeks
Paul G. Meeks
Senior Vice President and
Portfolio Manager
November 11, 1998
4
<PAGE> 6
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
- - Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
- - Class B Shares are subject to a maximum contingent deferred sales charge of
4% if redeemed during the first year, decreasing 1% each year thereafter to
0% after the fourth year. In addition, Class B Shares are subject to a
distribution fee of 0.75% and an account maintenance fee of 0.25%. These
shares automatically convert to Class D Shares after approximately 8 years.
(There is no initial sales charge for automatic share conversions.)
- - Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
- - Class D Shares incur a maximum initial sales charge of 5.25% and an account
maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of future
performance. Figures shown in the "Recent Performance Results" and "Aggregate
Annual Total Return" tables assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. Investment
return and principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Dividends paid to
each class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to each class,
which are deducted from the income available to be paid to shareholders.
Recent
Performance
Results*
<TABLE>
<CAPTION>
3 MONTH SINCE INCEPTION
TOTAL RETURN TOTAL RETURN
------------ ---------------
<S> <C> <C>
ML Global Technology Fund, Inc. Class A Shares -11.64% -11.20%
ML Global Technology Fund, Inc. Class B Shares -11.84 -11.40
ML Global Technology Fund, Inc. Class C Shares -11.84 -11.40
ML Global Technology Fund, Inc. Class D Shares -11.64 -11.20
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund commenced operations on 6/26/98.
5
<PAGE> 7
Aggregate
Total Return
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN WITH
CLASS A SHARES* SALES CHARGE SALES CHARGE**
- --------------- ---------------- --------------
<S> <C> <C>
Inception (6/26/98) through 9/30/98 -11.20% -15.86%
</TABLE>
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
% RETURN % RETURN
CLASS B SHARES* WITHOUT CDSC WITH CDSC**
- --------------- ------------ -----------
<S> <C> <C>
Inception (6/26/98) through 9/30/98 -11.40% -14.94%
</TABLE>
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4
years.
** Assuming payment of applicable contingent deferred sales charge.
<TABLE>
<CAPTION>
% RETURN % RETURN
CLASS C SHARES* WITHOUT CDSC WITH CDSC**
- --------------- ------------ -----------
<S> <C> <C>
Inception (6/26/98) through 9/30/98 -11.40% -12.29%
</TABLE>
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1
year.
** Assuming payment of applicable contingent deferred sales charge.
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN WITH
CLASS D SHARES* SALES CHARGE SALES CHARGE**
- --------------- ---------------- --------------
<S> <C> <C>
Inception (6/26/98) through 9/30/98 -11.20% -15.86%
</TABLE>
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
6
<PAGE> 8
Merrill Lynch Global Technology Fund, Inc., September 30, 1998
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY INDUSTRIES HELD STOCKS COST (NOTE 1a) NET ASSETS
- ------- ---------- ------ ------ ---- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Canada Telecommunication 121,000 Northern Telecom Limited $ 4,969,470 $ 3,872,000 0.8%
Equipment
Total Investments in Canada 4,969,470 3,872,000 0.8
Finland Telecommunication 62,600 Nokia Oyj (ADR)** 4,329,335 4,910,188 1.0
Equipment
Total Investments in Finland 4,329,335 4,910,188 1.0
Germany Software 93,200 SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
(ADR)** 5,229,200 3,628,975 0.7
Total Investments in Germany 5,229,200 3,628,975 0.7
Israel Telecommunication 213,400 ECI Telecommunications Limited 7,663,805 5,228,300 1.1
Equipment
Total Investments in Israel 7,663,805 5,228,300 1.1
United Components 322,000 ++American Power Conversion Corporation 9,178,406 12,115,250 2.5
States 311,000 General Cable Corporation 6,781,681 5,753,500 1.2
----------- ----------- ----
15,960,087 17,868,750 3.7
Computer 204,100 ++Seagate Technology, Inc. 5,139,702 5,115,256 1.1
Peripherals
Computer Systems 499,000 ++EMC Corporation 22,421,426 28,536,563 6.0
618,800 ++Electronics for Imaging, Inc. 12,068,578 13,072,150 2.7
45,000 International Business
Machines Corporation 5,852,700 5,760,000 1.2
99,000 ++Sun Microsystems, Inc. 4,314,875 4,931,438 1.0
----------- ----------- ----
44,657,579 52,300,151 10.9
Contract 323,200 ++Flextronics International Ltd. 13,767,416 11,392,800 2.4
Manufacturers 332,500 ++Jabil Circuit, Inc. 10,756,600 11,554,375 2.4
421,300 ++SCI Systems, Inc. 15,320,030 11,348,769 2.4
369,000 ++Sanmina Corporation 15,557,318 10,355,063 2.1
----------- ----------- ----
55,401,364 44,651,007 9.3
Data 195,400 ++3Com Corporation 5,816,837 5,862,000 1.2
Communications 100,000 ++Ascend Communications, Inc. 4,789,690 4,550,000 1.0
78,750 ++Cisco Systems, Inc. 4,679,719 4,867,734 1.0
----------- ----------- ----
15,286,246 15,279,734 3.2
Distribution 93,300 ++Ingram Micro Inc. 3,936,473 4,997,381 1.0
Diversified 50,500 Lockheed Martin Corporation 5,024,624 5,091,031 1.0
Technology 763,200 ++Thermo Electron Corporation 23,731,283 11,495,700 2.4
----------- ----------- ----
28,755,907 16,586,731 3.4
Electronic Design 722,300 ++Cadence Design Systems, Inc. 21,310,030 18,463,794 3.8
Automation 331,000 ++Synopsys, Inc. 14,172,380 11,026,438 2.3
----------- ----------- ----
35,482,410 29,490,232 6.1
Internet 86,300 ++America Online, Inc. 9,215,071 9,600,875 2.0
39,000 ++Yahoo! Inc. 3,334,371 5,048,063 1.0
----------- ----------- ----
12,549,442 14,648,938 3.0
Medical Technology 65,000 ++Boston Scientific Corporation 4,966,650 3,339,375 0.7
76,000 ++Genentech, Inc. 5,084,768 5,462,500 1.2
919,700 HBO & Company 29,532,852 26,556,338 5.5
----------- ----------- ----
39,584,270 35,358,213 7.4
Personal Computers 432,000 COMPAQ Computer Corporation 12,615,423 13,662,000 2.9
74,000 ++Dell Computer Corporation 3,431,750 4,865,500 1.0
10,800 ++Gateway 2000, Inc. 567,567 562,950 0.1
----------- ----------- ----
16,614,740 19,090,450 4.0
Semiconductor 140,700 Intel Corporation 10,763,381 12,065,025 2.5
180,000 ++Maxim Integrated Products, Inc. 4,991,870 5,017,500 1.0
183,700 Texas Instruments Incorporated 10,769,653 9,690,175 2.0
121,000 ++Xilinx, Inc. 4,307,621 4,227,437 0.9
----------- ----------- ----
30,832,525 31,000,137 6.4
Semiconductor 166,500 ++Applied Materials, Inc. 5,075,724 4,204,125 0.9
Equipment
Software 361,900 Autodesk, Inc. 11,350,399 9,499,875 2.0
91,700 ++BMC Software, Inc. 4,743,500 5,502,000 1.1
237,700 ++Citrix Systems, Inc. 15,972,120 16,876,700 3.5
90,600 ++Compuware Corporation 5,050,950 5,334,075 1.1
113,100 ++Microsoft Corporation 12,317,726 12,448,069 2.6
337,500 ++Network Associates, Inc. 15,133,179 11,981,250 2.5
744,700 ++PeopleSoft, Inc. 31,974,144 24,295,837 5.1
194,100 ++Symantec Corporation 5,116,753 2,547,562 0.5
----------- ----------- ----
101,658,771 88,485,368 18.4
Technology 120,500 ++BISYS Group, Inc. (The) 4,808,125 5,249,281 1.1
Services 154,200 ++DST Systems, Inc. 10,570,653 8,134,050 1.7
345,100 ++Keane, Inc. 18,682,937 12,121,637 2.5
----------- ----------- ----
34,061,715 25,504,968 5.3
Telecommunication 355,000 ++ADC Telecommunications, Inc. 12,511,878 7,477,187 1.6
Equipment 54,600 Lucent Technologies Inc. 4,450,332 3,770,812 0.8
293,500 ++Tellabs, Inc. 17,012,652 11,684,969 2.4
98,000 ++Uniphase Corporation 5,131,995 3,993,500 0.8
----------- ----------- ----
39,106,857 26,926,468 5.6
Telecommunications 332,100 ++MCI WorldCom, Inc. 16,429,425 16,231,387 3.4
Total Investments in the
United States 500,533,237 447,739,296 93.1
Total Investments in Stocks 522,725,047 465,378,759 96.7
</TABLE>
7
<PAGE> 9
Merrill Lynch Global Technology Fund, Inc., September 30, 1998
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
SHORT-TERM FACE VALUE PERCENT OF
SECURITIES AMOUNT ISSUE COST (NOTE 1a) NET ASSETS
- ---------- ------ ----- ---- --------- ----------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER* $ 13,393,000 General Motors Acceptance Corp.,
5.88% due 10/01/1998 $ 13,393,000 $ 13,393,000 2.8%
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES 13,393,000 13,393,000 2.8
TOTAL INVESTMENTS $536,118,047 478,771,759 99.5
============
OTHER ASSETS LESS LIABILITIES 2,289,081 0.5
------------ ------
NET ASSETS $481,060,840 100.0%
============ ======
</TABLE>
* Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rate paid at the time of purchase by the Fund.
** American Depositary Receipts (ADR).
++ Non-income producing security.
See Notes to Financial Statements.
8
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$536,118,047)(Note 1a) $478,771,759
Receivables:
Securities sold $ 9,596,470
Capital shares sold 663,115
Dividends 24,874 10,284,459
------------
Deferred organization expenses (Note 1f) 108,600
Prepaid registration fees and other assets (Note 1f) 200,000
------------
Total assets 489,364,818
------------
Liabilities: Payables:
Securities purchased 4,969,470
Custodian bank (Note 1h) 1,341,821
Capital shares redeemed 777,439
Investment adviser (Note 2) 386,499
Distributor (Note 2) 333,300 7,808,529
------------
Accrued expenses and other liabilities 495,449
------------
Total liabilities 8,303,978
------------
Net Assets: Net assets $481,060,840
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 213,753
Class B Shares of Common Stock, $0.10 par value, 200,000,000
shares authorized 3,642,205
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 866,454
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 706,628
Paid-in capital in excess of par 538,429,124
Accumulated investment loss--net (1,443,252)
Accumulated realized capital losses on investments--net (4,007,784)
Unrealized depreciation on investments--net (57,346,288)
------------
Net assets $481,060,840
============
Net Asset Class A--Based on net assets of $18,985,279 and 2,137,528
Value: shares outstanding $ 8.88
============
Class B--Based on net assets of $322,608,932 and 36,422,048
shares outstanding $ 8.86
============
Class C--Based on net assets of $76,745,116 and 8,664,536
shares outstanding $ 8.86
============
Class D--Based on net assets of $62,721,513 and 7,066,275
shares outstanding $ 8.88
============
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 11
Merrill Lynch Global Technology Fund, Inc., September 30, 1998
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 26, 1998++ TO SEPTEMBER 30, 1998
<S> <C> <C> <C>
Investment Interest and discount earned $ 1,317,528
Income Dividends (net of $1,771 foreign withholding tax) 104,652
(Notes 1d & 1e): ------------
Total income 1,422,180
------------
Expenses: Investment advisory fees (Note 2) $ 1,296,405
Account maintenance and distribution fees--Class B (Note 2) 866,949
Account maintenance and distribution fees--Class C (Note 2) 209,762
Transfer agent fees--Class B (Note 2) 120,649
Registration fees (Note 1f) 100,553
Custodian fees 72,939
Account maintenance fees--Class D (Note 2) 42,087
Printing and shareholder reports 35,839
Accounting services (Note 2) 32,633
Transfer agent fees--Class C (Note 2) 30,383
Transfer agent fees--Class D (Note 2) 19,663
Directors' fees and expenses 12,120
Professional fees 10,265
Transfer agent fees--Class A (Note 2) 6,002
Amortization of organization expenses (Note 1f) 5,867
Pricing fees 1,297
Other 2,019
------------
Total expenses 2,865,432
------------
Investment loss--net (1,443,252)
------------
Realized & Realized loss on investments--net (4,007,784)
Unrealized Loss on Unrealized depreciation on investments--net (57,346,288)
Investments--Net ------------
(Notes 1b, 1c, NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(62,797,324)
1e & 3): ============
</TABLE>
++ Commencement of operations.
See Notes to Financial Statements.
10
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 26, 1998++ TO SEPTEMBER 30, 1998
INCREASE (DECREASE) IN NET ASSETS:
----------------------------------
<S> <C> <C>
Operations: Investment loss--net $ (1,443,252)
Realized loss on investments--net (4,007,784)
Unrealized depreciation on investments--net (57,346,288)
------------
Net decrease in net assets resulting from operations (62,797,324)
------------
Capital Share Net increase in net assets derived from capital share transactions 543,758,164
Transactions ------------
(Note 4):
Net Assets: Total increase in net assets 480,960,840
Beginning of period 100,000
------------
End of period $481,060,840
============
</TABLE>
++ Commencement of operations.
See Notes to Financial Statements.
11
<PAGE> 13
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 26, 1998++ TO SEPTEMBER 30, 1998
-------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: CLASS A CLASS B CLASS C CLASS D
--------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment loss--net (.01) (.03) (.03) (.01)
Realized and unrealized loss on investments--net (1.11) (1.11) (1.11) (1.11)
-------- -------- -------- --------
Total from investment operations (1.12) (1.14) (1.14) (1.12)
-------- -------- -------- --------
Net asset value, end of period $ 8.88 $ 8.86 $ 8.86 $ 8.88
======== ======== ======== ========
Total Investment Based on net asset value per share (11.20%)+++ (11.40%)+++ (11.40%)+++ (11.20%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.33%* 2.35%* 2.36%* 1.58%*
Net Assets: ======== ======== ======== ========
Investment loss--net (.23%)* (1.25%)* (1.25%)* (.50%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 18,985 $322,609 $ 76,745 $ 62,722
Data: ======== ======== ======== ========
Portfolio turnover 9.98% 9.98% 9.98% 9.98%
======== ======== ======== ========
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
12
<PAGE> 14
Merrill Lynch Global Technology Fund, Inc., September 30, 1998
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Global Technology Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. Prior to commencement of operations on June 26, 1998, the Fund had no
operations other than those relating to organizational matters and the issue of
10,000 capital shares of the Fund to Merrill Lynch Asset Management, L.P.
("MLAM") for $100,000. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund offers four classes of shares under
the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C may be subject
to a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation, and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of securities--Portfolio securities which are traded on stock
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. Securities
traded in the over-the-counter market are valued at the last available bid
price prior to the time of valuation. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange designated by
or under the authority of the Board of Directors as the primary market.
Securities which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). Short-term securities are valued at amortized cost,
which approximates market value. Other investments, including futures contracts
and related options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the equity, debt and currency markets. Losses may arise due
to changes in the value of the contract or if the counterparty does not perform
under the contract.
- - Financial futures contracts--The Fund may purchase or sell financial
futures contracts and options on such futures contracts for the purpose of
hedging the market risk on existing securities or the intended purchase of
securities. Futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield. Upon
entering into a contract, the 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.
- - Options--The Fund is authorized to write and purchase 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.
13
<PAGE> 15
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.
- - Forward foreign exchange contracts--The Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Fund's records. However, the effect on operations is recorded from the date
the Fund enters into such contracts. Premium or discount is amortized over
the life of the contracts.
- - Foreign currency options and futures--The Fund may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long
hedge against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-US dollar
denominated securities owned by the Fund, sold by the Fund but not yet
delivered, or committed or anticipated to be purchased by the Fund.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(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.
(e) Security transactions and investment income---Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently recorded
when the Fund has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost basis.
(f) Deferred organization expenses and prepaid registration fees--Deferred
organization expenses are charged to expense on a straight-line basis over a
period not exceeding five years. Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions to shareholders--Dividends and distributions
paid by the Fund are recorded on the ex-dividend dates.
(h) Custodian bank--The Fund recorded an amount payable to the Custodian Bank
resulting from a timing difference of security transaction settlements.
14
<PAGE> 16
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Fund has entered into an Investment Advisory Agreement with MLAM. The
general partner of MLAM is Princeton Services, Inc. ("PSI"), an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution Agreement and
Distribution Plans with Merrill Lynch Funds Distributor ("MLFD" or
"Distributor"), a division of Princeton Funds Distributor, Inc. ("PFD"), which
is a wholly-owned subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and provides the
administrative services necessary for the operation of the Fund. As compensation
for its services to the Fund, MLAM receives monthly compensation at the annual
rate of 1.0% of the average daily net assets of the Fund.
Pursuant to the Distribution Plans adopted by the Fund, in accordance with Rule
12b-1 under the Investment Fund Act of 1940, the Fund pays the Distributor an
ongoing account maintenance fee and distribution fee. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
FEE FEE
----------- ------------
<S> <C> <C>
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
</TABLE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the period June 26, 1998 to September 30, 1998, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the Fund's Class A
and Class D Shares as follows:
<TABLE>
<CAPTION>
MLFD MLPF&S
---- ------
<S> <C> <C>
Class A $ 29 $ 445
Class D $13,871 $1,836,945
</TABLE>
For the period June 26, 1998 to September 30, 1998, MLPF&S received contingent
deferred sales charges of $83,190 and $11,638 relating to transactions in Class
B and Class C Shares, respectively.
In addition, MLPF&S received $65,472 in commissions on the execution of
portfolio security transactions for the Fund for the period June 26, 1998 to
September 30, 1998.
15
<PAGE> 17
Merrill Lynch Global Technology Fund, Inc., September 30, 1998
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
MLAM, PSI, FDS, PFD, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
period June 26, 1998 to September 30, 1998 were $561,935,039 and $35,203,192,
respectively.
Net realized losses for the period June 26, 1998 to September 30, 1998 and net
unrealized losses as of September 30, 1998 were as follows:
<TABLE>
<CAPTION>
REALIZED UNREALIZED
LOSSES LOSSES
-------- ----------
<S> <C> <C>
Long-term investments $(4,006,799) $(57,346,288)
Short-term investments (985) --
----------- ------------
Total $(4,007,784) $(57,346,288)
=========== ============
</TABLE>
As of September 30, 1998, net unrealized depreciation for Federal income tax
purposes aggregated $57,346,288, of which $22,213,770 related to appreciated
securities and $79,560,058 related to depreciated securities. The aggregate cost
of investments at September 30, 1998 for Federal income tax purposes was
$536,118,047.
4. CAPITAL SHARE TRANSACTIONS:
Net increase in net assets derived from capital share transactions was
$543,758,164 for the period June 26,1998 to September 30, 1998.
Transactions in capital shares for each class were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES FOR THE PERIOD DOLLAR
JUNE 26, 1998++ TO SEPTEMBER 30, 1998 SHARES AMOUNT
- ------------------------------------- ------ ------
<S> <C> <C>
Shares sold 2,595,556 $ 25,614,113
Shares redeemed (460,528) (4,238,895)
--------- ------------
Net increase 2,135,028 $ 21,375,218
========= ============
</TABLE>
++ Prior to June 26, 1998 (commencement of operations), the Fund issued 2,500
shares to MLAM for $25,000.
<TABLE>
<CAPTION>
CLASS B SHARES FOR THE PERIOD DOLLAR
JUNE 26, 1998++ TO SEPTEMBER 30, 1998 SHARES AMOUNT
- ------------------------------------- ------ ------
<S> <C> <C>
Shares sold 37,731,884 $ 376,776,025
Shares redeemed (1,288,489) (12,040,862)
Automatic conversion of shares (23,847) (230,730)
---------- -------------
Net increase 36,419,548 $ 364,504,433
========== =============
</TABLE>
++ Prior to June 26, 1998 (commencement of operations), the Fund issued 2,500
shares to MLAM for $25,000.
<TABLE>
<CAPTION>
CLASS C SHARES FOR THE PERIOD DOLLAR
JUNE 26, 1998++ TO SEPTEMBER 30, 1998 SHARES AMOUNT
- ------------------------------------- ------ ------
<S> <C> <C>
Shares sold 9,261,542 $ 92,488,979
Shares redeemed (599,506) (5,444,376)
--------- ------------
Net increase 8,662,036 $ 87,044,603
========= ============
</TABLE>
++ Prior to June 26, 1998 (commencement of operations), the Fund issued 2,500
shares to MLAM for $25,000.
<TABLE>
<CAPTION>
CLASS D SHARES FOR THE PERIOD DOLLAR
JUNE 26, 1998++ TO SEPTEMBER 30, 1998 SHARES AMOUNT
- ------------------------------------- ------ ------
<S> <C> <C>
Shares sold 7,309,457 $ 73,117,860
Automatic conversion of shares 23,818 230,730
--------- ------------
Total issued 7,333,275 73,348,590
Shares redeemed (269,500) (2,514,680)
--------- ------------
Net increase 7,063,775 $ 70,833,910
========= ============
</TABLE>
++ Prior to June 26, 1998 (commencement of operations), the Fund issued 2,500
shares to MLAM for $25,000.
5. REORGANIZATION PLAN:
On October 21, 1998, the Fund's Board of Directors approved a plan of
reorganization whereby the Fund would acquire substantially all of the assets
and liabilities of Merrill Lynch Technology Fund, Inc. in exchange for newly
issued shares of the Fund. The plan of reorganization is subject to Merrill
Lynch Technology Fund, Inc. shareholder approval. Merrill Lynch Technology Fund,
Inc. is a registered, non-diversified, open-end management investment company.
Both entities have a similar investment objective and are managed by MLAM.
16
<PAGE> 18
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Paul G. Meeks, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
TRANSFER AGENT
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
17
<PAGE> 1
MERRILL LYNCH TECHNOLOGY FUND, INC.
Portfolio Information As of 9/30/98
<TABLE>
<CAPTION>
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
<S> <C>
Creative Technology Ltd....................... 11.1%
Seagate Technology, Inc....................... 5.2
COMPAQ Computer Corporation................... 5.1
Cisco Systems, Inc............................ 4.9
Microsoft Corporation......................... 4.8
Texas Instruments Incorporated................ 4.7
Linear Technology Corporation................. 4.6
Lucent Technologies Inc....................... 4.6
Intel Corporation............................. 4.2
Altera Corporation............................ 4.2
</TABLE>
<TABLE>
<CAPTION>
Ten Largest Industries Percent of
Represented in the Portfolio Net Assets
<S> <C>
Semiconductors................................ 35.5%
Computer Peripherals.......................... 16.3
Software...................................... 12.3
Telecommunication Equipment................... 8.3
Personal Computers............................ 7.5
Data Communications........................... 6.0
Contract Manufacturers........................ 5.5
Electronic Design Automation.................. 2.2
Technology Services........................... 1.8
Components.................................... 1.3
</TABLE>
<PAGE> 2
MERRILL LYNCH TECHNOLOGY FUND, INC., SEPTEMBER 30, 1998
DEAR SHAREHOLDER
Merrill Lynch Technology Fund, Inc. and technology stocks in general, as
measured by the unmanaged Merrill Lynch 100 Technology Index (MLO), an index of
the world's 100 largest technology companies, peaked on July 20, 1998.
Throughout the remainder of the quarter ended September 30, 1998, the world's
equity markets and technology stocks declined. During the quarter ended
September 30, 1998, the Fund's total returns for Class A, Class B, Class C and
Class D Shares were -11.78%, -11.90%, -11.73% and -11.62%, respectively, while
the MLO declined 11.04%. The Fund slightly lagged the average technology fund
over the September quarter as measured by the Lipper Science and Technology
Funds Average, whose total return was -10.88%. Fortunately, technology stocks
have recovered somewhat since the end of September after reaching a new low on
October 8, 1998, which was below the low mark set on August 31, 1998.
Over the past few years, large-capitalization stocks have outperformed
smaller-capitalization issues. In fact, the media have extensively reported that
investors could not go wrong by owning large-capitalization companies such as
Microsoft Corporation, Intel Corporation, International Business Machines
Corporation, Cisco Systems, Inc., Lucent Technologies Inc. and Dell Computer
Corporation (the top six companies in the MLO). However, during the period ended
September 30, 1998, these stocks underperformed the broader averages, as
investors took profits in these higher-valued stocks.
PORTFOLIO MATTERS
During the quarter ended September 30, 1998, the Fund was essentially fully
invested in equities that we believed were reasonably priced current or future
technology leaders. Our strategy is to focus on leadership companies as defined
by top market shares and superior technology or business processes.
We believe that the strong get stronger, especially in the technology industry.
Once a company gains substantial market share, it achieves critical economies of
scale. Economies of scale allow these market leaders to fund powerhouse research
and development efforts and to lock up the best modes of distribution. Many of
these industry leaders also offer "one-stop shopping" (that is, the critical
broad product line of hardware, software and services that are appealing to
customers). Finally, these leaders have access to low-cost capital and skilled
labor in order to continue to grow their businesses.
After restructuring most of the Fund by the end of the September quarter, our
holdings were comprised of many of the "who's who" in the fastest-growing and
most important technology industries, such as: Cisco Systems, Inc. (data
networking); COMPAQ Computer Corporation (personal computers); Intel Corporation
(microprocessors); Lucent Technologies Inc. (telecommunications equipment); MCI
WorldCom, Inc. (telecommunications); Microsoft Corporation (desktop operating
system software); SAP AG (Systeme, Anwendungen, Produkte in der
Datenverarbeitung) (enterprise resource planning software); SCI Systems, Inc.
(contract manufacturing); and Sun Microsystems, Inc. (UNIX servers and
workstations).
Because of our focus on technology leaders, we typically invest in
large-capitalization stocks. Few of the Fund's holdings have market values of
less than $2 billion, and the Fund's weighted average market capitalization was
about $30.0 billion at September 30, 1998. Further, we expect to maintain a
diversified portfolio with no more than 5% in any single equity at the time of
purchase. In fact, the only stocks that accounted for 5% or more of the Fund's
net assets on September 30, 1998 were Creative Technology Ltd., COMPAQ Computer
Corporation and Seagate Technology, Inc., but we have been reducing their
weights. In keeping with our strategy of diversification, we plan to reduce any
position, regardless of how positively we view the company's outlook, if it were
to appreciate to 7.5% of net assets. Also, the Fund's largest industry position
was in semiconductors, which comprised over 35% of the Fund's net assets at
September 30, 1998. We will reduce the overweighting in this industry at
opportune times to at least the 25% industry limit under our diversification
guidelines. (See page 1 of this report to shareholders for complete listings of
the Fund's ten largest industries and ten largest holdings represented in the
portfolio.)
Currently, the world's equity markets are the most volatile they have been in
years, and technology stocks typically exaggerate the market's movements.
Furthermore, we have only recently completed the portfolio's initial investment
restructuring. However, we plan to hold core positions in technology leaders for
an extended period, provided no radical changes occur in their fundamental
outlooks. We may add to these positions on market dips, or we may reduce these
holdings when they appreciate beyond what fundamentals dictate. Also, we intend
to use a two-year price target for any investment. Over a reasonable investment
horizon, we expect to adhere to a 100% annual turnover limit.
It is our intention to keep the Fund essentially fully invested at all times in
an attempt to avoid market timing and focus primarily on long-term stock
selection. At September 30, 1998, the Fund was 99.1% invested. Although our
intent is to increase our foreign holdings in technology leaders around the
world, we do not believe that valuations have been attractive enough to warrant
purchase. Therefore, as of September 30, 1998, we were not significantly
invested in companies that are not domiciled in the United States. Our only
foreign holdings on September 30, 1998 were Creative Technology Ltd.
(Singapore), ECI Telecommunications Limited (Israel) and SAP AG (Systeme,
Anwendungen, Produkte in der Datenverarbeitung) (Germany). Combined, they
accounted for 13% of the Fund's net assets at the close of the September
quarter, with Creative Technology representing 11%. During the quarter, we had
few investments in Japan or the Asia/Pacific region, essentially because of the
negative macroeconomic conditions that bring a multitude of risks.
In addition to focusing on US companies, we are attracted to organizations that
are less dependent on sales to regions in crisis. We will continue to seek
companies that may be less affected by foreign competitors that are funded by
undervalued currencies relative to the US dollar, and that may be in such poor
financial condition that they may compete desperately and irrationally (for
example, sell products below cost). Therefore, we will become overweighted in
less cyclical, more domestically oriented software and computer service
industries. Conversely, we will reduce our exposure in export-oriented, more
cyclical hardware, semiconductor and semiconductor capital equipment
industries.
Our long-term outlook for the technology sector remains positive, but we are
cautious about the US equity market in the short term and on the fundamentals of
many foreign companies. While we continue to be fully invested, our domestic
focus was reflected in our overall portfolio allocation at September 30, 1998:
86.0% of net assets in US equities, 13.1% in foreign equities, and 0.9% in cash.
Despite some European companies' recent disappointing earnings results, we
continue to find opportunities in Europe to be much more attractive than those
in Asia. Our non-US investments are predominantly European companies with global
franchises and limited reliance on Asian markets. We do not foresee any drastic
change in the recent economic strength exhibited by Europe.
Also, we will continue to monitor opportunities in Japan, Taiwan and South
Korea, all significant technology producers, but we are wary of the pace of
recovery in Southeast Asia, Latin America, and other emerging markets and the
prospects for meaningful economic reform in Japan. Over the long term, we
anticipate some recovery in these markets, possibly as early as 1999.
Within the technology sector, we remained overweighted in industries that we
believed are less reliant on the weak markets of Asia and Latin America, or have
secular growth drivers that more than offset geographical weakness. We believe
that selected software and computer service companies should continue to post
strong, visible earnings in this environment. Contract manufacturers are riding
the global wave of outsourcing and, as such, we believe that they will continue
to exhibit above-trend earnings growth. In addition, these companies possess
reasonable valuations. We plan to be underweighted in the shares of
semiconductor, semiconductor equipment and disk drive companies as we wait for
evidence that supply and demand in these sectors are balanced.
2 & 3
<PAGE> 3
MERRILL LYNCH TECHNOLOGY FUND, INC., SEPTEMBER 30, 1998
Our outlook for technology stocks in 1999 is more positive than for the balance
of 1998, both in absolute terms and relative to the broader market. We continue
to believe that a portfolio of technology leaders, trading at a market multiple
but growing earnings many times faster, should produce superior returns for
investors over the long term.
IN CONCLUSION
On October 21, 1998, the Fund's Board of Directors approved a plan of
reorganization whereby Merrill Lynch Global Technology Fund, Inc. would acquire
substantially all of the assets and assume substantially all of the liabilities
of the Fund in exchange for newly issued shares of Merrill Lynch Global
Technology Fund, Inc. The plan of reorganization is subject to shareholder
approval. Merrill Lynch Global Technology Fund, Inc. is a registered,
diversified, open-end management investment company. Both entities have a
similar investment objective and are managed by Merrill Lynch Asset Management,
L.P.
We thank you for your investment in Merrill Lynch Technology Fund, Inc., and we
look forward to serving your investment needs in the months ahead.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Paul G. Meeks
Paul G. Meeks
Portfolio Manager
November 11, 1998
PERFORMANCE DATA
ABOUT FUND PERFORMANCE
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
- - CLASS A SHARES incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
A Shares are available only to eligible investors.
- - CLASS B SHARES are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.75% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 8 years. (There is no initial sales charge for automatic
share conversions.)
- - CLASS C SHARES are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
- - CLASS D SHARES incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer agency
fees applicable to each class, which are deducted from the income
available to be paid to shareholders.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN WITH
CLASS A SHARES* SALES CHARGE SALES CHARGE**
================================================================================
<S> <C> <C>
Year Ended 9/30/98 -39.83% -42.99%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 + 2.92 + 1.82
- --------------------------------------------------------------------------------
Inception (4/27/92) through 9/30/98 +11.80 +10.86
- --------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
% RETURN % RETURN
CLASS B SHARES* WITHOUT CDSC WITH CDSC**
================================================================================
<S> <C> <C>
Year Ended 9/30/98 -40.32% -42.71%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 + 1.90 + 1.90
- --------------------------------------------------------------------------------
Inception (4/27/92) through 9/30/98 +10.66 +10.66
- --------------------------------------------------------------------------------
</TABLE>
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
<TABLE>
<CAPTION>
================================================================================
% RETURN % RETURN
CLASS C SHARES* WITHOUT CDSC WITH CDSC**
================================================================================
<S> <C> <C>
Year Ended 9/30/98 -40.36% -40.96%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/98 - 3.03 - 3.03
- --------------------------------------------------------------------------------
</TABLE>
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
<TABLE>
<CAPTION>
================================================================================
% RETURN WITHOUT % RETURN WITH
CLASS D SHARES* SALES CHARGE SALES CHARGE**
================================================================================
<S> <C> <C>
Year Ended 9/30/98 -39.86% -43.02%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/98 - 2.25 - 3.58
- --------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
RECENT PERFORMANCE RESULTS*
<TABLE>
<CAPTION>
12 MONTH 3 MONTH SINCE INCEPTION
TOTAL RETURN TOTAL RETURN TOTAL RETURN
================================================================================================
<S> <C> <C> <C>
ML Technology Fund, Inc. Class A Shares -39.83% -11.78% +104.77%
- ------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class B Shares -40.32 -11.90 + 91.79
- ------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class C Shares -40.36 -11.73 - 11.41
- ------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class D Shares -39.86 -11.62 - 8.58
================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's inception periods are Class A &
Class B Shares, from 4/27/92 to 9/30/98 and Class C & Class D Shares, from
10/21/94 to 9/30/98.
4 & 5
<PAGE> 4
MERRILL LYNCH TECHNOLOGY FUND, INC., SEPTEMBER 30, 1998
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY INDUSTRIES HELD STOCKS & WARRANTS COST (NOTE 1a) NET ASSETS
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
GERMANY SOFTWARE 88,000 SAP AG (Systeme, Anwendungen, Produkte
in der Datenverarbeitung)(ADR)(b) $ 3,436,013 $ 3,426,500 1.0%
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 3,436,013 3,426,500 1.0
==================================================================================================================================
ISRAEL TELECOMMUNICATION 141,000 ECI Telecommunications Limited 3,551,438 3,454,500 1.0
EQUIPMENT
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ISRAEL 3,551,438 3,454,500 1.0
==================================================================================================================================
SINGAPORE COMPUTER PERIPHERALS 4,216,950 +Creative Technology Ltd. 57,832,135 37,952,550 11.1
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SINGAPORE 57,832,135 37,952,550 11.1
==================================================================================================================================
UNITED STATES COMPONENTS 234,000 General Cable Corporation 3,593,257 4,329,000 1.3
-------------------------------------------------------------------------------------------------------------------
COMPUTER PERIPHERALS 700,000 +Seagate Technology, Inc. 18,145,420 17,543,750 5.2
-------------------------------------------------------------------------------------------------------------------
COMPUTER SYSTEMS 79,000 +Sun Microsystems, Inc. 3,219,250 3,935,188 1.2
-------------------------------------------------------------------------------------------------------------------
CONTRACT MANUFACTURERS 100,000 +Flextronics International Ltd. 3,657,035 3,525,000 1.0
102,000 +Jabil Circuit, Inc. 3,711,358 3,544,500 1.0
123,000 +SCI Systems, Inc. 3,446,342 3,313,313 1.0
300,000 +Sanmina Corporation 6,722,982 8,418,750 2.5
------------ ------------ -----
17,537,717 18,801,563 5.5
-------------------------------------------------------------------------------------------------------------------
DATA COMMUNICATIONS 85,700 +Ascend Communications, Inc. 3,238,209 3,899,350 1.1
270,000 +Cisco Systems, Inc. 13,972,500 16,689,375 4.9
------------ ------------ -----
17,210,709 20,588,725 6.0
-------------------------------------------------------------------------------------------------------------------
ELECTRONIC DESIGN 152,000 +Cadence Design Systems, Inc. 4,171,389 3,885,500 1.1
AUTOMATION 111,000 +Synopsys, Inc. 4,072,312 3,697,688 1.1
------------ ------------ -----
8,243,701 7,583,188 2.2
-------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS 4,345 Iwerks Entertainment, Inc.
(Warrants)(a) 0 0 0.0
-------------------------------------------------------------------------------------------------------------------
PERSONAL COMPUTERS 550,000 COMPAQ Computer Corporation 17,627,775 17,393,750 5.1
154,400 +Gateway 2000, Inc. 7,201,451 8,048,100 2.4
------------ ------------ -----
24,829,226 25,441,850 7.5
-------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 410,000 +Altera Corporation 17,405,003 14,375,625 4.2
168,500 Intel Corporation 14,467,550 14,448,875 4.2
315,000 Linear Technology Corporation 21,232,812 15,750,000 4.6
490,200 +Maxim Integrated Products, Inc. 17,907,450 13,664,325 4.0
268,000 +Micron Technology, Inc. 8,025,686 8,157,250 2.4
432,800 +PMC-Sierra, Inc. 15,271,647 13,633,200 4.0
305,000 Texas Instruments Incorporated 15,462,557 16,088,750 4.7
485,000 +Vitesse Semiconductor Corporation 11,322,068 11,397,500 3.4
385,000 +Xilinx, Inc. 16,672,978 13,450,937 4.0
------------ ------------ -----
137,767,751 120,966,462 35.5
-------------------------------------------------------------------------------------------------------------------
SOFTWARE 155,000 Autodesk, Inc. 4,194,285 4,068,750 1.2
210,700 +BMC Software, Inc. 9,975,592 12,642,000 3.7
149,000 +Microsoft Corporation 12,821,035 16,399,312 4.8
92,000 +Networks Associates, Inc. 3,602,499 3,266,000 0.9
176,000 +Symantec Corporation 4,131,002 2,310,000 0.7
------------ ------------ -----
34,724,413 38,686,062 11.3
-------------------------------------------------------------------------------------------------------------------
TECHNOLOGY SERVICES 65,000 +DST Systems, Inc. 3,557,181 3,428,750 1.0
76,000 +Keane, Inc. 3,704,308 2,669,500 0.8
------------ ------------ -----
7,261,489 6,098,250 1.8
-------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION 125,000 +ADC Telecommunications, Inc. 3,550,625 2,632,812 0.8
EQUIPMENT 227,000 Lucent Technologies Inc. 16,336,253 15,677,187 4.6
77,000 +Tellabs, Inc. 3,613,810 3,065,563 0.9
86,000 +Uniphase Corporation 3,440,000 3,504,500 1.0
------------ ------------ -----
26,940,688 24,880,062 7.3
-------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 83,000 +MCI WorldCom, Inc. 4,144,250 4,056,625 1.2
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED STATES 303,617,871 292,910,725 86.0
==================================================================================================================================
TOTAL INVESTMENTS IN STOCKS & WARRANTS 368,437,457 337,744,275 99.1
==================================================================================================================================
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
COMMERCIAL $5,628,000 General Motors Acceptance Corp., 5.88%
PAPER* due 10/01/1998 5,628,000 5,628,000 1.7
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES 5,628,000 5,628,000 1.7
==================================================================================================================================
TOTAL INVESTMENTS $374,065,457 343,372,275 100.8
============
LIABILITIES IN EXCESS OF OTHER ASSETS (2,735,349) (0.8)
------------ -----
NET ASSETS $340,636,926 100.0%
============ =====
==================================================================================================================================
</TABLE>
(a) Warrants entitle the Company to purchase a predetermined
number of shares of common stock and are non-income producing.
The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date.
(b) American Depositary Receipts (ADR).
* Commercial Paper is traded on a discount basis; the interest
rate shown reflects the discount rate paid at the time of
purchase by the Company.
+ Non-income producing security.
See Notes to Financial Statements.
6 & 7
<PAGE> 5
Merrill Lynch Technology Fund, Inc., September 30, 1998
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
=================================================================================================================================
<S> <C> <C> <C>
ASSETS: Investments, at value (identified cost--$374,065,457) (Note 1a) ................... $ 343,372,275
Receivables:
Capital shares sold ............................................................. $ 469,176
Dividends ....................................................................... 8,250 477,426
-----------
Prepaid registration fees and other assets (Note 1f) .............................. 17,757
-------------
Total assets ...................................................................... 343,867,458
-------------
=================================================================================================================================
LIABILITIES: Payables:
Capital shares redeemed ......................................................... 1,253,889
Custodian bank (Note 1h) ........................................................ 1,209,095
Investment adviser (Note 2) ..................................................... 287,066
Distributor (Note 2) ............................................................ 148,686 2,898,736
-----------
Accrued expenses and other liabilities ............................................ 331,796
-------------
Total liabilities ................................................................. 3,230,532
-------------
=================================================================================================================================
NET ASSETS: Net assets ........................................................................ $ 340,636,926
=============
=================================================================================================================================
NET ASSETS Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized .... $ 4,220,712
CONSIST OF: Class B Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized .... 4,855,033
Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized .... 257,908
Class D Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized .... 624,751
Paid-in capital in excess of par .................................................. 531,660,385
Accumulated investment loss--net .................................................. (3,356,813)
Accumulated realized capital losses on investments and foreign currency
transactions--net (Note 5) ........................................................ (147,911,977)
Accumulated distributions in excess of realized capital gains on investments--net
(Note 1g) ........................................................................ (19,019,891)
Unrealized depreciation on investments--net ....................................... (30,693,182)
-------------
Net assets ........................................................................ $ 340,636,926
=============
=================================================================================================================================
NET ASSET Class A--Based on net assets of $148,645,908 and 42,207,121 shares outstanding .... $ 3.52
VALUE: =============
Class B--Based on net assets of $161,608,329 and 48,550,329 shares outstanding .... $ 3.33
=============
Class C--Based on net assets of $8,525,015 and 2,579,080 shares outstanding ....... $ 3.31
=============
Class D--Based on net assets of $21,857,674 and 6,247,508 shares outstanding ...... $ 3.50
=============
=================================================================================================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 6
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
=================================================================================================================================
<S> <C> <C> <C>
INVESTMENT Interest and discount earned ...................................................... $ 976,544
INCOME Dividends ......................................................................... 154,136
(NOTES 1d & 1e): -------------
Total income ...................................................................... 1,130,680
-------------
=================================================================================================================================
EXPENSES: Investment advisory fees (Note 2) ................................................. $ 2,257,240
Account maintenance and distribution fees--Class B (Note 2) ....................... 1,127,750
Transfer agent fees--Class B (Note 2) ............................................. 397,655
Transfer agent fees--Class A (Note 2) ............................................. 286,831
Printing and shareholder reports .................................................. 69,371
Accounting services (Note 2) ...................................................... 63,804
Account maintenance and distribution fees--Class C (Note 2) ....................... 60,526
Transfer agent fees--Class D (Note 2) ............................................. 44,033
Registration fees (Note 1f) ....................................................... 39,764
Professional fees ................................................................. 38,140
Account maintenance fees--Class D (Note 2) ........................................ 35,657
Transfer agent fees--Class C (Note 2) ............................................. 23,205
Directors' fees and expenses ...................................................... 19,820
Custodian fees .................................................................... 17,792
Pricing fees ...................................................................... 198
Other ............................................................................. 5,707
-----------
Total expenses .................................................................... 4,487,493
-------------
Investment loss--net .............................................................. (3,356,813)
-------------
=================================================================================================================================
REALIZED & Realized gain from investments--net ............................................... 10,007,159
UNREALIZED GAIN Change in unrealized appreciation/depreciation on investments and foreign
(LOSS) ON currency transactions--net ....................................................... (85,531,968)
INVESTMENTS & -------------
FOREIGN CURRENCY Net Decrease in Net Assets Resulting from Operations .............................. $ (78,881,622)
TRANSACTIONS-- =============
NET NOTES 1b,
1c,1e & 3):
=================================================================================================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 7
MERRILL LYNCH TECHNOLOGY FUND, INC., SEPTEMBER 30, 1998
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: SEPT. 30, 1998 MARCH 31, 1998
===================================================================================================================================
<S> <C> <C> <C>
OPERATIONS: Investment loss--net ........................................................ $ (3,356,813) $ (9,711,420)
Realized gain (loss) on investments and foreign currency transactions--net .. 10,007,159 (157,919,266)
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net .................................................. (85,531,968) 201,840,096
------------- -------------
Net increase (decrease) in net assets resulting from operations ............. (78,881,622) 34,209,410
------------- -------------
===================================================================================================================================
DISTRIBUTIONS TO Realized gain on investments--net:
SHAREHOLDERS Class A ................................................................... -- (44,407,215)
(NOTE 1g): Class B ................................................................... -- (72,911,047)
Class C ................................................................... -- (3,812,765)
Class D ................................................................... -- (7,217,791)
In excess of realized gain on investments--net:
Class A ................................................................... -- (6,580,664)
Class B ................................................................... -- (10,804,619)
Class C ................................................................... -- (565,010)
Class D ................................................................... -- (1,069,598)
------------- -------------
Net decrease in net assets resulting from distributions to shareholders ..... -- (147,368,709)
------------- -------------
===================================================================================================================================
CAPITAL SHARE Net increase (decrease) in net assets derived from capital shares (127,253,571) 7,796,208
TRANSACTIONS transactions ................................................................ ------------- -------------
(NOTE 4):
===================================================================================================================================
NET ASSETS: Total decrease in net assets ................................................ (206,135,193) (105,363,091)
Beginning of period ......................................................... 546,772,119 652,135,210
------------- -------------
End of period ............................................................... $ 340,636,926 $ 546,772,119
============= =============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 8
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A**
---------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS FOR THE
HAVE BEEN DERIVED FROM INFORMATION SIX MONTHS
PROVIDED IN THE FINANCIAL STATEMENTS. ENDED FOR THE YEAR ENDED MARCH 31,
SEPT. 30, --------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1998 1998 1997 1996 1995
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE Net asset value, beginning of period ..... $ 4.27 $ 5.07 $ 4.82 $ 4.89 $ 5.17
OPERATING -------- -------- -------- -------- --------
PERFORMANCE: Investment income (loss)--net ............. (.02) (.04) (.03) (.03) .05
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ........................ (.73) .46 .72 .28 .11
-------- -------- -------- -------- --------
Total from investment operations ......... (.75) .42 .69 .25 .16
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ................. -- -- -- -- (.02)
In excess of investment income--net .... -- -- -- -- (.01)
Realized gain on investments--net ...... -- (1.06) (.44) (.17) (.05)
In excess of realized gain on
investments--net ....................... -- (.16) -- (.15) (.36)
-------- -------- -------- -------- --------
Total dividends and distributions ........ -- (1.22) (.44) (.32) (.44)
-------- -------- -------- -------- --------
Net asset value, end of period ........... $ 3.52 $ 4.27 $ 5.07 $ 4.82 $ 4.89
======== ======== ======== ======== ========
========================================================================================================================
TOTAL INVESTMENT Based on net asset value per share ....... (17.56%)+ 3.96% 14.60% 5.15% 2.86%
RETURN:*** ======== ======== ======== ======== ========
========================================================================================================================
RATIOS TO AVERAGE Expenses ................................. 1.42%* 1.27% 1.30% 1.31% 1.33%
NET ASSETS: ======== ======== ======== ======== ========
Investment income (loss)--net ............ (.92%)* (.82%) (.63%) (.62%) .87%
======== ======== ======== ======== ========
========================================================================================================================
SUPPLEMENTAL Net assets, end of period (in thousands).. $148,646 $211,443 $222,118 $246,909 $254,188
DATA: ======== ======== ======== ======== ========
Portfolio turnover ....................... 102.21% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
</TABLE>
* Annualized.
** Based on average shares outstanding.
*** Total investment returns exclude the effects of sales
loads.
+ Aggregate total investment return.
See Notes to Financial Statements.
11
<PAGE> 9
MERRILL LYNCH TECHNOLOGY FUND, INC., SEPTEMBER 30, 1998
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B**
-----------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS FOR THE
HAVE BEEN DERIVED FROM INFORMATION SIX MONTHS
PROVIDED IN THE FINANCIAL STATEMENTS. ENDED FOR THE YEAR ENDED MARCH 31,
SEPT. 30, -------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1998 1998 1997 1996 1995
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE Net asset value, beginning of period ............. $ 4.06 $ 4.89 $ 4.66 $ 4.78 $ 5.08
OPERATING -------- -------- -------- -------- --------
PERFORMANCE: Investment loss--net ............................. (.04) (.09) (.08) (.09) (.01)
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... (.69) .46 .69 .29 .11
-------- -------- -------- -------- --------
Total from investment operations ................. (.73) .37 .61 .20 .10
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... -- -- -- -- --+
In excess of investment income--net ............ -- -- -- -- --+
Realized gain on investments--net .............. -- (1.05) (.38) (.17) (.05)
In excess of realized gain on investments--net.. -- (.15) -- (.15) (.35)
-------- -------- -------- -------- --------
Total dividends and distributions ................ -- (1.20) (.38) (.32) (.40)
-------- -------- -------- -------- --------
Net asset value, end of period ................... $ 3.33 $ 4.06 $ 4.89 $ 4.66 $ 4.78
======== ======== ======== ======== ========
=================================================================================================================================
TOTAL INVESTMENT Based on net asset value per share ............... (17.98%)+++ 3.09% 13.20% 4.21% 1.78%
RETURN:*** ======== ======== ======== ======== ========
=================================================================================================================================
RATIOS TO AVERAGE Expenses ......................................... 2.46%* 2.31% 2.35% 2.34% 2.38%
NET ASSETS: ======== ======== ======== ======== ========
Investment loss--net ............................. (1.96%)* (1.85%) (1.66%) (1.65%) (.10%)
======== ======== ======== ======== ========
=================================================================================================================================
SUPPLEMENTAL Net assets, end of period (in thousands) ......... $161,608 $285,193 $375,630 $553,819 $614,935
DATA: ======== ======== ======== ======== ========
Portfolio turnover ............................... 102.21% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
=================================================================================================================================
</TABLE>
12
<PAGE> 10
<TABLE>
<CAPTION>
CLASS C**
---------------------------------------------------------
FOR THE FOR THE
THE FOLLOWING PER SHARE DATA AND RATIOS SIX PERIOD
HAVE BEEN DERIVED FROM INFORMATION MONTHS OCT. 21,
PROVIDED IN THE FINANCIAL STATEMENTS. ENDED FOR THE YEAR ENDED MARCH 31, 1994++ TO
SEPT. 30, -------------------------------- MARCH 31,
INCREASE (DECREASE) IN NET ASSET VALUE: 1998 1998 1997 1996 1995
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE Net asset value, beginning of period ............. $ 4.03 $ 4.87 $ 4.64 $ 4.76 $ 5.75
OPERATING -------- -------- -------- -------- --------
PERFORMANCE: Investment loss--net ............................. (.04) (.09) (.08) (.09) --
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... (.68) .45 .68 .29 (.62)
-------- -------- -------- -------- --------
Total from investment operations ................. (.72) .36 .60 .20 (.62)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... -- -- -- -- (.02)
In excess of investment income--net ............ -- -- -- -- (.01)
Realized gain on investments--net .............. -- (1.05) (.37) (.17) (.04)
In excess of realized gain on investments--net.. -- (.15) -- (.15) (.30)
-------- -------- -------- -------- --------
Total dividends and distributions ................ -- (1.20) (.37) (.32) (.37)
-------- -------- -------- -------- --------
Net asset value, end of period ................... $ 3.31 $ 4.03 $ 4.87 $ 4.64 $ 4.76
======== ======== ======== ======== ========
================================================================================================================================
TOTAL INVESTMENT Based on net asset value per share ............... (17.87%)+++ 2.87% 13.19% 4.22% (11.11%)+++
RETURN:*** ======== ======== ======== ======== ========
================================================================================================================================
RATIOS TO AVERAGE Expenses ......................................... 2.49%* 2.33% 2.37% 2.36% 2.59%*
NET ASSETS: ======== ======== ======== ======== ========
Investment loss--net ............................. (1.99%)* (1.87%) (1.68%) (1.69%) (.02%)*
======== ======== ======== ======== ========
================================================================================================================================
SUPPLEMENTAL Net assets, end of period (in thousands) ......... $ 8,525 $ 15,424 $ 19,015 $ 31,090 $ 23,259
DATA: ======== ======== ======== ======== ========
Portfolio turnover ............................... 102.21% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
================================================================================================================================
</TABLE>
* Annualized.
** Based on average shares outstanding.
*** Total investment returns exclude the effects of sales
loads.
+ Amount is less than $.01 per share.
++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
13
<PAGE> 11
MERRILL LYNCH TECHNOLOGY FUND, INC., SEPTEMBER 30, 1998
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
CLASS D**
---------------------------------------------------------------
FOR THE FOR THE
THE FOLLOWING PER SHARE DATA AND RATIOS SIX PERIOD
HAVE BEEN DERIVED FROM INFORMATION MONTHS OCT. 21,
PROVIDED IN THE FINANCIAL STATEMENTS. ENDED FOR THE YEAR ENDED MARCH 31, 1994+ TO
SEPT. 30, ---------------------------------- MARCH 31,
INCREASE (DECREASE) IN NET ASSET VALUE: 1998 1998 1997 1996 1995
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE Net asset value, beginning of period ....... $ 4.25 $ 5.05 $ 4.81 $ 4.89 $ 5.88
OPERATING --------- --------- --------- --------- ---------
PERFORMANCE: Investment loss--net ....................... (.02) (.05) (.04) (.05) (.02)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .......................... (.73) .46 .71 .29 (.60)
--------- --------- --------- --------- ---------
Total from investment operations ........... (.75) .41 .67 .24 (.62)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net ................... -- -- -- -- (.02)
In excess of investment income--net ...... -- -- -- -- (.01)
Realized gain on investments--net ........ -- (1.05) (.43) (.17) (.04)
In excess of realized gain on
investments--net ......................... -- (.16) -- (.15) (.30)
--------- --------- --------- --------- ---------
Total dividends and distributions .......... -- (1.21) (.43) (.32) (.37)
--------- --------- --------- --------- ---------
Net asset value, end of period ............. $ 3.50 $ 4.25 $ 5.05 $ 4.81 $ 4.89
========= ========= ========= ========= =========
===============================================================================================================================
TOTAL INVESTMENT Based on net asset value per share ......... (17.65%)+++ 3.90% 14.09% 4.94% (10.76%)+++
RETURN:*** ========= ========= ========= ========= =========
===============================================================================================================================
RATIOS TO AVERAGE Expenses ................................... 1.67%* 1.52% 1.55% 1.56% 1.80%*
NET ASSETS: ========= ========= ========= ========= =========
Investment loss--net ....................... (1.18%)* (1.07%) (.88%) (.89%) (.81%)*
========= ========= ========= ========= =========
===============================================================================================================================
SUPPLEMENTAL Net assets, end of period (in thousands) ... $ 21,858 $ 34,712 $ 35,372 $ 43,858 $ 32,646
DATA: ========= ========= ========= ========= =========
Portfolio turnover ......................... 102.21% 206.40% 176.51% 108.36% 175.57%
========= ========= ========= ========= =========
===============================================================================================================================
</TABLE>
* Annualized.
** Based on average shares outstanding.
*** Total investment returns exclude the effects of sales
loads.
+ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
14
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Technology Fund, Inc. (the "Company") is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company. These unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are of a normal
recurring nature. The Company offers four classes of shares under the Merrill
Lynch Select Pricing(SM) System. Shares of Class A and Class D are sold with a
front-end sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have identical voting,
dividend, liquidation, and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain expenses related to
the account maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its account
maintenance and distribution expenditures. The following is a summary of
significant accounting policies followed by the Company.
(a) Valuation of securities--Portfolio securities which are traded on stock
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by or
under the authority of the Board of Directors as the primary market. Securities
which are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market. Options written
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Short-term securities are valued at amortized cost, which
approximates market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith by or under the direction of the Company's Board of
Directors.
(b) Derivative financial instruments--The Company may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the equity, debt and currency markets. Losses may
arise due to changes in the value of the contract or if the counterparty does
not perform under the contract.
- - Financial futures contracts--The Company may purchase or sell financial
futures contracts and options on such futures contracts for the purpose of
hedging the market risk on existing securities or the intended purchase of
securities. Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon entering into a
contract, the Company deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected. Pursuant to
the contract, the Company agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such receipts
or payments are known as variation margin and are recorded by the Company as
unrealized gains or losses. When the contract is closed, the Company records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
- - Options--The Company is authorized to write and purchase covered call and
purchase put options. When the Company writes an option, an amount equal to the
premium received by the Company is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently marked to market to
reflect the current market value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to
15
<PAGE> 13
MERRILL LYNCH TECHNOLOGY FUND, INC., SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
(or deducted from) the basis of the security acquired or deducted from (or added
to) the proceeds of the security sold. When an option expires (or the Company
enters into a closing transaction), the Company realizes a gain or loss on the
option to the extent of the premiums received or paid (or gain or loss to the
extent the cost of the closing transaction exceeds the premium paid or
received).
Written and purchased options are non-income producing investments.
- - Forward foreign exchange contracts--The Company is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Company's records. However, the effect on operations is recorded from the date
the Company enters into such contracts. Premium or discount is amortized over
the life of the contracts.
- - Foreign currency options and futures--The Company may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be effected
with respect to hedges on non-US dollar denominated securities owned by the
Company, sold by the Company but not yet delivered, or committed or anticipated
to be purchased by the Company.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) Income taxes--It is the Company's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends, and
capital gains at various rates.
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently recorded
when the Company has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(g) Dividends and distributions to shareholders--Dividends and distributions
paid by the Company are recorded on the ex-dividend dates. Distributions in
excess of realized capital gains are due primarily to differing tax treatments
for futures transactions and post-October losses.
(h) Custodian bank--The Fund recorded an amount payable to the Custodian Bank
resulting from a timing difference of security transaction settlements.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Company has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Company has entered
into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
MLAM is responsible for the management of the Company's portfolio and provides
the administrative services necessary for the operation of the Company. As
compensation for its services to the Company, MLAM receives monthly compensation
at the annual rate of 1.0% of the average daily net assets of the Company.
Pursuant to the Distribution Plans adopted by the Company, in accordance with
Rule 12b-1 under the Investment Company Act of 1940, the Company pays the
Distributor an ongoing account maintenance fee and distribution fee. The fees
are accrued daily and paid monthly at annual rates based upon the average daily
net assets of the shares as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ACCOUNT DISTRIBUTION
MAINTENANCE FEE FEE
- --------------------------------------------------------------------------------
<S> <C> <C>
Class B .................................. 0.25% 0.75%
Class C .................................. 0.25% 0.75%
Class D .................................. 0.25% --
- --------------------------------------------------------------------------------
</TABLE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Company. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended September 30, 1998, MLFD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales of the
Company's Class A and Class D Shares as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
<S> <C> <C>
Class A .................................. $332 $ 4,361
Class D .................................. $905 $12,341
- --------------------------------------------------------------------------------
</TABLE>
For the six months ended September 30, 1998, MLPF&S received contingent deferred
sales charges of $404,920 and $5,523 relating to transactions in Class B and
Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred
sales charges of $100,994 relating to transactions subject to front-end sales
charge waivers in Class A Shares.
In addition, MLPF&S received $14,040 in commissions on the execution of
portfolio security transactions for the Company for the six months ended
September 30, 1998.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Company's transfer agent.
Accounting services are provided to the Company by MLAM at cost.
Certain officers and/or directors of the Company are officers and/or directors
of MLAM, PSI, FDS, PFD, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the six
months ended September 30, 1998 were $428,530,554 and $550,665,679,
respectively.
Net realized gains (losses) for the six months ended September 30, 1998 and net
unrealized losses as of September 30, 1998 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
REALIZED UNREALIZED
GAINS (LOSSES) LOSSES
- --------------------------------------------------------------------------------
<S> <C> <C>
Long-term investments .................... $10,007,392 $(30,693,182)
Short-term investments ................... (233) --
----------- ------------
Total .................................... $10,007,159 $(30,693,182)
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
As of September 30, 1998, net unrealized depreciation for Federal income tax
purposes aggregated $30,693,182, of which $14,514,489 related to appreciated
securities and $45,207,671 related to depreciated securities. The aggregate cost
of investments at September 30, 1998 for Federal income tax purposes was
$374,065,457.
4. CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets derived from capital share transactions
was $(127,253,571) and $7,796,208 for the six months ended September 30, 1998
and for the year ended March 31, 1998, respectively.
Transactions in capital shares for each class were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A SHARES FOR THE SIX MONTHS DOLLAR
ENDED SEPTEMBER 30, 1998 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................. 5,940,283 $ 24,610,677
Shares redeemed .......................... (13,247,132) (54,479,234)
----------- ------------
Net decrease ............................. (7,306,849) $(29,868,557)
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
16 & 17
<PAGE> 14
MERRILL LYNCH TECHNOLOGY FUND, INC., SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A SHARES FOR THE YEAR DOLLAR
ENDED MARCH 31, 1998 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................. 14,964,900 $ 71,410,844
Shares issued to shareholders
in reinvestment of distributions ......... 8,838,083 45,869,650
----------- ------------
Total issued ............................. 23,802,983 117,280,494
Shares redeemed .......................... (18,121,971) (89,086,567)
----------- ------------
Net increase ............................. 5,681,012 $ 28,193,927
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS B SHARES FOR THE SIX MONTHS DOLLAR
ENDED SEPTEMBER 30, 1998 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................. 5,348,529 $ 20,270,477
Shares redeemed .......................... (26,502,756) (102,569,811)
Automatic conversion of shares ........... (583,617) (2,228,841)
----------- ------------
Net decrease ............................ (21,737,844) $(84,528,175)
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS B SHARES FOR THE YEAR DOLLAR
ENDED MARCH 31, 1998 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................. 19,604,583 $ 91,957,240
Shares issued to shareholders
in reinvestment of distributions ......... 14,953,197 74,317,386
----------- ------------
Total issued ............................. 34,557,780 166,274,626
Shares redeemed .......................... (40,126,849) (188,834,322)
Automatic conversion of shares ........... (898,029) (4,025,429)
----------- ------------
Net decrease ............................. (6,467,098) $(26,585,125)
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS C SHARES FOR THE SIX MONTHS DOLLAR
ENDED SEPTEMBER 30, 1998 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................. 504,064 $ 1,809,903
Shares redeemed .......................... (1,752,561) (6,621,068)
----------- ------------
Net decrease ............................. (1,248,497) $ (4,811,165)
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS C SHARES FOR THE YEAR DOLLAR
ENDED MARCH 31, 1998 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................. 2,933,295 $ 13,806,155
Shares issued to shareholders
in reinvestment of distributions ......... 764,385 3,776,060
----------- ------------
Total issued ............................. 3,697,680 17,582,215
Shares redeemed .......................... (3,776,280) (17,726,568)
----------- ------------
Net decrease ............................. (78,600) $ (144,353)
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS D SHARES FOR THE SIX MONTHS DOLLAR
ENDED SEPTEMBER 30, 1998 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................. 920,212 $ 3,587,235
Automatic conversion of shares ........... 556,501 2,228,841
----------- ------------
Total issued ............................. 1,476,713 5,816,076
Shares redeemed .......................... (3,401,818) (13,861,750)
----------- ------------
Net decrease ............................. (1,925,105) $ (8,045,674)
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS D SHARES FOR THE YEAR DOLLAR
ENDED MARCH 31, 1998 SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold .............................. 4,505,104 $ 21,202,799
Automatic conversion of shares ........... 861,473 4,025,429
Shares issued to shareholders
in reinvestment of distributions ......... 1,452,639 7,510,141
----------- ------------
Total issued ............................. 6,819,216 32,738,369
Shares redeemed .......................... (5,645,964) (26,406,610)
----------- ------------
Net increase ............................. 1,173,252 $ 6,331,759
=========== ============
- --------------------------------------------------------------------------------
</TABLE>
5. CAPITAL LOSS CARRYFORWARD:
At March 31, 1998, the Fund had a net capital loss carryforward of approximately
$60,435,000, all of which expires in 2006. This amount will be available to
offset like amounts of any future taxable gains.
6. REORGANIZATION PLAN:
On October 21, 1998, the Company's Board of Directors approved a plan of
reorganization whereby Merrill Lynch Global Technology Fund, Inc. would acquire
substantially all of the assets and liabilities of the Company in exchange for
newly issued shares of Merrill Lynch Global Technology Fund, Inc. The plan of
reorganization is subject to approval by the Company's shareholders. Merrill
Lynch Global Technology Fund, Inc. is a registered, diversified, open-end
management investment company. Both entities have a similar investment objective
and are managed by MLAM.
18
<PAGE> 15
PORTFOLIO CHANGES
For the Quarter Ended September 30, 1998
ADDITIONS
ADC Telecommunications, Inc.
Autodesk, Inc.
Cadence Design Systems, Inc.
*Ciena Corporation
COMPAQ Computer Corporation
DST Systems, Inc.
*EBay, Inc.
ECI Telecommunications Limited
Flextronics International Ltd.
General Cable Corporation
Intel Corporation
Jabil Circuit, Inc.
Keane, Inc.
Linear Technology Corporation
MCI WorldCom, Inc.
Networks Associates, Inc.
SAP AG (Systeme, Anwendungen, Produkte in der Datenverarbeitung) (ADR)
SCI Systems, Inc.
Sanmina Corporation
Sun Microsystems, Inc.
Symantec Corporation
Synopsys, Inc.
Tellabs, Inc.
Uniphase Corporation
DELETIONS
Ade Corporation
America Online, Inc.
Applied Micro Circuits Corporation
Aspec Technology Inc.
Broadcom Corporation (Class A)
*Ciena Corporation
Computer Associates International, Inc.
*EBay, Inc.
Iwerks Entertainment, Inc.
Level One Communications, Inc.
Quantum Corporation
* Added and deleted in the same quarter.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
CUSTODIAN
The Chase Manhattan Bank
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
TRANSFER AGENT
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
19
<PAGE> 16
MERRILL LYNCH
TECHNOLOGY
FUND, INC.
[GRAPHIC OF COMPASS]
STRATEGIC
Performance
Semi-Annual Report
September 30, 1998
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Company unless accompanied or preceded by the
Company's current prospectus. Past performance results shown in this report
should not be considered a representation of future performance. Investment
return and principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Statements and
other information herein are as dated and are subject to change.
MERRILL LYNCH
TECHNOLOGY FUND, INC.
BOX 9011
PRINCETON, NJ
08543-9011 #16091--9/98
[RECYCLE LOGO] Printed on post-consumer recycled paper
