MERRILL LYNCH
GLOBAL
TECHNOLOGY
FUND, INC.
FUND LOGO
Quarterly Report
December 31, 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
Printed on post-consumer recycled paper
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC.
Portfolio
Information
As of 12/31/98
Ten Largest Industries Percent of
Represented in the Portfolio Net Assets
Software 16.1%
Contract Manufacturers 13.7
Telecommunications Equipment 10.7
Computer Systems 10.4
Technology Services 10.0
Semiconductors 6.5
Electronic Design Automation 5.5
Data Communications 4.9
Telecommunications 3.3
Personal Computers 3.2
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Keane, Inc. 6.0%
EMC Corporation 4.9
Compuware Corporation 3.8
SCI Systems, Inc. 3.4
MCI WorldCom, Inc. 3.3
Sanmina Corporation 3.2
Networks Associates, Inc. 3.1
America Online, Inc. 3.0
Cadence Design Systems, Inc. 3.0
Solectron Corporation 2.8
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
Merrill Lynch Global Technology Fund, Inc., December 31, 1998
DEAR SHAREHOLDER
Merrill Lynch Global Technology Fund, Inc. commenced operations on
June 26, 1998, just prior to a difficult period for the broad stock
market, and particularly for technology stocks. The quarter ended
December 31, 1998 featured a reversal of fortunes for the stock
market and technology investors. The Fund, and technology holdings
in general, performed admirably during the period. For the quarter
ended December 31, 1998, Merrill Lynch Global Technology Fund,
Inc.'s total returns for Class A, Class B, Class C and Class D
Shares were +46.73%, +46.28%, +46.28% and +46.51%, respectively,
compared to the +48.32% return for the unmanaged Merrill Lynch 100
Technology Index (MLO), an equally weighted index of the world's
largest technology companies in terms of market capitalization. For
the three months ended December 31, 1998, the Fund's Class A Shares
outperformed the total returns of the unmanaged Standard & Poor's
500 Index and the Dow Jones Industrial Average by 25.43 and 29.14
percentage points, respectively, underscoring the exceptional
success of technology stocks compared to the broader market.
Although such strong absolute and relative performance in a single
quarter is welcomed by all of us, this was an extraordinary quarter
for the Fund and for technology stocks. Consequently, we would not
expect this performance to repeat often.
During the three-month period ended December 31, 1998, the Fund's
performance was enhanced by its overweighted position in contract
manufacturers (13.7% of the Fund's net assets compared to 3% for the
MLO). These companies outsource the production of the world's
leading original equipment manufacturers' (OEMs) electronic goods.
Increasingly, OEMs have decided that their value added is in the
design, and not in the manufacture, of their products. Outsourced
manufacturing allows these companies to cut costs and avoid
inventory risk. With this in mind, we invested in leaders of this
industry, which are those companies that have the critical global
capabilities to assist their OEM customers worldwide. Despite the
powerful performance of the contract manufacturing stocks, we
believe that this may be among the most compelling investment
opportunities in technology.
During the quarter ended December 31, 1998, the Fund's underweighted
position in semiconductors, semiconductor capital equipment and
Internet stocks were detrimental to performance. Semiconductor-
related companies, probably the most cyclical in all of technology,
rebounded during the quarter after performing poorly throughout most
of 1998. It is our opinion that investors may be discounting an
improvement in fundamentals that may be short-lived past the
seasonally strong December quarter. We remain exposed in the
industry to a few leadership companies that have already benefited
from the snapback. These included Applied Materials, Inc., Intel
Corporation, Maxim Integrated Products, Inc., Texas Instruments
Incorporated, Uniphase Corporation and Xilinx, Inc.
Throughout the three-month period ended December 31, 1998, the
exceptional performance of Internet stocks continued to confound us.
Our investment in the undisputed leader, America Online, Inc., has
greatly benefited the Fund. We recently sold another powerhouse,
Yahoo! Inc., for an approximate 101% gain over just a few months. We
became concerned about its astronomical valuation despite its strong
fundamentals. We will continue to track those companies that we
believe could be the current and future Internet leaders to retain
the ability to quickly buy them on significant corrections. It is
our opinion that the typical small-capitalization Internet firm may
not be around in the future and is not an attractive investment. We
believe that when these Internet stocks tumble, they will not drop a
bear market-defined 20%, but that several may decline as much as
90%. Technology funds are inherently volatile, and we are not
compelled to unnecessarily increase the Fund's risk by allocating
shareholder capital to such highly speculative situations.
Throughout the December quarter, we continued to invest in the
telecommunications equipment contract manufacturers industries.
During the period, we purchased Telefonaktiebolaget LM Ericsson and
Solectron Corporation. Although Ericsson has been a laggard thus
far, we still have long-term confidence in the company and believe
it is a compelling value.
During the quarter ended December 31, 1998, we eliminated positions
in HBO & Company, Peoplesoft, Inc. and Thermo Electron Corporation.
We became frustrated with HBO's proposed merger with a drug
distributor, McKesson Corporation. While Peoplesoft had performed
admirably during the quarter, it faced potential problems as a
member of the enterprise resource planning software industry, which
features products that are strong candidates for information
technology cutbacks or Year 2000-related deferred purchases. Thermo
Electron's capital-intensive instruments business, the company's
earnings driver, significantly weakened with the worsening economies
around the world. It should be noted that we deployed the cash from
these sales to new investments that have significantly outperformed
our original investments, which have either fallen further or have
not moved in this strong technology market.
The Fund continued to have minor exposure to the shares of companies
not domiciled in the United States, with 6.6% of the Fund's equities
in companies headquartered abroad. We continue to be wary of the
macroeconomic trends abroad, and how they may further negatively
impact foreign technology firms. Our focus remains on current and
future technology leaders, and the United States continues to
dominate most technology industries.
At the end of the December quarter, the Fund's cash position was
4.9% of net assets. Its large-capitalization leadership portfolio
has a $35 billion weighted average market capitalization and holds
the "who's who" of almost all technology industries.
Investment Outlook
Looking ahead, we do not anticipate any significant changes to our
outlook. Our two-year investment horizon focuses on large-
capitalization leadership companies whose fortunes typically improve
over time according to our "the strong get stronger" theme.
We continue to be relatively bearish on the macroeconomic variables
that have negatively impacted technology companies around the world.
Despite a recovery in several of the cyclical industries within the
technology sector, we are wary that the stocks may have discounted
an improvement in fundamentals that may be short-lived after the
seasonally strong fourth quarter of 1998. For example, after the run-
up in the stocks, we intend to wait for fundamentals to improve
before we become convinced that the semiconductor-related industries
are attractive. Therefore, we expect to remain underweighted in
these areas, but we will maintain our holdings in industry leaders
that we believe will continue to outperform under difficult
conditions. Furthermore, on a global basis, we intend to continue to
focus on Europe's leading technology companies in the near term.
In Conclusion
The performance of the Fund, and technology stocks in general, was
exceptional during the December quarter. Merrill Lynch Global
Technology Fund, Inc.'s Class A Shares have a total return of +30.3%
since inception (June 26, 1998) to December 31, 1998, and its net
asset value per share rebounded 78.3% from its October 8, 1998 low.
However, the world has not changed that much from the trough of this
fall to the current peak. We believe that some of the buying in
these stocks was by relatively unsophisticated investors who were
entranced by the Internet hype or the seasonally strong Christmas
season for technology products. Therefore, in our opinion, a
correction could be ahead.
We believe that our current portfolio possesses the best companies
in technology. For the Fund's portfolio holdings, we project a
weighted average earnings per share increase for calendar 1999 of
+35% versus +4% for the S&P 500. However, both the portfolio and the
market trade at about the same multiple of these earnings estimates,
27 and 25 times, respectively. Therefore, we believe that Merrill
Lynch Global Technology Fund, Inc. is well-positioned, regardless of
whether the market moves up, down or sideways in 1999.
We thank you for your investment in Merrill Lynch Global Technology
Fund, Inc., and we look forward to reviewing our outlook and
strategy with you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Paul G. Meeks)
Paul G. Meeks
Senior Vice President and
Portfolio Manager
February 9, 1999
Merrill Lynch Global Technology Fund, Inc., December 31, 1998
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "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.
<TABLE>
Recent
Performance
Results*
<CAPTION>
3 Month Since Inception
Total Return Total Return
<S> <C> <C>
ML Global Technology Fund, Inc. Class A Shares +46.73% +30.30%
ML Global Technology Fund, Inc. Class B Shares +46.28 +29.60
ML Global Technology Fund, Inc. Class C Shares +46.28 +29.60
ML Global Technology Fund, Inc. Class D Shares +46.51 +30.10
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund commenced operations on 6/26/98.
</TABLE>
Aggregate
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Inception (6/26/98) through 12/31/98 +30.30% +23.46%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Inception (6/26/98) through 12/31/98 +29.60% +25.60%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Inception (6/26/98) through 12/31/98 +29.60% +28.60%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Inception (6/26/98) through 12/31/98 +30.10% +23.27%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PORTFOLIO CHANGES
For the Quarter Ended December 31, 1998
Additions
*Computer Literacy, Inc.
*Etek Dynamics, Inc.
*The Globe.com, Inc.
J.D. Edwards & Company
Solectron Corporation
Tech Data Corporation
Telefonaktiebolaget LM Ericcson (ADR)
Teradyne, Inc.
Unisys Corporation
VERITAS Software Corporation
*Xoom.com, Inc.
Deletions
Boston Scientific Corporation
*Computer Literacy, Inc.
*Etek Dynamics, Inc.
Gateway 2000, Inc.
Genentech, Inc.
*The Globe.com, Inc.
HBO & Company
Lockheed Martin Corporation
PeopleSoft, Inc.
SAP AG (Systeme, Anwendungen, Produkte
in der Datenverarbeitung)(ADR)
Thermo Electron Corporation
*Xoom.com, Inc.
Yahoo! Inc.
[FN]
*Added and deleted in the same quarter.
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Telecommunications 121,000 Northern Telecom Limited $ 4,969,470 $ 6,065,125 0.8%
Equipment
Total Investments in Canada 4,969,470 6,065,125 0.8
Finland Telecommunications 62,600 Nokia OYJ (ADR)* 4,329,335 7,539,388 1.1
Equipment
Total Investments in Finland 4,329,335 7,539,388 1.1
Israel Telecommunications 213,400 ECI Telecommunications Limited 7,663,805 7,509,012 1.0
Equipment
Total Investments in Israel 7,663,805 7,509,012 1.0
Singapore Contract 183,200 Flextronics International Ltd. 7,730,216 15,663,600 2.2
Manufacturers
Total Investments in Singapore 7,730,216 15,663,600 2.2
Sweden Telecommunications 445,000 Telefonaktiebolaget LM
Equipment Ericsson (ADR)* 10,202,389 10,624,375 1.5
Total Investments in Sweden 10,202,389 10,624,375 1.5
</TABLE>
Merrill Lynch Global Technology Fund, Inc., December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Components 200,000 American Power Conversion
Corporation $ 5,747,156 $ 9,675,000 1.3%
339,600 General Cable Corporation 7,258,586 6,961,800 1.0
------------ ------------ ------
13,005,742 16,636,800 2.3
Computer Systems 412,000 EMC Corporation 18,567,622 35,020,000 4.9
438,800 Electronics for Imaging, Inc. 8,197,483 17,524,575 2.4
45,000 International Business
Machines Corporation 5,852,700 8,313,750 1.1
166,000 Sun Microsystems, Inc. 7,466,687 14,203,375 2.0
------------ ------------ ------
40,084,492 75,061,700 10.4
Contract 200,000 Jabil Circuit, Inc. 6,508,650 14,925,000 2.1
Manufacturers 421,300 SCI Systems, Inc. 15,320,030 24,330,075 3.4
369,000 Sanmina Corporation 15,557,318 22,970,250 3.2
220,000 Solectron Corporation 10,101,586 20,446,250 2.8
------------ ------------ ------
47,487,584 82,671,575 11.5
Data Communications 195,400 3Com Corporation 5,816,837 8,756,362 1.2
165,000 Ascend Communications, Inc. 7,775,985 10,848,750 1.5
170,750 Cisco Systems, Inc. 9,019,324 15,847,734 2.2
------------ ------------ ------
22,612,146 35,452,846 4.9
Distribution 396,300 Ingram Micro Inc. 16,537,696 13,820,962 1.9
147,000 Tech Data Corporation 6,087,388 5,898,375 0.8
------------ ------------ ------
22,625,084 19,719,337 2.7
Electronic Design 722,300 Cadence Design Systems, Inc. 21,310,030 21,488,425 3.0
Automation 331,000 Synopsys, Inc. 14,172,380 17,915,375 2.5
------------ ------------ ------
35,482,410 39,403,800 5.5
Internet 150,600 America Online, Inc. 8,038,098 21,799,350 3.0
Peripherals 204,100 Seagate Technology, Inc. 5,139,702 6,174,025 0.9
Personal Computers 432,000 Compaq Computer Corporation 12,615,423 18,117,000 2.5
74,000 Dell Computer Corporation 3,431,750 5,415,875 0.7
------------ ------------ ------
16,047,173 23,532,875 3.2
Semiconductor 166,500 Applied Materials, Inc. 5,075,724 7,107,469 1.0
Equipment 170,100 Teradyne, Inc. 6,825,990 7,207,988 1.0
------------ ------------ ------
11,901,714 14,315,457 2.0
Semiconductors 60,700 Intel Corporation 4,643,477 7,192,950 1.0
360,000 Maxim Integrated Products,
Inc. 10,841,870 15,705,000 2.2
183,700 Texas Instruments
Incorporated 10,769,653 15,717,831 2.2
121,000 Xilinx, Inc. 4,307,621 7,872,563 1.1
------------ ------------ ------
30,562,621 46,488,344 6.5
Software 361,900 Autodesk, Inc. 11,350,399 15,425,987 2.1
121,700 BMC Software, Inc. 6,095,375 5,423,256 0.7
168,700 Citrix Systems, Inc. 11,365,297 16,363,900 2.3
348,300 Compuware Corporation 18,126,297 27,189,169 3.8
217,000 J.D. Edwards & Company 6,050,915 6,157,375 0.8
113,100 Microsoft Corporation 12,317,726 15,671,419 2.2
337,500 Network Associates, Inc. 15,133,179 22,380,469 3.1
194,100 Symantec Corporation 5,116,753 4,197,413 0.6
56,900 VERITAS Software Corporation 3,129,500 3,403,331 0.5
------------ ------------ ------
88,685,441 116,212,319 16.1
Technology Services 120,500 The Bisys Group, Inc. 4,808,125 6,205,750 0.9
267,700 DST Systems, Inc. 16,295,248 15,275,631 2.1
1,089,600 Keane, Inc. 41,662,588 43,515,900 6.0
203,000 Unisys Corporation 5,867,412 6,990,813 1.0
------------ ------------ ------
68,633,373 71,988,094 10.0
Telecommunications 332,100 MCI WorldCom Inc. 16,429,425 23,828,175 3.3
Telecommunications 355,000 ADC Telecommunications, Inc. 12,511,878 12,247,500 1.7
Equipment 54,600 Lucent Technologies Inc. 4,450,332 6,006,000 0.8
293,500 Tellabs, Inc. 17,012,652 20,123,094 2.8
98,000 Uniphase Corporation 5,131,996 6,798,750 1.0
------------ ------------ ------
39,106,858 45,175,344 6.3
Total Investments in the
United States 465,841,863 638,460,041 88.6
Total Investments in Stocks 500,737,078 685,861,541 95.2
Face
Amount Issue
Commercial $ 2,000,000 General Electric Capital
Paper** Corp., 5% due 1/04/1999 1,999,167 1,999,167 0.3
33,337,000 General Motors Acceptance
5.13% due Corp., 1/04/1999 33,322,748 33,322,748 4.6
Total Investments in
Short-Term Securities 35,321,915 35,321,915 4.9
Total Investments $536,058,993 721,183,456 100.1
============
Liabilities in Excess of Other Assets (623,556) (0.1)
------------ ------
Net Assets $720,559,900 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $28,100,615 and
2,156,588 shares outstanding $ 13.03
============
Class B--Based on net assets of $483,388,738 and
37,295,445 shares outstanding $ 12.96
============
Class C--Based on net assets of $111,776,570 and
8,624,346 shares outstanding $ 12.96
============
Class D--Based on net assets of $97,293,977 and
7,476,334 shares outstanding $ 13.01
============
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rates
shown reflect the discount rates paid at the time of purchase by the
Fund.
</TABLE>
