<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1999
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
------------------------
[ ] PRE-EFFECTIVE AMENDMENT NO. [X] POST-EFFECTIVE AMENDMENT NO. 2
(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)
------------------------
TERRY K. GLENN
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.
It is proposed that this filing will become effective (check appropriate
box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
- --------------------------------------------------------------------------------
<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 Registration Statement Cover Page;
Outside Front Cover Page of Prospectus Proxy Statement and Prospectus Cover
Page
Item 2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
Item 3. Fee Table, Synopsis Information and Summary; Risk Factors and Special
Risk Factors 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 Proxy Statement and Prospectus Cover
Acquired 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 Not Applicable
Reoffering by Persons Deemed to be
Underwriters
PART B
- ---------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. Additional Information about the General Information
Registrant
Item 13. Additional Information about the General Information
Company Being Acquired
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 AUGUST 11, 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 Wednesday, August 11, 1999 at 9:00 a.m., Eastern
time, for the following purposes:
(1) To approve or disapprove an Amended Agreement and Plan of
Reorganization (the "Agreement and Plan") 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 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 May 28, 1999 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 July 28, 1999 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,
ROBERT E. PUTNEY, III
Secretary
Plainsboro, New Jersey
Dated: June 3, 1999
<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 Amended Agreement and Plan of
Reorganization between Technology Fund and Global Technology Fund (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 similar 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 Annual Report to
Shareholders of Global Technology Fund dated March 31, 1999 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, as
supplemented (the "Technology Fund Prospectus"), a statement of additional
information relating to Technology Fund, dated June 30, 1998 (the "Technology
Fund Statement") and an Annual Report to Shareholders of Technology Fund dated
March 31, 1999, 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 June 3, 1999 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 JUNE 3, 1999.
<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 March 31, 1999 (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 March 31, 1999 (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............................................... 23
Stockholder Rights........................................ 23
Dividends and Distributions............................... 24
Automatic Dividend Reinvestment Plan...................... 24
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.................. 30
Date, Time and Place of Meeting........................... 30
Solicitation, Revocation and Use of Proxies............... 30
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...................................... 32
LEGAL PROCEEDINGS........................................... 33
LEGAL OPINIONS.............................................. 33
EXPERTS..................................................... 33
STOCKHOLDER PROPOSALS....................................... 34
EXHIBIT I--AMENDED 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 August 11, 1999, at 9:00 a.m., Eastern 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 June 7, 1999.
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.
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 or disapprove 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 May 25,
1999, 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 similar investment objective to that of Technology Fund. Since the
net assets of Global Technology Fund as of March 31, 1999 were approximately
$849.1 million and will increase by approximately $481.4 million (the net asset
value of Technology Fund as of March 31, 1999) 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. In addition, the
management fee is likely to be reduced because the net assets of the Combined
Fund will exceed Global Technology Fund's breakpoint of $1 billion. See "The
Reorganization--Potential Benefits to Stockholders as a Result of the
Reorganization."
3
<PAGE> 7
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 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. 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 MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES(B)
--------------------------------------------- ----------------------------------------
ACTUAL ACTUAL
------------------------------ ----------------------------
TECHNOLOGY GLOBAL PRO FORMA TECHNOLOGY GLOBAL PRO FORMA
FUND TECHNOLOGY FUND COMBINED FUND TECHNOLOGY FUND COMBINED
---------- --------------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCKHOLDER FEES (FEES PAID DIRECTLY
FROM YOUR INVESTMENT)(a):
Maximum Sales Charge (Load) imposed
on purchases (as a percentage of
offering price) 5.25%(c) 5.25%(c) 5.25%(c) None None None
Maximum Deferred Sales Charge
(Load)(as a percentage of
original purchase price or
redemption proceeds, whichever
is lower) None(d) None(d) None(d) 4.0%(c) 4.0%(c) 4.0%(c)
Maximum Sales Charge (Load) imposed
on Dividend Reinvestments None None None None None None
Redemption Fee None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS):
Management Fees(e) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution and/or Service (12b-1)
Fees(f) None None None 1.00% 1.00% 1.00%
Other Expenses (including transfer
agency fees)(g) 0.38% 0.25% 0.23% 0.42% 0.27% 0.24%
----- ----- ----- ----- ----- -----
Total Annual Fund Operating
Expenses 1.38% 1.25% 1.23% 2.42% 2.27% 2.24%
===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
Footnotes appear on next page.
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 MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
CLASS C SHARES CLASS D SHARES
--------------------------------------------- ----------------------------------------
ACTUAL ACTUAL
------------------------------ ----------------------------
TECHNOLOGY GLOBAL PRO FORMA TECHNOLOGY GLOBAL PRO FORMA
FUND TECHNOLOGY FUND COMBINED FUND TECHNOLOGY FUND COMBINED
---------- --------------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCKHOLDER FEES (FEES PAID DIRECTLY
FROM YOUR INVESTMENT)(a):
Maximum Sales Charge (Load) imposed
on purchases (as a percentage of
offering price) None None None 5.25%(c) 5.25%(c) 5.25%(c)
Maximum Deferred Sales Charge
(Load)(as a percentage of
original purchase price or
redemption proceeds, whichever is
lower) 1.0%(c) 1.0%(c) 1.0%(c) None(d) None(d) None(d)
Maximum Sales Charge (Load) imposed
on Dividend Reinvestments None None None None None None
Redemption Fee None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS):
Management Fees(e) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution and/or Service (12b-1)
fees(f) 1.00% 1.00% 1.00% 0.25% 0.25% 0.25%
Other Expenses (including transfer
agency fees)(g) 0.44% 0.28% 0.27% 0.37% 0.25% 0.22%
-------- -------- -------- -------- -------- --------
Total Annual Fund Operating
Expenses 2.44% 2.28% 2.27% 1.62% 1.50% 1.47%
--- ----- --- ------ -------- -----
--- ----- --- ------ -------- -----
</TABLE>
- ---------------
(a) In addition, Merrill Lynch may charge clients a processing fee (currently
$5.35) when a client buys or sells shares.
(b) Class B shares automatically convert to Class D shares about eight years
after initial purchase and will no longer be subject to distribution fees.
See "Comparison of the Funds--Purchase of Shares."
(c) Some investors may qualify for reductions in the sales charge (load). See
"Comparison of the Funds--Purchase of Shares."
(d) A stockholder may pay a deferred sales charge if such stockholder purchases
$1 million or more and redeems within one year.
(e) Global Technology Fund pays, and the Combined Fund will pay, the Manager a
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 in
excess of $1.0 billion. For the period June 26, 1998 (commencement of
operations) to March 31, 1999, the Manager received a fee from Global
Technology Fund equal to 1.00% of the Fund's average daily net assets.
(f) The Funds call the "Service Fee" an "Account Maintenance Fee." Account
Maintenance Fee is the term used in the Prospectuses of the Funds and in all
other Fund materials. If a stockholder holds Class B or Class C for a long
time, it may cost that stockholder more in distribution (12b-1) fees than
the maximum sales charge that such stockholder would have paid if he or she
had bought one of the other classes.
(g) The Funds pay the Transfer Agent $11.00 for each Class A and Class D
stockholder account and $14.00 for each Class B and Class C stockholder
account and reimburse the Transfer Agent's out-of-pocket expenses. The Funds
pay a 0.10% fee for certain accounts that participate in the Merrill Lynch
Mutual Fund Advisor program. The Funds also pay a $0.20 monthly closed
account charge, which is assessed upon all accounts that close during the
year. This fee begins the month following the month the account is closed
and ends at the end of the calendar year. For the period June 26, 1998
(commencement of operations) to March 31, 1999, Global Technology Fund paid
the Transfer Agent fees totaling $624,217, and for the fiscal year ended
March 31, 1999, Technology Fund paid the Transfer Agent fees totaling
$1,345,959. The Manager provides accounting services to the Fund at its
cost. For the period June 26, 1998 (commencement of operations) to March 31,
1999, Global Technology Fund reimbursed the Manager $65,791 for these
services, and for the fiscal year ended March 31, 1999, Technology Fund
reimbursed the Manager $84,186 for these services.
6
<PAGE> 10
EXAMPLES:
These examples assume that you invest $10,000 in the relevant Fund for the time
periods indicated, that your investment has a 5% return each year, that you pay
the sales charges, if any, that apply to the particular class and that the
Fund's operating expenses remain the same. This assumption is not meant to
indicate you will receive a 5% annual rate of return. Your annual return may be
more or less than the 5% used in these examples. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES IF YOU DID REDEEM YOUR SHARES:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
- ----------------------------------------------------------------------------------------------------------------------
Technology Fund $658 $ 939 $1,241 $2,095
Global Technology Fund 646 901 1,175 1,957
Combined Fund** 644 895 1,165 1,935
- ----------------------------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------
Technology Fund $645 $ 955 $1,291 $2,571*
Global Technology Fund 630 909 1,215 2,417*
Combined Fund** 627 900 1,200 2,386*
- ----------------------------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------------------------
Technology Fund $347 $ 761 $1,301 $2,776
Global Technology Fund 331 712 1,220 2,615
Combined Fund** 330 709 1,215 2,605
- ----------------------------------------------------------------------------------------------------------------------
Class D
- ----------------------------------------------------------------------------------------------------------------------
Technology Fund $681 $1,009 $1,360 $2,346
Global Technology Fund 670 974 1,300 2,222
Combined Fund** 667 965 1,286 2,190
</TABLE>
EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
- ----------------------------------------------------------------------------------------------------------------------
Technology Fund $658 $ 939 $1,241 $2,095
Global Technology Fund 646 901 1,175 1,957
Combined Fund** 644 895 1,165 1,935
- ----------------------------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------
Technology Fund $245 $ 755 $1,291 $2,571*
Global Technology Fund 230 709 1,215 2,417*
Combined Fund** 227 700 1,200 2,386*
- ----------------------------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------------------------
Technology Fund $247 $ 761 $1,301 $2,776
Global Technology Fund 231 712 1,220 2,615
Combined Fund** 230 709 1,215 2,605
- ----------------------------------------------------------------------------------------------------------------------
Class D
- ----------------------------------------------------------------------------------------------------------------------
Technology Fund $681 $1,009 $1,360 $2,346
Global Technology Fund 670 974 1,300 2,222
Combined Fund** 667 965 1,286 2,190
</TABLE>
- ---------------
* Assumes conversion to Class D shares approximately eight years after
purchase. See note (b) to the Fees and Expenses table above.
** Assuming the Reorganization had taken place on March 31, 1999.
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 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 March 31, 1999, Technology Fund had net
assets of $481,385,732.
BUSINESS OF GLOBAL
TECHNOLOGY FUND Global Technology Fund was incorporated under the
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 March 31, 1999, Global Technology Fund had
net assets of $849,064,124.
COMPARISON OF THE FUNDS Investment Objectives. The investment objectives
of Global Technology Fund and Technology Fund are
substantially similar, 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
technology related 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 securities, 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. Neither Fund is required to use hedging
and each may choose not to do so.
Neither Global Technology Fund nor Technology Fund
may borrow money or pledge its assets, except that
each Fund may borrow from a bank as a temporary
measure for extraordinary or emergency purposes or
to meet redemptions in amounts not exceeding
33 1/3% (taken at market value) of its total assets
and pledge its assets to secure such borrowings,
8
<PAGE> 12
and may obtain such short-term credit as may be
necessary for the clearance of purchases and sales
of portfolio securities.
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."
Expense Ratio. The total operating expense ratio
for Class A shares as of March 31, 1999 was 1.38%
for Technology Fund and 1.25% for Global Technology
Fund. If the Reorganization had taken place on that
date, the total operating expense ratio for Class A
shares of the Combined Fund on a pro forma basis
would have been 1.23%.
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 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
9
<PAGE> 13
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. Eastern 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 "Comparison of the
Funds--Additional Information--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--Additional Information--
Stockholder Services."
TAX CONSIDERATIONS Technology Fund and Global Technology Fund jointly
have received a favorable 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 Reorganization will not
affect the status of Global Technology Fund as a
regulated investment company.
As of April 30, 1999, Technology Fund has
significant undistributed net realized capital
losses, which are almost completely offset by its
net unrealized appreciation. As of the same date,
Global Technology Fund has some undistributed net
realized capital gains and a significant amount of
net unrealized appreciation. After the
Reorganization, Technology Fund stockholders will
share in the net unrealized appreciation of Global
Technology Fund and, to the extent such
appreciation is realized, will be subject to any
tax consequences related to that appreciation.
Also, after the Reorganization, current Global
Technology Fund stockholders will benefit from the
ability of Global Technology Fund to share in a
portion of the undistributed net realized capital
losses of Technology Fund, which can be used to
offset realized capital gains. It is expected that
over time the reduction in expenses experienced by
Technology Fund stockholders as a result of the
Reorganization may in whole or in part offset any
potential increased tax liability.
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
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 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 the Funds. 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.
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.
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
12
<PAGE> 16
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 has
been audited in conjunction with the annual audits of the financial statements
of Global Technology Fund by Deloitte & Touche LLP, independent auditors.
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 MARCH 31, 1999
----------------------------------------------------
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 (.05) (.13) (.13) (.07)
Realized and unrealized gain on
investments--net 3.64 3.61 3.61 3.63
------- -------- -------- --------
Total from investment operations 3.59 3.48 3.48 3.56
------- -------- -------- --------
Net asset value, end of period $ 13.59 $ 13.48 $ 13.48 $ 13.56
======= ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share 35.90%# 34.80%# 34.80%# 35.60%#
======= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.25%* 2.27%* 2.28%* 1.50%*
======= ======== ======== ========
Investment loss--net (.74)%* (1.76)%* (1.76)%* (1.00)%*
======= ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $41,382 $565,111 $127,461 $115,110
======= ======== ======== ========
Portfolio turnover 49.72% 49.72% 49.72% 49.72%
======= ======== ======== ========
</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 following table 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 YEAR ENDED MARCH 31,
----------------------------------------------------------------
1999 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 year $ 4.27 $ 5.07 $ 4.82 $ 4.89 $ 5.17
-------- -------- -------- -------- --------
Investment income (loss)--net (.04) (.04) (.03) (.03) .05
Realized and unrealized gain on
investments and foreign currency
transactions--net 1.33 .46 .72 .28 .11
-------- -------- -------- -------- --------
Total from investment operations 1.29 .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 year $ 5.56 $ 4.27 $ 5.07 $ 4.82 $ 4.89
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share 30.21% 3.96% 14.60% 5.15% 2.86%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.38% 1.27% 1.30% 1.31% 1.33%
======== ======== ======== ======== ========
Investment income (loss)--net (1.01)% (.82)% (.63)% (.62)% .87%
======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands) $214,431 $211,443 $222,118 $246,909 $254,188
======== ======== ======== ======== ========
Portfolio turnover 155.34% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
<CAPTION>
CLASS B+
----------------------------------------------------------------
FOR THE YEAR ENDED MARCH 31,
----------------------------------------------------------------
1999 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 year $ 4.06 $ 4.89 $ 4.66 $ 4.78 $ 5.08
-------- -------- -------- -------- --------
Investment income (loss)--net (.08) (.09) (.08) (.09) (.01)
Realized and unrealized gain on
investments and foreign currency
transactions--net 1.25 .46 .69 .29 .11
-------- -------- -------- -------- --------
Total from investment operations 1.17 .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 year $ 5.23 $ 4.06 $ 4.89 $ 4.66 $ 4.78
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share 28.82% 3.09% 13.20% 4.21% 1.78%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses 2.42% 2.31% 2.35% 2.34% 2.38%
======== ======== ======== ======== ========
Investment income (loss)--net (2.04)% (1.85)% (1.66)% (1.65)% (.10)%
======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands) $219,062 $285,193 $375,630 $553,819 $614,935
======== ======== ======== ======== ========
Portfolio turnover 155.34% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
</TABLE>
- ---------------
* Total investment returns exclude the effects of sales loads.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
15
<PAGE> 19
TECHNOLOGY FUND--FINANCIAL HIGHLIGHTS (CONCLUDED)
<TABLE>
<CAPTION>
CLASS C++
---------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD
MARCH 31, OCTOBER 21, 1994+
---------------------------------------------- TO MARCH 31,
1999 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 $ 4.03 $ 4.87 $ 4.64 $ 4.76 $ 5.75
------- ------- ------- ------- -------
Investment loss--net (.08) (.09) (.08) (.09) --
Realized and unrealized gain
(loss) on investments
and foreign currency
transactions--net 1.24 .45 .68 .29 (.62)
------- ------- ------- ------- -------
Total from investment operations 1.16 .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 $ 5.19 $ 4.03 $ 4.87 $ 4.64 $ 4.76
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share 28.78% 2.87% 13.19% 4.22% (11.11)%#
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Expenses 2.44% 2.33% 2.37% 2.36% 2.59%*
======= ======= ======= ======= =======
Investment loss--net (2.06)% (1.87)% (1.68)% (1.69)% (.02)%*
======= ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $13,497 $15,424 $19,015 $31,090 $23,259
======= ======= ======= ======= =======
Portfolio turnover 155.34% 206.40% 176.51% 108.36% 175.57%
======= ======= ======= ======= =======
<CAPTION>
CLASS D++
---------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD
MARCH 31, OCTOBER 21, 1994+
---------------------------------------------- TO MARCH 31,
1999 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 $ 4.25 $ 5.05 $ 4.81 $ 4.89 $ 5.88
------- ------- ------- ------- -------
Investment loss--net (.05) (.05) (.04) (.05) (.02)
Realized and unrealized gain
(loss) on investments
and foreign currency
transactions--net 1.31 .46 .71 .29 (.60)
------- ------- ------- ------- -------
Total from investment operations 1.26 .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 $ 5.51 $ 4.25 $ 5.05 $ 4.81 $ 4.89
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share 29.65% 3.90% 14.09% 4.94% (10.76)%#
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.62% 1.52% 1.55% 1.56% 1.80%*
======= ======= ======= ======= =======
Investment loss--net (1.25)% (1.07)% (.88)% (.89)% (.81)%*
======= ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $34,396 $34,712 $35,372 $43,858 $32,646
======= ======= ======= ======= =======
Portfolio turnover 155.34% 206.40% 176.51% 108.36% 175.57%
======= ======= ======= ======= =======
</TABLE>
- ---------------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on 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 similar, 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. Although there are no prescribed limits on geographic
asset distribution, based upon the public market values in the world equity
markets and anticipated technological innovations it is presently anticipated
that 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 Global
Technology Fund is obligated to pay or is to receive under the swap agreement.
Global Technology 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, however, 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 in amounts not exceeding 33 1/3% (taken at market value) of its
total assets and pledge its assets to secure such borrowings, and may obtain
such short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities. The purchase of securities while borrowings are
outstanding will have the effect of leveraging the Funds. Such leveraging or
borrowing increases the Fund's exposure to capital risk, and borrowed funds are
subject to interest costs that will reduce net income. 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. Neither Fund is required
to use hedging and each may choose not to do so. 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
20
<PAGE> 24
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 its 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.
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 eight individuals, six of whom are not "interested
persons" as defined in the Investment Company Act. The same eight 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:
TERRY K. GLENN*--Executive Vice President of MLAM and its affiliate, Fund
Asset Management, L.P. ("FAM"); Executive Vice President and Director of
Princeton Services, Inc. ("Princeton Services"); President and Director of
Princeton Funds Distributor, Inc. ("PFD"); and President of Princeton
Administrators, L.P.
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.
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<PAGE> 25
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.
ARTHUR ZEIKEL*--Retired Chairman of MLAM and FAM; retired Chairman and
Director of Princeton Services; and retired Executive Vice President of Merrill
Lynch & Co., Inc. ("ML & Co.")
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.
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. 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. After the Reorganization, the Combined Fund will pay the management fee
rate paid by Global Technology 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 33 King
William Street, London EC4R 9AS, England.
After the Reorganization, on a pro forma combined basis, the total
operating expenses of Global Technology Fund, as a percent of net assets, are
expected to 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
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<PAGE> 26
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.
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 3/31/99 35.90 28.77 34.80 30.80 34.80 33.80 35.60 28.48
</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.
+ The Fund commenced operations on 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>
Year Ended 3/31/99 30.21 23.37 28.82 24.82 28.78 27.78 29.65 22.84
Five Years Ended 3/31/99 10.90 9.71 9.78 9.78 -- -- -- --
Inception** through 3/31/99 18.47 17.55 17.26 17.26 7.68 7.68 8.54 7.23
</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.
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.
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<PAGE> 27
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.
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Each of the Funds offers its stockholders an Automatic Dividend
Reinvestment Plan (the "Plan") with substantially similar terms. Pursuant to the
Plans, dividends will be automatically reinvested, without sales charge, in
additional full and fractional shares of the relevant Fund unless a stockholder
has elected to receive such dividends in cash. For further information about the
Plans, see "Shareholder Services--Automatic Reinvestment of Dividends and
Capital Gains Distributions" in the Global Technology Fund Prospectus and in the
Technology Fund Prospectus.
After the Reorganization, a Technology Fund stockholder who has elected to
receive dividends in cash will continue to receive dividends in cash; all other
Technology Fund stockholders will have their dividends automatically reinvested
in shares of the Combined Fund. However, if a stockholder owns shares of both
Funds, after the Reorganization the stockholder's election with respect to the
dividends of Global Technology Fund will control unless the stockholder
specifically elects a different option at that time.
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 "Summary--Tax
Considerations" and "The Reorganization--Tax Consequences of the Reorganization"
herein and "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, 1998 and 1999 were 206.40%
and 155.34%, respectively. The portfolio turnover rate for Global Technology
Fund for the period June 26, 1998 (commencement of operations) to March 31, 1999
was 49.72%. Higher portfolio turnover may contribute to higher transactional
costs and negative tax consequences, such as an increase in capital gain
dividends.
ADDITIONAL INFORMATION
Net Asset Value. Global Technology Fund and Technology Fund each
determines the 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. Eastern 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
24
<PAGE> 28
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 after the Reorganization 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.
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 "Terms of the Agreement and Plan of Reorganization--Valuation of
Assets and Liabilities" for information concerning the calculation of net asset
25
<PAGE> 29
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.
PROCEDURE
The Reorganization was considered and approved by the Board of Directors of
each of the Funds at meetings held on October 21, 1998. At that time, the Board
of Directors of Technology Fund called a special meeting of Technology Fund
stockholders to be held on January 12, 1999 to consider and vote upon the
Reorganization. Although a majority of those stockholders who did vote on the
proposal voted in favor of it, the proposal did not receive the vote of the
Technology Fund stockholders required for approval at the January 12, 1999
meeting or at subsequent adjournments.
On May 25, 1999, the Board of Directors of Technology Fund, including all
of the Directors present at the meeting 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 of Reorganization
to Technology Fund stockholders for approval. The Board of Directors of Global
Technology Fund, including all of the Directors present at the meeting who are
not interested persons, also approved the Agreement and Plan of Reorganization
on May 25, 1999.
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 third 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
26
<PAGE> 30
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 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 that a registration statement on Form N-14 shall have become
effective, approval of the Reorganization by Technology Fund stockholders, a
favorable IRS private letter 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 similar, though not 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.
27
<PAGE> 31
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, are expected to be less than the current operating
expenses for Technology Fund. See "Summary--Pro Forma Fee Tables" and
"--Comparison of the Funds--Expense Ratio." 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 March 31, 1999, the total operating expense ratio for
Technology Fund Class A shares was 1.38% (based on average daily net assets of
approximately $443.5 million) and the total operating expense ratio for Global
Technology Fund Class A shares was 1.25% (based on average daily net assets of
approximately $603.5 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 1.23% (based on average daily net
assets of approximately $1.0 billion).
The following table sets forth (i) the net assets of Technology Fund as of
its last four fiscal year ends and (ii) the net assets of Global Technology Fund
as of June 30, 1998 and as of March 31, 1999.
<TABLE>
<CAPTION>
GLOBAL TECHNOLOGY FUND TECHNOLOGY FUND
- ---------------------- ---------------------
AS OF NET ASSETS AS OF NET ASSETS
- -------- ------------ ------- ------------
<S> <C> <C> <C>
6/30/98* $439,392,080 3/31/96 $875,675,953
3/31/99 $849,064,124 3/31/97 $652,135,210
3/31/98 $546,772,119
3/31/99 $481,385,732
</TABLE>
- ---------------
* Global Technology Fund commenced operations on June 26, 1998.
The net assets of Technology Fund as of fiscal year end March 31, 1999 are
below the level reached at fiscal year end March 31, 1996 and have decreased
year-to-year since that date. The net assets of Global Technology Fund have
almost doubled in the less than 12 months since Global Technology Fund's
commencement of operations. MLAM believes that the economies of scale that may
be realized as a result of the Reorganization would be beneficial to Technology
Fund stockholders.
The Board of Directors of Technology Fund has 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 has
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 received a favorable 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
28
<PAGE> 32
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.
As of April 30, 1999, Technology Fund has significant undistributed net
realized capital losses, which are almost completely offset by its net
unrealized appreciation. As of the same date, Global Technology Fund has some
undistributed net realized capital gains and a significant amount of net
unrealized appreciation. After the Reorganization, Technology Fund stockholders
will share in the net unrealized appreciation of Global Technology Fund and, to
the extent such appreciation is realized, will be subject to any tax
consequences related to that appreciation. Also, after the Reorganization,
current Global Technology Fund stockholders will benefit from the ability of
Global Technology Fund to share in a portion of the undistributed net realized
capital losses of Technology Fund, which can be used to offset realized capital
gains. It is anticipated that over time the reduction in expenses experienced by
Technology Fund stockholders as a result of the Reorganization may in whole or
in part offset any potential increased tax liability. 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 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 March 31, 1999: (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 MARCH 31, 1999
GLOBAL TECHNOLOGY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total Net Assets: $41,382,488 $565,110,880 $127,461,077 $115,109,679
Shares Outstanding: 3,046,001 41,921,763 9,456,040 8,488,698
Net Asset Value Per Share: $ 13.59 $ 13.48 $ 13.48 $ 13.56
</TABLE>
29
<PAGE> 33
TECHNOLOGY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total Net Assets: $214,430,701 $219,062,343 $ 13,496,926 $ 34,395,762
Shares Outstanding: 38,587,524 41,924,879 2,601,788 6,238,529
Net Asset Value Per Share: $ 5.56 $ 5.23 $ 5.19 $ 5.51
</TABLE>
COMBINED FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total Net Assets:* $255,836,556 $784,244,853 $140,970,879 $149,519,097
Shares Outstanding: 18,829,456 58,172,517 10,457,356 11,025,184
Net Asset Value Per Share:* $ 13.59 $ 13.48 $ 13.48 $ 13.56
</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 March 31, 1999. The
data includes an accrual of estimated Reorganization expenses of $275,000. 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 August 11, 1999, at the offices of Merrill
Lynch Asset Management, L.P., 800 Scudders Mill Road, Plainsboro, New Jersey at
9:00 a.m., Eastern 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.
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 May 28, 1999 (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 87,108,927 shares of Technology Fund common stock issued and outstanding
and entitled to vote.
30
<PAGE> 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GLOBAL
TECHNOLOGY FUND
AND TECHNOLOGY FUND
Except as set forth below, to the knowledge of Global Technology Fund, no
person or entity owned beneficially or of record 5% or more of any class of
shares of Global 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 22.7%
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Company(3).............................. Class A 16.5%
Trustee FBO MLSIP
Investment Account
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Company(3).............................. Class A 5.5%
Trustee FBO MLRAP Plan
Investment Account
P.O. Box 30532
New Brunswick, NJ 08989
</TABLE>
- ---------------
(1) Assuming the Reorganization is consummated, such ownership percentages would
be: Merrill Lynch Trust Company, 45.7% (including Technology Fund Class A
shares owned prior to the Reorganization); FBO MSLIP Investment Account,
12.9% (including Technology Fund Class A shares owned prior to the
Reorganization); and FBO MLRAP Plan Investment Account, 1.2%. These
percentages are based on the pro forma capitalization of the Combined Fund
as of March 31, 1999. 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.
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 49.0%
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Company(2).............................. Class C 37.0%
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Company(3).............................. Class A 21.0%
Trustee FBO Chrysler Salaried
Employees' Savings Plan
265 Davidson Ave #4
Somerset, NJ 08873
Merrill Lynch Trust Company(3).............................. Class A 11.8%
Trustee FBO Chrysler Hourly
Employees Deferred Pay Plan
265 Davidson Ave #4
Somerset, NJ 08873
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
NAME AND ADDRESS CLASS OF SHARES PERCENT OF CLASS(1)
- ---------------- --------------- -------------------
<S> <C> <C>
Merrill Lynch Trust Company(3).............................. Class A 11.3%
Trustee FBO MLSIP
Investment Account
P.O. Box 30532
New Brunswick, NJ 08873
James H. Goodnight and...................................... Class D 5.4%
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 45.7% (Class A) (including Global Technology
Fund Class A shares owned prior to the Reorganization) and 4.3% (Class C);
FBO Chrysler Salaried Employees' Savings Plan, 17.2%; FBO Chrysler Hourly
Employees Deferred Pay Plan, 9.7%; FBO MLSIP Investment Account, 12.9%
(including Global Technology Fund Class A shares owned prior to the
Reorganization); and James H. Goodnight and Ann B. Goodnight JTWROS, 1.3%.
These percentages are based on the pro forma capitalization of the Combined
Fund as of March 31, 1999. 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 Global Technology Fund as
a group (11 persons) owned an aggregate of less than 1% of the outstanding
shares of Global Technology Fund and owned an aggregate of less than 1% of the
outstanding shares of common stock of ML & Co.
At the Record Date, the Directors and officers of Technology Fund as a
group (11 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.
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 one-third 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 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 $275,000.
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<PAGE> 36
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 Shareholder
Communications, Inc., 17 State Street, New York, New York 10004 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 and Global Technology Fund
included in this Proxy Statement and Prospectus have been so included in
reliance on the reports 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
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,
Robert E. Putney, III
Secretary, Merrill Lynch Technology
Fund, Inc.
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AMENDED AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of the 2nd day of June, 1999, 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> 39
(c) Technology has been furnished with a statement of assets and
liabilities and a schedule of investments of Global Technology, each as of March
31, 1999, said financial statements having been examined by Deloitte & Touche
LLP, independent public accountants. 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 Global Technology's Annual Report to
Stockholders for the period ended March 31, 1999 and the financial statements
appearing therein fairly present the financial position of Global Technology as
of the dates indicated, in conformity with generally accepted accounting
principles applied on a consistent basis.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
(i) 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 (l) below) or will not otherwise be disclosed to
Technology prior to the Valuation Time.
(j) 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 March 31, 1999, 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.
(k) 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).
(l) 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,
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amendment or post-effective amendment thereto or any amendment or supplement 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
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.
(m) 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.
(n) 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.
(o) 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.
(p) 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,
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<PAGE> 41
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,
1999, said financial statements having been examined by Deloitte & Touche LLP,
independent public accountants. An unaudited statement of assets and liabilities
of 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, 1999 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, 1999 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
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<PAGE> 42
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.
(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 or dividends 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., Eastern time, on September 24,
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.
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(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.
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.
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(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 Registration Statement as
required by the 1933 Act, the 1934 Act and 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.
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(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.
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 March 31, 1999,
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, restated and
supplemented, 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
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<PAGE> 46
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 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
I-9
<PAGE> 47
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
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.
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<PAGE> 48
(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.
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, 1999,
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, 1999 (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, 1999, 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, 1999, 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.
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<PAGE> 49
(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 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 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 to and including the Exchange Date.
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<PAGE> 50
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 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 March 31, 2000, 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 representa-
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<PAGE> 51
tions 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 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:
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<PAGE> 52
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 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: Terry K. Glenn, 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, restated and
supplemented, 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.
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<PAGE> 53
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: /s/ TERRY K. GLENN
-------------------------------------
(TERRY K. GLENN, PRESIDENT)
ATTEST:
/s/ JACLYN SCHECK
- --------------------------------------
(JACLYN SCHECK, ASSISTANT SECRETARY)
MERRILL LYNCH TECHNOLOGY FUND, INC.
BY: /s/ DONALD C. BURKE
-------------------------------------
(DONALD C. BURKE, VICE PRESIDENT AND
TREASURER)
ATTEST:
/s/ JACLYN SCHECK
- --------------------------------------
(JACLYN SCHECK, ASSISTANT SECRETARY)
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<PAGE> 54
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 June 3, 1999 (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.
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 June 3, 1999.
<PAGE> 55
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 March 31,
1999 (unaudited) F-1
Pro Forma Combined Statement of Assets and Liabilities for
Global Technology Fund and Technology Fund as of March
31, 1999 (unaudited) F-4
Pro Forma Combined Statement of Operations for Global
Technology Fund and Technology Fund as of March 31,
1999 (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 August 11, 1999, at 9:00 a.m., Eastern 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
Audited financial statements and accompanying notes for the period June 26,
1998 (commencement of operations) to March 31, 1999, and the independent
auditors' report thereon, dated May 17, 1999, of Global Technology Fund are
incorporated by reference from Global Technology Fund's Annual Report to
Shareholders, which accompanies this Statement of Additional Information.
TECHNOLOGY FUND
Audited financial statements and accompanying notes for the fiscal year
ended March 31, 1999, and the independent auditors' report thereon, dated May
17, 1999, of Technology Fund are incorporated by reference from Technology
Fund's Annual Report to Shareholders, which accompanies this Statement of
Additional Information.
2
<PAGE> 56
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
MARCH 31, 1999 (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 CONTRACT MANUFACTURERS 432,500 +Celestica Inc............... $ 8,839,219 $ 5,190,000 $ 14,029,219
------------ ------------ --------------
TELECOMMUNICATIONS 212,000 Northern Telecom Limited
EQUIPMENT (Nortel)................... 7,517,125 5,653,375 13,170,500
------------ ------------ --------------
TOTAL INVESTMENTS IN
CANADA..................... 16,356,344 10,843,375 27,199,719
============ ============ ==============
FINLAND TELECOMMUNICATIONS 179,600 Nokia Oyj 'A' (ADR)*......... 17,537,450 10,435,250 27,972,700
EQUIPMENT ------------ ------------ --------------
TOTAL INVESTMENTS IN
FINLAND.................... 17,537,450 10,435,250 27,972,700
============ ============ ==============
ISRAEL TELECOMMUNICATIONS 354,400 ECI Telecom Limited.......... 7,469,000 4,935,000 12,404,000
EQUIPMENT ------------ ------------ --------------
TOTAL INVESTMENTS IN
ISRAEL..................... 7,469,000 4,935,000 12,404,000
============ ============ ==============
SINGAPORE CONTRACT MANUFACTURERS 626,400 +Flextronics International
Ltd. ...................... 18,732,200 13,292,500 32,024,700
------------ ------------ --------------
TOTAL INVESTMENTS IN
SINGAPORE.................. 18,732,200 13,292,500 32,024,700
============ ============ ==============
SWEDEN TELECOMMUNICATIONS 790,000 Telefonaktiebolaget LM
EQUIPMENT Ericsson (ADR)*............ 10,596,563 8,215,313 18,811,876
------------ ------------ --------------
TOTAL INVESTMENTS IN
SWEDEN..................... 10,596,563 8,215,313 18,811,876
============ ============ ==============
TAIWAN SEMICONDUCTORS 617,000 +Taiwan Semiconductor
Manufacturing Company Ltd.
(ADR)*..................... 9,166,500 5,410,125 14,576,625
------------ ------------ --------------
TOTAL INVESTMENTS IN
TAIWAN..................... 9,166,500 5,410,125 14,576,625
============ ============ ==============
UNITED STATES COMPONENTS 591,400 General Cable Corporation.... 3,587,025 2,659,637 6,246,662
------------ ------------ --------------
COMPUTER SYSTEMS 308,000 +EMC Corporation............. 30,276,750 9,070,250 39,347,000
609,100 +Electronics for Imaging,
Inc. ...................... 17,442,300 6,769,425 24,211,725
118,700 International Business
Machines Corporation....... 15,987,950 5,051,625 21,039,575
290,000 +Network Appliance, Inc. .... 9,135,000 5,582,500 14,717,500
245,000 +Sun Microsystems, Inc. ..... 20,750,000 9,875,000 30,625,000
------------ ------------ --------------
93,592,000 36,348,800 129,940,800
------------ ------------ --------------
CONTRACT MANUFACTURERS 604,000 +Jabil Circuit, Inc. ........ 16,200,000 8,262,000 24,462,000
612,000 +Sanmina Corporation......... 23,431,500 15,481,300 38,912,800
440,000 Solectron Corporation........ 21,367,500 -- 21,367,500
------------ ------------ --------------
60,999,000 23,743,300 84,742,300
------------ ------------ --------------
DATA COMMUNICATIONS 290,700 +Ascend Communications,
Inc. ...................... 13,808,437 10,519,519 24,327,956
336,750 +Cisco Systems, Inc. ........ 25,281,547 11,613,625 36,895,172
------------ ------------ --------------
39,089,984 22,133,144 61,223,128
------------ ------------ --------------
DISTRIBUTION 690,300 +Ingram Micro Inc. (Class
A)......................... 9,040,594 6,706,875 15,747,469
------------ ------------ --------------
ELECTRONIC DESIGN 1,044,300 +Cadence Design Systems,
AUTOMATION Inc. ...................... 18,599,225 8,291,500 26,890,725
442,000 +Synopsys, Inc. ............. 17,770,563 5,959,313 23,729,876
------------ ------------ --------------
36,369,788 14,250,813 50,620,601
------------ ------------ --------------
</TABLE>
F-1
<PAGE> 57
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
MARCH 31, 1999 (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR COMBINED
COUNTRY INDUSTRIES SHARES HELD STOCKS FUND++ FUND++ FUND++
- ------------- ---------------------- ----------- ----------------------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES
(CONTINUED)
INTERNET 85,700 +Amazon.com, Inc. ........... 9,377,406 5,368,350 14,745,756
540,200 +America Online, Inc. ....... 49,815,200 29,054,000 78,869,200
99,000 +Exodus Communications,
Inc. ...................... 8,300,250 4,953,375 13,253,625
79,400 +Yahoo! Inc. ................ 8,039,363 5,314,725 13,354,088
------------ ------------ --------------
75,532,219 44,690,450 120,222,669
------------ ------------ --------------
MEDICAL TECHNOLOGY 185,100 Medtronic, Inc. ............. 8,258,425 5,022,500 13,280,925
------------ ------------ --------------
PERIPHERALS 122,000 +Lexmark International Group,
Inc. (Class A)............. 8,157,750 5,475,750 13,633,500
211,900 Pitney Bowes, Inc. .......... 8,580,750 4,927,875 13,508,625
414,100 +Seagate Technology, Inc. ... 6,033,706 6,208,125 12,241,831
------------ ------------ --------------
22,772,206 16,611,750 39,383,956
------------ ------------ --------------
PERSONAL COMPUTERS 833,800 +Compaq Computer
Corporation................ 13,689,000 12,732,037 26,421,037
568,000 +Dell Computer Corporation... 13,652,250 9,564,750 23,217,000
154,400 +Gateway 2000, Inc. ......... -- 10,586,050 10,586,050
------------ ------------ --------------
27,341,250 32,882,837 60,224,087
------------ ------------ --------------
SEMICONDUCTOR 244,500 +Applied Materials, Inc. .... 10,270,969 4,811,625 15,082,594
EQUIPMENT
230,400 +KLA-Tencor Corporation...... 7,162,969 4,025,831 11,188,800
239,700 +Novellus Systems, Inc. ..... 8,140,000 5,043,500 13,183,500
287,200 +Teradyne, Inc. ............. 9,281,081 6,389,269 15,670,350
------------ ------------ --------------
34,855,019 20,270,225 55,125,244
------------ ------------ --------------
SEMICONDUCTORS 265,000 +Altera Corporation.......... 7,726,875 8,024,062 15,750,937
196,200 Intel Corporation............ 13,991,587 9,331,687 23,323,274
670,200 +Maxim Integrated Products,
Inc. ...................... 19,462,500 16,770,188 36,232,688
76,800 PMC-Sierra, Inc. ............ -- 5,462,400 5,462,400
321,400 Texas Instruments
Incorporated............... 18,232,225 13,666,725 31,898,950
238,000 +Vitesse Semiconductor
Corporation................ 8,595,625 3,438,250 12,033,875
742,000 +Xilinx, Inc. ............... 18,346,500 11,704,500 30,051,000
------------ ------------ --------------
86,355,312 68,397,812 154,753,124
------------ ------------ --------------
SOFTWARE 516,900 Autodesk, Inc. .............. 14,634,331 6,267,812 20,902,143
554,400 +BMC Software, Inc. ......... 12,738,381 7,809,069 20,547,450
399,400 +Citrix Systems, Inc. ....... 11,111,200 4,066,000 15,177,200
1,478,400 +Compuware Corporation....... 22,881,800 12,415,000 35,296,800
524,200 +Microsoft Corporation....... 20,259,037 26,689,625 46,948,662
515,800 +Network Associates, Inc. ... 10,357,031 5,471,581 15,828,612
375,000 +Oracle Corporation.......... 6,053,062 3,837,563 9,890,625
171,500 +VERITAS Software
Corporation................ 8,592,088 5,192,225 13,784,313
------------ ------------ --------------
106,626,930 71,748,875 178,375,805
------------ ------------ --------------
</TABLE>
F-2
<PAGE> 58
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
MARCH 31, 1999 (UNAUDITED) -- (CONCLUDED)
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR COMBINED
COUNTRY INDUSTRIES SHARES HELD STOCKS FUND++ FUND++ FUND++
- ------------- ---------------------- ----------- ----------------------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES
(CONCLUDED)
TECHNOLOGY SERVICES 374,500 +DST Systems, Inc. .......... 16,078,731 6,414,675 22,493,406
1,862,600 +Keane, Inc. ................ 23,222,100 16,474,563 39,696,663
120,500 The BISYS Group, Inc. ....... 6,778,125 -- 6,778,125
549,100 +Unisys Corporation.......... 8,998,438 6,204,769 15,203,207
------------ ------------ --------------
55,077,394 29,094,007 84,171,401
------------ ------------ --------------
TELECOMMUNICATIONS 266,000 +ADC Telecommunications, 8,059,188 4,625,687 12,684,875
EQUIPMENT Inc. ......................
5,883,150 11,421,500 17,304,650
160,600 Lucent Technologies, Inc. ...
28,689,625 7,526,750 36,216,375
370,500 +Tellabs, Inc. ..............
118,600 +Uniphase Corporation........ 8,675,100 4,934,250 13,609,350
------------ ------------ --------------
51,307,063 28,508,187 79,815,250
------------ ------------ --------------
TELECOMMUNICATIONS 415,100 +MCI WorldCom, Inc. ......... 29,390,850 7,345,500 36,736,350
------------ ------------ --------------
TOTAL INVESTMENTS IN UNITED
STATES..................... 740,195,059 430,414,712 1,170,609,771
============ ============ ==============
TOTAL INVESTMENTS IN
STOCKS..................... 820,053,116 483,546,275 1,303,599,391
============ ============ ==============
<CAPTION>
SHORT-TERM
SECURITIES FACE AMOUNT ISSUE
- ------------- --------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL PAPER** 49,924,000 General Electric Capital
Corp., 5.08% due
4/01/1999.................. 38,297,000 11,627,000 49,924,000
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES...... 38,297,000 11,627,000 49,924,000
------------ ------------ --------------
TOTAL INVESTMENTS (COST
$1,040,232,616)............ 858,350,116 495,173,275 1,353,523,391
LIABILITIES IN EXCESS OF
OTHER ASSETS............... (9,285,992) (13,787,543) (22,952,006)
------------ ------------ --------------
NET ASSETS................... $849,064,124 $481,385,732 $1,330,571,385
============ ============ ==============
</TABLE>
- ---------------
* 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 Fund.
+ Non-income producing security.
++ Value as discussed in the Combined Notes to Financial Statements.
See Notes to Financial Statements.
F-3
<PAGE> 59
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
FOR MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
AS OF MARCH 31, 1999 (UNAUDITED)
The following unaudited Pro Forma Combined Statement of Assets and
Liabilities for Merrill Lynch Global Technology Fund, Inc. ("Global Technology
Fund") and Merrill Lynch Technology Fund, Inc. ("Technology Fund") has been
derived from the Statements of Assets and Liabilities of Global Technology Fund
and Technology Fund as of March 31, 1999, and such information has been adjusted
to give effect to the Reorganization as if the Reorganization had occurred on
March 31, 1999. The Pro Forma Combined Statement of Assets and Liabilities is
presented for informational purposes only and does not purport to be indicative
of the financial condition that would have resulted if the Reorganization had
been consummated on March 31, 1999. The Pro Forma Combined Statement of Assets
and Liabilities should be read in conjunction with the financial statements and
related notes from the audited financial statements for the period June 26, 1998
(commencement of operations) to March 31, 1999 of Global Technology Fund
included in its Annual Report to Shareholders and with the financial statements
and related notes from the audited financial statements for the year ended March
31, 1999 of Technology Fund included in its Annual Report to Shareholders.
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR
FUND FUND ADJUSTMENTS COMBINED FUND
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value* (Note 1a).......... $858,350,116 $ 495,173,275 $1,353,523,391
Cash..................................... 0 1,804 1,804
Receivables:
Capital shares sold.................... 2,840,005 788,592 3,628,597
Securities sold........................ 4,037,891 676,267 4,714,158
Dividends.............................. 206,559 108,799 315,358
Deferred organization expenses
(Note 1f)................................ 62,661 0 62,661
Prepaid registration fees and other
assets (Note 1f)....................... 107,045 15,925 122,970
------------ ------------- ------------ --------------
Total assets............................. 865,604,277 496,764,662 1,362,368,939
------------ ------------- ------------ --------------
LIABILITIES:
Payables:
Securities purchased................... 11,401,206 11,294,373 22,695,579
Capital shares redeemed................ 1,625,313 3,195,884 4,821,197
Distributor (Note 2)................... 606,192 209,043 815,235
Investment adviser (Note 2)............ 713,093 416,118 1,129,211
Custodian bank (Note 1h)............... 1,679,879 0 1,679,879
Accrued expenses and other liabilities... 514,470 263,512 (121,529)(1) 656,453
------------ ------------- ------------ --------------
Total liabilities........................ 16,540,153 15,378,930 (121,529) 31,797,554
------------ ------------- ------------ --------------
NET ASSETS:
Net Assets............................... $849,064,124 $ 481,385,732 $ 121,529 $1,330,571,385
============ ============= ============ ==============
NET ASSETS CONSIST OF:
Class A Common Stock, $0.10 par value,
100,000,000 shares authorized+......... $ 304,600 $ 3,858,752 $ (2,280,406) $ 1,882,946
Class B Common Stock, $0.10 par value,
200,000,000 shares authorized+......... 4,192,176 4,192,488 (2,567,412) 5,817,252
Class C Common Stock, $0.10 par value,
100,000,000 shares authorized+......... 945,604 260,179 (160,047) 1,045,736
Class D Common Stock, $0.10 par value,
100,000,000 shares authorized+......... 848,870 623,853 (370,205) 1,102,518
Paid-in capital in excess of par......... 650,295,181 480,484,553 5,499,599 1,136,279,333
</TABLE>
F-4
<PAGE> 60
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
FOR MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
AS OF MARCH 31, 1999 (UNAUDITED) -- (CONCLUDED)
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR
FUND FUND ADJUSTMENTS COMBINED FUND
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Accumulated realized capital losses on
investments and foreign currency
transactions -- net.................... -- (128,847,175) -- (128,847,175)
Unrealized appreciation on investments
and foreign currency
transactions -- net.................... 192,477,693 120,813,082 313,290,775
------------ ------------- ------------ --------------
Net assets............................... $849,064,124 $ 481,385,732 $ 121,529 $1,330,571,385
============ ============= ============ ==============
NET ASSET VALUE:
Class A:
Net assets............................. $ 41,382,488 $ 214,430,701 $ 23,367 $ 255,836,556
============ ============= ============ ==============
Shares outstanding..................... 3,046,001 38,587,524 (22,804,069) 18,829,456
============ ============= ============ ==============
Net Asset Value........................ $ 13.59 $ 5.56 -- $ 13.59
============ ============= ============ ==============
Class B:
Net assets............................. $565,110,880 $ 219,062,343 $ 71,630 $ 784,244,853
============ ============= ============ ==============
Shares outstanding..................... 41,921,763 41,924,879 (25,674,125) 58,172,517
============ ============= ============ ==============
Net Asset Value........................ $ 13.48 $ 5.23 -- $ 13.48
============ ============= ============ ==============
Class C:
Net Assets............................. $127,461,077 $ 13,496,926 12,876 $ 140,970,879
============ ============= ============ ==============
Shares outstanding..................... 9,456,040 2,601,788 (1,600,472) 10,457,356
============ ============= ============ ==============
Net Asset Value........................ $ 13.48 $ 5.19 -- $ 13.48
============ ============= ============ ==============
Class D:
Net Assets............................. $115,109,679 $ 34,395,762 13,656 $ 149,519,097
============ ============= ============ ==============
Shares outstanding..................... 8,488,698 6,238,529 (3,702,043) 11,025,184
============ ============= ============ ==============
Net Asset Value........................ $ 13.56 $ 5.51 -- $ 13.56
============ ============= ============ ==============
*Identified cost......................... $665,872,423 $ 374,360,193 -- $1,040,232,616
============ ============= ============ ==============
</TABLE>
- ---------------
(1) Reflects the charge for estimated Reorganization expenses of $275,000 and
anticipated savings of the Reorganization.
+ Represents authorized shares for Global Technology Fund and the Combined
Fund. Technology Fund has authorized shares as follows: Class A, 100,000,000
shares; Class B, 300,000,000 shares; Class C, 100,000,000 shares; and Class
D, 300,000,000 shares.
See Notes to Financial Statements.
F-5
<PAGE> 61
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
FOR THE YEAR ENDED MARCH 31, 1999+
(UNAUDITED)
The following unaudited Pro Forma Combined Statement of Operations for
Global Technology Fund and Technology Fund has been derived from the Statements
of Operations of Global Technology Fund and Technology Fund for the period ended
March 31, 1999, and such information has been adjusted to give effect to the
Reorganization as if the Reorganization had occurred on April 1, 1998. The Pro
Forma Combined Statement of Operations is presented for informational purposes
only and does not purport to be indicative of the financial condition that would
have resulted if the Reorganization had been consummated on April 1, 1998. The
Pro Forma Combined Statement of Operations should be read in conjunction with
the financial statements and related notes from the audited financial statements
for the period June 26, 1998 (commencement of operations) to March 31, 1999 of
Global Technology Fund included in its Annual Report to Shareholders and with
the financial statements and related notes from the audited financial statements
for the year ended March 31, 1999 of Technology Fund included in its Annual
Report to Shareholders.
<TABLE>
<CAPTION>
GLOBAL PRO FORMA
TECHNOLOGY TECHNOLOGY FOR
FUND FUND ADJUSTMENTS COMBINED FUND
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTES 1d & 1e)++:
Dividends**.......................... $ 683,577 $ 414,053 $ 1,097,630
Interest and discount earned......... 2,416,840 1,248,301 3,665,141
------------ ------------ -------------
Total income......................... 3,100,417 1,662,354 4,762,771
------------ ------------ -------------
EXPENSES++:
Investment advisory fees............. 6,035,177 4,435,074 (23,513)(2) 10,446,738
Account maintenance and distribution
fees -- Class B (Note 2).......... 4,036,852 2,134,708 6,171,560
Account maintenance and distribution
fees -- Class C (Note 2).......... 944,814 116,578 1,061,392
Transfer agent fees -- Class B
(Note 2)............................... 557,197 692,653 1,249,850
Registration fees (Note 1f).......... 382,570 66,233 (128,249)(2) 320,554
Account maintenance fees -- Class D
(Note 2).......................... 200,897 71,984 272,881
Custodian fees....................... 99,228 32,745 131,973
Transfer agent fees -- Class C
(Note 2).......................... 137,652 40,719 178,371
Transfer agent fees -- Class D
(Note 2).......................... 93,197 80,452 173,649
Printing and shareholder reports..... 132,656 112,382 (85,380)(2) 159,658
Accounting services (Note 2)......... 86,071 84,186 (72,257)(2) 98,000
Directors' fees and expenses......... 47,893 40,895 (49,888)(2) 38,900
Transfer agent fees -- Class A
(Note 2).......................... 28,582 532,135 560,717
Professional fees.................... 36,630 75,912 (37,242)(2) 75,300
Amortization of organization
expenses.......................... 14,467 0 14,467
Pricing fees......................... 400 465 865
Other................................ 9,031 11,619 275,000(1) 295,650
------------ ------------ --------- -------------
Total expenses....................... 12,843,314 8,528,740 (121,529) 21,250,525
------------ ------------ --------- -------------
Investment income (loss) -- net...... (9,742,897) (6,866,386) 121,529 (16,487,754)
------------ ------------ --------- -------------
</TABLE>
F-6
<PAGE> 62
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
For the Year Ended March 31, 1999+
(Unaudited) -- (concluded)
<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................ 6,603,836 48,091,852 54,695,688
Foreign currency
transactions -- net............. (8) (6,894) (6,902)
Change in unrealized
appreciation/depreciation on:
Investments -- net................ 192,477,693 65,974,296 258,451,989
Net realized and unrealized gain on
investments and foreign currency
transactions...................... 199,081,521 114,059,254 313,140,775
------------ ------------ --------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $189,338,624 $107,192,868 $ 121,529 $ 296,653,021
============ ============ ========= =============
**Net foreign withholding tax on
dividends............................ $ 43,859 $ 22,973 $ -- $ 66,832
============ ============ ========= =============
</TABLE>
- ---------------
+ Merrill Lynch Global Technology Fund, Inc. commenced operations on June 26,
1998.
++ Annualized.
(1) Reflects the charge for estimated Reorganization expenses of $275,000.
(2) Reflects the anticipated savings of the Reorganization.
F-7
<PAGE> 63
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", which term as used
herein shall refer to Merrill Lynch Global Technology Fund, Inc. after giving
effect to the Reorganization) is registered under the Investment Company Act of
1940 as a diversified, open-end management investment company. The Fund's pro
forma financial statements are prepared in accordance with generally accepted
accounting principles which may require the use of management accruals and
estimates. These pro forma financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the 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
F-8
<PAGE> 64
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
equivalent liability. The amount of the liability is subsequently marked
to market to reflect the current market value of the option written.
When a security is purchased or sold through an exercise of an option,
the related premium paid (or received) is added to (or deducted from) the
basis of the security acquired or deducted from (or added to) the
proceeds of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the
option to the extent of the premiums received or paid (or gain or loss to
the extent the cost of the closing transaction exceeds the premium paid
or received).
Written and purchased options are non-income producing investments.
- 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.
- 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-U.S. dollar denominated securities owned by the Fund, sold by the
Fund but not yet delivered, or committed or anticipated to be purchased
by the Fund.
(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 U.S. 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.
F-9
<PAGE> 65
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
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.
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 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 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 year ended March 31, 1999, 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............................................ $ 145 $ 1,501
MLPF&S.......................................... $ 2,491 $13,321
Class D:
MLFD............................................ $ 32,129 $ 2,409
MLPF&S.......................................... $2,094,686 $34,372
</TABLE>
For the year ended March 31, 1999, 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........................................... $846,091 $568,106
Class C........................................... $ 90,355 $ 9,560
</TABLE>
F-10
<PAGE> 66
MERRILL LYNCH GLOBAL TECHNOLOGY FUND, INC. AND
MERRILL LYNCH TECHNOLOGY FUND, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED) -- (CONCLUDED)
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 $74,762 and $20,054 in commissions on the
execution of portfolio security transactions for Merrill Lynch Global Technology
Fund, Inc. for the period June 26, 1998 (commencement of operations) to March
31, 1999 and Merrill Lynch Technology Fund, Inc. for the year ended March 31,
1999, respectively.
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.
F-11
<PAGE> 67
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 Terry K. Glenn, Donald C.
Burke and Robert E. Putney, III as proxies, each of them with the power to
appoint his substitute, and hereby authorizes 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 May 28, 1999, at
the Special Meeting of Stockholders of the Fund to be held on August 11, 1999
and any adjournments 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 matters as may properly come
before the meeting and any adjournments thereof. If you do not intend to
personally attend the meeting, please complete and return this card at once in
the enclosed envelope.
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
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.
Vote on Proposals
1. To approve the Amended 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 and any adjournments thereof.
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
Signature (PLEASE Date Signature (Joint Owners) Date
SIGN WITHIN BOX)
<PAGE> 68
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 the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of
C-1
<PAGE> 69
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) -- Amended 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 Amended and Restated Management Agreement between
the Registrant and Merrill Lynch Asset Management, L.P.
("MLAM").(e)
(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.(f)
(11)(a) -- Opinion of Brown & Wood LLP, counsel for the Registrant.(g)
(11)(b) -- Consent of Brown & Wood LLP, counsel for the Registrant.
(12) -- Private Letter Ruling from the Internal Revenue Service.(h)
(13) -- Not applicable.
(14) -- Consent of Deloitte & Touche LLP, independent auditors for
the Registrant and for Merrill Lynch Technology Fund, Inc.
(15) -- Not applicable.
(16) -- Power of Attorney.(i)
(17)(a) -- Prospectus dated May 20, 1998, and Statement of Additional
Information dated May 20, 1998, of the Registrant.(j)
(17)(b) -- Semi-Annual Report to Shareholders of the Registrant.(g)
</TABLE>
C-2
<PAGE> 70
<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.(j)
(17)(d) -- Semi-Annual Report to Shareholders of Merrill Lynch Technology Fund, Inc.(g)
(17)(e) -- Annual Report to Shareholders of the Registrant.
(17)(f) -- Annual Report to Shareholders of Merrill Lynch Technology Fund, Inc.
(17)(g) -- Letter to Stockholders and enclosure.
</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 on N-14.
(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) Filed on May 27, 1999, as an Exhibit to Post-Effective Amendment No. 1 to
the Registration Statement.
(f) 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).
(g) Filed on December 10, 1998 as an Exhibit to Pre-Effective Amendment No. 1 to
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").
(h) Filed on April 12, 1999 as Exhibit 12 to Post-Effective Amendment No. 1 to
the Registration Statement on Form N-14.
(i) Included on the signature page of the Registration Statement on Form N-14
filed on November 2, 1998 and incorporated by reference herein.
(j) 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.
C-3
<PAGE> 71
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Registrant certifies that it meets all the requirements for
effectiveness of this registration statement under Rule 485(b) under the
Securities Act and has duly caused this registration statement to be signed on
its behalf by the undersigned, duly authorized, in the Township of Plainsboro
and State of New Jersey, on the 2nd day of June, 1999.
MERRILL LYNCH GLOBAL TECHNOLOGY FUND,
INC.
(Registrant)
By: /s/ TERRY K. GLENN
-------------------------------------
(TERRY K. GLENN, PRESIDENT)
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
TERRY K. GLENN* President and Director
--------------------------------------------------- (Principal Executive
(TERRY K. GLENN) Officer)
/s/ DONALD C. BURKE Vice President and June 3, 1999
--------------------------------------------------- Treasurer (Principal
(DONALD C. BURKE) Financial and Accounting
Officer)
DONALD CECIL* Director
---------------------------------------------------
(DONALD CECIL)
ROLAND M. MACHOLD* Director
---------------------------------------------------
(ROLAND M. MACHOLD)
EDWARD H. MEYER* Director
---------------------------------------------------
(EDWARD H. MEYER)
CHARLES C. REILLY* Director
---------------------------------------------------
(CHARLES C. REILLY)
RICHARD R. WEST* Director
---------------------------------------------------
(RICHARD R. WEST)
ARTHUR ZEIKEL* Director
---------------------------------------------------
(ARTHUR ZEIKEL)
EDWARD D. ZINBARG* Director
---------------------------------------------------
(EDWARD D. ZINBARG)
*By: /s/ TERRY K. GLENN June 3, 1999
-----------------------------------------------
(TERRY K. GLENN, ATTORNEY-IN-FACT)
</TABLE>
C-4
<PAGE> 72
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
11 -- Consent of Brown & Wood LLP, counsel for the Registrant
14 -- Consent of Deloitte & Touche LLP, independent auditors for
the Registrant and for Merrill Lynch Technology Fund, Inc.
17(e) -- Annual Report to Shareholders of the Registrant
17(f) -- Annual Report to Shareholders of Merrill Lynch Technology
Fund, Inc.
17(g) -- Letter to Stockholders and enclosure
</TABLE>
<PAGE> 1
EXHIBIT 11(b)
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
TELEPHONE: 212-839-5300
FACSIMILE: 212-839-5599
June 3, 1999
Merrill Lynch Global Technology Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Ladies and Gentlemen:
We consent to the incorporation by reference in Post-Effective Amendment No. 2
to the Registration Statement on Form N-14 (File No. 333-66637) of our opinion
dated December 10, 1998 filed on December 10, 1998 as an Exhibit to
Pre-Effective Amendment No. 1 to such 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
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Global Technology Fund, Inc.:
We consent to the incorporation by reference in this Post-Effective Amendment
No. 2 to Registration Statement No. 333-66637 of our reports dated May 17, 1999
appearing in the annual reports to shareholders of Merrill Lynch Global
Technology Fund, Inc. for the period ended March 31, 1999 and Merrill Lynch
Technology Fund, Inc. for the year ended March 31, 1999, and to the reference
to us under the captions "Financial Highlights" and "Experts" in the
Prospectus, which is a part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Princeton, New Jersey
May 28, 1999
<PAGE> 1
EXHIBIT 17(e)
MERRILL LYNCH
GLOBAL
TECHNOLOGY
FUND, INC.
[FUND LOGO]
Annual Report
March 31, 1999
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.
Officers and
Directors
Terry K. Glenn, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
<PAGE> 2
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Paul G. Meeks, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Gerald M. Richard, Treasurer, Norman R. Harvey, Senior Vice
President and Philip M. Mandel, Secretary of Merrill Lynch Global
Technology Fund, Inc. have recently retired. Their colleagues at
Merrill Lynch Asset Management, L.P. join the Fund's Board of
Directors in wishing Messrs. Richard, Harvey and Mandel well in
their retirements.
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., March 31, 1999
DEAR SHAREHOLDER
For the quarter ended March 31, 1999, Merrill Lynch Global
Technology Fund, Inc.'s total returns for Class A, Class B, Class C
and Class D Shares were +4.30%, +4.01%, +4.01% and +4.23%,
respectively. The Fund performed in line with the unmanaged Standard
& Poor's (S&P) 500 Index, which posted a +4.98% return for the same
period. However, the Fund's quarterly relative performance masked
significant absolute and relative monthly swings. The Fund's Class A
Shares returned +7.83% in January, -12.03% in February and +9.95% in
March. The corresponding returns for the S&P 500 were +4.18%, -3.11%
and +4.00%, respectively. (Results shown do not reflect sales
charges and would be lower if sales charges were included. Complete
performance information can be found on pages 5--7 of this report
to shareholders.) Thus, January and March featured dramatic
outperformance by technology investors while February was absolutely
and relatively poor.
Despite a difficult February, we were surprised by the sector's
absolute strength during the March quarter. In our last report to
shareholders, we forecast that the large-capitalization technology
leaders in which we typically invest might be likely to decline
since they had significantly outperformed the market from the
<PAGE> 3
October 8, 1998 trough. According to various financial publications,
the Fund was among the United States' best-performing equity mutual
funds. The Fund's Class A Shares had a total return of +46.7%
compared to the S&P 500's +21.3% in the fourth quarter of 1998 and
returned +92.2% (compared to the S&P 500's +33.9%) from its trough
on October 8, 1998 to its January 29, 1999 high.
For the quarter ended March 31, 1999, the Fund benefited from our
increased weighting in semiconductor capital equipment and Internet
stocks. Fund performance was also enhanced by our telecommunications
equipment holdings, a significant exposure since August 1998. On the
other hand, the most costly industry exposure was in software, a
group that has been negatively impacted by two issues. The first is
the likelihood that spending on software will be "crowded out" in
1999 by customers' increasing focus on Year 2000 preparedness in the
second half of the year. We feel that it is too early to make that
definitive of a statement for all types of software, and that such a
potential short-term phenomenon should not impact our long-term
investment strategy.
Second, many software companies are under the scrutiny of regulators
over purported aggressive accounting practices. Several software
firms have made acquisitions in recent years. Because software
companies have fewer tangible assets than other businesses, it is
difficult to accurately attribute the goodwill (the excess of the
cash paid over the acquired firm's understated book value) in such
transactions. Therefore, at the time of purchase, many software
acquirers immediately wrote off the majority of its price to an
account called "in-process research and development." Although it
will not impact cash earnings or cash flow whatsoever, such
aggressive charges may be reversed by the Securities & Exchange
Commission, and more goodwill may be added to the acquirers' balance
sheets that must be amortized over time, in order to lessen future
reported earnings. Although we feel that the software companies held
by the Fund have strong operating prospects, they may have been
obscured in investors' minds by this transitory regulatory cloud.
In terms of individual stocks, we benefited from holding some of the
technology sector's best performers, including Internet stalwart
America Online, Inc.; semiconductor capital equipment leader,
Applied Materials, Inc.; computer systems vendors EMC Corporation
and Sun Microsystems, Inc.; and telecommunications equipment players
Tellabs, Inc., ADC Telecommunications, Inc. and Uniphase
Corporation. Unfortunately, performance was hurt by power supplier
American Power Conversion Corporation; contract manufacturer SCI
Systems, Inc.; data networking vendor 3Com Corporation; distributor
Tech Data Corporation; software firms J.D. Edwards & Company and
Network Associates, Inc.; and consultant Keane, Inc. In our opinion,
fundamentals deteriorated significantly enough for these laggards
that we eliminated each position, with the exception of Keane and
Network Associates. Although Keane's revenue transition from Year
2000 business to other projects has not gone as smoothly as we had
hoped, we continue to be bullish on this company's long-term
prospects.
<PAGE> 4
Investment Strategy
In addition to being fully invested in preparation for technology
stocks regaining the market's leadership, our industry decisions
included increasing our exposure in three groups: semiconductors,
semiconductor capital equipment and Internet. Our decision to boost
the Fund's semiconductor-related exposure was based on evidence that
the industry probably troughed in the third quarter of 1998.
Consequently, we focused our efforts on semiconductor leaders with
strong intellectual property, such as microprocessor vendor Intel
Corporation and communications integrated circuit pioneer Vitesse
Semiconductor Corporation. Our semiconductor capital equipment
holdings included the who's who of the key enabling process
technologies for their partners, such as Teradyne, Inc., a leader in
back-end testing. Our decision to increase our Internet exposure was
not to capture improving fundamentals, but to purchase several
leadership stocks that had fallen significantly since technology
securities began to tumble in February 1999. So far, our decision to
add to our holdings in the America Online position, Yahoo! Inc., and
initiate a holding in Exodus Communications, Inc. has been sound.
Fiscal Year in Review
Since inception (June 26, 1998) through March 31, 1999, the Fund's
total returns for Class A, Class B, Class C and Class D Shares were
+35.90%, +34.80%, +34.80% and +35.60%, respectively, outperforming
the unmanaged S&P 500 gain of +14.75% for the same period. The nine-
month period was punctuated by several difficult months for
technology stocks, but it also featured strong relative
outperformance by this sector for the full period. The relative
momentum for technology companies continues to build. According to
Lipper Analytical Services, Inc., the average technology fund
outperformed the average equity fund by substantial margins over the
12-month period ended March 31, 1999, as well as the annualized
three-year, five-year and ten-year periods. This is not surprising,
since the sector is steadily becoming a greater portion of the
economy and the equity market's capitalization. In fact, technology
currently comprises about one-fifth of the weight of the S&P 500.
Since inception, our overweighted position in contract manufacturing
stocks contributed positively to the performance of the Fund
compared to most other technology funds. For example, two holdings,
Jabil Circuit, Inc. and Solectron Corporation, appreciated 145% and
131%, respectively, for the nine-month period ended March 31, 1999.
Other notable winners were EMC Corporation and Sun Microsystems
(computer systems); America Online and Yahoo! (Internet); Applied
Materials and Xilinx, Inc. (semiconductors); and Nokia Oyj (wireless
handsets and infrastructure).
In Conclusion
We did not have to raise much cash by selling securities because of
continued strong inflows into the Fund. However, as always, we will
look to prune our portfolio of stocks that may, for fundamental or
valuation reasons, become relatively inferior holdings. Because
investing in the technology sector can be volatile and product
cycles move so quickly, it is very easy to do countless hours of due
diligence and still be wrong. It is one of the reasons why we will
<PAGE> 5
remain fully diversified (our largest concentration is limited to
25% of assets at time of purchase) across the sector's 17 industry
groups, and only hold up to 5% of our Fund's assets in any stock at
the time of purchase.
In summary, we continue to be short-term (over the next few months)
cautious on the technology sector and the prospects for the Fund. We
are more encouraged about the intermediate term (calendar 1999)
outlook. Last, we could not be more positive about the sector's
secular forecast for 1999.
We thank you for your continued investment in Merrill Lynch Global
Technology Fund, Inc., and we look forward to reporting to you again
in our upcoming quarterly report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Paul G. Meeks)
Paul G. Meeks
Senior Vice President and
Portfolio Manager
May 17, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch Global Technology
Fund, Inc.'s Board of Directors. We are pleased to announce that
Terry K. Glenn has been elected President and Director of the Fund.
Mr. Glenn has held the position of Executive Vice President of MLAM
since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
<PAGE> 6
Merrill Lynch Global Technology Fund, Inc., March 31, 1999
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.
<PAGE> 7
<TABLE>
Recent
Performance
Results*
<CAPTION>
3 Month Since Inception
Total Return Total Return
<S> <C> <C>
ML Global Technology Fund, Inc. Class A Shares +4.30% +35.90%
ML Global Technology Fund, Inc. Class B Shares +4.01 +34.80
ML Global Technology Fund, Inc. Class C Shares +4.01 +34.80
ML Global Technology Fund, Inc. Class D Shares +4.23 +35.60
</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.
Merrill Lynch Global Technology Fund, Inc., March 31, 1999
PERFORMANCE DATA (concluded)
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the S&P 500 Index. Beginning and ending values are:
6/26/98** 3/99
ML Global Technology Fund, Inc.++--
Class A Shares* $ 9,475 $12,877
ML Global Technology Fund, Inc.++--
Class B Shares* $10,000 $12,941
S&P 500 Index++++ $10,000 $11,475
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the S&P 500 Index. Beginning and ending values are:
6/26/98** 3/99
ML Global Technology Fund, Inc.++--
Class C Shares* $10,000 $13,345
ML Global Technology Fund, Inc.++--
Class D Shares* $ 9,475 $12,848
S&P 500 Index++++ $10,000 $11,475
<PAGE> 8
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Global Technology Fund, Inc. invests primarily in equity
securities of issuers that, in the opinion of the Manager, derive a
substantial portion of their income from products and services in
technology-related industries.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future results.
Aggregate
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Inception (6/26/98) through 3/31/99 +35.90% +28.77%
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Inception (6/26/98) through 3/31/99 +34.80% +30.80%
*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 3/31/99 +34.80% +33.80%
*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 3/31/99 +35.60% +28.48%
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE> 9
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Stocks Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
Canada Contract 272,500 ++Celestica Inc. $ 7,859,914 $ 8,839,219 1.0%
Manufacturers
Telecommunications 121,000 Northern Telecom Limited (Nortel) 4,969,470 7,517,125 0.9
Equipment
Total Investments in Canada 12,829,384 16,356,344 1.9
Finland Telecommunications 112,600 Nokia Oyj 'A' (ADR)* 11,482,920 17,537,450 2.1
Equipment
Total Investments in Finland 11,482,920 17,537,450 2.1
Israel Telecommunications 213,400 ECI Telecom Limited 7,663,805 7,469,000 0.9
Equipment
Total Investments in Israel 7,663,805 7,469,000 0.9
Singapore Contract Manufacturers 366,400 ++Flextronics International Ltd. 7,730,216 18,732,200 2.2
Total Investments in Singapore 7,730,216 18,732,200 2.2
Sweden Telecommunications 445,000 Telefonaktiebolaget LM Ericsson
Equipment (ADR)* 10,202,389 10,596,563 1.2
Total Investments in Sweden 10,202,389 10,596,563 1.2
Taiwan Semiconductors 388,000 ++Taiwan Semiconductor Manufacturing
Company Ltd. (ADR)* 8,288,674 9,166,500 1.1
Total Investments in Taiwan 8,288,674 9,166,500 1.1
</TABLE>
Merrill Lynch Global Technology Fund, Inc., March 31, 1999
<PAGE> 10
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
Shares Value Percent of
COUNTRY Industries Held Stocks Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
United Components 339,600 General Cable Corporation $ 7,258,586 $ 3,587,025 0.4%
States
Computer Systems 237,000 ++EMC Corporation 10,651,562 30,276,750 3.6
438,800 ++Electronics for Imaging, Inc. 8,197,483 17,442,300 2.0
90,200 International Business Machines
Corporation 13,736,742 15,987,950 1.9
180,000 ++Network Appliance, Inc. 7,119,126 9,135,000 1.1
166,000 ++Sun Microsystems, Inc. 7,466,687 20,750,000 2.4
------------ ------------ ------
47,171,600 93,592,000 11.0
Contract 400,000 ++Jabil Circuit, Inc. 6,508,650 16,200,000 1.9
Manufacturers 369,000 ++Sanmina Corporation 15,557,318 23,431,500 2.8
440,000 Solectron Corporation 10,101,586 21,367,500 2.5
------------ ------------ ------
32,167,554 60,999,000 7.2
Data 165,000 ++Ascend Communications, Inc. 7,775,985 13,808,437 1.6
Communications 230,750 ++Cisco Systems, Inc. 14,599,324 25,281,547 3.0
------------ ------------ ------
22,375,309 39,089,984 4.6
Distribution 396,300 ++Ingram Micro Inc. (Class A) 16,537,696 9,040,594 1.1
Electronic Design 722,300 ++Cadence Design Systems, Inc. 21,310,029 18,599,225 2.2
Automation 331,000 ++Synopsys, Inc. 14,172,380 17,770,563 2.1
35,482,409 36,369,788 4.3
Internet 54,500 ++Amazon.com, Inc. 8,176,352 9,377,406 1.1
341,200 ++America Online, Inc. 17,754,505 49,815,200 5.9
62,000 ++Exodus Communications, Inc. 5,367,197 8,300,250 1.0
47,800 ++Yahoo! Inc. 7,533,251 8,039,363 0.9
------------ ------------ ------
38,831,305 75,532,219 8.9
Medical Technology 115,100 Medtronic, Inc. 7,661,056 8,258,425 1.0
Peripherals 73,000 ++Lexmark International Group,
Inc. (Class A) 7,553,161 8,157,750 1.0
134,600 Pitney Bowes Inc. 8,275,054 8,580,750 1.0
204,100 ++Seagate Technology, Inc. 5,139,702 6,033,706 0.7
------------ ------------ ------
20,967,917 22,772,206 2.7
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Personal Computers 432,000 Compaq Computer Corporation 12,615,423 13,689,000 1.6
334,000 ++Dell Computer Corporation 10,875,470 13,652,250 1.6
------------ ------------ ------
23,490,893 27,341,250 3.2
Semiconductor 166,500 ++Applied Materials, Inc. 5,075,724 10,270,969 1.2
Equipment 147,500 ++KLA-Tencor Corporation 8,104,374 7,162,969 0.8
148,000 ++Novellus Systems, Inc. 9,628,539 8,140,000 1.0
170,100 ++Teradyne, Inc. 6,825,990 9,281,081 1.1
------------ ------------ ------
29,634,627 34,855,019 4.1
Semiconductors 130,000 ++Altera Corporation 7,669,064 7,726,875 0.9
117,700 Intel Corporation 12,256,922 13,991,587 1.7
360,000 ++Maxim Integrated Products, Inc. 10,841,870 19,462,500 2.3
183,700 Texas Instruments Incorporated 10,769,653 18,232,225 2.1
170,000 ++Vitesse Semiconductor Corporation 8,053,750 8,595,625 1.0
453,000 ++Xilinx, Inc. 12,246,496 18,346,500 2.2
------------ ------------ ------
61,837,755 86,355,312 10.2
Software 361,900 Autodesk, Inc. 11,350,399 14,634,331 1.7
343,700 ++BMC Software, Inc. 15,566,251 12,738,381 1.5
292,400 ++Citrix Systems, Inc. 9,819,093 11,111,200 1.3
958,400 ++Compuware Corporation 25,980,297 22,881,800 2.7
226,200 ++Microsoft Corporation 12,317,726 20,259,037 2.4
337,500 ++Network Associates, Inc. 15,133,179 10,357,031 1.2
229,500 ++Oracle Corporation 8,149,545 6,053,062 0.7
106,900 ++VERITAS Software Corporation 7,299,631 8,592,088 1.0
------------ ------------ ------
105,616,121 106,626,930 12.5
Technology Services 120,500 The BISYS Group, Inc. 4,808,125 6,778,125 0.8
267,700 ++DST Systems, Inc. 16,295,248 16,078,731 1.9
1,089,600 ++Keane, Inc. 41,662,588 23,222,100 2.7
325,000 ++Unisys Corporation 9,798,284 8,998,438 1.1
------------ ------------ ------
72,564,245 55,077,394 6.5
Telecommunications 332,100 ++MCI WorldCom Inc. 16,429,425 29,390,850 3.5
Telecommunications 169,000 ++ADC Telecommunications, Inc. 5,929,585 8,059,188 0.9
Equipment 54,600 Lucent Technologies Inc. 4,450,332 5,883,150 0.7
293,500 ++Tellabs, Inc. 17,012,652 28,689,625 3.4
75,600 ++Uniphase Corporation 3,958,968 8,675,100 1.0
------------ ------------ ------
31,351,537 51,307,063 6.0
Total Investments in the
United States 569,378,035 740,195,059 87.2
Total Investments in Stocks 627,575,423 820,053,116 96.6
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
<S> <C> <C> <C> <C>
Commercial $38,297,000 General Electric Capital Corp.,
Paper** 5.08% due 4/01/1999 38,297,000 38,297,000 4.5
Total Investments in Short-Term Securities 38,297,000 38,297,000 4.5
Total Investments $665,872,423 858,350,116 101.1
============
Liabilities in Excess of Other Assets (9,285,992) (1.1)
------------ ------
Net Assets $849,064,124 100.0%
============ ======
</TABLE>
*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
Fund.
++Non-income producing security.
See Notes to Financial Statements.
<PAGE> 13
Merrill Lynch Global Technology Fund, Inc., March 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
As of March 31, 1999
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$665,872,423)(Note 1a) $858,350,116
Receivables:
Securities sold $ 4,037,891
Capital shares sold 2,840,005
Dividends 206,559 7,084,455
------------
Deferred organization expenses (Note 1f) 62,661
Prepaid registration fees and other assets (Note 1f) 107,045
------------
Total assets 865,604,277
------------
Liabilities: Payables:
Securities purchased 11,401,206
Custodian bank (Note 1h) 1,679,879
Capital shares redeemed 1,625,313
Investment adviser (Note 2) 713,093
Distributor (Note 2) 606,192 16,025,683
------------
Accrued expenses and other liabilities 514,470
------------
Total liabilities 16,540,153
------------
Net Assets: Net assets $849,064,124
============
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 100,000,000 shares authorized $ 304,600
Class B Shares of Common Stock, $0.10 par value,
200,000,000 shares authorized 4,192,176
Class C Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 945,604
Class D Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 848,870
Paid-in capital in excess of par 650,295,181
Unrealized appreciation on investments--net 192,477,693
------------
Net assets $849,064,124
============
Net Asset Class A--Based on net assets of $41,382,488 and
Value: 3,046,001 shares outstanding $ 13.59
============
Class B--Based on net assets of $565,110,880 and
41,921,763 shares outstanding $ 13.48
============
Class C--Based on net assets of $127,461,077 and
9,456,040 shares outstanding $ 13.48
============
Class D--Based on net assets of $115,109,679 and
8,488,698 shares outstanding $ 13.56
============
See Notes to Financial Statements.
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period June 26, 1998++ to March 31, 1999
<S> <C> <C> <C>
Investment Interest and discount earned $ 1,847,393
Income Dividends (net of $43,859 foreign withholding tax) 522,515
(Notes 1d & 1e): ------------
Total income 2,369,908
------------
Expenses: Investment advisory fees (Note 2) $ 4,613,190
Account maintenance and distribution fees--Class B (Note 2) 3,085,703
Account maintenance and distribution fees--Class C (Note 2) 722,200
Transfer agent fees--Class B (Note 2) 425,912
Registration fees (Note 1f) 292,430
Account maintenance fees--Class D (Note 2) 153,562
Transfer agent fees--Class C (Note 2) 105,219
Printing and shareholder reports 101,400
Custodian fees 75,848
Transfer agent fees--Class D (Note 2) 71,238
Accounting services (Note 2) 65,791
Directors' fees and expenses 36,609
Professional fees 27,999
Transfer agent fees--Class A (Note 2) 21,848
Amortization of organization expenses (Note 1f) 11,058
Pricing fees 306
Other 6,903
------------
Total expenses 9,817,216
------------
Investment loss--net (7,447,308)
------------
Realized & Realized gain (loss) from:
Unrealized Investments--net $ 6,603,836
Gain (Loss) on Foreign currency transactions--net (8) 6,603,828
Investments & ------------
Foreign Currency Unrealized appreciation on investments--net 192,477,693
Transactions--Net ------------
(Notes 1b, 1c, Net Increase in Net Assets Resulting from Operations $191,634,213
1e & 3): ============
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
<PAGE> 15
Merrill Lynch Global Technology Fund, Inc., March 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period
June 26, 1998++ to
Increase (Decrease) in Net Assets: March 31, 1999
<S> <C> <C>
Operations: Investment loss--net $ (7,447,308)
Realized gain on investments and foreign currency transactions--net 6,603,828
Unrealized appreciation on investments--net 192,477,693
------------
Net increase in net assets resulting from operations 191,634,213
------------
Capital Share Net increase in net assets derived from capital share transactions 657,329,911
Transactions ------------
(Note 4):
Net Assets: Total increase in net assets 848,964,124
Beginning of period 100,000
------------
End of period $849,064,124
============
</TABLE>
++Commencement of operations.
See Notes to Financial Statements.
<PAGE> 16
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period
June 26, 1998++ to March 31, 1999
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 (.05) (.13) (.13) (.07)
Realized and unrealized gain on investments
and foreign currency transactions--net 3.64 3.61 3.61 3.63
-------- -------- -------- --------
Total from investment operations 3.59 3.48 3.48 3.56
-------- -------- -------- --------
Net asset value, end of period $ 13.59 $ 13.48 $ 13.48 $ 13.56
======== ======== ======== ========
Total Investment Based on net asset value per share 35.90%+++ 34.80%+++ 34.80%+++ 35.60%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.25%* 2.27%* 2.28%* 1.50%*
Net Assets: ======== ======== ======== ========
Investment loss--net (.74%)* (1.76%)* (1.76%)* (1.00%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 41,382 $565,111 $127,461 $115,110
Data: ======== ======== ======== ========
Portfolio turnover 49.72% 49.72% 49.72% 49.72%
======== ======== ======== ========
</TABLE>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
<PAGE> 17
Merrill Lynch Global Technology Fund, Inc., March 31, 1999
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. The Fund's
financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of
management accruals and estimates. 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. 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
<PAGE> 18
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.
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.
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
<PAGE> 19
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. Rea-
lized 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 reflecting an overnight overdraft which resulted from
a failed trade which settled the next day.
(i) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$6,603,836 have been reclassified between undistributed net
investment income and undistributed net realized capital gains,
$843,472 has been reclassified between undistributed net investment
<PAGE> 20
income and paid-in excess of par and $8 has been reclassified
between paid-in capital in excess of par and undistributed net
realized capital gains. These classifications have no effect on net
assets or net asset values per share.
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 the "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:
Account
Maintenance Distribution
Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Merrill Lynch Global Technology Fund, Inc., March 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("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 March 31, 1999, MLFD earned
underwriting discounts and direct commissions and MLPF&S earned
<PAGE> 21
dealer concessions on sales of the Fund's Class A and Class D Shares
as follows:
MLFD MLPF&S
Class A $ 145 $ 2,491
Class D $32,129 $2,094,686
For the period June 26, 1998 to March 31, 1999, MLPF&S received
contingent deferred sales charges of $846,091 and $90,355 relating
to transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $74,762 in commissions on the execution
of portfolio security transactions for the Fund for the period June
26, 1998 to March 31, 1999.
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 March 31, 1999 were $884,207,054 and
$263,236,452 respectively.
Net realized gains (losses) for the period June 26, 1998 to March
31, 1999 and net unrealized gains as of March 31, 1999 were as
follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 6,604,821 $192,477,693
Short-term investments (985) --
Foreign currency transactions (8) --
------------ ------------
Total $ 6,603,828 $192,477,693
============ ============
As of March 31, 1999, net unrealized appreciation for Federal income
tax purposes aggregated $192,477,693, of which $241,237,759 related
to appreciated securities and $48,760,066 related to depreciated
securities. The aggregate cost of investments at March 31, 1999 for
Federal income tax purposes was $665,872,423.
4. Capital Share Transactions:
Net increase in net assets derived from capital share trans-
actions was $657,329,911 for the period June 26, 1998 to
March 31, 1999.
Transactions in capital shares for each class were as follows:
<PAGE> 22
Class A Shares
for the Period Dollar
June 26, 1998++ to March 31, 1999 Shares Amount
Shares sold 4,203,702 $ 45,983,223
Shares redeemed (1,160,201) (12,333,818)
------------- -------------
Net increase 3,043,501 $ 33,649,405
============= =============
++Prior to June 26, 1998 (commencement of operations), the Fund
issued 2,500 shares to MLAM for $25,000.
Class B Shares
for the Period Dollar
June 26, 1998++ to March 31, 1999 Shares Amount
Shares sold 47,293,584 $ 496,077,139
Shares redeemed (5,297,659) (58,872,700)
Automatic conversion of shares (76,662) (877,438)
------------- -------------
Net increase 41,919,263 $ 436,327,001
============= =============
++Prior to June 26, 1998 (commencement of operations), the Fund
issued 2,500 shares to MLAM for $25,000.
Class C Shares
for the Period Dollar
June 26, 1998++ to March 31, 1999 Shares Amount
Shares sold 11,344,612 $ 118,580,717
Shares redeemed (1,891,072) (20,384,308)
------------- -------------
Net increase 9,453,540 $ 98,196,409
============= =============
++Prior to June 26, 1998 (commencement of operations), the Fund
issued 2,500 shares to MLAM for $25,000.
Class D Shares
for the Period Dollar
June 26, 1998++ to March 31, 1999 Shares Amount
Shares sold 9,420,462 $ 99,236,824
Automatic conversion of shares 76,412 877,438
------------- -------------
Total issued 9,496,874 100,114,262
Shares redeemed (1,010,676) (10,957,166)
------------- -------------
Net increase 8,486,198 $ 89,157,096
============= =============
++Prior to June 26, 1998 (commencement of operations), the Fund
issued 2,500 shares to MLAM for $25,000.
<PAGE> 23
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 proposed
reorganization was considered at the meeting of the stockholders of
Merrill Lynch Technology Fund, Inc. held on January 12, 1999 and at
the adjournments thereof. The reorganization did not receive the
requisite vote of a majority of the shares of Merrill Lynch
Technology Fund, Inc. outstanding in order to consummate the
reorganization.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Global Technology Fund, Inc.:
We have audited the accompanying statement of assets and liabilities
of Merrill Lynch Global Technology Fund, Inc., including the
schedule of investments, as of March 31, 1999, the related
statements of operations and changes in net assets, and the
financial highlights for the period from June 26, 1998 (commencement
of operations) to March 31, 1999. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at March
31, 1999 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Global Technology Fund, Inc. as of March 31, 1999, the
results of its operations, the changes in its net assets, and the
financial highlights for the period from June 26, 1998 (commencement
<PAGE> 24
of operations) to March 31, 1999, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 17, 1999
Merrill Lynch Global Technology Fund, Inc., March 31, 1999
PORTFOLIO CHANGES (unaudited)
For the Quarter Ended March 31, 1999
Additions
*Allaire Corp.
Altera Corporation
Amazon.com, Inc.
*Autoweb.com, Inc.
Celestica Inc.
*Covad Communications
Exodus Communications, Inc.
*Ivillage Inc.
KLA-Tencor Corporation
Lexmark International Group, Inc.
(Class A)
Medtronic, Inc.
Network Appliance, Inc.
Novellus Systems, Inc.
Oracle Corporation
*Pcorder.Com Inc.
*Perot Systems Corporation (Class A)
Pitney Bowes Inc.
*Prodigy Communications Corp.
*Rowecom Inc.
Taiwan Semiconductor
Manufacturing Company Ltd.
(ADR)
*Tut Systems Inc.
*Vignette Corporation
Vitesse Semiconductor Corporation
Yahoo! Inc.
Deletions
3Com Corporation
*Allaire Corp.
American Power Conversion Corporation
*Autoweb.com, Inc.
*Covad Communications
*Ivillage Inc.
<PAGE> 25
J.D. Edwards & Company
*Pcorder.Com Inc.
*Perot Systems Corporation (Class A)
*Prodigy Communications Corp.
*Rowecom Inc.
SCI Systems, Inc.
Symantec Corporation
Tech Data Corporation
*Tut Systems Inc.
*Vignette Corporation
*Added and deleted in the same quarter.
PORTFOLIO INFORMATION (unaudited)
As of March 31, 1999
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
America Online, Inc. 5.9%
EMC Corporation 3.6
MCI WorldCom Inc. 3.5
Tellabs, Inc. 3.4
Cisco Systems, Inc. 3.0
Sanmina Corporation 2.8
Keane, Inc. 2.7
Compuware Corporation 2.7
Solectron Corporation 2.5
Sun Microsystems, Inc. 2.4
Ten Largest Industries Percent of
Represented in the Portfolio Net Assets
Software 12.5%
Semiconductors 11.3
Telecommunications Equipment 11.1
Computer Systems 11.0
Contract Manufacturers 10.4
Internet 8.9
Technology Services 6.5
Data Communications 4.6
Electronic Design Automation 4.3
Semiconductor Equipment 4.1
<PAGE> 1
EXHIBIT 17(f)
<TABLE>
<CAPTION>
<S> <C>
MERRILL
LYNCH
TECHNOLOGY
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
March 31, 1999
</TABLE>
<PAGE> 2
MERRILL LYNCH TECHNOLOGY FUND, INC.
<TABLE>
<CAPTION>
<S> <C>
Portfolio Information As of 3/31/99
Ten Largest Holdings Represented Percent of
in the Portfolio Net Assets
America Online, Inc. .......................................... 6.1%
Microsoft Corporation ......................................... 5.6
Maxim Integrated Products, Inc. ............................... 3.5
Keane, Inc. ................................................... 3.4
Sanmina Corporation ........................................... 3.2
Texas Instruments Incorporated ................................ 2.9
Flextronics International Ltd. ................................ 2.8
Compaq Computer Corporation ................................... 2.6
Compuware Corporation ......................................... 2.6
Xilinx, Inc. .................................................. 2.4
Ten Largest Industries Represented Percent of
in the Portfolio Net Assets
Semiconductors ................................................ 15.3%
Software ...................................................... 14.9
Telecommunications Equipment .................................. 12.0
Internet ...................................................... 9.3
Contract Manufacturers ........................................ 8.8
Computer Systems .............................................. 7.6
Personal Computers ............................................ 6.8
Technology Services ........................................... 6.0
Data Communications ........................................... 4.6
Semiconductor Equipment ....................................... 4.2
Officers and Directors
Terry K. Glenn, President and Director
Donald Cecil, Director
Roland N. Machold, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Donald C. Burke, Vice President and Treasurer
- --------------------------------------------------------------------------------
Gerald N. Richard, Treasurer, Norman R. Harvey, Senior Vice President and Philip
M. Mandel, Secretary of Merrill Lynch Technology Fund, Inc. have recently
retired. Their colleagues at Merrill Lynch Asset Management, L.P. join the
Fund's Board of Directors in wishing Messrs. Richard, Harvey and Mandel well in
their retirements.
- --------------------------------------------------------------------------------
Custodian
The Chase Manhattan Bank
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
</TABLE>
<PAGE> 3
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE> 4
Merrill Lynch Technology Fund, Inc., March 31, 1999
DEAR SHAREHOLDER
For the quarter ended March 31, 1999, Merrill Lynch Technology Fund, Inc.'s
total returns for Class A, Class B, Class C and Class D Shares were +3.35%,
+2.95%, +2.98% and +2.99%, respectively. The Fund slightly underperformed the
unmanaged Standard & Poor's (S&P) 500 Index, which posted a +4.98% return for
the same period. However, the Fund's quarterly relative performance masked
significant absolute and relative monthly swings. The Fund's Class A Shares
returned +9.29% in January, -13.44% in February and +9.23% in March. The
corresponding returns for the S&P 500 were +4.18%, -3.11% and +4.00%,
respectively. (Results shown do not reflect sales charges and would be lower if
sales charges were included. Complete performance information can be found on
pages 4-6 of this report to shareholders.) Thus, January and March featured
dramatic outperformance by technology investors while February was absolutely
and relatively poor.
Despite a difficult February, we were surprised by the sector's absolute
strength during the March quarter. In our last report to shareholders, we
forecast that the large-capitalization technology leaders in which we typically
invest might be likely to decline since they had significantly outperformed the
market from the October 8, 1998 trough. According to various financial
publications, the Fund was among the United States' best- performing equity
mutual funds. The Fund's Class A Shares had a total return of +52.8% compared to
the S&P 500's +21.3% in the fourth quarter of 1998 and returned +96.0% (compared
to the S&P 500's +33.9%) from its trough on October 8, 1998 to its January 29,
1999 high.
For the quarter ended March 31, 1999, the Fund benefited from our increased
weighting in semiconductor capital equipment and Internet stocks. Fund
performance was also enhanced by our telecommunications equipment holdings, a
significant exposure since August 1998. On the other hand, the most costly
industry exposure was in software, a group that has been negatively impacted by
two issues. The first is the likelihood that spending on software will be
"crowded out" in 1999 by customers' increasing focus on Year 2000 preparedness
in the second half of the year. We feel that it is too early to make that
definitive of a statement for all types of software, and that such a potential
short-term phenomenon should not impact our long-term investment strategy.
Second, many software companies are under the scrutiny of regulators over
purported aggressive accounting practices. Several software firms have made
acquisitions in recent years. Because software companies have fewer tangible
assets than other businesses, it is difficult to accurately attribute the
goodwill (the excess of the cash paid over the acquired firm's understated book
value) in such transactions. Therefore, at the time of purchase, many software
acquirers immediately wrote off the majority of its price to an account called
"in-process research and development." Although it will not impact cash
earnings or cash flow whatsoever, such aggressive charges may be reversed by the
Securities & Exchange Commission, and more goodwill may be added to the
acquirers' balance sheets that must be amortized over time, in order to lessen
future reported earnings. Although we feel that the software companies held by
the Fund have strong operating prospects, they may have been obscured in
investors' minds by this transitory regulatory cloud.
In terms of individual stocks, we benefited from holding some of the technology
sector's best performers, including Internet stalwart America Online, Inc.;
semiconductor capital equipment leader, Applied Materials, Inc.; computer
systems vendors EMC Corporation and Sun Microsystems, Inc.; personal computer
<PAGE> 5
supplier Gateway 2000, Inc.; and telecommunications equipment players Tellabs,
Inc., ADC Telecommunications, Inc. and Uniphase Corporation. Unfortunately,
performance was hurt by contract manufacturer SCI Systems, Inc.; data networking
vendor 3Com Corporation; distributor Tech Data Corporation; software firms J.D.
Edwards & Company and Network Associates, Inc.; and consultant Keane, Inc. In
our opinion, fundamentals deteriorated significantly enough for these laggards
that we eliminated each position, with the exception of Keane and Network
Associates. Although Keane's revenue transition from Year 2000 business to other
projects has not gone as smoothly as we had hoped, we continue to be bullish on
this company's long-term prospects.
Investment Strategy
In addition to being fully invested in preparation for technology stocks
regaining the market's leadership, our industry decisions included increasing
our exposure in three groups: semiconductors, semiconductor capital equipment
and Internet. Our decision to boost the Fund's semiconductor-related exposure
was based on evidence that the industry probably troughed in the third quarter
of 1998. Consequently, we focused our efforts on semiconductor leaders with
strong intellectual property such as microprocessor vendor Intel Corporation and
communications integrated circuit pioneer Vitesse Semiconductor Corporation. Our
semiconductor capital equipment holdings included the who's who of the key
enabling process technologies for their partners, such as Teradyne, Inc., a
leader in back-end testing. Our decision to increase our Internet exposure was
not to capture improving fundamentals, but to purchase several leadership stocks
that had fallen significantly since technology securities began to tumble in
February 1999. So far, our decision to add to our holdings in the America Online
position, Yahoo! Inc., and initiate a holding in Exodus Communications, Inc. has
been sound.
Fiscal Year in Review
For the 12 months ended March 31, 1999, the Fund's total returns for Class A,
Class B, Class C and Class D Shares were +30.21%, +28.82%, +28.78% and +29.65%,
respectively, outperforming the unmanaged S&P 500 gain of +18.46% for the same
period. The fiscal year was punctuated by several difficult months for
technology stocks, but it also featured strong relative outperformance by this
sector for the full period. The relative momentum for technology companies
continues to build. According to Lipper Analytical Services, Inc., the average
technology fund outperformed the average equity fund by substantial margins over
the 12-month period ended March 31, 1999, as well as the annualized
three-year, five-year and ten-year periods. This is not surprising, since the
sector is steadily becoming a greater portion of the economy and the equity
market's capitalization. In fact, technology currently comprises about
one-fifth of the weight of the S&P 500.
Since August 1998, our overweighted position in contract manufacturing stocks
contributed positively to the performance of the Fund compared to most other
technology funds. For example, one holding, Jabil Circuit, Inc., appreciated
245% from August 31, 1998 to March 31, 1999. Other notable winners were EMC and
Sun Microsystems in computer systems; America Online and Yahoo! (Internet);
Applied Materials and Xilinx, Inc. (semiconductors) and Nokia Oyj (wireless
handsets and infrastructure).
In Conclusion
As always, we will look to prune our portfolio of stocks that may, for
fundamental or valuation reasons, become relatively inferior holdings. Because
investing in the technology sector can be volatile and product cycles move so
quickly, it is very easy to do countless hours of due diligence and still be
wrong. It is one of the reasons why we will remain diversified (our largest
<PAGE> 6
concentration is limited to 25% of assets at time of purchase) across the
sector's 17 industry groups, and only hold up to 5% of our Fund's assets in any
stock at the time of purchase.
In summary, we continue to be short-term cautious (over the next few months) on
the technology sector and the prospects for the Fund. We are more encouraged
about the intermediate term (calendar 1999) outlook. Finally, we could not be
more positive about the sector's secular forecast for 1999.
We thank you for your continued investment in Merrill Lynch Technology Fund,
Inc., and we look forward to reporting to you again in our upcoming quarterly
report to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Paul G. Meeks
Paul G. Meeks
Senior Vice President and
Portfolio Manager
May 17, 1999
- --------------------------------------------------------------------------------
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on Merrill Lynch Technology Fund, Inc.'s Board of Directors.
We are pleased to announce that Terry K. Glenn has been elected President and
Director of the Fund. Mr. Glenn has held the position of Executive Vice
President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors in wishing
him well in his retirement from Merrill Lynch and are pleased that he will
continue as a member of the Fund's Board of Directors.
- --------------------------------------------------------------------------------
2 & 3
<PAGE> 7
Merrill Lynch Technology Fund, Inc., March 31, 1999
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.
Total Return Based on a $10,000 Investment
[GRAPHIC OMITTED]
A line graph depicting the growth of an investment in the Fund's Class A and
Class B Shares compared to growth of an investment in the S&P 500 Index.
Beginning and ending values are:
<TABLE>
<CAPTION>
4/27/92** 3/99
- --------------------------------------------------------------------------------
<S> <C> <C>
ML Technology Fund, Inc.+ --
Class A Shares* $ 9,475 $30,649
MLTechnology Fund, Inc.+ --
Class B Shares* $10,000 $30,122
S&P 500 Index++ $10,000 $37,019
</TABLE>
[GRAPHIC OMITTED]
A line graph depicting the growth of an investment in the Fund's Class C and
Class D Shares compared to growth of an investment in the S&P 500 Index.
<PAGE> 8
Beginning and ending values are:
<TABLE>
<CAPTION>
10/21/94** 3/99
- --------------------------------------------------------------------------------
<S> <C> <C>
ML Technology Fund, Inc.+ --
Class C Shares* $10,000 $13,891
ML Technology Fund, Inc.+ --
Class D Shares* $ 9,475 $13,637
S&P 500 Index++ $10,000 $30,274
</TABLE>
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Technology Fund, Inc. invests primarily in companies offering products
and services in such areas as computers (including software and
hardware), communications, electronics, factory automation, office
automation and other companies substantially involved in the field of
technology.
++ This unmanaged broad-based Index is comprised of common stocks. Past
performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
<S> <C> <C>
Year Ended 3/31/99 +30.21% +23.37%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 +10.90 + 9.71
- --------------------------------------------------------------------------------
Inception (4/27/92) through 3/31/99 +18.47 +17.55
- --------------------------------------------------------------------------------
</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 3/31/99 +28.82% +24.82%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 + 9.78 + 9.78
- --------------------------------------------------------------------------------
Inception (4/27/92) through 3/31/99 +17.26 +17.26
- --------------------------------------------------------------------------------
</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 3/31/99 +28.78% +27.78%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 + 7.68 + 7.68
- --------------------------------------------------------------------------------
</TABLE>
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
<PAGE> 9
<TABLE>
<CAPTION>
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
<S> <C> <C>
Year Ended 3/31/99 +29.65% +22.84%
- ---------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 + 8.54 + 7.23
- ---------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4 & 5
<PAGE> 10
Merrill Lynch Technology Fund, Inc., March 31, 1999
PERFORMANCE DATA (concluded)
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 +30.21% +3.35% +223.45%
- -----------------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class B Shares +28.82 +2.95 +2O1.22
- -----------------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class C Shares +28.78 +2.98 + 38.91
- -----------------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class D Shares +29.65 +2.99 + 43.93
</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 since inception periods are Class
A & Class B Shares, from 4/27/92 to 3/31/99 and Class C & Class D Shares,
from 10/21/94 to 3/31/99.
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 Contract Manufacturers 160,000 +Celestica Inc. $ 4,481,968 $ 5,190,000 1.1%
------------------------------------------------------------------------------------------------------------
Telecommunications 91,000 Northern Telecom Limited (Nortel) 3,307,777 5,653,375 1.2
Equipment
------------------------------------------------------------------------------------------------------------
Total Investments in Canada 7,789,745 10,843,375 2.3
Finland Telecommunications 67,000 Nokia Oyj 'A' (ADR)* 9,794,277 10,435,250 2.2
Equipment
------------------------------------------------------------------------------------------------------------
Total Investments in Finland 9,794,277 10,435,250 2.2
Israel Telecommunications 141,000 ECI Telecom Limited 3,551,438 4,935,000 1.0
Equipment
------------------------------------------------------------------------------------------------------------
Total Investments in Israel 3,551,438 4,935,000 1.0
Singapore Contract
Manufacturers 260,000 +Flextronics International Ltd. 5,518,404 13,292,500 2.8
------------------------------------------------------------------------------------------------------------
Total Investments in Singapore 5,518,404 13,292,500 2.8
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Sweden Telecommunications 345,000 Telefonaktiebolaget LM Ericsson 7,905,899 8,215,313 1.7
Equipment (ADR)*
------------------------------------------------------------------------------------------------------------
Total Investments in Sweden 7,905,899 8,215,313 1.7
Taiwan Semiconductors 229,000 +Taiwan Semiconductor
Manufacturing Company Ltd. (ADR)* 4,892,068 5,410,125 1.1
------------------------------------------------------------------------------------------------------------
Total Investments in Taiwan 4,892,068 5,410,125 1.1
United States Components 251,800 General Cable Corporation 3,890,072 2,659,637 0.6
------------------------------------------------------------------------------------------------------------
Computer Systems 71,000 +EMC Corporation 3,274,350 9,070,250 1.9
170,300 +Electronics for Imaging, Inc. 3,253,956 6,769,425 1.4
28,500 International Business
Machines Corporation 4,971,132 5,051,625 1.0
110,000 +Network Appliance, Inc. 4,350,577 5,582,500 1.2
79,000 +Sun Microsystems, Inc. 3,219,250 9,875,000 2.1
----------- ----------- ----
19,069,265 36,348,800 7.6
------------------------------------------------------------------------------------------------------------
Contract Manufacturers 204,000 +Jabil Circuit, Inc. 3,711,358 8,262,000 1.7
243,800 +Sanmina Corporation 5,448,118 15,481,300 3.2
----------- ----------- ----
9,159,476 23,743,300 4.9
------------------------------------------------------------------------------------------------------------
Data Communications 125,700 +Ascend Communications, Inc. 5,075,929 10,519,519 2.2
106,000 +Cisco Systems, Inc. 5,485,500 11,613,625 2.4
----------- ----------- ----
10,561,429 22,133,144 4.6
------------------------------------------------------------------------------------------------------------
Distribution 294,000 +Ingram Micro Inc. (Class A) 12,212,655 6,706,875 1.4
------------------------------------------------------------------------------------------------------------
Electronic Design 322,000 +Cadence Design Systems, Inc. 7,655,267 8,291,500 1.7
Automation 111,000 +Synopsys, Inc. 4,072,312 5,959,313 1.3
----------- ----------- ----
11,727,579 14,250,813 3.0
------------------------------------------------------------------------------------------------------------
Internet 31,200 +Amazon.com, Inc. 4,680,774 5,368,350 1.1
199,000 +America Online, Inc. 14,645,245 29,054,000 6.1
37,000 +Exodus Communications, Inc. 3,203,005 4,953,375 1.0
31,600 +Yahoo! Inc. 4,760,549 5,314,725 1.1
----------- ----------- ----
27,289,573 44,690,450 9.3
------------------------------------------------------------------------------------------------------------
Medical Technology 70,000 Medtronic, Inc. 4,659,200 5,022,500 1.0
------------------------------------------------------------------------------------------------------------
Peripherals 49,000 +Lexmark International
Group, Inc. (Class A) 4,435,176 5,475,750 1.2
77,300 Pitney Bowes Inc. 4,752,297 4,927,875 1.0
210,000 +Seagate Technology, Inc. 5,275,330 6,208,125 1.3
------------ ------------ ----
14,462,803 16,611,750 3.5
------------------------------------------------------------------------------------------------------------
Personal Computers 401,800 Compaq Computer Corporation 12,929,998 12,732,037 2.6
234,000 +Dell Computer Corporation 7,648,530 9,564,750 2.0
154,400 +Gateway 2000, Inc. 7,201,451 10,586,050 2.2
------------ ------------ ----
27,779,979 32,882,837 6.8
------------------------------------------------------------------------------------------------------------
Semiconductor
Equipment 78,000 +Applied Materials, Inc. 4,717,752 4,811,625 1.0
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
82,900 +KLA-Tencor Corporation 4,757,648 4,025,831 0.8
91,700 +Novellus Systems, Inc. 5,790,955 5,043,500 1.1
117, 100 +Teradyne, Inc. 4,699,139 6,389,269 1.3
------------- ------------- ------
19,965,494 20,270,225 4.2
- -------------------------------------------------------------------------------------------------------------------------
Semiconductors 135,000 +Altera Corporation 5,606,563 8,024,062 1.7
78,500 Intel Corporation 8,484,002 9,331,687 1.9
310,200 +Maxim Integrated Products, Inc. 11,140,713 16,770,188 3.5
76,800 +PMC-Sierra, Inc. 2,977,073 5,462,400 1.1
</TABLE>
7 & 8
<PAGE> 13
Merrill Lynch Technology Fund, Inc., March 31, 1999
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Stocks Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
United States Semiconductors 137,700 Texas Instruments Incorporated $ 7,612,598 $ 13,666,725 2.9%
(concluded) (concluded) 68,000 +Vitesse Semiconductor Corporation 1,769,278 3,438,250 0.7
289,000 +Xilinx, Inc. 6,598,206 11,704,500 2.4
------------- -------------- ------
44,188,433 68,397,812 14.2
-------------------------------------------------------------------------------------------------------------------
Software 155,000 Autodesk, Inc. 4,194,285 6,267,812 1.3
210,700 +BMC Software, Inc. 9,975,592 7,809,069 1.6
107,000 +Citrix Systems, Inc. 2,988,875 4,066,000 0.8
520,000 +Compuware Corporation 12,485,830 12,415,000 2.6
298,000 +Microsoft Corporation 12,821,035 26,689,625 5.6
178,300 +Network Associates, Inc. 8,402,937 5,471,581 1.1
145,500 +Oracle Corporation 5,166,705 3,837,563 0.8
64,600 +VERITAS Software Corporation 4,262,894 5,192,225 1.1
------------- -------------- ------
60,298,153 71,748,875 14.9
-------------------------------------------------------------------------------------------------------------------
Technology Services 106,800 +DST Systems, Inc. 5,618,776 6,414,675 1.3
773,000 +Keane, Inc. 25,797,651 16,474,563 3.4
224,100 +Unisys Corporation 6,733,050 6,204,769 1.3
------------- -------------- ------
38,149,477 29,094,007 6.0
-------------------------------------------------------------------------------------------------------------------
Telecommunications 83,000 +MCI WorldCom Inc. 4,144,250 7,345,500 1.5
-------------------------------------------------------------------------------------------------------------------
Telecommunications 97,000 +ADC Telecommunications, Inc. 2,755,285 4,625,687 0.9
Equipment 106,000 Lucent Technologies Inc. 7,634,429 11,421,500 2.4
77,000 +Tellabs, Inc. 3,613,810 7,526,750 1.6
43,000 +Uniphase Corporation 1,720,000 4,934,250 1.0
------------- -------------- ------
15,723,524 28,508,187 5.9
-------------------------------------------------------------------------------------------------------------------
Total Investments in the
United States 323,281,362 430,414,712 89.4
Total Investments in Stocks 362,733,193 483,546,275 100.5
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
<S> <C> <C> <C> <C> <C>
Commercial Paper** $11,627,000 General Electric Capital Corp.,
5.08% due 4/01/1999 11,627,000 11,627,000 2.4
-------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities 11,627,000 11,627,000 2.4
Total Investments $374,360,193 495,173,275 102.9
Liabilities in Excess of Other Assets (13,787,543) (2.9)
-------------- ------
Net Assets $481,385,732 100. 0%
</TABLE>
* 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 Fund.
+ Non-income producing security.
See Notes to Financial Statements.
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of March 31, 1999
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$374,360,193) (Note 1a) ................. $495,173,275
Cash ............................................................................ 1,804
Receivables:
Capital shares sold ........................................................... $ 788,592
Securities sold ............................................................... 676,267
Dividends ..................................................................... 108,799 1,573,658
-----------
Prepaid registration fees and other assets (Note 1f) ............................ 15,925
------------
Total assets .................................................................... 496,764,662
------------
Liabilities: Payables:
Securities purchased .......................................................... 11,294,373
Capital shares redeemed ....................................................... 3,195,884
Investment adviser (Note 2) ................................................... 416,118
Distributor (Note 2) .......................................................... 209,043 15,115,418
-----------
Accrued expenses and other liabilities .......................................... 263,512
------------
Total liabilities ............................................................... 15,378,930
------------
Net Assets: Net assets ...................................................................... $481,385,732
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized .. $ 3,858,752
Consist of: Class B Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized .. 4,192,488
Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized .. 260,179
Class D Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized .. 623,853
Paid-in capital in excess of par ................................................ 480,484,553
Accumulated realized capital losses on investments and foreign currency
transactions-net (Note 5) ....................................................... (128,847,175)
Unrealized appreciation on investments--net ..................................... 120,813,082
------------
Net assets ...................................................................... $481,385,732
Net Asset Class A--Based on net assets of $214,43O,701 and 38,587,524 shares outstanding .. $ 5.56
Value:
Class B--Based on net assets of $219,062,343 and 41,924,879 shares outstanding .. $ 5.23
Class C--Based on net assets of $13,496,926 and 2,601,788 shares outstanding .... $ 5.19
Class D--Based on net assets of $34,395,762 and 6,238,529 shares outstanding .... $ 5.51
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE> 15
Merrill Lynch Technology Fund, Inc., March 31, 1999
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended March 31, 1999
<S> <C> <C> <C>
Investment Interest and discount earned ................................. $ 1,248,301
Income Dividends (net of $22,973 foreign withholding tax)............ 414,053
(Notes 1d & 1e): ------------
Total income 1,662,354
------------
Expenses: Investment advisory fees (Note 2)............................. $ 4,435,074
Account maintenance and distribution fees--Class B (Note 2)... 2,134,708
Transfer agent fees--Class B (Note 2)......................... 692,653
Transfer agent fees--Class A (Note 2)......................... 532,135
Account maintenance and distribution fees--Class C (Note 2)... 116,578
Printing and shareholder reports.............................. 112,382
Accounting services (Note 2).................................. 84,186
Transfer agent fees--Class D (Note 2)......................... 80,452
Professional fees............................................. 75,912
Account maintenance fees--Class D (Note 2).................... 71,984
Registration fees (Note 1f)................................... 66,233
Directors' fees and expenses.................................. 40,895
Transfer agent fees--Class C (Note 2)......................... 40,719
Custodian fees................................................ 32,745
Pricing fees.................................................. 465
Other......................................................... 11,619
-----------
Total expenses................................................ 8,528,740
------------
Investment loss--net.......................................... (6,866,386)
------------
Realized & Unreal- Realized gain (loss) from:
ized Gain (Loss) on Investments--net............................................ 48,091,852
Investments & Foreign currency transactions--net.......................... (6,894) 48,084,958
Foreign Currency -----------
Transactions -- Change in unrealized appreciation on investments and foreign
Net (Notes 1b, 1c, currency transactions--net.................................... 65,974,296
1e & 3): ------------
Net Increase in Net Assets Resulting from Operations.......... $107,192,868
</TABLE>
See Notes to Financial Statements.
<PAGE> 16
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended March 31,
---------------------------------
Increase (Decrease) in Net Assets: 1999 1998
<S> <C> <C> <C>
Operations: Investment loss--net..................................................... $ (6,866,386) $ (9,711,420)
Realized gain (loss) on investments and foreign currency
transactions--net........................................................ 48,084,958 (157,919,266)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net....................................... 65,974,296 201,840,096
------------- -------------
Net increase in net assets resulting from operations..................... 107,192,868 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 share
Transactions (Note 4): transactions............................................................. (172,579,255) 7,796,208
------------- -------------
Net Assets: Total decrease in net assets............................................. (65,386,387) (105,363,091)
Beginning of year........................................................ 546,772,199 652,135,210
------------- -------------
End of year.............................................................. $ 481,385,732 $ 546,772,199
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE> 17
Merrill Lynch Technology Fund, Inc., March 31, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and
ratios have been derived from Class A++
information provided in the ------------------------------------------------------------------
financial statements. For the Year Ended March 31,
------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year.......... $ 4.27 $ 5.07 $ 4.82 $ 4.89 $ 5.17
Operating -------- -------- -------- ---------- --------
Performance: Investment income (loss)--net............... (.04) (.04) (.03) (.03) .05
Realized and unrealized gain on investments
and foreign currency transactions--net...... 1.33 .46 .72 .28 .11
-------- -------- -------- ---------- --------
Total from investment operations............ 1.29 .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 year................ $ 5.56 $ 4.27 $ 5.07 $ 4.82 $ 4.89
Total Investment Based on net asset value per share.......... 30.21% 3.96% 14.60% 5.15% 2.86%
Return:**
Ratios to Average Expenses.................................... 1.38% 1.27% 1.30% 1.31% 1.33%
Net Assets:
Investment income (loss)--net............... (1.01%) (.82%) (.63%) (.62%) .87%
Supplemental Net assets, end of year (in thousands)...... $214,431 $211,443 $222,118 $ 246,909 $254,188
Data:
Portfolio turnover.......................... 155.34% 206.40% 176.51% 108.36% 175.57%
</TABLE>
<TABLE>
<CAPTION>
The following per share data and
ratios have been derived from
information provided in the Class B++
financial statements. ----------------------------------------------------------------
For the Year Ended March 31,
----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year.......... $ 4.06 $ 4.89 $ 4.66 $ 4.78 $ 5.08
Operating -------- -------- -------- ------- --------
Performance: Investment loss--net........................ (.08) (.09) (.08) (.09) (.01)
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Realized and unrealized gain on investments
and foreign currency transactions--net...... 1.25 .46 .69 .29 .11
-------- ------ -------- --------- --------
Total from investment operations............ 1.17 .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 year................ $ 5.23 $ 4.06 $ 4.89 $ 4.66 $ 4.78
Total Investment Based on net asset value per share.......... 28.82% 3.09% 13.20% 4.21% 1.78%
Return:**
Ratios to Average Expenses.................................... 2.42% 2.31% 2.35% 2.34% 2.38%
Net Assets:
Investment loss--net........................ (2.04%) (1.85%) (1.66%) (1.65%) (.10%)
Supplemental Net assets, end of year (in thousands)...... $219,062 $285,193 $375,630 $553,819 $614,935
Data:
Portfolio turnover.......................... 155.34% 206.40% 176.51% 108.36% 175.57%
</TABLE>
<TABLE>
<CAPTION>
Class C++
-----------------------------------------------------------
For the
The following per share data and ratios Period
have been derived from information provided Oct. 21,
in the financial statements. For the Year Ended March 31, 1994+ to
----------------------------------------------- March 31,
Increase (Decrease) in Net Asset Value: 1999 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........................ (.08) (.09) (.08) (.09) --
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net........................... 1.24 .45 .68 .29 (.62)
------- ------- ------- ------- -------
Total from investment operations............ 1.16 .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)
------- ------- ------- ------- -------
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total dividends and distributions........... -- (1.20) (.37) (.32) (.37)
------- ------- ------- ------- -------
Net asset value, end of period.............. $ 5.19 $ 4.03 $ 4.87 $ 4.64 $ 4.76
Total Investment Based on net asset value per share.......... 28.78% 2.87% 13.19% 4.22% (11.11%)+++
Return:**
Ratios to Average Expenses.................................... 2.44% 2.33% 2.37% 2.36% 2.59%*
Net Assets:
Investment loss-net......................... (2.06%) (1.87%) (1.68%) (1.69%) (.02%)
Supplemental Net assets, end of period (in thousands).... $13,497 $15,424 $19,015 $31,090 $23,259
Data:
Portfolio turnover.......................... 155.34% 206.40% 176.51% 108.36% 175.57%
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
++++ Amount is less than $.O1 per share.
See Notes to Financial Statements.
12 & 13
<PAGE> 20
Merrill Lynch Technology Fund, Inc., March 31, 1999
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class D++
--------------------------------------------------------------
The following per share data and ratios
have been derived from information provided For the
in the financial statements. Period
Oct. 21,
For the Year Ended March 31, 1994+ to
------------------------------------------------ March 31,
Increase (Decrease) in Net Asset Value: 1999 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...................... (.05) (.05) (.04) (.05) (.02)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net......................... 1.31 .46 .71 .29 (.60)
-------- --------- --------- --------- --------
Total from investment operations.......... 1.26 .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............ $ 5.51 $ 4.25 $ 5.05 $ 4.81 $ 4.89
Total Investment Based on net asset value per share........ 29.65% 3.90% 14.09% 4.94% (10.76%)+++
Return:**
Ratios to Average Expenses.................................. 1.62% 1.52% 1.55% 1.56% 1.80%*
Net Assets:
Investment loss--net...................... (1.25%) (1.07%) (.88%) (.89%) (.81%)*
Supplemental Net assets, end of period (in thousands).. $ 34,396 $ 34,712 $ 35,372 $ 43,858 $ 32,646
Data:
Portfolio turnover........................ 155.34% 206.40% 176.51% 108.36% 175.57%
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
See Notes to Financial Statements.
<PAGE> 21
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. The Company's financial statements are prepared in
accordance with generally accepted accounting principles which may require the
use of management accruals and estimates. 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 (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.
- - 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
14 & 15
<PAGE> 22
Merrill Lynch Technology Fund, Inc., March 31, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
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) Reclassification--Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences of $6,866,386 have been reclassified between undistributed
net investment income and paid-in capital in excess of par and $6,894 has been
reclassified between paid-in capital in excess of par and accumulated net
realized capital losses. These reclassifications have no effect on net assets
or net asset values per share.
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 the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
<PAGE> 23
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:
- -------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- -------------------------------------------------------------------------------
Class B .......................... 0.25% 0.75%
Class C .......................... 0.25% 0.75%
Class D .......................... 0.25% --
- -------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("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 year ended March 31, 1999, MLFD earned underwriting discounts and
direct commissions and MLPF&S earned dealer concessions on sales of the
Company's Class A and Class D Shares as follows:
- -------------------------------------------------------------------------------
MLFD MLPF&S
- -------------------------------------------------------------------------------
Class A .......................... $1,501 $13,321
Class D .......................... $2,409 $34,372
- -------------------------------------------------------------------------------
For the year ended March 31, 1999, MLPF&S received contingent deferred sales
charges of $568,106 and $9,560 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 $20,054 in commissions on the execution of
portfolio security transactions for the Company for the year ended March 31,
1999.
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:
<PAGE> 24
Purchases and sales of investments, excluding short-term securities, for the
year ended March 31, 1999 were $668,795,337 and $834,719,419, respectively.
Net realized gains (losses) for the year ended March 31, 1999 and net
unrealized gains as of March 31, 1999 were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- -------------------------------------------------------------------------------
Long-term investments .............. $48,092,085 $120,813,082
Short-term investments ............. (233) --
Foreign currency transactions ...... (6,894) --
----------- ------------
Total .............................. $48,084,958 $120,813,082
- -------------------------------------------------------------------------------
As of March 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $120,256,369, of which $145,019,037 related to appreciated
securities and $24,762,668 related to depreciated securities. The aggregate
cost of investments at March 31, 1999 for Federal income tax purposes was
$374,916,906.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $(172,579,255) and $7,796,208 for the years ended March 31, 1999 and March
31, 1998, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended March 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ........................ 11,238,351 $ 51,509,236
Shares redeemed .................... (22,164,797) (98,998,863)
------------ -------------
Net decrease ....................... (10,926,446) $ (47,489,627)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended March 31, 1998 Shares Amount
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended March 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
<PAGE> 25
<TABLE>
<S> <C> <C>
Shares sold .................. 12,736,571 $ 55,839,988
Shares redeemed .............. (39,862,157) (163,438,600)
Automatic conversion of shares (1,237,708) (5,415,219)
----------- -------------
Net decrease ................. (28,363,294) $(113,013,831)
</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>
- --------------------------------------------------------------------------------
16 & 17
<PAGE> 26
Merrill Lynch Technology Fund, Inc., March 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended March 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ....................... 1,618,619 $ 7,224,244
Shares redeemed ................... (2,844,408) (11,608,920)
----------- ------------
Net decrease ...................... (1,225,789) $ (4,384,676)
</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 Year Dollar
Ended March 31, 1999 Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ....................... 2,402,037 $ 10,893,111
Automatic conversion of shares .... 1,177,752 5,415,219
----------- ------------
Total issued ...................... 3,579,789 16,308,330
Shares redeemed ................... (5,513,873) (23,999,451)
----------- ------------
Net decrease ...................... (1,934,084) $ (7,691,121)
</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:
<PAGE> 27
At March 31, 1999, the Company had a net capital loss carryforward of
approximately $128,290,000, of which $60,434,000 expires in 2006 and $67,856,000
expires in 2007. This amount will be available to offset like amounts of any
future taxable gains.
6. Loaned Securities:
At March 31, 1999, the Company held US Treasury Bonds having an aggregate value
of approximately $5,472,000 as collateral for portfolio securities loaned having
a market value of approximately $5,410,000.
7. 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 proposed
reorganization was considered at the meeting of the stockholders of the Company
held on January 12, 1999 and at the adjournments thereof. The reorganization did
not receive the requisite vote of a majority of the shares of the Company
outstanding in order to consummate the reorganization.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Technology Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Technology Fund, Inc. as of March
31, 1999, the related statements of operations for the year then ended and
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and the financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Technology Fund, Inc. as of March 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 17, 1999
PORTFOLIO CHANGES (unaudited)
<PAGE> 28
For the Quarter Ended March 31, 1999
Additions
*Acclaim Entertainment Inc.
Amazon.com, Inc.
Applied Materials, Inc.
*Autoweb.com, Inc.
Celestica Inc.
*Covad Communications
Exodus Communications, Inc.
International Business Machines
Corporation
*Ivillage Inc.
KLA-Tencor Corporation
Lexmark International Group, Inc.
(Class A)
Medtronic, Inc.
Network Appliance, Inc.
Nokia Oyj 'A' (ADR)
Novellus Systems, Inc.
Oracle Corporation
*Pcorder.Com Inc.
*Perot Systems Corporation (Class A)
Pitney Bowes Inc.
*Prodigy Communications Corp.
*Rowecom Inc.
Taiwan Semiconductor Manufacturing
Company Ltd. (ADR)
*Tut Systems Inc.
*Vignette Corporation
Yahoo! Inc.
Deletions
3Com Corporation
*Acclaim Entertainment Inc.
*Autoweb.com, Inc.
*Covad Communications
*Ivillage Inc.
J.D. Edwards & Company
Linear Technology Corporation
*Pcorder.Com Inc.
*Perot Systems Corporation (Class A)
*Prodigy Communications Corp.
*Rowecom Inc.
SCI Systems, Inc.
Symantec Corporation
Tech Data Corporation
*Tut Systems Inc.
*Vignette Corporation
*Added and deleted in the same quarter.
18 & 19
<PAGE> 29
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--3/99
[Recycle Logo] Printed on post-consumer recycled paper
<PAGE> 1
Dear Stockholder:
On August 11, 1999, Merrill Lynch Technology Fund, Inc. (the "Fund")
will hold a Special Stockholders' Meeting to consider the reorganization of the
Fund with Merrill Lynch Global Technology Fund, Inc. ("Global Technology").
Enclosed is a combined proxy statement and prospectus which provides information
about the proposal and about Global Technology and the Fund. A Question and
Answer sheet is also enclosed to address frequently asked questions.
You are being asked to approve the Amended Agreement and Plan of
Reorganization between the Fund and Global Technology pursuant to which the
Fund's assets and liabilities will be transferred to Global Technology in
exchange for shares of Global Technology. The Fund will distribute these shares
to the Fund's stockholders so that each stockholder will receive shares with
the same letter designation (e.g., if you hold Class A shares of the Fund you
will receive Class A shares of Global Technology) and with an equal aggregate
net asset value.
The Fund's Board of Directors has reviewed the proposal and recommends
that you vote FOR the proposal after carefully reviewing the enclosed materials.
Your vote is important. Please take a moment now to sign and return your
proxy card in the enclosed postage paid return envelope. If we do not hear from
you after a reasonable amount of time, you may receive a telephone call from our
proxy solicitor, Shareholder Communications, Inc., reminding you to vote your
shares. You may also vote your shares by telephone by calling 1-800-645-4519 or
on the web at http://www.proxyvote.com by following the instructions that
appear.
Sincerely,
Robert E. Putney, III
Secretary
Enclosure
<PAGE> 2
Q. Why am I receiving this proxy?
A. As a stockholder of Merrill Lynch Technology Fund, Inc., you are being
asked to consider the reorganization of the Fund with Merrill Lynch
Global Technology Fund, Inc. The transaction requires approval of the
Fund's stockholders.
Q. Will the reorganization change my privileges as a stockholder?
A. The stockholder services available to stockholders of Global Technology
are substantially the same as the stockholder services currently
available to you.
Q. How will the reorganization benefit Fund stockholders?
A. Stockholders should consider the following:
- After the reorganization, the Fund's stockholders will be invested
in a fund with substantially similar investment objectives.
- The Fund's assets have been declining since March 31, 1996 and as
assets decline, stockholders may experience higher operating
expenses as a percent of net assets.
- The total expenses of Global Technology as a percent of net assets
are currently lower than those of the Fund and after the
reorganization, the total expenses of the combined fund as a
percent of net assets are expected to be lower than those of
either Global Technology or the Fund.
Q. Will the reorganization affect the value of my investment?
A. The value of your investment will not change. It is currently anticipated
that the net asset value of your investment in the Fund will be
calculated on September 24, 1999. It also is currently anticipated that
you will receive shares of Global Technology with the same total net
asset value as of the close of business on September 24, 1999. It is
expected that the effective date of the reorganization will be September
27, 1999.
Q. After the reorganization, will I own the same number of shares of Global
Technology as I currently own of the Fund?
A. No. You will receive shares of Global Technology with the same aggregate
net asset value as the shares of the Fund you own on September 24, 1999.
The number of shares you receive will depend on the net asset value of
the Fund's shares as compared to the net asset value of Global Technology
shares on that date. For example, let us suppose that you own 10 Class A
shares of the Fund on September 24. If the net asset value of the Fund's
Class A shares on September 24 is $6 per share, and the net asset value
of Global Technology Class A shares is $12 per share, you will receive 5
Global Technology Class A
<PAGE> 3
shares in the reorganization. The aggregate net asset value will not
change. (10 Fund Class A shares x $6 =$60; 5 Global Technology Class A
shares x $12 = $60).
Q. What are the tax consequences for stockholders?
A. The reorganization is structured as a tax-free transaction so that
consummation of the reorganization itself will not result in Federal
income tax liability for stockholders of the Fund. The Fund and Global
Technology have obtained a favorable private letter ruling from the
Internal Revenue Service on the tax-free treatment of the reorganization.
Of course, stockholders will continue to be taxed on any dividends and
distributions made to them by the Combined Fund after the reorganization.
Q. Who will manage the combined fund after the reorganization?
A. Merrill Lynch Asset Management, L.P. serves as the manager for both funds
and after the reorganization will be the manager of the combined fund.
Paul G. Meeks is currently the portfolio manager of both funds and will
be the portfolio manager of the combined fund. Mr. Meeks has been the
portfolio manager of Global Technology since it commenced operations on
June 26, 1998 and of the Fund since August 1998.
Q. What will the name of the combined fund be after the reorganization?
A. If the reorganization is approved by Fund stockholders, the combined
fund's name will be Merrill Lynch Global Technology Fund, Inc.
Q. Will there be a stockholders' meeting?
A. Yes, a stockholders' meeting will be held on August 11, 1999 at 9:00
a.m., at 800 Scudders Mill Road, Plainsboro, New Jersey.
Q. Why is my vote important?
A. For a quorum to be present at the Special Meeting, one-third of the
outstanding shares of the Fund must be represented either in person or by
proxy. Approval of the reorganization requires the affirmative votes of
Fund stockholders representing a majority of the total votes entitled to
be cast, with all shares voting as a single class. The Board of Directors
urges every stockholder to vote. Please read all proxy materials
thoroughly before casting your vote.
Q. How can I vote?
A. You may vote by signing and returning your proxy card in the enclosed
postage-paid envelope. Or you may vote by telephone by calling
1-800-645-4519. Or you may vote your shares on the internet at
http://www.proxyvote.com. When voting by phone or on the internet,
you will be asked for a control number that you received in your proxy
mailing. You may also vote in person at the Special Meeting. If you
submitted a
2
<PAGE> 4
proxy by mail, by telephone or on the internet, you may withdraw it at
the Special Meeting and then vote in person at the Meeting.
Q. Has the Fund retained a proxy solicitation firm?
A. Yes, the Fund has hired Shareholder Communications, Inc. to assist in the
solicitation of proxies for the Special Meeting. While the Fund expects
most proxies to be returned by mail, it may also solicit proxies by
telephone, fax, telegraph or personal interview.
Q. What if there are not enough votes to reach a quorum by the scheduled
meeting date?
A. To facilitate receiving sufficient votes, we will need to take further
action. We or our proxy solicitation firm may contact you by mail or
telephone. Therefore, we encourage stockholders to vote as soon as they
review the enclosed proxy materials to avoid additional mailings or
telephone calls. If there are not sufficient votes for a quorum or a
quorum is present but there are not sufficient votes to approve the
proposal by the time of the Stockholders' Meeting on August 11, 1999, the
meeting may be adjourned to permit further solicitation of proxy votes.
Q. What is the Board's recommendation?
A. The Board of Directors of the Fund believes the reorganization is in the
best interests of the Fund's stockholders. It encourages stockholders
to vote FOR the reorganization.
3
