MERRILL
LYNCH
TECHNOLOGY
FUND, INC.
FUND LOGO
Quarterly Report June 30, 1994
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.
Merrill Lynch
Technology Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH TECHNOLOGY FUND, INC.
<PAGE>
Worldwide
Investments
As of 6/30/94
Industries Represented Percent of
In the Portfolio Net Assets
Semiconductors--Memory 22.4%
Microcomputer Software 21.4
Educational/Entertainment Software 17.4
Semiconductors--Capital Equipment 5.2
Application Development Software 4.6
Systems Integration 4.3
Wireline Communications 1.8
Internetworking 1.2
Wireless Communications 0.5
Applied Technology 0.2
Liquid Crystal Display Capital Equipment 0.2
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Micron Technology, Inc. 20.5%
Creative Technology Ltd. 17.3
Acclaim Entertainment, Inc. 13.6
Applied Materials, Inc. 5.2
Oracle Systems Corp. 4.6
General Motors Corporation (Class E) 4.3
Microsoft Corporation 4.1
Sega Enterprises, Ltd. 3.7
Integrated Device Technology, Inc. 1.9
Newbridge Networks Corp. 1.8
DEAR SHAREHOLDER
Merrill Lynch Technology Fund, Inc. made money, again. The Fund's
total returns for Class A and Class B Shares were +6.19% and +5.91%,
respectively, for the quarter ended June 30, 1994. For the first six
months of this year, Class A and Class B Shares' total returns were
+22.00% and +21.44%, respectively. Since the Fund's inception just
over two years ago, Class A and Class B Shares have provided total
investment returns of +104.72% and +100.10%, respectively. (Complete
performance information can be found on pages 4 and 5 of this report
to shareholders.)
<PAGE>
It seems to us that most investors are worried about inflation and
the direction of interest rates, but already have done quite a bit
of selling, particularly in technology stocks. As we have stated
before, it is unwise to generalize on the entire technology sector.
Our focus continues to be on company-specific issues rather than
"top-down guesstimates". We are merely reiterating what appears to
us to be common sense: The financial markets do what is least
expected.
We are bullish because technology stock valuations are generally
much lower than four months ago and yet business is improving for
many companies. There are always exceptions. For example, a
technology transition is occurring in local area networking and the
personal computer distribution channel has become even more crowded.
Nevertheless, semiconductor demand is generally strong in North
America, booming in Asia, improving in Japan and accelerating in
Europe. We believe the stage has been set for positive earnings
surprises during the remainder of 1994 and the first half of 1995.
Portfolio Matters
During the June quarter, we decreased the Fund's cash position,
which ranged as high as 53.0% of net assets, to close the quarter at
25.6%. We continue to find new investment opportunities as well as
add to existing positions.
Micron Technology, Inc. and Creative Technology, Ltd. are still our
largest holdings, together comprising 37.8% of net assets. Both
stocks remain significantly undervalued, in our opinion. Micron
Technology, Inc. is expected to report a step-function up in
earnings in coming quarters resulting from continuing strong demand
for 4-Megabit DRAMs, capacity constraints for Korean competitors
(particularly Hyundai Electronics Industries Co., Ltd. and Goldstar
Electron) throughout 1995, the increasing memory content of new
operating systems and applications, stable-to-up pricing and
significant manufacturing efficiencies. The efficiencies are
attributable to Micron's ability to shrink its 4-Meg DRAMs and
produce more die per wafer. The shrink parts, which accounted for
less than 5% of "wafers out" in the February quarter, should account
for 45%--50% of "wafers out" in the August quarter and over 75% of
"wafers out" in the November quarter. We estimate that incremental
gross margins exceed 80% on these "shrink" parts, well above the
corporate gross margin. Over the longer term, Micron, for the first
time, has an opportunity to be a technology leader on the 16-Meg
DRAM (in the all important 300 mil package).
<PAGE>
Creative Technology, Ltd. is the leading developer of sound cards
and multi-media upgrade kits for the personal computer market. The
company's Sound Blaster line of audio cards has become the de facto
standard with more than a 70% market share and is the benchmark by
which all others are measured. Creative's focus on technology
development and shrewd marketing enable it to continually drive down
prices while improving performance on its broad array of products as
a means of staying well ahead of the competition.
The accelerating interest in home computers and CD ROM-based multi-
media suggest that the 1994 Christmas season will be explosive for
the industry and Creative in particular. We expect this to be
followed in very early 1995 by the initial stages of business audio,
the first serious penetration of the business market with voice
assisted/activated applications.
We substantially increased our holding of Acclaim Entertainment,
Inc., the leading publisher of video games for the Sega and Nintendo
platforms. While Acclaim was always a significant factor in the
industry, in less than 12 months it has surged to the top of the
charts with the introduction of two blockbuster hits, Mortal Kombat
and NBA Jam. Combined with an innovative marketing approach, the
company has captured the number-one market share position. Acclaim's
management has outlined aggressive short-term and long-term plans.
During the 1994 Christmas season, Acclaim expects to introduce
sequels to its blockbusters, as well as begin shipping NFL
Quarterback Club. The company is leveraging its distribution
strength by signing a long-term agreement with Marvel Comics to
handle its video game titles and, in 1995, it will enter the coin-
operated video game market for the first time. Finally, Acclaim has
developed a unique technology, Digital Actors, which enables video
game characters to have life-like motion on the screen. This
technology will appear in products in 1995 and is currently being
evaluated by several major motion picture studios. In short, we
believe the upside potential in Acclaim's stock is considerable.
As a reminder, we are accustomed to stock price volatility, and we
welcome it because it creates investment opportunities. We thank you
for your continued investment in Merrill Lynch Technology Fund,
Inc., and we look forward to discussing new developments with you in
the next semi-annual report to shareholders.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(James K. Renck)
James K. Renck
Vice President and Portfolio Manager
July 13, 1994
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
James K. Renck, Vice President and Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Global Securities Services
Brooklyn, New York 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
PERFORMANCE DATA
<PAGE>
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
Class A and Class B Shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
4/27/92--12/31/92 $3.83 $4.90 -- $0.337 + 37.05%
1993 4.90 4.50 $0.002 1.411 + 22.44
1/1/94--6/30/94 4.50 5.49 -- -- + 22.00
------ ------
Total $0.002 Total $1.748
Cumulative total return as of 6/30/94: +104.72%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and
do not include sales charge; results would be lower if sales charge
was included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<C> <C> <C> <C> <C> <C>
4/27/92--12/31/92 $3.83 $4.87 -- $0.337 + 36.29%
1993 4.87 4.43 $ 0.002 1.374 + 20.89
1/1/94--6/30/94 4.43 5.38 -- -- + 21.44
------- ------
Total $ 0.002 Total $1.711
Cumulative total return as of 6/30/94: +100.10%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and
do not reflect deduction of any sales charge; results would be
lower if sales charge was deducted.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/94 +33.08% +24.43%
Inception (4/27/92) through 6/30/94 +39.01 +34.78
[FN]
* Maximum sales charge is 6.5%.
** Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/94 +31.68% +27.68%
Inception (4/27/92) through 6/30/94 +37.56 +36.92
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
6/30/94 3/31/94 6/30/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares** $5.49 $5.17 $5.50 - 0.15%(1) +6.19%
Class B Shares** 5.38 5.08 5.43 - 0.89(1) +5.91
Class A Shares--Total Return +33.08(2) +6.19
Class B Shares--Total Return +31.68(3) +5.91
<PAGE>
<FN>
*Investment results shown for the 3-month and 12-month periods are before the
deduction of any sales charges.
**These results do not include reinvestment of ordinary income dividends.
(1)Percent change includes reinvestment of $0.002 per share capital gains distributions.
(2)Percent change includes reinvestment of $1.411 per share ordinary income dividends
and $0.002 per share capital gains distributions.
(3)Percent change includes reinvestment of $1.374 per share ordinary income dividends
and $0.002 per share capital gains distributions.
</TABLE>
PORTFOLIO CHANGES
For the Quarter Ended June 30, 1994
Additions Applied Materials, Inc.
Fore Systems, Inc.
Integrated Device Technology, Inc.
Newbridge Networks Corp.
Nextel Communications Inc.
3Com Corporation
Deletions Advanced Micro Devices, Inc.
Cyrix Corporation
Motorola, Inc.
Software Toolworks, Inc.
Veritas Software Corp.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Percent of
COUNTRY Industries Shares Held Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Japan Educational/Entertainment 250,000 Sega Enterprises, Ltd. $ 18,343,664 $ 19,406,393 3.7%
Software
Total Investments in Japanese
Stocks 18,343,664 19,406,393 3.7
Singapore Microcomputer Software 5,260,000 Creative Technology Ltd. 75,025,319 90,735,000 17.3
<PAGE>
Total Investments in
Singaporean Stocks 75,025,319 90,735,000 17.3
United States Application Development 650,000 Oracle Systems Corp. 22,189,385 24,293,750 4.6
Software
Applied Technology 152,500 Quick Response Services, Inc. 3,584,375 1,525,000 0.2
Education/Entertainement 4,425,000 Acclaim Entertainment, Inc. 72,961,854 71,353,125 13.6
Software 53,000 Iwerks Entertainment Inc. 1,759,000 331,250 0.1
------------ ------------ ------
74,720,854 71,684,375 13.7
Internetworking 90,000 3Com Corporation 4,226,247 4,623,750 0.9
45,000 Fore Systems, Inc. 863,750 1,316,250 0.2
------------ ------------ ------
5,089,997 5,940,000 1.1
Liquid Crystal Display 85,000 MRS Technology Inc. 1,126,251 658,750 0.2
Capital Equipment
Microcomputer Software 425,000 Microsoft Corporation 20,868,123 21,887,500 4.1
Semiconductors-- 650,000 Applied Materials, Inc. 28,246,252 27,625,000 5.2
Capital Equipment
Semiconductors--Memory 400,000 Integrated Device Technology, Inc. 11,106,246 9,850,000 1.9
3,115,000 Micron Technology, Inc. 70,074,718 107,467,500 20.5
------------ ------------ ------
81,180,964 117,317,500 22.4
Systems Integration 645,000 General Motors Corporation
(Class E) 22,065,290 22,494,375 4.3
Wireless Communications 75,000 Nextel Communications Inc. 2,936,875 2,250,000 0.5
Wireline Communications 285,000 Newbridge Networks Corp. 9,317,191 9,796,875 1.8
Total Investments in US Stocks 271,325,557 305,473,125 58.1
Total Investments in Stocks 364,694,540 415,614,518 79.1
<PAGE>
<CAPTION>
SHORT-TERM
SECURITIES Face Amount Commercial Paper*
<S> <C> <S> <C> <C> <C>
$18,799,000 Associates Corp. of North America,
4.35% due 7/01/1994 18,799,000 18,799,000 3.6
20,000,000 Ciesco L.P., 4.25% due 7/01/1994 20,000,000 20,000,000 3.8
22,000,000 du Pont (E.I.) de Nemours & Co.,
4.22% due 7/25/1994 21,938,107 21,938,107 4.2
1,000,000 Miles Inc., 4.25% due 7/08/1994 999,174 999,174 0.2
10,000,000 Nomura Holding America Inc., 4.10%
due 7/05/1994 9,995,444 9,995,444 1.9
10,000,000 Pitney Bowes Inc., 4.27% due
8/04/1994 9,959,672 9,959,672 1.9
11,000,000 Preferred Receivables Funding
Corp., 4.25% due 7/15/1994 10,981,820 10,981,820 2.1
16,000,000 Southern California Edison Co.,
4.30% due 7/06/1994 15,990,444 15,990,444 3.0
20,000,000 Wal-Mart Stores, Inc., 4.25% due
7/14/1994 19,969,306 19,969,306 3.8
6,000,000 Xerox Credit Corp., 4.30% due
7/29/1994 5,979,933 5,979,933 1.1
Total Investments in Short-Term
Securities 134,612,900 134,612,900 25.6
Total Investments $499,307,440 550,227,418 104.7
============
Liabilities in Excess of Other Assets (24,986,467) (4.7)
------------ ------
Net Assets $525,240,951 100.0%
============ ======
Net Asset Class A--Based on net assets of
Value: $207,143,913 and 37,731,104 shares
outstanding $ 5.49
===========
Class B--Based on net assets of
$318,097,038 and 59,103,232 shares
outstanding $ 5.38
===========
<FN>
*Commercial Paper is traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Company.
</TABLE>
<PAGE>
