MERRILL LYNCH TECHNOLOGY FUND, INC.
FUND LOGO
Quarterly Report December 31, 1993
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.
Merrill Lynch
Technology Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH TECHNOLOGY FUND, INC.
Worldwide
Investments
As of 12/31/93
Industries Represented Percent of
In the Portfolio Net Assets
Wireless Communications 23.6%
Semiconductor--Memory 23.4
Wireline Communications 14.1
Microcomputer Software 6.0
Application Development Software 5.2
Internetworking 4.8
Educational/Entertainment Software 3.9
Semiconductor Capital Equipment 1.4
Applied Technology 1.2
Liquid Crystal Display Capital Equipment 0.4
Systems Software 0.3
<PAGE>
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Motorola, Inc. 23.6%
Micron Technology, Inc. 16.8
DSC Communications Corp. 6.7
Texas Instruments Inc. 5.3
Newbridge Networks Corp. 5.1
Creative Technology Ltd. 4.8
Oracle Systems Corp. 3.6
Acclaim Entertainment, Inc. 3.0
Cabletron Systems, Inc. 2.5
cisco Systems Inc. 2.3
DEAR SHAREHOLDER
Merrill Lynch Technology Fund, Inc. declined in value in the December
quarter. Total returns for Class A and Class B Shares were -5.37% and
- -5.61%, respectively. However, the Fund had positive total returns for
1993 overall of 22.44% for Class A Shares and 20.89% for Class B Shares.
The paper losses incurred in the December quarter have been recouped.
(Complete performance information, including average annual total returns,
can be found on page 4 of this report to shareholders.)
During mid-November we began reinvesting the Fund's large cash position,
which was as high as 92% in November. Unfortunately, our timing was early
by a matter of weeks. Nevertheless, we used stock price weakness to build
large positions in a limited number of semiconductor, software and
communications stocks. As of this writing, the Fund is 90% invested and
holds 23 equity positions. The top ten equity positions alone represent
nearly 80% of the Fund's net assets.
The weakness in technology shares during the December quarter is attributable
in part to forecasts of slower (but still strong) growth for the semiconductor
industry in 1994, a fear that incremental demand for personal computers was
being driven solely by the consumer and would therefore collapse in the March
quarter, Congressional hearings on video game violence, and a realization
among investors that there is a great deal of hype as well as potential con-
cerning the information superhighway.
As we enter the new year, technology stock prices are appreciating sharply as
companies report much better-than-expected earnings and comment positively
about the business outlook. Even stocks of companies reporting worse-than-
expected earnings are trading higher, indicating to us that much of the bad
news has been discounted. Moreover, a day does not pass without the press or
some strategist discussing an imminent decline in the stock market. Although
such declines are more difficult to forecast than deteriorating fundamentals
of a specific company, we suspect stocks will "climb a wall of worry."
<PAGE>
Portfolio Matters
Here is an update on some of the portfolio's holdings. Motorola, Inc.,
comprising 23.6% of the Fund's net assets, is a preeminent supplier of
wireless communications products and semiconductors throughout the world.
The company has been at the forefront of the cellular telephone industry
as a dominant supplier of phones and infrastructure equipment. As the world's
leading supplier, the paging business has become synonymous with the name
Motorola. More recently, the company is in the process of expanding its wire-
less expertise and dominance with the restructuring of the shared mobile radio
(SMR) industry. Today's radio dispatching services (taxis and repair services,
for example) are evolving into a fully digital, national communications network
and, again, Motorola is at the forefront.
Driving much of the company's communications success has been its expertise
in semiconductors. Motorola remains one of the world's largest and most
successful semiconductor operations with expertise in memory, logic and
microprocessors. In 1994 Motorola will be the supplier of the much-awaited
Power PC, the new microprocessor selected by International Business Machines
and Apple Computer Co. to drive their future high-end personal computers and
workstations.
Micron Technology, Inc. is the Fund's second largest holding representing
16.8% of net assets. The company is the lowest cost, most efficient producer
of dynamic random access memory (DRAM) in the world, using substantially
fewer mask steps than major competitors in the production of 4-Megabit DRAMs
and next generation 16-Megabit DRAMs. Since the DRAM market is expected to
remain capacity-constrained for possibly two more years and many new high-
end personal computers require substantially higher memory content, we
believe that the incremental profit opportunity at Micron is substantial.
In our judgment, the stock is undervalued at current prices.
Creative Technology Ltd. is the dominant supplier of multimedia peripherals
for personal computers. The company's initial product, the Sound Blaster,
has become the world leader and the effective standard in bringing sound
to personal computers. The success of the Sound Blaster has been a factor
in the increasing demand for home computers and the growth in educational
and entertainment software. Creative Technology continually evolves the
Sound Blaster line and has added the Video Blaster to enter the new market
for personal video capture/manipulation. In both areas Creative Technology
has become the dominant marketing force with very aggressive pricing and
attractive packaging of complete solutions (hardware/software/speakers) in
its MultiMedia Upgrade Kits.
<PAGE>
Iwerks Entertainment Inc. is one of the leading producers of movie-based
specialty theaters for the out-of-home entertainment market. Founded by
Walt Disney Studios expatriates, Iwerks has been at the forefront of
providing special purpose "rides" and movies at theme parks, museums,
world expositions, visitor centers and special events. The company's
projects have included Days of Thunder--The Ride for Paramount Parks and
RoboCop--The Ride for Universal Studios. These experiences have led Iwerks
to embark on a mission to dramatically change the out-of-home entertainment
experience and significantly expand the market via its Cinetropolis strategy.
A Cinetropolis is a self-contained unit that may include up to four Iwerks
attractions such as the giant screen theater, 360 degree theater, motion
simulation ride and/or virtual reality ride. It is targeted at casinos,
retail malls and other high traffic venues, with the first opening to be
in January 1994 at Foxwood Casino in Connecticut. Given the success of
theme park experiences, Iwerks may indeed be changing how we have fun.
We thank you for your continued investments in Merrill Lynch Technology
Fund, Inc., and we look forward to discussing new developments with you in
our upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(James K. Renck)
James K. Renck
Vice President and Portfolio Manager
January 14, 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
<PAGE>
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<TABLE>
PERFORMANCE DATA
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.
<CAPTION>
Performance
Summary-- Net Asset Value Capital Gains
Class A Shares 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
------ ------
Total $0.002 Total $1.748
Cumulative total return as of 12/31/93: +67.80%**
<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>
<CAPTION>
Performance
Summary-- Net Asset Value Capital Gains
Class B Shares Period Covered Beginning Ending Distributed Dividends 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
------ ------
Total $0.002 Total $1.711
Cumulative total return as of 12/31/93: +64.77%**
<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>
<PAGE>
<TABLE>
<CAPTION>
Recent 12 Month 3 Month
Performance 12/31/93 9/30/93 12/31/92 % Change % Change
Results*
<S> <C> <C> <C> <C> <C>
Class A Shares** $4.50 $5.58 $4.90 - 8.13%(1) - 19.35%
Class B Shares** 4.43 5.48 4.87 - 9.00(1) - 19.16
Class A Shares--Total Return + 22.44(2) - 5.37(3)
Class B Shares--Total Return + 20.89(4) - 5.61(5)
<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 distribution.
(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 $0.758 per share ordinary income dividends.
(4)Percent change includes reinvestment of $1.374 per share ordinary income dividends and $0.002 per share capital gains
distributions.
(5)Percent change includes reinvestment of $0.721 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
Average Annual % Return Without % Return With
Total Return Class A Shares* Sales Charge Sales Charge**
<S> <C> <C>
Year Ended 12/31/93 +22.44% +14.48%
Inception (4/27/92) through 12/31/93 +36.10 +30.76
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
<CAPTION>
% Return % Return
Class B Shares* Without CDSC With CDSC**
<S> <C> <C>
Year Ended 12/31/93 +20.89% +17.27%
Inception (4/27/92) through 12/31/93 +34.63 +33.16
<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>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION> Percent
Shares of Net
Industries Held Stocks Cost Value Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Wireline Communications 255,000 Newbridge Networks Corp. $ 15,708,748 $ 13,929,375 5.1%
Total Investments in Canadian Stocks 15,708,748 13,929,375 5.1
Singapore Microcomputer Software 420,000 Creative Technology Ltd. 11,408,760 13,125,000 4.8
Total Investments in Singaporean Stocks 11,408,760 13,125,000 4.8
United Application Development 23,700 Mercury Interactive Corp. 308,100 408,825 0.1
States Software 340,000 Oracle Systems Corp. 11,884,380 9,775,000 3.6
100,000 Sybase Inc. 4,176,254 4,200,000 1.5
----------- ----------- ----
16,368,734 14,383,825 5.2
Applied Technology 152,500 Quick Response Services, Inc. 3,584,375 3,355,000 1.2
Educational/ 395,000 Acclaim Entertainment, Inc. 9,011,568 8,344,375 3.0
Entertainment Software 53,000 Iwerks Entertainment Inc. 1,759,000 1,378,000 0.5
100,000 Software Toolworks, Inc. 1,234,375 1,000,000 0.4
----------- ----------- ----
12,004,943 10,722,375 3.9
Internetworking 60,000 Cabletron Systems, Inc. 5,929,278 6,750,000 2.5
100,000 cisco Systems Inc. 5,589,380 6,450,000 2.3
----------- ----------- ----
11,518,658 13,200,000 4.8
Liquid Crystal Display 85,000 MRS Technology Inc. 1,126,251 1,062,500 0.4
Capital Equipment
Microcomputer Software 155,000 Adobe Systems Inc. 3,638,752 3,410,000 1.2
Semiconductor Capital 50,000 KLA Instruments Corp. 1,218,750 1,387,500 0.5
Equipment 80,000 Lam Research Corp. 2,695,000 2,580,000 0.9
----------- ----------- ----
3,913,750 3,967,500 1.4
Semiconductor--Memory 220,000 Integrated Device Technology, Inc. 3,549,791 3,712,500 1.3
995,000 Micron Technology, Inc. 46,811,129 46,143,125 16.8
230,000 Texas Instruments Inc. 14,686,574 14,605,000 5.3
----------- ----------- ----
65,047,494 64,460,625 23.4
Systems 11,200 FTP Software Inc. 212,800 291,200 0.1
Software 31,500 Veritas Software Inc. 610,250 519,750 0.2
----------- ----------- ----
823,050 810,950 0.3
<PAGE>
Wireless 705,000 Motorola, Inc. 70,326,315 65,124,375 23.6
Communications
Wireline 200,000 BroadBand Technologies Inc. 7,990,251 6,200,000 2.3
Communications 300,000 DSC Communications Corp. 18,430,005 18,412,500 6.7
----------- ----------- ----
26,420,256 24,612,500 9.0
Total Investments in US Stocks 214,772,578 205,109,650 74.4
Total Investments in Stocks 241,890,086 232,164,025 84.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION> Percent
SHORT-TERM of Net
SECURITIES Face Amount Commercial Paper* Cost Value Assets
<C> <S> <C> <C> <C>
$10,000,000 Ciesco L.P., 3.20% due 1/10/1994 $ 9,992,000 $ 9,992,000 3.7%
3,922,000 Ford Motor Credit Co., 3.20%
due 1/03/1994 3,921,303 3,921,303 1.4
10,000,000 Preferred Receivables Funding Corp.,
3.25% due 1/31/1994 9,972,916 9,972,916 3.6
Total Investments in Commercial Paper 23,886,219 23,886,219 8.7
<CAPTION>
US Government Obligations*
<C> <S> <C> <C> <C>
15,000,000 Federal Home Loan Bank, 3.19% due
1/19/1994 14,976,075 14,976,075 5.4
Total Investments in US Government
Obligations 14,976,075 14,976,075 5.4
Total Investments in Short-Term
Securities 38,862,294 38,862,294 14.1
Total Investments $280,752,380 271,026,319 98.4
============
Other Assets Less Liabilities 4,362,916 1.6
------------ -----
Net Assets $275,389,235 100.0%
============ =====
<PAGE>
Net Asset Class A--Based on net assets of $134,298,594 and
Value: 29,873,001 shares outstanding $ 4.50
============
Class B--Based on net assets of $141,090,641 and
31,850,539 shares outstanding $ 4.43
============
<FN>
*Commercial Paper and US Government Obligations are traded on a discount basis; the interest rates shown are the discount rates
paid at the time of purchase by the Fund.
</TABLE>
PORTFOLIO CHANGES
For the Quarter Ended December 31, 1993
Additions Adobe Systems Inc.
BroadBand Technologies Inc.
Cabletron Systems, Inc.
cisco Systems Inc.
Creative Technology Ltd.
DSC Communications Corp.
FTP Software Inc.
Iwerks Entertainment Inc.
KLA Instruments Corp.
Lam Research Corp.
*Macromedia, Inc.
Mercury Interactive Corp.
Micron Technology, Inc.
Motorola, Inc.
MRS Technology Inc.
*National Semiconductor Corp.
Newbridge Networks Corp.
Sybase Inc.
Texas Instruments Inc.
Veritas Software Inc.
Deletions *Macromedia, Inc.
*National Semiconductor Corp.
[FN]
*Added and deleted in the same quarter.
