MERRILL LYNCH
TECHNOLOGY
FUND, INC.
FUND LOGO
Annual Report
March 31, 1996
This report is not authorized for use as an offer of sale or
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.
<PAGE>
Merrill Lynch
Technology Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH TECHNOLOGY FUND, INC.
Worldwide
Investments
As of 3/31/96
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Informix Corp. 12.7%
cisco Systems, Inc. 9.4
Acclaim Entertainment, Inc. 7.8
LSI Logic Corp. 6.9
Ascend Communications, Inc. 6.5
3Com Corporation 6.2
FORE Systems, Inc. 6.1
Creative Technology Ltd.* 6.1
Stratacom, Inc. 5.9
Electronic Arts, Inc. 5.1
<PAGE>
[FN]
*Includes holdings in Singapore and the United States.
Ten Largest Industries Percent of
Represented in the Portfolio Net Assets
Internetworking 21.7%
Application Development Software 16.3
Communications Equipment 14.7
Educational/Entertainment Software 12.9
Application Specific Integrated Circuits 11.6
Semiconductors--Memory 6.7
Microcomputer Peripherals 6.2
Photography 3.1
Semiconductors--Microprocessors 2.2
Systems Software 2.1
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
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.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
Merrill Lynch Technology Fund, Inc. lost money in the March quarter.
For the three months ended March 31, 1996, total returns for Class
A, Class B, Class C and Class D Shares were -7.31%, -7.54%, -7.57%
and -7.32%, respectively. During the last two weeks of the quarter,
investors became increasingly concerned about first-quarter earnings
reports and aggressively sold technology stocks. We believe this
could be part of the bottoming process in technology share prices.
Technology stocks have sold off sharply since mid-September of 1995.
The risks associated with a slowdown in corporate and consumer
demand for computers and software in North America, as well as
underutilized semiconductor capacity and excess component
inventories globally, were widely discussed. We believe the risks
are real and there still will be disappointments. However, it
appears that most of the negative news was discounted, at least on a
short-term basis, because many stock prices either stopped declining
or rose as bad news was reported during April. Since stock prices
are supposed to anticipate changes in a company's business at the
margin, and business at the margin seems to have stabilized and, in
some cases, may be getting better, we are seeking investment
opportunities. However, we do not anticipate a broad-based advance
in technology stocks.
1996 Fiscal Year in Review
The Fund performed well in the first half of the fiscal year through
September, largely because of our decision to aggressively reduce
the Fund's Japanese technology stock investments following the Kobe
earthquake and reinvest those assets in a limited number of US
technology stocks. During the second half of the fiscal year
(October 1995 through March 1996), the Fund performed poorly as
technology-related investments came under considerable selling
pressure. As stated before, we believe technology stocks may be
experiencing a bottoming process and positioned the Fund
accordingly. We raised our maximum threshold of stocks in the
portfolio from 25 to 45. The average size of most new positions will
be somewhat smaller than in the past. We think these changes are
reasonable given the current size of the Fund compared to the $66
million in assets at the Fund's inception in April 1992.
<PAGE>
By the close of the fiscal year ended March 31, 1996, the Fund held
30 stocks and was essentially fully invested.
Portfolio Matters
The Fund holds large positions in several companies including
Informix Corp., cisco Systems, Inc., Acclaim Entertainment, Inc.,
LSI Logic Corp., and Ascend Communications, Inc.
Informix Corp. is a leading supplier of data base management
software and development tools. The company's products are
recognized as being technically superior to the competition and have
been gaining market share for more than one year. Informix Corp.'s
recent acquisition of Illustra Software should keep Informix well
ahead of competitors in the developing area of unstructured data
management. While the acquisition and sales management changes
caused some softening in first quarter business, Informix' license
sales grew by 52%, demonstrating continued market share gains.
cisco Systems, Inc. dominates the market for internetworking
equipment. As demonstrated in the company's second fiscal quarter,
which ended January 31, 1996, cisco's revenues (+82%) and earnings
(+70%) significantly exceed the industry growth rate of 30%--50%.
More importantly, the company has a history of successfully
identifying new growth segments such as switching, ATM and remote
access, and acquiring companies and technologies to fill product
gaps. cisco recently announced plans to acquire Stratacom
Corporation, a leading supplier of wide-area network ATM and frame
relay products.
Acclaim Entertainment, Inc. is a leading developer of interactive
entertainment software for dedicated video game systems and personal
computers. The industry was in a transition as old platforms such as
Super Nintendo and Sega Genesis gave way to the new technology of
Sony Playstation and personal computers (PCs). When Acclaim recently
reported results for its fiscal February quarter, management
announced plans to exit the aging 16-bit game cartridges market and
concentrate solely on the next-generation platforms. While this
necessitated a significant write-down of inventory during the
quarter, we believe this removes a significant drag on Acclaim's
future performance.
LSI Logic Corp. is the leading supplier of customer-specific
semiconductors. The company recently reported results for the March
quarter that were in line with pre-announced expectations. The
softening in the company's business appears to have been solely the
result of an inventory correction occurring in the PC industry. With
that behind it, LSI experienced order strength from communications
and consumer electronics customers which should begin to accelerate
growth in the second quarter.
<PAGE>
Ascend Communications, Inc. is the leading supplier of remote access
communications equipment. Demand for dial-up and dedicated
communications services from homes, offices and business travelers
exploded in recent years as people accessed on-line services
(Internet, America Online, etc.) as well as corporate systems. This
propelled Ascend's growth to extraordinary levels. The company
recently reported results for the March quarter, with revenue growth
of 347% and net income growth of 505%. While it is unlikely Ascend's
growth rates will continue at current levels, the company's
positioning, coupled with increasing demand, suggest successful
performance for the foreseeable future.
In Conclusion
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,
(Arthur Zeikel)
Arthur Zeikel
President
(James K. Renck)
James K. Renck
Vice President and Portfolio Manager
April 23, 1996
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:
<PAGE>
* 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 8 years.
* 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. 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.
PERFORMANCE DATA (continued)
<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
1994 4.50 5.24 -- 0.442 +26.63
1995 5.24 5.20 -- 0.320 + 5.86
1/1/96--3/31/96 5.20 4.82 -- -- - 7.31
------ ------
Total $0.002 Total $2.510
Cumulative total return as of 3/31/96: +108.51%**
<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
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
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
1994 4.43 5.14 -- 0.405 +25.50
1995 5.14 5.04 -- 0.320 + 4.81
1/1/96--3/31/96 5.04 4.66 -- -- - 7.54
------ ------
Total $0.002 Total $2.436
Cumulative total return as of 3/31/96: +100.39%**
<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>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $5.75 $5.12 -- $0.364 -4.39%
1995 5.12 5.02 -- 0.320 +4.83
1/1/96--3/31/96 5.02 4.64 -- -- -7.57
------
Total $0.684
Cumulative total return as of 3/31/96: -7.36%**
<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>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $5.88 $5.24 -- $0.370 -4.37%
1995 5.24 5.19 -- 0.320 +5.67
1/1/96--3/31/96 5.19 4.81 -- -- -7.32
------
Total $0.690
Cumulative total return as of 3/31/96: -6.35%**
<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>
Total Return
Based on a $10,000
Investment--
Class A and
Class B Shares
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:
4/27/92 3/96
ML Technology Fund, Inc.++--
Class A Shares* $ 9,600 $19,756
<PAGE>
ML Technology Fund, Inc.++--
Class B Shares* $10,000 $19,939
S&P 500 Index++++ $10,000 $17,319
[FN]
*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.
Average Annual
Total Return--
Class A and
Class B Shares
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 3/31/96 + 5.15% - 0.37%
Inception (4/27/92) through 3/31/96 +20.57 +18.92
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 3/31/96 + 4.21% + 0.31%
Inception (4/27/92) through 3/31/96 +19.35 +19.20
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
Total Return
Based on a
$10,000
Investment--
Class C and
Class D Shares
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:
10/21/94** 3/96
ML Technology Fund, Inc.++--
Class C Shares* $10,000 $ 9,264
ML Technology Fund, Inc.++--
Class D Shares* $ 9,600 $ 8,874
S&P 500 Index++++ $10,000 $14,398
[FN]
*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-base Index is comprised of common stocks.
Past performance is not predictive of future performance.
Average Annual
Total Return--
Class C and
Class D Shares
<PAGE>
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 3/31/96 +4.22% +3.25%
Inception (10/21/94) through 3/31/96 -5.16 -5.16
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 3/31/96 +4.94% -0.57%
Inception (10/21/94) through 3/31/96 -4.44 -7.94
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
3/31/96 12/31/95 3/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $4.82 $5.20 $4.89 -1.43% -7.31%
Class B Shares 4.66 5.04 4.78 -2.51 -7.54
Class C Shares 4.64 5.02 4.76 -2.52 -7.57
Class D Shares 4.81 5.19 4.89 -1.64 -7.32
Class A Shares--Total Return +5.15 1) -7.31
Class B Shares--Total Return +4.21(1) -7.54
Class C Shares--Total Return +4.22(1) -7.57
Class D Shares--Total Return +4.94(1) -7.32
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.320 per share ordinary
income dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Singapore Microcomputer 727,150 ++Creative Technology Ltd. $ 9,807,063 $ 4,728,800 0.5%
Peripherals
Total Investments in
Singaporean Stocks 9,807,063 4,728,800 0.5
United Analog 20,000 ++Analog Devices, Inc. 588,150 560,000 0.1
States Semiconductors 20,000 Linear Technology Corporation 965,000 835,000 0.1
------------ ------------ ------
1,553,150 1,395,000 0.2
Application 20,000 ++Baan Company, N.V. 1,230,000 1,152,500 0.1
Development 4,203,000 ++Informix Corp. 83,875,337 110,854,125 12.7
Software 280,000 ++Oracle Corporation 13,976,075 13,125,000 1.5
311,200 ++Peoplesoft Inc. 6,052,916 17,894,000 2.0
------------ ------------ ------
105,134,328 143,025,625 16.3
Application 786,400 ++C-Cube Microsystems, Inc. 46,725,852 40,499,600 4.6
Specific 2,264,400 ++LSI Logic Corp. 79,898,858 60,572,700 6.9
Integrated 30,000 ++Oak Technology, Inc. 748,125 622,500 0.1
Circuits ------------ ------------ ------
127,372,835 101,694,800 11.6
Broadcasting/Cable 50,000 ++US West Media Group 1,034,250 1,031,250 0.1
Communications 1,050,000 ++Ascend Communications, Inc. 37,488,272 56,568,750 6.5
Equipment 60,000 ++Cascade Communications Corp. 4,076,249 5,385,000 0.6
20,000 ++Gandalf Technologies, Inc. 282,500 292,500 0.0
25,000 ++Pairgain Technologies, Inc. 1,630,357 1,609,375 0.2
1,419,000 ++Stratacom, Inc. 36,489,685 51,793,500 5.9
262,900 ++Tellabs, Inc. 12,283,178 12,684,925 1.5
------------ ------------ ------
92,250,241 128,334,050 14.7
Educational/ 6,480,000 ++Acclaim Entertainment, Inc. ++++ 103,211,387 68,040,000 7.8
Entertainment 1,679,400 ++Electronic Arts, Inc. 49,908,085 44,504,100 5.1
Software ------------ ------------ ------
153,119,472 112,544,100 12.9
<PAGE>
Internetworking 1,360,000 ++3Com Corporation 44,615,006 54,060,000 6.2
1,780,000 ++cisco Systems, Inc. 58,681,825 82,547,500 9.4
750,200 ++FORE Systems, Inc. 41,776,489 53,545,525 6.1
------------ ------------ ------
145,073,320 190,153,025 21.7
Microcomputer 20,000 ++Adaptec, Inc. 1,098,334 965,000 0.1
Peripherals 8,106,700 ++Creative Technology Ltd. ++++ 113,149,604 48,640,200 5.6
------------ ------------ ------
114,247,938 49,605,200 5.7
Microcomputer 130,000 ++Microsoft Corporation 13,472,500 13,390,000 1.5
Software
Photography 602,300 Polaroid Corporation 26,543,556 27,103,500 3.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Semiconductors-- 316,900 ++Altera Corporation $ 21,187,427 $ 17,667,175 2.0%
States Memory 725,000 Micron Technology, Inc. 24,034,662 22,746,875 2.6
(concluded) 570,000 ++Xilinx, Inc. 23,798,633 18,097,500 2.1
------------ ------------ ------
69,020,722 58,511,550 6.7
Semiconductors-- 340,000 Intel Corporation 19,838,957 19,295,000 2.2
Microprocessors
Systems Software 255,000 Computer Associates International,
Inc. 18,623,972 18,264,375 2.1
Total Investments in
United States Stocks 887,285,241 864,347,475 98.8
Total Investments in Stocks 897,092,304 869,076,275 99.3
<PAGE>
SHORT-TERM Face
SECURITIES Amount Issue
Commercial $ 4,619,000 Associates Corp. of North America,
Paper* 5.48% due 4/01/1996 4,617,594 4,617,594 0.5
Total Investments in Short-Term
Securities 4,617,594 4,617,594 0.5
Total Investments $901,709,898 873,693,869 99.8
============
Other Assets Less Liabilities 1,982,084 0.2
------------ ------
Net Assets $875,675,953 100.0%
============ ======
<FN>
*Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the
Company.
++Non-income producing security.
++++Investment in companies 5% or more of whose outstanding
securities are held by the Company (such companies are defined as
'Affiliated Companies' in Section 2 (a)(3) of the Investment Company
Act of 1940) is as follows:
Net Share Net Dividend
Industry Affiliate Activity Cost Income
Educational/ Acclaim
Entertainment Entertainment,
Software Inc. 605,000 $ 9,376,747 --
Microcomputer Creative
Peripherals Technology Ltd 275,500 3,011,641 --
Total $12,388,388
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of March 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$901,709,898)(Note 1a) $873,693,869
Cash 496
Foreign cash (Note 1c) 32
Receivables:
Securities sold $ 22,316,211
Capital shares sold 4,512,616 26,828,827
------------
Deferred organization expenses (Note 1f) 27,437
Prepaid registration fees and other assets (Note 1f) 32,225
------------
Total assets 900,582,886
------------
Liabilities: Payables:
Securities purchased 20,748,022
Capital shares redeemed 1,997,181
Investment adviser (Note 2) 731,587
Distributor (Note 2) 500,553 23,977,343
------------
Accrued expenses and other liabilities 929,590
------------
Total liabilities 24,906,933
------------
Net Assets: Net assets $875,675,953
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 5,119,031
Class B Shares of Common Stock, $0.10 par value, 300,000,000
shares authorized 11,882,751
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 670,683
Class D Shares of Common Stock, $0.10 par value, 300,000,000
shares authorized 911,820
Paid-in capital in excess of par 926,058,084
Accumulated realized capital losses on investments and foreign
currency transactions--net (14,068,351)
Accumulated distributions in excess of realized capital gains on
investments and foreign currency transactions--net (26,882,035)
Unrealized depreciation on investments and foreign currency
transactions--net (28,016,030)
------------
Net assets $875,675,953
============
<PAGE>
Net Asset Class A--Based on net assets of $246,909,290 and 51,190,305
Value: shares outstanding $ 4.82
============
Class B--Based on net assets of $553,818,469 and 118,827,509
shares outstanding $ 4.66
============
Class C--Based on net assets of $31,089,950 and 6,706,834
shares outstanding $ 4.64
============
Class D--Based on net assets of $43,858,244 and 9,118,197
shares outstanding $ 4.81
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended March 31, 1996
<S> <S> <C> <C>
Investment Interest and discount earned $ 6,305,688
Income Dividends (net of $13,009 foreign withholding tax) 790,302
(Notes 1d & 1e): ------------
Total income 7,095,990
------------
Expenses: Investment advisory fees (Note 2) 10,196,193
Account maintenance and distribution fees--Class B (Note 2) 6,638,132
Transfer agent fees--Class B (Note 2) 1,665,727
Transfer agent fees--Class A (Note 2) 595,584
Account maintenance and distribution fees--Class C (Note 2) 328,158
Printing and shareholder reports 326,265
Custodian fees 264,644
Accounting services (Note 2) 198,451
Registration fees (Note 1f) 146,176
Account maintenance fees--Class D (Note 2) 111,299
Transfer agent fees--Class D (Note 2) 94,795
Transfer agent fees--Class C (Note 2) 86,765
Professional fees 72,304
Amortization of organization expenses (Note 1f) 25,326
Directors' fees and expenses 20,542
Pricing fees 198
Other 25,002
------------
Total expenses 20,795,561
------------
Investment loss--net (13,699,571)
------------
<PAGE>
Realized & Realized gain from:
Unrealized Gain Investments--net $ 75,358,732
(Loss) on Foreign currency transactions--net 9,233,227 84,591,959
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (30,055,810)
(Notes 1b, 1c, Foreign currency transactions--net 7,633,796 (22,422,014)
1e & 3): ------------ ------------
Net Increase in Net Assets Resulting from Operations $ 48,470,374
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income (loss)--net $(13,699,571) $ 1,661,432
Realized gain on investments and foreign currency
transactions--net 84,591,959 870,828
Change in unrealized depreciation on investments and foreign
currency transactions--net (22,422,014) (29,622,966)
------------ ------------
Net increase (decrease) in net assets resulting from operations 48,470,374 (27,090,706)
------------ ------------
Dividends & Investment income--net:
Distributions to Class A -- (1,262,702)
Shareholders Class B -- (287,745)
(Note 1g): Class C -- (41,855)
Class D -- (69,130)
In excess of investment income--net:
Class A -- (280,276)
Class B -- (63,869)
Class C -- (9,290)
Class D -- (15,345)
Realized gain on investments--net:
Class A (8,279,075) (2,232,025)
Class B (20,434,367) (4,866,620)
Class C (1,128,078) (81,670)
Class D (1,437,377) (110,609)
In excess of realized gain on investments--net:
Class A (7,115,288) (16,321,125)
Class B (17,561,916) (35,585,943)
Class C (969,506) (597,190)
Class D (1,235,326) (808,804)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (58,160,933) (62,634,198)
------------ ------------
<PAGE>
Capital Share Net increase (decrease) in net assets derived from capital
Transactions shares transactions (39,662,007) 615,613,902
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets (49,352,566) 525,888,998
Beginning of year 925,028,519 399,139,521
------------ ------------
End of year $875,675,953 $925,028,519
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A**
For the
The following per share data and ratios have been derived Period
from information provided in the financial statements. For the Year April 27, 1992++
Ended March 31, to March 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.89 $ 5.17 $ 5.08 $ 3.83
Operating -------- -------- -------- --------
Performance: Investment income (loss)--net (.03) .05 (.01) --
Realized and unrealized gain on investments and
foreign currency transactions--net .28 .11 1.51 1.59
-------- -------- -------- --------
Total from investment operations .25 .16 1.50 1.59
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- (.02) -- --
In excess of investment income--net -- (.01) -- --
Realized gain on investments--net (.17) (.05) (1.41) (.34)
In excess of realized gain on investments--net (.15) (.36) -- --
-------- -------- -------- --------
Total dividends and distributions (.32) (.44) (1.41) (.34)
-------- -------- -------- --------
Net asset value, end of period $ 4.82 $ 4.89 $ 5.17 $ 5.08
======== ======== ======== ========
Total Investment Based on net asset value per share 5.15% 2.86% 35.68% 42.09%+++
Return:*** ======== ======== ======== ========
<PAGE>
Ratios to Average Expenses 1.31% 1.33% 1.35% 1.59%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net (.62%) .87% (.11%) .04%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $246,909 $254,188 $174,809 $100,830
Data: ======== ======== ======== ========
Portfolio turnover 108.36% 175.57% 350.64% 482.79%
======== ======== ======== ========
Average commission rate paid $ .0366 -- -- --
======== ======== ======== ========
<CAPTION>
Class B**
For the
The following per share data and ratios have been derived Period
from information provided in the financial statements. For the Year April 27, 1992++
Ended March 31, to March 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.78 $ 5.08 $ 5.03 $ 3.83
Operating -------- -------- -------- --------
Performance: Investment loss--net (.09) (.01) (.05) (.04)
Realized and unrealized gain on investments and
foreign currency transactions--net .29 .11 1.48 1.58
-------- -------- -------- --------
Total from investment operations .20 .10 1.43 1.54
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- --++++ -- --
In excess of investment income--net -- --++++ -- --
Realized gain on investments--net (.17) (.05) (1.38) (.34)
In excess of realized gain on investments--net (.15) (.35) -- --
-------- -------- -------- --------
Total dividends and distributions (.32) (.40) (1.38) (.34)
-------- -------- -------- --------
Net asset value, end of period $ 4.66 $ 4.78 $ 5.08 $ 5.03
======== ======== ======== ========
Total Investment Based on net asset value per share 4.21% 1.78% 34.22% 40.77%+++
Return:*** ======== ======== ======== ========
Ratios to Average Expenses 2.34% 2.38% 2.36% 2.53%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net (1.65%) (.10%) (1.08%) .93%*
======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $553,819 $614,935 $224,330 $ 57,592
Data: ======== ======== ======== ========
Portfolio turnover 108.36% 175.57% 350.64% 482.79%
======== ======== ======== ========
Average commission rate paid $ .0366 -- -- --
======== ======== ======== ========
<CAPTION>
Class C** Class D**
For the For the
Period Period
The following per share data and ratios have been derived For the Oct. 21, For the Oct. 21,
from information provided in the financial statements Year Ended 1994++ to Year Ended 1994++ to
March 31, March 31, March 31, March 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.76 $ 5.75 $ 4.89 $ 5.88
Operating -------- -------- -------- --------
Performance: Investment loss--net (.09) -- (.05) (.02)
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .29 (.62) .29 (.60)
-------- -------- -------- --------
Total from investment operations .20 (.62) .24 (.62)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- (.02) -- (.02)
In excess of investment income--net -- (.01) -- (.01)
Realized gain on investments--net (.17) (.04) (.17) (.04)
In excess of realized gain on investments--net (.15) (.30) (.15) (.30)
-------- -------- -------- --------
Total dividends and distributions (.32) (.37) (.32) (.37)
-------- -------- -------- --------
Net asset value, end of period $ 4.64 $ 4.76 $ 4.81 $ 4.89
======== ======== ======== ========
Total Investment Based on net asset value per share 4.22% (11.11%)+++ 4.94% (10.76%)+++
Return:*** ======== ======== ======== ========
Ratios to Average Expenses 2.36% 2.59%* 1.56% 1.80%*
Net Assets: ======== ======== ======== ========
Investment loss--net (1.69%) (.02%)* (.89%) (.81%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 31,090 $ 23,259 $ 43,858 $ 32,646
Data: ======== ======== ======== ========
Portfolio turnover 108.36% 175.57% 108.36% 175.57%
======== ======== ======== ========
Average commission rate paid $ .0366 -- $ .0366 --
======== ======== ======== ========
<PAGE>
<FN>
*Annualized.
**Based on average shares outstanding during the period.
***Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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 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 are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. 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.
<PAGE>
(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
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 call and
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. Premium or discount is amortized over the life of the
contracts.
<PAGE>
* Foreign currency options and futures--The Company may also
purchase or sell listed or over-the-counter foreign currency
options, foreign currency futures and related options on foreign
currency futures as a short or long hedge against possible
variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-US dollar denominated
securities owned by the Company, sold by the Company but not yet
delivered, or committed or anticipated to be purchased by the
Company.
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is the Company's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the
exdividend date, except if the ex-dividend date has passed, certain
dividends from foreign securities are recorded as soon as the
Company is informed of 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 five-year period. 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 net investment income and realized
capital gains are due primarily to differing tax treatments for
futures transactions and post-October losses.
<PAGE>
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial reporting and tax
purposes. Accordingly, current year's permanent book/tax differences
of $368,780 have been reclassified from undistributed net investment
income to paid-in capital in excess of par. 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 also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Company's portfolio
and provides the administrative services necessary for the operation
of the Company. As compensation for its services to the Company,
MLAM receives monthly compensation at the annual rate of 1.0% of the
average daily net assets of the Company. Certain states in which
shares of the Company are qualified for sale impose limitations on
the expenses of the Company. The most restrictive annual expense
limitation requires that MLAM reimburse the Company to the extent
that expenses (excluding interest, taxes, distribution fees,
brokerage fees and commissions, and extraordinary items) exceed 2.5%
of the Company's first $30 million of average daily net assets, 2.0%
of the Company's next $70 million of average daily net assets, and
1.5% of the average daily net assets in excess thereof. MLAM's
obligation to reimburse the Company is limited to the amount of the
investment advisory fee. No fee payment will be made to MLAM during
any fiscal year which will cause such expenses to exceed the most
restrictive expense limitation applicable at the time of such
payment.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Company, pursuant to 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:
<PAGE>
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 Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Company. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
NOTES TO FINANCIAL STATEMENTS (concluded)
For the year ended March 31, 1996, 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 $ 6,404 $ 83,635
Class D $22,873 $357,623
For the year ended March 31, 1996, MLPF&S received contingent
deferred sales charges of $2,839,725 and $56,334 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $10,605 in commissions on the execution
of portfolio security transactions for the year ended March 31,
1996.
For the year ended March 31, 1996, the Company paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $137 for security
price quotations to compute the net asset value of the Company.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Company's transfer agent.
Accounting services are provided to the Company by MLAM at cost.
<PAGE>
Certain officers and/or directors of the Company are officers and/or
directors of MLAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended March 31, 1996 were $1,099,230,553 and
$992,526,999, respectively.
Net realized and unrealized gains (losses) as of March 31, 1996 were
as follows:
Realized Unrealized
Gains Losses
Long-term investments $ 75,358,038 $(28,016,029)
Short-term investments 694 --
Foreign currency transactions (20,637) (1)
Forward foreign exchange contracts 9,253,864 --
------------ ------------
Total $ 84,591,959 $(28,016,030)
============ ============
As of March 31, 1996, net unrealized depreciation for Federal income
tax purposes aggregated $28,432,931, of which $120,564,312 related
to appreciated securities and $148,997,243 related to depreciated
securities. The aggregate cost of investments at March 31, 1996 for
Federal income tax purposes was $902,126,800.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $(39,662,007) and $615,613,902 for the years ended
March 31, 1996 and March 31, 1995, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended March 31, 1996 Shares Amount
Shares sold 14,643,437 $ 80,491,145
Shares issued to shareholders
in reinvestment of distributions 2,916,570 13,999,534
------------ ------------
Total issued 17,560,007 94,490,679
Shares redeemed (18,367,105) (101,763,387)
------------ ------------
Net decrease (807,098) $ (7,272,708)
============ ============
<PAGE>
Class A Shares for the Year Dollar
Ended March 31, 1995 Shares Amount
Shares sold 31,862,508 $ 174,435,046
Shares issued to shareholders
in reinvestment of dividends and
distributions 3,494,000 17,829,324
------------ -------------
Total issued 35,356,508 192,264,370
Shares redeemed (17,158,170) (92,814,537)
------------ ------------
Net increase 18,198,338 $ 99,449,833
============ =============
Class B Shares for the Year Dollar
Ended March 31, 1996 Shares Amount
Shares sold 44,533,673 $ 247,425,471
Shares issued to shareholders
in reinvestment of distributions 7,345,183 34,155,100
------------ -------------
Total issued 51,878,856 281,580,571
Shares redeemed (60,499,212) (331,236,048)
Automatic conversion of shares (1,154,117) (6,053,728)
------------ -------------
Net decrease (9,774,473) $ (55,709,205)
============ =============
Class B Shares for the Year Dollar
Ended March 31, 1995 Shares Amount
Shares sold 110,181,775 $ 589,755,859
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,328,692 36,567,423
------------ -------------
Total issued 117,510,467 626,323,282
Shares redeemed (31,692,920) (163,195,508)
Automatic conversion
of shares (1,346,902) (7,153,389)
------------ -------------
Net increase 84,470,645 $ 455,974,385
============ =============
<PAGE>
Class C Shares for the Year Dollar
Ended March 31, 1996 Shares Amount
Shares sold 4,886,598 $ 26,661,560
Shares issued to shareholders
in reinvestment of distributions 393,754 1,823,084
------------ -------------
Total issued 5,280,352 28,484,644
Shares redeemed (3,459,920) (18,347,380)
------------ -------------
Net increase 1,820,432 $ 10,137,264
============ =============
Class C Shares for the Period Dollar
October 21, 1994++ to March 31, 1995 Shares Amount
Shares sold 5,309,942 $ 27,166,187
Shares issued to shareholders
in reinvestment of dividends and
distributions 128,715 635,854
------------ -------------
Total issued 5,438,657 27,802,041
Shares redeemed (552,255) (2,727,441)
------------ -------------
Net increase 4,886,402 $ 25,074,600
============ =============
[FN]
++Commencement of Operations.
Class D Shares for the Year Dollar
Ended March 31, 1996 Shares Amount
Shares sold 11,068,175 $ 62,166,617
Automatic conversion of shares 1,119,350 6,053,728
Shares issued to shareholders 499,971 2,394,860
------------ ------------
Total issued 12,687,496 70,615,205
Shares redeemed (10,248,895) (57,432,563)
------------ ------------
Net increase 2,438,601 $ 13,182,642
============ ============
<PAGE>
Class D Shares for the Period Dollar
October 21, 1994++ to March 31, 1995 Shares Amount
Shares sold 8,332,225 $ 43,660,136
Automatic conversion of shares 1,316,991 7,153,389
Shares issued to shareholders
in reinvestment of dividends and
distributions 174,684 883,900
------------ ------------
Total issued 9,823,900 51,697,425
Shares redeemed (3,144,304) (16,582,341)
------------ ------------
Net increase 6,679,596 $ 35,115,084
============ ============
[FN]
++Commencement of Operations.
<AUDIT-REPORT>
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, 1996, 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 three-year period
then ended and for the period April 27, 1992 (commencement of
operations) to March 31, 1993. 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, 1996 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.
<PAGE>
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, 1996, 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 1, 1996
</AUDIT-REPORT>
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions
paid by Merrill Lynch Technology Fund, Inc. during its taxable year
ended March 31, 1996:
<CAPTION>
Domestic Interest From Domestic Total
Record Payable Qualifying Federal Non-Qualifying Ordinary
Date Date Ordinary Income Obligations Ordinary Income Income
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 12/15/95 12/26/95 $.003929 $.002504 $.313939 $.320372
Class B Shares 12/15/95 12/26/95 $.003929 $.002504 $.313939 $.320372
Class C Shares: 12/15/95 12/26/95 $.003929 $.002504 $.313939 $.320372
Class D Shares: 12/15/95 12/26/95 $.003929 $.002504 $.313939 $.320372
</TABLE>
The qualifying domestic ordinary income qualifies for the dividends
received deduction for corporations.
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt
from state income tax.
Listed below are the percentages of total assets of the Company
invested in Federal obligations as of the end of each quarter of the
fiscal year:
<PAGE>
For the Percentage of
Quarter Ended Federal Obligations*
June 30, 1995 0.00%
September 30, 1995 3.88%
December 31, 1995 0.00%
March 31, 1996 0.00%
Please retain this information for your records.
[FN]
*For purposes of this calculation, Federal obligations include US
Treasury Notes, US Treasury Bills, and US Treasury Bonds. Also
included are obligations issued by the following agencies: Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Land Banks,
Federal Home Loan Banks, and the Student Loan Marketing Association.
Repurchase agreements are not included in this calculation.
PORTFOLIO CHANGES (unaudited)
For the Quarter Ended March 31, 1996
Additions
Adaptec, Inc.
Altera Corporation
Analog Devices, Inc.
Baan Company, N.V.
C-Cube Microsystems, Inc.
Cascade Communications Corp.
Computer Associates International, Inc.
Gandalf Technologies, Inc.
*Integrated Device Technology, Inc.
Intel Corporation
Linear Technology Corporation
Micron Technology, Inc.
Microsoft Corporation
Oak Technology, Inc.
Oracle Corporation
Pairgain Technologies, Inc.
US West Media Group
Xilinx, Inc.
<PAGE>
Deletions
Bay Networks Inc.
Bolt Beranek and Newman, Inc.
Cirrus Logic, Inc.
FTP Software, Inc.
*Integrated Device Technology, Inc.
MRS Technology Inc.
Novell, Inc.
SMK Corp.
Tamura Corp.
Tokin Corp.
Ushio Inc.
[FN]
*Added and deleted in the same quarter.
