MERRILL LYNCH
TECHNOLOGY
FUND, INC.
FUND LOGO
Semi-Annual Report
September 30, 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
Printed on post-consumer recycled paper
MERRILL LYNCH TECHNOLOGY FUND, INC.
Worldwide
Investments
As of 9/30/96
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Informix Corporation 9.4%
Computer Associates International, Inc. 8.0
Creative Technology Ltd. 6.2
Acclaim Entertainment, Inc. 6.0
C-Cube Microsystems, Inc. 6.0
BMC Software, Inc. 5.6
Seagate Technology, Inc. 5.0
Cascade Communications Corp. 4.9
Sun Microsystems, Inc. 4.9
Electronic Arts, Inc. 4.9
Ten Largest Industries Percent of
Represented in the Portfolio Net Assets
Systems Software 13.7%
Application Development Software 13.3
Microcomputer Peripherals 11.2
Semiconductors--Logic 11.0
Educational/Entertainment Software 10.9
Communications Equipment 9.8
Internetworking 7.1
Internet Software 6.1
Computer Systems 4.9
Semiconductors--Microprocessors 4.6
<PAGE>
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
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. made money in the September
quarter. For the three months ended September 30, 1996, total
returns for Class A, Class B, Class C and Class D Shares were
+11.41%, +10.97%, +11.26% and +11.23%, respectively. The Fund held
26 stocks and was fully invested at the end of September.
In May we increased the Fund's cash position to 30% of net assets,
and then in early June to 52%. Technology stocks subsequently
declined dramatically in June and July. In our shareholder report
for the quarter ended June 30, 1996, we said that we had begun to
reinvest the Fund's cash position aggressively. As a result of this
action, the Fund had a positive swing in performance of nearly 24%
from the trough on July 23 to September quarter-end.
<PAGE>
Investors in technology stocks appear apprehensive given the
volatility in stock prices from one day to the next, which presents
us with an investment opportunity. While we are now seeing some
profit-taking after a sharp appreciation in stock prices, we intend
to concentrate our investments in companies whose businesses at the
margin are improving or are expected to be improving in the next
three months-six months. For example, business at the margin has
been better-than-anticipated for personal computer companies and
some of their suppliers as they prepare for a strong fourth quarter.
Although this should now be well-known, there remains uncertainty
about actual retail demand. In terms of corporate demand,
spending on database software and systems software remains very good
and, for specific companies, is expected to get better. Demand for
specific data communications equipment could be accelerating as
well. We prefer not to make generalizations on the technology sector
but to stay focused on specific opportunities, stock by stock.
Portfolio Matters
We hold large positions in several companies including Informix
Corporation, Computer Associates International, Inc., C-Cube
Microsystems, Inc. and Creative Technology Ltd.
Informix Corporation, at 9.4% of net assets, is a leading supplier
of database management software and development tools. The company
recently reported results for its third fiscal quarter ended
September 30, 1996, which was generally expected to be the turning
point in its recent acquisition of Illustra Corporation. Informix
reported revenue growth of 30% compared to the prior year's third
quarter, while earnings per share were essentially flat at $0.17 as
compared to $0.16 last year. However, the company announced it had
shipped initial test versions of its Universal Server, a significant
milestone in integrating Illustra's technology with that of
Informix.
Computer Associates International, Inc., at 8.0% of net assets, is a
leading supplier of systems management software. Computer Associates
reported results for its second fiscal quarter ended September 30,
1996 which were ahead of "street" expectations. Total revenue of
$990 million increased 22% year-over-year, and earnings per share
were $0.59 as compared to $0.45 (excluding acquisition charges) a
year ago. Once again, the company's flagship product, Unicenter,
continued to drive Computer Associates' revenue growth (up 66% year-
over-year). With its introduction on Microsoft's Windows NT
computing platforms, Computer Associates should continue to dominate
the systems management software market.
C-Cube Microsystems, Inc., at 6.0% of net assets, is the dominant
supplier of semiconductors for the digital video market. C-Cube
recently reported results for its third quarter (ended September 30,
1996) which exceeded expectations. Revenues were $83 million, a gain
of 135% as compared to the third quarter of last year. Earnings per
share (excluding acquisition charges) were $0.41 as compared to
$0.24 last year. During the quarter, C-Cube acquired Divicom, one of
their customers and a leading integrator of digital video solutions.
Given the explosive growth potential of digital video disks, direct
broadcast satellite TV and digital cable TV, we believe C-Cube's
markets will provide extraordinary growth potential.
<PAGE>
Creative Technology Ltd., at 6.2% of net assets, is the leading
supplier of audio and multimedia solutions for the personal computer
market. The company has been restructuring its operations and
management team during the last several months. Despite significant
restructuring charges in the company's fourth fiscal quarter (ended
June 30, 1996), Creative Technology's balance sheet improved
significantly. The company announced it would stop manufacturing CD-
ROM drives (the reason for significant losses) and focus on its
profitable core audio business (51% of total revenues), whose
revenues increased 49% year-over-year to $662 million. Creative also
has consolidated its management team and strategy under its founder,
Sim Wong Hoo. We expect that a renewed emphasis on the company's
core audio technology, plus an aggressive cost control program, will
create a profitable fiscal 1997.
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
October 31, 1996
PORTFOLIO CHANGES
<PAGE>
For the Quarter Ended September 30, 1996
Additions
Aware Inc.
BMC Software, Inc.
Cascade Communications Corp.
Cirrus Logic, Inc.
cisco Systems, Inc.
Dell Computer Corp.
E* TRADE Group, Inc.
Forte Software, Inc.
Intel Corporation
Interlink Computer Sciences, Inc.
*Microsoft Corporation
National Semiconductor Corporation
PairGain Technologies, Inc.
*Peerless Systems Corp.
Seagate Technology, Inc.
Sun Microsystems, Inc.
*Xilinx, Inc.
Deletions
Gandalf Technologies, Inc.
*Microsoft Corporation
Oak Technology, Inc.
*Peerless Systems Corp.
*Xilinx, Inc.
[FN]
*Added and deleted in the same quarter.
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 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. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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--9/30/96 5.20 5.37 -- -- + 3.27
------ ------
Total $0.002 Total $2.510
Cumulative total return as of 9/30/96: +132.30%**
<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**
<S> <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--9/30/96 5.04 5.16 -- -- + 2.38
------ ------
Total $0.002 Total $2.436
Cumulative total return as of 9/30/96: +121.89%**
<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**
<S> <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--9/30/96 5.02 5.14 -- -- +2.39
------
Total $0.684
Cumulative total return as of 9/30/96: +2.63%**
<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>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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--9/30/96 5.19 5.35 -- -- +3.08
------
Total $0.690
Cumulative total return as of 9/30/96: +4.17%**
<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>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 9/30/96 -14.63% -19.11%
Inception (4/27/92) through 9/30/96 +20.97 +19.51
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 9/30/96 -15.54% -18.72%
Inception (4/27/92) through 9/30/96 +19.72 +19.72
[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>
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 9/30/96 -15.45% -16.25%
Inception (10/21/94) through 9/30/96 + 1.34 + 1.34
[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 9/30/96 -14.81% -19.28%
Inception (10/21/94) through 9/30/96 + 2.12 - 0.67
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
9/30/96 6/30/96 9/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $5.37 $4.82 $6.71 -19.97% +11.41%
Class B Shares 5.16 4.65 6.53 -20.98 +10.97
Class C Shares 5.14 4.62 6.50 -20.92 +11.26
Class D Shares 5.35 4.81 6.70 -20.15 +11.23
Class A Shares--Total Return -14.63(1) +11.41
Class B Shares--Total Return -15.54(1) +10.97
Class C Shares--Total Return -15.45(1) +11.26
Class D Shares--Total Return -14.81(1) +11.23
<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>
United Application 140,000 ++Forte Software, Inc. $ 4,595,625 $ 5,460,000 0.7%
States Development 2,788,000 ++Informix Corporation 57,048,504 77,715,500 9.4
Software 620,000 ++Oracle Corporation 21,594,835 26,350,000 3.2
------------ ------------ ------
83,238,964 109,525,500 13.3
Communications 500,000 ++Cascade Communications Corp. 33,466,043 40,687,500 4.9
Equipment 510,000 ++PairGain Technologies, Inc. 34,542,704 39,907,500 4.9
------------ ------------ ------
68,008,747 80,595,000 9.8
Computer Systems 650,000 ++Sun Microsystems, Inc. 35,314,630 40,300,000 4.9
Educational/ 6,480,000 ++Acclaim Entertainment, Inc.++++ 103,211,387 49,410,000 6.0
Entertainment 1,078,900 ++Electronic Arts, Inc. 38,161,872 40,189,025 4.9
Software ------------ ------------ -----
141,373,259 89,599,025 10.9
Internet Software 695,000 ++Cybercash, Inc. 36,437,228 21,197,500 2.6
75,000 ++E* TRADE Group, Inc. 787,500 984,375 0.1
45,000 ++Infonautics, Inc. (Class A) 630,000 191,250 0.0
600,000 ++Netscape Communications Corp. 36,563,777 27,750,000 3.4
------------ ------------ ------
74,418,505 50,123,125 6.1
Internetworking 640,000 ++cisco Systems, Inc. 32,016,208 39,680,000 4.8
460,400 ++FORE Systems, Inc. 14,476,296 19,049,050 2.3
------------ ------------ ------
46,492,504 58,729,050 7.1
Microcomputer 8,833,850 ++Creative Technology Ltd. ++++(a) 122,956,667 50,794,638 6.2
Peripherals 739,300 ++Seagate Technology, Inc. 36,723,082 41,308,388 5.0
------------ ------------ ------
159,679,749 92,103,026 11.2
Microcomputers 429,400 ++Dell Computer Corp. 22,666,137 33,332,175 4.1
Photography 502,300 Polaroid Corporation 22,067,599 22,101,200 2.7
Semiconductors-- 195,000 ++Aware, Inc. 2,325,001 3,266,250 0.4
Logic 1,115,000 ++C-Cube Microsystems, Inc. 59,092,061 49,338,750 6.0
190,300 ++Cirrus Logic, Inc. 3,244,425 3,972,512 0.5
1,660,500 ++National Semiconductor Corporation 34,980,027 33,417,563 4.1
------------ ------------ ------
99,641,514 89,995,075 11.0
<PAGE>
Semiconductors-- 400,000 Intel Corporation 29,644,440 38,150,000 4.6
Microprocessors
Systems Software 575,000 ++BMC Software, Inc. 33,765,630 45,712,500 5.6
1,093,150 Computer Associates International,
Inc. 54,401,098 65,315,712 8.0
115,700 ++Interlink Computer Sciences, Inc. 1,157,000 997,913 0.1
------------ ------------ ------
89,323,728 112,026,125 13.7
Total Investments in Stocks 871,869,776 816,579,301 99.4
Total Investments $871,869,776 816,579,301 99.4
============
Other Assets Less Liabilities 5,153,906 0.6
------------ ------
Net Assets $821,733,207 100.0%
============ ======
<FN>
(a)Shares of Creative Technology Ltd. (Singapore Holdings) were
combined with the US holdings of Creative Technology Ltd.
++Non-income producing security.
++++Investments 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) are as follows:
Net Share Net Dividend
Industry Affiliate Activity Cost Income
Educational/ Acclaim
Entertainment Entertainment,
Software Inc. -- -- --
Microcomputer Creative
Peripherals Technology Ltd. 727,150 $9,807,063 --
Total $9,807,063
==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of September 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$871,869,776)(Note 1a) $816,579,301
Foreign cash (Note 1c) 30
Receivables:
Securities sold $ 38,603,625
Capital shares sold 1,080,060 39,683,685
------------
Deferred organization expenses (Note 1f) 27,437
Prepaid registration fees and other assets (Note 1f) 32,149
------------
Total assets 856,322,602
------------
Liabilities: Payables:
Securities purchased 27,842,677
Capital shares redeemed 3,422,386
Investment adviser (Note 2) 667,533
Distributor (Note 2) 440,637 32,373,233
------------
Accrued expenses and other liabilities 2,216,162
------------
Total liabilities 34,589,395
------------
Net Assets: Net assets $821,733,207
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 4,626,383
Class B Shares of Common Stock, $0.10 par value, 300,000,000
shares authorized 9,733,731
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 545,767
Class D Shares of Common Stock, $0.10 par value, 300,000,000
shares authorized 792,991
Paid-in capital in excess of par 789,699,714
Accumulated investment loss--net (4,431,414)
Undistributed realized capital gains on investments and foreign
currency transactions--net 102,938,549
Accumulated distributions in excess of realized capital gains on
investments and foreign currency transactions--net (Note 1g) (26,882,036)
Unrealized depreciation on investments and foreign currency
transactions--net (55,290,478)
------------
Net assets $821,733,207
============
<PAGE>
Net Asset Class A--Based on net assets of $248,576,338 and 46,263,834
Value: shares outstanding $ 5.37
============
Class B--Based on net assets of $502,690,452 and 97,337,312
shares outstanding $ 5.16
============
Class C--Based on net assets of $28,031,331 and 5,457,665
shares outstanding $ 5.14
============
Class D--Based on net assets of $42,435,086 and 7,929,908
shares outstanding $ 5.35
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended September 30, 1996
<S> <S> <C>
Investment Interest and discount earned $ 3,879,525
Income Dividends 295,887
(Notes 1d & 1e): ------------
Total income 4,175,412
------------
Expenses: Investment advisory fees (Note 2) 4,208,779
Account maintenance and distribution fees--Class B (Note 2) 2,627,771
Transfer agent fees--Class B (Note 2) 815,646
Transfer agent fees--Class A (Note 2) 328,213
Account maintenance and distribution fees--Class C (Note 2) 146,567
Accounting services (Note 2) 91,340
Printing and shareholder reports 82,582
Registration fees (Note 1f) 64,965
Transfer agent fees--Class D (Note 2) 56,737
Account maintenance fees--Class D (Note 2) 52,856
Transfer agent fees--Class C (Note 2) 48,495
Professional fees 29,507
Custodian fees 23,271
Directors' fees and expenses 20,406
Pricing fees 134
Other 9,557
------------
Total expenses 8,606,826
------------
Investment loss--net (4,431,414)
------------
<PAGE>
Realized & Realized gain on investments--net 117,006,898
Unrealized Gain Change in unrealized appreciation/depreciation on:
(Loss) on Investments--net $(27,274,446)
Investments & Foreign currency transactions--net (2) (27,274,448)
Foreign Currency ------------ ------------
Transactions--Net Net Increase in Net Assets Resulting from Operations $ 85,301,036
(Notes 1b, 1c, ============
1e & 3):
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Sept. 30, 1996 Mar. 31, 1996
<S> <S> <C> <C>
Operations: Investment loss--net $ (4,431,414) $(13,699,571)
Realized gain on investments and foreign currency
transactions--net 117,006,898 84,591,959
Change in unrealized depreciation on investments and
foreign currency transactions--net (27,274,448) (22,422,014)
------------ ------------
Net increase in net assets resulting from operations 85,301,036 48,470,374
------------ ------------
Distributions to Realized gain on investments--net:
Shareholders Class A -- (8,279,075)
(Note 1g): Class B -- (20,434,367)
Class C -- (1,128,078)
Class D -- (1,437,377)
In excess of realized gain on investments--net:
Class A -- (7,115,288)
Class B -- (17,561,916)
Class C -- (969,506)
Class D -- (1,235,326)
------------ ------------
Net decrease in net assets resulting from distributions to
shareholders -- (58,160,933)
------------ ------------
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (139,243,782) (39,662,007)
(Note 4): ------------ ------------
<PAGE>
Net Assets: Total decrease in net assets (53,942,746) (49,352,566)
Beginning of period 875,675,953 925,028,519
------------ ------------
End of period $821,733,207 $875,675,953
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A**
For the
The following per share data and ratios have For the Period
been derived from information provided in the Six Months April 27,
financial statements. Ended For the Year 1992++ to
Sept. 30, Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1996 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.82 $ 4.89 $ 5.17 $ 5.08 $ 3.83
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.01) (.03) .05 (.01) --
Realized and unrealized gain on investments
and foreign currency
transactions--net .56 .28 .11 1.51 1.59
-------- -------- -------- -------- --------
Total from investment operations .55 .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 $ 5.37 $ 4.82 $ 4.89 $ 5.17 $ 5.08
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 11.41%+++ 5.15% 2.86% 35.68% 42.09%+++
Return:*** ======== ======== ======== ======== ========
Ratios to Expenses 1.34%* 1.31% 1.33% 1.35% 1.59%*
Average ======== ======== ======== ======== ========
Net Assets: Investment income (loss)--net (.35%)* (.62%) .87% (.11%) .04%*
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $248,576 $246,909 $254,188 $174,809 $100,830
Data: ======== ======== ======== ======== ========
Portfolio turnover 84.76% 108.36% 175.57% 350.64% 482.79%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0622 $ .0366 -- -- --
======== ======== ======== ======== ========
<CAPTION>
Class B**
For the
The following per share data and ratios have For the Period
been derived from information provided in the Six Months April 27,
financial statements. Ended For the Year 1992++ to
Sept. 30, Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1996 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.66 $ 4.78 $ 5.08 $ 5.03 $ 3.83
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net (.03) (.09) (.01) (.05) (.04)
Realized and unrealized gain on investments
and foreign currency transactions--net .53 .29 .11 1.48 1.58
-------- -------- -------- -------- --------
Total from investment operations .50 .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 $ 5.16 $ 4.66 $ 4.78 $ 5.08 $ 5.03
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 10.73%+++ 4.21% 1.78% 34.22% 40.77%+++
Return:*** ======== ======== ======== ======== ========
Ratios to Expenses 2.39%* 2.34% 2.38% 2.36% 2.53%*
Average ======== ======== ======== ======== ========
Net Assets: Investment income (loss)--net (1.39%)* (1.65%) (.10%) (1.08%) .93%*
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $502,691 $553,819 $614,935 $224,330 $ 57,592
Data: ======== ======== ======== ======== ========
Portfolio turnover 84.76% 108.36% 175.57% 350.64% 482.79%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0622 $ .0366 -- -- --
======== ======== ======== ======== ========
<FN>
*Annualized.
**Based on average shares outstanding during the
period.
***Total investment returns exclude the effect
of sales loads.
++Commencement of Operations.
++++Amount is less than $.01 per share.
++++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission
rate per share for purchases and sales of equity
securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been
converted into US dollars using the prevailing exchange
rate on the date of the transaction. Such conversion
may materially affect the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C** Class D**
For the For the For the For the
The following per share data and ratios Six For the Period Six For the Period
have been derivedfrom information Months Year Oct. 21, Months Year Oct. 21,
provided in the financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
Sept. 30, March 31, March 31, Sept. 30, March 31, March 31,
Increase (Decrease) in Net Asset Value: 1996 1996 1995 1996 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 4.64 $ 4.76 $ 5.75 $ 4.81 $ 4.89 $ 5.88
Operating -------- -------- -------- -------- -------- --------
Performance: Investment loss--net (.03) (.09) -- (.02) (.05) (.02)
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .53 .29 (.62) .56 .29 (.60)
-------- -------- -------- -------- -------- --------
Total from investment operations .50 .20 (.62) .54 .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 $ 5.14 $ 4.64 $ 4.76 $ 5.35 $ 4.81 $ 4.89
======== ======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 10.78%+++ 4.22% (11.11%)+++ 11.23%+++ 4.94% (10.76%)+++
Return:*** ======== ======== ======== ======== ======== ========
Ratios to Expenses 2.41%* 2.36% 2.59%* 1.59%* 1.56% 1.80%*
Average ======== ======== ======== ======== ======== ========
Net Assets: Investment loss--net (1.42%)* (1.69%) (.02%)* (.61%)* (.89%) (.81%)*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 28,031 $ 31,090 $ 23,259 $ 42,435 $ 43,858 $ 32,646
======== ======== ======== ======== ======== ========
Portfolio turnover 84.76% 108.36% 175.57% 84.76% 108.36% 175.57%
======== ======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0622 $ .0366 -- $ .0622 $ .0366 --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Based on average shares outstanding during the
period.
***Total investment returns exclude the effect
of sales loads.
++Commencement of Operations.
++++Amount is less than $.01 per share.
++++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per
share for purchases and sales of equity securities. The
"Average Commission Rate Paid" includes commissions paid in
foreign currencies, which have been converted into US dollars
using the prevailing exchange rate on the date of the transaction.
Such conversion may materially affect the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
<PAGE>
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. These unaudited financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. 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.
(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.
<PAGE>
*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.
*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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
(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 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 realized capital gains are due
primarily to differing tax treatments for futures transactions and
post-October losses.
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.
<PAGE>
MLAM is responsible for the management of the Company's port-folio
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 (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:
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.
For the six months ended September 30, 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 $1,103 $14,786
Class D $3,815 $65,329
For the six months ended September 30, 1996, MLPF&S received
contingent deferred sales charges of $1,199,814 and $12,088 relating
to transactions in Class B and Class C Shares, respectively.
<PAGE>
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.
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 six months ended September 30, 1996 were $599,015,830 and
$741,243,111, respectively.
Net realized and unrealized gains (losses) as of September 30, 1996
were as follows:
Realized Unrealized
Gains Losses
Long-term investments $117,004,752 $(55,290,475)
Short-term investments 2,146 --
Foreign currency transactions -- (3)
------------ ------------
Total $117,006,898 $(55,290,478)
============ ============
As of September 30, 1996, net unrealized depreciation for Federal
income tax purposes aggregated $55,290,475, of which $106,640,059
related to appreciated securities and $161,930,534 related to
depreciated securities. The aggregate cost of investments at
September 30, 1996 for Federal income tax purposes was $871,869,776.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $139,243,782 and $39,662,007 for the six months ended September
30, 1996 and the year ended March 31, 1996, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended September 30, 1996 Shares Amount
Shares sold 6,171,227 $ 30,399,580
Shares redeemed (11,097,698) (55,164,267)
------------- -------------
Net decrease (4,926,471) $ (24,764,687)
============= =============
<PAGE>
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)
============= =============
Class B Shares for the Six Months Dollar
Ended September 30, 1996 Shares Amount
Shares sold 11,514,708 $ 54,554,738
Shares redeemed (32,813,455) (156,144,141)
Automatic conversion of shares (191,450) (900,302)
------------- -------------
Net decrease (21,490,197) $(102,489,705)
============= =============
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 C Shares for the Six Months Dollar
Ended September 30, 1996 Shares Amount
<PAGE>
Shares sold 1,097,204 $ 5,193,959
Shares redeemed (2,346,373) (11,160,649)
------------- -------------
Net decrease (1,249,169) $ (5,966,690)
============= =============
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 D Shares for the Six Months Dollar
Ended September 30, 1996 Shares Amount
Shares sold 2,599,092 $ 12,866,763
Automatic conversion of shares 185,153 900,302
------------- -------------
Total issued 2,784,245 13,767,065
Shares redeemed (3,972,534) (19,789,765)
------------- -------------
Net decrease (1,188,289) $ (6,022,700)
============= =============
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
in reinvestment of distributions 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
============= =============
