MERRILL LYNCH
TECHNOLOGY
FUND, INC.
FUND LOGO
Quarterly Report
June 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
MERRILL LYNCH TECHNOLOGY FUND, INC.
Worldwide
Investments
As of 6/30/96
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Informix Corporation 7.7%
Acclaim Entertainment, Inc. 7.7
Creative Technology Ltd.* 6.6
Electronic Arts, Inc. 5.0
Computer Associates International, Inc. 5.0
C-Cube Microsystems, Inc. 3.9
Cybercash, Inc. 3.7
Netscape Communications Corp. 3.3
Polaroid Corporation 2.8
Oracle Corporation. 2.1
[FN]
*Includes holdings in Singapore and the United States.
<PAGE>
Industries Represented Percent of
in the Portfolio Net Assets
Educational/Entertainment Software 12.7%
Application Development Software 9.8
Microcomputer Peripherals 6.6
Systems Software 5.0
Internetworking 4.8
Application Specific Integrated Circuits 4.0
Internet Software 3.3
Photography 2.8
Communications Equipment 0.1
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
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
DEAR SHAREHOLDER
Merrill Lynch Technology Fund, Inc.'s performance was essentially
unchanged for the June quarter. For the three months ended June 30,
1996, total returns for Class A, Class B, Class C and Class D Shares
were 0.00%, -0.21%, -0.43% and 0.00%, respectively. During the
quarter we increased the cash position substantially. At May 30,
1996, cash was increased to 30% of net assets; by quarter-end cash
was 51.5% of net assets. The Fund held 14 stocks at the end of June
compared to 30 at the end of March.
We increased the cash position in the June quarter for a variety of
reasons. Most important, business at the margin appeared to be
deteriorating for many technology companies. The slowdown in North
America had apparently spread to Europe and Japan. It seemed
reasonable to expect selling pressure in the stocks given their
rebound from lows in January and the likelihood of earnings
disappointments. Semiconductor companies, in particular, were
revising their expectations downward, citing more limited order
visibility. Whether this slowdown was simply an inventory correction
or an indicator of weakening personal computer demand seemed
irrelevant in the short term, since we believed investors would sell
in either case. Since most semiconductor companies made only modest
reductions in operating expenses, we expected difficult second
quarter and third quarter results. Semiconductor capital equipment
companies also began to cancel orders to subcontractors and parts
suppliers, and late in the June quarter started announcing order
deferrals and/or cancellations from semiconductor companies.
Computer peripheral companies disclosed slower-than-expected sales,
including a sooner-than-expected slowdown in Europe. Although
problems at a few communications companies could be considered
company-specific, it seemed likely that few of these favorites among
investors would significantly exceed earnings expectations in the
June quarter.
In our discussions with Asian technology companies during a recent
research trip, some of the semiconductor and semiconductor capital
equipment companies drew comparisons between the current state of
the industry and the debacle experienced by the industry in 1984--
1985. Most felt excess capacity could take two years to be absorbed,
with capital spending reductions likely to impact only 1997 results.
Process improvements alone would increase semiconductor wafer output
this year substantially--in two cases by approximately 60%. One
leading equipment company felt orders could be "over the cliff" in
1997. Semiconductor foundry prices also fell sharply. Equally
important, a number of semiconductor and personal computer companies
indicated that personal computer demand was below expectations in
Europe and Japan. In summary, conditions seemed much worse than
expected.
<PAGE>
The question is what do we do now, because technology stocks
declined precipitously from the start of June through most of July.
Many of the negative aspects have been analyzed by investors, and
there have been numerous earnings disappointments. While we are
concerned that many investors do not fully appreciate the amount of
time it could take for semiconductor capacity to be absorbed and
therefore, for earnings to stabilize, there are opportunities for
investment in other areas. We have begun to reinvest our cash
position aggressively, and the Fund currently owns 24 stocks.
Portfolio Matters
One of the Fund's holdings, Informix Corporation, is a leading
supplier of data base management software and development tools for
the client-server computing industry. In early 1996, the company
announced the acquisition of Illustra Corp., the leading supplier of
unstructured data management software such as graphics, video, time-
series and audio. The task faced by Informix in combining the
technologies to form a single product is not small, but the project
remains on schedule for a late 1996 introduction. Such a product
should position the company well ahead of its competitors,
particularly in the high-growth arena of data management on the
Internet.
In the interim, Informix continued to perform well. Results for the
quarter ended June 30, 1996 demonstrated that the company has put
their recent sales management changes behind them. Revenues
increased 30% versus last year's comparable quarter, with North
American sales up by 48%. Earnings per share were $0.02 below
expectations largely because of the company's decision to add
consulting staff. Most important, license revenues increased by 51%,
the highest growth rate in the industry.
Another Fund holding, Computer Associates International, Inc., is
the second-largest company in the software industry. For many years,
the company focused on systems management software for older, legacy
systems of the Fortune 1000 companies. However, in recent years, it
evolved CA-Unicenter, its flagship product line, into the leading
system management product for client-server computing. This
reaccelerated its growth rates to the 25%--30% range for revenues
and earnings. The company recently reported results for its
seasonally slow fiscal quarter ended June 30, 1996, which were ahead
of expectations. Revenues increased 37% compared to same quarter in
1995, and earnings per share increased 39%. The company reported
strength across all platforms, product lines and geographies, and
the demand for Unicenter intensified.
C-Cube Microsystems, Inc. is the leading designer of semiconductors
for the emerging digital video industry. In recent years, demand
exploded worldwide for direct broadcast satellite TV, karaoke
systems and video CD systems. In late 1996, these markets will begin
to be augmented by digital video disks. Each of these products
requires the encoding and decoding of video using one of the two
worldwide standards, MPEG-1 and MPEG-2.
<PAGE>
C-Cube forged ahead to become the leading supplier of semiconductors
for MPEG encoding and decoding. As a result, its revenue and
earnings growth exploded: up 177% and 397%, respectively, in 1995.
This growth continued through the quarter ended June 30, 1996 when
revenues increased 238% year-over-year and earnings per share
increased 225%. Despite expectations of competitive pressures, C-
Cube has not seen any realistic competition, particularly in the
encoder markets where they have approximately 90% share of the
market. Given the outlook for digital video products, C-Cube's near-
term results should continue to be particularly strong.
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 semi-annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(James K. Renck)
James K. Renck
Vice President and Portfolio Manager
July 26, 1996
PORTFOLIO CHANGES
For the Quarter Ended June 30, 1996
Additions
*American Portable Telecom, Inc.
Cybercash, Inc.
Infonautics, Inc.
Netscape Communications Corp.
*Texas Instruments, Inc.
<PAGE>
Deletions
3Com Corporation
Adaptec, Inc.
Altera Corporation
*American Portable Telecom, Inc.
Analog Devices, Inc.
Ascend Communications, Inc.
Baan Company, N.V.
Cascade Communications Corp.
cisco Systems, Inc.
Intel Corporation
LSI Logic Corp.
Linear Technology Corporation
Micron Technology, Inc.
Microsoft Corporation
Pairgain Technologies, Inc.
Peoplesoft Inc.
Stratacom, Inc.
Tellabs, Inc.
*Texas Instruments, Inc.
U S West Media Group
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:
* 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.
<PAGE>
* 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--6/30/96 5.20 4.82 -- -- - 7.31
------ ------
Total $0.002 Total $2.510
Cumulative total return as of 6/30/96:+108.51%**
<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--6/30/96 5.04 4.65 -- -- - 7.74
------ ------
Total $0.002 Total $2.436
Cumulative total return as of 6/30/96:+99.96%**
<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 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--6/30/96 5.02 4.62 -- -- - 7.97
------
Total $0.684
Cumulative total return as of 6/30/96:-7.76%**
<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**
<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--6/30/96 5.19 4.81 -- -- - 7.32
------
Total $0.690
Cumulative total return as of 6/30/96: -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>
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/96 - 4.25% - 9.28%
Inception (4/27/92) through 6/30/96 +19.24 +17.71
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/96 - 5.15% - 8.70%
Inception (4/27/92) through 6/30/96 +18.05 +18.05
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/96 - 5.37% - 6.26%
Inception (10/21/94) through6/30/96 - 4.66 - 4.66
[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 6/30/96 - 4.44% - 9.45%
Inception (10/21/94) through 6/30/96 - 3.80 - 6.81
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
PERFORMANCE DATA (concluded)
<CAPTION>
Recent
Performance
Results*
12 Month 3 Month
6/30/96 3/31/96 6/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $4.82 $4.82 $5.37 -10.24% 0.00%
Class B Shares 4.65 4.66 5.24 -11.26 -0.21
Class C Shares 4.62 4.64 5.22 -11.49 -0.43
Class D Shares 4.81 4.81 5.37 -10.43 0.00
Class A Shares--Total Return - 4.25(1) 0.00
Class B Shares--Total Return - 5.15(1) -0.21
Class C Shares--Total Return - 5.37(1) -0.43
Class D Shares--Total Return - 4.44(1) 0.00
<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>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Singapore Microcomputer 727,150 Creative Technology Ltd. $ 9,807,063 $ 4,613,961 0.6%
Peripherals
Total Investments in
Singaporean Stocks 9,807,063 4,613,961 0.6
United Application 2,788,000 Informix Corporation 57,048,504 62,381,500 7.7
States Development 420,000 Oracle Corporation 13,976,075 16,537,500 2.1
Software ------------ ------------ ------
71,024,579 78,919,000 9.8
<PAGE>
Application 965,000 C-Cube Microsystems, Inc. 54,919,248 31,845,000 4.0
Specific Integrated 30,000 Oak Technology, Inc. 748,125 281,250 0.0
Circuits ------------ ------------ ------
55,667,373 32,126,250 4.0
Communications 120,000 Gandalf Technologies, Inc. 2,151,250 937,500 0.1
Equipment
Educational/ 6,480,000 Acclaim Entertainment, Inc. 103,211,388 62,370,000 7.7
Entertainment 1,521,500 Electronic Arts, Inc. 46,748,372 40,319,750 5.0
Software ------------ ------------ ------
149,959,760 102,689,750 12.7
Internet Software 45,000 Infonautics, Inc. (Class A) 630,000 348,750 0.1
425,000 Netscape Communications 29,075,000 26,456,250 3.2
Corp. ------------ ------------ ------
29,705,000 26,805,000 3.3
Internetworking 546,900 Cybercash, Inc. 30,614,919 29,874,413 3.7
255,400 FORE Systems, Inc. 6,925,457 9,194,400 1.1
------------ ------------ ------
37,540,376 39,068,813 4.8
Microcomputer 8,106,700 Creative Technology Ltd. 113,149,604 48,640,200 6.0
Peripherals
Photography 502,300 Polaroid Corporation 22,067,599 22,917,438 2.8
Systems Software 562,100 Computer Associates
International, Inc. 42,361,038 40,049,625 5.0
Total Investments in
United States Stocks 523,626,579 392,153,576 48.5
Total Investments in 533,433,642 396,767,537 49.1
Stocks
SHORT-TERM Face
SECURITIES Amount Issue
Commercial $ 25,442,000 Allomon Funding Corp.,
Paper* 5.38% due 8/01/1996 25,316,529 25,316,529 3.2
32,556,000 Associates Corp. of North
America, 5.56% due 7/01/1996 32,545,944 32,545,944 4.0
30,000,000 Banc One Corporation,
5.30% due 7/23/1996 29,894,000 29,894,000 3.7
40,000,000 Goldman Sachs Group,
L.P., 5.34% due 8/05/1996 39,780,467 39,780,467 4.9
30,000,000 McKenna Triangle National
Corp., 5.36% due 7/24/1996 29,888,333 29,888,333 3.7
30,000,000 National Fleet Funding Corp.,
5.37% due 7/22/1996 29,897,075 29,897,075 3.7
40,000,000 PHH Corporation, 5.38%
due 8/01/1996 39,802,733 39,802,733 4.9
30,000,000 Riverwoods Funding Corp.,
5.35% due 7/16/1996 29,924,208 29,924,208 3.7
------------ ------------ ------
257,049,289 257,049,289 31.8
<PAGE>
US Government & Federal Home Loan Mortgage
Agency Corp.:
Obligations* 30,000,000 5.25% due 7/15/1996 29,930,000 29,930,000 3.7
30,000,000 5.27% due 7/24/1996 29,890,208 29,890,208 3.7
Federal National Mortgage
Association:
50,000,000 5.24% due 7/08/1996 49,934,500 49,934,500 6.2
50,000,000 5.25% due 7/08/1996 49,934,375 49,934,375 6.1
------------ ------------ ------
159,689,083 159,689,083 19.7
Total Investments in
Short-Term Securities 416,738,372 416,738,372 51.5
Total Investments $950,172,014 813,505,909 100.6
============
Liabilities In Excess Of Other Assets (4,659,561) (0.6)
------------ ------
Net Assets $808,846,348 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $234,635,937
and 48,640,312 shares outstanding $ 4.82
============
Class B--Based on net assets of $506,318,229
and 108,908,336 shares outstanding $ 4.65
============
Class C--Based on net assets of $27,698,283
and 5,990,250 shares outstanding $ 4.62
============
Class D--Based on net assets of $40,193,899
and 8,360,707 shares outstanding $ 4.81
============
<FN>
*Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Company.
</TABLE>
