MERRILL LYNCH
TECHNOLOGY
FUND, INC.
FUND LOGO
Quarterly Report
December 31, 1995
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 12/31/95
<PAGE>
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Informix Corp. 14.6%
Acclaim Entertainment, Inc. 8.1
Creative Technology Ltd.* 7.8
LSI Logic Corp. 7.5
Bay Networks Inc. 7.2
cisco Systems, Inc. 6.7
3Com Corporation 6.4
Polaroid Corporation 6.4
Stratacom, Inc. 5.3
Novell, Inc. 5.0
[FN]
*Includes holdings in Singapore and the United States.
Ten Largest Industries Percent of
Represented in the Portfolio Net Assets
Internetworking 22.6%
Application Development Software 16.2
Educational/Entertainment Software 12.6
Communications Equipment 9.3
Microcomputer Peripherals 7.8
Application Specific Integrated Circuits 7.5
Photography 6.4
Communications 6.0
Machinery 4.1
Semiconductor 1.8
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.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
Merrill Lynch Technology Fund, Inc. lost money in the December
quarter and only provided a mediocre total return for the entire
year. For the three months ended December 31, 1995, the Fund's total
returns for Class A, Class B, Class C and Class D Shares were -
17.33%, -17.50%, -17.43% and -17.36%, respectively. For the 1995
calendar year, the Fund's total returns for Class A, Class B, Class
C and Class D Shares were +5.86%, +4.81%, +4.83% and +5.67%,
respectively. (Complete performance information, including average
annual total returns, can be found on pages 4--6 of this report to
shareholders.)
The stage was set for the Fund's performance in the December quarter
of 1994, when we decided to protect profits by selling stocks and
reinvesting the cash in Japanese technology stocks. Those stocks
collapsed, along with the Japanese stock market, after the Kobe
earthquake during the March quarter of 1995. At about the same time,
the speculative frenzy for US technology stocks resumed. We managed
a turnaround by selling most of our Japanese investments and
reinvesting the cash in a limited number of US technology stocks.
Unfortunately, we purchased these stocks too late and held them too
long. Investors locked in gains by selling technology stocks during
the December quarter. The selling pressure intensified as a number
of companies announced that earnings would be below expectations.
Acclaim Entertainment, Inc., the Fund's largest holding at the
beginning of the December quarter, was among those companies
revising estimates downward. The stock fell 51% in the December
quarter.
As we begin 1996, we hold 23 stocks and have a cash position of 5.4%
of net assets. We see emerging investment opportunities in US
technology stocks, particularly in software and communications. The
consumer market, in contrast to the corporate market, is also
becoming increasingly important to US technology companies. In order
to take advantage of these opportunities, we are raising our target
for the number of stocks in the portfolio. Since the Fund's
inception in 1992, when we started with $66 million in assets, we
have owned no more than 25 stocks. We still intend to manage the
Fund as a non-diversified fund, but we expect that the average size
of most new positions will be somewhat smaller than in the past.
<PAGE>
Portfolio Matters
Informix Corp., our largest holding at 14.6% of net assets, is a
leading supplier of relational database management software and
application development tools. The company has held the technology
leadership position for the last several years against its primary
competitors, Oracle Corp. and Sybase, Inc. Throughout 1995, Informix
continued to gain market share as evidenced by its 54% revenue
growth rate for the first nine months of the year. At this juncture,
we see no reason why the company's growth rate should not continue
to be very strong. Informix recently announced the acquisition of
Illustra Information Technologies, Inc., a developer of next-
generation object/relational database technology for complex,
unstructured data (video, audio, 3-D graphics, spatial data).
Illustra's technology and products are widely considered to be years
ahead of any competitor and should integrate well with Informix.
Given the explosive growth in the Internet within the last year and
its focus on unstructured data, we believe the acquisition provides
Informix with an extraordinary growth opportunity.
Acclaim Entertainment, Inc., at 8.1% of net assets, is a leading
independent supplier of entertainment software for dedicated video
game platforms and personal computers (PCs). 1995 has been a year of
transition for the video game industry. The popularity of older, 16-
bit platforms (Super Nintendo and Sega Genesis) has declined with
the advent of next-generation platforms (Sony Playstation and Sega
Saturn). Although Acclaim is well-positioned on new platforms and
the PC, the transition depressed revenue growth. As these next
generation platforms achieve critical mass throughout 1996, we
believe Acclaim's growth rate will reaccelerate. Moreover, Acclaim's
initiative into interactive gaming and electronic distribution, in
conjunction with TeleCommunications Inc., will add a new dimension
to Acclaim's growth prospects.
LSI Logic Corp., at 7.5% of net assets, is one of the largest
suppliers of application specific integrated circuits (ASICs). Over
the last several years its ASIC technology and expertise have
evolved into its Coreware strategy, whereby LSI is able to offer
completely integrated, customer-specific solutions in silicon. As a
result, customers have been able to enter the video game market very
rapidly and with significant cost and performance advantages over
the competition, such as Sony Corp. with its Playstation. This same
strategy, coupled with leading edge wafer manufacturing, has also
enabled LSI to announce a personal Internet access system for less
than $500. However, the stock declined 33.5% in the December
quarter, in part because LSI announced the expectation of 6%
sequential revenue growth rather than the 6%--8% anticipated
earlier. Nevertheless, we believe LSI is evolving into a premier
consumer electronics company.
<PAGE>
In Conclusion
We thank you for your patience and continued investment in Merrill
Lynch Technology Fund, Inc., and we look forward to reporting to you
again in our upcoming annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(James K. Renck)
James K. Renck
Vice President and Portfolio Manager
January 23, 1996
PORTFOLIO CHANGES
For the Quarter Ended December 31, 1995
Additions
Ascend Communications, Inc.
FORE Systems, Inc.
Deletions
Hewlett-Packard Company
Integrated Device Technology, Inc.
<PAGE>
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.
* 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.
<PAGE>
<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
------ ------
Total $0.002 Total $2.510
Cumulative total return as of 12/31/95: +124.95%**
<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
------ ------
Total $0.002 Total $2.436
Cumulative total return as of 12/31/95: +116.73%**
<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
------
Total $0.684
Cumulative total return as of 12/31/95: +0.23%**
<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
------
Total $0.690
Cumulative total return as of 12/31/95: +1.05%**
<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 12/31/95 + 5.86% + 0.30%
Inception (4/27/92) through 12/31/95 +24.65 +22.83
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/95 + 4.81% + 0.87%
Inception (4/27/92) through 12/31/95 +23.39 +23.24
[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 12/31/95 + 4.83% + 3.85%
Inception (10/21/94) through 12/31/95 + 0.19 + 0.19
[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 12/31/95 + 5.67% + 0.12%
Inception (10/21/94) through 12/31/95 + 0.88 - 3.57
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
12/31/95 9/30/95 12/31/94 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $5.20 $6.71 $5.24 -0.76% -22.50%
Class B Shares 5.04 6.53 5.14 -1.95 -22.82
Class C Shares 5.02 6.50 5.12 -1.95 -22.77
Class D Shares 5.19 6.70 5.24 -0.95 -22.54
Class A Shares--Total Return +5.86 (1) -17.33 (1)
Class B Shares--Total Return +4.81 (1) -17.50 (1)
Class C Shares--Total Return +4.83 (1) -17.43 (1)
Class D Shares--Total Return +5.67 (1) -17.36 (1)
<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>
Japan Components 200,000 SMK Corp $ 1,432,563 $ 1,336,691 0.1%
489,000 Tamura Corp. 3,759,508 3,216,108 0.3
200,000 Tokin Corp. 2,834,543 3,254,553 0.3
------------- ------------- ------
8,026,614 7,807,352 0.7
Machinery 3,419,000 Ushio Inc. 37,465,179 40,733,921 4.1
Total Investments in Japanese Stocks 45,491,793 48,541,273 4.8
<PAGE>
Singapore Microcomputer 727,150 Creative Technology Ltd. 9,807,063 6,993,805 0.7
Peripherals
Total Investments in Singaporean
Stocks 9,807,063 6,993,805 0.7
United Application 60,000 FTP Software, Inc. 1,666,872 1,740,000 0.2
States Development 4,800,000 Informix Corp. 95,190,961 144,000,000 14.6
Software 311,200 Peoplesoft Inc. 6,052,916 13,226,000 1.4
------------- ------------- ------
102,910,749 158,966,000 16.2
Application 2,264,400 LSI Logic Corp. 79,898,858 74,159,100 7.5
Specific
Integrated
Circuits
Communications 225,000 Bolt Beranek and Newman, Inc. 8,117,850 9,253,125 1.0
3,496,700 Novell, Inc. 66,133,027 49,390,888 5.0
------------- ------------- ------
74,250,877 58,644,013 6.0
Communications 360,000 Ascend Communications, Inc. 25,413,892 29,205,000 3.0
Equipment 709,500 Stratacom, Inc. 36,489,685 51,793,500 5.3
262,900 Tellabs, Inc. 12,283,178 9,727,300 1.0
------------- ------------- ------
74,186,755 90,725,800 9.3
Educational/ 6,480,000 Acclaim Entertainment, Inc. 103,211,387 80,190,000 8.1
Entertainment 1,679,400 Electronic Arts, Inc. 49,908,085 43,874,325 4.5
Software ------------- ------------- ------
153,119,472 124,064,325 12.6
Internetworking 1,360,000 3Com Corporation 44,615,006 63,410,000 6.4
1,740,000 Bay Networks Inc. 55,262,550 71,340,000 7.2
890,000 cisco Systems, Inc. 58,681,825 66,416,250 6.7
380,200 FORE Systems, Inc. 22,092,239 22,574,375 2.3
------------- ------------- ------
180,651,620 223,740,625 22.6
Liquid Crystal 85,000 MRS Technology Inc. 1,126,251 276,250 0.0
Display Capital
Equipment
Microcomputer 8,106,700 Creative Technology Ltd. 113,149,604 69,920,287 7.1
Peripherals
<PAGE>
Photography 1,332,300 Polaroid Corporation 57,834,990 63,117,712 6.4
Semiconductor 913,000 Cirrus Logic, Inc. 44,066,738 18,031,750 1.8
Total Investments in
United States Stocks 881,195,914 881,645,862 89.5
Total Investments in Stocks 936,494,770 937,180,940 95.0
SHORT-TERM Face
SECURITIES Amount Issue
Commercial $ 5,885,000 Associates Corp. of North America,
Paper* 6.00% due 1/02/1996 5,882,058 5,882,058 0.6
17,644,000 Matterhorn Capital Corp., 5.75%
due 1/11/1996 17,610,182 17,610,182 1.8
30,000,000 National Fleet Funding Corp.,
5.74% due 2/09/1996 29,803,883 29,803,883 3.0
Total Investments in Short-Term
Securities 53,296,123 53,296,123 5.4
Total Investments $ 989,790,893 990,477,063 100.4
=============
Unrealized Appreciation on Forward Foreign Exchange Contracts** 1,698,349 0.2
Liabilities in Excess of Other Assets (5,892,108) (0.6)
------------- ------
Net Assets $ 986,283,304 100.0%
============= ======
Net Asset Value: Class A--Based on net assets of $266,834,642 and
51,271,029 shares outstanding $ 5.20
=============
Class B--Based on net assets of $637,019,393 and
126,353,082 shares outstanding $ 5.04
=============
Class C--Based on net assets of $35,366,234 and
7,049,939 shares outstanding $ 5.02
=============
Class D--Based on net assets of $47,063,035 and
9,063,383 shares outstanding $ 5.19
=============
<PAGE>
<FN>
*Commercial Paper is traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the
Company.
**Forward foreign exchange contracts as of December 31, 1995 were as
follows:
Expiration Unrealized
Foreign Currency Sold Date Appreciation
YEN 3,831,400,864 January 1996 $1,698,349
Total Unrealized Appreciation on Forward Foreign
Exchange Contracts--Net (US$ Commitment--$74,775,773) $1,698,349
==========
</TABLE>
