MERRILL LYNCH
TECHNOLOGY
FUND, INC.
FUND LOGO
Quarterly Report
June 30, 1997
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.
Portfolio
Information
As of 6/30/97
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Creative Technology Ltd. 20.6%
Bay Networks, Inc. 8.3
Oracle Corporation 5.2
Integrated Device Technology, Inc. 4.6
Cypress Semiconductor Corporation 4.5
Acclaim Entertainment, Inc. 3.8
Tellabs, Inc. 3.6
Microsoft Corporation 3.2
PMC-Sierra, Inc. 1.2
Cybercash, Inc. 1.0
Industries Represented Percent of
in the Portfolio Net Assets
Microcomputer Peripherals 20.6%
Internetworking 8.3
Semiconductors--Logic 5.8
Application Development Software 5.2
Semiconductors--Memory 4.5
Educational/Entertainment Software 3.8
Communications Equipment 3.6
Computer Software 3.2
Internet Software 1.0
Semiconductor Capital Equipment 0.2
<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
Philip M. Mandel, Secretary
Custodian
The Chase Manhattan Bank
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
Merrill Lynch Technology Fund, Inc. made money in the June quarter.
For the three months ended June 30, 1997, total returns for Class A,
Class B, Class C and Class D Shares were +14.79%, +14.52%, +14.37%
and +14.85%, respectively. For the six months ended June 30, 1997,
total returns for Class A, Class B, Class C and Class D Shares were
+16.87%, +16.18%, +16.04% and +16.70%, respectively. For the 12
months ended June 30, 1997, total returns for Class A, Class B,
Class C and Class D Shares were +31.55%, +29.91%, +30.02% and
+31.03%, respectively. (Complete performance results, including
average annual total returns, can be found on pages 3--5 of this
report to shareholders.)
<PAGE>
In our March 31, 1997 shareholders' letter we stated that the Fund's
30% cash position was reinvested and that we were optimistic. We
noted that the steep price declines in software and communications
stocks in the March quarter had created new investment
opportunities, but that semiconductor and semiconductor capital
equipment stocks would continue to represent the majority of the
Fund's investments for several reasons. First, business at the
margin continues to improve. Second, semiconductor companies are
reporting further order improvements, and many are just beginning to
exceed consensus earnings expectations. Third, operating leverage at
many companies is substantial. Finally, the direction of change in
return on equity for most companies is positive and the magnitude
of improvement is potentially substantial.
Technology stocks, particularly semiconductor stocks, rallied
sharply during May. The Fund appreciated approximately 25 percentage
points in about two--three weeks. We believed this appreciation
discounted much of the positive news on a short-term basis.
Therefore, we decided to realize some profits. To our surprise and
to the surprise of most semiconductor companies, semiconductor
orders softened more than expected during May, meaning most
companies were unlikely to exceed consensus earnings estimates by a
wide margin in the June quarter. A number of companies, including
Intel Corp., Seagate Technology Inc., and Gateway 2000 Inc., warned
investors that revenues and earnings would fall short of
expectations. Business in Europe, in particular, was cited by many
technology companies' managements as being weaker than expected.
Growth in the personal computer industry also slowed more than
expected, although Dell Computer Corp. and Compaq Computer Corp.
were clearly taking market share. Given that the seasonally slow
summer months were still ahead of us, we raised the cash position to
approximately 42% of net assets by the end of June.
By mid-July, we had reinvested virtually the entire cash position.
We believed that as companies reported earnings in July, they would
speak positively about the potential for accelerating earnings by
the December quarter. Most companies did just that, while lowering
expectations for the September quarter. Technology stocks reacted
positively, and the Fund's year-to-date returns exceeded 30% by late
July.
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,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(James K. Renck)
James K. Renck
Vice President and
Portfolio Manager
August 8, 1997
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 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).
<PAGE>
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the ex-dividend date. 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**
<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
1996 5.20 4.98 0.197 0.246 + 4.34
1/1/97--6/30/97 4.98 5.82 -- -- +16.87
------ ------
Total $0.199 Total $2.756
Cumulative total return as of 6/30/97: +174.30%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
PERFORMANCE DATA (concluded)
<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
1996 5.04 4.82 0.197 0.181 + 3.17
1/1/97--6/30/97 4.82 5.60 -- -- +16.18
------ ------
Total $0.199 Total $2.617
<PAGE>
Cumulative total return as of 6/30/97: +159.77%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 5.02 4.80 $0.197 0.177 + 3.12
1/1/97--6/30/97 4.80 5.57 -- -- +16.04
------ ------
Total $0.197 Total $0.861
Cumulative total return as of 6/30/97: +19.93%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 5.19 4.97 $0.197 0.231 + 4.06
1/1/97--6/30/97 4.97 5.80 -- -- +16.70
------ ------
Total $0.197 Total $0.921
Cumulative total return as of 6/30/97: +22.72%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
6/30/97 3/31/97 6/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $5.82 $5.07 $4.82 +25.56%(1) +14.79%
Class B Shares 5.60 4.89 4.65 +25.38(1) +14.52
Class C Shares 5.57 4.87 4.62 +25.54(1) +14.37
Class D Shares 5.80 5.05 4.81 +25.39(1) +14.85
Class A Shares--Total Return +31.55(2) +14.79
Class B Shares--Total Return +29.91(3) +14.52
Class C Shares--Total Return +30.02(4) +14.37
Class D Shares--Total Return +31.03(5) +14.85
<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 $0.197 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.246 per share ordinary
income dividends and $0.197 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.181 per share ordinary
income dividends and $0.197 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.177 per share ordinary
income dividends and $0.197 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.231 per share ordinary
income dividends and $0.197 per share capital gains distributions.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/97 +31.55% +24.65%
Five Years Ended 6/30/97 +21.30 +20.00
Inception (4/27/92) through 6/30/97 +21.53 +20.27
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +29.91% +25.91%
Five Years Ended 6/30/97 +20.05 +20.05
Inception (4/27/92) through 6/30/97 +20.26 +20.26
[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 6/30/97 +30.02% +29.02%
Inception (10/21/94) through 6/30/97 + 6.99 + 6.99
[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 6/30/97 +31.03% +24.15%
Inception (10/21/94) through 6/30/97 + 7.91 + 5.76
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
COUNTRY Industries Held Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Application 730,000 Oracle Corporation $ 33,510,970 $ 36,728,125 5.2%
States Development Software
Communications 450,000 Tellabs, Inc. 20,548,130 25,087,500 3.6
Equipment
<PAGE>
Computer Software 175,000 Microsoft Corporation 16,759,685 22,126,563 3.2
Educational/ 6,480,000 Acclaim Entertainment, Inc. 103,211,387 26,730,000 3.8
Entertainment
Software
Internet Software 607,600 Cybercash, Inc. 32,900,716 6,835,500 1.0
Internetworking 2,198,000 Bay Networks, Inc. 50,678,347 58,384,375 8.3
Microcomputer 8,593,150 Creative Technology Ltd. 120,349,439 143,935,262 20.6
Peripherals
Semiconductor 25,000 KLA-Tencor Corporation 1,200,000 1,218,750 0.2
Capital Equipment
Semiconductors-- 3,088,500 Integrated Device Technology, Inc. 36,073,920 32,429,250 4.6
Logic 310,000 PMC-Sierra, Inc. 6,336,256 8,098,750 1.2
------------ ------------ ------
42,410,176 40,528,000 5.8
Semiconductors-- 2,161,900 Cypress Semiconductor Corporation 30,140,803 31,347,550 4.5
Memory
Total Investments in Stocks 451,709,653 392,921,625 56.2
SHORT-TERM Face
SECURITIES Amount Issue
Commercial Paper* $37,000,000 Associates Corp. of North America,
6.15% due 7/01/1997 37,000,000 37,000,000 5.3
2,000,000 Associates First Capital Corporation,
5.49% due 7/01/1997 2,000,000 2,000,000 0.3
10,250,000 Falcon Asset Securitization Corp.,
5.55% due 7/07/1997 10,240,519 10,240,519 1.5
35,000,000 GTE Corp., 5.59% due 7/08/1997 34,961,957 34,961,957 5.0
37,000,000 General Electric Capital Corp.,
6.15% due 7/01/1997 37,000,000 37,000,000 5.3
37,000,000 General Motors Acceptance Corp.,
6.25% due 7/01/1997 37,000,000 37,000,000 5.3
25,000,000 International Securitization
Corporation, 5.57% due 7/17/1997 24,938,111 24,938,111 3.6
32,000,000 NYNEX Corporation, 5.535% due
7/18/1997 31,916,360 31,916,360 4.6
------------ ------------ ------
215,056,947 215,056,947 30.9
<PAGE>
US Government Federal Home Loan Mortgage Corp.:
Agency 26,675,000 6% due 7/01/1997 26,675,000 26,675,000 3.8
Obligations* 50,000,000 5.43% due 7/14/1997 49,901,958 49,901,958 7.1
------------ ------------ ------
76,576,958 76,576,958 10.9
Total Investments in Short-Term
Securities 291,633,905 291,633,905 41.8
Total Investments $743,343,558 684,555,530 98.0
============
Other Assets Less Liabilities 13,984,184 2.0
------------ ------
Net Assets $698,539,714 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $244,296,120
and 41,997,549 shares outstanding $ 5.82
============
Class B--Based on net assets of $394,322,095
and 70,372,631 shares outstanding $ 5.60
============
Class C--Based on net assets of $20,288,141
and 3,640,132 shares outstanding $ 5.57
============
Class D--Based on net assets of $39,633,358
and 6,836,190 shares outstanding $ 5.80
============
<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>
PORTFOLIO CHANGES
For the Quarter Ended June 30, 1997
<PAGE>
Additions
*Amazon.com, Inc.
*Applied Materials, Inc.
*Ascend Communications, Inc.
Bay Networks, Inc.
*Cisco Systems, Inc.
Cypress Semiconductor Corporation
*Dell Computer Corp.
KLA-Tencor Corporation
Oracle Corporation
PMC-Sierra, Inc.
*RF Micro Devices, Inc.
Tellabs, Inc.
Deletions
Adaptec, Inc.
Altera Corporation
*Amazon.com, Inc.
Analog Devices, Inc.
*Applied Materials, Inc.
*Ascend Communications, Inc.
C-Cube Microsystems, Inc.
*Cisco Systems, Inc.
*Dell Computer Corp.
Intel Corporation
LSI Logic Corporation
Linear Technology Corporation
Micron Technology, Inc.
National Semiconductor Corporation
PairGain Technologies, Inc.
*RF Micro Devices, Inc.
Teradyne, Inc.
Texas Instruments, Inc.
[FN]
*Added and deleted in the same quarter.
