MERRILL LYNCH
TECHNOLOGY
FUND, INC.
FUND LOGO
Annual Report
March 31, 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.
Worldwide
Investments
As of 3/31/97
Ten Largest Holdings Percent of
Represented in the Portfolio Net Assets
Micron Technology, Inc. 13.6%
National Semiconductor Corporation 13.5
Creative Technology Ltd. 12.3
Integrated Device Technology, Inc. 7.6
LSI Logic Corporation 5.3
Linear Technology Corporation 5.2
Texas Instruments, Inc. 5.1
Altera Corporation 5.0
C-Cube Microsystems, Inc. 4.9
Intel Corporation 4.7
Industries Represented Percent of
in the Portfolio Net Assets
Semiconductors--Memory 26.3%
Semiconductors--Analog 21.8
Semiconductors--Logic 18.2
Microcomputer Peripherals 14.6
Semiconductors--Microprocessors 4.7
Educational/Entertainment Software 4.5
Computer Software 4.4
Communications Equipment 3.4
Internet Software 1.8
<PAGE>
DEAR SHAREHOLDER
Merrill Lynch Technology Fund, Inc. made money in the March quarter.
For the three months ended March 31, 1997, total returns for Class
A, Class B, Class C and Class D Shares were +1.81%, +1.45%, +1.46%
and +1.61%, respectively. (Complete performance results, including
average annual total returns, can be found on pages 4--7 of this
report to shareholders.) Although these returns were modest, they
were positive. The March quarter proved to be a negative one for
many technology investors. Software and communications stocks, in
particular, experienced large price declines ranging from 30% to
80%. According to Lipper Analytical Services, Inc., Science and
Technology Funds,on average, declined 8.6%, but technology-laden
aggressive growth funds declined by as much as 25%.
The Fund avoided the price declines for several reasons. First, we
owned a limited number of stocks, principally semiconductor stocks.
Micron Technology, Inc. and National Semiconductor Corporation,
which together represented 27% of net assets, appreciated 39% and
12%, respectively. Second, during February, we raised the Fund's
cash position to just above 30% of net assets. Third, software and
communication stocks were largely reduced or eliminated from the
Fund during the September 30, 1996 and December 31, 1996 quarters.
The magnitude of the price declines created some investment
opportunities. For example, the communications sector experienced a
slowdown in sequential revenue growth since the June 30, 1996
quarter. While revenue growth is still strong relative to most other
industries, business at the margin slowed and returns on equity
peaked. "Product transition" and "consolidation" are the familiar
euphemisms being used to explain the slowdown. No one really knows
when business stabilizes or re-accelerates, but we will closely
monitor developments. There also may be new investment opportunities
within the software industry. The surge in initial public offerings
last year was a classic sign of a top in software companies' stock
prices, but investors' expectations were sharply reduced.
We anticipate that the majority of the Fund's investments will
remain in semiconductor and semiconductor-related stocks throughout
1997. As we mentioned in prior shareholder letters, business at the
margin continues to improve. Many of the companies reported further
improvements in orders, and are just beginning to exceed consensus
earnings expectations. Operating leverage at many of the companies
is substantial. Returns on equity bottomed in the third quarter and
fourth quarter of 1996. The direction of change is positive and the
potential magnitude of change could be substantial. Currently, the
Fund is essentially fully invested, and we are optimistic.
<PAGE>
Fiscal Year in Review
For the 12 months ended March 31, 1997, total returns for Merrill
Lynch Technology Fund, Inc.'s Class A, Class B, Class C and Class D
Shares were +14.60%, +13.20%, +13.19% and +14.09%, respectively. By
comparison, the average total return for Lipper Analytical Services,
Inc., Science and Technology Funds was +7.61%.
From late May 1996 through early June 1996, we increased the Fund's
cash position to more than 50%, which helped protect the Fund's
assets during the sharp sell-off in June and July. During the
September 30, 1996 and December 31, 1996 quarters, we eliminated or
substantially reduced investments in software and communications
stocks, and reinvested those assets in semiconductor stocks. We also
retained our investment in Creative Technology Ltd., which staged a
significant financial turnaround beginning in the June 30, 1996
quarter. Creative Technology continues to be one of the Fund's
largest holdings, and has significantly exceeded expectations for
three consecutive quarters. We still view the company as
significantly undervalued, and look forward to step-function
increases in earnings estimates as the company prepares for its
strongest seasonal quarters.
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
<PAGE>
April 29, 1997
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
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
PERFORMANCE DATA
About Fund
Performance
<PAGE>
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).
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.
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Fund's
Class A Shares, Class B Shares, Class C Shares and Class D Shares
compared to the growth of an investment in the S&P 500 Index:
<PAGE>
4/27/92** 3/97
ML Technology Fund, Inc.++--
Class A Shares* $ 9,475 $22,641
ML Technology Fund, Inc.++--
Class B Shares* $10,000 $22,684
S&P 5000 Index++++ $10,000 $20,752
10/21/94** 3/97
ML Technology Fund, Inc.++--
Class C Shares* $10,000 $10,486
ML Technology Fund, Inc.++--
Class D Shares* $ 9,475 $10,123
S&P 5000 Index++++ $10,000 $17,252
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses including advisory fees.
**Commencement of Operations.
++ML Technology Fund, Inc. invests primarily in companies offering
products and services in such areas as computers (including software and
hardware), communications, electronics, factory automation, office
automation and other companies substantially involved in the field
of technology.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance in not predictive of future performance.
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 3/31/97 +14.60% + 8.58%
Inception (4/27/92) through 3/31/97 +19.34 +18.04
<PAGE>
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 3/31/97 +13.20% + 9.20%
Inception (4/27/92) through 3/31/97 +18.09 +18.09
[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 3/31/97 +13.19% +12.19%
Inception (10/21/94) through 3/31/97 + 1.96 + 1.96
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 3/31/97 +14.09% +8.10%
Inception (10/21/94) through 3/31/97 + 2.75 +0.51
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<PAGE>
<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--3/31/97 4.98 5.07 -- -- + 1.81
------ ------
Total $0.199 Total $2.756
Cumulative total return as of 3/31/97: +138.95%**
<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>
<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--3/31/97 4.82 4.89 -- -- + 1.45
------ ------
Total $0.199 Total $2.617
Cumulative total return as of 3/31/97: +126.84%**
<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>
<PAGE>
<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--3/31/97 4.80 4.87 -- -- +1.46
------ ------
Total $0.197 Total $0.861
Cumulative total return as of 3/31/97: +4.86%**
<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--3/31/97 4.97 5.05 -- -- +1.61
------ ------
Total $0.197 Total $0.921
Cumulative total return as of 3/31/97: +6.85%**
<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
3/31/97 12/31/96 3/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $5.07 $4.98 $4.82 + 9.38%(1) +1.81%
Class B Shares 4.89 4.82 4.66 + 9.24(1) +1.45
Class C Shares 4.87 4.80 4.64 + 9.29(1) +1.46
Class D Shares 5.05 4.97 4.81 + 9.18(1) +1.61
Class A Shares--Total Return +14.60(2) +1.81
Class B Shares--Total Return +13.20(3) +1.45
Class C Shares--Total Return +13.19(4) +1.46
Class D Shares--Total Return +14.09(5) +1.61
<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>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Communications 746,000 ++PairGain Technologies, Inc. $ 26,108,898 $ 22,100,250 3.4%
Equipment
Computer Software 310,000 ++Microsoft Corporation 28,969,069 28,403,750 4.4
Educational/ 6,480,000 ++Acclaim Entertainment, 103,211,387 29,565,000 4.5
Entertainment Software Inc. ++++
Internet Software 685,000 ++Cybercash, Inc. 36,122,228 11,816,250 1.8
<PAGE>
Microcomputer 420,000 ++Adaptec, Inc. 14,520,469 14,962,500 2.3
Peripherals 8,833,850 ++Creative Technology
Ltd. ++++ (a) 122,956,666 80,608,881 12.3
------------- ------------- ------
137,477,135 95,571,381 14.6
Semiconductors--Analog 891,533 ++Analog Devices, Inc. 20,237,150 20,059,493 3.1
759,000 Linear Technology Corporation 33,554,581 33,585,750 5.2
3,212,500 ++National Semiconductor
Corporation 74,488,889 88,343,750 13.5
------------- ------------- ------
128,280,620 141,988,993 21.8
Semiconductors--Logic 755,500 ++Altera Corporation 32,959,783 32,486,500 5.0
1,263,000 ++C-Cube Microsystems, Inc. 50,666,818 32,206,500 4.9
1,001,200 ++LSI Logic Corporation 36,832,062 34,791,700 5.3
674,000 ++Teradyne, Inc. 19,550,660 19,461,750 3.0
------------- ------------- ------
140,009,323 118,946,450 18.2
Semiconductors--Memory 4,971,700 ++Integrated Device
Technology, Inc. ++++ 60,180,480 49,717,000 7.6
2,189,600 Micron Technology, Inc. 75,584,967 88,678,800 13.6
440,000 Texas Instruments, Inc. 32,979,157 32,945,000 5.1
------------- ------------- ------
168,744,604 171,340,800 26.3
Semiconductors-- 220,000 Intel Corporation 28,390,915 30,580,000 4.7
Microprocessors
Total Investments in Stocks 797,314,179 650,312,874 99.7
SHORT-TERM Face
SECURITIES Amount Issue
Commercial Paper* $ 1,561,000 Associates Corp. of North
America, 6.75% due 4/01/1997 1,561,000 1,561,000 0.2
26,840,000 Clipper Receivables Corp.,
5.32% due 4/02/1997 26,836,034 26,836,034 4.1
25,000,000 International Securitization
Corporation, 5.38% due
4/23/1997 24,917,805 24,917,805 3.8
12,742,000 National Fleet Funding Corp.,
5.33% due 4/07/1997 12,730,681 12,730,681 2.0
Total Investments in
Short-Term Securities 66,045,520 66,045,520 10.1
Total Investments $863,359,699 716,358,394 109.8
============
Liabilities in Excess of Other Assets (64,223,184) (9.8)
----------- ------
Net Assets $652,135,210 100.0%
============ ======
<PAGE>
<FN>
(a)Shares of Creative Technology Ltd. (Singapore Holdings) were
combined with the US holdings of Creative Technology Ltd.
*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.
++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:
<CAPTION>
Net Share Net Dividend
Industry Affiliate Activity Cost Income
<S> <S> <C> <C> <C>
Educational/ Acclaim
Entertainment Entertainment,
Software Inc. -- -- --
Microcomputer Creative
Peripherals Technology Ltd. 727,150 $ 9,807,062 --
Semiconductors-- Integrated Device
Memory Technology, Inc. 4,971,700 60,180,480 --
See Notes to Financial Statements.
</TABLE>
PORTFOLIO CHANGES (UNAUDITED)
For the Quarter Ended March 31, 1997
Additions
LSI Logic Corporation
Microsoft Corporation
Teradyne, Inc.
<PAGE>
Deletions
BMC Software, Inc.
Broderbund Software, Inc.
Cascade Communications Corp.
Dell Computer Corp.
FORE Systems, Inc.
Lam Research Corporation
Micron Electronics, Inc.
Quantum Corporation
Seagate Technology, Inc.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of March 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$863,359,699)(Note 1a) $716,358,394
Cash 974,085
Foreign cash (Note 1c) 28
Receivables:
Securities sold $ 1,799,940
Capital shares sold 1,305,358
Dividends 74,800 3,180,098
------------
Prepaid registration fees and other assets (Note 1f) 23,180
------------
Total assets 720,535,785
------------
Liabilities: Payables:
Securities purchased 63,171,406
Capital shares redeemed 3,589,559
Investment adviser (Note 2) 586,371
Distributor (Note 2) 365,283 67,712,619
------------
Accrued expenses and other liabilities 687,956
------------
Total liabilities 68,400,575
------------
Net Assets: Net assets $652,135,210
============
<PAGE>
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 4,383,296
Class B Shares of Common Stock, $0.10 par value, 300,000,000
shares authorized 7,675,527
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 390,618
Class D Shares of Common Stock, $0.10 par value, 300,000,000
shares authorized 699,936
Paid-in capital in excess of par 657,638,325
Undistributed realized capital gains on investments--net 128,348,818
Unrealized depreciation on investments and foreign currency
transactions--net (147,001,310)
------------
Net assets $652,135,210
============
Net Asset Class A--Based on net assets of $222,117,738 and 43,832,958
Value: shares outstanding $ 5.07
============
Class B--Based on net assets of $375,630,242 and 76,755,271
shares outstanding $ 4.89
============
Class C--Based on net assets of $19,015,022 and 3,906,177
shares outstanding $ 4.87
============
Class D--Based on net assets of $35,372,208 and 6,999,361
shares outstanding $ 5.05
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended March 31, 1997
<S> <S> <C> <C>
Investment Interest and discount earned $ 4,834,882
Income Dividends 577,404
(Notes 1d & 1e): ------------
Total income 5,412,286
------------
<PAGE>
Expenses: Investment advisory fees (Note 2) 7,927,513
Account maintenance and distribution fees--Class B (Note 2) 4,850,451
Transfer agent fees--Class B (Note 2) 1,394,509
Transfer agent fees--Class A (Note 2) 584,520
Account maintenance and distribution fees--Class C (Note 2) 263,379
Accounting services (Note 2) 107,801
Printing and shareholder reports 102,111
Account maintenance fees--Class D (Note 2) 101,242
Transfer agent fees--Class D (Note 2) 99,015
Registration fees (Note 1f) 87,304
Transfer agent fees--Class C (Note 2) 81,927
Professional fees 62,621
Custodian fees 38,977
Directors' fees and expenses 35,880
Amortization of organization expenses (Note 1f) 27,437
Other 14,867
------------
Total expenses 15,779,554
------------
Investment loss--net (10,367,268)
------------
Realized & Realized gain on investments--net 235,762,290
Unrealized Gain Change in unrealized depreciation on:
(Loss) on Investments--net $(118,985,276)
Investments & Foreign currency transactions--net (4) (118,985,280)
Foreign Currency ------------- ------------
Transactions--Net Net Increase in Net Assets Resulting from Operations $106,409,742
(Notes 1b, 1c, ============
1e & 3):
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment loss--net $(10,367,268) $(13,699,571)
Realized gain on investments and foreign currency
transactions--net 235,762,290 84,591,959
Change in unrealized depreciation on investments
and foreign currency transactions--net (118,985,280) (22,422,014)
------------ ------------
Net increase in net assets resulting from operations 106,409,742 48,470,374
------------ ------------
<PAGE>
Distributions to Realized gain on investments--net:
Shareholders Class A (19,050,400) (8,279,075)
(Note 1g): Class B (32,293,067) (20,434,367)
Class C (1,699,433) (1,128,078)
Class D (3,052,919) (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 (56,095,819) (58,160,933)
------------ ------------
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (273,854,666) (39,662,007)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (223,540,743) (49,352,566)
Beginning of year 875,675,953 925,028,519
------------ ------------
End of year $652,135,210 $875,675,953
============ ============
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A**
For the
Period
The following per share data and ratios have been April 27,
derived from information provided in the financial 1992++ to
statements. For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1997 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 (.03) (.03) .05 (.01) --
Realized and unrealized gain on investments
and foreign currency transactions--net .72 .28 .11 1.51 1.59
-------- -------- -------- -------- --------
Total from investment operations .69 .25 .16 1.50 1.59
<PAGE> -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.02) -- --
In excess of investment income--net -- -- (.01) -- --
Realized gain on investments--net (.44) (.17) (.05) (1.41) (.34)
In excess of realized gain on investments
--net -- (.15) (.36) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.44) (.32) (.44) (1.41) (.34)
-------- -------- -------- -------- --------
Net asset value, end of period $ 5.07 $ 4.82 $ 4.89 $ 5.17 $ 5.08
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 14.60% 5.15% 2.86% 35.68% 42.09%+++
Return:*** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.30% 1.31% 1.33% 1.35% 1.59%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net (.63%) (.62%) .87% (.11%) .04%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $222,118 $246,909 $254,188 $174,809 $100,830
Data: ======== ======== ======== ======== ========
Portfolio turnover 176.51% 108.36% 175.57% 350.64% 482.79%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0604 $ .0366 -- -- --
======== ======== ======== ======== ========
<CAPTION>
Class B**
For the
Period
The following per share data and ratios have been April 27,
derived from information provided in the financial 1992++ to
statements. For the Year Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1997 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 (.08) (.09) (.01) (.05) (.04)
Realized and unrealized gain on investments
and foreign currency transactions--net .69 .29 .11 1.48 1.58
-------- -------- -------- -------- --------
Total from investment operations .61 .20 .10 1.43 1.54
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- --++++ -- --
In excess of investment income--net -- -- --++++ -- --
Realized gain on investments--net (.38) (.17) (.05) (1.38) (.34)
In excess of realized gain on investments
--net -- (.15) (.35) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.38) (.32) (.40) (1.38) (.34)
-------- -------- -------- -------- --------
Net asset value, end of period $ 4.89 $ 4.66 $ 4.78 $ 5.08 $ 5.03
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 13.20% 4.21% 1.78% 34.22% 40.77%+++
Return:*** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.35% 2.34% 2.38% 2.36% 2.53%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net (1.66%) (1.65%) (.10%) (1.08%) .93%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $375,630 $553,819 $614,935 $224,330 $ 57,592
Data: ======== ======== ======== ======== ========
Portfolio turnover 176.51% 108.36% 175.57% 350.64% 482.79%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0604 $ .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.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C** Class D**
For the For the
Period Period
The following per share data and ratios Oct. 21, Oct. 21,
have been derived from information For the Year 1994++ to For the Year 1994++ to
provided in the financial statements. Ended March 31, March 31, Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1997 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 (.08) (.09) -- (.04) (.05) (.02)
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .68 .29 (.62) .71 .29 (.60)
-------- -------- -------- -------- -------- --------
Total from investment operations .60 .20 (.62) .67 .24 (.62)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.02) -- -- (.02)
In excess of investment income--net -- -- (.01) -- -- (.01)
Realized gain on investments--net (.37) (.17) (.04) (.43) (.17) (.04)
In excess of realized gain on
investments--net -- (.15) (.30) -- (.15) (.30)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.37) (.32) (.37) (.43) (.32) (.37)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 4.87 $ 4.64 $ 4.76 $ 5.05 $ 4.81 $ 4.89
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 13.19% 4.22% (11.11%)+++ 14.09% 4.94% (10.76%)+++
Return:*** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 2.37% 2.36% 2.59%* 1.55% 1.56% 1.80%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment loss--net (1.68%) (1.69%) (.02%)* (.88%) (.89%) (.81%)*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $19,015 $ 31,090 $ 23,259 $ 35,372 $ 43,858 $ 32,646
======== ======== ======== ======== ======== ========
Portfolio turnover 176.51% 108.36% 175.57% 176.51% 108.36% 175.57%
======== ======== ======== ======== ======== ========
Average commission rate paid++++ $ .0604 $ .0366 -- $ .0604 $ .0366 --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Based on average shares outstanding during the period.
***Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
++++++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
conversions may significantly affect the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Technology Fund, Inc. (the "Company") is registered
under the Investment Company Act of 1940 as a non-diversified, open-
end management investment company. The Company offers four classes
of shares under the Merrill Lynch Select Pricing SM System. Shares
of Class A and Class D are sold with a front-end sales charge.
Shares of Class B and Class C may be subject to a contingent
deferred sales charge. All classes of shares have identical voting,
dividend, liquidation, and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to
the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to its account maintenance
and distribution expenditures. The following is a summary of
significant accounting policies followed by the Company.
(a) Valuation of securities--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market quotations are not readily available are valued at
their fair value as determined in good faith by or under the
direction of the Company's Board of Directors.
(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.
NOTES TO FINANCIAL STATEMENTS (continued)
* 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>
(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 dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Company has determined 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.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$10,367,268 have been reclassified between undistributed net
realized capital gains and accumulated net investment loss. These
reclassifications have no effect on net assets or net asset values
per share.
<PAGE>
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Company has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Company has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Company's portfolio
and provides the administrative services necessary for the operation
of the Company. As compensation for its services to the Company,
MLAM receives monthly compensation at the annual rate of 1.0% of the
average daily net assets of the Company.
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 year ended March 31, 1997, 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 $2,678 $22,657
Class D $5,120 $85,752
<PAGE>
For the year ended March 31, 1997, MLPF&S received contingent
deferred sales charges of $2,548,458 and $21,205 relating to
transactions in Class B and Class C Shares, respectively.
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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended March 31, 1997 were $1,228,742,052 and
$1,564,277,747, respectively.
Net realized and unrealized gains (losses) as of March 31, 1997 were
as follows:
Realized Unrealized
Gains Losses
Long-term investments $235,761,831 $(147,001,305)
Short-term investments 459 --
Foreign currency transactions -- (5)
------------ -------------
Total $235,762,290 $(147,001,310)
============ =============
As of March 31, 1997, net unrealized depreciation for Federal income
tax purposes aggregated $158,182,264, of which $29,610,980 related
to appreciated securities and $187,793,244 related to depreciated
securities. The aggregate cost of investments at March 31, 1997 for
Federal income tax purposes was $874,540,658.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $273,854,666 and $39,662,007 for the years ended March 31, 1997
and March 31, 1996, respectively.
Transactions in capital shares for each class were as follows:
<PAGE>
Class A Shares for the
Year Ended Dollar
March 31, 1997 Shares Amount
Shares sold 12,264,759 $ 62,702,121
Shares issued to shareholders in
reinvestment of distributions 3,468,111 17,167,147
------------ ------------
Total issued 15,732,870 79,869,268
Shares redeemed (23,090,217) (118,937,167)
------------ ------------
Net decrease (7,357,347) $(39,067,899)
============ ============
Class A Shares for the
Year Ended Dollar
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
Year Ended Dollar
March 31, 1997 Shares Amount
Shares sold 18,468,222 $ 90,190,537
Shares issued to shareholders in
reinvestment of distributions 6,005,201 28,824,967
------------- -------------
Total issued 24,473,423 119,015,504
Shares redeemed (66,039,743) (326,159,610)
Automatic conversion of shares (505,918) (2,524,115)
------------- -------------
Net decrease (42,072,238) $(209,668,221)
============= =============
<PAGE>
Class B Shares for the
Year Ended Dollar
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)
============ ============
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Class C Shares for the Year Dollar
Ended March 31, 1997 Shares Amount
Shares sold 1,668,621 $ 8,095,294
Shares issued to shareholders in
reinvestment of distributions 310,392 1,480,569
------------ ------------
Total issued 1,979,013 9,575,863
Shares redeemed (4,779,670) (23,555,658)
------------ ------------
Net decrease (2,800,657) $(13,979,795)
============ ============
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 Year Dollar
Ended March 31, 1997 Shares Amount
<PAGE>
Shares sold 3,867,166 $ 19,608,228
Automatic conversion of shares 491,920 2,524,115
Shares issued to shareholders in
reinvestment of distributions 548,896 2,711,548
------------ ------------
Total issued 4,907,982 24,843,891
Shares redeemed (7,026,818) (35,982,642)
------------ ------------
Net decrease (2,118,836) $(11,138,751)
============ ============
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
============ ============
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Technology Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Technology Fund, Inc. as of March 31, 1997, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period
then ended and the period April 27, 1992 (commencement of
operations) to March 31, 1993. These financial statements and the
financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at March
31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Technology Fund, Inc. as of March 31, 1997, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 2, 1997
</AUDIT-REPORT>
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions
paid by Merrill Lynch Technology Fund, Inc. during its taxable year
ended March 31, 1997:
<CAPTION>
Domestic Interest Domestic
Qualifying From Non-Qualifying Total Long-Term
Record Payable Ordinary Federal Ordinary Ordinary Capital
Date Date Income Obligations Income Income Gains
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares 12/16/96 12/24/96 $.000823 $.000421 $.244676 $.245920 $.197112
Class B Shares 12/16/96 12/24/96 $.000605 $.000310 $.179919 $.180834 $.197112
Class C Shares 12/16/96 12/24/96 $.000592 $.000303 $.176033 $.176928 $.197112
Class D Shares 12/16/96 12/24/96 $.000772 $.000396 $.229753 $.230921 $.197112
The qualifying domestic ordinary income qualifies for the dividends
received deduction for corporations.
<PAGE>
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt
from state income tax.
Please retain this information for your records.
</TABLE>
