MERRILL LYNCH
TECHNOLOGY
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Quarterly Report
December 31, 1997
<PAGE>
MERRILL LYNCH TECHNOLOGY FUND, INC.
Worldwide Ten Largest Holdings Percent of
Investments Represented in the Portfolio Net Assets
As of 12/31/97
Creative Technology Ltd. ........................ 29.1%
National Semiconductor Corporation .............. 9.1
Applied Materials, Inc. ......................... 5.7
Teradyne, Inc. .................................. 4.6
Integrated Device Technology, Inc. .............. 4.6
Texas Instruments, Inc. ......................... 4.5
KLA-Tencor Corporation .......................... 4.5
Novellus Systems, Inc. .......................... 4.3
Compaq Computer Corporation ..................... 4.1
Linear Technology Corporation ................... 3.9
Industries Percent of
Represented in the Portfolio Net Assets
Microcomputer Peripherals ....................... 31.9%
Semiconductor Capital Equipment ................. 23.1
Semiconductors--Analog .......................... 14.9
Semiconductors--Memory .......................... 11.1
Semiconductors--Logic ........................... 4.6
Computers ....................................... 4.1
Application Specific Integrated Circuits ........ 3.9
Semiconductors--Microprocessors ................. 3.9
Internet Software ............................... 1.9
Officers and Arthur Zeikel, President and Director
Directors 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, Senior 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
<PAGE>
Merrill Lynch Technology Fund, Inc., December 31, 1997
DEAR SHAREHOLDER
Many technology stocks declined 35%-70% during the December quarter. In most
cases, the declines were worse than those experienced during the stock market
crash of 1987 and the third quarter of 1990 (when Iraq invaded Kuwait). Merrill
Lynch Technology Fund, Inc. also suffered a substantial decline. For the three
months ended December 31, 1997, the Fund's total returns for Class A, Class B,
Class C and Class D Shares were -33.50%, -33.51%, -33.69% and -33.51%,
respectively. As a consequence, for the 12 months ended December 31, 1997 the
Fund's Class A, Class B, Class C and Class D Shares had total returns of -3.58%,
- -4.43%, -4.70% and -3.87%, respectively.
Two factors contributed to these declines. First, and most important, the Fund
ended the June quarter with a cash position of 42% of net assets. However, in
July and August we reinvested the cash. Second, we concentrated the additional
investments in semiconductor and semiconductor capital equipment stocks. This
action resulted in a 25% gain for the Fund in the September quarter.
Unfortunately, the Fund declined sharply in October. Furthermore, semiconductor
and semiconductor capital equipment stocks were among the hardest hit because a
very large percentage of the industry's revenue comes from Asia. In addition,
the stocks were up the most among all technology stocks for the year, so they
were ripe for profit-taking.
In our September report to shareholders, we expressed our belief that most of
the bad news had been discounted by mid-November. We were wrong. The Fund
declined sharply again during the first two weeks of December. By mid-December a
consensus had formed among brokerage firms' analysts that the outlook for
technology companies was unattractive. Despite the negative environment,
technology stocks started to recover. We believe the bad news was discounted, in
most cases.
Since December 31, 1997, the Fund has rallied more than 25% from its low in
December. We believe the worst is behind us, and as of this writing the Fund is
fully invested.
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 annual
report to shareholders.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ James K. Renck
James K. Renck
Senior Vice President and
Portfolio Manager
February 17, 1998
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:
o 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.
o 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.)
o 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.
o 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.
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
========================================================================
Year Ended 12/31/97 - 3.58% - 8.65%
------------------------------------------------------------------------
Five Years Ended 12/31/97 +10.55 + 9.36
------------------------------------------------------------------------
Inception (4/27/92) through 12/31/97 +15.46 +14.37
------------------------------------------------------------------------
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
========================================================================
Year Ended 12/31/97 - 4.43% - 7.26%
------------------------------------------------------------------------
Five Years Ended 12/31/97 + 9.41 + 9.41
------------------------------------------------------------------------
Inception (4/27/92) through 12/31/97 +14.30 +14.30
------------------------------------------------------------------------
*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 12/31/97 - 4.70% - 5.40%
------------------------------------------------------------------------
Inception (10/21/94) through 12/31/97 - 0.47 - 0.47
------------------------------------------------------------------------
*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 12/31/97 - 3.87% - 8.91%
------------------------------------------------------------------------
Inception (10/21/94) through 12/31/97 + 0.34 - 1.34
------------------------------------------------------------------------
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
2 & 3
<PAGE>
Merrill Lynch Technology Fund, Inc., December 31, 1997
PERFORMANCE DATA (concluded)
Performance
Summary--
Class A Shares
<TABLE>
<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
--------------------------------------------------------------------------------------------------
1996 5.20 4.98 0.197 0.246 + 4.34
--------------------------------------------------------------------------------------------------
1997 4.98 3.89 -- 1.216 - 3.58
--------------------------------------------------------------------------------------------------
Total $0.199 Total $3.972
==================================================================================================
Cumulative total return as of 12/31/97: +126.30%**
==================================================================================================
</TABLE>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if sales charge
was included.
Performance
Summary--
Class B Shares
<TABLE>
<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
--------------------------------------------------------------------------------------------------
1996 5.04 4.82 0.197 0.181 + 3.17
--------------------------------------------------------------------------------------------------
1997 4.82 3.71 -- 1.201 - 4.43
--------------------------------------------------------------------------------------------------
Total $0.199 Total $3.818
==================================================================================================
Cumulative total return as of 12/31/97: +113.68%**
==================================================================================================
</TABLE>
*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.
Performance
Summary--
Class C Shares
<TABLE>
<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
--------------------------------------------------------------------------------------------------
1996 5.02 4.80 $0.197 0.177 + 3.12
--------------------------------------------------------------------------------------------------
1997 4.80 3.68 -- 1.201 - 4.70
--------------------------------------------------------------------------------------------------
Total $0.197 Total $2.062
==================================================================================================
Cumulative total return as of 12/31/97: - 1.50%**
==================================================================================================
</TABLE>
*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.
Performance
Summary--
Class D Shares
<TABLE>
<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
--------------------------------------------------------------------------------------------------
1996 5.19 4.97 $0.197 0.231 + 4.06
--------------------------------------------------------------------------------------------------
1997 4.97 3.87 -- 1.213 - 3.87
--------------------------------------------------------------------------------------------------
Total $0.197 Total $2.134
==================================================================================================
Cumulative total return as of 12/31/97: + 1.09%**
==================================================================================================
</TABLE>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if sales charge
was included.
Recent
Performance
Results*
<TABLE>
<CAPTION>
12 Month 3 Month
12/31/97 9/30/97 12/31/96 % Change % Change
=================================================================================================
<S> <C> <C> <C> <C> <C>
Class A Shares $3.89 $5.85 $4.98 - 21.89% - 33.50%
-------------------------------------------------------------------------------------------------
Class B Shares 3.71 5.58 4.82 - 23.03 - 33.51
-------------------------------------------------------------------------------------------------
Class C Shares 3.68 5.55 4.80 - 23.33 - 33.69
-------------------------------------------------------------------------------------------------
Class D Shares 3.87 5.82 4.97 - 22.13 - 33.51
-------------------------------------------------------------------------------------------------
Class A Shares--Total Return - 3.58(1) - 33.50
-------------------------------------------------------------------------------------------------
Class B Shares--Total Return - 4.43(2) - 33.51
-------------------------------------------------------------------------------------------------
Class C Shares--Total Return - 4.70(2) - 33.69
-------------------------------------------------------------------------------------------------
Class D Shares--Total Return - 3.87(3) - 33.51
=================================================================================================
</TABLE>
*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 $1.216 per share ordinary income
dividends.
(2) Percent change includes reinvestment of $1.201 per share ordinary income
dividends.
(3) Percent change includes reinvestment of $1.213 per share ordinary income
dividends.
4 & 5
<PAGE>
Merrill Lynch Technology Fund, Inc., December 31, 1997
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Percent of
COUNTRY Industries Held Stocks Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Netherlands Semiconductor 102,000 ASM Lithography Holding N.V. (ADR)* $ 8,539,000 $ 6,885,000 1.2%
Capital Equipment
--------------------------------------------------------------------------------------------------------------------
Total Investments in the Netherlands 8,539,000 6,885,000 1.2
==================================================================================================================================
United States Application Specific 1,315,000 C-Cube Microsystems, Inc. 42,748,640 21,368,750 3.9
Integrated Circuits
--------------------------------------------------------------------------------------------------------------------
Computers 400,000 Compaq Computer Corporation 24,959,440 22,575,000 4.1
--------------------------------------------------------------------------------------------------------------------
Internet Software 278,000 Cybercash, Inc. 13,422,626 3,475,000 0.6
300,000 E* TRADE Group, Inc. 8,250,000 6,900,000 1.3
------------ ----------- ----
21,672,626 10,375,000 1.9
--------------------------------------------------------------------------------------------------------------------
Microcomputer 7,244,350 Creative Technology Ltd. 99,780,078 158,470,156 29.1
Peripherals 755,000 Quantum Corporation 28,771,560 15,147,188 2.8
------------ ----------- ----
128,551,638 173,617,344 31.9
--------------------------------------------------------------------------------------------------------------------
Semiconductor 150,000 Ade Corporation 4,633,000 2,606,250 0.5
Capital 1,040,000 Applied Materials, Inc. 41,857,915 31,265,000 5.7
Equipment 632,000 KLA-Tencor Corporation 36,013,820 24,371,500 4.5
681,600 Kulicke and Soffa Industries, Inc. 27,587,086 12,694,800 2.3
722,500 Novellus Systems, Inc. 37,184,902 23,345,781 4.3
786,300 Teradyne, Inc. 35,524,783 25,161,600 4.6
------------ ----------- ----
182,801,506 119,444,931 21.9
--------------------------------------------------------------------------------------------------------------------
Semiconductors-- 372,100 Linear Technology Corporation 21,940,790 21,395,750 3.9
Analog 300,000 Maxim Integrated Products, Inc. 9,623,125 10,350,000 1.9
1,915,800 National Semiconductor Corporation 67,165,974 49,691,063 9.1
------------ ----------- ----
98,729,889 81,436,813 14.9
--------------------------------------------------------------------------------------------------------------------
Semiconductors-- 2,678,500 Integrated Device Technology, Inc. 31,115,506 25,110,937 4.6
Logic
--------------------------------------------------------------------------------------------------------------------
Semiconductors-- 2,361,900 Cypress Semiconductor Corporation 33,416,613 20,076,150 3.7
Memory 610,000 Micron Technology, Inc. 15,905,883 15,860,000 2.9
550,000 Texas Instruments, Inc. 25,738,680 24,750,000 4.5
------------ ----------- ----
75,061,176 60,686,150 11.1
--------------------------------------------------------------------------------------------------------------------
Semiconductors-- 300,000 Intel Corporation 23,858,750 21,056,250 3.9
Microprocessors
--------------------------------------------------------------------------------------------------------------------
Total Investments in the United States 629,499,171 535,671,175 98.2
<CAPTION>
====================================================================================================================================
SHORT-TERM Face
SECURITIES Amount Issue
====================================================================================================================================
Commercial Paper** $ 130,000 General Motors Acceptance Corp.,
6.75% due 1/02/1998 129,976 129,976 0.0
--------------------------------------------------------------------------------------------------------------------
US Government 1,940,000 Federal Home Loan Banks, 5.57% due
Agency Obligations** 1/05/1998 1,938,799 1,938,799 0.4
--------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities 2,068,775 2,068,775 0.4
====================================================================================================================================
Total Investments $640,106,946 544,624,950 99.8
============
Other Assets Less Liabilities 818,744 0.2
------------ -----
Net Assets $545,443,694 100.0%
============ =====
====================================================================================================================================
<CAPTION>
Net Asset Value: Class A--Based on net assets of $202,055,088 and 51,893,302
shares outstanding $ 3.89
===========
Class B--Based on net assets of $293,393,366 and 79,099,581
shares outstanding $ 3.71
===========
Class C--Based on net assets of $15,695,993 and 4,260,613
shares outstanding $ 3.68
===========
Class D--Based on net assets of $34,299,247 and 8,851,681
shares outstanding $ 3.87
===========
====================================================================================================================================
</TABLE>
* American Depositary Receipts (ADR).
** 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.
PORTFOLIO CHANGES
For the Quarter Ended December 31, 1997
===============================================================================
Additions
ASM Lithography Holding N.V. (ADR)
Ade Corporation
Compaq Computer Corporation
Intel Corporation
Micron Technology, Inc.
Novellus Systems, Inc.
*ONSALE, Inc.
Quantum Corporation
===============================================================================
Deletions
3Com Corporation
Acclaim Entertainment, Inc.
Advanced Fibre Communications
Bay Networks, Inc.
Globalstar Telecommunications Ltd.
J.D. Edwards & Company
*ONSALE, Inc.
Tellabs, Inc.
===============================================================================
*Added and deleted in the same quarter.
6 & 7
<PAGE>
This report is not authorized for use as an offer of sale or a 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.
Merrill Lynch
Technology Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #16091--12/97
[Recycle LOGO] Printed on post-consumer recycled paper
