MERRILL LYNCH
TECHNOLOGY
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
March 31, 1999
<PAGE>
MERRILL LYNCH TECHNOLOGY FUND, INC.
Portfolio Information As of 3/31/99
Ten Largest Holdings Represented Percent of
in the Portfolio Net Assets
America Online, Inc. ........................... 6.1%
Microsoft Corporation .......................... 5.6
Maxim Integrated Products, Inc. ................ 3.5
Keane, Inc. .................................... 3.4
Sanmina Corporation ............................ 3.2
Texas Instruments Incorporated ................. 2.9
Flextronics International Ltd. ................. 2.8
Compaq Computer Corporation .................... 2.6
Compuware Corporation .......................... 2.6
Xilinx, Inc. ................................... 2.4
Ten Largest Industries Represented Percent of
in the Portfolio Net Assets
Semiconductors ................................. 15.3%
Software ....................................... 14.9
Telecommunications Equipment ................... 12.0
Internet ....................................... 9.3
Contract Manufacturers ......................... 8.8
Computer Systems ............................... 7.6
Personal Computers ............................. 6.8
Technology Services ............................ 6.0
Data Communications ............................ 4.6
Semiconductor Equipment ........................ 4.2
Officers and Directors
Terry K. Glenn, President and Director
Donald Cecil, Director
Roland M. Machold, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Donald C. Burke, Vice President and Treasurer
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer, Norman R. Harvey, Senior Vice President and Philip
M. Mandel, Secretary of Merrill Lynch Technology Fund, Inc. have recently
retired. Their colleagues at Merrill Lynch Asset Management, L.P. join the
Fund's Board of Directors in wishing Messrs. Richard, Harvey and Mandel well in
their retirements.
- --------------------------------------------------------------------------------
Custodian
The Chase Manhattan Bank
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
DEAR SHAREHOLDER
For the quarter ended March 31, 1999, Merrill Lynch Technology Fund, Inc.'s
total returns for Class A, Class B, Class C and Class D Shares were +3.35%,
+2.95%, +2.98% and +2.99%, respectively. The Fund slightly underperformed the
unmanaged Standard & Poor's (S&P) 500 Index, which posted a +4.98% return for
the same period. However, the Fund's quarterly relative performance masked
significant absolute and relative monthly swings. The Fund's Class A Shares
returned +9.29% in January, -13.44% in February and +9.23% in March. The
corresponding returns for the S&P 500 were +4.18%, -3.11% and +4.00%,
respectively. (Results shown do not reflect sales charges and would be lower if
sales charges were included. Complete performance information can be found on
pages 4-6 of this report to shareholders.) Thus, January and March featured
dramatic outperformance by technology investors while February was absolutely
and relatively poor.
Despite a difficult February, we were surprised by the sector's absolute
strength during the March quarter. In our last report to shareholders, we
forecast that the large-capitalization technology leaders in which we typically
invest might be likely to decline since they had significantly outperformed the
market from the October 8, 1998 trough. According to various financial
publications, the Fund was among the United States' best- performing equity
mutual funds. The Fund's Class A Shares had a total return of +52.8% compared to
the S&P 500's +21.3% in the fourth quarter of 1998 and returned +96.0% (compared
to the S&P 500's +33.9%) from its trough on October 8, 1998 to its January 29,
1999 high.
For the quarter ended March 31, 1999, the Fund benefited from our increased
weighting in semiconductor capital equipment and Internet stocks. Fund
performance was also enhanced by our telecommunications equipment holdings, a
significant exposure since August 1998. On the other hand, the most costly
industry exposure was in software, a group that has been negatively impacted by
two issues. The first is the likelihood that spending on software will be
"crowded out" in 1999 by customers' increasing focus on Year 2000 preparedness
in the second half of the year. We feel that it is too early to make that
definitive of a statement for all types of software, and that such a potential
short-term phenomenon should not impact our long-term investment strategy.
Second, many software companies are under the scrutiny of regulators over
purported aggressive accounting practices. Several software firms have made
acquisitions in recent years. Because software companies have fewer tangible
assets than other businesses, it is difficult to accurately attribute the
goodwill (the excess of the cash paid over the acquired firm's understated book
value) in such transactions. Therefore, at the time of purchase, many software
acquirers immediately wrote off the majority of its price to an account called
"in-process research and development." Although it will not impact cash earnings
or cash flow whatsoever, such aggressive charges may be reversed by the
Securities & Exchange Commission, and more goodwill may be added to the
acquirers' balance sheets that must be amortized over time, in order to lessen
future reported earnings. Although we feel that the software companies held by
the Fund have strong operating prospects, they may have been obscured in
investors' minds by this transitory regulatory cloud.
In terms of individual stocks, we benefited from holding some of the technology
sector's best performers, including Internet stalwart America Online, Inc.;
semiconductor capital equipment leader, Applied Materials, Inc.; computer
systems vendors EMC Corporation and Sun Microsystems, Inc.; personal computer
supplier Gateway 2000, Inc.; and telecommunications equipment players Tellabs,
Inc., ADC Telecommunications, Inc. and Uniphase Corporation. Unfortunately,
performance was hurt by contract manufacturer SCI Systems, Inc.; data networking
vendor 3Com Corporation; distributor Tech Data Corporation; software firms J.D.
Edwards & Company and Network Associates, Inc.; and consultant Keane, Inc. In
our opinion, fundamentals deteriorated significantly enough for these laggards
that we eliminated each position, with the exception of Keane and Network
Associates. Although Keane's revenue transition from Year 2000 business to other
projects has not gone as smoothly as we had hoped, we continue to be bullish on
this company's long-term prospects.
Investment Strategy
In addition to being fully invested in preparation for technology stocks
regaining the market's leadership, our industry decisions included increasing
our exposure in three groups: semiconductors, semiconductor capital equipment
and Internet. Our decision to boost the Fund's semiconductor-related exposure
was based on evidence that the industry probably troughed in the third quarter
of 1998. Consequently, we focused our efforts on semiconductor leaders with
strong intellectual property such as microprocessor vendor Intel Corporation and
communications integrated circuit pioneer Vitesse Semiconductor Corporation. Our
semiconductor capital equipment holdings included the who's who of the key
enabling process technologies for their partners, such as Teradyne, Inc., a
leader in back-end testing. Our decision to increase our Internet exposure was
not to capture improving fundamentals, but to purchase several leadership stocks
that had fallen significantly since technology securities began to tumble in
February 1999. So far, our decision to add to our holdings in the America Online
position, Yahoo! Inc., and initiate a holding in Exodus Communications, Inc. has
been sound.
Fiscal Year in Review
For the 12 months ended March 31, 1999, the Fund's total returns for Class A,
Class B, Class C and Class D Shares were +30.21%, +28.82%, +28.78% and +29.65%,
respectively, outperforming the unmanaged S&P 500 gain of +18.46% for the same
period. The fiscal year was punctuated by several difficult months for
technology stocks, but it also featured strong relative outperformance by this
sector for the full period. The relative momentum for technology companies
continues to build. According to Lipper Analytical Services, Inc., the average
technology fund outperformed the average equity fund by substantial margins over
the 12-month period ended March 31, 1999, as well as the annualized three-year,
five-year and ten-year periods. This is not surprising, since the sector is
steadily becoming a greater portion of the economy and the equity market's
capitalization. In fact, technology currently comprises about one-fifth of the
weight of the S&P 500.
Since August 1998, our overweighted position in contract manufacturing stocks
contributed positively to the performance of the Fund compared to most other
technology funds. For example, one holding, Jabil Circuit, Inc., appreciated
245% from August 31, 1998 to March 31, 1999. Other notable winners were EMC and
Sun Microsystems in computer systems; America Online and Yahoo! (Internet);
Applied Materials and Xilinx, Inc. (semiconductors) and Nokia Oyj (wireless
handsets and infrastructure).
In Conclusion
As always, we will look to prune our portfolio of stocks that may, for
fundamental or valuation reasons, become relatively inferior holdings. Because
investing in the technology sector can be volatile and product cycles move so
quickly, it is very easy to do countless hours of due diligence and still be
wrong. It is one of the reasons why we will remain diversified (our largest
concentration is limited to 25% of assets at time of purchase) across the
sector's 17 industry groups, and only hold up to 5% of our Fund's assets in any
stock at the time of purchase.
In summary, we continue to be short-term cautious (over the next few months) on
the technology sector and the prospects for the Fund. We are more encouraged
about the intermediate term (calendar 1999) outlook. Finally, we could not be
more positive about the sector's secular forecast for 1999.
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,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Paul G. Meeks
Paul G. Meeks
Senior Vice President and
Portfolio Manager
May 17, 1999
- --------------------------------------------------------------------------------
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on Merrill Lynch Technology Fund, Inc.'s Board of Directors.
We are pleased to announce that Terry K. Glenn has been elected President and
Director of the Fund. Mr. Glenn has held the position of Executive Vice
President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors in wishing
him well in his retirement from Merrill Lynch and are pleased that he will
continue as a member of the Fund's Board of Directors.
- --------------------------------------------------------------------------------
2 & 3
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
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 "Recent Performance Results" and
"Average Annual Total Return" 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
[GRAPHIC OMITTED]
A line graph depicting the growth of an investment in the Fund's Class A and
Class B Shares compared to growth of an investment in the S&P 500 Index.
Beginning and ending values are:
4/27/92** 3/99
- --------------------------------------------------------------------------------
ML Technology Fund, Inc.+ --
Class A Shares* $ 9,475 $30,649
MLTechnology Fund, Inc.+ --
Class B Shares* $10,000 $30,122
S&P 500 Index++ $10,000 $37,019
[GRAPHIC OMITTED]
A line graph depicting the growth of an investment in the Fund's Class C and
Class D Shares compared to growth of an investment in the S&P 500 Index.
Beginning and ending values are:
10/21/94** 3/99
- --------------------------------------------------------------------------------
ML Technology Fund, Inc.+ --
Class C Shares* $10,000 $13,891
ML Technology Fund, Inc.+ --
Class D Shares* $ 9,475 $13,637
S&P 500 Index++ $10,000 $30,274
* 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 is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
================================================================================
Year Ended 3/31/99 +30.21% +23.37%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 +10.90 + 9.71
- --------------------------------------------------------------------------------
Inception (4/27/92) through 3/31/99 +18.47 +17.55
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
================================================================================
Year Ended 3/31/99 +28.82% +24.82%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 + 9.78 + 9.78
- --------------------------------------------------------------------------------
Inception (4/27/92) through 3/31/99 +17.26 +17.26
- --------------------------------------------------------------------------------
* 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 3/31/99 +28.78% +27.78%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 + 7.68 + 7.68
- -------------------------------------------------------------------------------
* 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 3/31/99 +29.65% +22.84%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 3/31/99 + 8.54 + 7.23
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
PERFORMANCE DATA (concluded)
Recent Performance Results*
<TABLE>
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
====================================================================================================================================
<S> <C> <C> <C>
ML Technology Fund, Inc. Class A Shares +30.21% +3.35% +223.45%
- ------------------------------------------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class B Shares +28.82 +2.95 +201.22
- ------------------------------------------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class C Shares +28.78 +2.98 + 38.91
- ------------------------------------------------------------------------------------------------------------------------------------
ML Technology Fund, Inc. Class D Shares +29.65 +2.99 + 43.93
====================================================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume reinvestment
of all dividends and capital gains distributions at net asset value on the
ex-dividend date. The Fund's since inception periods are Class A & Class B
Shares, from 4/27/92 to 3/31/99 and Class C & Class D Shares, from 10/21/94
to 3/31/99.
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Stocks Cost (Note 1a) Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Canada Contract Manufacturers 160,000 +Celestica Inc. $ 4,481,968 $ 5,190,000 1.1%
---------------------------------------------------------------------------------------------------------------------
Telecommunications 91,000 Northern Telecom Limited (Nortel) 3,307,777 5,653,375 1.2
Equipment
---------------------------------------------------------------------------------------------------------------------
Total Investments in Canada 7,789,745 10,843,375 2.3
====================================================================================================================================
Finland Telecommunications 67,000 Nokia Oyj 'A' (ADR)* 9,794,277 10,435,250 2.2
Equipment
---------------------------------------------------------------------------------------------------------------------
Total Investments in Finland 9,794,277 10,435,250 2.2
====================================================================================================================================
Israel Telecommunications 141,000 ECI Telecom Limited 3,551,438 4,935,000 1.0
Equipment
---------------------------------------------------------------------------------------------------------------------
Total Investments in Israel 3,551,438 4,935,000 1.0
====================================================================================================================================
Singapore Contract Manufacturers 260,000 +Flextronics International Ltd. 5,518,404 13,292,500 2.8
---------------------------------------------------------------------------------------------------------------------
Total Investments in Singapore 5,518,404 13,292,500 2.8
====================================================================================================================================
Sweden Telecommunications 345,000 Telefonaktiebolaget LM Ericsson (ADR)* 7,905,899 8,215,313 1.7
Equipment
---------------------------------------------------------------------------------------------------------------------
Total Investments in Sweden 7,905,899 8,215,313 1.7
====================================================================================================================================
Taiwan Semiconductors 229,000 +Taiwan Semiconductor
Manufacturing Company Ltd. (ADR)* 4,892,068 5,410,125 1.1
---------------------------------------------------------------------------------------------------------------------
Total Investments in Taiwan 4,892,068 5,410,125 1.1
====================================================================================================================================
United States Components 251,800 General Cable Corporation 3,890,072 2,659,637 0.6
---------------------------------------------------------------------------------------------------------------------
Computer Systems 71,000 +EMC Corporation 3,274,350 9,070,250 1.9
170,300 +Electronics for Imaging, Inc. 3,253,956 6,769,425 1.4
28,500 International Business Machines
Corporation 4,971,132 5,051,625 1.0
110,000 +Network Appliance, Inc. 4,350,577 5,582,500 1.2
79,000 +Sun Microsystems, Inc. 3,219,250 9,875,000 2.1
------------ ------------ -----
19,069,265 36,348,800 7.6
---------------------------------------------------------------------------------------------------------------------
Contract Manufacturers 204,000 +Jabil Circuit, Inc. 3,711,358 8,262,000 1.7
243,800 +Sanmina Corporation 5,448,118 15,481,300 3.2
------------ ------------ -----
9,159,476 23,743,300 4.9
---------------------------------------------------------------------------------------------------------------------
Data Communications 125,700 +Ascend Communications, Inc. 5,075,929 10,519,519 2.2
106,000 +Cisco Systems, Inc. 5,485,500 11,613,625 2.4
------------ ------------ -----
10,561,429 22,133,144 4.6
---------------------------------------------------------------------------------------------------------------------
Distribution 294,000 +Ingram Micro Inc. (Class A) 12,212,655 6,706,875 1.4
---------------------------------------------------------------------------------------------------------------------
Electronic Design 322,000 +Cadence Design Systems, Inc. 7,655,267 8,291,500 1.7
Automation 111,000 +Synopsys, Inc. 4,072,312 5,959,313 1.3
------------ ------------ -----
11,727,579 14,250,813 3.0
---------------------------------------------------------------------------------------------------------------------
Internet 31,200 +Amazon.com, Inc. 4,680,774 5,368,350 1.1
199,000 +America Online, Inc. 14,645,245 29,054,000 6.1
37,000 +Exodus Communications, Inc. 3,203,005 4,953,375 1.0
31,600 +Yahoo! Inc. 4,760,549 5,314,725 1.1
------------ ------------ -----
27,289,573 44,690,450 9.3
---------------------------------------------------------------------------------------------------------------------
Medical Technology 70,000 Medtronic, Inc. 4,659,200 5,022,500 1.0
---------------------------------------------------------------------------------------------------------------------
Peripherals 49,000 +Lexmark International Group,
Inc. (Class A) 4,435,176 5,475,750 1.2
77,300 Pitney Bowes Inc. 4,752,297 4,927,875 1.0
210,000 +Seagate Technology, Inc. 5,275,330 6,208,125 1.3
------------ ------------ -----
14,462,803 16,611,750 3.5
---------------------------------------------------------------------------------------------------------------------
Personal Computers 401,800 Compaq Computer Corporation 12,929,998 12,732,037 2.6
234,000 +Dell Computer Corporation 7,648,530 9,564,750 2.0
154,400 +Gateway 2000, Inc. 7,201,451 10,586,050 2.2
------------ ------------ -----
27,779,979 32,882,837 6.8
---------------------------------------------------------------------------------------------------------------------
Semiconductor Equipment 78,000 +Applied Materials, Inc. 4,717,752 4,811,625 1.0
82,900 +KLA-Tencor Corporation 4,757,648 4,025,831 0.8
91,700 +Novellus Systems, Inc. 5,790,955 5,043,500 1.1
117,100 +Teradyne, Inc. 4,699,139 6,389,269 1.3
------------ ------------ -----
19,965,494 20,270,225 4.2
---------------------------------------------------------------------------------------------------------------------
Semiconductors 135,000 +Altera Corporation 5,606,563 8,024,062 1.7
78,500 Intel Corporation 8,484,002 9,331,687 1.9
310,200 +Maxim Integrated Products, Inc. 11,140,713 16,770,188 3.5
76,800 +PMC-Sierra, Inc. 2,977,073 5,462,400 1.1
</TABLE>
7 & 8
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Stocks Cost (Note 1a) Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
United States Semiconductors 137,700 Texas Instruments Incorporated $ 7,612,598 $ 13,666,725 2.9%
(concluded) (concluded) 68,000 +Vitesse Semiconductor Corporation 1,769,278 3,438,250 0.7
289,000 +Xilinx, Inc. 6,598,206 11,704,500 2.4
------------ ------------ -----
44,188,433 68,397,812 14.2
---------------------------------------------------------------------------------------------------------------------
Software 155,000 Autodesk, Inc. 4,194,285 6,267,812 1.3
210,700 +BMC Software, Inc. 9,975,592 7,809,069 1.6
107,000 +Citrix Systems, Inc. 2,988,875 4,066,000 0.8
520,000 +Compuware Corporation 12,485,830 12,415,000 2.6
298,000 +Microsoft Corporation 12,821,035 26,689,625 5.6
178,300 +Network Associates, Inc. 8,402,937 5,471,581 1.1
145,500 +Oracle Corporation 5,166,705 3,837,563 0.8
64,600 +VERITAS Software Corporation 4,262,894 5,192,225 1.1
------------ ------------ -----
60,298,153 71,748,875 14.9
---------------------------------------------------------------------------------------------------------------------
Technology Services 106,800 +DST Systems, Inc. 5,618,776 6,414,675 1.3
773,000 +Keane, Inc. 25,797,651 16,474,563 3.4
224,100 +Unisys Corporation 6,733,050 6,204,769 1.3
------------ ------------ -----
38,149,477 29,094,007 6.0
---------------------------------------------------------------------------------------------------------------------
Telecommunications 83,000 +MCI WorldCom Inc. 4,144,250 7,345,500 1.5
---------------------------------------------------------------------------------------------------------------------
Telecommunications 97,000 +ADC Telecommunications, Inc. 2,755,285 4,625,687 0.9
Equipment 106,000 Lucent Technologies Inc. 7,634,429 11,421,500 2.4
77,000 +Tellabs, Inc. 3,613,810 7,526,750 1.6
43,000 +Uniphase Corporation 1,720,000 4,934,250 1.0
------------ ------------ -----
15,723,524 28,508,187 5.9
---------------------------------------------------------------------------------------------------------------------
Total Investments in the
United States 323,281,362 430,414,712 89.4
====================================================================================================================================
Total Investments in Stocks 362,733,193 483,546,275 100.5
====================================================================================================================================
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Commercial Paper** $11,627,000 General Electric Capital Corp.,
5.08% due 4/01/1999 11,627,000 11,627,000 2.4
---------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities 11,627,000 11,627,000 2.4
====================================================================================================================================
Total Investments $374,360,193 495,173,275 102.9
============
Liabilities in Excess of Other Assets (13,787,543) (2.9)
------------ -----
Net Assets $481,385,732 100.0%
============ =====
====================================================================================================================================
</TABLE>
* American Depositary Receipts (ADR).
** Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rate paid at the time of purchase by the Fund.
+ Non-income producing security.
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of March 31, 1999
===================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$374,360,193) (Note 1a) .................... $495,173,275
Cash ............................................................................... 1,804
Receivables:
Capital shares sold .............................................................. $ 788,592
Securities sold .................................................................. 676,267
Dividends ........................................................................ 108,799 1,573,658
----------
Prepaid registration fees and other assets (Note 1f) ............................... 15,925
------------
Total assets ....................................................................... 496,764,662
------------
===================================================================================================================================
Liabilities: Payables:
Securities purchased ............................................................. 11,294,373
Capital shares redeemed .......................................................... 3,195,884
Investment adviser (Note 2) ...................................................... 416,118
Distributor (Note 2) ............................................................. 209,043 15,115,418
----------
Accrued expenses and other liabilities ............................................. 263,512
------------
Total liabilities .................................................................. 15,378,930
------------
===================================================================================================================================
Net Assets: Net assets ......................................................................... $481,385,732
============
===================================================================================================================================
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized ..... $ 3,858,752
Consist of: Class B Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized ..... 4,192,488
Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized ..... 260,179
Class D Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized ..... 623,853
Paid-in capital in excess of par ................................................... 480,484,553
Accumulated realized capital losses on investments and foreign currency
transactions--net (Note 5) ......................................................... (128,847,175)
Unrealized appreciation on investments--net ........................................ 120,813,082
------------
Net assets ......................................................................... $481,385,732
============
===================================================================================================================================
Net Asset Class A--Based on net assets of $214,430,701 and 38,587,524 shares outstanding ..... $ 5.56
Value: ============
Class B--Based on net assets of $219,062,343 and 41,924,879 shares outstanding ..... $ 5.23
============
Class C--Based on net assets of $13,496,926 and 2,601,788 shares outstanding ....... $ 5.19
============
Class D--Based on net assets of $34,395,762 and 6,238,529 shares outstanding ....... $ 5.51
============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended March 31, 1999
===================================================================================================================================
<S> <C> <C> <C>
Investment Interest and discount earned .............................................. $ 1,248,301
Income Dividends (net of $22,973 foreign withholding tax) ........................ 414,053
(Notes 1d & 1e): ------------
Total income .............................................................. 1,662,354
------------
===================================================================================================================================
Expenses: Investment advisory fees (Note 2) ......................................... $ 4,435,074
Account maintenance and distribution fees--Class B (Note 2) ............... 2,134,708
Transfer agent fees--Class B (Note 2) ..................................... 692,653
Transfer agent fees--Class A (Note 2) ..................................... 532,135
Account maintenance and distribution fees--Class C (Note 2) ............... 116,578
Printing and shareholder reports .......................................... 112,382
Accounting services (Note 2) .............................................. 84,186
Transfer agent fees--Class D (Note 2) ..................................... 80,452
Professional fees ......................................................... 75,912
Account maintenance fees--Class D (Note 2) ................................ 71,984
Registration fees (Note 1f) ............................................... 66,233
Directors' fees and expenses .............................................. 40,895
Transfer agent fees--Class C (Note 2) ..................................... 40,719
Custodian fees ............................................................ 32,745
Pricing fees .............................................................. 465
Other ..................................................................... 11,619
-----------
Total expenses ............................................................ 8,528,740
------------
Investment loss--net ...................................................... (6,866,386)
------------
===================================================================================================================================
Realized & Unreal- Realized gain (loss) from:
ized Gain (Loss) on Investments--net ........................................................ 48,091,852
Investments & Foreign currency transactions--net ...................................... (6,894) 48,084,958
Foreign Currency -----------
Transactions -- Change in unrealized appreciation on investments and foreign
Net (Notes 1b, 1c, currency transactions--net ................................................ 65,974,296
1e & 3): ------------
Net Increase in Net Assets Resulting from Operations ...................... $107,192,868
============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended March 31,
------------------------------
Increase (Decrease) in Net Assets: 1999 1998
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment loss--net ..................................................... $ (6,866,386) $ (9,711,420)
Realized gain (loss) on investments and foreign currency
transactions--net ........................................................ 48,084,958 (157,919,266)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net ....................................... 65,974,296 201,840,096
------------- -------------
Net increase in net assets resulting from operations ..................... 107,192,868 34,209,410
------------- -------------
===================================================================================================================================
Distributions to Realized gain on investments--net:
Shareholders Class A ................................................................ -- (44,407,215)
(Note 1g): Class B ................................................................ -- (72,911,047)
Class C ................................................................ -- (3,812,765)
Class D ................................................................ -- (7,217,791)
In excess of realized gain on investments--net:
Class A ................................................................ -- (6,580,664)
Class B ................................................................ -- (10,804,619)
Class C ................................................................ -- (565,010)
Class D ................................................................ -- (1,069,598)
------------- -------------
Net decrease in net assets resulting from distributions to shareholders .. -- (147,368,709)
------------- -------------
===================================================================================================================================
Capital Share Net increase (decrease) in net assets derived from capital share
Transactions (Note 4): transactions ............................................................. (172,579,255) 7,796,208
------------- -------------
===================================================================================================================================
Net Assets: Total decrease in net assets ............................................. (65,386,387) (105,363,091)
Beginning of year ........................................................ 546,772,119 652,135,210
------------- -------------
End of year .............................................................. $ 481,385,732 $ 546,772,119
============= =============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios Class A++
have been derived from information provided ------------------------------------------------------------
in the financial statements. For the Year Ended March 31,
------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ............. $ 4.27 $ 5.07 $ 4.82 $ 4.89 $ 5.17
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .................. (.04) (.04) (.03) (.03) .05
Realized and unrealized gain on investments
and foreign currency transactions--net ......... 1.33 .46 .72 .28 .11
-------- -------- -------- -------- --------
Total from investment operations ............... 1.29 .42 .69 .25 .16
Less dividends and distributions:
Investment income--net ....................... -- -- -- -- (.02)
In excess of investment income--net .......... -- -- -- -- (.01)
Realized gain on investments--net ............ -- (1.06) (.44) (.17) (.05)
In excess of realized gain on
investments--net ............................. -- (.16) -- (.15) (.36)
-------- -------- -------- -------- --------
Total dividends and distributions .............. -- (1.22) (.44) (.32) (.44)
-------- -------- -------- -------- --------
Net asset value, end of year ................... $ 5.56 $ 4.27 $ 5.07 $ 4.82 $ 4.89
======== ======== ======== ======== ========
================================================================================================================================
Total Investment Based on net asset value per share ............. 30.21% 3.96% 14.60% 5.15% 2.86%
Return:** ======== ======== ======== ======== ========
================================================================================================================================
Ratios to Average Expenses ....................................... 1.38% 1.27% 1.30% 1.31% 1.33%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net .................. (1.01%) (.82%) (.63%) (.62%) .87%
======== ======== ======== ======== ========
================================================================================================================================
Supplemental Net assets, end of year (in thousands) ......... $214,431 $211,443 $222,118 $246,909 $254,188
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................. 155.34% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
The following per share data and ratios Class B++
have been derived from information provided ------------------------------------------------------------
in the financial statements. For the Year Ended March 31,
------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ............. $ 4.06 $ 4.89 $ 4.66 $ 4.78 $ 5.08
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net ........................... (.08) (.09) (.08) (.09) (.01)
Realized and unrealized gain on investments
and foreign currency transactions--net ......... 1.25 .46 .69 .29 .11
-------- -------- -------- -------- --------
Total from investment operations ............... 1.17 .37 .61 .20 .10
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ....................... -- -- -- -- --++++
In excess of investment income--net .......... -- -- -- -- --++++
Realized gain on investments--net ............ -- (1.05) (.38) (.17) (.05)
In excess of realized gain on
investments--net ............................. -- (.15) -- (.15) (.35)
-------- -------- -------- -------- --------
Total dividends and distributions .............. -- (1.20) (.38) (.32) (.40)
-------- -------- -------- -------- --------
Net asset value, end of year ................... $ 5.23 $ 4.06 $ 4.89 $ 4.66 $ 4.78
======== ======== ======== ======== ========
================================================================================================================================
Total Investment Based on net asset value per share ............. 28.82% 3.09% 13.20% 4.21% 1.78%
Return:** ======== ======== ======== ======== ========
================================================================================================================================
Ratios to Average Expenses ....................................... 2.42% 2.31% 2.35% 2.34% 2.38%
Net Assets: ======== ======== ======== ======== ========
Investment loss--net ........................... (2.04%) (1.85%) (1.66%) (1.65%) (.10%)
======== ======== ======== ======== ========
================================================================================================================================
Supplemental Net assets, end of year (in thousands) ......... $219,062 $285,193 $375,630 $553,819 $614,935
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................. 155.34% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C++
-----------------------------------------------------------
For the
The following per share data and ratios Period
have been derived from information provided Oct. 21,
in the financial statements. For the Year Ended March 31, 1994+ to
----------------------------------------------- March 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........... $ 4.03 $ 4.87 $ 4.64 $ 4.76 $ 5.75
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net ........................... (.08) (.09) (.08) (.09) --
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .............................. 1.24 .45 .68 .29 (.62)
-------- -------- -------- -------- --------
Total from investment operations ............... 1.16 .36 .60 .20 (.62)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ....................... -- -- -- -- (.02)
In excess of investment income--net .......... -- -- -- -- (.01)
Realized gain on investments--net ............ -- (1.05) (.37) (.17) (.04)
In excess of realized gain on
investments--net ............................. -- (.15) -- (.15) (.30)
-------- -------- -------- -------- --------
Total dividends and distributions .............. -- (1.20) (.37) (.32) (.37)
-------- -------- -------- -------- --------
Net asset value, end of period ................. $ 5.19 $ 4.03 $ 4.87 $ 4.64 $ 4.76
======== ======== ======== ======== ========
===============================================================================================================================
Total Investment Based on net asset value per share ............. 28.78% 2.87% 13.19% 4.22% (11.11%)+++
Return:** ======== ======== ======== ======== ========
===============================================================================================================================
Ratios to Average Expenses ....................................... 2.44% 2.33% 2.37% 2.36% 2.59%*
Net Assets: ======== ======== ======== ======== ========
Investment loss--net ........................... (2.06%) (1.87%) (1.68%) (1.69%) (.02%)*
======== ======== ======== ======== ========
===============================================================================================================================
Supplemental Net assets, end of period (in thousands) ....... $ 13,497 $ 15,424 $ 19,015 $ 31,090 $ 23,259
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................. 155.34% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
===============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
++++ Amount is less than $.01 per share.
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class D++
The following per share data and ratios -----------------------------------------------------------
have been derived from information provided For the
in the financial statements. Period
Oct. 21,
For the Year Ended March 31, 1994+ to
----------------------------------------------- March 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........... $ 4.25 $ 5.05 $ 4.81 $ 4.89 $ 5.88
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net ........................... (.05) (.05) (.04) (.05) (.02)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .............................. 1.31 .46 .71 .29 (.60)
-------- -------- -------- -------- --------
Total from investment operations ............... 1.26 .41 .67 .24 (.62)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ....................... -- -- -- -- (.02)
In excess of investment income--net .......... -- -- -- -- (.01)
Realized gain on investments--net ............ -- (1.05) (.43) (.17) (.04)
In excess of realized gain on
investments--net ............................. -- (.16) -- (.15) (.30)
-------- -------- -------- -------- --------
Total dividends and distributions .............. -- (1.21) (.43) (.32) (.37)
-------- -------- -------- -------- --------
Net asset value, end of period ................. $ 5.51 $ 4.25 $ 5.05 $ 4.81 $ 4.89
======== ======== ======== ======== ========
===============================================================================================================================
Total Investment Based on net asset value per share ............. 29.65% 3.90% 14.09% 4.94% (10.76%)+++
Return:** ======== ======== ======== ======== ========
===============================================================================================================================
Ratios to Average Expenses ....................................... 1.62% 1.52% 1.55% 1.56% 1.80%*
Net Assets: ======== ======== ======== ======== ========
Investment loss--net ........................... (1.25%) (1.07%) (.88%) (.89%) (.81%)*
======== ======== ======== ======== ========
===============================================================================================================================
Supplemental Net assets, end of period (in thousands) ....... $ 34,396 $ 34,712 $ 35,372 $ 43,858 $ 32,646
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................. 155.34% 206.40% 176.51% 108.36% 175.57%
======== ======== ======== ======== ========
===============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
See Notes to Financial Statements.
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's financial statements are prepared in
accordance with generally accepted accounting principles which may require the
use of management accruals and estimates. 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
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). 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.
o Financial futures contracts--The Company may purchase or sell financial
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.
o Options--The Company is authorized to write and purchase covered call and
purchase 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.
o 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.
o 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
14 & 15
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
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.
(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) Prepaid registration fees--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 $6,866,386 have been reclassified between undistributed
net investment income and paid-in capital in excess of par and $6,894 has been
reclassified between paid-in capital in excess of par and accumulated net
realized capital losses. These reclassifications have no effect on net assets or
net asset values per share.
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 entered
into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is 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 adopted by the Company, in accordance with
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 Incorporated ("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, 1999, 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 ............................. $1,501 $13,321
Class D ............................. $2,409 $34,372
- --------------------------------------------------------------------------------
For the year ended March 31, 1999, MLPF&S received contingent deferred sales
charges of $568,106 and $9,560 relating to transactions in Class B and Class C
Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $100,994 relating to transactions subject to front-end sales charge
waivers in Class A Shares.
In addition, MLPF&S received $20,054 in commissions on the execution of
portfolio security transactions for the Company for the year ended March 31,
1999.
Financial Data Services, Inc. ("FDS"), 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, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended March 31, 1999 were $668,795,337 and $834,719,419, respectively.
Net realized gains (losses) for the year ended March 31, 1999 and net unrealized
gains as of March 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- --------------------------------------------------------------------------------
Long-term investments ............... $48,092,085 $120,813,082
Short-term investments .............. (233) --
Foreign currency transactions ....... (6,894) --
----------- ------------
Total ............................... $48,084,958 $120,813,082
=========== ============
- --------------------------------------------------------------------------------
As of March 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $120,256,369, of which $145,019,037 related to appreciated
securities and $24,762,668 related to depreciated securities. The aggregate cost
of investments at March 31, 1999 for Federal income tax purposes was
$374,916,906.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $(172,579,255) and $7,796,208 for the years ended March 31, 1999 and March
31, 1998, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended March 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ......................... 11,238,351 $ 51,509,236
Shares redeemed ..................... (22,164,797) (98,998,863)
----------- -------------
Net decrease ........................ (10,926,446) $ (47,489,627)
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended March 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ......................... 14,964,900 $ 71,410,844
Shares issued to shareholders
in reinvestment of distributions .... 8,838,083 45,869,650
----------- -------------
Total issued ........................ 23,802,983 117,280,494
Shares redeemed ..................... (18,121,971) (89,086,567)
----------- -------------
Net increase ........................ 5,681,012 $ 28,193,927
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended March 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ......................... 12,736,571 $ 55,839,988
Shares redeemed ..................... (39,862,157) (163,438,600)
Automatic conversion of shares ...... (1,237,708) (5,415,219)
----------- -------------
Net decrease ........................ (28,363,294) $(113,013,831)
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended March 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ......................... 19,604,583 $ 91,957,240
Shares issued to shareholders
in reinvestment of distributions .... 14,953,197 74,317,386
----------- -------------
Total issued ........................ 34,557,780 166,274,626
Shares redeemed ..................... (40,126,849) (188,834,322)
Automatic conversion of shares ...... (898,029) (4,025,429)
----------- -------------
Net decrease ........................ (6,467,098) $ (26,585,125)
=========== =============
- --------------------------------------------------------------------------------
16 & 17
<PAGE>
Merrill Lynch Technology Fund, Inc., March 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended March 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ......................... 1,618,619 $ 7,224,244
Shares redeemed ..................... (2,844,408) (11,608,920)
----------- -------------
Net decrease ........................ (1,225,789) $ (4,384,676)
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended March 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ......................... 2,933,295 $ 13,806,155
Shares issued to shareholders
in reinvestment of distributions .... 764,385 3,776,060
----------- -------------
Total issued ........................ 3,697,680 17,582,215
Shares redeemed ..................... (3,776,280) (17,726,568)
----------- -------------
Net decrease ........................ (78,600) $ (144,353)
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended March 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ......................... 2,402,037 $ 10,893,111
Automatic conversion of shares ...... 1,177,752 5,415,219
----------- -------------
Total issued ........................ 3,579,789 16,308,330
Shares redeemed ..................... (5,513,873) (23,999,451)
----------- -------------
Net decrease ........................ (1,934,084) $ (7,691,121)
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended March 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ......................... 4,505,104 $ 21,202,799
Automatic conversion of shares ...... 861,473 4,025,429
Shares issued to shareholders
in reinvestment of distributions .... 1,452,639 7,510,141
----------- -------------
Total issued ........................ 6,819,216 32,738,369
Shares redeemed ..................... (5,645,964) (26,406,610)
----------- -------------
Net increase ........................ 1,173,252 $ 6,331,759
=========== =============
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At March 31, 1999, the Company had a net capital loss carryforward of
approximately $128,290,000, of which $60,434,000 expires in 2006 and $67,856,000
expires in 2007. This amount will be available to offset like amounts of any
future taxable gains.
6. Loaned Securities:
At March 31, 1999, the Company held US Treasury Bonds having an aggregate value
of approximately $5,472,000 as collateral for portfolio securities loaned having
a market value of approximately $5,410,000.
7. Reorganization Plan:
On October 21, 1998, the Company's Board of Directors approved a plan of
reorganization whereby Merrill Lynch Global Technology Fund, Inc. would acquire
substantially all of the assets and liabilities of the Company in exchange for
newly issued shares of Merrill Lynch Global Technology Fund, Inc. The proposed
reorganization was considered at the meeting of the stockholders of the Company
held on January 12, 1999 and at the adjournments thereof. The reorganization did
not receive the requisite vote of a majority of the shares of the Company
outstanding in order to consummate the reorganization.
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, 1999, 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 five-year period then
ended. 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.
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, 1999 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, 1999, 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 17, 1999
PORTFOLIO CHANGES (unaudited)
For the Quarter Ended March 31, 1999
================================================================================
Additions
*Acclaim Entertainment Inc.
Amazon.com, Inc.
Applied Materials, Inc.
*Autoweb.com, Inc.
Celestica Inc.
*Covad Communications
Exodus Communications, Inc.
International Business Machines
Corporation
*Ivillage Inc.
KLA-Tencor Corporation
Lexmark International Group, Inc.
(Class A)
Medtronic, Inc.
Network Appliance, Inc.
Nokia Oyj 'A' (ADR)
Novellus Systems, Inc.
Oracle Corporation
*Pcorder.Com Inc.
*Perot Systems Corporation (Class A)
Pitney Bowes Inc.
*Prodigy Communications Corp.
*Rowecom Inc.
Taiwan Semiconductor Manufacturing
Company Ltd. (ADR)
*Tut Systems Inc.
*Vignette Corporation
Yahoo! Inc.
================================================================================
Deletions
3Com Corporation
*Acclaim Entertainment Inc.
*Autoweb.com, Inc.
*Covad Communications
*Ivillage Inc.
J.D. Edwards & Company
Linear Technology Corporation
*Pcorder.Com Inc.
*Perot Systems Corporation (Class A)
*Prodigy Communications Corp.
*Rowecom Inc.
SCI Systems, Inc.
Symantec Corporation
Tech Data Corporation
*Tut Systems Inc.
*Vignette Corporation
================================================================================
*Added and deleted in the same quarter.
18 & 19
<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--3/99
[Recycle Logo] Printed on post-consumer recycled paper
