N-30D 1 ANNUAL REPORT MERRILL LYNCH CAPITAL FUND, INC. FUND LOGO Annual Report March 31, 1995 Officers and Directors Arthur Zeikel, President and Director Donald Cecil, Director M. Colyer Crum, Director Edward H. Meyer, Director Jack B. Sunderland, Director J. Thomas Touchton, Director Terry K. Glenn, Executive Vice President Norman R. Harvey, Executive Vice President Donald C. Burke, Vice President Ernest S. Watts, Vice President and Portfolio Manager Gerald M. Richard, Treasurer Mark B. Goldfus, Secretary Custodian The Bank of New York 90 Washington Street New York, NY 10286 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 (800) 637-3863 This report is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund'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. Merrill Lynch Capital Fund, Inc. Box 9011 Princeton, NJ 08543-9011 MERRILL LYNCH CAPITAL FUND, INC. PORTFOLIO SUMMARY Security Diversification* As of March 31, 1995 A pie chart illustrating the following percentages: US Bonds 38.0% Non-US Bonds 1.1% Cash 3.9% US Stocks 48.5% Non-US Stocks 8.5% Sector Representation* As a Percentage of US Equities As of March 31, 1995 A pie chart illustrating the following percentages: Financial Services 28.2% Consumer Services 1.9% Utilities 5.7% Transportation 2.1% Capital Goods--Technology 6.9% Basic Industries 13.1% Diversified 2.4% Consumer Staples 10.1% Credit Cyclicals 0.1% Capital Goods 4.0% Energy 14.9% Consumer Cyclical 10.6% [FN] *Totals may not equal 100% Currency Diversification Percent of As of March 31, 1995 Net Assets US Dollar 91.1% Canadian Dollar 1.4 Spanish Peseta 0.6 Argentinian Peso 2.4 French Franc 0.9 Hong Kong Dollar 0.4 Netherlands Guilder 0.5 UK Sterling 1.7 Australian Dollar 0.1 Swiss Franc 0.9 US Common Stock Investments S&P As of March 31, 1995 Fund 500* Average Capitalization (in billions) $8.9 $7.3 Price-to-Book Value 2.02 3.36 Price-to-Earnings Ratio** 12.19 16.46 Yield Based on Current Dividend 3.28% 2.63% [FN] *An unmanaged broad-based index comprised of common stocks. **Based on 1995 earnings estimates. Fixed-Income Investments Merrill Lynch As of March 31, 1995 Fund D0A0 Index* Duration 6.2 Years 5.1 Years Average Maturity 10.9 Years 12.9 Years Asset Breakdown: Corporates 49.4% 16.9% US Treasuries/Agencies 43.7% 56.3% Mortgage-Backed 5.1% 26.8% International Governments 1.8% -- [FN] *An unmanaged marked-weighted corporate, Government and mortgage master bond index reflecting approximately 97% of total outstanding US bonds. DEAR SHAREHOLDER Increasing signs of slowing economic growth led to higher US stock and bond prices during the March quarter. Although gross domestic product (GDP) was reported to have increased at a revised 5.1% rate during the final quarter of 1994, declines in other indicators such as new home sales and durable goods orders registered thus far in 1995 have led investors to anticipate that the economy is losing enough momentum to keep inflation under control and preclude further significant monetary policy tighten- ing by the Federal Reserve Board. However, as US stock and bond markets have risen, the value of the US dollar reached new lows relative to the yen and the Deutschemark. Persistent trade deficits and exports of capital from the United States have kept the US currency in a decade-long decline relative to the Japanese and German currencies. Over the longer term, since the United States has the high- est productivity among industrialized nations and among the lowest labor costs, demand for US dollar- denominated assets may improve. However, a reduc- tion of the still-widening US trade deficit may be necessary before the US dollar appreciates substan- tially relative to the yen and the Deutschemark. The first three months of 1995 were very positive for the US stock and bond markets. Continued signs of a moderating expansion and well-contained infla- tionary pressures would provide further assurance that the peak in interest rates is behind us, creating a stronger foundation for higher stock and bond prices. On the other hand, indications of reacceler- ating growth and inflation and further significant monetary policy tightening by the Federal Reserve Board would be decided negatives for the US financial markets. Portfolio Matters It is our belief that investors must find solid values from a statistical perspective, and discuss with the management of each portfolio company its ability to make steady progress in the face of varying economic conditions. If these factors are in place, we are con- vinced that investors need not be as concerned about swings in the stock market and that good returns over the long term can be realized. In looking first at some statistics regarding holdings in your Merrill Lynch Capital Fund, Inc., the average price/earnings multiple for the 125 stocks held is 12.2 times, based on estimated 1995 per share earnings. That is well below the 16.5 times price/earnings ratio for the average stock in the Standard & Poor's Composite Index of 500 Stocks (S&P 500), yet earn- ings gains going into 1996 are expected to be stronger for portfolio companies. If your Fund can continue to invest in companies with a similar valuation of earn- ings per share as those held at present, which earned 14.1% on their capital and surplus last year, the long-term investment return is likely to be strong. At present, the average stock held has a dividend yield of 3.3%, versus 2.6% for the S&P 500, and it is priced at 2.0 times book value per share versus 3.4 times for the Index. Reviewing the March quarter, more than 83% of the stocks in your Merrill Lynch Capital Fund, Inc. increased in price sufficiently so that the equity portion of your Fund was estimated to outpace the 9.7% total return of the S&P 500. Common stocks represented 58.2% of net assets in Merrill Lynch Capital Fund, Inc. on December 31, 1994 and 57% on March 31, 1995, representing a modest reduction in equity holdings as the stock market advanced sharply for the quarter. Bond holdings did not provide as high a total return for the quarter as did common stocks, but they did return an estimated 5.3% for the quarter, which exceeded the total returns from the unmanaged Merrill Lynch D0A0 and Merrill Lynch B0A0 bond indexes, which are widely followed by bond professionals. Turning to some of the individual common stocks in your portfolio, Williams Companies, Inc. has returned to a major position as a result of the effec- tive drive for progress by its management, and it was priced at less than 12 times estimated 1995 profits. The company has an exciting future aided by its positions in the fast-growing communications indus- try, the executive and financial strengths it can lend to the soon-to-be acquired Transco Energy pipeline company and continuing gains at its expanding pipeline complex. We believe Yacimientos Petroliferos Fiscales S.A. is a strong petroleum company, with hydrocarbon reserves in the ground possibly worth more than the market capitalization of the corporation. Already held in your portfolio, the stock dropped sharply in reaction to general emerging markets, political, economic and currency uncertainties, compounded by a widespread belief--which we did not share--that the company was overpaying in buying Maxus Energy Corporation, in an effort to increase international operations. The company has long had an admiration for the ability of Maxus to find oil. The companies have a common interest in seeking oil in Bolivia, an interest which has been expanded to a number of areas around the world. Furthermore, both compa- nies have a solid reserve base, in our opinion. Argentina, we believe, is working to improve its financial and political strengths. An added benefit is that Yacimientos pays many of its bills in the local currency while receiving its oil payments at prices set in the US dollars. Altogether, we increased the positions in 67 com- panies held in your portfolio. Most of the increases were moderate in relation to shares already held. They were generally made as certain companies did better than expected, or as other companies met expectations but the stocks had failed to move higher or as the stocks declined in price making them relatively more attractive than at the start of the March quarter. A concerted effort was made to build up petroleum holdings, as stocks in that industry often perform relatively better late in an economic cycle, and it is one of the few industries with favor- able prospects that affords above-average yields. We also increased holdings in electric utility stocks. Here again, the yields were favorable, and we did not believe the rate of inflation or interest rates would be as high as some project. There were 18 common stocks added in your portfolio. In addition, the Tandy PERCS, a type of convertible preferred, were converted into common shares. Repsol, S.A., Exxon Corp., Texaco Inc., all petroleum companies, and Texas Utilities Company, an electric utility, were added for the general reasons indicated earlier. As a cyclical industrial stock, Ford Motor Company had dropped sharply in price to the point where its yield was appealing and the shares were selling at a sharp discount to the multiples of earnings placed on most stocks. Progress made in Australia and prospects for further gains made moderately priced National Australian Bank Ltd. attractive for purchase. Premark International, Inc., Cadbury Schweppes PLC, TIG Holdings, Inc., Roche Holdings AG and Rollins, Inc. were chosen as companies that should do reasonably well even in the next downtrend in the economic business cycle. During the March quarter, 77 holdings were reduced in size and 11 common stocks were sold. Most of the stocks sold were eliminated as they advanced in price. As stock prices increase, we generally sell some shares, particularly as market risks appear to increase. Many of the reductions were in the banking, chemical, diver- sified companies, electronics, financial services and railroad industries. American Premier Underwriters, Inc. and Provident Life & Accident Insurance Co. investments were reduced as progress at the com- panies has been disappointing. H.J. Heinz Co. and Honeywell, Inc. were eliminated because their earnings continued to fall short of expectations. Corporate and Government bonds continued to repre- sent 39% of your portfolio. As the uptrend in interest rates appeared to flatten out, at least for the present, the average years to maturity increased during the March quarter from 6.6 to 10.9. At a time when common stocks are at the low end of their historic range of yields, bonds are providing yields that have proven to be attractive in the past, so bond maturities were lengthened to potentially provide the additional in- come for a longer period of time. As of March 31, 1995, the average bond held was yielding 7.8% to maturity. Fiscal Year in Review Total returns for the year ended March 31, 1995 for your Fund were less than that of the S&P 500 since bonds and finance-related stocks, such as bank, insur- ance, personal loan and brokerage stocks, did not do as well for the period. For the most part, however, the operations of the companies made progress and for that reason, as well as the moderate valuations, your Fund is heavily invested in the area. Your Fund was not a significant investor in many healthcare areas, beverages, household products or food pro- ducers, which outperformed the US equity market, since their stock valuations were considered to be relatively high, nor in technology stocks, which generally pay little in dividends and are often highly volatile in price, which does not fit well with the conservative investment tenants of your Fund, in our opinion. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Ernest S. Watts) Ernest S. Watts Vice President and Portfolio Manager May 5, 1995 PROXY RESULTS During the six-month period ended March 31, 1995, Merrill Lynch Capital Fund, Inc. shareholders voted on the following proposals. Proposals 1, 2 and 4 were approved at a special shareholders' meeting on September 26, 1994. Proposal 3 was passed at a special shareholders' meeting on January 31, 1995. The description of each proposal and number of shares voted are as follows:
Shares Voted Shares Voted For Without Authority 1. To elect the Fund's Board of Directors: Donald Cecil 200,754,136 3,700,873 M. Colyer Crum 200,794,353 3,660,656 Edward H. Meyer 200,750,492 3,704,517 Jack B. Sunderland 200,822,072 3,632,937 J. Thomas Touchton 200,811,181 3,643,828 Arthur Zeikel 200,785,697 3,669,312 2. To select Deloitte & Touche LLP as the Fund's independent auditors. 197,835,135 1,597,488 5,022,386 3. To approve certain changes to the Fund's fundamental investment restrictions. 104,754,610 4,250,598 5,888,704 4. To amend the Fund's articles of incorporation to implement the Merrill Lynch Select Pricing SM System. 180,689,379 10,547,017 13,218,613
PERFORMANCE DATA About Fund Performance Since October 21, 1994, investors have been able to pur- chase shares of the Fund through the Merrill Lynch Select Pricing SM System, which offers four pricing alternatives: *Class A Shares incur a maximum initial sales charge (front-end load) of 5.25% and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. *Class B Shares are subject to a maximum contingent de- ferred 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 distribu- tion fee of 0.75% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after 8 years. *Class C Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. *Class D Shares incur a maximum initial sales charge of 5.25% and an account maintenance fee of 0.25% (but no distribution fee). Performance data for the Fund's Class A and Class B Shares are presented in the "Performance Summary", "Average Annual Total Return" and "Total Return Based on a $10,000 Investment" tables on pages 5 and 7. The "Results of a $1,000 Investment Since Inception--Class A Shares" chart on page 6 illustrates the performance of a $1,000 investment in Class A Shares made at the Fund's inception (assuming the maximum initial sales charge of 5.25%) through March 31, 1995. "Aggregate Total Return" tables for Class C and Class D Shares are also presented on page 5. Data for all of the Fund's shares, including Class C and Class D Shares, are presented in the "Recent Performance Results" table on page 6. The "Recent Performance Results" table shows investment results before the deduction of any sales charges for Class A and Class B Shares for the 12-month and 3-month periods ended March 31, 1995 and for Class C and Class D Shares for the since inception and the 3-month periods ended March 31, 1995. All data in this table assume imposition of the actual total expenses incurred by each class of shares during the relevant period. None of the past results shown should be considered a representation of future performance. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of account mainte- nance, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. PERFORMANCE DATA (continued) Total Return Based on $10,000 Investment A line graph depicting the growth of an investment in the Fund's Class A Shares compared to growth of an investment in the S&P 500 Index. Beginning and ending values are: 3/85 3/95 ML Capital Fund, Inc.++-- $ 9,475 $33,050 Class A Shares* S&P 500 Index++++ $10,000 $38,494 A line graph depicting the growth of an investment in the Fund's Class B Shares compared to growth of an investment in the S&P 500 Index. Beginning and ending values are: 10/21/88** 3/95 ML Capital Fund, Inc.++-- $10,000 $18,965 Class B Shares* S&P 500 Index++++ $10,000 $21,595 [FN] *Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. **Commencement of Operations. ++ML Capital Fund, Inc. through a fully managed investment policy utilizes equity, debt and convertible securities. ++++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 Sales Charge Sales Charge** Class A Shares* Year Ended 3/31/95 +10.95% + 5.12% Five Years Ended 3/31/95 +11.11 + 9.92 Ten Years Ended 3/31/95 +13.31 +12.70 [FN] *Maximum sales charge is 5.25%. **Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** Class B Shares* Year Ended 3/31/95 + 9.81% + 5.81% Five Years Ended 3/31/95 + 9.99 + 9.99 Inception (10/21/88) through 3/31/95 +10.44 +10.44 [FN] *Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4 years. **Assuming payment of applicable contingent deferred sales charge. Aggregate Total Return % Return % Return Without CDSC With CDSC** Class C Shares* Inception (10/21/94) through 3/31/95 +6.07% +5.07% [FN] *Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1 year. **Assuming payment of applicable contingent deferred sales charge. % Return Without % Return With Sales Charge Sales Charge** Class D Shares* Inception (10/21/94) through 3/31/95 +6.42% +0.83% [FN] *Maximum sales charge is 5.25%. **Assuming maximum sales charge. PERFORMANCE DATA (continued) Results of a $1,000 Investment Since Inception--Class A Shares (5.25% sales charge--$947.50 net amount invested; assuming reinvestment of all dividends and capital gains distributions) A mountain chart depicting the growth of an investment in the Fund's Class A Shares from $947.50 on November 8, 1973 to $11,877.67 on Maarch 31, 1995. Recent Performance Results
12 Month 3 Month 3/31/95 12/31/94 3/31/94++ % Change++ % Change ML Capital Fund, Inc. Class A Shares* $27.74 $25.70 $27.46 + 5.93%(1) +7.94% ML Capital Fund, Inc. Class B Shares* 27.28 25.34 27.04 + 5.86(1) +7.66 ML Capital Fund, Inc. Class C Shares* 27.17 25.24 26.81 + 5.42(2) +7.65 ML Capital Fund, Inc. Class D Shares* 27.72 25.70 27.27 + 4.13(2) +7.86 Dow Jones Industrial Average** 4,157.69 3,834.44 3,635.96 +14.35 +8.43 Standard & Poor's 500 Index** 500.71 459.27 445.77 +12.32 +9.02 ML Capital Fund, Inc. Class A Shares--Total Return* +10.95(3) +7.94 ML Capital Fund, Inc. Class B Shares--Total Return* + 9.81(4) +7.66 ML Capital Fund, Inc. Class C Shares--Total Return* + 6.07(5) +7.65 ML Capital Fund, Inc. Class D Shares--Total Return* + 6.42(6) +7.86 Dow Jones Industrial Average--Total Return** +17.58 +9.20 Standard & Poor's 500 Index--Total Return** +15.59 +9.73 *Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included. **An unmanaged broad-based index comprised of common stocks. Total investment returns for unmanaged indexes are based on estimates. ++Investment results shown for Class C and Class D Shares are since inception (10/21/94). (1)Percent change includes reinvestment of $1.245 per share capital gains distributions. (2)Percent change includes reinvestment of $0.617 per share capital gains distributions. (3)Percent change includes reinvestment of $1.247 per share ordinary income dividends and $1.245 per share capital gains distributions. (4)Percent change includes reinvestment of $0.974 per share ordinary income dividends and $1.245 per share capital gains distributions. (5)Percent change includes reinvestment of $0.543 per share ordinary income dividends and $0.617 per share capital gains distributions. (6)Percent change includes reinvestment of $0.572 per share ordinary income dividends and $0.617 per share capital gains distributions.
PERFORMANCE DATA (concluded) Performance Summary--Class A Shares
Net Asset Value Capital Gains Period Covered Beginning Ending Distributed Dividends Paid* % Change** 11/8/73--12/31/73 $14.03 $13.87 -- -- - 1.11% 1974 13.87 10.78 -- $0.560 -18.62 1975 10.78 12.83 -- 0.510 +23.86 1976 12.83 14.10 -- 0.360 +12.75 1977 14.10 12.68 -- 0.370 - 7.37 1978 12.68 13.63 -- 0.500 +11.65 1979 13.63 16.54 -- 0.650 +26.73 1980 16.54 17.70 $1.250 1.150 +24.83 1981 17.70 16.62 1.990 1.150 +11.85 1982 16.62 17.85 0.830 0.930 +19.27 1983 17.85 20.63 0.600 0.690 +23.13 1984 20.63 19.33 1.990 0.670 + 7.98 1985 19.33 22.57 1.600 0.660 +29.88 1986 22.57 24.40 2.100 0.440 +19.89 1987 24.40 19.79 5.763 0.219 + 4.60 1988 19.79 21.39 1.008 0.742 +17.04 1989 21.39 24.43 0.723 1.099 +22.98 1990 24.43 23.01 0.390 1.295 + 1.08 1991 23.01 26.92 0.262 1.361 +24.69 1992 26.92 26.33 0.954 0.921 + 5.03 1993 26.33 27.97 0.699 1.201 +13.71 1994 27.97 25.70 1.245 1.247 + 0.91 1/1/95--3/31/95 25.70 27.74 -- -- + 7.94 ------- ------- Total $21.404 Total $16.725 Cumulative total return as of 3/31/95: +1,153.58%** *Figures may include short-term capital gains distributions. **Figures assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date, and do not include sales charge; results would be lower if sales charge was included.
Performance Summary--Class B Shares
Net Asset Value Capital Gains Period Covered Beginning Ending Distributed Dividends Paid* % Change** 10/21/88--12/31/88 $22.64 $21.38 $0.773 $0.537 + 0.25% 1989 21.38 24.29 0.723 0.961 +21.70 1990 24.29 22.85 0.390 1.077 + 0.10 1991 22.85 26.66 0.262 1.147 +23.39 1992 26.66 26.03 0.954 0.684 + 3.99 1993 26.03 27.61 0.699 0.930 +12.54 1994 27.61 25.34 1.245 0.974 - 0.10 1/1/95--3/31/95 25.34 27.28 -- -- + 7.66 ------ ------ Total $5.046 Total $6.310 Cumulative total return as of 3/31/95: +89.65%** *Figures may include short-term capital gains distributions. **Figures assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date, and do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
SCHEDULE OF INVESTMENTS
Shares Value Percent of Industries Held Common Stocks Cost (Note 1a) Net Assets Aerospace 95,000 The Boeing Co. $ 4,182,040 $ 5,118,125 0.1% 500,000 E-Systems, Inc. 20,529,589 22,687,500 0.4 400,000 Lockheed Corp. 17,783,366 21,150,000 0.3 1,370,000 Rockwell International Corporation 49,126,026 53,430,000 0.8 110,000 Thiokol Corporation 2,670,202 3,121,250 0.1 -------------- -------------- ------ 94,291,223 105,506,875 1.7 Automobile 800,000 Echlin Inc. 23,083,465 30,800,000 0.5 Equipment Automotive 575,000 Ford Motor Company 14,936,737 15,525,000 0.2 Banking 700,000 Banco Bilboa Vizcaya (ADR)* 17,128,729 17,675,000 0.3 425,000 BancOne Corp. 11,754,992 12,112,500 0.2 1,593,000 Bancorp Hawaii, Inc. 45,961,032 45,201,375 0.7 3,540,000 Chemical Banking Corp. 131,045,003 133,635,000 2.1 155,000 First Union Corp. 6,685,000 6,723,125 0.1 600,000 National Australian Bank Ltd. 4,808,234 5,061,658 0.1 2,995,000 NationsBank Corp. 143,971,834 151,996,250 2.4 3,314,000 SouthTrust Corp. 52,776,401 69,179,750 1.1 1,530,000 ++++Union Planters Corp. 18,715,616 35,381,250 0.5 -------------- -------------- ------ 432,846,841 476,965,908 7.5 Beverages 3,100,000 Cadbury Schweppes PLC 21,320,768 22,240,001 0.3 Building & 3,973,000 Kumagai Gumi Co., Ltd. (Ordinary) 2,854,985 2,954,763 0.0 Construction Capital Goods 683,000 GATX Capital Corp. 23,355,006 30,564,250 0.5 Chemicals 900,000 Albemarle Corp. 13,100,366 11,475,000 0.2 690,000 du Pont (E.I.) de Nemours & Co. 35,108,540 41,745,000 0.7 920,000 Engelhard Corp. 22,757,034 27,255,000 0.4 180,000 Goodrich (B.F.) Co. 7,885,348 7,987,500 0.1 1,457,000 Grace (W.R.) & Co. 57,783,068 77,585,250 1.2 1,050,000 Imperial Chemical Industries PLC (ADR)* 49,729,518 49,350,000 0.8 600,000 Union Carbide Corp. 16,269,758 18,375,000 0.3 -------------- -------------- ------ 202,633,632 233,772,750 3.7 Conglomerates 120,000 AlliedSignal, Inc. 4,296,015 4,710,000 0.1 Diversified 161,000 Corning Inc. 4,912,759 5,796,000 0.1 Companies 113,000 Dial Corp. 2,309,624 2,867,375 0.0 9,250,000 Hillsdown Holdings PLC 21,555,611 27,405,623 0.4 98,000 ITT Corp. 7,833,524 10,057,250 0.2 600,000 Tenneco, Inc. 23,717,598 28,275,000 0.4 1,100,000 United Technologies Corp. 63,816,513 76,037,500 1.2 990,000 Worldtex Inc. (b) 4,808,753 3,960,000 0.1 -------------- -------------- ------ 128,954,382 154,398,748 2.4 Electrical Equipment 765,000 General Electric Co. 37,039,957 41,405,625 0.6 923,000 Philips Electronics N.V. (ADR)* 14,596,805 31,497,375 0.5 -------------- -------------- ------ 51,636,762 72,903,000 1.1 Electronics 230,000 General Motors Corp. (Class H) 7,952,318 9,487,500 0.1
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held Common Stocks Cost (Note 1a) Net Assets Financial Services 560,000 Dean Witter, Discover & Co. $ 18,513,096 $ 22,820,000 0.4% 330,000 Federal National Mortgage Association 23,903,393 26,853,750 0.4 200,000 Household International, Inc. 7,121,885 8,700,000 0.1 -------------- -------------- ------ 49,538,374 58,373,750 0.9 Food Distribution 13,346,000 Dairy Farm International Holdings Ltd. (Ordinary) 19,067,425 17,089,232 0.2 200,000 Fleming Cos., Inc. 5,623,541 4,525,000 0.1 -------------- -------------- ------ 24,690,966 21,614,232 0.3 Foods 380,000 Universal Foods Corp. 12,340,680 12,920,000 0.2 Home Builders 270,000 ++++Oriole Homes Corp. 2,499,746 1,991,250 0.0 Hospital Management 3,100,000 National Medical Enterprises, Inc. (b) 39,572,413 49,212,500 0.8 Household Products 725,000 Premark International, Inc. 29,305,099 31,990,625 0.5 Insurance 206,000 Aetna Life & Casualty Co. 10,112,034 11,742,000 0.2 1,900,000 Allstate Corporation 47,445,671 54,625,000 0.9 530,000 American General Corporation 14,546,495 17,092,500 0.3 860,000 American International Group, Inc. 74,625,000 89,655,000 1.4 199,000 American Premier Underwriters, Inc. 5,369,665 4,800,875 0.1 1,320,000 EXEL Ltd. (ADR)* 53,556,226 58,245,000 0.9 1,450,000 ++++Fremont General Corp. (b) 30,727,920 28,456,250 0.4 202,000 Integon Corp. 2,488,257 2,626,000 0.0 114,000 Ohio Casualty Corp. 3,287,364 3,819,000 0.1 421,000 Provident Life & Accident Insurance Co. 11,373,807 9,525,125 0.1 800,000 Safeco Corp. 41,891,912 43,600,000 0.7 62,000 TIG Holdings, Inc. 1,253,058 1,395,000 0.0 1,579,000 Travelers Inc. 34,484,362 60,988,875 0.9 120,000 USLIFE Corporation 3,922,295 4,575,000 0.1 -------------- -------------- ------ 335,084,066 391,145,625 6.1 Lodging/Hotels 240,000 Carnival Corp. (Class A) 5,170,816 5,610,000 0.1 Manufactured Housing 500,000 Fleetwood Enterprises, Inc. 10,300,013 11,812,500 0.2 Metals & Basic 272,000 Cameco Corp. 5,259,688 7,660,944 0.1 Materials 67,000 Harsco Corp. 2,898,057 2,948,000 0.0 732,000 Magma Copper Co. (b) 12,208,350 12,718,500 0.2 1,260,000 Newmont Mining Corp. 49,767,818 53,865,000 0.9 -------------- -------------- ------ 70,133,913 77,192,444 1.2 Natural Gas 1,322,000 Coastal Corp. 36,224,932 38,007,500 0.6 Suppliers 290,000 MAPCO, Inc. 15,203,489 16,167,500 0.3 700,000 MetroGas S.A. (ADR)* (b) 9,064,313 6,562,500 0.1 395,000 ONEOK Inc. 7,694,035 7,455,625 0.1 3,655,000 TransCanada Pipelines, Ltd. (ADR)* 53,909,854 47,058,125 0.7 3,628,000 Williams Companies, Inc. 95,404,110 111,107,500 1.7 -------------- -------------- ------ 217,500,733 226,358,750 3.5 Office Equipment 1,143,000 ++++Wallace Computer Services, Inc. 27,348,699 36,718,875 0.6 Oil & Gas Producers 665,000 Repsol S.A. (ADR)* 18,547,170 18,872,332 0.3 7,700,000 Yacimientos Petroliferos Fiscales S.A. (Sponsored) (ADR)* 161,797,410 146,300,000 2.3 -------------- -------------- ------ 180,344,580 165,172,332 2.6
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held Common Stocks Cost (Note 1a) Net Assets Oil--Integrated 260,000 Exxon Corp. $ 16,829,862 $ 17,355,000 0.3% 80,000 Mobil Corp. 6,393,048 7,410,000 0.1 2,248,000 Occidental Petroleum Corp. 45,824,709 49,175,000 0.8 119,000 Texaco Inc. 7,820,140 7,913,500 0.1 1,941,000 TOTAL S.A. (ADR)* 51,197,859 58,230,000 0.9 708,000 USX-Marathon Group, Inc. 12,245,355 12,390,000 0.2 -------------- -------------- ------ 140,310,973 152,473,500 2.4 Paper 1,875,000 Federal Paper Board Co., Inc. 50,262,052 53,437,500 0.9 275,000 Kimberly-Clark Corp. 14,081,476 14,300,000 0.2 1,016,000 Temple-Inland, Inc. 48,823,404 45,593,000 0.7 -------------- -------------- ------ 113,166,932 113,330,500 1.8 Pharmaceuticals 485,000 Block Drug, Inc. (Class A) 14,594,736 16,975,000 0.3 430,000 Glaxo Holdings PLC (ADR)* 8,283,275 9,836,250 0.1 1,490,000 Mallinckrodt Group Inc. 47,176,242 50,287,500 0.8 1,475,000 Merck & Co., Inc. 45,473,895 62,871,875 1.0 601,000 Pfizer, Inc. 47,570,024 51,535,750 0.8 10,000 Roche Holdings AG 50,843,567 57,621,145 0.9 800,000 Warner-Lambert Co. 54,736,215 62,600,000 1.0 -------------- -------------- ------ 268,677,954 311,727,520 4.9 Photography 200,000 Eastman Kodak Co. 8,509,497 10,625,000 0.2 400,000 Polaroid Corp. 12,752,887 13,900,000 0.2 -------------- -------------- ------ 21,262,384 24,525,000 0.4 Plastic Recycling 1,110,000 Wellman Inc. 23,898,457 28,027,500 0.4 Printing & 365,000 American Greetings Corp. 10,118,477 10,858,750 0.2 Publishing 14,402,000 Oriental Press Holdings (Ordinary) 9,181,713 6,147,138 0.1 -------------- -------------- ------ 19,300,190 17,005,888 0.3 Railroads 2,110,000 Canadian Pacific Ltd. 33,271,322 31,650,000 0.5 600,000 Conrail, Inc. 31,315,863 33,675,000 0.5 150,000 Norfolk Southern Corp. 9,102,606 10,031,250 0.2 -------------- -------------- ------ 73,689,791 75,356,250 1.2 Real Estate 1,100,000 RFS Hotel Investors, Inc. 17,119,211 15,537,500 0.3 Investment Trusts 795,000 Walden Residential Properties, Inc. 15,343,555 15,005,625 0.2 -------------- -------------- ------ 32,462,766 30,543,125 0.5 Restaurants 177,000 Luby's Cafeterias, Inc. 4,091,252 3,761,250 0.1 Retail Trade 676,000 Fingerhut Companies, Inc. 12,524,247 8,027,500 0.1 107,000 Penney (J.C.) Company, Inc. 5,561,718 4,801,625 0.1 2,000,000 Sears, Roebuck & Co. 72,080,256 106,750,000 1.7 200,000 Tandy Corp. 8,880,724 9,550,000 0.1 1,000,000 Wal-Mart Stores, Inc. 24,232,700 25,500,000 0.4 -------------- -------------- ------ 123,279,645 154,629,125 2.4 Savings & Loan 610,000 Ahmanson (H.F.) & Co. 10,410,632 10,980,000 0.2 Associations Services 1,670,000 ++++PHH Corp. 62,537,753 63,460,000 1.0 365,000 Rollins, Inc. 9,108,996 10,037,500 0.2 -------------- -------------- ------ 71,646,749 73,497,500 1.2
SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held Common Stocks Cost (Note 1a) Net Assets Steel 445,000 Birmingham Steel Corp. $ 10,175,161 $ 9,011,250 0.2% 1,059,000 ++++Cleveland Cliffs, Inc. 36,464,349 40,771,500 0.6 -------------- -------------- ------ 46,639,510 49,782,750 0.8 Telecommunications 2,189,000 GTE Corp. 68,550,750 72,784,250 1.1 Textiles 251,000 Delta Woodside Industries, Inc. 2,910,188 2,102,125 0.0 Tires & Rubber 3,713,000 The Goodyear Tire & Rubber Co. 141,384,746 136,452,750 2.1 Utilities--Electric, 305,552 American Water Works Co., Inc. 6,874,996 8,861,008 0.1 Gas & Water 31,000 Cascade Natural Gas Corp. 428,110 430,125 0.0 226,000 Central Hudson Gas & Electric Corp. 5,885,720 5,932,500 0.1 100,000 Entergy Corp 2,106,000 2,087,500 0.0 1,100,000 Illinova Corp. (a) 22,841,253 25,025,000 0.4 300,000 PacifiCorp 5,263,244 5,812,500 0.1 1,800,000 Pinnacle West Capital Corp. 35,431,138 37,575,000 0.6 139,000 Texas Utilities Company 4,378,172 4,413,250 0.1 1,700,000 Unicom Corp. 37,990,541 40,375,000 0.6 219,000 Western Resources, Inc. 6,293,169 6,843,750 0.1 -------------- -------------- ------ 127,492,343 137,355,633 2.1 Total Common Stocks 3,301,167,494 3,644,276,344 57.0 Convertible Preferred Stock Pharmaceuticals 140,000 Liposome Co., Inc. 2,453,465 3,482,500 0.0 Total Convertible Preferred Stock 2,453,465 3,482,500 0.0 Face Amount Corporate Bonds Aerospace McDonnell Douglas Finance Corp.: $ 10,000,000 6.38% due 1/15/1996 9,989,900 9,932,900 0.2 15,000,000 5.61% due 2/25/1997 15,000,000 14,518,350 0.2 -------------- -------------- ------ 24,989,900 24,451,250 0.4 Automotive Ford Motor Co.: 10,000,000 7.20% due 6/18/1997 10,000,000 9,970,200 0.1 20,000,000 5.625% due 12/15/1998 19,369,800 18,790,400 0.3 -------------- -------------- ------ 29,369,800 28,760,600 0.4 Banking 20,000,000 Banco Rio de la Plata, 8.75% due 12/15/2003 20,060,800 11,800,000 0.2 10,000,000 Bank of Boston Corp., 6.625% due 12/01/2005 8,621,750 8,890,900 0.1 Bankers Trust Company: 25,000,000 4.70% due 7/01/1996 24,551,500 24,322,250 0.4 10,000,000 7.50% due 1/15/2002 9,688,700 9,640,500 0.2 The Chase Manhattan Corp.: 10,000,000 7.50% due 12/01/1997 10,165,600 9,982,800 0.2 20,000,000 7.75% due 11/01/1999 20,190,800 19,945,000 0.3 10,000,000 6.75% due 8/15/2008 8,517,400 8,772,500 0.1 First Chicago Corp.: 10,000,000 6.875% due 6/15/2003 8,952,700 9,302,100 0.1 20,000,000 6.375% due 1/30/2009 16,758,800 16,750,800 0.3 5,000,000 First Security Corp., 5.71% due 2/09/1999 5,000,000 4,683,700 0.1 15,000,000 First USA Bank, Wilmington, 5.75% due 1/15/1999 15,005,550 13,920,000 0.2 13,000,000 Great Western Financial Corp., 6.125% due 6/15/1998 12,244,010 12,521,210 0.2 10,000,000 Margaretten Financial Corp., 6.75% due 6/15/2000 9,621,060 9,565,800 0.1
SCHEDULE OF INVESTMENTS (continued)
Face Value Percent of Industries Amount Corporate Bonds Cost (Note 1a) Net Assets Banking NationsBank Corp.: (concluded) $ 10,500,000 5.70% due 9/11/2000 $ 9,545,865 $ 9,624,720 0.1% 20,000,000 6.50% due 8/15/2003 17,358,050 18,097,400 0.3 5,000,000 8.57% due 11/15/2024 5,011,800 5,222,550 0.1 -------------- -------------- ------ 201,294,385 193,042,230 3.0 Broadcasting & 30,000,000 News America Holdings, Inc., 7.50% Publishing due 3/01/2000 29,179,330 29,333,100 0.5 Capital Goods GATX Capital Corp.: 30,000,000 5.45% due 3/18/1996 30,000,000 29,549,700 0.5 15,000,000 5.48% due 3/22/1996 15,000,000 14,776,050 0.2 10,000,000 8.20% due 5/05/1997 10,000,000 10,116,900 0.1 10,000,000 General American Transport Corp., 8.625% due 12/01/2004 9,936,900 10,357,200 0.2 -------------- -------------- ------ 64,936,900 64,799,850 1.0 Chemicals Grace (W.R.) & Co.: 10,000,000 6.85% due 6/23/1997 9,903,700 9,849,000 0.2 20,000,000 7.40% due 2/01/2000 19,663,100 19,537,600 0.3 10,000,000 8% due 8/15/2004 9,530,100 9,830,500 0.1 -------------- -------------- ------ 39,096,900 39,217,100 0.6 Diversified ITT Corp.: Companies 20,000,000 5.50% due 3/24/1997 20,000,000 19,351,400 0.3 10,000,000 7.25% due 5/15/1997 10,080,100 9,940,600 0.2 5,000,000 8.125% due 11/15/1998 5,065,810 5,082,550 0.1 14,000,000 Tenneco, Inc., 7.875% due 10/01/2002 13,612,800 13,903,960 0.2 -------------- -------------- ------ 48,758,710 48,278,510 0.8 Electronics 10,000,000 Philips Electronics N.V., 8.375% due 9/15/2006 10,039,100 10,223,300 0.2 Finance 5,000,000 Caterpillar Financial Services Corp., 5.35% due 11/10/1998 4,924,800 4,643,400 0.1 22,000,000 Chrysler Finance Corp., 6.50% due 6/15/1998 22,107,192 21,328,120 0.3 40,000,000 ++GTE Finance Corp., 5.81% due 12/15/1997 40,000,000 38,200,000 0.6 8,000,000 General Electric Capital Corp., 5.13% due 4/01/2004 8,000,000 8,056,000 0.1 General Motors Acceptance Corp.: 8,000,000 5.20% due 12/13/1996 7,680,000 7,742,000 0.1 22,000,000 6.70% due 4/15/1997 21,755,440 21,686,280 0.3 25,000,000 7% due 8/19/1997 24,898,750 24,719,250 0.4 10,000,000 8.25% due 1/23/1998 9,977,100 10,161,800 0.2 15,000,000 5.95% due 1/11/1999 13,783,650 14,142,150 0.2 25,000,000 5.875% due 1/12/1999 25,044,500 23,506,000 0.4 45,000,000 5.625% due 2/01/1999 43,885,925 41,851,800 0.7 10,000,000 7.15% due 4/30/1999 9,884,400 9,786,500 0.1 21,000,000 7.375% due due 6/22/2000 20,693,890 20,578,740 0.3 10,000,000 Greyhound Financial Corp., 6.75% due 3/25/1999 9,694,200 9,684,400 0.1 Household Finance Corp.: 10,000,000 6.70% due 8/08/1997 9,999,800 9,868,100 0.2 20,000,000 7.125% due 4/30/1999 19,142,400 19,675,600 0.3 10,000,000 7.45% due 4/01/2000 9,958,700 9,907,400 0.2 International Lease Finance Corp.: 25,000,000 5.98% due 11/16/1998 24,975,500 23,691,250 0.4 22,500,000 6.05% due 4/30/1999 22,368,375 21,202,875 0.3 5,000,000 7.10% due 6/15/1999 4,930,900 4,886,850 0.1 10,000,000 8.15% due 10/01/2004 9,691,300 10,027,400 0.2 -------------- -------------- ------ 363,396,822 355,345,915 5.6
SCHEDULE OF INVESTMENTS (continued)
Face Value Percent of Industries Amount Corporate Bonds Cost (Note 1a) Net Assets Financial Services Dean Witter, Discover & Co.: $ 10,000,000 6% due 3/01/1998 $ 9,808,950 $ 9,613,300 0.2% 6,000,000 6.75% due 10/15/2013 5,011,560 5,051,940 0.1 15,000,000 Morgan Stanley Group, Inc., 7.875% due 12/15/1998 14,940,900 15,070,800 0.2 Smith Barney Shearson Holdings, Inc.: 20,000,000 6% due 3/15/1997 19,897,700 19,475,400 0.3 15,000,000 7.98% due 3/01/2000 15,017,850 15,057,300 0.2 -------------- -------------- ------ 64,676,960 64,268,740 1.0 Food & Tobacco 10,000,000 RJR Nabisco Holding Corp., 8.30% due 4/15/1999 9,897,500 10,050,000 0.2 Foreign 10,000,000 Hellenic Republic (Greece), 9.75% due 11/28/1999 10,020,300 10,336,800 0.2 Government Republic of Argentina: Obligations 29,000,000 10.95% due 11/01/1999 24,392,500 25,592,500 0.4 14,000,000 8.375% due 12/20/2003 8,715,000 9,170,000 0.1 -------------- -------------- ------ 43,127,800 45,099,300 0.7 Hospital Columbia-HCA Healthcare Corp.: Management 20,000,000 6.125% due 12/15/2000 18,456,800 18,340,600 0.3 20,000,000 8.70% due 2/10/2010 19,921,500 20,702,600 0.3 10,000,000 National Medical Enterprises, Inc., 9.625% due 9/01/2002 10,000,000 10,225,000 0.2 -------------- -------------- ------ 48,378,300 49,268,200 0.8 Industrial 9,775,000 Crane Co., 7.25% due 6/15/1999 9,619,840 9,550,859 0.1 Insurance 10,000,000 NAC Re Corp., 8% due 6/15/1999 10,189,300 9,990,900 0.1 20,000,000 Travelers Inc., 6.125% due 6/15/2000 18,772,550 18,606,400 0.3 -------------- -------------- ------ 28,961,850 28,597,300 0.4 Machinery 10,000,000 Black & Decker Corp., 6.625% due 11/15/2000 9,343,100 9,254,200 0.1 10,000,000 Harris Corp., 10.375% due 12/01/2018 10,541,400 10,976,900 0.2 10,000,000 TRINOVA Corp., 7.95% due 5/01/1997 9,975,000 9,935,400 0.2 -------------- -------------- ------ 29,859,500 30,166,500 0.5 Manufactured 3,000,000 Oakwood Homes Corp., 9.125% due 6/01/2007 3,000,000 3,007,500 0.0 Housing Natural Gas Coastal Corp.: Suppliers 13,000,000 8.75% due 5/15/1999 13,055,960 13,229,190 0.2 30,000,000 8.125% due 9/15/2002 29,984,410 29,876,700 0.5 10,000,000 Williams Companies, Inc., 8.875% due 9/15/2012 10,172,200 10,261,700 0.1 -------------- -------------- ------ 53,212,570 53,367,590 0.8 Oil--Integrated Occidental Petroleum Corp.: 15,100,000 5.85% due 11/09/1998 14,057,259 14,207,741 0.2 12,000,000 5.90% due 11/09/1998 11,343,120 11,311,320 0.2 -------------- -------------- ------ 25,400,379 25,519,061 0.4 Oil--International 5,000,000 Union Texas Petroleum Holdings, Inc., 8.375% due 3/15/2005 5,008,250 5,000,000 0.1 Pharmaceutical 5,750,000 Cardinal Distribution, Inc., 8% due 3/01/1997 5,750,000 5,791,228 0.1 Distribution
SCHEDULE OF INVESTMENTS (continued)
Face Value Percent of Industries Amount Corporate Bonds Cost (Note 1a) Net Assets Railroads $ 3,000,000 Burlington Northern, Inc., 7.40% due 5/15/1999 $ 2,993,580 $ 2,974,230 0.0% Services 17,725,000 ADT Operations, 8.25% due 8/01/2000 17,873,500 17,237,563 0.3 Steel 20,000,000 USX Corp., 6.375% due 7/15/1998 19,894,000 19,197,400 0.3 Telecommunications 20,000,000 AT&T Capital Corp., 7.66% due 1/30/1997 20,000,000 20,178,000 0.3 10,000,000 Allnet Communications Services, Inc., 9% due 5/15/2003 9,746,250 9,600,000 0.2 10,000,000 Bell Atlantic Financial Services, Inc., 5.47% due 4/27/1998 10,031,400 9,508,900 0.1 -------------- -------------- ------ 39,777,650 39,286,900 0.6 Utilities--Electric Commonwealth Edison Co.: 10,000,000 6% due 3/15/1998 10,157,200 9,521,700 0.2 25,000,000 6.40% due 10/15/2005 21,178,955 21,543,500 0.3 5,000,000 Long Island Lighting Co., 7.625% due 4/15/1998 4,986,210 4,961,750 0.1 15,000,000 PECO Energy Co., 7.50% due 1/15/1999 15,111,500 14,886,000 0.2 Texas Utilities Co.: 5,000,000 7.125% due 6/01/1997 4,987,500 4,970,650 0.1 9,500,000 5.75% due 7/01/1998 9,297,135 9,008,375 0.1 United Illuminating Co.: 5,000,000 7.375% due 1/15/1998 5,003,125 4,933,800 0.1 5,000,000 6.20% due 1/15/1999 4,693,050 4,702,500 0.1 -------------- -------------- ------ 75,414,675 74,528,275 1.2 Total Corporate Bonds 1,293,908,201 1,276,362,501 20.0 Collateralized Mortgage Obligations Federal Home Loan Mortgage Corp.: 20,000,000 5.80% due 4/15/2006 18,615,625 18,381,200 0.3 17,879,976 6% due 4/15/2006 17,467,200 17,181,539 0.3 Federal National Mortgage Association: 20,000,000 5.10% due 3/25/2002 19,256,250 19,037,400 0.3 20,000,000 5% due 3/25/2012 19,425,000 18,893,600 0.3 10,000,000 5% due 4/25/2014 9,756,250 9,462,500 0.1 29,402,892 6.999% due 10/25/2022 25,326,303 25,928,528 0.4 19,439,157 Prudential Home Mortgage Security Co., 5.25% due 12/25/2000 18,606,918 18,467,199 0.3 Total Collateralized Mortgage Obligations 128,453,546 127,351,966 2.0 US Government Obligations US Treasury Notes: 10,000,000 6.875% due 8/31/1999 9,951,562 9,923,000 0.2 236,000,000 6.375% due 8/15/2002 222,402,854 224,974,080 3.5 475,000,000 7.25% due 5/15/2016 448,562,150 459,263,250 7.2 400,000,000 7.50% due 11/15/2016 382,711,719 396,936,000 6.2 Total US Government Obligations 1,063,628,285 1,091,096,330 17.1
SCHEDULE OF INVESTMENTS (concluded)
Face Value Percent of Amount Short-Term Investments Cost (Note 1a) Net Assets Commercial Paper** $202,366,000 General Electric Capital Corp., 6.25% due 4/03/1995 $ 202,295,734 $ 202,295,734 3.2% Total Short-Term Investments 202,295,734 202,295,734 3.2 Total Investments $5,991,906,725 6,344,865,375 99.3 ============== Other Assets Less Liabilities 45,254,558 0.7 -------------- ------ Net Assets $6,390,119,933 100.0% ============== ====== *American Depositary Receipt (ADR). **Commercial Paper is traded on a discount basis; the interest rate shown is the discount rate paid at the time of purchase by the Fund. (a)Name changed from Illinois Power Co. (b)Non-income producing security. ++Restricted security as to resale. The value of the Fund's investments in the restricted security was approximately $38,200,000, representing 0.6% of net assets. Acquisition Value Issue Date Cost (Note 1a) GTE Finance Corp., 5.81% due 12/15/1997 5/25/1993 $40,000,000 $38,200,000 Total $40,000,000 $38,200,000 =========== =========== ++++Investments in companies 5% or more of whose outstanding securities are held by the Fund (such companies are defined as "Affiliated Companies" in section 2(a)(3) of the Investment Company Act of 1940) are as follows: Net Share Net Dividend Industry Affiliate Activity Cost Income Banking Union Planters Corp. 128,000 $3,758,652 $1,303,200 Home Builders Oriole Homes Corp. -- -- 108,000 Insurance Fremont General Corp. 262,000 6,181,523 -- Office Equipment Wallace Computer Services, Inc. (7,000) 75,649 793,102 Services PHH Corp. -- -- 2,104,200 Steel Cleveland Cliffs, Inc. (3,000) (111,680) 1,325,900 See Notes to Financial Statements.
PORTFOLIO INFORMATION Ten Largest Percent of Common Stock Holdings Net Assets NationsBank Corp. 2.4% Yacimientos Petroliferos Fiscales S.A. (Sponsored) (ADR) 2.3 The Goodyear Tire & Rubber Co. 2.1 Chemical Banking Corp. 2.1 Williams Companies, Inc. 1.7 Sears, Roebuck & Co. 1.7 American International Group, Inc. 1.4 Grace (W.R.) & Co. 1.2 United Technologies Corp. 1.2 GTE Corp. 1.1 Ten Largest Percent of Industries Net Assets* Banking 10.5% Insurance 6.5 Finance 5.6 Pharmaceuticals 4.9 Natural Gas Suppliers 4.3 Chemicals 4.3 Diversified Companies 3.2 Oil--Integrated 2.8 Oil & Gas Producers 2.6 Retail Trade 2.4 [FN] *Based on total holdings in commmon stocks and bonds. FINANCIAL INFORMATION
Statement of Assets and Liabilities as of March 31, 1995 Assets: Investments, at value (identified cost--$5,991,906,725) (Note 1a) $6,344,865,375 Receivables: Securities sold $ 70,189,239 Interest 51,868,769 Capital shares sold 32,656,354 Dividends 10,991,721 165,706,083 -------------- Prepaid registration fees and other assets (Note 1f) 66,763 -------------- Total assets 6,510,638,221 -------------- Liabilities: Payables: Securities purchased 74,693,709 Capital shares redeemed 21,297,144 Distributor (Note 2) 3,099,130 Investment adviser (Note 2) 2,142,361 101,232,344 -------------- Accrued expenses and other liabilities 19,285,944 -------------- Total liabilities 120,518,288 -------------- Net Assets: Net assets $6,390,119,933 ============== Net Assets Class A Shares of Common Stock, $0.10 par value, 300,000,000 shares Consist of: authorized $ 9,040,642 Class B Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized 13,432,818 Class C Shares of Common Stock, $0.10 par value, 200,000,000 shares authorized 172,620 Class D Shares of Common Stock, $0.10 par value, 200,000,000 shares authorized 617,567 Paid-in capital in excess of par 5,886,600,213 Undistributed investment income--net 61,422,496 Undistributed realized capital gains on investments and foreign currency transactions--net 65,876,859 Unrealized appreciation on investments and foreign currency transactions--net 352,956,718 -------------- Net assets $6,390,119,933 ============== Net Asset Value: Class A--Based on net assets of $2,507,766,853 and 90,406,424 shares outstanding $ 27.74 ============== Class B--Based on net assets of $3,664,249,823 and 134,328,178 shares outstanding $ 27.28 ============== Class C--Based on net assets of $46,902,309 and 1,726,200 shares outstanding $ 27.17 ============== Class D--Based on net assets of $171,200,948 and 6,175,669 shares outstanding $ 27.72 ============== See Notes to Financial Statements.
FINANCIAL INFORMATION (continued)
Statement of Operations for the Year Ended March 31, 1995 Investment Interest and discount earned $ 142,744,258 Income Dividends (net of $1,800,077 foreign withholding tax) 108,179,348 (Notes 1d & 1e): Other 272,288 -------------- Total income 251,195,894 -------------- Expenses: Distribution fees--Class B (Note 2) 33,250,376 Investment advisory fees (Note 2) 23,221,209 Transfer agent fees--Class B (Note 2) 5,124,732 Transfer agent fees--Class A (Note 2) 3,099,547 Printing and shareholder reports 574,959 Custodian fees 499,949 Registration fees (Note 1f) 406,040 Professional fees 127,195 Account maintenance fees--Class D (Note 2) 110,571 Distribution fees--Class C (Note 2) 88,111 Transfer agent fees--Class D (Note 2) 75,967 Directors' fees and expenses 40,890 Transfer agent fees--Class C (Note 2) 17,660 Pricing fees 7,109 Other 38,471 -------------- Total expenses 66,682,786 -------------- Investment income--net 184,513,108 -------------- Realized & Realized gain (loss) from: Unrealized Gain Investments--net $ 240,271,642 (Loss) on Foreign currency transactions--net (10,591,681) 229,679,961 Investments & -------------- Foreign Currency Change in unrealized appreciation/depreciation on: Transactions--Net Investments--net 156,164,666 (Notes 1b, 1c, Foreign currency transactions--net 16,947 156,181,613 1e & 3): -------------- -------------- Net realized and unrealized gain on investments and foreign currency transactions 385,861,574 -------------- Net Increase in Net Assets Resulting from Operations $ 570,374,682 ============== See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statements of Changes in Net Assets
For the Year Ended March 31, Increase (Decrease) in Net Assets: 1995 1994 Operations: Investment income--net $ 184,513,108 $ 150,688,436 Realized gain on investments and foreign currency transactions--net 229,679,961 277,803,155 Change in unrealized appreciation/depreciation on investments and foreign currency transactions--net 156,181,613 (196,672,342) -------------- -------------- Net increase in net assets resulting from operations 570,374,682 231,819,249 -------------- -------------- Dividends & Investment income--net: Distributions to Class A (79,657,527) (72,525,266) Shareholders Class B (80,336,105) (71,778,790) (Note 1g): Class C (186,349) -- Class D (1,531,830) -- Realized gain on investments--net: Class A (132,046,243) (72,489,831) Class B (188,065,461) (100,419,177) Class C (321,434) -- Class D (2,472,719) -- -------------- -------------- Net decrease in net assets resulting from dividends and distributions to shareholders (484,617,668) (317,213,064) -------------- -------------- Capital Share Net increase in net assets derived from capital share transactions 987,538,601 651,421,432 Transactions -------------- -------------- (Note 4): Net Assets: Total increase in net assets 1,073,295,615 566,027,617 Beginning of year 5,316,824,318 4,750,796,701 -------------- -------------- End of year* $6,390,119,933 $5,316,824,318 ============== ============== *Undistributed investment income--net $ 61,422,496 $ 38,621,199 ============== ============== See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Financial Highlights
The following per share data and ratios have been derived from information provided in the financial statements. Class A For the Year Ended March 31, Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991 Per Share Net asset value, beginning of year $ 27.46 $ 27.89 $ 26.90 $ 25.38 $ 23.65 Operating ----------- ----------- ----------- ----------- ----------- Performance: Investment income--net 1.01 .97 .87 1.02 1.17 Realized and unrealized gain on investments and foreign currency transactions--net 1.77 .50 1.99 2.12 2.24 ----------- ----------- ----------- ----------- ----------- Total from investment operations 2.78 1.47 2.86 3.14 3.41 ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.94) (.95) (.87) (1.02) (1.14) Realized gain on investments--net (1.56) (.95) (1.00) (.60) (.54) ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (2.50) (1.90) (1.87) (1.62) (1.68) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year $ 27.74 $ 27.46 $ 27.89 $ 26.90 $ 25.38 =========== =========== =========== =========== =========== Total Investment Based on net asset value per share 10.95% 5.39% 11.33% 12.96% 15.17% Return:* =========== =========== =========== =========== =========== Ratios to Expenses .57% .53% .55% .56% .58% Average =========== =========== =========== =========== =========== Net Assets: Investment income--net 3.81% 3.52% 3.56% 4.21% 5.13% =========== =========== =========== =========== =========== Supplemental Net assets, end of year (in thousands) $ 2,507,767 $ 2,237,492 $ 2,056,023 $ 1,533,530 $ 1,083,741 Data: =========== =========== =========== =========== =========== Portfolio turnover 89% 86% 55% 59% 86% =========== =========== =========== =========== =========== *Total investment returns exclude the effects of sales loads. See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Financial Highlights (continued)
The following per share data and ratios have been derived from information provided in the financial statements. Class B For the Year Ended March 31, Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991 Per Share Net asset value, beginning of year $ 27.04 $ 27.49 $ 26.58 $ 25.14 $ 23.46 Operating ----------- ----------- ----------- ----------- ----------- Performance: Investment income--net .74 .70 .65 .80 .96 Realized and unrealized gain on investments and foreign currency transactions--net 1.72 .48 1.89 2.05 2.19 ----------- ----------- ----------- ----------- ----------- Total from investment operations 2.46 1.18 2.54 2.85 3.15 ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.66) (.68) (.63) (.81) (.93) Realized gain on investments--net (1.56) (.95) (1.00) (.60) (.54) ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (2.22) (1.63) (1.63) (1.41) (1.47) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year $ 27.28 $ 27.04 $ 27.49 $ 26.58 $ 25.14 =========== =========== =========== =========== =========== Total Investment Based on net asset value per share 9.81% 4.36% 10.16% 11.81% 14.03% Return:* =========== =========== =========== =========== =========== Ratios to Expenses, excluding distribution fees .59% .55% .56% .58% .60% Average =========== =========== =========== =========== =========== Net Assets: Expenses 1.59% 1.55% 1.56% 1.58% 1.60% =========== =========== =========== =========== =========== Investment income--net 2.79% 2.50% 2.53% 3.14% 4.11% =========== =========== =========== =========== =========== Supplemental Net assets, end of year (in thousands) $ 3,664,250 $ 3,079,332 $ 2,694,774 $ 1,582,065 $ 620,842 Data: =========== =========== =========== =========== =========== Portfolio turnover 89% 86% 55% 59% 86% =========== =========== =========== =========== =========== *Total investment returns exclude the effects of sales loads. See Notes to Financial Statements.
FINANCIAL INFORMATION (concluded) Financial Highlights (concluded)
The following per share data and ratios have been derived For the Period from information provided in the financial statements. October 21, 1994++ to March 31, 1995 Increase (Decrease) in Net Asset Value: Class C Class D Per Share Net asset value, beginning of period $ 26.81 $ 27.27 Operating -------- ------- Performance: Investment income--net .49 .48 Realized and unrealized gain on investments and foreign currency transactions--net 1.03 1.15 -------- ------- Total from investment operations 1.52 1.63 -------- ------- Less dividends and distributions: Investment income--net (.43) (.45) Realized gain on investments--net (.73) (.73) -------- ------- Total dividends and distributions (1.16) (1.18) Net asset value, end of period $ 27.17 $ 27.72 ======== ======== Total Investment Based on net asset value per share 6.07%+++ 6.42%+++ Return:** ======== ======== Ratios to Average Expenses, excluding account maintenance and distribution fees .64%* .62%* Net Assets: ======== ======== Expenses 1.64%* .87%* ======== ======== Investment income--net 3.22%* 3.94%* ======== ======== Supplemental Net assets, end of period (in thousands) $ 46,902 $171,201 Data: ======== ======== Portfolio turnover 89% 89% ======== ======== *Annualized. **Total investment returns exclude the effects of sales loads. ++Commencement of Operations. +++Aggregate total investment return. See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: Merrill Lynch Capital Fund, Inc. (the "Fund") is regis- tered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund 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 Fund. (a) Valuation of investments--Portfolio securities which are traded on stock exchanges are valued at the last sale price on exchanges 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 representa- tive market. Options written are valued at the last sale price in the case of exchange-traded options or, in the case of options traded in the over-the-counter market, the last asked price. Short-term securities are valued at amortized cost, which approximates market value. Other investments are stated at market value. Securities and assets for which market value quotations are not available are valued at their fair value as determined in good faith by or under the direction of the Fund's Board of Directors. (b) Derivative financial instruments--The Fund may engage in various portfolio strategies to seek to increase its return by hedging its portfolio against adverse move- ments 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. *Options--The Fund is authorized to write covered call options. When the Fund sells an option, an amount equal to the premium received by the Fund 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 Fund enters into a closing transaction), the Fund 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. (c) Foreign currency transactions--Transactions denom- inated 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 unreal- ized gains or losses from investments include the effects of foreign exchange rates on investments. (d) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its share- holders. Therefore, no Federal income tax provision is required. Under the applicable foreign tax law, a with- holding 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). Divi- dend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Fund is informed of 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--Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund 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 sub- sidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc. MLAM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facili- ties, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays a monthly fee based upon the average daily value of the Fund's net assets at the following annual rates: 0.50% of the Fund's average daily net assets not exceeding $250 million; 0.45% of average daily net assets in excess of $250 million but not exceeding $300 million; 0.425% of average daily net assets in excess of $300 million but not exceeding $400 million; and 0.40% of average daily net assets in excess of $400 million. The Investment Advisory Agreement obligates MLAM to reimburse the Fund to the extent the Fund's expenses (excluding interest, taxes, distribution fees, brokerage fees and commissions, and extraordinary items) exceed 2.5% of the Fund's first $30 million of average daily net assets, 2.0% of the Fund's next $70 million of average daily net assets, and 1.5% of the average daily net assets in excess thereof. No fee payment will be made to the Investment Adviser during any fiscal year which will cause such expenses to exceed the most restrictive expense limitation at the time of such payment. Pursuant to the distribution plans (the "Distribution Plans") adopted by the Fund in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor ongoing account maintenance and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares as follows: Account Distribution Maintenance Fee Fee Class B 0.25% 0.75% Class C 0.25% 0.75% Class D 0.25% -- Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account maintenance and distribution services to the Fund. The ongoing account maintenance fee compensates the Distributor and MLPF&S for providing account mainte- nance services to Class B, Class C and Class D share- holders. 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, 1995, MLFD earned underwriting discounts and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D Shares as follows: MLFD MLPF&S Class A $168,068 $2,770,834 Class D $ 50,600 $ 871,472 For the year ended March 31, 1995, MLPF&S received contingent deferred sales charges of $3,965,708 and $4,929 relating to transactions in Class B and Class C Shares, respectively. In addition, MLPF&S received $315,095 in commissions on the execution of portfolio security transactions for the Fund for the year ended March 31, 1995. Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is the Fund's transfer agent. Accounting services are provided to the Fund by MLAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of MLAM, PSI, MLPF&S, FDS, MLFD, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short- term securities, for the year ended March 31, 1995 were $5,599,721,276 and $5,009,815,623, respectively. Net realized and unrealized gains (losses) as of March 31, 1995 were as follows: Realized Unrealized Gains (Losses) Gains (Losses) Long-term investments $240,112,182 $352,958,650 Short-term investments (15,073) -- Paydowns 174,533 -- Foreign currency transactions (10,591,681) (1,932) ------------ ------------ Total $229,679,961 $352,956,718 ============ ============ As of March 31, 1995, net unrealized appreciation for Federal income tax purposes aggregated $349,542,219 of which $440,544,225 related to appreciated securities and $91,002,006 related to depreciated securities. At March 31, 1995, the aggregate cost of investments for Federal income tax purposes was $5,995,323,156. 4. Capital Share Transactions: Net increase in net assets derived from capital share transactions was $987,538,601 and $651,421,432 for the years ended March 31, 1995 and 1994, respectively. Transactions in capital shares for each class were as follows: Class A Shares for the Year Dollar Ended March 31, 1995 Shares Amount Shares sold 17,286,503 $471,481,609 Shares issued to shareholders in reinvestment of dividends & distributions 7,424,496 192,734,824 ------------ ------------ Total issued 24,710,999 664,216,433 Shares redeemed (15,776,697) (427,291,645) ------------ ------------ Net increase 8,934,302 $236,924,788 ============ ============ Class A Shares for the Year Dollar Ended March 31, 1994 Shares Amount Shares sold 18,233,680 $513,827,652 Shares issued to shareholders in reinvestment of dividends & distributions 4,757,359 130,645,330 ------------ ------------ Total issued 22,991,039 644,472,982 Shares redeemed (15,246,391) (429,372,888) ------------ ------------ Net increase 7,744,648 $215,100,094 ============ ============ Class B Shares for the Year Dollar Ended March 31, 1995 Shares Amount Shares sold 35,795,347 $958,699,323 Shares issued to shareholders in reinvestment of dividends & distributions 9,333,565 239,011,925 ------------ ------------ Total issued 45,128,912 1,197,711,248 Shares redeemed (20,872,708) (557,090,978) Automatic conversion of shares (3,804,492) (100,075,150) ------------ ------------ Net increase 20,451,712 $540,545,120 ============ ============ Class B Shares for the Year Dollar Ended March 31, 1994 Shares Amount Shares sold 29,452,988 $816,967,279 Shares issued to shareholders in reinvestment of dividends & distributions 5,685,835 154,225,540 ------------ ------------ Total issued 35,138,823 971,192,819 Shares redeemed (19,273,929) (534,871,481) ------------ ------------ Net increase 15,864,894 $436,321,338 ============ ============ Class C Shares for the Period October 21, 1994++ to Dollar March 31, 1995 Shares Amount Shares sold 1,868,357 $ 49,114,822 Shares issued to shareholders in reinvestment of dividends & distributions 18,191 452,606 ------------ ------------ Total issued 1,886,548 49,567,428 Shares redeemed (160,348) (4,186,298) ------------ ------------ Net increase 1,726,200 $ 45,381,130 ============ ============ [FN] ++Commencement of Operations. Class D Shares for the Period October 21, 1994++ to Dollar March 31, 1995 Shares Amount Shares sold 2,621,771 $ 69,784,869 Shares issued to shareholders in reinvestment of dividends & distributions 140,100 3,548,731 Automatic conversion of shares 3,740,107 100,075,150 ------------ ------------ Total issued 6,501,978 173,408,750 Shares redeemed (326,309) (8,721,187) ------------ ------------ Net increase 6,175,669 $164,687,563 ============ ============ [FN] ++Commencement of Operations. 5. Commitments: At March 31, 1995, the Fund had entered into forward exchange contracts under which it had agreed to buy and sell various foreign currencies with values of $2,838,892 and $165,434, respectively. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders, Merrill Lynch Capital Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of invest- ments, of Merrill Lynch Capital Fund, Inc. as of March 31, 1995, 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 periods in the five-year period then ended. These financial statements and the financial highlights are the responsibility of the Fund'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, 1995 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 Capital Fund, Inc. as of March 31, 1995, 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 5, 1995 PORTFOLIO CHANGES (unaudited) For the Quarter Ended March 31, 1995 Additions Stocks AlliedSignal, Inc. Cadbury Schweppes PLC Cascade Natural Gas Corp. Entergy Corp. Exxon Corp. Ford Motor Company Harsco Corp. Integon Corp. Kumagai Gumi Co., Ltd. (Ordinary) Magma Copper Co. National Australian Bank Ltd. *Pittston Co. Premark International, Inc. *Ren Corporation Repsol S.A. (ADR) Roche Holdings AG Rollins, Inc. *Sphere Drake Holdings Ltd. TIG Holdings, Inc. Texaco Inc. Texas Utilities Company Bonds AT&T Capital Corp., 7.66% due 1/30/1997 Bank of Boston Corp., 6.625% due 12/01/2005 Bankers Trust Company, 7.50% due 1/15/2002 The Chase Manhattan Corp., 6.75% due 8/15/2008 Coastal Corp., 8.125% due 9/15/2002 Columbia-HCA Healthcare Corp., 8.70% due 2/10/2010 Commonwealth Edison Co., 6.40% due 10/15/2005 Dean Witter, Discover & Co., 6.75% due 10/15/2013 Federal National Mortgage Association, 6.999% due 10/25/2022 First Chicago Corp., 6.375% due 1/30/2009 General Motors Acceptance Corp.: 8.25% due 1/23/1998 5.95% due 1/11/1999 Grace (W.R.) & Co., 8% due 8/15/2004 Household Finance Corp.: 7.125% due 4/30/1999 7.45% due 4/01/2000 National Medical Enterprises, Inc., 9.625% due 9/01/2002 Philips Electronics N.V., 8.375% due 9/15/2006 Republic of Argentina, 8.375% due 12/20/2003 Smith Barney Shearson Holdings, Inc., 7.98% due 3/01/2000 Tenneco, Inc., 7.875% due 10/01/2002 US Treasury Notes: 6.875% due 8/31/1999 6.375% due 8/15/2002 Union Texas Petroleum Holdings, Inc., 8.375% due 3/15/2005 Williams Companies, Inc., 8.875% due 9/15/2012 Deletions Stocks CIGNA Corp. Dresser Industries, Inc. Heinz (H.J.) Co. Honeywell, Inc. IVAX Corp. Masco Corp. NICOR, Inc. *Pittston Co. Public Service Co. of Colorado *Ren Corporation Rigel Energy Corp. Ryland Group, Inc. Sears, Roebuck & Co. Preferred PERCS *Sphere Drake Holdings Ltd. Trident Microsystems, Inc. [FN] *Added and deleted in the same quarter. Bonds AT&T Capital Corp., 6.99% due 10/04/1996 AVCO Financial Services, Inc., 5.875% due 10/15/1997 Associates Corp., 4.75% due 8/01/1996 BankAmerica Corp.: 7.25% due 2/03/1997 7.50% due 3/15/1997 Bell Canada, Inc., 7.125% due 5/01/1998 Canadian Tire Corp., 7.50% due 3/04/1998 Cemex, S.A. de C.V., 8.875% due 6/10/1998 Chemical Banking Corp., 6.50% due 1/15/2009 Chrysler Finance Corp., 6% due 6/03/1996 Commonwealth Edison Co., 7% due 2/01/1997 Dow Chemical Co., 6.85% due 8/15/2013 Federal Home Loan Mortgage Corp., 5.40% due 4/15/2002 Ford Motor Co.: 5.625% due 3/03/1997 5.625% due 1/15/1999 General Electric Capital Corp., 5.38% due 11/17/1997 General Motors Acceptance Corp.: 7.75% due 4/15/1997 7.45% due 6/05/1997 Household Finance Corp.: 5.51% due 3/17/1997 6.25% due 10/15/1997 Household International, Inc., 5.25% due 10/15/1998 International Business Machines Corp., 7.50% due 6/15/2013 Lockheed Corp., 5.65% due 4/01/1997 National Medical Enterprises, Inc.: 8.05% due 5/15/1997 7.375% due 9/01/1997 Norwest Financial, Inc.: 4.93% due 11/15/1996 6.25% due 2/15/1997 Occidential Petroleum Corp., 6.04% due 9/15/1997 Sears, Roebuck & Co.: 5.25% due 2/24/1997 8.45% due 11/01/1998 5.86% due 1/22/1999 Tenneco, Inc., 8% due 11/15/1999 Tennessee Gas Pipeline, 6% due 12/15/2011 US Treasury Notes: 4% due 1/31/1996 4.625% due 2/15/1996 4.25% due 5/15/1996 4.375% due 8/15/1996 4.375% due 11/15/1996 5.25% due 7/31/1998 5.875% due 3/31/1999 5.75% due 8/15/2003 Union Texas Petroleum Holdings, Inc., 8.25% due 11/15/1999 UtiliCorp United, Inc., 6% due 4/01/1998 IMPORTANT TAX INFORMATION (unaudited) The following information summarizes all per share distributions paid by Merrill Lynch Capital Fund, Inc. during the fiscal year ended March 31, 1995:
Record Payable Qualifying Domestic Interest from Other Non-Qualifying Total Long-Term Date Date Ordinary Income* Federal Obligations Ordinary Income Ordinary Income Capital Gains Class A Shares: 07/05/94 07/13/94 $.264483 $.045902 $.357236 $.667621 $.628302 12/12/94 12/20/94 $.260126 $.065430 $.254178 $.579734 $.617148 Class B Shares: 07/05/94 07/13/94 $.210917 $.036606 $.284885 $.532408 $.628302 12/12/94 12/20/94 $.198070 $.049821 $.193541 $.441432 $.617148 Class C Shares: 12/12/94 12/20/94 $.243477 $.061243 $.237909 $.542629 $.617148 Class D Shares: 12/12/94 12/20/94 $.256572 $.064536 $.250704 $.571812 $.617148
The qualifying domestic ordinary income qualifies for the dividends-received deduction for corporations. The law varies in each state as to whether and what percentage of dividend income attributable to Federal obligations is exempt from state income tax. We recommend that you consult your tax adviser to determine if any portion of the dividends you received are exempt from state income tax. Listed at right are the percentages of total assets of the Fund invested in Federal obligations as of the end of each quarter of the fiscal year. Please retain this information for your records. Percentage of For the Quarter Ended Federal Obligations* June 30, 1994 10.92% September 30, 1994 10.46% December 31, 1994 12.54% March 31, 1995 16.24% [FN] *For purposes of this calculation, Federal Obligations include US Treasury Notes, US Treasury Bills and US Treasury Bonds. Also included are obligations issued by the following agencies: Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Land Banks, Federal Home Loan Banks and the Student Loan Marketing Association. Repurchase Agreements are not included in this calculation.