-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GwjJteXvmbb+bs8PpEpiA5WFsoT6qCFsO313++/bE7xqEggKHx8XOf9A4frgtM9v DlR+WxsM4TFGljTwjIBM0w== 0001005477-99-000789.txt : 19990219 0001005477-99-000789.hdr.sgml : 19990219 ACCESSION NUMBER: 0001005477-99-000789 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH CAPITAL FUND INC CENTRAL INDEX KEY: 0000110055 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132757134 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-02405 FILM NUMBER: 99544980 BUSINESS ADDRESS: STREET 1: P O BOX 9011 CITY: PRINCETON STATE: NJ ZIP: 08543 BUSINESS PHONE: 6092823319 MAIL ADDRESS: STREET 1: P.O. BOX 9066 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 FORMER COMPANY: FORMER CONFORMED NAME: LIONEL D EDIE CAPITAL FUND INC DATE OF NAME CHANGE: 19760810 N-30B-2 1 QUARTERLY REPORT MERRILL LYNCH CAPITAL FUND, INC. [GRAPHIC OMITTED] STRATEGIC Performance Quarterly Report December 31, 1998 MERRILL LYNCH CAPITAL FUND, INC. PORTFOLIO SUMMARY Security Diversification As a Percentage of Net Assets As of December 31, 1998 A pie chart illustrating the following percentages: US Stocks 53.9% US Bonds 28.8% Non-US Bonds 4.2% Non-US Stocks 9.4% Cash & Cash Equivalents 3.7% Sector Representation As a Percentage of Equities As of December 31, 1998 A pie chart illustrating the following percentages: Financial Services 20.4% Consumer Services 5.6% Utilities 2.8% Transportation 4.9% Capital Goods--Technology 8.7% Energy 10.8% Basic Industries 2.7% Diversified 2.1% Credit Cyclicals 2.7% Consumer Staples 15.0% Capital Goods 11.9% Consumer Cyclicals 12.4% Geographic Diversification Percent of As of December 31, 1998 Net Assets - -------------------------------------------------------------------------------- United States 85.4%* - -------------------------------------------------------------------------------- United Kingdom 4.0 - -------------------------------------------------------------------------------- Switzerland 2.5 - -------------------------------------------------------------------------------- Argentina 2.3 - -------------------------------------------------------------------------------- Bermuda 1.3 - -------------------------------------------------------------------------------- Mexico 1.1 - -------------------------------------------------------------------------------- Bahamas 1.0 - -------------------------------------------------------------------------------- Netherlands 0.5 - -------------------------------------------------------------------------------- Chile 0.4 - -------------------------------------------------------------------------------- Turkey 0.3 - -------------------------------------------------------------------------------- Panama 0.3 - -------------------------------------------------------------------------------- India 0.3 - -------------------------------------------------------------------------------- Colombia 0.3 - -------------------------------------------------------------------------------- Hong Kong 0.1 - -------------------------------------------------------------------------------- South Korea 0.1 - -------------------------------------------------------------------------------- Guatemala 0.1 - -------------------------------------------------------------------------------- * Includes investments in short-term securities. US Common Stock Investments S&P As of December 31, 1998 Fund 500* - -------------------------------------------------------------------------------- Average Capitalization (in billions) $23.1 $19.6 - -------------------------------------------------------------------------------- Price/Book Value 2.2 6.5 - -------------------------------------------------------------------------------- Price/Earnings Ratio** 22.6 30.4 - -------------------------------------------------------------------------------- Yield Based on Current Dividend 1.7% 1.3% - -------------------------------------------------------------------------------- * An unmanaged broad-based index comprised of common stocks. ** Based on 1998 earnings estimates. Fixed-Income Investments Merrill Lynch As of December 31, 1998 Fund DOAO Index* - -------------------------------------------------------------------------------- Duration 5.3 Years 5.3 Years - -------------------------------------------------------------------------------- Average Maturity 8.8 Years 8.7 Years - -------------------------------------------------------------------------------- Asset Breakdown: - -------------------------------------------------------------------------------- Corporates 55.1% 21.3% - -------------------------------------------------------------------------------- US Treasuries/Agencies 37.4% 50.1% - -------------------------------------------------------------------------------- Mortgage-Backed 0.7% 28.6% - -------------------------------------------------------------------------------- International Governments 6.8% -- - -------------------------------------------------------------------------------- * An unmanaged market-weighted corporate, Government and mortgage master bond index reflecting approximately 97% of total outstanding US bonds. 1 Merrill Lynch Capital Fund, Inc. December 31, 1998 DEAR SHAREHOLDER During the quarter ended December 31, 1998, the US equity market staged a powerful advance, completing a near-full recovery from the dramatic emerging markets-related declines of late summer and propelling the broad market indexes to new highs near the end of the quarter. Beginning in late September, expectations for a more accommodative monetary policy and the potential for a coordinated global reduction in interest rates began to reverse the downdraft in the market. With the US economy weakening because of ongoing economic turmoil in emerging markets, investors anticipated Federal Reserve Board action to lower interest rates in order to alleviate these growing economic pressures. With the risk of deflation superseding that of inflation in many investors' minds, a lower interest rate structure was expected to facilitate more growth-oriented policies and precipitate a more stable economic environment. Such actions were indeed forthcoming, as the Federal Reserve Board reduced the Federal Funds rate on September 29, 1998 by 25 basis points (0.25%). In October, the Federal Reserve Board lowered interest rates again in a surprise move in response to continued turmoil affecting global financial markets and fears of a reduction in credit availability impairing economic growth. Other central banks, including those of Canada, Italy and Spain, also reduced interest rates, suggesting a more coordinated effort to improve global liquidity, a scenario that historically bodes favorably for financial asset prices. In addition, new funding for the International Monetary Fund was expected to enhance that organization's ability to respond to adverse developments in emerging markets, especially Brazil, another indication that the worst of the Asian-induced global financial crisis may have passed. Furthermore, Japan's bank bailout program ignited renewed enthusiasm for the prospects of a turnaround in that vital economy. Finally, a number of companies in the high profile technology sector reported third-quarter earnings that exceeded expectations and indicated that the tone of business had improved. By November, positive liquidity flows, solid economic conditions and expectations for reasonable corporate profits growth in 1999 sustained the recovery. The Federal Reserve Board lowered interest rates for the third time with an additional 25 basis points reduction on November 17, 1998. This lower interest rate structure, combined with accelerating money supply growth, provided tremendous fuel with which to drive financial asset prices higher. Also, an upward revision to third-quarter gross domestic product growth to 3.9%, and continued high levels of auto, housing and retail sales, suggested recessionary worries were misplaced and a hospitable economic environment would be sustained. Finally, most observers continued to expect modest growth in US corporate profits in 1999. In December, accelerating financial market liquidity, continued robust real consumer spending and some evidence of improvement in economic conditions in selected developing countries like South Korea, completed the recovery, with the US equity market recording its eighth-best quarterly performance ever and its second best since 1975. For the quarter overall, these constructive developments produced an extraordinary +21.30% total return for the unmanaged Standard & Poor's (S&P) 500 Index. The US bond market provided only modest returns for the period. Inflation pressures continued to be well-contained, with the third-quarter implicit price deflator rising at a mere 0.8% annual rate, the lowest in 30 years, and producer prices having declined on an annualized basis for five consecutive months through November. Investors' reduced focus on safety and security in this strong equity environment restrained the advance of the unmanaged Merrill Lynch Domestic Bond Master Index to a mere +0.42% total return for the quarter ended December 31, 1998, and cash equivalents earned a +1.13% total return. Portfolio Matters Total returns for Merrill Lynch Capital Fund, Inc.'s Class A, Class B, Class C and Class D Shares for the quarter ended December 31, 1998 were +11.07%, +10.81%, +10.79% and +10.99%, respectively. (Fund results shown do not reflect sales charges and would be lower if sales charges were included.) While we are encouraged by this more proactive posture on the part of the monetary authorities and expect lower interest rates and rapid money supply growth to provide strong support, we believe that the ramifications of the volatility in the emerging markets economies have yet to be fully incorporated into corporate earnings expectations and, in turn, stock prices. Consequently, we remain concerned about the equity market's ability to continue to advance from current levels. The stock market's recovery from the early October lows has driven price/earnings and price/book value multiples back to record levels. Meanwhile, after-tax corporate profits fell 1.8% 2 Merrill Lynch Capital Fund, Inc. December 31, 1998 during the third quarter and at a 5.4% pace over the past year. Record-high valuations, combined with deteriorating corporate profits, does not represent a formula for significant stock price appreciation, in our opinion. Also, bonds continue to represent good value, with inflation-adjusted interest rates at historically above-average levels and inflation pressures expected to remain benign. Consequently, we continue to maintain a significant bond weighting in the Fund, with our investment position at quarter-end showing 63.3% of net assets invested in equities, 33.0% in fixed-income securities and 3.7% in cash equivalents. This compares to 61.3% in equities, 35.0%Ein fixed-income securities and 3.7% in cash equivalents at September 30, 1998. The remarkable recovery of the US equity market masks a significant disparity of performance within the market. While the unmanaged S&P 500 Index advanced by 26.7% for the year ended December 31, 1998, this gain was heavily concentrated in the 30 largest companies in the Index, which rose an average of 39% for the year and accounted for 46% of the Index's gain. Equally weighting the 500 stocks in the Index produced a far more modest 13% return for 1998. This concentration of performance in the ultra-large capitalization companies is further evident by the more restrained +17.68% of the unmanaged S&P Mid-Cap Index and the 3.45% decline in 1998 by the unmanaged Russell 2000 Index of smaller companies. Indeed, almost twice as many New York Stock Exchange listed stocks declined in price for the 12-month period than advanced in price, and the average stock remained 26% below its 52-week high. Since the Fund maintains only a nominal representation among the large consumer, pharmaceutical and technology companies that account for the bulk of the top 30 stocks because of the extremely high valuations they command, this detracted from our relative equity returns for the 12-month period. Furthermore, our value style of investing underperformed the growth style of investing for both the fourth quarter and the full year, further constraining our performance. The unmanaged Russell 1000 Value Index rose 16.0% for the fourth quarter and 13.2% for 1998, compared to the unmanaged Russell 1000 Growth Index, which provided a gain of 26.5% for the fourth quarter and a gain of 37.5% for the full year. We continue to believe our stock selection methodologies are sound and will provide superior risk-adjusted equity returns over time. Within the equity component of the Fund, we continued to diversify our holdings to better control risk during the quarter, adding 3 new investments, increasing positions in 23 holdings, reducing positions in 14 holdings, and eliminating 10 stocks from the Fund. We established a position in The Sherwin-Williams Company, the paint and coatings firm, which enjoys a high and rising market share in the architectural paints and coatings business with good margins, high returns, ample free cash flow and a solid balance sheet. We believe Sherwin-Williams offers attractive value from its current price levels, and believe it represents an attractive addition to the portfolio. Another new position is Monsanto Company, the pharmaceutical/agricultural chemical company, where a significant decline in the share price created an attractive buying opportunity. We believe Monsanto offers an attractive risk/reward profile and will prove to be a profitable addition to the portfolio. During the December quarter, we sold our position in Wal-Mart Stores, Inc., the nation's largest retailer. The company was a big winner over the past few years, appreciating over 70% in 1997 and a further 80% in 1998. Now selling at over 33 times the fiscal year 2000 earnings per share estimate, the stock's premium valuation has been restored. We bought Wal-Mart when business was weak, earnings growth was negative and valuations were at relatively low levels. With business now strong, earnings growth accelerating and the valuation approaching all-time highs, we believe the stock is fairly valued, so we decided to sell and look to redeploy proceeds into more attractive investment opportunities. We also sold our position in United Dominion Industries, Ltd., a diversified industrial manufacturer. Our original investment outlook on United Dominion was predicated upon our expectations for double-digit top-line revenue growth, significant margin improvement, accelerating earnings growth and multiple expansion. However, a combination of internal and external events resulted in significant shortfalls from these projected results, and earnings expectations were reduced. While the company's financial position remains sound and it is repurchasing shares in response to the recent stock price decline, the company's ability to create shareholder value is highly captive to an improved economic environment. The company's recent lack of performance, coupled with few indications of any forthcoming improvements in results, compelled us to sell the stock. 3 Merrill Lynch Capital Fund, Inc. December 31, 1998 Despite the stock market's recent volatility, we continue to seek to invest in above-average companies whose stocks sell at below-average valuation levels. We define an above-average company as one which maintains a strong competitive position, earns consistently high returns on capital, is financially sound, generates cash in excess of its internal reinvestment requirements, and is managed by individuals motivated to create value for shareholders. We define a below-average valuation as one that does not adequately or accurately reflect what we believe to be the company's underlying intrinsic value. On average, the stocks held in the Fund generated comparable returns on shareholders' equity and have stronger balance sheets while offering faster earnings growth than the average company, as measured by the S&P 500 Index. However, these same stocks sell at an average price/earnings ratio of 18.0 times estimated 1999 earnings per share compared to 27.9 times for the S&P 500, at 2.2 times book value per share compared to 6.5 times for the S&P 500 Index, and provide an above-average 1.7% dividend yield compared to 1.3% for the S&P 500 Index. Within the fixed-income portion of the Fund, when interest rates were near historically low levels, we reduced the average maturity of our bond holdings from 8.9 years at September 30, 1998 to 8.8 years by December 31, 1998, and shortened the average duration from 5.4 years to 5.3 years. This reflected our view that the current yield spread between longer and shorter maturity bonds is very narrow, limiting the expected compensation for the additional risk associated with longer-duration bonds. We also responded to reduced levels of liquidity in the fixed-income market during the quarter by increasing our exposure to US Treasury securities from 35.2% of fixed-income assets at September 30, 1998 to 37.4%E at December 31, 1998, and by decreasing our exposure to foreign government bonds from 7.5% toE6.8%. We reduced our corporate bond exposure as well, with investment-grade corporate bonds declining from 49.2% of fixed-income assets to 47.0%, while high-yield corporate bonds rose slightly from 7.3% to 8.1%. Mortgage-backed securities, already a minor portion of the total, declined from 0.8% to 0.7% of our bond holdings at December 31, 1998. The average quality of our bonds remained unchanged at AA/A and the average yield to maturity at quarter-end was 6.52%, up a modest five basis points from the end of the September quarter. In Conclusion For the 12 months ended December 31, 1998, the Fund's Class A Shares had a total return of +6.18%. This marks the twenty-first consecutive year of positive returns for the Fund. It is one of only four equity mutual funds in the industry that has not experienced at least one negative annual total return since 1977. We appreciate your continued interest and participation in Merrill Lynch Capital Fund Inc., and we look forward to assisting you with your financial needs in the months and years to come. Sincerely, /s/ Arthur Zeikel Arthur Zeikel President /s/ Kurt Schansinger Kurt Schansinger Senior Vice President and Portfolio Manager February 10, 1999 4 Merrill Lynch Capital Fund, Inc. December 31, 1998 PERFORMANCE DATA About Fund Performance Investors are able to purchase shares of the Fund through the Merrill Lynch Select Pricing(SM) System, which offers four pricing alternatives: o Class A Shares incur a maximum initial sales charge (front-end load) of 5.25% and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. o Class B Shares are subject to a maximum contingent deferred sales charge of 4% if redeemed during the first year, decreasing 1% each year thereafter to 0% after the fourth year. In addition, Class B Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after approximately 8 years. (There is no initial sales charge for automatic share conversions.) o Class C Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. o Class D Shares incur a maximum initial sales charge of 5.25% and an account maintenance fee of 0.25% (but no distribution fee). None of the past results shown should be considered a representation of future performance. Figures shown in the "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. Recent Performance Results
Ten Years/ 12 Month 3 Month Since Inception Total Return Total Return Total Return ======================================================================================== ML Capital Fund, Inc. Class A Shares* + 6.18% +11.07% +260.51% - ---------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class B Shares* + 5.11 +10.81 +225.59 - ---------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class C Shares* + 5.10 +10.79 + 82.48 - ---------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class D Shares* + 5.91 +10.99 + 88.51 - ---------------------------------------------------------------------------------------- Dow Jones Industrial Average** +18.12 +17.59 +461.64/+158.83 - ---------------------------------------------------------------------------------------- Standard & Poor's 500 Index** +28.58 +21.30 +479.62/+188.38 ========================================================================================
* 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 ten-year/since inception periods are Class A & Class B Shares, for the ten years ended 12/31/98 and Class C & Class D Shares, from 10/21/94 to 12/31/98. ** An unmanaged broad-based index comprised of common stocks. Ten years/since inception total returns are for the ten years ended 12/31/98 and from 10/21/94 to 12/31/98, respectively. 5 Merrill Lynch Capital Fund, Inc. December 31, 1998 PERFORMANCE DATA (concluded) 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 $21,237.55 on December 31, 1998. Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** ================================================================================ Class A Shares* ================================================================================ Year Ended 12/31/98 + 6.18% + 0.61% - -------------------------------------------------------------------------------- Five Years Ended 12/31/98 +14.26 +13.04 - -------------------------------------------------------------------------------- Ten Years Ended 12/31/98 +13.68 +13.07 - -------------------------------------------------------------------------------- * Maximum sales charge is 5.25%. ** Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** ================================================================================ Class B Shares* ================================================================================ Year Ended 12/31/98 + 5.11% + 1.13% - -------------------------------------------------------------------------------- Five Years Ended 12/31/98 +13.10 +13.10 - -------------------------------------------------------------------------------- Ten Years Ended 12/31/98 +12.53 +12.53 - -------------------------------------------------------------------------------- * 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 Without CDSC With CDSC** ================================================================================ Class C Shares* ================================================================================ Year Ended 12/31/98 + 5.10% + 4.10% - -------------------------------------------------------------------------------- Inception (10/21/94) through 12/31/98 +15.42 +15.42 - -------------------------------------------------------------------------------- * 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* ================================================================================ Year Ended 12/31/98 + 5.91% + 0.35% - -------------------------------------------------------------------------------- Inception (10/21/94) through 12/31/98 +16.32 +14.83 - -------------------------------------------------------------------------------- * Maximum sales charge is 5.25%. ** Assuming maximum sales charge. 6 Merrill Lynch Capital Fund, Inc. December 31, 1998 SCHEDULE OF INVESTMENTS
Shares Percent of Industries Held Common Stocks Cost Value Net Assets =================================================================================================================================== Aerospace 1,500,000 Lockheed Martin Corporation $ 136,266,348 $ 127,125,000 1.1% =================================================================================================================================== Apparel 3,200,000 Fruit of the Loom, Inc. (Class A) 89,072,762 44,200,000 0.4 =================================================================================================================================== Automobile Parts 2,800,000 Federal-Mogul Corporation 127,787,823 166,600,000 1.5 2,000,000 LucasVarity PLC (ADR)* 64,703,825 67,000,000 0.6 -------------- --------------- ------ 192,491,648 233,600,000 2.1 =================================================================================================================================== Banking 2,300,000 The Chase Manhattan Corporation 99,841,284 156,543,750 1.4 =================================================================================================================================== Building Materials 1,000,000 American Standard Companies, Inc. 44,614,174 35,937,500 0.3 5,225,000 Masco Corporation 86,066,568 150,218,750 1.3 1,430,000 The Sherwin-Williams Company 40,105,052 42,006,250 0.4 -------------- --------------- ------ 170,785,794 228,162,500 2.0 =================================================================================================================================== Chemicals 2,100,000 du Pont (E.I.) de Nemours and Company 108,372,212 111,431,250 1.0 650,000 Imperial Chemical Industries PLC (ADR)* 34,103,932 22,709,375 0.2 1,835,700 Monsanto Company 76,055,613 87,195,750 0.8 -------------- --------------- ------ 218,531,757 221,336,375 2.0 =================================================================================================================================== Computer Software 1,700,000 Computer Associates International, Inc. 51,998,321 72,462,500 0.6 =================================================================================================================================== Consumer--Products 2,700,000 Kimberly-Clark Corporation 133,853,736 147,150,000 1.3 =================================================================================================================================== Diversified 3,000,000 Corning Incorporated 113,323,300 135,000,000 1.2 Companies 2,000,000 GenCorp Inc. 58,220,920 49,875,000 0.5 1,250,000 Tenneco Inc. 53,711,302 42,578,125 0.4 12,500,000 Tomkins PLC 56,833,792 58,936,106 0.5 2,000,000 United Technologies Corporation 63,643,951 217,500,000 1.9 1,750,000 Varian Associates, Inc. 93,141,060 66,281,250 0.6 -------------- --------------- ------ 438,874,325 570,170,481 5.1 =================================================================================================================================== Drug Stores 4,000,000 Rite Aid Corporation 64,702,181 198,250,000 1.8 =================================================================================================================================== Electrical Equipment 1,500,000 General Electric Company 38,165,328 153,093,750 1.4 750,000 Koninklijke (Royal) Philips Electronics N.V. (NY Registered Shares) 50,507,781 50,765,625 0.4 2,125,100 Rockwell International Corporation 117,249,591 103,200,169 0.9 -------------- --------------- ------ 205,922,700 307,059,544 2.7 =================================================================================================================================== Electronic 1,500,000 Avnet, Inc. 83,947,762 90,750,000 0.8 Components =================================================================================================================================== Financial Services 2,000,000 Federal National Mortgage Association 52,392,099 148,000,000 1.3 1,000,000 Transamerica Corporation 76,009,264 115,500,000 1.1 -------------- --------------- ------ 128,401,363 263,500,000 2.4 =================================================================================================================================== Food & Beverage 3,400,000 Diageo PLC (ADR)* 151,886,428 157,250,000 1.4 2,000,000 McCormick & Company Incorporated 66,067,228 67,500,000 0.6 75,000 Nestle S.A. (Registered Shares) 78,575,411 163,387,978 1.5 -------------- --------------- ------ 296,529,067 388,137,978 3.5 =================================================================================================================================== Footwear 2,100,000 Nike, Inc. (Class B) 95,689,536 85,181,250 0.8 6,322,000 Yue Yuen Industrial (Holdings) Limited 8,513,557 11,996,205 0.1 -------------- --------------- ------ 104,203,093 97,177,455 0.9 =================================================================================================================================== Hospital Management 4,400,000 Tenet Healthcare Corporation 77,536,116 115,500,000 1.0 ===================================================================================================================================
7 Merrill Lynch Capital Fund, Inc. December 31, 1998 SCHEDULE OF INVESTMENTS (continued)
Shares Percent of Industries Held Common Stocks Cost Value Net Assets =================================================================================================================================== Information Systems 3,000,000 Reynolds & Reynolds Company (Class A) $ 60,661,921 $ 68,812,500 0.6% =================================================================================================================================== Insurance 3,500,000 The Allstate Corporation 59,100,135 135,187,500 1.2 1,500,000 American International Group, Inc. 46,545,446 144,937,500 1.3 4,500,000 Citigroup Inc. 47,234,757 222,750,000 2.0 2,000,000 EXEL Limited (Class A) 48,930,546 150,000,000 1.4 4,400,000 Fremont General Corporation 42,145,143 108,900,000 1.0 2,500,000 Horace Mann Educators Corporation 43,202,941 71,250,000 0.6 2,600,000 ITT Industries, Inc. 88,865,894 103,350,000 0.9 4,100,000 Provident Companies, Inc. 86,885,613 170,150,000 1.5 -------------- --------------- ------ 462,910,475 1,106,525,000 9.9 =================================================================================================================================== Leisure/Hotels 3,500,000 Carnival Corporation (Class A) 49,885,576 168,000,000 1.5 3,700,000 Harrah's Entertainment, Inc. 67,109,660 58,043,750 0.5 2,500,000 Sun International Hotels Ltd. 99,267,368 113,593,750 1.0 -------------- --------------- ------ 216,262,604 339,637,500 3.0 =================================================================================================================================== Machinery & 1,000,000 SPX Corporation 58,441,924 67,000,000 0.6 Machine Tools =================================================================================================================================== Natural Gas 3,750,000 The Coastal Corporation 81,382,658 131,015,625 1.2 2,900,000 El Paso Energy Corporation 67,267,469 100,956,250 0.9 7,500,000 The Williams Companies, Inc. 67,338,233 233,906,250 2.1 -------------- --------------- ------ 215,988,360 465,878,125 4.2 =================================================================================================================================== Oil--Integrated 3,200,000 Unocal Corporation 119,773,873 93,400,000 0.8 4,750,000 YPF Sociedad Anonima (ADR)* 91,723,454 132,703,125 1.2 -------------- --------------- ------ 211,497,327 226,103,125 2.0 =================================================================================================================================== Oil--Service 2,500,000 Halliburton Company 69,699,584 74,062,500 0.7 =================================================================================================================================== Paper & Forest 1,100,000 Weyerhaeuser Company 50,261,754 55,893,750 0.5 Products =================================================================================================================================== Pharmaceuticals 1,750,000 Glaxo Wellcome PLC (ADR)* 47,298,375 121,625,000 1.1 60,000 Novartis AG (Registered Shares) 78,569,582 118,032,787 1.0 -------------- --------------- ------ 125,867,957 239,657,787 2.1 =================================================================================================================================== Railroads 5,000,000 Kansas City Southern Industries, Inc. 83,444,911 245,937,500 2.2 2,300,000 Union Pacific Corporation 135,110,114 103,643,750 0.9 -------------- --------------- ------ 218,555,025 349,581,250 3.1 =================================================================================================================================== Real Estate 1,000,000 CarrAmerica Realty Corporation 26,832,805 24,000,000 0.2 Investment Trusts =================================================================================================================================== Restaurants 2,000,000 McDonald's Corporation 98,086,085 153,250,000 1.4 =================================================================================================================================== Retail--Stores 1,300,000 Sears, Roebuck and Co. 56,842,861 55,250,000 0.5 =================================================================================================================================== Telecommunications 3,425,000 Frontier Corporation 99,086,315 116,450,000 1.0 =================================================================================================================================== Tires & Rubber 2,000,000 The Goodyear Tire & Rubber Company 78,770,232 100,875,000 0.9 ===================================================================================================================================
8 Merrill Lynch Capital Fund, Inc. December 31, 1998 SCHEDULE OF INVESTMENTS (continued)
Shares Percent of Industries Held Common Stocks Cost Value Net Assets =================================================================================================================================== Waste Management 3,000,000 Waste Management, Inc. $ 150,984,576 $ 139,875,000 1.3% =================================================================================================================================== Wireless 2,600,000 Motorola, Inc. 138,387,503 158,762,500 1.4 Communication-- 3,500,000 Nextel Communications, Inc. 76,691,509 82,687,500 0.8 Domestic Paging & -------------- --------------- ------ Cellular 215,079,012 241,450,000 2.2 =================================================================================================================================== Total Common Stocks 4,908,787,074 7,085,427,120 63.3 =================================================================================================================================== Face Amount Corporate Bonds =================================================================================================================================== Aerospace Boeing Capital Corporation, Series X: $ 12,500,000 6.44% due 12/20/2004 12,560,000 12,667,500 0.1 10,000,000 6.18% due 3/15/2005 10,000,000 9,938,800 0.1 -------------- --------------- ------ 22,560,000 22,606,300 0.2 =================================================================================================================================== Automotive Hertz Corp.: 10,000,000 7% due 5/01/2002 10,305,500 10,364,500 0.1 25,000,000 6.70% due 6/15/2002 24,815,300 25,707,250 0.2 13,000,000 6% due 1/15/2003 12,891,670 13,089,570 0.1 20,000,000 Hyundai Motor Co., Ltd., 7.60% due 7/15/2007 19,916,100 15,800,000 0.1 -------------- --------------- ------ 67,928,570 64,961,320 0.5 =================================================================================================================================== Banking 30,000,000 Banco Nacional de Commercio Exterior SNC, Global Bonds, 7.25% due 2/02/2004 28,187,700 27,600,000 0.2 13,600,000 Banco Rio de la Plata, 8.75% due 12/15/2003 13,751,700 12,716,000 0.1 29,000,000 Bank of Boston Corporation, 6.625% due 12/01/2005 27,575,520 29,556,510 0.3 BankAmerica Corporation: 15,000,000 6.875% due 6/01/2003 14,149,050 15,716,400 0.1 30,000,000 6.75% due 9/15/2005 29,591,750 31,768,800 0.3 The Chase Manhattan Corporation: 15,000,000 6.50% due 8/01/2005 14,552,850 15,544,050 0.1 15,000,000 6.25% due 1/15/2006 13,892,250 15,324,900 0.1 20,000,000 First Security Corp., 7% due 7/15/2005 19,803,850 21,278,060 0.2 30,000,000 First Union Corp., 6.55% due 10/15/2035 29,953,350 31,601,700 0.3 22,750,000 Firstbank Puerto Rico, 7.625% due 12/20/2005 22,140,803 22,576,918 0.2 10,000,000 Great Western Financial Corp., 6.375% due 7/01/2000 9,998,800 10,097,200 0.1 Household Bank: 10,000,000 6.87% due 5/15/2001 9,868,800 10,220,680 0.1 20,000,000 6.875% due 3/17/2003 19,886,200 20,778,280 0.2 10,300,000 6.50% due 7/15/2003 10,202,253 10,549,054 0.1 40,000,000 NationsBank Corp., 5.60% due 2/07/2001 40,000,000 40,189,600 0.4 25,500,000 PNC Funding Corp., 6.125% due 9/01/2003 24,922,025 25,952,880 0.2 20,000,000 People's Bank--Bridgeport, 7.20% due 12/01/2006 19,956,700 18,843,800 0.2 26,000,000 Provident Bank, 6.375% due 1/15/2004 25,287,430 26,605,540 0.2 Union Planters Corp.: 20,000,000 6.25% due 11/01/2003 18,756,100 20,470,200 0.2 12,500,000 6.75% due 11/01/2005 12,001,875 13,069,125 0.1 -------------- --------------- ------ 404,479,006 420,459,697 3.7 =================================================================================================================================== Beverages 15,000,000 Coca-Cola Femsa, S.A., 8.95% due 11/01/2006 14,987,325 14,652,675 0.1 10,000,000 Panamerican Beverages Inc., 7.25% due 7/01/2009 10,037,500 8,800,000 0.1 -------------- --------------- ------ 25,024,825 23,452,675 0.2 ===================================================================================================================================
9 Merrill Lynch Capital Fund, Inc. December 31, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets =================================================================================================================================== Broadcasting $ 20,000,000 British Sky Broadcasting Group PLC, 7.30% due 10/15/2006 $ 20,037,440 $ 20,082,800 0.2% =================================================================================================================================== Building Materials 10,000,000 Armstrong World, 6.50% due 8/15/2005 9,980,400 10,145,400 0.1 =================================================================================================================================== Chemicals 12,000,000 Airgas, Inc., 7.14% due 3/08/2004 12,007,480 12,185,676 0.1 37,000,000 Equistar Chemicals LP, 6.50% due 2/15/2006 35,447,016 35,372,888 0.3 10,000,000 Monsanto Company, 5.75% due 12/01/2005 9,973,500 10,025,600 0.1 40,000,000 Union Carbide Corp., 6.79% due 6/01/2025 40,292,500 42,014,000 0.4 -------------- --------------- ------ 97,720,496 99,598,164 0.9 =================================================================================================================================== Consumer Services Loewen Group International, Inc.: 16,000,000 6.70% due 10/01/1999 15,970,340 15,360,000 0.1 20,000,000 Series 4, 8.25% due 10/15/2003 20,208,132 17,200,000 0.2 -------------- --------------- ------ 36,178,472 32,560,000 0.3 =================================================================================================================================== Electronics Tandy Corporation: 15,000,000 6.95% due 9/01/2007 14,944,120 15,641,400 0.1 20,000,000 Series B, 6.125% due 1/15/2003 19,971,600 20,582,000 0.2 -------------- --------------- ------ 34,915,720 36,223,400 0.3 =================================================================================================================================== Finance General Motors Acceptance Corp.: 55,000,000 5.625% due 2/15/2001 54,450,000 55,288,200 0.5 30,000,000 5.35% due 12/07/2001 30,000,000 29,895,180 0.3 30,000,000 5.48% due 12/16/2002 30,000,000 29,946,900 0.3 15,000,000 USL Capital Corporation, Series D, 5.79% due 1/23/2001 14,995,800 15,154,650 0.1 -------------- --------------- ------ 129,445,800 130,284,930 1.2 =================================================================================================================================== Financial Leasing GATX Capital Corporation: 25,000,000 6.875% due 11/01/2004 24,938,000 25,473,250 0.2 25,000,000 Series C, 6.69% due 11/30/2005 24,984,750 26,334,000 0.2 XTRA Inc., Series C: 20,000,000 6.68% due 11/30/2001 20,000,000 20,521,120 0.2 3,000,000 6.50% due 1/15/2004 2,988,330 3,084,090 0.0 -------------- --------------- ------ 72,911,080 75,412,460 0.6 =================================================================================================================================== Financial Other 14,000,000 Case Credit Corporation, Series B, 5.95% due 8/01/2000 13,988,380 14,011,704 0.1 =================================================================================================================================== Financial Services Finova Capital Corp.: 25,000,000 6.45% due 6/01/2000 24,766,550 25,236,500 0.2 15,000,000 5.98% due 2/27/2001 14,968,950 14,993,235 0.1 10,000,000 6.56% due 11/15/2002 10,000,000 10,150,300 0.1 20,000,000 McDonnell Douglas Finance Corp., Series X, 20,049,200 21,403,640 0.2 6.965% due 9/12/2005 35,000,000 Morgan Stanley Group, Inc., Series C, 5.75% due 2/15/2001 34,968,150 35,122,990 0.3 13,000,000 Norwest Financial, Inc., 6.625% due 7/15/2004 13,000,000 13,636,090 0.1 10,000,000 Salomon, Inc., 6.75% due 2/15/2003 9,804,000 10,299,210 0.1
10 Merrill Lynch Capital Fund, Inc. December 31, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets =================================================================================================================================== Financial Services Salomon Smith Barney Holdings, Inc.: (concluded) $ 25,000,000 6.625% due 7/01/2002 $ 24,994,000 $ 25,608,500 0.2% 20,000,000 7% due 3/15/2004 19,951,800 20,858,400 0.2 5,000,000 6.375% due 10/01/2004 5,104,400 5,093,400 0.0 -------------- --------------- ------ 177,607,050 182,402,265 1.5 =================================================================================================================================== Food & Tobacco Nabisco, Inc.: 21,500,000 6.125% due 2/01/2033 21,405,450 20,965,725 0.2 20,000,000 6.375% due 2/01/2035 19,939,200 19,363,600 0.2 -------------- --------------- ------ 41,344,650 40,329,325 0.4 =================================================================================================================================== Hospital Management Medpartners, Inc.: 29,125,000 6.875% due 9/01/2000 28,915,910 25,064,101 0.2 5,500,000 7.375% due 10/01/2006 4,886,570 4,338,180 0.0 -------------- --------------- ------ 33,802,480 29,402,281 0.2 =================================================================================================================================== Industrial 20,000,000 Browning-Ferris Industries, Inc., 6.375% due 1/15/2008 19,627,200 19,966,200 0.2 Interface, Inc.: 7,800,000 9.50% due 11/15/2005 7,552,000 8,190,000 0.1 8,000,000 7.30% due 4/01/2008 7,999,520 7,895,320 0.1 20,000,000 Reliance Industries Ltd., 8.25% due 1/15/2027 19,526,999 16,337,500 0.1 29,500,000 Triton Energy Ltd., 8.75% due 4/15/2002 29,455,930 26,255,000 0.2 15,000,000 United Refining Co., Series B, 10.75% due 6/15/2007 15,000,000 10,350,000 0.1 Williams Holdings of Delaware, Inc.: 20,000,000 6.625% due 11/15/2004 19,908,000 20,257,800 0.2 50,000,000 6.25% due 2/01/2006 49,739,500 49,501,500 0.4 -------------- --------------- ------ 168,809,149 158,753,320 1.4 =================================================================================================================================== Information Systems Reynolds & Reynolds Company: 10,000,000 5.875% due 3/20/2000 9,992,900 10,045,200 0.1 37,500,000 6.12% due 3/02/2001 37,500,000 37,245,375 0.3 -------------- --------------- ------ 47,492,900 47,290,575 0.4 =================================================================================================================================== Machinery FMC Corp.: 20,000,000 Series A, 6.75% due 5/05/2005 19,890,200 19,380,380 0.2 10,000,000 Series B, 7.125% due 11/25/2002 10,000,000 10,051,670 0.1 22,500,000 Harris Corporation, Series B, 6.375% due 8/15/2002 22,461,850 22,951,575 0.2 -------------- --------------- ------ 52,352,050 52,383,625 0.5 =================================================================================================================================== Media /Publishing 15,000,000 News America Inc., 6.75% due 1/09/2038 15,000,000 15,351,150 0.1 =================================================================================================================================== Natural Gas-- Enron Corp.: Pipelines 30,000,000 6.75% due 7/01/2005 29,387,285 30,827,100 0.3 20,000,000 6.40% due 7/15/2006 20,036,050 20,027,000 0.2 -------------- --------------- ------ 49,423,335 50,854,100 0.5 =================================================================================================================================== Natural Gas 27,500,000 The Coastal Corporation, 6.70% due 2/15/2027 27,225,400 27,926,360 0.3 Suppliers ===================================================================================================================================
11 Merrill Lynch Capital Fund, Inc. December 31, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets =================================================================================================================================== Oil--Integrated $ 10,000,000 Compania Naviera Perez Compac S.A.C.F.I.M.F.A., 9% due 1/30/2004 $ 10,125,000 $ 9,700,000 0.1% 10,000,000 Giant Industries, Inc., 9% due 9/01/2007 10,000,000 9,500,000 0.1 Occidental Petroleum Corp.: 20,000,000 6.50% due 4/01/2005 19,805,815 19,582,200 0.2 18,375,000 Series B, 6.24% due 11/24/2000 18,135,306 18,513,180 0.2 20,000,000 Perez Companc S.A., 8.125% due 7/15/2007 19,701,880 17,550,000 0.2 10,000,000 Union Oil of California, Series C, 6.11% due 2/17/2004 10,000,000 9,923,860 0.1 23,250,000 Union Texas Petroleum Holdings, Inc., Series A, 6.70% due 11/18/2002 23,190,070 23,997,302 0.2 20,000,000 YPF Sociedad Anonima, 8% due 2/15/2004 18,334,375 19,000,000 0.2 -------------- --------------- ------ 129,292,446 127,766,542 1.3 =================================================================================================================================== Oil Field Equipment 20,000,000 R & B Falcon Corporation, 6.75% due 4/15/2005 19,663,800 18,230,100 0.2 =================================================================================================================================== Paper & Forest Boise Cascade Corporation: Products 10,000,000 7.35% due 10/11/2004 10,316,700 9,939,000 0.1 20,000,000 7.66% due 5/27/2005 20,000,000 20,065,200 0.2 25,000,000 Champion International Corp., 6.65% due 12/15/2037 25,000,000 25,467,500 0.2 -------------- --------------- ------ 55,316,700 55,471,700 0.5 =================================================================================================================================== Real Estate 10,000,000 Franchise Finance Corp. of America, 6.95% Investment Trusts due 8/29/2007 10,000,000 8,903,590 0.1 =================================================================================================================================== Telecommunications 10,000,000 Pacific Telecom, Inc., 6.625% due 10/20/2005 10,000,000 10,285,480 0.1 10,000,000 Worldcom Inc., 6.40% due 8/15/2005 10,013,350 10,393,200 0.1 -------------- --------------- ------ 20,013,350 20,678,680 0.2 =================================================================================================================================== Tires & Rubber 40,000,000 The Goodyear Tire & Rubber Company, 6.625% due 12/01/2006 39,840,000 40,672,800 0.4 =================================================================================================================================== Transportation 10,000,000 Continental Airlines, 8% due 12/15/2005 10,000,000 9,881,000 0.1 Northwest Airlines, Inc.: 20,000,000 7.625% due 3/15/2005 19,390,850 18,959,200 0.2 5,000,000 7.875% due 3/15/2008 4,473,700 4,667,100 0.0 Ryder System Inc.: 9,000,000 6.30% due 7/21/2003 9,000,000 8,948,304 0.1 20,000,000 Series O, 6.50% due 5/15/2005 19,960,600 20,610,820 0.2 17,000,000 Transportacion Maritima Mexicana, S.A. de C.V., 10% due 11/15/2006 17,152,730 13,940,000 0.1 12,500,000 Union Pacific Corporation, Series E, 6.39% due 11/01/2004 12,500,000 12,631,638 0.1 -------------- --------------- ------ 92,477,880 89,638,062 0.8 =================================================================================================================================== Travel & Lodging Royal Caribbean Cruises Ltd.: 10,000,000 7.125% due 9/18/2002 9,900,050 10,174,800 0.1 15,000,000 7.25% due 8/15/2006 15,036,055 15,245,700 0.1 -------------- --------------- ------ 24,936,105 25,420,500 0.2 =================================================================================================================================== Utilities--Electric 20,000,000 Connecticut Light & Power Co., 7.75% due Gas & Water 6/01/2002 19,946,000 20,644,080 0.2 33,000,000 Empresa Nacional de Electricidad S.A. (Endesa), 7.325% due 2/01/2037 33,065,750 30,324,657 0.3
12 Merrill Lynch Capital Fund, Inc. December 31, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets =================================================================================================================================== Utilities--Electric $ 20,000,000 Niagara Mohawk Power Corp., 5.875% due Gas & Water 9/01/2002 $ 19,504,200 $ 19,444,200 0.2% (concluded) 24,750,000 Tata Electric Co., 8.50% due 8/19/2017 23,737,525 19,594,525 0.2 -------------- --------------- ------ 96,253,475 90,007,462 0.9 =================================================================================================================================== Yankee Corporates 15,000,000 Enersis S.A., 6.60% due 12/01/2026 14,350,102 13,997,850 0.1 =================================================================================================================================== Total Corporate Bonds 2,050,371,061 2,045,279,137 18.3 =================================================================================================================================== Collateralized Mortgage Obligations =================================================================================================================================== Federal Home Loan Mortgage Corporation: 8,141,075 6.50% due 5/15/2008 7,779,815 8,133,422 0.1 5,000,000 7% due 8/15/2008 4,762,500 5,071,850 0.0 13,000,000 6% due 2/15/2011 12,020,937 12,872,340 0.1 =================================================================================================================================== Total Collateralized Mortgage Obligations 24,563,252 26,077,612 0.2 =================================================================================================================================== Foreign Government Obligations =================================================================================================================================== 10,000,000 Province of Mendoza, 10% due 9/04/2007 9,931,700 7,162,500 0.1 Republic of Argentina: 59,500,000 8.75% due 7/10/2002 55,708,750 48,641,250 0.4 9,400,000 Floating Rate Brady Bonds, Series L, 6.188% due 3/31/2005+ 8,582,200 7,990,000 0.1 20,000,000 Global Bonds, 8.375% due 12/20/2003 19,773,750 18,400,000 0.2 35,000,000 Republic of Colombia, Global Bonds, 7.625% due 2/15/2007 32,457,325 29,225,000 0.2 15,000,000 Republic of Guatemala, 8.50% due 8/03/2007 15,082,250 12,750,000 0.1 36,000,000 Republic of Panama, Global Bonds, 8.25% due 4/22/2008 35,795,360 33,750,000 0.3 Republic of Turkey: 15,000,000 9.875% due 2/23/2005 14,853,700 13,200,000 0.1 20,000,000 10% due 9/19/2007 19,661,250 17,700,000 0.1 67,500,000 United Mexican States, Global Bonds, 8.625% due 3/12/2008 65,097,500 62,184,375 0.6 =================================================================================================================================== Total Foreign Government Obligations 276,943,785 251,003,125 2.2 =================================================================================================================================== US Government Obligations =================================================================================================================================== US Treasury Bonds: 190,000,000 6.25% due 8/15/2023 175,748,828 212,355,400 1.9 10,000,000 6% due 2/15/2026 10,510,547 10,907,800 0.1 35,000,000 US Treasury Inflation Indexed Note, 3.625% due 1/15/2008 34,855,937 34,827,678 0.3 US Treasury Notes: 40,000,000 5.875% due 7/31/1999 40,132,031 40,268,800 0.4 25,000,000 6.375% due 9/30/2001 26,142,578 26,093,750 0.2 50,000,000 6.50% due 5/15/2005 54,742,187 54,797,000 0.5 575,000,000 5.875% due 11/15/2005 558,272,731 613,364,000 5.5 325,000,000 5.625% due 2/15/2006 324,570,703 342,774,250 3.1 35,000,000 5.50% due 2/15/2008 36,595,312 37,089,150 0.3 =================================================================================================================================== Total US Government Obligations 1,261,570,854 1,372,477,828 12.3 ===================================================================================================================================
13 Merrill Lynch Capital Fund, Inc. December 31, 1998 SCHEDULE OF INVESTMENTS (concluded)
Face Percent of Industries Amount Short-Term Investments Cost Value Net Assets =================================================================================================================================== Commercial Paper** $ 71,852,000 General Motors Acceptance Corp., 5.13% due 1/04/1999 $ 71,821,283 $ 71,821,283 0.6% Lexington Parker Capital Company, LLC: 10,000,000 5.55% due 1/05/1999 9,993,833 9,993,833 0.1 50,000,000 5.40% due 1/15/1999 49,895,000 49,895,000 0.4 30,000,000 5.58% due 1/15/1999 29,934,900 29,934,900 0.3 30,165,000 Metropolitan Life Insurance Company, 5.25% due 1/15/1999 30,103,413 30,103,413 0.3 50,000,000 Variable Funding Capital Corp., 5.48% due 1/11/1999 49,923,889 49,923,889 0.4 66,372,000 Xerox Capital (Europe) PLC, 5.25% due 1/14/1999 66,246,170 66,246,170 0.6 =================================================================================================================================== US Government 43,960,000 Federal National Mortgage Association, Agency Obligations** 5.12% due 1/04/1999 43,941,244 43,941,244 0.4 =================================================================================================================================== Total Short-Term Investments 351,859,732 351,859,732 3.1 =================================================================================================================================== Total Investments $8,874,095,758 11,132,124,554 99.4 ============== Other Assets Less Liabilities 68,913,389 0.6 --------------- ------ Net Assets $11,201,037,943 100.0% =============== ====== =================================================================================================================================== Net Asset Class A--Based on net assets of $3,805,411,591 and 110,605,351 shares outstanding $ 34.41 Value: =============== Class B--Based on net assets of $5,385,309,090 and 159,727,557 shares outstanding $ 33.72 =============== Class C--Based on net assets of $548,819,986 and 16,481,246 shares outstanding $ 33.30 =============== Class D--Based on net assets of $1,461,497,276 and 42,533,290 shares outstanding $ 34.36 =============== ===================================================================================================================================
* American Depositary Receipts (ADR). ** Commercial Paper and certain US Government Agency Obligations are traded on a discount basis; the interest rates shown reflect the discount rates paid at the time of purchase by the Fund. + Brady Bonds are securities which have been issued to refinance commercial bank loans and other debt. The risk associated with these instruments is the amount of any uncollateralized principal or interest payments since there is a high default rate of commercial bank loans by countries issuing these securities. 14 Merrill Lynch Capital Fund, Inc. December 31, 1998 PORTFOLIO INFORMATION As of December 31, 1998 Percent of Ten Largest Common Stock Holdings Net Assets Kansas City Southern Industries, Inc ........ 2.2% The Williams Companies, Inc. ................ 2.1 Citigroup Inc. .............................. 2.0 United Technologies Corporation ............. 1.9 Rite Aid Corporation ........................ 1.8 Provident Companies, Inc. ................... 1.5 Carnival Corporation (Class A) .............. 1.5 Federal-Mogul Corporation ................... 1.5 Nestle S.A. (Registered Shares) ............. 1.5 Motorola, Inc. .............................. 1.4 Percent of Ten Largest Industries Net Assets* Insurance ................................... 9.9% Diversified Companies ....................... 5.1 Banking ..................................... 5.1 Natural Gas ................................. 4.2 Financial Services .......................... 3.9 Food & Beverage ............................. 3.5 Oil--Integrated ............................. 3.3 Railroads ................................... 3.1 Leisure/Hotels .............................. 3.0 Chemicals ................................... 2.9 * Based on total holdings in common stocks and bonds. Common Stock Portfolio Changes for the Quarter Ended December 31, 1998 Additions Citigroup Inc. * Echlin Inc. Monsanto Company The Sherwin-Williams Company Deletions Berkley (W.R.) Corporation The Boeing Co. * Echlin Inc. Patriot American Hospitality, Inc. TOTAL S.A. (ADR) Telecomunicacoes Brasileiras S.A.--Telebras (ADR) Temple-Inland, Inc. Travelers Group, Inc. United Dominion Industries, Ltd. Wal-Mart Stores, Inc. Walden Residential Properties, Inc. * Added and deleted in the same quarter. 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 Fred G. Weiss, Director Terry K. Glenn, Executive Vice President Norman R. Harvey, Senior Vice President Kurt Schansinger, Senior Vice President and Portfolio Manager Donald C. Burke, Vice President Walter Cuje, Vice President Gerald M. Richard, Treasurer Thomas D. Jones, III, Secretary Custodian The Bank of New York 90 Washington Street, 12th Floor New York, NY 10286 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 (800) 637-3863 15 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. Statements and other information herein are as dated and are subject to change. Merrill Lynch Capital Fund, Inc. Box 9011 Princeton, NJ 08543-9011 #10252--12/98 [RECYCLE LOGO] Printed on post-consumer recycled paper -----END PRIVACY-ENHANCED MESSAGE-----