-----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, BTe9w0IK4ceLGigi+hF0QoVenWNqPnUZ6vEJtURBa9UucpwgLOwt6v5txm1knv/2 h8qlMuu8WPmJLOceJ2vtpw== 0001005477-98-002407.txt : 19980812 0001005477-98-002407.hdr.sgml : 19980812 ACCESSION NUMBER: 0001005477-98-002407 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 SROS: NONE 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: 98682590 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. Strategic Performance [GRAPHIC OMITTED] Quarterly Report June 30, 1998 MERRILL LYNCH CAPITAL FUND, INC. PORTFOLIO SUMMARY Security Diversification As a Percentage of Net Assets As of June 30, 1998 A pie chart illustrating the following percentages: US Bonds 29.3% Non-US Bonds 4.5% Cash & Cash Equivalents 3.9% US Stocks 51.3% Non-US Stocks 11.0% Sector Representation As a Percentage of Equities As of June 30, 1998 A pie chart illustrating the following percentages: Financial Services 23.0% Consumer Services 6.9% Utilities 0.8% Transportation 4.6% Capital Goods--Technology 13.2% Consumer Cyclicals 13.7% Energy 13.3% Basic Industries 7.5% Diversified 3.5% Credit Cyclicals 2.0% Consumer Staples 7.6% Capital Goods 3.9% Geographic Diversification Percent of As of June 30, 1998 Net Assets* - -------------------------------------------------------------------------------- United States 84.9% - -------------------------------------------------------------------------------- United Kingdom 4.4 - -------------------------------------------------------------------------------- Argentina 2.7 - -------------------------------------------------------------------------------- Switzerland 2.2 - -------------------------------------------------------------------------------- Mexico 1.1 - -------------------------------------------------------------------------------- Netherlands 1.0 - -------------------------------------------------------------------------------- France 0.7 - -------------------------------------------------------------------------------- Brazil 0.5 - -------------------------------------------------------------------------------- Italy 0.4 - -------------------------------------------------------------------------------- Turkey 0.4 - -------------------------------------------------------------------------------- Panama 0.3 - -------------------------------------------------------------------------------- Japan 0.3 - -------------------------------------------------------------------------------- India 0.3 - -------------------------------------------------------------------------------- Chile 0.3 - -------------------------------------------------------------------------------- Colombia 0.2 - -------------------------------------------------------------------------------- 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 June 30, 1998 Fund 500* - -------------------------------------------------------------------------------- Average Capitalization (in billions) $23.8 $17.8 - -------------------------------------------------------------------------------- Price/Book Value 2.6 6.2 - -------------------------------------------------------------------------------- Price/Earnings Ratio** 21.0 25.9 - -------------------------------------------------------------------------------- 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 June 30, 1998 Fund DOAO Index* - -------------------------------------------------------------------------------- Duration 5.4 Years 5.2 Years - -------------------------------------------------------------------------------- Average Maturity 9.0 Years 8.7 Years - -------------------------------------------------------------------------------- Asset Breakdown: - -------------------------------------------------------------------------------- Corporates 51.8% 20.9% - -------------------------------------------------------------------------------- US Treasuries/Agencies 40.3% 51.2% - -------------------------------------------------------------------------------- Mortgage-Backed 0.8% 27.9% - -------------------------------------------------------------------------------- International Governments 7.1% -- - -------------------------------------------------------------------------------- *An unmanaged market-weighted corporate, Government and mortgage master bond index reflecting approximately 97% of total outstanding bonds. 1 Merrill Lynch Capital Fund, Inc. June 30, 1998 DEAR SHAREHOLDER The financial market environment was characterized by tremendous volatility and unpredictability during the quarter ended June 30, 1998 as investors confronted divergent political, economic and corporate earnings trends. In April, concerns about the sustained rapid pace of economic growth and the associated risk of higher inflation began to offset continued upbeat expectations for corporate earnings growth and very positive investor sentiment. As a result, financial markets results were relatively stagnant for the month. While reports continued to show a benign inflationary environment, with most readings at levels not seen since the mid-1960s, the acceleration in first quarter real economic growth to a +5.4% rate increased the likelihood of the Federal Reserve Board raising short-term interest rates to quell prospective inflationary pressures. Typically, this would be viewed negatively by stock market investors. In the interim, first quarter corporate earnings growth met or exceeded reduced expectations. By May, intensifying economic and political problems in Asia compelled investors to further reduce corporate earnings growth expectations. Despite the strong domestic economy, after-tax corporate profits declined in both the fourth quarter of 1997 and the first quarter of 1998. With a sharply deteriorating US trade deficit and export markets suffering economic contraction, prospects for accelerating earnings growth became increasingly suspect, resulting in the first monthly decline in stock prices since October 1997. While June appeared to be a rewarding month for investors with the broad stock market averages providing attractive returns, these results masked a very disparate performance between various sectors of the market. Large-capitalization stocks performed relatively well, while medium-capitalization and small-capitalization companies performed poorly because investors were willing to pay increasingly large premiums for liquidity. Companies that serve the consumer segment of the economy (including pharmaceutical, retail, broadcasting and entertainment companies) provided positive returns, while companies serving the industrial sector of the economy (including companies in commodities, transportation and selected areas of technology) provided negative returns for the month. These results closely mirrored trends in the US economy, where high consumer confidence and rising consumer incomes have sustained strong auto, housing and other consumer-related markets. By contrast, the Asian economic turmoil negatively affected manufacturing, with orders, industrial production and inventories all showing deteriorating trends and earnings expectations being sharply reduced. For the June quarter, the US stock market, as measured by the unmanaged Standard & Poor's 500 Index (S&P 500), provided a +3.30% total return. The US bond market continued to provide positive returns in this environment, as measured by the unmanaged Merrill Lynch Domestic Bond Master Index, which had a +2.37% total return for the June quarter. This performance was driven by three factors: o Evidence of moderating economic growth; o Continued benign inflation, with the gross domestic product implicit price deflator rising at a mere 1.0% annual rate in the first calendar quarter of 1998, the lowest increase in almost 35 years; o A renewed flight-to-quality among global investors seeking the safety and security of US Government securities. During the June quarter, cash equivalents earned a +1.29% total return as measured by the three-month US Treasury bill. 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 June 30, 1998 were -0.85%, -1.09%, - -1.10% and -0.93%, respectively. (Fund results shown do not reflect sales charges; results would be lower if sales charges were included.) The Fund's underperformance compared to the broad market averages during the June quarter is largely attributable to adverse stock selection in this increasingly difficult environment. As previously discussed, while the S&P 500 Index of large companies provided relatively attractive returns, the unmanaged S&P Mid Cap Index of medium-sized companies declined by over 3% for the June quarter and the unmanaged Russell 2000 Index of smaller companies fell more than 6% for the same period. Furthermore, our value style of investing suffered during the June quarter compared to the growth style of investing, with value stocks declining 0.5% on average and growth stocks advancing by almost 4% on average. The Fund's value orientation and investments in many moderately sized companies consequently extracted a short-term performance penalty. In addition, some traditionally defensive sectors of the stock market in which the Fund has representation--such as insurance and 2 Merrill Lynch Capital Fund, Inc. June 30, 1998 real estate--significantly underperformed the broader averages. This underperformance occurred despite the domestic orientation of these companies and the benefits of declining interest rates because of deteriorating pricing trends in selected markets. Finally, expectations for slowing economic growth precipitated sharp declines in most commodity prices, negatively affecting the performance of companies in the energy and forest products groups in which the Fund is invested. While disappointed by these results, we continue to believe our investment philosophy and security selection disciplines are sound and will provide above-average returns to investors over time. In our view, the increasingly narrow universe of stocks propelling the market averages higher represents an unsound foundation upon which to build further significant gains. Those consumer-related companies that have continued to produce consistent earnings performance, and which are largely accountable for the market's recent advance, command dauntingly high valuation levels, limiting their investment attraction. Meanwhile, consensus expectations for overall corporate profits growth have been revised sharply lower as the reality of the "Asian contagion" has begun to impair corporate earnings results. Yet, despite these limited earnings growth prospects, broad stock market valuations stand at record high levels on virtually every measure. This condition does not, in our view, represent a formula for substantial stock price appreciation and this disparity is likely to restrain the market's advance. We believe bonds continue to represent good value, with inflation-adjusted interest rates at historically above-average levels and inflationary pressures continuing to moderate. Consequently, we maintained our bond weighting in Merrill Lynch Capital Fund, Inc. At June 30, 1998, we had 62.3% of the Fund's net assets invested in equities, 33.8% in fixed-income securities and 3.9% in cash and cash equivalents. This compares to 63.3% of the Fund's net assets invested in equities, 33.1% in fixed-income securities and 3.6% in cash and cash equivalents at March 31, 1998. Within the equity component of the portfolio, we increased our position in 22 stocks, reduced our ownership in 13 others and eliminated 3 holdings. Two of the three holdings we sold were Cisco Systems, Inc., the data networking company, and Sunbeam Corporation, the household appliance manufacturer. Cisco Systems had been an admirable performer, dramatically outperforming the market and the overall technology sector. While Cisco remains the dominant company in the rapidly growing networking industry, the stock's appreciation had driven its valuation to levels that, we believed, adequately reflected these positive characteristics. While no evident near-term risks are on the horizon, even the most powerful companies may be at risk in the current volatile stock market environment. Since we have been handsomely rewarded for our investment in the company, we decided to sell our position and look to redeploy proceeds into alternative investment opportunities. We also sold our position in Sunbeam Corporation. The initial success of this investment proved temporary, following announced revenue declines, operating losses and allegations of questionable accounting practices. Having successfully restructured the core Sunbeam operation, investors greeted a series of acquisition announcements favorably, anticipating further consolidation and integration benefits and significant incremental shareholder value. However, it soon became apparent that revenue projections were too high, margins were contracting and the balance sheet was deteriorating, resulting in a significant decline in the stock price. While there will ultimately be a resolution of these difficulties and a restoration of some degree of earnings growth and value enhancement, Sunbeam's problems will likely be long-lived. Therefore, we decided to eliminate our position in order to redeploy the proceeds into more attractive investment opportunities. Despite the high overall level of the stock market, we continue to identify and 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 who we believe are motivated to create value for shareholders. We define a below-average valuation level as one that does not adequately or accurately reflect what we believe to be the company's underlying intrinsic value. On average, the stocks in the portfolio generated comparable returns on shareholder equity and have much stronger balance sheets while offering faster earnings growth than the average company as measured by the S&P 500. However, as of June 30, 1998, these same stocks sold at an average price/earnings ratio of 21.0 times estimated 1998 3 Merrill Lynch Capital Fund, Inc. June 30, 1998 earnings per share as compared to 25.9 times for the S&P 500, 2.6 times book value per share as of June 30 as compared to 6.2 times for the S&P 500 and provided a 1.7% dividend yield as compared to 1.3% for the S&P 500 for the quarter ended June 30, 1998. Within the fixed-income component of the portfolio, we slightly reduced the average portfolio maturity and duration of the bonds to 9.0 years and 5.4 years, respectively, at June 30, 1998, as domestic interest rates approached historically low levels. This is compared to 9.1 years and 5.5 years, respectively, at March 31, 1998. In reaction to the relatively narrow yield differential between corporate bonds and US Treasury bonds, we continued to shift more assets from the corporate sector into a combination of higher-yielding foreign government bonds and US Treasury securities. Thus, we reduced investment-grade corporate bonds and high-yield corporate bonds from 45.3% of fixed-income assets and 8.3% at March 31, 1998, respectively, to 44.0% and 7.8%, respectively, at June 30, 1998. We increased US Government bonds from 39.0% of fixed-income assets at March 31, 1998 to 40.3% at June 30, 1998, and foreign government bonds from 6.6% of fixed-income assets to 7.1% for the same three-month period. Mortgage-backed securities remained unchanged during the quarter at 0.8% of fixed-income assets. The net result of these transactions was an increase in the average quality rating of our bonds to A1/A+, as rated by Moody's Investors Service, Inc. and Standard & Poor's Corp., and a nominal 2 basis point (0.02%) decline in the average yield-to-maturity to 6.53% by June 30, 1998. This contrasts with the 20 basis point decline in intermediate-term interest rates during the same period. In Conclusion We appreciate your investment in Merrill Lynch Capital Fund, Inc., and we look forward to sharing our investment outlook and strategies again with you in our next report to shareholders. Sincerely, /s/ Arthur Zeikel Arthur Zeikel President /s/ Kurt Schansinger Kurt Schansinger Senior Vice President and Portfolio Manager July 30, 1998 4 Merrill Lynch Capital Fund, Inc. June 30, 1998 PERFORMANCE DATA About Fund Performance Investors are able to purchase shares of the Fund through the Merrill Lynch Select Pricing(SM) System, which offers four pricing alternatives: o Class A Shares incur a maximum initial sales charge (front-end load) of 5.25% and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. o Class B Shares are subject to a maximum contingent deferred sales charge of 4% if redeemed during the first year, decreasing 1% each year thereafter to 0% after the fourth year. In addition, Class B Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after approximately 8 years. (There is no initial sales charge for automatic share conversions.) o Class C Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. o Class D Shares incur a maximum initial sales charge of 5.25% and an account maintenance fee of 0.25% (but no distribution fee). None of the past results shown should be considered a representation of future performance. Figures shown in the "Average Annual Total Return" tables 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* +17.34% -0.85% +279.18% - --------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class B Shares* +16.13 -1.09 +233.40 - --------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class C Shares* +16.15 -1.10 + 86.46 - --------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class D Shares* +17.04 -0.93 + 91.83 - --------------------------------------------------------------------------------------- Dow Jones Industrial Average +18.67 +2.13 +460.35/+451.23/+150.12 - --------------------------------------------------------------------------------------- Standard & Poor's 500 Index** +30.16 +3.30 +448.89/+423.82/+164.01 =======================================================================================
* 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/inception dates are: Class A Shares, ten years ended 6/30/98; Class B Shares, 10/21/88; and Class C and Class D Shares, 10/21/94. ** An unmanaged broad-based index comprised of common stocks. Total investment returns for unmanaged indexes are based on estimates. Ten years/since inception total returns are: for the ten years ended 6/30/98; from 10/21/88 to 6/30/98; and from 10/21/94 to 6/30/98, respectively. 5 Merrill Lynch Capital Fund, Inc. June 30, 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 $21,583.01 on June 30, 1998. Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** ============================================================================== Class A Shares* ============================================================================== Year Ended 6/30/98 +17.34% +11.18% ------------------------------------------------------------------------------ Five Years Ended 6/30/98 +16.08 +14.83 ------------------------------------------------------------------------------ Ten Years Ended 6/30/98 +14.26 +13.64 ------------------------------------------------------------------------------ *Maximum sales charge is 5.25%. **Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** ============================================================================== Class B Shares* ============================================================================== Year Ended 6/30/98 +16.13% +12.13% ------------------------------------------------------------------------------ Five Years Ended 6/30/98 +14.90 +14.90 ------------------------------------------------------------------------------ Inception (10/21/88) through 6/30/98 +13.23 +13.23 ------------------------------------------------------------------------------ *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 6/30/98 +16.15% +15.15% ------------------------------------------------------------------------------ Inception (10/21/94) through 6/30/98 +18.39 +18.39 ------------------------------------------------------------------------------ *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 6/30/98 +17.04% +10.90% ------------------------------------------------------------------------------ Inception (10/21/94) through 6/30/98 +19.31 +17.58 ------------------------------------------------------------------------------ *Maximum sales charge is 5.25%. **Assuming maximum sales charge. 6 Merrill Lynch Capital Fund, Inc. June 30, 1998 SCHEDULE OF INVESTMENTS
Shares Percent of Industries Held Common Stocks Cost Value Net Assets ==================================================================================================================================== Aerospace 2,500,000 Boeing Co. (The) $ 122,280,349 $ 111,406,250 0.9% 913,000 Lockheed Martin Corporation 79,769,902 96,663,875 0.8 -------------- --------------- ----- 202,050,251 208,070,125 1.7 ==================================================================================================================================== Apparel 2,750,000 Fruit of the Loom, Inc. (Class A) 79,184,128 91,265,625 0.8 ==================================================================================================================================== Automobile Parts 2,000,000 Federal-Mogul Corp. 86,309,094 135,000,000 1.1 ==================================================================================================================================== Automotive 1,000,000 General Motors Corp. 44,944,948 66,812,500 0.6 ==================================================================================================================================== Banking 2,000,000 Chase Manhattan Corporation (The) 81,222,073 151,000,000 1.3 ==================================================================================================================================== Building Materials 2,000,000 American Standard Companies, Inc. 93,322,961 89,375,000 0.8 2,400,000 Masco Corporation 75,254,389 145,200,000 1.2 -------------- --------------- ----- 168,577,350 234,575,000 2.0 ==================================================================================================================================== Capital Goods 2,000,000 United Dominion Industries, Ltd. 50,002,195 66,750,000 0.6 ==================================================================================================================================== Chemicals 1,685,000 du Pont (E.I.) de Nemours & Co. 80,776,366 125,743,125 1.0 2,000,000 Imperial Chemical Industries PLC (ADR)* 102,243,511 129,000,000 1.1 -------------- --------------- ----- 183,019,877 254,743,125 2.1 ==================================================================================================================================== Computer Software 1,500,000 Computer Associates International, Inc. 44,432,476 83,343,750 0.7 ==================================================================================================================================== Consumer Electronics 400,000 Nintendo Corp. Ltd. 28,474,285 37,093,166 0.3 ==================================================================================================================================== Diversified 2,200,000 Corning, Inc. 87,464,309 76,450,000 0.6 Companies 1,850,000 GenCorp Inc. 54,315,295 46,712,500 0.4 2,100,000 Rockwell International Corporation 116,109,160 100,931,250 0.8 1,875,500 Tenneco, Inc. 81,128,414 71,386,219 0.6 10,000,000 Tomkins PLC 44,821,118 54,267,962 0.5 2,000,000 United Technologies Corp. 63,643,951 185,000,000 1.6 1,750,000 Varian Associates, Inc. 93,141,060 68,250,000 0.6 -------------- --------------- ----- 540,623,307 602,997,931 5.1 ==================================================================================================================================== Drug Stores 4,300,000 Rite Aid Corp. 68,282,570 161,518,750 1.4 ==================================================================================================================================== Electrical Equipment 1,500,000 Belden Inc. 47,721,621 45,937,500 0.4 1,500,000 General Electric Co. 38,165,328 136,500,000 1.1 1,000,000 Philips Electronics N.V. 70,415,130 85,000,000 0.7 -------------- --------------- ----- 156,302,079 267,437,500 2.2 ==================================================================================================================================== Electronic 1,500,000 Avnet, Inc. 83,947,762 82,031,250 0.7 Components ==================================================================================================================================== Financial Services 2,000,000 Federal National Mortgage Association 52,392,099 121,500,000 1.0 1,000,000 Transamerica Corporation 76,009,264 115,125,000 1.0 -------------- --------------- ----- 128,401,363 236,625,000 2.0 ==================================================================================================================================== Food & Beverage 2,601,300 Diageo PLC (ADR)* 100,982,572 125,350,144 1.1 ==================================================================================================================================== Foods/Food 75,000 Nestle S.A. (Registered) 78,575,411 160,608,260 1.3 Processing ==================================================================================================================================== Footwear 1,700,000 Nike, Inc. (Class B) 80,368,533 82,768,750 0.7 8,000,000 Yue Yuen Industrial (Holdings Limited) 10,727,086 14,300,280 0.1 -------------- --------------- ----- 91,095,619 97,069,030 0.8 ==================================================================================================================================== Hospital Management 4,000,000 Tenet Healthcare Corp. 66,520,659 125,000,000 1.0 ====================================================================================================================================
7 Merrill Lynch Capital Fund, Inc. June 30, 1998 SCHEDULE OF INVESTMENTS (continued)
Shares Percent of Industries Held Common Stocks Cost Value Net Assets ==================================================================================================================================== Hotels & Casinos 2,500,000 Sun International Hotels Ltd. $ 99,267,368 $ 113,750,000 1.0% ==================================================================================================================================== Information Systems 3,000,000 Reynolds & Reynolds Company (Class A) 60,505,409 54,562,500 0.5 ==================================================================================================================================== Insurance 1,800,000 Allstate Corporation 57,144,862 164,812,500 1.4 1,000,000 American International Group, Inc. 46,545,446 146,000,000 1.2 1,800,000 Berkley (W.R.) Corporation 62,155,679 72,112,500 0.6 1,900,000 EXEL Ltd. (US Registered Shares) 41,181,437 147,843,750 1.2 2,000,000 Fremont General Corp. 33,362,385 108,375,000 0.9 2,200,000 Horace Mann Educators Corp. 34,550,993 75,900,000 0.6 2,000,000 Penncorp Financial Group, Inc. 62,850,797 41,000,000 0.3 4,000,000 Provident Companies, Inc. 79,650,937 138,000,000 1.2 1,800,000 TIG Holdings, Inc. 54,108,848 41,400,000 0.3 4,500,000 Travelers Group, Inc. 39,986,618 272,812,500 2.3 -------------- --------------- ----- 511,538,002 1,208,256,250 10.0 ==================================================================================================================================== Iron & Steel 1,372,100 Birmingham Steel Corp. 22,939,267 16,979,738 0.1 ==================================================================================================================================== Leisure/Hotels 4,400,000 Carnival Corp. (Class A) 57,830,550 174,350,000 1.4 3,000,000 Harrah's Entertainment, Inc. 55,543,541 69,750,000 0.6 -------------- --------------- ----- 113,374,091 244,100,000 2.0 ==================================================================================================================================== Machinery & Machine 750,000 SPX Corp. 44,070,962 48,281,250 0.4 Tools ==================================================================================================================================== Natural Gas 1,750,000 Coastal Corp. 73,551,243 122,171,875 1.0 Suppliers 2,500,000 El Paso Natural Gas Co. 54,411,468 95,625,000 0.8 8,000,000 Williams Companies, Inc. 71,579,900 270,000,000 2.3 -------------- --------------- ----- 199,542,611 487,796,875 4.1 ==================================================================================================================================== Oil Field Equipment 1,000,000 McCormick & Company, Inc. 33,154,872 35,687,500 0.3 ==================================================================================================================================== Oil--Integrated 790,500 Ente Nazionale Idrocarburi S.p.A. (ENI) (ADR)* 39,595,869 51,382,500 0.4 1,350,000 TOTAL S.A. (ADR)* 50,875,698 88,256,250 0.8 2,750,000 Unocal Corporation 104,663,889 98,312,500 0.8 5,000,000 Yacimientos Petroliferos Fiscales S.A. (YPF) (ADR)* 95,920,616 150,312,500 1.3 -------------- --------------- ----- 291,056,072 388,263,750 3.3 ==================================================================================================================================== Oil--Service 2,500,000 Dresser Industries, Inc. 69,699,584 110,156,250 0.9 ==================================================================================================================================== Paper & Forest 2,100,000 Kimberly-Clark Corp. 105,243,199 96,337,500 0.8 Products 800,000 Temple-Inland, Inc. 36,743,614 43,100,000 0.4 1,500,000 Weyerhaeuser Co. 68,318,476 69,281,250 0.6 -------------- --------------- ----- 210,305,289 208,718,750 1.8 ==================================================================================================================================== Pharmaceuticals 1,800,000 Glaxo Wellcome PLC (ADR)* 48,669,764 107,662,500 0.9 60,000 Novartis AG (Registered) 78,569,582 99,907,640 0.8 -------------- --------------- ----- 127,239,346 207,570,140 1.7 ==================================================================================================================================== Railroads 4,750,000 Kansas City Southern Industries, Inc. 72,518,792 235,718,750 2.0 2,300,000 Union Pacific Corporation 135,110,114 101,487,500 0.8 -------------- --------------- ----- 207,628,906 337,206,250 2.8 ====================================================================================================================================
8 Merrill Lynch Capital Fund, Inc. June 30, 1998 SCHEDULE OF INVESTMENTS (continued)
Shares Percent of Industries Held Common Stocks Cost Value Net Assets ==================================================================================================================================== Real Estate 1,000,000 CarrAmerica Realty Corp. $ 26,832,805 $ 28,375,000 0.3% Investment Trusts 2,600,000 Patriot American Hospitality, Inc. 69,867,303 62,237,500 0.5 1,000,000 Walden Residential Properties, Inc. 20,679,751 24,500,000 0.2 -------------- --------------- ----- 117,379,859 115,112,500 1.0 ==================================================================================================================================== Restaurants 2,000,000 McDonald's Corporation 98,086,085 138,000,000 1.2 ==================================================================================================================================== Retail Trade 2,400,000 Wal-Mart Stores, Inc. 58,428,638 145,800,000 1.2 ==================================================================================================================================== Semiconductors 2,000,000 Motorola, Inc. 111,044,417 105,125,000 0.9 ==================================================================================================================================== Telecommunications 2,000,000 Frontier Corporation 55,148,100 63,000,000 0.5 600,000 Telecomunicacoes Brasileiras S.A.--Telebras (ADR)* 51,096,291 65,512,500 0.6 -------------- --------------- ----- 106,244,391 128,512,500 1.1 ==================================================================================================================================== Tires & Rubber 2,250,000 Goodyear Tire & Rubber Co. (The) 87,133,864 144,984,375 1.2 ==================================================================================================================================== Total Common Stocks 4,851,587,052 7,426,154,784 62.3 ==================================================================================================================================== Face Amount Corporate Bonds ==================================================================================================================================== Aerospace Boeing Company (The): $ 12,500,000 6.44% due 12/20/2004 12,560,000 12,672,250 0.1 10,000,000 6.18% due 3/15/2005 10,000,000 10,009,320 0.1 -------------- --------------- ----- 22,560,000 22,681,570 0.2 ==================================================================================================================================== Automotive Hertz Corp.: 10,000,000 7% due 5/01/2002 10,305,500 10,214,800 0.1 25,000,000 6.70% due 6/15/2002 24,815,300 25,303,750 0.2 13,000,000 6% due 1/15/2003 12,891,670 12,832,690 0.1 20,000,000 Hyundai Motor Co., Ltd., 7.60% due 7/15/2007 19,916,100 15,250,000 0.1 -------------- --------------- ----- 67,928,570 63,601,240 0.5 ==================================================================================================================================== Banking 30,000,000 Banco Nacional de Commercio Exterior SNC, Global Bonds, 7.25% due 2/02/2004 28,187,700 28,050,000 0.2 13,600,000 Banco Rio de la Plata, 8.75% due 12/15/2003 13,751,700 13,362,000 0.1 29,000,000 Bank of Boston Corp., 6.625% due 12/01/2005 27,575,520 29,279,560 0.2 BankAmerica Corp.: 15,000,000 6.875% due 6/01/2003 14,149,050 15,517,800 0.1 30,000,000 6.75% due 9/15/2005 29,591,750 30,917,100 0.3 Chase Manhattan Corporation (The): 15,000,000 6.50% due 8/01/2005 14,552,850 15,188,400 0.1 15,000,000 6.25% due 1/15/2006 13,892,250 15,004,800 0.1 20,000,000 First Security Corp., 7% due 7/15/2005 19,803,850 20,903,640 0.2 30,000,000 First Union Corp., 6.55% due 10/15/2035 29,953,350 30,526,200 0.3 22,750,000 Firstbank Puerto Rico, 7.625% due 12/15/2005 22,140,803 23,444,353 0.2 10,000,000 Great Western Financial Corp., 6.375% due 7/01/2000 9,998,800 10,036,400 0.1 Household Bank: 10,000,000 6.87% due 5/15/2001 9,868,800 10,177,220 0.1 20,000,000 6.875% due 3/17/2003 19,886,200 20,498,400 0.2 10,300,000 6.50% due 7/15/2003 10,202,253 10,384,048 0.1 NationsBank Corp.: 40,000,000 5.60% due 2/07/2001 40,000,000 39,712,000 0.3 10,000,000 6.20% due 8/15/2003 9,670,360 10,090,600 0.1 25,000,000 6.50% due 8/15/2003 22,104,200 25,335,500 0.2
9 Merrill Lynch Capital Fund, Inc. June 30, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== Banking $ 25,500,000 PNC Funding Corp., 6.125% due 9/01/2003 $ 24,922,025 $ 25,328,385 0.2% (concluded) 20,000,000 People's Bank--Bridgeport, 7.20% due 12/01/2006 19,956,700 20,770,200 0.2 26,000,000 Provident Bank, 6.375% due 1/15/2004 25,287,430 26,115,700 0.2 Union Planters Corp.: 20,000,000 6.25% due 11/01/2003 18,756,100 20,062,600 0.2 12,500,000 6.75% due 11/01/2005 12,001,875 12,718,750 0.1 -------------- --------------- ----- 436,253,566 453,423,656 3.8 ==================================================================================================================================== Beverages 22,000,000 Coca-Cola Femsa S.A., 8.95% due 11/01/2006 21,984,595 22,303,116 0.2 10,000,000 Panamerican Beverages, Inc., 7.25% due 7/01/2009 10,037,500 9,975,000 0.1 -------------- --------------- ----- 32,022,095 32,278,116 0.3 ==================================================================================================================================== Broadcasting 20,000,000 British Sky Broadcasting Group PLC, 7.30% due 10/15/2006 20,037,440 20,886,400 0.2 ==================================================================================================================================== Cable 10,000,000 Comcast Cable Communications, Inc., 8.125% due 5/01/2004 9,991,000 10,834,300 0.1 ==================================================================================================================================== Chemicals 8,000,000 Airgas, Inc., 7.14% due 3/08/2004 8,000,000 8,161,680 0.1 37,000,000 Lyondell Petrochemical Company, 6.50% due 2/15/2006 35,447,015 36,144,190 0.3 40,000,000 Union Carbide Corp., 6.79% due 6/01/2025 40,292,500 39,169,600 0.3 -------------- --------------- ----- 83,739,515 83,475,470 0.7 ==================================================================================================================================== Consumer Services Loewen Group, Inc.: 16,000,000 6.70% due 10/01/1999 15,970,340 15,941,792 0.1 20,000,000 8.25% due 10/15/2003 20,208,132 20,771,800 0.2 -------------- --------------- ----- 36,178,472 36,713,592 0.3 ==================================================================================================================================== Electronics 10,000,000 Dell Computer Corporation, 6.55% due 4/15/2008 9,978,200 10,004,600 0.1 Tandy Corp.: 20,000,000 6.125% due 1/15/2003 19,971,600 19,948,000 0.2 15,000,000 6.95% due 9/01/2007 14,944,120 15,514,500 0.1 -------------- --------------- ----- 44,893,920 45,467,100 0.4 ==================================================================================================================================== Finance 40,000,000 Ford Motor Credit Co., 5.75% due 1/25/2001 39,596,900 39,739,200 0.3 General Motors Acceptance Corp.: 30,000,000 6.375% due 4/04/2000 29,932,500 30,167,040 0.2 55,000,000 5.625% due 2/15/2001 54,450,000 54,429,650 0.5 30,000,000 6.75% due 6/10/2002 29,520,300 30,679,500 0.3 15,000,000 USL Capital Corp., 5.79% due 1/23/2001 14,995,800 14,953,950 0.1 -------------- --------------- ----- 168,495,500 169,969,340 1.4 ==================================================================================================================================== Financial Leasing GATX Corp.: 25,000,000 6.875% due 11/01/2004 24,938,000 25,480,250 0.2 25,000,000 6.69% due 11/30/2005 24,984,750 25,699,000 0.2 20,000,000 XTRA Corp., 6.68% due 11/30/2001 20,000,000 20,391,820 0.2 -------------- --------------- ----- 69,922,750 71,571,070 0.6 ==================================================================================================================================== Financial Services Finova Capital Corp.: 25,000,000 6.45% due 6/01/2000 24,766,550 25,190,750 0.2 15,000,000 5.98% due 2/27/2001 14,968,950 14,980,845 0.1 10,000,000 6.56% due 11/15/2002 10,000,000 10,200,800 0.1 20,000,000 McDonnell Douglas Finance Corp., 6.965% due 9/12/2005 20,049,200 21,078,240 0.2 35,000,000 Morgan Stanley Group, Inc., 5.75% due 2/15/2001 34,968,150 34,790,035 0.3
10 Merrill Lynch Capital Fund, Inc. June 30, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== Financial Services $ 13,000,000 Norwest Financial, Inc., 6.625% due 7/15/2004 $ 13,000,000 $ 13,356,980 0.1% (concluded) Salomon Inc.: 10,000,000 6.75% due 2/15/2003 9,804,000 10,243,230 0.1 5,000,000 6.875% due 12/15/2003 4,968,500 5,158,090 0.0 Smith Barney Shearson Holdings, Inc.: 25,000,000 6.625% due 7/01/2002 24,994,000 25,345,000 0.2 20,000,000 7% due 3/15/2004 19,951,800 20,706,980 0.2 -------------- --------------- ----- 177,471,150 181,050,950 1.5 ==================================================================================================================================== Food & Tobacco Nabisco Inc.: 20,000,000 6.125% due 2/01/2033 19,915,200 19,768,600 0.1 20,000,000 6.375% due 2/01/2035 19,939,200 19,871,400 0.2 -------------- --------------- ----- 39,854,400 39,640,000 0.3 ==================================================================================================================================== Foreign Government 10,000,000 Province of Mendoza, 10% due 9/04/2007 9,931,700 9,200,000 0.1 Obligations Republic of Argentina: 55,000,000 8.75% due 7/10/2002 52,688,750 47,300,000 0.4 33,012,500 Floating Rate Brady Bonds, Series L, 6.625% due 3/31/2005+ 24,404,453 29,087,314 0.3 25,000,000 Global Bonds, 8.375% due 12/20/2003 24,480,000 24,875,000 0.2 25,000,000 Republic of Colombia, Global Bonds, 7.625% due 2/15/2007 23,410,450 22,500,000 0.2 15,000,000 Republic of Guatemala, 8.50% due 8/03/2007 15,082,250 14,400,000 0.1 39,500,000 Republic of Panama, 8.25% due 4/22/2008 39,272,995 38,413,750 0.3 Republic of Turkey: 15,000,000 9.875% due 2/23/2005 14,853,700 14,100,000 0.1 40,000,000 10% due 9/19/2007 39,980,625 38,600,000 0.3 50,000,000 United Mexican States, Global Bonds, 8.625% due 3/12/2008 50,000,000 48,500,000 0.4 -------------- --------------- ----- 294,104,923 286,976,064 2.4 ==================================================================================================================================== Hospital Management Medpartners, Inc.: 29,125,000 6.875% due 9/01/2000 28,915,910 27,387,694 0.2 5,500,000 7.375% due 10/01/2006 4,886,570 4,929,650 0.1 -------------- --------------- ----- 33,802,480 32,317,344 0.3 ==================================================================================================================================== Industrial 20,000,000 Browning--Ferris Industries, Inc., 6.375% due 1/15/2008 19,627,200 20,114,000 0.2 Interface, Inc.: 7,800,000 9.50% due 11/15/2005 7,552,000 8,287,500 0.1 8,000,000 7.30% due 4/01/2008 7,999,520 8,058,848 0.1 20,000,000 Reliance Industries Ltd., 8.25% due 1/15/2027 19,526,999 17,800,000 0.1 25,000,000 Triton Energy Ltd., 8.75% due 4/15/2002 25,363,000 26,186,600 0.2 15,000,000 United Refining Co., 10.75% due 6/15/2007 15,000,000 14,512,500 0.1 Williams Holdings of Delaware, Inc.: 20,000,000 6.625% due 11/15/2004 19,908,000 20,282,200 0.2 50,000,000 6.25% due 2/01/2006 49,739,500 50,343,500 0.4 -------------- --------------- ----- 164,716,219 165,585,148 1.4 ==================================================================================================================================== Information Systems Reynolds & Reynolds Company: 10,000,000 5.875% due 3/20/2000 9,992,900 10,000,200 0.1 28,750,000 6.12% due 3/02/2001 28,750,000 28,803,532 0.2 -------------- --------------- ----- 38,742,900 38,803,732 0.3 ====================================================================================================================================
11 Merrill Lynch Capital Fund, Inc. June 30, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== Machinery $ 20,000,000 FMC Corp., 6.75% due 5/05/2005 $ 19,890,200 $ 20,179,120 0.2% 22,500,000 Harris Corp., 6.375% due 8/15/2002 22,461,850 22,762,350 0.2 -------------- --------------- ----- 42,352,050 42,941,470 0.4 ==================================================================================================================================== Media/Publishing 15,000,000 News American, Inc., 6.75% due 1/09/2038 15,000,000 15,004,350 0.1 ==================================================================================================================================== Natural Gas 27,500,000 Coastal Corp., 6.70% due 2/15/2027 27,225,400 29,023,060 0.2 Suppliers ==================================================================================================================================== Oil--Integrated 10,000,000 Compania Naviera Perez Companc S.A.C.F.I.M.F.A., 9% due 1/30/2004 10,125,000 9,800,000 0.1 10,000,000 Giant Industries, Inc., 9% due 9/01/2007 10,000,000 10,262,500 0.1 Occidental Petroleum Corp.: 18,375,000 6.24% due 11/24/2000 18,135,306 18,465,956 0.1 10,500,000 6.50% due 4/01/2005 10,440,150 10,499,895 0.1 20,500,000 Perez Companc S.A., 8.125% due 7/15/2007 20,201,470 18,706,250 0.1 Union Texas Petroleum Holdings, Inc.: 23,250,000 6.70% due 11/18/2002 23,190,070 23,715,558 0.2 20,000,000 6.81% due 12/05/2007 20,000,000 20,869,200 0.2 10,000,000 Unocal Corporation, 6.11% due 2/17/2004 10,000,000 10,002,940 0.1 20,000,000 Yacimientos Petroliferos Fiscales S.A. (YPF), 8% due 2/15/2004 18,334,375 20,146,000 0.2 -------------- --------------- ----- 140,426,371 142,468,299 1.2 ==================================================================================================================================== Paper & Forest Boise Cascade Corporation: Products 10,000,000 7.35% due 10/11/2004 10,316,700 10,257,000 0.1 20,000,000 7.66% due 5/27/2005 20,000,000 20,725,400 0.2 25,000,000 Champion International Corp., 6.65% due 12/15/2037 25,000,000 26,558,000 0.2 -------------- --------------- ----- 55,316,700 57,540,400 0.5 ==================================================================================================================================== Real Estate 10,000,000 Franchise Finance Corp. of America, 6.95% Investment Trusts due 8/29/2007 (Convertible) 10,000,000 9,996,890 0.1 ==================================================================================================================================== Telecommunications 10,000,000 Pacific Telecom, Inc., 6.625% due 10/20/2005 10,000,000 10,308,620 0.1 20,000,000 WorldCom, Inc., 7.55% due 4/01/2004 19,966,800 21,258,740 0.2 -------------- --------------- ----- 29,966,800 31,567,360 0.3 ==================================================================================================================================== Tires & Rubber 40,000,000 Goodyear Tire & Rubber Co. (The), 6.625% due 12/01/2006 39,840,000 40,719,600 0.3 ==================================================================================================================================== Transportation 12,500,000 Northwest Airlines Inc., 7.625% due 3/15/2005 12,471,225 12,250,000 0.1 20,000,000 Ryder System, Inc., 6.50% due 5/15/2005 19,960,600 20,161,980 0.2 17,000,000 Transportacion Maritima Mexicana, S.A. de C.V., 10% due 11/15/2006 17,152,730 15,980,000 0.1 15,000,000 Union Pacific Corp., 6.625% due 2/01/2008 14,776,750 14,972,400 0.1 -------------- --------------- ----- 64,361,305 63,364,380 0.5 ==================================================================================================================================== Travel & Lodging Royal Caribbean Cruises Ltd.: 10,000,000 7.125% due 9/18/2002 9,900,050 10,240,200 0.1 10,000,000 7.25% due 8/15/2006 9,854,415 10,405,800 0.1 -------------- --------------- ----- 19,754,465 20,646,000 0.2 ====================================================================================================================================
12 Merrill Lynch Capital Fund, Inc. June 30, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== Utilities--Electric, Connecticut Light & Power Co.: Gas & Water $ 28,250,000 7.75% due 6/01/2002 $ 28,173,725 $ 28,975,347 0.2% 20,000,000 7.875% due 10/01/2024 20,431,000 20,406,000 0.2 33,000,000 Empresa Nacional de Electricidad S.A. (Endesa), 7.325% due 2/01/2037 33,065,750 34,440,417 0.3 38,500,000 Enron Corp., 6.75% due 7/01/2005 37,527,310 39,149,110 0.3 20,000,000 Niagara Mohawk Power Corp., 5.875% due 9/01/2002 19,504,200 19,645,400 0.2 24,750,000 Tata Electric Co., 8.50% due 8/19/2017 23,737,525 20,882,812 0.2 -------------- --------------- ----- 162,439,510 163,499,086 1.4 ==================================================================================================================================== Total Corporate Bonds 2,347,397,501 2,372,045,987 19.9 ==================================================================================================================================== Collateralized Mortgage Obligations ==================================================================================================================================== 6,000,000 Criimi Mae CMBS Corp., Series 1998-1, Class A2, 6.009% due 2/20/2008 5,865,000 5,902,500 0.1 Federal Home Loan Mortgage Corp.: 9,241,900 6.50% due 5/15/2008 8,831,790 9,080,166 0.1 5,000,000 7% due 8/15/2008 4,762,500 5,096,850 0.0 13,000,000 6% due 2/15/2011 12,020,938 12,676,170 0.1 ==================================================================================================================================== Total Collateralized Mortgage Obligations 31,480,228 32,755,686 0.3 ==================================================================================================================================== US Government Obligations ==================================================================================================================================== US Treasury Bonds: 200,000,000 6.25% due 8/15/2023 184,808,985 214,124,000 1.8 80,000,000 6% due 2/15/2026 79,564,844 83,224,800 0.7 US Treasury Notes: 200,000,000 5.875% due 7/31/1999 200,618,945 200,718,000 1.7 55,000,000 5.50% due 2/28/2003 54,694,922 54,957,100 0.5 50,000,000 5.75% due 8/15/2003 47,705,859 50,531,000 0.4 650,000,000 5.875% due 11/15/2005 634,453,981 662,389,000 5.6 350,000,000 5.625% due 2/15/2006 349,235,547 351,421,000 2.9 ==================================================================================================================================== Total US Government Obligations 1,551,083,083 1,617,364,900 13.6 ==================================================================================================================================== Short-Term Investments ==================================================================================================================================== Commercial Paper** Atlantic Asset Securitization Corp.: 24,117,000 5.55% due 7/01/1998 24,117,000 24,117,000 0.2 25,000,000 5.54% due 7/17/1998 24,938,444 24,938,444 0.2 78,407,000 General Motors Acceptance Corp., 6.50% due 7/01/1998 78,407,000 78,407,000 0.7 20,000,000 Lexington Parker Capital Co. LLC, 5.53% due 7/06/1998 19,984,639 19,984,639 0.2 30,000,000 Morgan Stanley Dean Group, Inc., 6% due 7/01/1998 30,000,000 30,000,000 0.3 Park Avenue Receivables Corp.: 16,622,000 5.54% due 7/07/1998 16,606,653 16,606,653 0.1 33,088,000 5.55% due 7/09/1998 33,047,191 33,047,191 0.3 40,000,000 Preferred Receivable Funding Corp., 5.56% due 8/04/1998 39,789,956 39,789,956 0.3 Republic Industries, Inc.: 50,000,000 5.52% due 7/20/1998 49,854,333 49,854,333 0.4 20,000,000 5.55% due 8/06/1998 19,889,000 19,889,000 0.2
13 Merrill Lynch Capital Fund, Inc. June 30, 1998 SCHEDULE OF INVESTMENTS (concluded)
Face Percent of Amount Short-Term Investments Cost Value Net Assets ==================================================================================================================================== Commercial Paper** $ 40,000,000 Riverwoods Funding Corp., 5.60% due 7/02/1998 $ 39,993,778 $ 39,993,778 0.3% (concluded) 15,000,000 Transamerica Finance Corp., 5.53% due 8/11/1998 14,905,529 14,905,529 0.1 25,000,000 Variable Funding Capital Corp., 5.60% due 7/20/1998 24,926,111 24,926,111 0.2 ==================================================================================================================================== Total Short-Term Investments 416,459,634 416,459,634 3.5 ==================================================================================================================================== Total Investments $9,198,007,498 11,864,780,991 99.6 ============== Time Deposit++ 2,187,000 0.0 Other Assets Less Liabilities 47,441,554 0.4 --------------- ------ Net Assets $11,914,409,545 100.0% =============== ====== ==================================================================================================================================== Net Asset Class A--Based on net assets of $4,125,371,382 and 110,778,262 shares outstanding $ 37.24 Value: =============== Class B--Based on net assets of $5,866,988,464 and 161,709,595 shares outstanding $ 36.28 =============== Class C--Based on net assets of $569,578,431 and 15,863,465 shares outstanding $ 35.91 =============== Class D--Based on net assets of $1,352,471,268 and 36,412,319 shares outstanding $ 37.14 =============== ====================================================================================================================================
* American Depositary Receipts (ADR). ** Commercial Paper is traded on a discount basis; the interest rates shown are 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. ++ The time deposit bears interest at 5.50% and matures on 7/01/1998. 14 Merrill Lynch Capital Fund, Inc. June 30, 1998 PORTFOLIO INFORMATION As of June 30, 1998 Percent of Ten Largest Common Stock Holdings Net Assets Travelers Group, Inc. ........................... 2.3% Williams Companies, Inc. ........................ 2.3 Kansas City Southern Industries, Inc. ........... 2.0 United Technologies Corp. ....................... 1.6 Carnival Corp. (Class A) ........................ 1.4 Allstate Corporation ............................ 1.4 Rite Aid Corp. .................................. 1.4 Nestle S.A. (Registered) ........................ 1.3 Chase Manhattan Corporation (The) ............... 1.3 Yacimientos Petroliferos Fiscales S.A. (YPF)(ADR) .................................... 1.3 Percent of Ten Largest Industries Net Assets* Insurance ....................................... 10.0% Banking ......................................... 5.1 Diversified Companies ........................... 5.1 Oil--Integrated ................................. 4.5 Natural Gas Suppliers ........................... 4.3 Financial Services .............................. 3.5 Chemicals ....................................... 2.8 Railroads ....................................... 2.8 Foreign Government Obligations .................. 2.4 Paper & Forest Products ......................... 2.3 *Based on total holdings in common stocks and bonds. Common Stock Portfolio Changes for the Quarter Ended June 30, 1998 Deletions Cisco Systems, Inc. Sears, Roebuck and Co. Sunbeam Corporation 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 Merrill Lynch 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--6/98 [LOGO] Printed on post-consumer recycled paper -----END PRIVACY-ENHANCED MESSAGE-----