-----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, O4Y8rvAGE9fBAGHilWS99Pzt2mTkBSaZzDsncx8cR9+FK95Gp+b11u/xeCIC0g5+ 3OyINVUYjWFhkuICLqVrQQ== 0001005477-99-003544.txt : 19990812 0001005477-99-003544.hdr.sgml : 19990812 ACCESSION NUMBER: 0001005477-99-003544 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990811 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: 99683528 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 June 30, 1999 MERRILL LYNCH CAPITAL FUND, INC. PORTFOLIO SUMMARY Security Diversification As a Percentage of Net Assets As of June 30, 1999 [GRAPHIC OMITTED] [The following table was depicted as a pie chart in the printed material.] US Stocks 58.5% US Bonds 29.6% Non-US Bonds 3.0% Non-US Stocks 5.7% Cash & Cash Equivalents 3.2% Sector Representation As a Percentage of Equities As of June 30, 1999 [GRAPHIC OMITTED] [The following table was depicted as a pie chart in the printed material.] Financial Services 19.4% Consumer Services 6.3% Utilities 3.0% Transportation 5.8% Capital Goods--Technology 12.0% Energy 12.1% Basic Industries 2.3% Diversified 0.8% Credit Cyclicals 3.4% Consumer Staples 14.2% Capital Goods 11.2% Consumer Cyclicals 9.5% ================================================================================ Geographic Diversification Percent of As of June 30, 1999 Net Assets - -------------------------------------------------------------------------------- United States 89.1%* - -------------------------------------------------------------------------------- United Kingdom 3.4 - -------------------------------------------------------------------------------- Bermuda 1.2 - -------------------------------------------------------------------------------- Argentina 1.1 - -------------------------------------------------------------------------------- Switzerland 1.1 - -------------------------------------------------------------------------------- Bahamas 1.1 - -------------------------------------------------------------------------------- Sweden 1.1 - -------------------------------------------------------------------------------- India 0.4 - -------------------------------------------------------------------------------- Mexico 0.3 - -------------------------------------------------------------------------------- Chile 0.3 - -------------------------------------------------------------------------------- Canada 0.3 - -------------------------------------------------------------------------------- South Korea 0.2 - -------------------------------------------------------------------------------- Colombia 0.1 - -------------------------------------------------------------------------------- Panama 0.1 - -------------------------------------------------------------------------------- Turkey 0.1 - -------------------------------------------------------------------------------- Guatemala 0.1 - -------------------------------------------------------------------------------- * Includes investments in short-term securities. US Common Stock Investments S&P As of June 30, 1999 Fund 500* - -------------------------------------------------------------------------------- Average Capitalization (in billions) $33.8 $22.4 - -------------------------------------------------------------------------------- Price/Book Value 5.6 7.2 - -------------------------------------------------------------------------------- Price/Earnings Ratio** 24.3 32.0 - -------------------------------------------------------------------------------- Yield Based on Current Dividend 1.3% 1.2% - -------------------------------------------------------------------------------- * An unmanaged broad-based index comprised of common stocks. ** Based on 1999 earnings estimates. Fixed-Income Investments Merrill Lynch As of June 30, 1999 Fund DOAO Index* - -------------------------------------------------------------------------------- Duration 5.2 Years 5.4 Years - -------------------------------------------------------------------------------- Average Maturity 9.0 Years 9.0 Years - -------------------------------------------------------------------------------- Asset Breakdown: - -------------------------------------------------------------------------------- Corporates 57.4% 22.1% - -------------------------------------------------------------------------------- US Treasuries/Agencies 39.1% 47.4% - -------------------------------------------------------------------------------- Mortgage-Backed 0.6% 30.5% - -------------------------------------------------------------------------------- International Governments 2.9% -- - -------------------------------------------------------------------------------- * 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. June 30, 1999 DEAR SHAREHOLDER The US stock market continued its powerful advance during the quarter ended June 30, 1999 with the broad market averages reaching new highs at the end of June and trending toward an unprecedented fifth consecutive year of greater than 20% returns. In April, there was evidence suggesting that the global economy was on sounder footing, precipitating a pronounced shift in market leadership away from the large-capitalization growth sector toward the more economically sensitive value sector. Continued strength in the US economy, as evidenced by the +4.3% rate of first quarter gross domestic product growth, falling European interest rates, incipient recoveries in Asia and some early signs of stabilization in Brazil, suggested a more hospitable global economic environment. Investors perceived that such a coordinated global recovery would make corporate earnings growth more widely available and at significantly lower stock market valuations than was the case last year. Thus, investors began to move away from consumer and technology stocks, which had long been at the forefront of the market's advance, toward industrial, cyclical and commodity stocks, which would be the primary beneficiaries of a revitalized global economy. In May, concerns over the sustained rapid pace of economic growth and its implications for higher inflation produced rising interest rates and falling stock prices. The continued strength in the consumer sector of the US economy was augmented by improved conditions in the industrial sector, led by renewed export market opportunities. This broader growth platform, combined with the rapid increase in energy prices during 1999, engendered fears of accelerating inflation and encouraged the Federal Reserve Board to adopt a tightening monetary policy bias at its Federal Open Market Committee meeting, driving long-term interest rates to their highest levels in over a year. Since rising interest rates typically compress equity valuations, stock prices declined accordingly, particularly in those market sectors most sensitive to interest rate movements such as financials, technology and growth. In June, positive Federal Reserve Board actions, further evidence of resurgent global growth and rising expectations for second-quarter profits renewed the market's advance and propelled the broad market averages to record high levels. The Federal Reserve Board's decision to increase the Federal Funds rate by a mere 25 basis points (0.25%) and to change its bias regarding its future course of action from tightening to neutral suggested that there would not be further short-term interest rate hikes for the balance of 1999. In addition, positive economic news from Japan and other Asian nations suggested a favorable global economic outlook with positive implications for corporate earnings. Furthermore, the relative scarcity of second quarter earnings warnings suggested that there could be more positive surprises for equities. This favorable confluence of events drove the unmanaged Standard & Poor's 500 (S&P 500) Index to a +7.05% total return for the three-month period ended June 30, 1999. In contrast, fixed-income investors, fearing the inflationary implications of strong economic growth, drove long-term interest rates above the 6% level, resulting in a - 0.92% total return for the unmanaged Merrill Lynch Domestic Bond Master Index for the June quarter. Cash equivalents provided a +1.17% total return for the same period as measured by the Merrill Lynch 91-day Treasury Bill Index. Merrill Lynch Capital Fund, Inc.'s Class A, Class B, Class C and Class D Shares had total returns of +6.48%, +6.19%, +6.21% and +6.41%, respectively, for the June quarter. (Fund results shown do not reflect sales charges; results would be lower if sales charges were included. Complete performance information can be found on pages 5 and 6 of this report to shareholders.) Portfolio Matters While these favorable developments suggest a positive near-term outlook for equities, we remain concerned about the market's ability to provide significant appreciation from current levels. Robust fundamental conditions have driven overall stock market valuations to record high levels, which we believe will constrain the market's further advance. In our view, these lofty valuations suggest limited upside potential and offer little room for disappointment. Expectations for significant stock market appreciation from current levels are predicated on two possible scenarios, neither of which we support. These scenarios include a strong acceleration in US corporate profits growth and/or a continued expansion in valuations from the already record high levels. While S&P 500 corporate profits are expected to grow at a low double-digit rate in 1999, we believe that intense global competition and limited pricing power will likely restrain opportunities for growth above 2 Merrill Lynch Capital Fund, Inc. June 30, 1999 this level. While market valuations could certainly expand further, we believe it is not appropriate to base investment decisions on such a view. On the other hand, bonds appear to offer good value with inflation-adjusted interest rates at historically high levels and inflationary pressures expected to moderate. We believe the Federal Reserve Board's proactive posture will slow economic growth and keep inflation in check, offering attractive total return opportunities in the fixed-income market. As a result, we maintained a significant weighting in fixed-income securities, with 64.2% of net assets invested in equities, 32.6% in fixed-income securities and 3.2% in cash equivalents at June 30, 1999. This compares to 64.1% of net assets in equities, 33.5% in fixed-income securities and 2.4% in cash equivalents as of March 31, 1999. Within the equity component of the Fund, we continued to adjust our holdings to seek to enhance quality and better control risk during the quarter. We added three new investments, increased positions in 12 holdings, reduced positions in 21 holdings, and eliminated eight stocks from the portfolio. Notable among the new positions was Mellon Bank Corporation, the Pittsburgh-based regional banking concern, which has dramatically restructured over the last several years and now generates over 50% of its income from high value, fiduciary businesses such as asset management, custody and benefits consulting. This enhanced business mix is expected to drive above-average earnings growth and improved valuation parameters. The company has moved into an excess capital position and is generating approximately $600 million per year in free capital. The company enjoys industry-leading cash returns of 23% - 25% on equity with opportunities for further improvement driven by changes in its business mix and capital structure. Selling at 18 times estimated 1999 cash earnings per share of $4.05 and 16 times estimated 2000 cash earnings of $4.50 per share, we believe this represents an attractive entry price for the shares of this high-quality company. Continued low double-digit earnings growth and rising returns are likely to drive valuations higher and generate significant shareholder value. In contrast, any shortfall in performance would likely drive Mellon into the ongoing banking industry consolidation. Therefore, we believe the stock represents a very attractive addition to the Fund. We also established a position in Xerox Corporation, the document/copier company, which is committed to transforming itself from a traditional, stand-alone black and white copier company to a digital, network, color, services and solutions company for corporate printing and copying needs. Xerox's management has targeted double-digit top-line growth and mid-to-high teens earnings per share growth over the next few years driven by new products, increased equipment and services prices, continued customer outsourcing and a recovery in emerging markets. Significant cost declines will drive improved operating margins and enhanced earnings per share growth. Xerox enjoys a solid financial position with a 36.5% return on equity, an improving trend in return on capital and interest coverage in excess of seven times. Free cash flow generation is expected to improve with a renewed emphasis on working capital management, adding another component to earnings growth. Selling at 19 times estimated year 2000 earnings per share of $3.20, we believe Xerox offers an attractive risk/reward profile and represents an attractive addition to the Fund. Despite the stock market's record high levels, we continue to identify and invest in what we perceive as above-average companies whose stocks sell at below-average valuation levels. We define an above-average company as one that 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 Merrill Lynch Capital Fund, Inc. have 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. However, these same stocks sell at an average price to earnings ratio of 24.3 times estimated 1999 earnings per share versus to 32.1 times for the S&P 500, at 5.6 times current book value per share versus 7.2 times for the S&P 500, and provide an above-average dividend yield. We believe this formula will provide superior risk-adjusted equity returns over time. We eliminated our position in Sears, Roebuck & Co., the department store retailer, which, despite 3 Merrill Lynch Capital Fund, Inc. June 30, 1999 repeated restructuring and merchandise repositioning strategies, has been unable to generate consistent sales growth. Poor customer perception, competitive market share gains and tighter credit policies have contributed to these disappointing results. While the shares remain statistically inexpensive, we believe the company's ability to create shareholder value is severely constrained. We consequently decided to eliminate our position and redeploy proceeds into what we view as more attractive investment opportunities. We also sold our position in Novartis SA, the Swiss pharmaceutical company. Despite the stock's attractive valuation parameters, the lack of any near-term momentum in the company's core drug business, ongoing problems in the agricultural sector and the company's unwillingness or inability to redeploy its enormous cash position encouraged us to sell the stock and to use the proceeds for what we view as more attractive investment opportunities. Within the fixed-income portion of the portfolio, our decision to maintain an average duration of 5.2 years proved beneficial as domestic interest rates rose sharply for the second consecutive quarter. We further enhanced the liquidity of our holdings by reducing our position in foreign government securities and high-yield current bonds from 4.5% and 8.1% of fixed-income assets, respectively, at March 31, 1999 to 2.9% and 7.0%, respectively, at June 30, 1999. We increased our position in investment-grade corporate bonds from 49.4% to 50.4% and our position in US Government securities from 37.4% of fixed-income assets to 39.1%. Our position in mortgage-backed securities remained unchanged at 0.6% of fixed-income assets. As a result of these transactions, the average quality of our bonds rose slightly from A2/A+ to A1/A+, while the average yield to maturity increased by 34 basis points to 7.20%. In Conclusion We appreciate your investment in Merrill Lynch Capital Fund, Inc., and we look forward to sharing our investment outlook and strategies with you in our next report to shareholders. Sincerely, /s/ Terry K. Glenn Terry K. Glenn President and Director /s/ Kurt Schansinger Kurt Schansinger Senior Vice President and Senior Portfolio Manager August 3, 1999 4 Merrill Lynch Capital Fund, Inc. June 30, 1999 PERFORMANCE DATA About Fund Performance Investors are able to purchase shares of the Fund through the Merrill Lynch Select Pricing(SM) System, which offers four pricing alternatives: o Class A Shares incur a maximum initial sales charge (front-end load) of 5.25% and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. o Class B Shares are subject to a maximum contingent deferred sales charge of 4% if redeemed during the first year, decreasing 1% each year thereafter to 0% after the fourth year. In addition, Class B Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after approximately 8 years. (There is no initial sales charge for automatic share conversions.) o Class C Shares are subject to a distribution fee of 0.75% and an account maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. o Class D Shares incur a maximum initial sales charge of 5.25% and an account maintenance fee of 0.25% (but no distribution fee). None of the past results shown should be considered a representation of future performance. Figures shown in the "Recent Performance Results" and "Average Annual Total Return" tables assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of account maintenance, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. Recent Performance Results
Ten Years/ 12 Month 3 Month Since Inception Total Return Total Return Total Return ============================================================================================ ML Capital Fund, Inc. Class A Shares* + 6.66% + 6.48% +248.00% - -------------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class B Shares* + 5.59 + 6.19 +214.28 - -------------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class C Shares* + 5.57 + 6.21 + 96.84 - -------------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class D Shares* + 6.42 + 6.41 +104.14 - -------------------------------------------------------------------------------------------- Dow Jones Industrial Average** +24.64 +12.52 +472.35/+203.27 - -------------------------------------------------------------------------------------------- Standard & Poor's 500 Index** +22.76 + 7.05 +458.93/+224.09 ============================================================================================
* 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 for ten years for Class A & Class B Shares and from 10/21/94 for Class C & Class D Shares. ** An unmanaged broad-based index comprised of common stocks. Ten years/since inception total returns are for ten years and from 10/21/94, respectively. 5 Merrill Lynch Capital Fund, Inc. June 30, 1999 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) [GRAPHIC OMITTED] [The following table was depicted as a mountain chart in the printed material.] A mountain chart depicting the growth of an investment in the Fund's Class A Shares from $947.50 on November 8, 1973 to $23,021.31 on June 30, 1999. Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** ================================================================================ Class A Shares* ================================================================================ Year Ended 6/30/99 + 6.66% + 1.06% - -------------------------------------------------------------------------------- Five Years Ended 6/30/99 +16.24 +15.00 - -------------------------------------------------------------------------------- Ten Years Ended 6/30/99 +13.28 +12.67 - -------------------------------------------------------------------------------- * Maximum sales charge is 5.25%. ** Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** ================================================================================ Class B Shares* ================================================================================ Year Ended 6/30/99 + 5.59% + 1.59% - -------------------------------------------------------------------------------- Five Years Ended 6/30/99 +15.06 +15.06 - -------------------------------------------------------------------------------- Ten Years Ended 6/30/99 +12.13 +12.13 - -------------------------------------------------------------------------------- * 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 6/30/99 + 5.57% + 4.57% - -------------------------------------------------------------------------------- Inception (10/21/94) through 6/30/99 +15.53 +15.53 - -------------------------------------------------------------------------------- * 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 6/30/99 + 6.42% + 0.83% - -------------------------------------------------------------------------------- Inception (10/21/94) through 6/30/99 +16.43 +15.10 - -------------------------------------------------------------------------------- * Maximum sales charge is 5.25%. ** Assuming maximum sales charge. 6 Merrill Lynch Capital Fund, Inc. June 30, 1999 SCHEDULE OF INVESTMENTS
Shares Percent of Industries Held Common Stocks Cost Value Net Assets ==================================================================================================================================== Aerospace 2,500,000 Lockheed Martin Corporation $ 117,416,283 $ 93,125,000 0.9% ==================================================================================================================================== Automobile Parts 2,900,000 Federal-Mogul Corporation 132,309,674 150,800,000 1.4 ==================================================================================================================================== Banking 1,800,000 The Chase Manhattan Corporation 82,772,176 155,925,000 1.5 ==================================================================================================================================== Banking & Financial 3,000,000 Mellon Bank Corporation 109,930,249 109,125,000 1.0 ==================================================================================================================================== Building Materials 5,000,000 Masco Corporation 82,696,370 144,375,000 1.4 3,000,000 The Sherwin-Williams Company 83,094,100 83,250,000 0.8 -------------- -------------- ---- 165,790,470 227,625,000 2.2 ==================================================================================================================================== Chemicals 2,250,000 E.I. du Pont de Nemours and Company 120,883,421 153,703,125 1.5 2,500,000 Monsanto Company 105,763,188 98,593,750 0.9 -------------- -------------- ---- 226,646,609 252,296,875 2.4 ==================================================================================================================================== Computer Software 1,000,000 Computer Associates International, Inc. 31,917,365 55,000,000 0.5 ==================================================================================================================================== Consumer Products 3,000,000 Kimberly-Clark Corporation 148,809,666 171,000,000 1.6 ==================================================================================================================================== Diversified 2,000,000 Corning Incorporated 74,024,064 140,250,000 1.3 Companies 2,000,000 GenCorp Inc. 58,220,920 50,500,000 0.5 3,000,000 United Technologies Corporation 50,687,815 215,062,500 2.0 1,750,000 Varian Medical Systems, Inc. 42,527,430 44,187,500 0.4 2,000,000 Varian Semiconductor Equipment Associates, Inc. 31,185,914 34,250,000 0.3 -------------- -------------- ---- 256,646,143 484,250,000 4.5 ==================================================================================================================================== Electrical Equipment 1,100,000 General Electric Company 28,396,494 124,300,000 1.2 2,650,000 Rockwell International Corporation 117,207,271 160,987,500 1.5 -------------- -------------- ---- 145,603,765 285,287,500 2.7 ==================================================================================================================================== Financial Services 1,500,000 Federal National Mortgage Association 40,716,335 102,562,500 1.0 ==================================================================================================================================== Food & Beverage 3,500,000 Diageo PLC (ADR)* 156,391,175 150,500,000 1.4 2,300,000 McCormick & Company Incorporated 74,718,410 72,593,750 0.7 65,000 Nestle SA (Registered Shares) 68,163,280 117,257,036 1.1 -------------- -------------- ---- 299,272,865 340,350,786 3.2 ==================================================================================================================================== Foods 1,800,000 H.J. Heinz Company 91,252,913 90,225,000 0.9 ==================================================================================================================================== Footwear 1,500,000 Nike, Inc. (Class B) 65,618,533 94,968,750 0.9 ==================================================================================================================================== Information 1,900,000 Xerox Corporation 113,228,508 112,218,750 1.1 Processing ==================================================================================================================================== Information Systems 3,000,000 Reynolds & Reynolds Company (Class A) 60,661,921 69,937,500 0.7 ==================================================================================================================================== Insurance 3,000,000 The Allstate Corporation 53,093,756 107,625,000 1.0 1,150,000 American International Group, Inc. 37,190,221 134,621,875 1.3 5,250,000 Citigroup Inc. 42,764,113 249,375,000 2.4 4,400,000 Fremont General Corporation 42,145,143 83,050,000 0.8 2,500,000 Horace Mann Educators Corporation 43,202,941 67,968,750 0.6 3,000,000 ITT Industries, Inc. 104,812,452 114,375,000 1.1 4,300,000 Provident Companies, Inc. 95,751,056 172,000,000 1.6 2,200,000 XL Capital Ltd. (Class A) 60,594,939 124,300,000 1.2 -------------- -------------- ---- 479,554,621 1,053,315,625 10.0 ====================================================================================================================================
Merrill Lynch Capital Fund, Inc. June 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Shares Percent of Industries Held Common Stocks Cost Value Net Assets ==================================================================================================================================== Leisure/Hotels 3,250,000 Carnival Corporation $ 47,123,859 $ 157,625,000 1.5% 3,700,000 Harrah's Entertainment, Inc. 67,109,660 81,400,000 0.8 2,500,000 Sun International Hotels Ltd. 99,267,368 111,875,000 1.1 -------------- -------------- ---- 213,500,887 350,900,000 3.4 ==================================================================================================================================== Machinery & 1,000,000 SPX Corporation 58,441,924 83,500,000 0.8 Machine Tools ==================================================================================================================================== Multimedia 1,500,000 Reuters Group PLC (ADR)* 118,522,153 121,500,000 1.2 ==================================================================================================================================== Natural Gas 4,200,000 The Coastal Corporation 96,041,889 168,000,000 1.6 3,400,000 El Paso Energy Corporation 83,910,541 119,637,500 1.1 6,000,000 The Williams Companies, Inc. 54,549,827 255,375,000 2.4 -------------- -------------- ---- 234,502,257 543,012,500 5.1 ==================================================================================================================================== Oil -- Integrated 3,500,000 Unocal Corporation 128,846,079 138,687,500 1.3 ==================================================================================================================================== Oil -- Service 3,000,000 Halliburton Company 85,879,664 135,750,000 1.3 ==================================================================================================================================== Pharmaceuticals 1,400,000 American Home Products Corporation 81,935,905 80,500,000 0.8 1,500,000 Glaxo Wellcome PLC (ADR)* 40,376,196 84,937,500 0.8 -------------- -------------- ---- 122,312,101 165,437,500 1.6 ==================================================================================================================================== Railroads 4,000,000 Kansas City Southern Industries, Inc. 70,081,981 255,250,000 2.4 2,300,000 Union Pacific Corporation 135,110,114 134,118,750 1.3 -------------- -------------- ---- 205,192,095 389,368,750 3.7 ==================================================================================================================================== Restaurants 3,750,000 McDonald's Corporation 92,169,597 154,921,875 1.5 ==================================================================================================================================== Telecommunications 484,200 Frontier Corporation 16,885,022 28,567,800 0.3 3,750,000 Telefonaktiebolaget LM Ericsson (ADR)* 94,311,376 123,281,250 1.2 -------------- -------------- ---- 111,196,398 151,849,050 1.5 ==================================================================================================================================== Tires & Rubber 723,000 The Goodyear Tire & Rubber Company 31,512,771 42,521,437 0.4 ==================================================================================================================================== Tobacco 2,250,000 Fortune Brands, Inc. 87,015,000 93,093,750 0.9 ==================================================================================================================================== Waste Management 3,000,000 Waste Management, Inc. 150,984,576 161,250,000 1.5 ==================================================================================================================================== Wireless 2,000,000 Motorola, Inc. 104,696,553 189,500,000 1.8 Communication -- 3,500,000 Nextel Communications, Inc. (Class A) 76,691,509 175,656,250 1.7 Domestic Paging & -------------- -------------- ---- Cellular 181,388,062 365,156,250 3.5 ==================================================================================================================================== Total Common Stocks 4,389,611,660 6,744,961,898 64.2 ====================================================================================================================================
8 Merrill Lynch Capital Fund, Inc. June 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== Aerospace Boeing Capital Corporation: $ 12,500,000 6.44% due 12/20/2004 $ 12,560,000 $ 12,340,250 0.1% 10,000,000 6.18% due 3/15/2005 10,000,000 9,344,290 0.1 ------------ ------------ ---- 22,560,000 21,684,540 0.2 ==================================================================================================================================== Auto & Truck 14,000,000 Cummins Engine, 6.75% due 2/15/2007 14,016,000 13,134,940 0.1 ==================================================================================================================================== Automotive Hertz Corp.: 25,000,000 6.70% due 6/15/2002 24,815,300 25,056,000 0.2 13,000,000 6% due 1/15/2003 12,891,670 12,725,570 0.1 15,000,000 6.25% due 3/15/2009 14,857,500 13,976,550 0.1 20,000,000 Hyundai Motor Co., Ltd., 7.60% due 7/15/2007 19,916,100 17,600,000 0.2 ------------ ------------ ---- 72,480,570 69,358,120 0.6 ==================================================================================================================================== Banking 25,000,000 Banco Nacional de Commercio Exterior SNC, 7.25% due 2/02/2004 23,502,700 22,562,500 0.2 12,000,000 Banco Rio de la Plata, 8.75% due 12/15/2003 12,144,388 11,160,000 0.1 29,000,000 Bank of Boston Corporation, 6.625% due 12/01/2005 27,575,520 28,357,650 0.3 BankAmerica Corporation: 15,000,000 6.875% due 6/01/2003 14,149,050 15,275,100 0.1 30,000,000 6.75% due 9/15/2005 29,591,750 29,788,500 0.3 The Chase Manhattan Corporation: 14,000,000 6.50% due 8/01/2005 13,582,660 13,850,200 0.1 15,000,000 6.25% due 1/15/2006 13,892,250 14,595,300 0.1 20,000,000 First Security Corp., 7% due 7/15/2005 19,803,850 19,775,500 0.2 30,000,000 First Union Corp., 6.55% due 10/15/2035 29,953,350 29,712,300 0.3 22,500,000 Firstbank Puerto Rico, 7.625% due 12/20/2005 21,896,655 21,303,968 0.2 Household Bank: 20,000,000 6.875% due 3/17/2003 19,886,200 20,049,120 0.2 13,300,000 6.50% due 7/15/2003 13,259,673 13,124,307 0.1 25,500,000 PNC Funding Corp., 6.125% due 9/01/2003 24,922,025 24,859,950 0.2 20,000,000 People's Bank-- Bridgeport, 7.20% due 12/01/2006 19,956,700 18,700,000 0.2 26,000,000 Provident Bank, 6.375% due 1/15/2004 25,287,430 25,405,900 0.2 Union Planters Corp.: 20,000,000 6.25% due 11/01/2003 18,756,100 19,539,400 0.2 12,500,000 6.75% due 11/01/2005 12,001,875 12,192,750 0.1 ------------ ------------ ---- 340,162,176 340,252,445 3.1 ==================================================================================================================================== Beverages 10,000,000 Panamerican Beverages Inc., 7.25% due 7/01/2009 10,037,500 8,362,500 0.1 ==================================================================================================================================== Building Materials 10,000,000 Armstrong World, 6.50% due 8/15/2005 9,980,400 9,581,000 0.1 ==================================================================================================================================== Chemicals Airgas Inc.: 8,000,000 7.15% due 9/17/2001 7,917,840 8,070,240 0.1 13,000,000 7.14% due 3/08/2004 12,952,100 11,927,799 0.1 38,000,000 Equistar Chemicals LP, 6.50% due 2/15/2006 36,366,455 34,222,952 0.3 10,000,000 Monsanto Company, 5.75% due 12/01/2005 9,973,500 9,426,720 0.1 40,000,000 Union Carbide Corp., 6.79% due 6/01/2025 40,292,500 39,816,400 0.4 ------------ ------------ ---- 107,502,395 103,464,111 1.0 ====================================================================================================================================
9 Merrill Lynch Capital Fund, Inc. June 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== Electronics Tandy Corporation: $ 20,000,000 6.125% due 1/15/2003 $ 19,971,600 $ 19,756,400 0.2% 15,000,000 6.95% due 9/01/2007 14,944,120 14,455,950 0.1 ------------ ------------ ---- 34,915,720 34,212,350 0.3 ==================================================================================================================================== Energy 10,000,000 Occidental Petroleum Corp. (MOPPRS), 6.40% due 4/01/2013 9,815,800 9,746,420 0.1 ==================================================================================================================================== Finance General Motors Acceptance Corp.: 40,000,000 5.625% due 2/15/2001 39,453,450 39,612,000 0.4 30,000,000 5.35% due 12/07/2001 30,000,000 29,302,830 0.3 30,000,000 5.48% due 12/16/2002 30,000,000 29,068,800 0.3 10,000,000 6.85% due 6/17/2004 9,997,100 10,073,300 0.1 15,000,000 Household Finance Corp., 6% due 5/01/2004 14,983,450 14,533,545 0.1 ------------ ------------ ---- 124,434,000 122,590,475 1.2 ==================================================================================================================================== Financial Leasing GATX Capital Corporation: 25,000,000 6.875% due 11/01/2004 24,938,000 23,982,000 0.2 25,000,000 6.69% due 11/30/2005 24,984,750 23,903,750 0.2 XTRA Inc.: 20,000,000 6.68% due 11/30/2001 20,000,000 19,904,520 0.2 3,000,000 6.50% due 1/15/2004 2,988,330 2,933,250 0.0 ------------ ------------ ---- 72,911,080 70,723,520 0.6 ==================================================================================================================================== Financial -- Other 14,000,000 Case Credit Corporation, 5.95% due 8/01/2000 13,988,380 13,923,210 0.1 35,000,000 Ford Motor Credit Company, 5.75% due 2/23/2004 34,918,790 33,719,665 0.3 40,000,000 International Lease Finance Corp., 5.64% due 4/01/2002 39,838,800 39,048,000 0.4 ------------ ------------ ---- 88,745,970 86,690,875 0.8 ==================================================================================================================================== Financial Finova Capital Corp.: Services 15,000,000 5.99% due 1/10/2003 14,976,450 14,624,400 0.1 25,000,000 5.98% due 1/15/2003 24,960,500 24,350,575 0.2 10,000,000 6.42% due 11/19/2003 10,094,400 9,769,900 0.1 20,000,000 McDonnell Douglas Finance Corp., 6.965% due 9/12/2005 20,049,200 19,901,780 0.2 15,000,000 Morgan Stanley Group, Inc., 5.75% due 2/15/2001 14,986,350 14,865,345 0.1 13,000,000 Norwest Financial, Inc., 6.625% due 7/15/2004 13,000,000 12,971,660 0.1 10,000,000 Salomon, Inc., 6.75% due 2/15/2003 9,804,000 10,023,100 0.1 Salomon Smith Barney Holdings, Inc.: 25,000,000 6.625% due 7/01/2002 24,994,000 25,194,000 0.2 20,000,000 7% due 3/15/2004 19,951,800 20,146,280 0.2 5,000,000 6.375% due 10/01/2004 5,104,400 4,934,650 0.0 ------------ ------------ ---- 157,921,100 156,781,690 1.3 ==================================================================================================================================== Food & Tobacco Nabisco, Inc.: 21,500,000 6.125% due 2/01/2033 21,405,450 20,896,280 0.2 20,000,000 6.375% due 2/01/2035 19,939,200 19,151,400 0.2 ------------ ------------ ---- 41,344,650 40,047,680 0.4 ====================================================================================================================================
10 Merrill Lynch Capital Fund, Inc. June 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== Hospital Medpartners, Inc.: Management $ 29,125,000 6.875% due 9/01/2000 $ 28,915,910 $ 27,231,875 0.3% 5,500,000 7.375% due 10/01/2006 4,886,570 4,798,750 0.0 ------------ ------------ ---- 33,802,480 32,030,625 0.3 ==================================================================================================================================== Industrial 20,000,000 Browning-Ferris Industries, Inc., 6.375% due 1/15/2008 19,627,200 16,599,000 0.2 Interface, Inc.: 4,000,000 9.50% due 11/15/2005 3,885,000 4,140,000 0.0 10,000,000 7.30% due 4/01/2008 9,934,520 9,131,760 0.1 20,000,000 Reliance Industries Ltd., 8.25% due 1/15/2027 19,526,999 17,750,000 0.2 20,000,000 Tosco Corporation, 7.625% due 5/15/2006 21,264,300 20,368,000 0.2 Triton Energy Ltd./Corp.: 28,500,000 8.75% due 4/15/2002 28,460,180 27,787,500 0.3 1,500,000 9.25% due 4/15/2005 1,473,750 1,464,570 0.0 15,000,000 United Refining Co., 10.75% due 6/15/2007 15,000,000 10,987,500 0.1 20,000,000 Williams Companies Inc., 6.625% due 11/15/2004 19,908,000 19,746,800 0.2 40,000,000 Williams Holdings of Delaware, Inc., 6.25% due 2/01/2006 39,791,600 38,064,000 0.4 ------------ ------------ ---- 178,871,549 166,039,130 1.7 ==================================================================================================================================== Information 37,500,000 Reynolds & Reynolds Company, 6.12% due Systems 3/02/2001 37,500,000 36,750,000 0.4 ==================================================================================================================================== Machinery FMC Corp.: 10,000,000 7.125% due 11/25/2002 10,000,000 9,829,950 0.1 20,000,000 6.75% due 5/05/2005 19,890,200 18,603,980 0.2 22,500,000 Harris Corporation, 6.375% due 8/15/2002 22,461,850 22,172,400 0.2 ------------ ------------ ---- 52,352,050 50,606,330 0.5 ==================================================================================================================================== Media/ 15,000,000 News America Inc., 6.75% due 1/09/2038 15,000,000 13,981,950 0.1 Publishing ==================================================================================================================================== Miscellaneous 20,000,000 Morgan Stanley, Dean Witter, Discover & Co., Materials & 5.625% due 1/20/2004 19,061,600 19,276,800 0.2 Commodities ==================================================================================================================================== Natural Gas -- Enron Corp.: Pipelines 30,000,000 6.75% due 7/01/2005 29,387,285 29,443,500 0.3 20,000,000 6.40% due 7/15/2006 20,036,050 19,255,200 0.2 ------------ ------------ ---- 49,423,335 48,698,700 0.5 ==================================================================================================================================== Natural Gas 27,500,000 The Coastal Corporation, 6.70% due 2/15/2027 27,225,400 26,621,100 0.3 Suppliers ====================================================================================================================================
11 Merrill Lynch Capital Fund, Inc. June 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== 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 $ 9,275,000 0.1% 11,500,000 Giant Industries, Inc., 9% due 9/01/2007 11,368,750 10,465,000 0.1 Occidental Petroleum Corp.: 18,375,000 6.24% due 11/24/2000 18,135,306 18,307,196 0.2 25,000,000 6.50% due 4/01/2005 24,658,435 24,129,000 0.2 20,000,000 Perez Companc SA, 8.125% due 7/15/2007 19,701,880 17,000,000 0.2 10,000,000 Union Oil of California, 6.11% due 2/17/2004 10,000,000 9,713,280 0.1 23,250,000 Union Texas Petroleum Holdings, Inc., 6.70% 23,190,070 23,304,963 0.2 due 11/18/2002 20,000,000 YPF Sociedad Anonima, 8% due 2/15/2004 18,334,375 19,480,200 0.2 ------------ ------------ ---- 135,513,816 131,674,639 1.3 ==================================================================================================================================== Oil Field 21,000,000 R & B Falcon Corporation, 6.75% due 4/15/2005 20,491,300 17,640,000 0.2 Equipment ==================================================================================================================================== Paper & Forest Boise Cascade Corporation: Products 10,000,000 7.35% due 10/11/2004 10,316,700 9,535,700 0.1 20,000,000 7.66% due 5/27/2005 20,000,000 19,161,000 0.2 20,000,000 Champion Enterprises Inc., 7.625% due 5/15/2009 19,859,800 19,264,260 0.2 25,000,000 Champion International Corp., 6.65% due 12/15/2037 25,000,000 24,102,000 0.2 ------------ ------------ ---- 75,176,500 72,062,960 0.7 ==================================================================================================================================== Real Estate 10,000,000 Franchise Finance Corp. of America, 6.95% Investment Trusts due 8/29/2007 10,000,000 8,874,690 0.1 ==================================================================================================================================== Telecommunications 10,000,000 Pacific Telecom, Inc., 6.625% due 10/20/2005 10,000,000 9,577,190 0.1 20,000,000 Worldcom Inc., 6.40% due 8/15/2005 20,077,050 19,566,000 0.2 ------------ ------------ ---- 30,077,050 29,143,190 0.3 ==================================================================================================================================== Tires & Rubber 40,000,000 The Goodyear Tire & Rubber Company, 6.625% due 12/01/2006 39,840,000 38,130,400 0.4 ==================================================================================================================================== Transportation 10,000,000 Continental Airlines, 8% due 12/15/2005 10,000,000 9,545,400 0.1 27,750,000 Kansas City Southern Industries, Inc., 7% due 12/15/2025 26,709,375 24,211,043 0.2 Northwest Airlines, Inc.: 20,000,000 7.625% due 3/15/2005 19,390,850 18,298,600 0.2 5,000,000 7.875% due 3/15/2008 4,473,700 4,350,050 0.0 Ryder Systems, Inc.: 9,000,000 6.30% due 7/21/2003 9,000,000 8,706,285 0.1 20,000,000 6.50% due 5/15/2005 19,960,600 19,427,600 0.2 17,000,000 Transportacion Maritima Mexicana, SA de CV, 10% due 11/15/2006 17,152,730 12,622,500 0.1 12,500,000 Union Pacific Corporation, 6.39% due 11/01/2004 12,500,000 12,113,125 0.1 ------------ ------------ ---- 119,187,255 109,274,603 1.0 ==================================================================================================================================== Travel & Lodging Royal Caribbean Cruises Ltd.: 10,000,000 7.125% due 9/18/2002 9,900,050 10,048,900 0.1 17,500,000 7.25% due 8/15/2006 17,549,580 17,289,300 0.2 ------------ ------------ ---- 27,449,630 27,338,200 0.3 ====================================================================================================================================
12 Merrill Lynch Capital Fund, Inc. June 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Corporate Bonds Cost Value Net Assets ==================================================================================================================================== Utilities -- $ 33,000,000 Empresa Nacional de Electricidad SA (Endesa), Electric, Gas & 7.325% due 2/01/2037 $ 33,065,750 $ 30,061,581 0.3% Water 23,000,000 Tata Electric Co., 8.50% due 8/19/2017 21,998,830 18,871,845 0.2 -------------- -------------- --- 55,064,580 48,933,426 0.5 ==================================================================================================================================== Yankee Corporates 15,000,000 Enersis SA, 6.60% due 12/01/2026 14,350,102 14,029,650 0.1 ==================================================================================================================================== Total Corporate Bonds 2,047,214,008 1,977,737,059 18.8 ==================================================================================================================================== Collateralized Mortgage Obligations** ==================================================================================================================================== Federal Home Loan Mortgage Corporation: 2,617,634 6.50% due 5/15/2008 2,501,477 2,599,625 0.0 5,000,000 7% due 8/15/2008 4,762,500 4,984,350 0.0 13,000,000 6% due 2/15/2011 12,020,937 12,150,060 0.1 ==================================================================================================================================== Total Collateralized Mortgage Obligations 19,284,914 19,734,035 0.1 ==================================================================================================================================== Foreign Government Obligations ==================================================================================================================================== 10,000,000 Province of Mendoza, 10% due 9/04/2007 9,931,700 6,600,000 0.1 Republic of Argentina: 59,500,000 8.75% due 7/10/2002 55,708,750 48,492,500 0.5 9,300,000 5.938% due 3/31/2005+** 8,490,900 7,946,850 0.1 10,000,000 Republic of Colombia, 7.625% due 2/15/2007 9,046,875 7,537,500 0.1 12,500,000 Republic of Guatemala, 8.50% due 8/03/2007 12,563,500 11,284,288 0.1 15,000,000 Republic of Panama, 8.25% due 4/22/2008 14,923,200 13,050,000 0.1 4,000,000 Republic of Turkey, 12.375% due 6/15/2009 3,957,720 3,885,000 0.0 ==================================================================================================================================== Total Foreign Government Obligations 114,622,645 98,796,138 1.0 ==================================================================================================================================== US Government Obligations ==================================================================================================================================== US Treasury Bonds: 165,000,000 6.25% due 8/15/2023 153,347,266 165,773,850 1.6 50,000,000 6% due 2/15/2026 52,653,906 48,789,000 0.5 60,000,000 5.50% due 8/15/2028 55,982,031 54,937,200 0.5 35,000,000 US Treasury Inflation Indexed Note, 3.625% due 1/15/2008 4,855,937 34,985,410 0.3 US Treasury Notes: 10,000,000 5.50% due 5/31/2003 9,846,875 9,923,400 0.1 50,000,000 4.25% due 11/15/2003 48,373,438 47,211,000 0.4 50,000,000 6.50% due 5/15/2005 54,742,188 51,531,000 0.5 560,000,000 5.875% due 11/15/2005 543,439,919 560,000,000 5.3 375,000,000 5.625% due 2/15/2006 376,241,016 369,375,000 3.5 ==================================================================================================================================== Total US Government Obligations 1,329,482,576 1,342,525,860 12.7 ====================================================================================================================================
13 Merrill Lynch Capital Fund, Inc. June 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Percent of Industries Amount Short-Term Investments Cost Value Net Assets ==================================================================================================================================== Commercial $123,508,000 General Electric Capital Corp., 5.75% Paper*** due 7/01/1999 $ 123,508,000 $ 123,508,000 1.2% ==================================================================================================================================== Total Short-Term Investments 123,508,000 123,508,000 1.2 ==================================================================================================================================== Total Investments $8,023,723,803 10,307,262,990 98.0 ============== Other Assets Less Liabilities 206,946,746 2.0 --------------- ----- Net Assets $10,514,209,736 100.0% =============== ===== ==================================================================================================================================== Net Asset Value: Class A -- Based on net assets of $3,696,722,204 and 99,111,477 shares of beneficial interest outstanding $ 37.30 =============== Class B -- Based on net assets of $4,664,565,200 and 128,262,111 shares of beneficial interest outstanding $ 36.37 =============== Class C -- Based on net assets of $481,713,050 and 13,411,765 shares of beneficial interest outstanding $ 35.92 =============== Class D -- Based on net assets of $1,671,209,282 and 44,918,880 shares of beneficial interest outstanding $ 37.21 =============== ====================================================================================================================================
* American Depositary Receipts (ADR). ** Subject to principle paydowns. *** Commercial Paper is traded on a discount basis; the interest rate shown reflects the discount rate paid at the time of purchase by the Fund. + Brady Bonds are securities that 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. June 30, 1999 PORTFOLIO INFORMATION As of June 30, 1999 Percent of Ten Largest Common Stock Holdings Net Assets The Williams Companies, Inc. ......................................... 2.4% Kansas City Southern Industries, Inc. ................................ 2.4 Citigroup Inc. ....................................................... 2.4 United Technologies Corporation ...................................... 2.0 Motorola, Inc. ....................................................... 1.8 Nextel Communications, Inc. (Class A) ................................ 1.7 Provident Companies, Inc. ............................................ 1.6 Kimberly-Clark Corporation ........................................... 1.6 The Coastal Corporation .............................................. 1.6 Waste Management, Inc. ............................................... 1.5 Percent of Ten Largest Industries *Net Assets* Insurance ................................................. 10.0% Natural Gas ............................................... 5.1 Banking ................................................... 4.6 Diversified Companies ..................................... 4.5 Railroads ................................................. 3.7 Wireless Communication -- Domestic Paging & Cellular .............................. 3.5 Chemicals ................................................. 3.4 Leisure/Hotels ............................................ 3.4 Food & Beverage ........................................... 3.2 Electrical Equipment ...................................... 2.7 * Based on total holdings in common stocks and bonds. Common Stock Portfolio Changes for the Quarter Ended June 30, 1999 Additions H.J. Heinz Company Mellon Bank Corporation Xerox Corporation Deletions Avnet, Inc. CarrAmerica Realty Corporation Fruit of the Loom, Inc. (Class A) Novartis AG (Registered Shares) Sears, Roebuck & Co. Tenet Healthcare Corporation Tomkins PLC YPF Sociedad Anonima (ADR) OFFICERS AND DIRECTORS Terry K. Glenn, 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 Arthur Zeikel, Director Kurt Schansinger, Senior Vice President and Portfolio Manager Walter Cuje, Vice President Donald C. Burke, Vice President and 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 -- 6/99 [RECYCLE LOGO] Printed on post-consumer recycled paper -----END PRIVACY-ENHANCED MESSAGE-----