-----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, AmoKBERaCi94kIENmSiBbIzywI6+ys4ItPRHHuUBydGvhtvgMYLDgvRTCvpAD7Pz KBJ6sWU0c/odWFTCDh/zHw== 0001005477-99-005385.txt : 19991117 0001005477-99-005385.hdr.sgml : 19991117 ACCESSION NUMBER: 0001005477-99-005385 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991116 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-30D SEC ACT: SEC FILE NUMBER: 811-02405 FILM NUMBER: 99758344 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-30D 1 SEMI-ANNUAL REPORT MERRILL LYNCH CAPITAL FUND, INC. [GRAPHIC OMITTED] STRATEGIC Performance Semi-Annual Report September 30, 1999 MERRILL LYNCH CAPITAL FUND, INC. PORTFOLIO SUMMARY Security Diversification As a Percentage of Net Assets As of September 30, 1999 A pie chart illustrating the following percentages: US Stocks 52.5% US Bonds 30.9% Non-US Bonds 2.9% Non-US Stocks 5.7% Cash & Cash Equivalents 8.0% Sector Representation As a Percentage of Equities As of September 30, 1999 A pie chart illustrating the following percentages: Financial Services 16.9% Consumer Services 6.9% Utilities 6.7% Transportation 5.6% Capital Goods--Technology 14.4% Energy 14.5% Credit Cyclicals 3.2% Consumer Staples 16.8% Capital Goods 6.8% Consumer Cyclicals 8.2% Geographic Diversification Percent of As of September 30, 1999 Net Assets - -------------------------------------------------------------------------------- United States 90.1%* - -------------------------------------------------------------------------------- United Kingdom 3.1 - -------------------------------------------------------------------------------- Sweden 1.3 - -------------------------------------------------------------------------------- Switzerland 1.3 - -------------------------------------------------------------------------------- Argentina 1.1 - -------------------------------------------------------------------------------- Bermuda 1.0 - -------------------------------------------------------------------------------- Bahamas 0.5 - -------------------------------------------------------------------------------- India 0.4 - -------------------------------------------------------------------------------- Mexico 0.3 - -------------------------------------------------------------------------------- Chile 0.3 - -------------------------------------------------------------------------------- Canada 0.3 - -------------------------------------------------------------------------------- South Korea 0.2 - -------------------------------------------------------------------------------- Panama 0.1 - -------------------------------------------------------------------------------- * Includes investments in short-term securities. US Common Stock Investments S&P As of September 30, 1999 Fund 500* - -------------------------------------------------------------------------------- Average Capitalization (in billions) $34.7 $21.1 - -------------------------------------------------------------------------------- Price/Book Value 4.8 6.3 - -------------------------------------------------------------------------------- Price/Earnings Ratio** 23.3 28.2 - -------------------------------------------------------------------------------- Yield Based on Current Dividend 1.5% 1.3% - -------------------------------------------------------------------------------- * An unmanaged broad-based index comprised of common stocks. ** Based on 1999 earnings estimates. Fixed-Income Investments Merrill Lynch As of September 30, 1999 Fund DOAO Index* - -------------------------------------------------------------------------------- Duration 5.1 Years 5.3 Years - -------------------------------------------------------------------------------- Average Maturity 9.2 Years 8.9 Years - -------------------------------------------------------------------------------- Asset Breakdown: - -------------------------------------------------------------------------------- Corporates 58.5% 20.5% - -------------------------------------------------------------------------------- US Treasuries/Agencies 38.9% 47.4% - -------------------------------------------------------------------------------- Mortgage-Backed 0.6% 32.1% - -------------------------------------------------------------------------------- International Governments 2.0% -- - -------------------------------------------------------------------------------- * 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. September 30, 1999 DEAR SHAREHOLDER Economic Environment The US financial markets were extremely volatile during the quarter ended September 30, 1999, driven by varying perceptions of the pace of economic growth, its implication for inflation and the associated course of action by the Federal Reserve Board. In June, the broad US stock market averages reached record highs. By July, however, fears of accelerating inflation and the associated risk of further increases in interest rates negatively affected financial asset prices. While the rate of economic growth slowed sharply in the second quarter, with the gross domestic product rising at a 1.6% annual rate compared to 4.3% in the first quarter, concerns about additional Federal Reserve Board actions to tighten monetary policy were renewed after a greater-than-expected increase in the employment cost index and a slowdown in the pace of supplier deliveries. With price and valuation levels near record highs, the stock market offered little room to accommodate such a development, resulting in a decline in the market. In August, continued strength in the US economy combined with resurgent economic growth abroad raised additional concerns about the outlook for inflation and interest rates. Despite the second interest rate hike by the Federal Reserve Board, the US economy exhibited few signs of weakness. Consumer spending remained strong and the housing market robust, while industrial activity continued to accelerate driven by strong durable goods demand and rising export activity. In addition, commodity prices continued to rise and purchasing managers reported a significant increase in prices paid. These developments renewed concerns about further increases in interest rates and precipitated a further market decline. Stock prices declined for the third consecutive month in September as a weakening of the US dollar against the Japanese yen prompted concerns over threats to Japan's fragile economic recovery and the potential for accelerated repatriation of US investments. In addition, the bulging trade deficit, coupled with rising commodity prices and still robust economic activity, suggested the Federal Reserve Board might increase short-term interest rates for the third time this year at its October meeting. Finally, announced earnings shortfalls for many prominent companies, particularly in the consumer arena, raised concerns over the sustainability of corporate earnings growth. For the quarter as a whole, the unmanaged Standard & Poor's 500 (S&P 500) Index recorded a -6.24% total return. The US bond market was a beneficiary of many of these developments. While fixed-income investors reacted poorly to evidence of incipient inflation pressures and the prospect of higher interest rates in the early months of the quarter, a significant rally ensued in September driven by a slowdown in average hourly earnings and extremely benign inflation reports. The adjusted core producer price index rose at a 1.0% annual rate through the first nine months of 1999, while the core consumer price index increased at a modest 2% annual rate during this period. As a result, the unmanaged Merrill Lynch Domestic Bond Master Index recorded a +0.71% total return for the quarter. Cash equivalents, as measured by the Merrill Lynch 91-day Treasury Bill Index, were the best performing asset class in the third quarter, recording a +1.29% total return for the period. Portfolio Matters Total returns for Merrill Lynch Capital Fund's Class A, Class B, Class C and Class D Shares for the quarter ended September 30, 1999 were -7.04%, -7.28%, - -7.29% and -7.12%, respectively. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. Complete performance information can be found on pages 5 and 6 of this report to shareholders.) For some time now we have expressed concern about the stock market's ability to provide significant appreciation as many of the forces that have propelled the market higher during the past several years have begun to abate. The global economy is reviving, foreign fund flows are shrinking or reversing, US monetary liquidity is eroding, interest rates rose, the Federal Reserve Board has tightened monetary policy, and commodity prices are rising. This combination of deteriorating fundamentals and still high valuations did not represent, in our view, a formula for further advances in share prices. We believed that bonds offered good value based upon the historically high prevailing level of real interest rates and the likelihood that the Federal Reserve Board's proactive posture would secure a continued low inflation environment. Our cautious asset allocation position proved appropriate during this challenging and uncertain period 2 Merrill Lynch Capital Fund, Inc. September 30, 1999 in the US financial markets. Our investment position at September quarter-end showed 58.2% of net assets invested in equities, 33.8% in fixed-income securities and 8.0% in cash equivalents. This compares to 64.2% in equities, 32.6% in fixed-income securities and 3.2% in cash equivalents at the end of June. However, our relative equity returns proved disappointing in the September quarter, constraining overall Fund returns as many of the favorable trends that benefited results earlier in the year began to reverse. During the quarter, the value style of investing once again underperformed the growth style of investing. For example, the S&P Value Index recorded a total return of -9.17% during the September quarter, while the S&P Growth Index provided a -3.40% total return for the same period. In addition, after two quarters of broad and balanced group performance, market breath narrowed significantly in the third quarter with only 17 out of 102 S&P groups posting gains in the quarter, and only 37 groups outperforming the S&P 500 Index. This narrowing of the market during the quarter significantly compounded our investment challenge. Finally, several of the companies in which we are invested pre-announced third-quarter earnings below expectations, resulting in significant stock price declines. We believe that investors' short-term focus and exclusive emphasis on positive near-term earnings momentum has resulted in many of these securities being excessively punished for short-term disappointments. As a result, we also believe many attractive long-term investment opportunities have been created. Looking ahead, the significant decline in many individual stocks and industry groups during the past several months suggests some attractive equity investment opportunities are now available, in our opinion. Consequently, we may begin to reverse our conservative asset allocation strategy and look to increase our equity exposure in the future in order to take advantage of such opportunities. Within the equity component of the Fund, we continued to adjust our holdings to enhance quality and to seek to better manage risk during the quarter, adding four new investments, increasing positions in five holdings, reducing positions in 16 holdings, and eliminating nine stocks from the portfolio. Notable among the new positions is Eastman Kodak Company, the photographic products and services company. Selling at a low 13 times estimated year 2000 earnings per share and yielding 2 1/2%, we believe this represents an attractive entry price for the shares of this improving company. We also established a position in Bell Atlantic Corporation, the regional bell operating company. Following the pending acquisition of GTE, Bell Atlantic is expected to enjoy a powerful strategic position in the rapidly changing telecommunications market. Bell Atlantic appears to offer an attractive risk/reward profile. Selling at an 11% discount to its peer group and a 36% discount to the market, we believe Bell Atlantic represents an attractive addition to the portfolio. We eliminated our position in E.I. du Pont de Nemours & Co. (Du Pont), the diversified chemical concern, whose stock had performed handsomely this year, up more than 35%, reaching its target price objective. The stock performed particularly well subsequent to the announced terms of the exchange offer between Du Pont and its energy affiliate Conoco, which appeared to precipitate an arbitrage opportunity generating a short-term positive benefit for Du Pont's share price. With the stock performing well and approaching fair value while fundamental business trends remain challenging, particularly in the agricultural unit, we decided to eliminate our position and look to redeploy proceeds into more attractive investment opportunities. We also sold our position in Tenet Healthcare Corp., the hospital management company. Ongoing repercussions from the 1998 balanced-budget amendment, which reduced hospital reimbursement rates and continued rate pressures from both government and private sector insurers, have severely constrained Tenet's revenue and earnings growth prospects and ability to create shareholder value. We decided to eliminate our position because even though the stock is statistically inexpensive, an ongoing series of earnings shortfalls coupled with sales and earnings pressures, which are unlikely to abate, suggest limited upside potential. 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, 3 Merrill Lynch Capital Fund, Inc. September 30, 1999 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 Index. These same stocks sell, however, at an average price to earnings ratio of 23.3 times estimated 1999 earnings per share versus 28.3 times for the S&P 500 Index, at 4.8 times current book value per share versus 6.3 times for the S&P 500 Index, and provide an above-average dividend yield. We believe this formula will provide superior risk-adjusted equity returns over time. Within the fixed-income portion of the portfolio, we continued to benefit from the maintenance of a relatively short average duration as interest rates rose modestly during the quarter. Our asset mix was virtually unchanged during the September quarter with investment-grade corporate bonds remaining the largest fixed-income asset class at 50.5% of net assets at September 30, 1999 compared to 50.4% at June 30, 1999, followed by US Treasury issues at 38.9% of net assets compared to 39.1%. High-yield corporate bonds rose to 8.0% of fixed-income assets from 7.0% while foreign government bonds were further reduced to 2.0% at September 30 from 2.9% at June 30. Our average quality ratings were unchanged at A1/A+, while the average yield-to-maturity increased by 15 basis points to 7.35% despite the modest decline in average duration from 5.2 years at June 30, 1999 to 5.1 years at September 30, 1999. In Conclusion We appreciate your continued interest and participation in Merrill Lynch Capital Fund, Inc., and we look forward to assisting you with your financial needs in the months and years to come. Sincerely, /s/ Terry K. Glenn Terry K. Glenn President and Director /s/ Kurt Schansinger Kurt Schansinger Senior Vice President and Portfolio Manager November 2, 1999 4 Merrill Lynch Capital Fund, Inc. September 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/ 3 Month 12 Month Since Inception As of September 30, 1999 Total Return Total Return Total Return =========================================================================================== ML Capital Fund, Inc. Class A Shares* -7.04% +11.92% +204.09% - ------------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class B Shares* -7.28 +10.82 +174.61 - ------------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class C Shares* -7.29 +10.79 + 82.49 - ------------------------------------------------------------------------------------------- ML Capital Fund, Inc. Class D Shares* -7.12 +11.64 + 89.61 - ------------------------------------------------------------------------------------------- Dow Jones Industrial Average** -5.40 +34.02 +399.13/+195.03 - ------------------------------------------------------------------------------------------- Standard & Poor's 500 Index** -6.24 +27.80 +373.34/+203.85 ===========================================================================================
* 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 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 ten years and from 10/21/94, respectively. 5 Merrill Lynch Capital Fund, Inc. September 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) A mountain chart depicting the growth of an investment in the Fund's Class A Shares from $947.50 on November 8, 1973 to $21,399.57 on September 30, 1999. Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** ================================================================================ Class A Shares* ================================================================================ Year Ended 9/30/99 +11.92% + 6.05% - -------------------------------------------------------------------------------- Five Years Ended 9/30/99 +13.80 +12.58 - -------------------------------------------------------------------------------- Ten Years Ended 9/30/99 +11.76 +11.16 - -------------------------------------------------------------------------------- * Maximum sales charge is 5.25%. ** Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** ================================================================================ Class B Shares* ================================================================================ Year Ended 9/30/99 +10.82% + 6.82% - -------------------------------------------------------------------------------- Five Years Ended 9/30/99 +12.66 +12.66 - -------------------------------------------------------------------------------- Ten Years Ended 9/30/99 +10.63 +10.63 - -------------------------------------------------------------------------------- * 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 9/30/99 +10.79% + 9.79% - -------------------------------------------------------------------------------- Inception (10/21/94) through 9/30/99 +12.94 +12.94 - -------------------------------------------------------------------------------- * 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 9/30/99 +11.64% + 5.78% - -------------------------------------------------------------------------------- Inception (10/21/94) through 9/30/99 +13.82 +12.58 - -------------------------------------------------------------------------------- * Maximum sales charge is 5.25%. ** Assuming maximum sales charge. 6 Merrill Lynch Capital Fund, Inc. September 30, 1999 SCHEDULE OF INVESTMENTS
Shares Value Percent of Industries Held Common Stocks (Note 1a) Net Assets ==================================================================================================================================== Aerospace 2,500,000 Lockheed Martin Corporation $ 81,718,750 0.9% ==================================================================================================================================== Automobile Parts 2,900,000 Federal-Mogul Corporation (c) 79,931,250 0.9 ==================================================================================================================================== Banking 1,750,000 The Chase Manhattan Corporation 131,906,250 1.4 4,250,000 Citigroup Inc. 187,000,000 2.1 3,000,000 Mellon Bank Corporation 101,250,000 1.1 -------------- -------- 420,156,250 4.6 ==================================================================================================================================== Building Materials 5,000,000 Masco Corporation 155,000,000 1.7 810,300 The Sherwin-Williams Company 16,965,656 0.2 -------------- -------- 171,965,656 1.9 ==================================================================================================================================== Chemicals 2,500,000 Monsanto Company 89,218,750 1.0 ==================================================================================================================================== Computers 2,500,000 Compaq Computer Corporation 57,343,750 0.6 ==================================================================================================================================== Consumer Products 2,350,000 Fortune Brands, Inc. 75,787,500 0.9 3,000,000 Kimberly-Clark Corporation 157,500,000 1.7 -------------- -------- 233,287,500 2.6 ==================================================================================================================================== Diversified 2,000,000 GenCorp Inc. 36,625,000 0.4 Companies 3,000,000 ITT Industries, Inc. 95,437,500 1.0 3,000,000 United Technologies Corporation 177,937,500 1.9 2,000,000 + Varian Semiconductor Equipment Associates, Inc. 41,750,000 0.5 -------------- -------- 351,750,000 3.8 ==================================================================================================================================== Electrical Equipment 750,000 General Electric Company 88,921,875 1.0 2,150,000 Rockwell International Corporation 112,875,000 1.2 -------------- -------- 201,796,875 2.2 ==================================================================================================================================== Financial Services 1,500,000 Federal National Mortgage Association 94,031,250 1.0 ==================================================================================================================================== Food & Beverage 3,500,000 Diageo PLC (ADR)* 145,031,250 1.6 65,000 Nestle SA (Registered Shares) 122,053,536 1.4 -------------- -------- 267,084,786 3.0 ==================================================================================================================================== Foods 1,800,000 H.J. Heinz Company 77,400,000 0.8 2,300,000 McCormick & Company Incorporated 76,043,750 0.8 -------------- -------- 153,443,750 1.6 ==================================================================================================================================== Footwear 1,500,000 Nike, Inc. (Class B) 85,312,500 0.9 ==================================================================================================================================== Information 2,350,000 Xerox Corporation 98,553,125 1.1 Processing ==================================================================================================================================== Information Systems 3,000,000 Reynolds & Reynolds Company (Class A) 61,125,000 0.7 ==================================================================================================================================== Insurance 2,000,000 The Allstate Corporation 49,875,000 0.5 1,250,000 American International Group, Inc. 108,671,875 1.2 2,068,200 Horace Mann Educators Corporation 53,385,413 0.6 2,750,000 UnumProvident Corporation 80,953,125 0.9 2,000,000 XL Capital Ltd. (Class A) 90,000,000 1.0 -------------- -------- 382,885,413 4.2 ====================================================================================================================================
7 Merrill Lynch Capital Fund, Inc. September 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Shares Value Percent of Industries Held Common Stocks (Note 1a) Net Assets ==================================================================================================================================== Leisure/Hotels 3,000,000 Carnival Corporation $ 130,500,000 1.4% 3,500,000 + Harrah's Entertainment, Inc. 97,125,000 1.1 2,000,000 + Sun International Hotels Ltd. (c) 47,750,000 0.5 -------------- -------- 275,375,000 3.0 ==================================================================================================================================== Machinery & 1,000,000 + SPX Corporation 90,750,000 1.0 Machine Tools ==================================================================================================================================== Multimedia 886,100 Reuters Group PLC (ADR)* 60,919,375 0.7 ==================================================================================================================================== Natural Gas 4,200,000 The Coastal Corporation 171,937,500 1.9 3,500,000 El Paso Energy Corporation 139,343,750 1.5 5,500,000 The Williams Companies, Inc. 205,906,250 2.3 -------------- -------- 517,187,500 5.7 ==================================================================================================================================== Oil--Integrated 3,500,000 Unocal Corporation 129,718,750 1.4 ==================================================================================================================================== Oil--Service 3,000,000 Halliburton Company 123,000,000 1.4 ==================================================================================================================================== Pharmaceuticals 1,750,000 American Home Products Corporation 72,625,000 0.8 1,500,000 Glaxo Wellcome PLC (ADR)* 78,000,000 0.9 -------------- -------- 150,625,000 1.7 ==================================================================================================================================== Photography 1,750,000 Eastman Kodak Company 132,015,625 1.4 ==================================================================================================================================== Railroads 4,000,000 Kansas City Southern Industries, Inc. 185,750,000 2.0 2,300,000 Union Pacific Corporation 110,543,750 1.2 -------------- -------- 296,293,750 3.2 ==================================================================================================================================== Restaurants 3,500,000 McDonald's Corporation 150,500,000 1.6 ==================================================================================================================================== Telecommunications 2,250,000 Bell Atlantic Corporation 151,453,125 1.6 3,750,000 Telefonaktiebolaget LM Ericsson (ADR)* 116,953,125 1.3 -------------- -------- 268,406,250 2.9 ==================================================================================================================================== Wireless 1,000,000 Motorola, Inc. 88,000,000 1.0 Communications-- 3,000,000 + Nextel Communications, Inc. (Class A) 203,437,500 2.2 Domestic Paging & -------------- -------- Cellular 291,437,500 3.2 ==================================================================================================================================== Total Common Stocks (Cost--$3,925,864,589) 5,315,833,355 58.2 ==================================================================================================================================== Face Amount Corporate Bonds ==================================================================================================================================== Aerospace Boeing Capital Corporation: $ 12,500,000 6.44% due 12/20/2004 12,296,250 0.1 10,000,000 6.18% due 3/15/2005 9,524,940 0.1 -------------- -------- 21,821,190 0.2 ====================================================================================================================================
8 Merrill Lynch Capital Fund, Inc. September 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Value Percent of Industries Amount Corporate Bonds (Note 1a) Net Assets ==================================================================================================================================== Auto & Truck $ 14,000,000 Cummins Engine, 6.75% due 2/15/2007 $ 12,924,660 0.1% ==================================================================================================================================== Automotive Hertz Corp.: 25,000,000 6.70% due 6/15/2002 24,910,500 0.3 13,000,000 6% due 1/15/2003 12,644,840 0.1 15,000,000 6.25% due 3/15/2009 13,758,600 0.2 20,000,000 Hyundai Motor Co., Ltd., 7.60% due 7/15/2007 (a) 17,400,000 0.2 -------------- -------- 68,713,940 0.8 ==================================================================================================================================== Banking 20,000,000 Banco Nacional de Commercio Exterior SNC, 7.25% due 2/02/2004 18,150,000 0.2 5,000,000 Banco Rio de la Plata, 8.75% due 12/15/2003 4,550,000 0.1 30,000,000 BankAmerica Corporation, 6.75% due 9/15/2005 29,559,000 0.3 29,000,000 Bank of Boston Corporation, 6.625% due 12/01/2005 28,101,000 0.3 The Chase Manhattan Corporation: 14,000,000 6.50% due 8/01/2005 13,714,820 0.2 15,000,000 6.25% due 1/15/2006 14,422,350 0.2 21,500,000 Firstbank Puerto Rico, 7.625% due 12/20/2005 20,350,868 0.2 20,000,000 First Security Corp., 7% due 7/15/2005 19,388,580 0.2 30,000,000 First Union Corp., 6.55% due 10/15/2035 28,690,200 0.3 Household Bank: 20,000,000 6.875% due 3/17/2003 19,864,140 0.2 13,300,000 6.50% due 7/15/2003 13,047,300 0.1 30,000,000 PNC Funding Corp., 6.125% due 9/01/2003 28,992,000 0.3 20,000,000 People's Bank--Bridgeport, 7.20% due 12/01/2006 18,624,200 0.2 26,000,000 Provident Bank, 6.375% due 1/15/2004 25,197,120 0.3 Union Planters Corp.: 20,000,000 6.25% due 11/01/2003 19,220,600 0.2 12,500,000 6.75% due 11/01/2005 12,341,250 0.1 -------------- -------- 314,213,428 3.4 ==================================================================================================================================== Beverages 10,000,000 Panamerican Beverages Inc., 7.25% due 7/01/2009 8,100,000 0.1 ==================================================================================================================================== Building 10,000,000 Armstrong World, 6.50% due 8/15/2005 9,479,500 0.1 Materials ==================================================================================================================================== Chemicals Airgas Inc.: 8,000,000 7.15% due 9/17/2001 8,086,960 0.1 13,000,000 7.14% due 3/08/2004 11,719,266 0.1 40,000,000 Equistar Chemicals LP, 6.50% due 2/15/2006 35,652,080 0.4 10,000,000 Monsanto Company, 5.75% due 12/01/2005 (a) 9,359,200 0.1 40,000,000 Union Carbide Corp., 6.79% due 6/01/2025 39,049,200 0.4 -------------- -------- 103,866,706 1.1 ==================================================================================================================================== Electronics Tandy Corporation: 20,000,000 6.125% due 1/15/2003 19,838,600 0.2 15,000,000 7.22% due 9/29/2004 14,922,300 0.2 -------------- -------- 34,760,900 0.4 ==================================================================================================================================== Energy 10,000,000 Occidental Petroleum Corp. (MOPPRS), 6.40% due 4/01/2013 9,770,960 0.1 ====================================================================================================================================
9 Merrill Lynch Capital Fund, Inc. September 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Value Percent of Industries Amount Corporate Bonds (Note 1a) Net Assets ==================================================================================================================================== Finance General Motors Acceptance Corp.: $ 20,000,000 5.35% due 12/07/2001 $ 19,545,880 0.2% 30,000,000 5.48% due 12/16/2002 28,931,100 0.3 10,000,000 5.75% due 11/10/2003 9,622,000 0.1 10,000,000 6.85% due 6/17/2004 9,996,050 0.1 15,000,000 Household Finance Corp., 6% due 5/01/2004 14,415,810 0.2 -------------- -------- 82,510,840 0.9 ==================================================================================================================================== Financial GATX Capital Corporation: Leasing 25,000,000 6.875% due 11/01/2004 23,771,000 0.3 25,000,000 6.69% due 11/30/2005 23,995,750 0.3 XTRA Inc.: 20,000,000 6.68% due 11/30/2001 19,941,320 0.2 3,000,000 6.50% due 1/15/2004 2,951,310 0.0 -------------- -------- 70,659,380 0.8 ==================================================================================================================================== Financial--Other 35,000,000 Ford Motor Credit Company, 5.75% due 2/23/2004 33,588,240 0.4 40,000,000 International Lease Finance Corp., 5.64% due 4/01/2002 39,074,800 0.4 -------------- -------- 72,663,040 0.8 ==================================================================================================================================== Financial Finova Capital Corp.: Services 15,000,000 5.99% due 1/10/2003 14,558,100 0.2 25,000,000 5.98% due 1/15/2003 24,191,475 0.3 10,000,000 6.42% due 11/19/2003 9,700,000 0.1 20,000,000 McDonnell Douglas Finance Corp., 6.965% due 9/12/2005 19,812,480 0.2 35,000,000 Morgan Stanley & Company, 5.625% due 1/20/2004 33,441,100 0.4 13,000,000 Norwest Financial, Inc., 6.625% due 7/15/2004 12,923,820 0.1 10,000,000 Salomon, Inc., 6.75% due 2/15/2003 9,975,470 0.1 Salomon Smith Barney Holdings, Inc.: 25,000,000 6.625% due 7/01/2002 24,903,500 0.3 20,000,000 7% due 3/15/2004 19,983,220 0.2 5,000,000 6.375% due 10/01/2004 4,906,550 0.0 -------------- -------- 174,395,715 1.9 ==================================================================================================================================== Food & Tobacco Nabisco, Inc.: 21,500,000 6.125% due 2/01/2033 20,761,905 0.2 20,000,000 6.375% due 2/01/2035 18,941,200 0.2 -------------- -------- 39,703,105 0.4 ==================================================================================================================================== Hospital Medpartners, Inc.: Management 29,125,000 6.875% due 9/01/2000 27,814,375 0.3 5,500,000 7.375% due 10/01/2006 4,785,000 0.1 -------------- -------- 32,599,375 0.4 ====================================================================================================================================
10 Merrill Lynch Capital Fund, Inc. September 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Value Percent of Industries Amount Corporate Bonds (Note 1a) Net Assets ==================================================================================================================================== Industrial $ 20,000,000 Browning-Ferris Industries, Inc., 6.375% due 1/15/2008 $ 16,000,000 0.2% 10,000,000 Diamond Shamrock, 7.65% due 7/01/2026 9,815,500 0.1 Interface, Inc.: 4,000,000 9.50% due 11/15/2005 3,720,000 0.0 10,000,000 7.30% due 4/01/2008 9,103,690 0.1 20,000,000 Reliance Industries Ltd., 8.25% due 1/15/2027 (a) 18,050,000 0.2 20,000,000 Tosco Corporation, 7.625% due 5/15/2006 20,202,400 0.2 Triton Energy Ltd./Corp.: 24,500,000 8.75% due 4/15/2002 23,948,750 0.3 5,500,000 9.25% due 4/15/2005 5,439,555 0.1 15,000,000 United Refining Co., 10.75% due 6/15/2007 10,912,500 0.1 20,000,000 Williams Companies Inc., 6.625% due 11/15/2004 19,643,800 0.2 30,000,000 Williams Holdings of Delaware, Inc., 6.25% due 2/01/2006 28,050,900 0.3 -------------- -------- 164,887,095 1.8 ==================================================================================================================================== Information 37,500,000 Reynolds & Reynolds Company, 6.12% due 3/02/2001 36,821,250 0.4 Systems ==================================================================================================================================== Machinery FMC Corp.: 10,000,000 7.125% due 11/25/2002 9,916,700 0.1 20,000,000 6.75% due 5/05/2005 18,808,740 0.2 22,500,000 Harris Corporation, 6.375% due 8/15/2002 22,425,075 0.2 -------------- -------- 51,150,515 0.5 ==================================================================================================================================== Media/Publishing 10,000,000 News America Holdings, 7.43% due 10/01/2026 9,831,220 0.1 15,000,000 News America Inc., 6.75% due 1/09/2038 13,759,350 0.2 -------------- -------- 23,590,570 0.3 ==================================================================================================================================== Natural Gas-- Enron Corp.: Pipelines 15,000,000 6.75% due 7/01/2005 14,512,650 0.2 20,000,000 6.40% due 7/15/2006 18,978,000 0.2 -------------- -------- 33,490,650 0.4 ==================================================================================================================================== Natural Gas 27,500,000 The Coastal Corporation, 6.70% due 2/15/2027 26,369,475 0.3 Suppliers ==================================================================================================================================== Oil--Integrated 10,000,000 Compania Naviera Perez Companc S.A.C.F.I.M.F.A., 9% due 1/30/2004 (a) 9,400,000 0.1 11,500,000 Giant Industries, Inc., 9% due 9/01/2007 (a) 10,580,000 0.1 25,000,000 Occidental Petroleum Corp., 6.50% due 4/01/2005 23,997,500 0.2 20,000,000 Perez Companc SA, 8.125% due 7/15/2007 (a) 17,200,000 0.2 10,000,000 Union Oil of California, 6.11% due 2/17/2004 9,694,580 0.1 15,000,000 YPF Sociedad Anonima, 8% due 2/15/2004 14,868,300 0.2 -------------- -------- 85,740,380 0.9 ====================================================================================================================================
11 Merrill Lynch Capital Fund, Inc. September 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Value Percent of Industries Amount Corporate Bonds (Note 1a) Net Assets ==================================================================================================================================== Oil Field $ 21,000,000 R & B Falcon Corporation, 6.75% due 4/15/2005 $ 17,955,000 0.2% Equipment ==================================================================================================================================== Paper & Forest Boise Cascade Corporation: Products 10,000,000 7.35% due 10/11/2004 9,802,500 0.1 20,000,000 7.66% due 5/27/2005 19,700,600 0.2 25,000,000 Champion Enterprises Inc., 7.625% due 5/15/2009 (a) 23,534,975 0.3 25,000,000 Champion International Corp., 6.65% due 12/15/2037 23,789,000 0.3 -------------- -------- 76,827,075 0.9 ==================================================================================================================================== Real Estate 10,000,000 Franchise Finance Corp. of America, 6.95% due 8/29/2007 9,123,050 0.1 Investment Trusts ==================================================================================================================================== Telecommunications 10,000,000 Pacific Telecom, Inc., 6.625% due 10/20/2005 9,542,160 0.1 ==================================================================================================================================== Tires & Rubber 20,000,000 The Goodyear Tire & Rubber Company, 6.625% due 12/01/2006 18,721,000 0.2 ==================================================================================================================================== Transportation 10,000,000 Continental Airlines, 8% due 12/15/2005 9,260,900 0.1 27,750,000 Kansas City Southern Industries, Inc., 7% due 12/15/2025 23,614,973 0.3 Northwest Airlines, Inc.: 20,000,000 7.625% due 3/15/2005 17,925,000 0.2 5,000,000 7.875% due 3/15/2008 4,341,300 0.0 Ryder Systems, Inc.: 9,000,000 6.30% due 7/21/2003 8,638,848 0.1 20,000,000 6.50% due 5/15/2005 19,378,260 0.2 17,000,000 Transportacion Maritima Mexicana, SA de CV, 10% due 11/15/2006 11,687,500 0.1 12,500,000 Union Pacific Corporation, 6.39% due 11/01/2004 12,107,775 0.2 -------------- -------- 106,954,556 1.2 ==================================================================================================================================== Travel & Lodging Royal Caribbean Cruises Ltd.: 10,000,000 7.125% due 9/18/2002 9,968,300 0.1 17,500,000 7.25% due 8/15/2006 17,064,075 0.2 -------------- -------- 27,032,375 0.3 ==================================================================================================================================== Utilities-- 33,000,000 Empresa Nacional de Electricidad SA (Endesa), 29,857,674 0.3 Electric, Gas & 7.325% due 2/01/2037 Water 20,000,000 Tata Electric Co., 8.50% due 8/19/2017 (a) 15,848,980 0.2 -------------- -------- 45,706,654 0.5 ==================================================================================================================================== Yankee Corporates 15,000,000 Enersis SA, 6.60% due 12/01/2026 14,036,550 0.2 ==================================================================================================================================== Total Corporate Bonds (Cost--$1,882,325,099) 1,804,131,094 19.8 ==================================================================================================================================== Collateralized Mortgage Obligations** ==================================================================================================================================== Federal Home Loan Mortgage Corporation: 1,188,236 6.50% due 5/15/2008 1,177,459 0.0 5,000,000 7% due 8/15/2008 4,948,400 0.1 13,000,000 Gold Program, 6% due 2/15/2011 12,039,040 0.1 ==================================================================================================================================== Total Collateralized Mortgage Obligations (Cost--$17,918,946) 18,164,899 0.2 ====================================================================================================================================
12 Merrill Lynch Capital Fund, Inc. September 30, 1999 SCHEDULE OF INVESTMENTS (continued)
Face Value Percent of Amount Foreign Government Obligations (Note 1a) Net Assets ==================================================================================================================================== $ 10,000,000 Province of Mendoza, 10% due 9/04/2007 (a) $ 7,000,000 0.1% Republic of Argentina: 45,000,000 8.75% due 7/10/2002 (a) 38,081,250 0.4 8,800,000 6.813% due 3/31/2005 (b)** 7,717,600 0.1 10,000,000 Republic of Panama, 8.25% due 4/22/2008 8,650,000 0.1 ==================================================================================================================================== Total Foreign Government Obligations (Cost--$69,239,650) 61,448,850 0.7 ==================================================================================================================================== US Government Obligations ==================================================================================================================================== US Treasury Bonds: 165,000,000 6.25% due 8/15/2023 162,241,200 1.8 50,000,000 6% due 2/15/2026 47,648,500 0.5 45,000,000 5.50% due 8/15/2028 40,275,000 0.4 US Treasury Notes: 550,000,000 5.875% due 11/15/2005 546,650,500 6.0 375,000,000 5.625% due 2/15/2006 367,560,000 4.0 35,000,000 3.625% due 1/15/2008 34,948,598 0.4 ==================================================================================================================================== Total US Government Obligations (Cost--$1,191,901,715) 1,199,323,798 13.1 ==================================================================================================================================== Short-Term Investments ==================================================================================================================================== Commercial 25,000,000 Bell South Capital Corp., 5.27% due 10/07/1999 24,978,042 0.3 Paper*** Ford Motor Credit Company: 25,000,000 5.29% due 10/04/1999 24,988,979 0.3 40,000,000 5.29% due 10/21/1999 39,882,444 0.4 25,000,000 Gannett Company, 5.28% due 10/13/1999 24,956,000 0.3 82,413,000 General Electric Capital Corp., 5.60% due 10/01/1999 82,413,000 0.9 50,000,000 General Electric Co., 5.31% due 11/23/1999 49,609,125 0.5 25,000,000 H.J. Heinz Company, 5.30% due 10/25/1999 24,911,667 0.3 Metropolitan Life Insurance Company: 19,914,000 5.28% due 10/06/1999 19,899,396 0.2 33,283,000 5.30% due 10/08/1999 33,248,700 0.4 25,000,000 5.30% due 11/05/1999 24,871,181 0.3 25,000,000 Pfizer Inc., 5.27% due 10/19/1999 24,934,125 0.3 35,000,000 Transamerica Finance Corporation, 5.33% due 11/15/1999 34,766,813 0.4 25,000,000 U S A A Capital Corp., 5.27% due 10/01/1999 25,000,000 0.3 29,500,000 Vodafone Airtouch PLC, 5.33% due 11/17/1999 29,294,721 0.3 Wal-Mart Stores, Inc.: 28,000,000 5.28% due 10/04/1999 27,987,680 0.3 20,000,000 5.28% due 10/12/1999 19,967,733 0.2 ====================================================================================================================================
13 Merrill Lynch Capital Fund, Inc. September 30, 1999 SCHEDULE OF INVESTMENTS (concluded)
Face Value Percent of Amount Short-Term Investments (Note 1a) Net Assets ==================================================================================================================================== US Government Federal Home Loan Mortgage Corporation: Agency $ 50,000,000 5.23% due 10/14/1999 $ 49,905,569 0.5% Obligations*** 41,670,000 5.23% due 10/15/1999 41,585,248 0.4 40,000,000 Federal National Mortgage Association, 5.22% due 10/15/1999 39,918,800 0.4 ==================================================================================================================================== Total Short-Term Investments (Cost--$643,119,223) 643,119,223 7.0 ==================================================================================================================================== Total Investments (Cost--$7,730,369,222) 9,042,021,219 99.0 Other Assets Less Liabilities 89,582,129 1.0 -------------- ----- Net Assets $9,131,603,348 100.0% ============== ===== ====================================================================================================================================
* American Depositary Receipts (ADR). ** Subject to principal paydowns. *** Commercial Paper and certain US Government Agency Obligations are traded on a discount basis; the interest rates shown reflect the discount rates paid at the time of purchase by the Fund. + Non-income producing security. (a) The security may be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act of 1933. (b) 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. (c) Investments in companies 5% or more of whose outstanding securities are held by the Fund (such companies are defined as "Affiliated Companies" in Section 2 (a)(3) of the Investment Company Act of 1940) are as follows: -------------------------------------------------------------------------- Net Share Net Dividend Industry Affiliate Activity Cost Income -------------------------------------------------------------------------- Automobile Federal-Mogul Parts Corporation 100,000 $4,521,851 $14,500 Leisure/ Sun International Hotels Hotels Ltd. (500,000) (22,268,612) ++ -------------------------------------------------------------------------- ++ Non-income producing security. See Notes to Financial Statements. 14 Merrill Lynch Capital Fund, Inc. September 30, 1999 FINANCIAL INFORMATION Statement of Assets and Liabilities as of September 30, 1999 Assets: Investments, at value (identified cost--$7,730,369,222) (Note 1a) .. $9,042,021,219 Cash ............................................................... 806,306 Receivables: Securities sold ................................................. $ 79,168,866 Interest ........................................................ 52,078,360 Dividends ....................................................... 9,412,530 Capital shares sold ............................................. 8,891,695 149,551,451 ------------- Prepaid registration fees and other assets (Note 1f) ............... 129,137 -------------- Total assets ....................................................... 9,192,508,113 -------------- ======================================================================================================================== Liabilities: Payables: Capital shares redeemed ......................................... 51,603,456 Distributor (Note 2) ............................................ 4,044,375 Investment adviser (Note 2) ..................................... 604,744 56,252,575 ------------- Accrued expenses and other liabilities ............................. 4,652,190 -------------- Total liabilities .................................................. 60,904,765 -------------- ======================================================================================================================== Net Assets: Net assets ......................................................... $9,131,603,348 ============== ======================================================================================================================== Net Assets Class A Shares of Common Stock, $.10 par value, 400,000,000 Consist of: shares authorized .................................................. $ 9,669,991 Class B Shares of Common Stock, $.10 par value, 400,000,000 shares authorized .................................................. 12,192,670 Class C Shares of Common Stock, $.10 par value, 200,000,000 shares authorized .................................................. 1,306,406 Class D Shares of Common Stock, $.10 par value, 200,000,000 shares authorized .................................................. 4,652,762 Paid-in capital in excess of par ................................... 7,186,816,632 Undistributed investment income--net ............................... 53,014,795 Undistributed realized capital gains on investments and foreign currency transactions--net ................................. 552,297,842 Unrealized appreciation on investments and foreign currency transactions--net ......................................... 1,311,652,250 -------------- Net assets ......................................................... $9,131,603,348 ============== ======================================================================================================================== Net Asset Value: Class A--Based on net assets of $3,217,292,491 and 96,699,913 shares outstanding ................................................. $ 33.27 ============== Class B--Based on net assets of $3,951,560,849 and 121,926,695 shares outstanding ................................................. $ 32.41 ============== Class C--Based on net assets of $418,339,974 and 13,064,060 shares outstanding ................................................. $ 32.02 ============== Class D--Based on net assets of $1,544,410,034 and 46,527,616 shares outstanding ................................................. $ 33.19 ============== ========================================================================================================================
See Notes to Financial Statements. 15 Merrill Lynch Capital Fund, Inc. September 30, 1999 FINANCIAL INFORMATION (continued) Statement of Operations for the Six Months Ended September 30, 1999 Investment Interest and discount earned ................................. $ 120,311,828 Income Dividends (net of $548,319 foreign withholding tax) .......... 39,258,970 (Notes 1d & 1e): Other ........................................................ 18,089 ------------- Total income ................................................. 159,588,887 ------------- ================================================================================================================== Expenses: Account maintenance and distribution fees--Class B (Note 2) .. $ 22,768,378 Investment advisory fees (Note 2) ............................ 20,602,656 Transfer agent fees--Class B (Note 2) ........................ 3,776,416 Transfer agent fees--Class A (Note 2) ........................ 2,669,233 Account maintenance and distribution fees--Class C (Note 2) .. 2,349,691 Account maintenance fees--Class D (Note 2) ................... 2,023,744 Transfer agent fees--Class D (Note 2) ........................ 1,205,562 Transfer agent fees--Class C (Note 2) ........................ 410,329 Custodian fees ............................................... 298,647 Printing and shareholder reports ............................. 296,157 Registration fees (Note 1f) .................................. 122,785 Professional fees ............................................ 65,686 Directors' fees and expenses ................................. 25,783 Pricing fees ................................................. 12,431 Other ........................................................ 55,349 ------------- Total expenses ............................................... 56,682,847 ------------- Investment income--net ....................................... 102,906,040 ------------- ================================================================================================================== Realized & Realized gain (loss) from: Unrealized Gain Investments--net .......................................... 554,622,234 (Loss) on Foreign currency transactions--net ........................ (339,513) 554,282,721 Investments & ------------- Foreign Currency Change in unrealized appreciation/depreciation on: Transactions--Net Investments--net .......................................... (731,264,286) (Notes 1b, 1c, Foreign currency transactions--net ........................ 11,198 (731,253,088) 1e & 3): ------------- ------------- Net realized and unrealized loss on investments and foreign currency transactions ........................................ (176,970,367) ------------- Net Decrease in Net Assets Resulting from Operations ......... $ (74,064,327) ============= ==================================================================================================================
See Notes to Financial Statements. 16 Merrill Lynch Capital Fund, Inc. September 30, 1999 FINANCIAL INFORMATION (continued) Statements of Changes in Net Assets
For the Six For the Year Months Ended Ended September 30, March 31, Increase (Decrease) in Net Assets: 1999 1999 ============================================================================================================================== Operations: Investment income--net ............................................... $ 102,906,040 $ 256,455,669 Realized gain on investments and foreign currency transactions--net .. 554,282,721 415,237,179 Change in unrealized appreciation/depreciation on investments and foreign currency transactions--net ................................... (731,253,088) (873,948,482) --------------- --------------- Net decrease in net assets resulting from operations ................. (74,064,327) (202,255,634) --------------- --------------- ============================================================================================================================== Dividends & Investment income--net: Distributions to Class A ........................................................... (42,510,989) (118,803,106) Shareholders Class B ........................................................... (43,453,801) (102,818,160) (Note 1g): Class C ........................................................... (4,111,814) (11,137,417) Class D ........................................................... (17,955,579) (38,623,542) Realized gain on investments--net: Class A ........................................................... (104,604,985) (129,813,411) Class B ........................................................... (136,437,869) (188,516,486) Class C ........................................................... (14,304,465) (18,832,977) Class D ........................................................... (47,793,690) (45,329,436) --------------- --------------- Net decrease in net assets resulting from dividends and distributions to shareholders ........................................ (411,173,192) (653,874,535) --------------- --------------- ============================================================================================================================== Capital Share Net decrease in net assets derived from capital Transactions share transactions ................................................... (885,803,267) (528,711,091) (Note 4): --------------- --------------- ============================================================================================================================== Net Assets: Total decrease in net assets ......................................... (1,371,040,786) (1,384,841,260) Beginning of period .................................................. 10,502,644,134 11,887,485,394 --------------- --------------- End of period* ....................................................... $ 9,131,603,348 $10,502,644,134 =============== =============== ============================================================================================================================== * Undistributed investment income--net ................................. $ 53,014,795 $ 58,140,938 =============== =============== ==============================================================================================================================
See Notes to Financial Statements. 17 Merrill Lynch Capital Fund, Inc. September 30, 1999 FINANCIAL INFORMATION (continued) Financial Highlights
Class A ---------------------------------------------------------------- For the The following per share data and ratios have been derived Six Months from information provided in the financial statements. Ended For the Year Ended March 31, Sept. 30, ------------------------------------------------- Increase (Decrease) in Net Asset Value: 1999+ 1999+ 1998+ 1997+ 1996 ================================================================================================================================= Per Share Net asset value, beginning of period ...... $ 35.03 $ 37.56 $ 31.39 $ 30.90 $ 27.74 Operating ---------- ---------- ---------- ---------- ---------- Performance: Investment income--net .................... .46 1.00 1.11 1.25 1.21 Realized and unrealized gain (loss) on investments and foreign currency transactions--net ......................... (.72) (1.28) 8.14 2.43 5.41 ---------- ---------- ---------- ---------- ---------- Total from investment operations .......... (.26) (.28) 9.25 3.68 6.62 ---------- ---------- ---------- ---------- ---------- Less dividends and distributions: Investment income--net ................. (.43) (1.08) (1.11) (1.25) (1.16) Realized gain on investments--net ...... (1.07) (1.17) (1.97) (1.94) (2.30) ---------- ---------- ---------- ---------- ---------- Total dividends and distributions ......... (1.50) (2.25) (3.08) (3.19) (3.46) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ............ $ 33.27 $ 35.03 $ 37.56 $ 31.39 $ 30.90 ========== ========== ========== ========== ========== ================================================================================================================================= Total Investment Based on net asset value per share ........ (1.02%)++ (.68%) 30.71% 12.62% 24.50% Return:** ========== ========== ========== ========== ========== ================================================================================================================================= Ratios to Expenses .................................. .57%* .57% .55% .55% .56% Average ========== ========== ========== ========== ========== Net Assets: Investment income--net .................... 2.55%* 2.86% 3.21% 3.99% 4.09% ========== ========== ========== ========== ========== ================================================================================================================================= Supplemental Net assets, end of period (in thousands) .. $3,217,292 $3,631,440 $4,155,677 $3,291,219 $3,225,758 Data: ========== ========== ========== ========== ========== Portfolio turnover ........................ 13% 33% 38% 47% 84% ========== ========== ========== ========== ========== =================================================================================================================================
* Annualized. ** Total investment returns exclude the effects of sales charges. + Based on average shares outstanding. ++ Aggregate total investment return. See Notes to Financial Statements. 18 Merrill Lynch Capital Fund, Inc. September 30, 1999 FINANCIAL INFORMATION (continued) Financial Highlights (continued)
Class B ---------------------------------------------------------------- For the The following per share data and ratios have been derived Six Months from information provided in the financial statements. Ended For the Year Ended March 31, Sept. 30, ------------------------------------------------- Increase (Decrease) in Net Asset Value: 1999+ 1999+ 1998+ 1997+ 1996 ================================================================================================================================= Per Share Net asset value, beginning of period ...... $ 34.25 $ 36.68 $ 30.72 $ 30.30 $ 27.28 Operating ---------- ---------- ---------- ---------- ---------- Performance: Investment income--net .................... .27 .63 .74 .91 .90 Realized and unrealized gain (loss) on investments and foreign currency transactions--net ......................... (.70) (1.25) 7.96 2.39 5.29 ---------- ---------- ---------- ---------- ---------- Total from investment operations .......... (.43) (.62) 8.70 3.30 6.19 ---------- ---------- ---------- ---------- ---------- Less dividends and distributions: Investment income--net ................. (.34) (.64) (.77) (.94) (.87) Realized gain on investments--net ...... (1.07) (1.17) (1.97) (1.94) (2.30) ---------- ---------- ---------- ---------- ---------- Total dividends and distributions ......... (1.41) (1.81) (2.74) (2.88) (3.17) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ............ $ 32.41 $ 34.25 $ 36.68 $ 30.72 $ 30.30 ========== ========== ========== ========== ========== ================================================================================================================================= Total Investment Based on net asset value per share ........ (1.54%)++ (1.65%) 29.38% 11.48% 23.22% Return:** ========== ========== ========== ========== ========== ================================================================================================================================= Ratios to Expenses .................................. 1.58%* 1.59% 1.57% 1.57% 1.58% Average ========== ========== ========== ========== ========== Net Assets: Investment income--net .................... 1.53%* 1.85% 2.19% 2.97% 3.07% ========== ========== ========== ========== ========== ================================================================================================================================= Supplemental Net assets, end of period (in thousands) .. $3,951,561 $4,866,564 $5,938,708 $4,977,431 $5,025,504 Data: ========== ========== ========== ========== ========== Portfolio turnover ........................ 13% 33% 38% 47% 84% ========== ========== ========== ========== ========== =================================================================================================================================
* Annualized. ** Total investment returns exclude the effects of sales charges. + Based on average shares outstanding. ++ Aggregate total investment return. See Notes to Financial Statements. 19 Merrill Lynch Capital Fund, Inc. September 30, 1999 FINANCIAL INFORMATION (continued) Financial Highlights (continued)
Class C ---------------------------------------------------------------- For the The following per share data and ratios have been derived Six Months from information provided in the financial statements. Ended For the Year Ended March 31, Sept. 30, ------------------------------------------------- Increase (Decrease) in Net Asset Value: 1999+ 1999+ 1998+ 1997+ 1996 ================================================================================================================================= Per Share Net asset value, beginning of period ...... $ 33.82 $ 36.31 $ 30.44 $ 30.08 $ 27.17 Operating ---------- ---------- ---------- ---------- ---------- Performance: Investment income--net .................... .26 .62 .73 .90 .92 Realized and unrealized gain (loss) on investments and foreign currency transactions--net ......................... (.68) (1.25) 7.89 2.36 5.24 ---------- ---------- ---------- ---------- ---------- Total from investment operations .......... (.42) (.63) 8.62 3.26 6.16 ---------- ---------- ---------- ---------- ---------- Less dividends and distributions: Investment income--net ................. (.31) (.69) (.78) (.96) (.95) Realized gain on investments--net ...... (1.07) (1.17) (1.97) (1.94) (2.30) ---------- ---------- ---------- ---------- ---------- Total dividends and distributions ......... (1.38) (1.86) (2.75) (2.90) (3.25) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ............ $ 32.02 $ 33.82 $ 36.31 $ 30.44 $ 30.08 ========== ========== ========== ========== ========== ================================================================================================================================= Total Investment Based on net asset value per share ........ (1.53%)++ (1.70%) 29.40% 11.45% 23.25% Return:** ========== ========== ========== ========== ========== ================================================================================================================================= Ratios to Expenses .................................. 1.59%* 1.59% 1.58% 1.58% 1.59% Average ========== ========== ========== ========== ========== Net Assets: Investment income--net .................... 1.52%* 1.83% 2.18% 2.96% 3.08% ========== ========== ========== ========== ========== ================================================================================================================================= Supplemental Net assets, end of period (in thousands) .. $ 418,340 $ 491,234 $ 512,783 $ 322,438 $ 259,131 Data: ========== ========== ========== ========== ========== Portfolio turnover ........................ 13% 33% 38% 47% 84% ========== ========== ========== ========== ========== =================================================================================================================================
* Annualized. ** Total investment returns exclude the effects of sales charges. + Based on average shares outstanding. ++ Aggregate total investment return. See Notes to Financial Statements. 20 Merrill Lynch Capital Fund, Inc. September 30, 1999 FINANCIAL INFORMATION (continued) Financial Highlights (continued)
Class D ---------------------------------------------------------------- For the The following per share data and ratios have been derived Six Months from information provided in the financial statements. Ended For the Year Ended March 31, Sept. 30, ------------------------------------------------- Increase (Decrease) in Net Asset Value: 1999+ 1999+ 1998+ 1997+ 1996 ================================================================================================================================= Per Share Net asset value, beginning of period ...... $ 34.97 $ 37.49 $ 31.34 $ 30.86 $ 27.72 Operating ---------- ---------- ---------- ---------- ---------- Performance: Investment income--net .................... .41 .91 1.02 1.17 1.16 Realized and unrealized gain (loss) on investments and foreign currency transactions--net ......................... (.72) (1.28) 8.14 2.43 5.38 ---------- ---------- ---------- ---------- ---------- Total from investment operations .......... (.31) (.37) 9.16 3.60 6.54 ---------- ---------- ---------- ---------- ---------- Less dividends and distributions: Investment income--net ................. (.40) (.98) (1.04) (1.18) (1.10) Realized gain on investments--net ...... (1.07) (1.17) (1.97) (1.94) (2.30) ---------- ---------- ---------- ---------- ---------- Total dividends and distributions ......... (1.47) (2.15) (3.01) (3.12) (3.40) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ............ $ 33.19 $ 34.97 $ 37.49 $ 31.34 $ 30.86 ========== ========== ========== ========== ========== ================================================================================================================================= Total Investment Based on net asset value per share ........ (1.17%)++ (.92%) 30.40% 12.34% 24.21% Return:** ========== ========== ========== ========== ========== ================================================================================================================================= Ratios to Expenses .................................. .82%* .82% .80% .80% .81% Average ========== ========== ========== ========== ========== Net Assets: Investment income--net .................... 2.30%* 2.60% 2.95% 3.75% 3.84% ========== ========== ========== ========== ========== ================================================================================================================================= Supplemental Net assets, end of period (in thousands) .. $1,544,410 $1,513,406 $1,280,317 $ 690,116 $ 521,599 Data: ========== ========== ========== ========== ========== Portfolio turnover ........................ 13% 33% 38% 47% 84% ========== ========== ========== ========== ========== =================================================================================================================================
* Annualized. ** Total investment returns exclude the effects of sales charges. + Based on average shares outstanding. ++ Aggregate total investment return. See Notes to Financial Statements. 21 Merrill Lynch Capital Fund, Inc. September 30, 1999 NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: Merrill Lynch Capital Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund's financial statements are prepared in accordance with generally accepted accounting principles, which may require the use of management accruals and estimates. These unaudited financial statements reflect all adjustments, which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature. The Fund offers four classes of shares under the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D are sold with a front-end sales charge. Shares of Class B and Class C may be subject to a contingent deferred sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class B, Class C and Class D Shares bear certain expenses related to the account maintenance of such shares, and Class B and Class C Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its account maintenance and distribution expenditures. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments--Portfolio securities that are traded on stock exchanges are valued at the last sale price on the exchange on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Securities traded in the over-the-counter market are valued at the last available bid price prior to the time of valuation. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated by or under the authority of the Board of Directors as the primary market. Securities that are traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market. Options written or purchased are valued at the last sale price in the case of exchange-traded options. In the case of options traded in the over-the-counter market, valuation is the last asked price (options written) or the last bid price (options purchased). Short-term securities are valued at amortized cost, which approximates market value. Securities and assets for which market quotations are not available are valued at fair value as determined in good faith by or under the direction of the Fund's Board of Directors. (b) Derivative financial instruments--The Fund may engage in various portfolio strategies to seek to increase its return by hedging its portfolio against adverse movements in the equity, debt and currency markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. o Options--The Fund is authorized to write covered call options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written options are non-income producing investments. (c) Foreign currency transactions--Transactions denominated in foreign currencies are recorded at the exchange rate prevailing when recognized. Assets and liabilities denominated in foreign currencies are valued at the exchange rate at the end of the period. Foreign currency transactions are the result of settling (realized) or valuing (unrealized) assets or liabilities expressed in foreign currencies into US dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. (d) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. Under the applicable foreign 22 Merrill Lynch Capital Fund, Inc. September 30, 1999 tax law, a withholding tax may be imposed on interest, dividends, and capital gains at various rates. (e) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund has determined the ex-dividend date. Interest income (including amortization of discount) is recognized on the accrual basis. Realized gains and losses on security transactions are determined on the identified cost basis. (f) Prepaid registration fees--Prepaid registration fees are charged to expense as the related shares are issued. (g) Dividends and distributions--Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds Distributor ("MLFD" or the "Distributor"), a division of Princeton Funds Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch Group, Inc. MLAM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays a monthly fee based upon the average daily value of the Fund's net assets at the following annual rates: .50% of the Fund's average daily net assets not exceeding $250 million; .45% of average daily net assets in excess of $250 million but not exceeding $300 million; .425% of average daily net assets in excess of $300 million but not exceeding $400 million; and .40% of average daily net assets in excess of $400 million. Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor ongoing account maintenance and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares as follows: - -------------------------------------------------------------------------------- Account Distribution Maintenance Fee Fee - -------------------------------------------------------------------------------- Class B ................................. .25% .75% Class C ................................. .25% .75% Class D ................................. .25% -- - -------------------------------------------------------------------------------- Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account maintenance and distribution services to the Fund. The ongoing account maintenance fee compensates the Distributor and MLPF&S for providing account maintenance services to Class B, Class C and Class D shareholders. The ongoing distribution fee compensates the Distributor and MLPF&S for providing shareholder and distribution-related services to Class B and Class C shareholders. For the six months ended September 30, 1999, MLFD earned underwriting discounts and direct commissions and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D Shares as follows: - -------------------------------------------------------------------------------- MLFD MLPF&S - -------------------------------------------------------------------------------- Class A ................................. $ 5,007 $ 65,582 Class D ................................. $11,221 $171,264 - -------------------------------------------------------------------------------- For the six months ended September 30, 1999, MLPF&S received contingent deferred sales charges of $3,141,263 and $79,603 relating to transactions in Class B and Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred sales charges of $17 relating to transactions subject to front-end sales charge waivers in Class A Shares. In addition, MLPF&S received $430,056 in commissions on the execution of portfolio security transactions for the six months ended September 30, 1999. Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is the Fund's transfer agent. During the six months ended September 30, 1999, Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, received $2,313 for security price quotations to compute the net asset value of the Fund. 23 Merrill Lynch Capital Fund, Inc. September 30, 1999 NOTES TO FINANCIAL STATEMENTS (concluded) Certain officers and/or directors of the Fund are officers and/or directors of MLAM, PSI, FDS, PFD, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the six months ended September 30, 1999 were $1,284,123,882 and $2,957,159,633, respectively. Net realized gains (losses) for the six months ended September 30, 1999 and net unrealized gains as of September 30, 1999 were as follows: - -------------------------------------------------------------------------------- Realized Unrealized Gains (Losses) Gains - -------------------------------------------------------------------------------- Long-term investments ..................... $ 554,622,887 $1,311,651,997 Short-term investments .................... (653) -- Foreign currency transactions .............................. (339,513) 253 -------------- -------------- Total ..................................... $ 554,282,721 $1,311,652,250 ============== ============== - -------------------------------------------------------------------------------- As of September 30, 1999, net unrealized appreciation for Federal income tax purposes aggregated $1,311,651,997, of which $1,739,505,192 related to appreciated securities and $427,853,195 related to depreciated securities. At September 30, 1999 the aggregate cost of investments for Federal income tax purposes was $7,730,369,222. 4. Capital Share Transactions: Net decrease in net assets derived from capital share transactions was $885,803,267 and $528,711,091 for the six months ended September 30, 1999 and the year ended March 31, 1999, respectively. Transactions in capital shares for each class were as follows: - ------------------------------------------------------------------------------- Class A Shares for the Six Months Dollar Ended September 30, 1999 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................... 4,683,380 $ 167,535,451 Shares issued to shareholders in reinvestment of dividends and distributions ......................... 3,765,018 134,298,211 -------------- -------------- Total issued .............................. 8,448,398 301,833,662 Shares redeemed ........................... (15,403,627) (549,597,109) -------------- -------------- Net decrease .............................. (6,955,229) $ (247,763,447) ============== ============== - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class A Shares for the Dollar Year Ended March 31, 1999 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................... 16,782,506 $ 585,910,429 Shares issued to shareholders in reinvestment of dividends and distributions ......................... 6,484,241 228,111,225 -------------- -------------- Total issued .............................. 23,266,747 814,021,654 Shares redeemed ........................... (30,254,844) (1,040,366,870) -------------- -------------- Net decrease .............................. (6,988,097) $ (226,345,216) ============== ============== - ------------------------------------------------------------------------------- Class B Shares for the Six Months Dollar Ended September 30, 1999 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................... 6,210,038 $ 216,712,650 Shares issued to shareholders in reinvestment of dividends and distributions ......................... 4,437,971 154,530,155 -------------- -------------- Total issued .............................. 10,648,009 371,242,805 Automatic conversion of shares ................................. (7,904,459) (277,806,412) Shares redeemed ........................... (22,924,585) (799,026,761) -------------- -------------- Net decrease .............................. (20,181,035) $ (705,590,368) ============== ============== - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class B Shares for the Dollar Year Ended March 31, 1999 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................... 28,293,185 $ 968,253,586 Shares issued to shareholders in reinvestment of dividends and distributions ......................... 7,386,447 255,009,750 -------------- -------------- Total issued .............................. 35,679,632 1,223,263,336 Automatic conversion of shares ................................. (7,978,182) (270,957,196) Shares redeemed ........................... (47,481,419) (1,598,341,212) -------------- -------------- Net decrease .............................. (19,779,969) $ (646,035,072) ============== ============== - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class C Shares for the Six Months Dollar Ended September 30, 1999 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................... 861,709 $ 29,754,888 Shares issued to shareholders in reinvestment of dividends and distributions ......................... 463,663 15,954,654 -------------- -------------- Total issued .............................. 1,325,372 45,709,542 Shares redeemed ........................... (2,785,247) (95,904,075) -------------- -------------- Net decrease .............................. (1,459,875) $ (50,194,533) ============== ============== - ------------------------------------------------------------------------------- 24 Merrill Lynch Capital Fund, Inc. September 30, 1999 - ------------------------------------------------------------------------------- Class C Shares for the Dollar Year Ended March 31, 1999 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................... 5,475,285 $ 187,992,163 Shares issued to shareholders in reinvestment of dividends and distributions ......................... 777,031 26,502,658 -------------- -------------- Total issued .............................. 6,252,316 214,494,821 Shares redeemed ........................... (5,852,431) (193,387,191) -------------- -------------- Net increase .............................. 399,885 $ 21,107,630 ============== ============== - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class D Shares for the Six Months Dollar Ended September 30, 1999 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................... 3,925,155 $ 139,973,721 Automatic conversion of shares ................................. 7,731,431 277,806,412 Shares issued to shareholders in reinvestment of dividends and distributions ......................... 1,666,981 59,344,523 -------------- -------------- Total issued .............................. 13,323,567 477,124,656 Shares redeemed ........................... (10,076,279) (359,379,575) -------------- -------------- Net increase .............................. 3,247,288 $ 117,745,081 ============== ============== - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class D Shares for the Dollar Year Ended March 31, 1999 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................... 14,328,461 $ 483,227,861 Automatic conversion of shares ................................. 7,815,253 270,957,196 Shares issued to shareholders in reinvestment of dividends and distributions ......................... 2,175,293 76,273,791 -------------- -------------- Total issued .............................. 24,319,007 830,458,848 Shares redeemed ........................... (15,193,896) (507,897,281) -------------- -------------- Net increase .............................. 9,125,111 $ 322,561,567 ============== ============== - ------------------------------------------------------------------------------- 25 Merrill Lynch Capital Fund, Inc. September 30, 1999 PORTFOLIO INFORMATION As of September 30, 1999 Percent of Ten Largest Common Stock Holdings Net Assets The Williams Companies, Inc. ...................................... 2.3% Nextel Communications, Inc. (Class A) ............................. 2.2 Citigroup Inc. .................................................... 2.1 Kansas City Southern Industries, Inc. ............................. 2.0 United Technologies Corporation ................................... 1.9 The Coastal Corporation ........................................... 1.9 Kimberly-Clark Corporation ........................................ 1.7 Masco Corporation ................................................. 1.7 Bell Atlantic Corporation ......................................... 1.6 McDonald's Corporation ............................................ 1.6 Percent of Ten Largest Industries Net Assets Banking ........................................................... 8.0% Natural Gas ....................................................... 5.7 Insurance ......................................................... 4.2 Diversified Companies ............................................. 3.8 Railroads ......................................................... 3.2 Wireless Communications--Domestic Paging & Cellular ............... 3.2 Telecommunications ................................................ 3.0 Leisure/Hotels .................................................... 3.0 Food & Beverage ................................................... 3.0 Financial Services ................................................ 2.9 26 Merrill Lynch Capital Fund, Inc. September 30, 1999 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 Robert C. Doll, Senior Vice President 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 27 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--9/99 [RECYCLE LOGO] Printed on post-consumer recycled paper -----END PRIVACY-ENHANCED MESSAGE-----