MERRILL LYNCH
CAPITAL FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
March 31, 2000
<PAGE>
MERRILL LYNCH CAPITAL FUND, INC.
DEAR SHAREHOLDER
Economic Review
During the six months ended March 31, 2000, the performance of the US financial
markets continued to be dictated by investors' changing perceptions about the
pace of economic growth, future rate of inflation and associated course of
action by the Federal Reserve Board. In late fall, evidence of a slowdown in the
interest rate-sensitive housing sector, coupled with declines in durable goods
orders and moderate labor cost growth, suggested inflation remained
well-contained and the Federal Reserve Board was unlikely to further increase
interest rates, driving the market to a solid advance. Stocks went on to provide
a strong finish to a strong year with a powerful winter rally, driven by a
select group of large-capitalization technology companies whose share prices
continued to benefit from expectations for rapid revenue growth, a cessation of
Year 2000-related concerns and the impact of momentum-driven investors.
During January, renewed concerns over the rapid pace of economic growth, the
associated risk of accelerating inflation and higher interest rates combined
with a number of earnings shortfalls in the bellwether technology sector to
precipitate a significant drop in equity prices. The 5.8% increase in fourth
quarter 1999 gross domestic product, led by continued strong consumer spending
and a greater-than-expected 3.4% rise in the fourth quarter employment cost
index, suggested further tightening action by the Federal Reserve Board would be
forthcoming and drove interest rates higher. Rising interest rates typically
depress equity prices as bonds become a more attractive investment alternative.
Earnings disappointments from such technology standard bearers as Lucent
Technologies Inc. and Dell Computer Corp. suggested that expectations for rapid
earnings growth to support higher stock prices may have been misplaced. Combined
with record high valuation levels, the market offered little room for such
disappointments, and the benchmark unmanaged Standard & Poor's (S&P 500) Index
had a negative total return.
However, by spring, expectations for upbeat first quarter 2000 corporate profits
reports and the belief that Federal Reserve Board action to increase short-term
interest rates may be nearing an end combined to produce a solid advance in
equity prices. Largely driven by productivity improvements, the strong economic
backdrop was expected to result in greater-than 15% corporate profits growth in
the first quarter of 2000. In addition, having increased the Federal Funds rate
for the fifth time since last fall, many investors believed that the Federal
Reserve Board would soon conclude its monetary tightening initiatives. This
favorable confluence of events propelled the S&P 500 Index higher. For the six
months ended March 31, 2000, the S&P 500 Index had a total return of +17.51%.
The US bond market also produced positive returns with the unmanaged Merrill
Lynch Domestic Bond Master Index providing a +2.17% total return for the same
six-month period. While short-term interest rates rose, intermediate-term and
long-term interest rates declined as oil prices fell and investors believed
Federal Reserve Board action would slow the economy and contain any incipient
inflationary pressures. For the six-month period ended March 31, 2000, cash
equivalents had a +2.66% total return, as measured by the Merrill Lynch 91-day
Treasury Bill Index. Merrill Lynch Capital Fund, Inc.'s Class A, Class B, Class
C and Class D Shares had total returns of +5.65%, +5.10%, +5.11% and +5.63%,
respectively, for the same period. (Results shown do not reflect sales charges
and would be lower if sales charges were included. Complete performance
information can be found on pages 4-6 of this report to shareholders.)
The character of the market began to change by the end of the six-month period.
The value style of investing continued to significantly underperform the growth
style of investing as the unmanaged Russell 1000 Value Index had a +5.94% total
return and the unmanaged Russell 1000 Growth Index had a +34.06% total return
for the six-month period ended March 31, 2000. However, the stock market advance
1
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
toward the end of March was largely driven by the stocks of "old economy"
companies in the basic industry, consumer and industrial sectors, while the hard
charging technology stocks were generally down, as evidenced by the -2.67% total
return of the technology-laden NASDAQ Index in the month of March. This reversal
of fortunes suggests the period of dramatic outperformance of technology and
telecommunications stocks may be ending. Coordinated global economic growth,
declining oil prices, ongoing restructuring and productivity improvements, easy
year-over-year earnings comparisons and low valuations have created a highly
attractive environment for these traditional companies, while the unprecedented
valuation of many technology stocks has left no margin for error. As a result,
investors have begun to exploit the attractive investment potential in these
value sectors of the market, while taking profits in the "new economy" arena. We
expect these trends to continue, which should bode well for the types of
companies in which we invest. As a result, we modestly increased the Fund's
allocation to equities.
Portfolio Matters
At March 31, 2000, 64.0% of the Fund's net assets was invested in equities,
34.0% in fixed-income securities and 2.0% in cash equivalents. This compares to
the 58.2% position in equities, 33.8% in fixed-income securities and 8.0% in
cash equivalents as of September 30, 1999.
Within the equity component of the Fund, we continued to adjust our holdings to
seek to enhance quality and better control risk. We added 13 new investments,
increased our positions in nine holdings, reduced positions in 19 holdings and
eliminated 15 stocks from the portfolio. Notable among the new positions is
Lucent Technologies, Inc., one of the world's leading manufacturers of
telecommunications equipment. Lucent's share price fell sharply subsequent to an
announced shortfall in fourth quarter earnings. We believe this afforded an
excellent opportunity to invest in a premier company in an attractive business
at a reasonable price. We also established a position in Burlington Resources
Inc., a major independent natural gas company whose share price is expected to
benefit from an improved outlook for commodity prices, rising production volumes
and a renewed focus on capital allocation and returns. With the US natural gas
market in a secular uptrend, driven by strong demand and limited new supply,
Burlington Resources' strong position in this market bodes well for earnings and
cashflow growth and shareholder value creation opportunities.
We sold our position in Varian Semiconductor Equipment Associates, Inc., a
semi-conductor equipment manufacturer, which we received as part of last year's
break-up of Varian Corporation. The stock performed well as business conditions
improved and its valuation expanded dramatically. We took advantage of this
opportunity to eliminate our holding. We also sold our position in Allstate
Corporation, the personal lines insurer. Competition in this market continues to
intensify with new entrants precipitating fierce price competition. While the
stock is statistically inexpensive, these unrelenting competitive pressures are
likely to constrain the company's ability to create shareholder value. We
decided to redeploy these funds into more attractive investment opportunities.
Within the fixed-income portion of the portfolio, our decision to lengthen the
average duration of our bonds from 5.1 years to 5.5 years early in the period
proved beneficial as domestic interest rates reversed course and began to
decline. The average quality ratings of our bonds fell from A1/A+ at September
30, 1999 to A2/A at March 31, 2000, as we increased our exposure to
investment-grade corporate bonds from 50.5% to 53.3% of fixed-income assets and
reduced our exposure to lower-yielding US Treasury securities from 38.9% to
36.2% of fixed-income assets and less liquid high-yield corporate bonds from
8.0% to 7.8% of fixed-income assets. Foreign government bond exposure was
unchanged at 2.0% of fixed-income assets. As a result, the average yield to
maturity of the bonds increased by 30 basis points to 7.75%.
Merrill Lynch Capital Fund, Inc. seeks to invest in above-average companies
whose stocks sell at below-average valuation levels. On average, the stocks in
the Fund have generated comparable returns on shareholder equity and have
stronger balance sheets, while offering faster earnings growth than the average
company as measured by the S&P 500 Index. However, these same stocks sell at an
average price/earning ratio of 18.8 times estimated year 2000 earnings per share
as compared to 27.9 times for the S&P 500 Index, 4.8 times current book value
per
2
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Merrill Lynch Capital Fund, Inc. March 31, 2000
share as compared to 7.4 times for the S&P 500 Index, and provide an
above-average 1.5% dividend yield as compared to 1.1% for the S&P 500 Index. We
believe this formula will provide superior risk adjusted equity returns over
time.
Fiscal Year in Review
The 12 months ended March 31, 2000 proved to be a challenging period for the
Fund. For the year ended March 31, 2000, the Fund's Class A, Class B, Class C
and Class D Shares had total returns of +4.58%, +3.48%, +3.50% and +4.29%,
respectively. (Results shown do not reflect sales charges and would be lower if
sales charges were included. Complete performance information can be found on
pages 4-6 of this report to shareholders.) While each individual asset class
within the Fund outperformed its relevant benchmark, the value style of
investing that we espouse significantly underperformed the growth style of
investing as positive equity performance remained heavily concentrated in the
large-capitalization technology sector of the market. Outside this sector, the
broader equity market struggled. The unmanaged Russell 1000 Value Index rose a
mere 4.1% during this 12-month period, while the unmanaged Russell 1000 Growth
Index recorded a 33.1% return and the technology-laden NASDAQ Composite Index
appreciated over 86%. The dauntingly high valuation levels these leading
technology companies commanded in the marketplace largely precluded us from
owning them and consequently impaired the Fund's relative performance results.
This bifurcation in returns was the most significant factor affecting the Fund's
results for the year.
Within the equity component of the Fund's portfolio, our positions in energy,
communications and healthcare sectors performed well, while consumer and
diversified industrial exposures performed poorly. Within the fixed-income
portion of the portfolio, our decision to maintain a relatively short duration
through most of the year proved beneficial as interest rates rose sharply. We
gradually increased the liquidity of our holdings by reducing our exposure to
foreign government debt and high-yield corporate bonds, while increasing our
position in investment-grade corporate bonds. The Fund's average
yield-to-maturity increased from 6.86% to 7.75%, while our average quality
ratings fell nominally from A2/A+ to A2/A.
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
May 8, 2000
================================================================================
To reduce shareholders' expenses, Merrill Lynch Capital Fund, Inc. will no
longer be printing and mailing quarterly reports to shareholders. We will
continue to provide you with reports on a semi-annual and annual basis.
================================================================================
================================================================================
Effective July 1, 2000, Merrill Lynch Capital Fund, Inc. will change its name to
Merrill Lynch Balanced Capital Fund, Inc. The Fund's management believes that
the new name better reflects the Fund's main investment strategies. The change
in the Fund's name does not connote a change in its investment objective, which
remains the same: to seek the highest total investment return through a fully
managed investment policy utilizing equity, debt (including money market) and
convertible securities. Also effective July 1, 2000, the Fund will maintain a
minimum of 25% in fixed-income securities at all times.
================================================================================
3
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 3/31/00 + 4.58% - 0.92%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/00 +13.74 +12.52
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/00 +12.42 +11.81
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%. (Prior to October 21, 1994, Class A Shares
were offered at a higher sales charge. Thus, actual returns would have
been lower than shown for the ten-year period.)
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 3/31/00 + 3.48% - 0.22%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/00 +12.59 +12.59
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/00 +11.28 +11.28
- --------------------------------------------------------------------------------
* 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 3/31/00 + 3.50% + 2.57%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/00 +12.58 +12.58
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 3/31/00 +12.71 +12.71
- --------------------------------------------------------------------------------
* 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 3/31/00 + 4.29% - 1.18%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/00 +13.46 +12.24
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 3/31/00 +13.59 +12.47
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A & Class B Shares
A line graph depicting the growth of an investment in the Fund's Class A and
Class B Shares compared to growth of an investment in the S&P 500 Index and the
ML Domestic Fixed-Income Master Index. Beginning and ending values are:
3/90 3/00
ML Capital Fund, Inc.+--
Class A Shares* $ 9,475 $30,546
Class B Shares* $10,000 $29,112
S&P 500 Index++ $10,000 $56,189
ML Domestic Fixed-Income
Master Index+++ $10,000 $21,772
Edgar--Merrill Lynch Capital Fund, Inc.
Total Return Based on a $10,000 Investment--Class C & Class D Shares
A line graph depicting the growth of an investment in the Fund's Class C and
Class D Shares compared to growth of an investment in the S&P 500 Index and the
ML Domestic Fixed-Income Master Index. Beginning and ending values are:
10/21/94** 3/00
ML Capital Fund, Inc.+--
Class C Shares* $10,000 $19,181
Class D Shares* $ 9,475 $18,958
S&P 500 Index++ $10,000 $35,707
ML Domestic Fixed-Income
Master Index+++ $10,000 $14,976
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Capital Fund, Inc., through a fully managed investment policy, utilizes
equity, debt and convertible securities.
++ This unmanaged broad-based Index is comprised of common stocks.
+++ This unmanaged Index is comprised of the entire universe of domestic
investment-grade bonds including US Treasury bonds, corporate bonds and
mortgages.
Past performance is not predictive of future performance.
5
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
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 $22,609.43 on March 31, 2000.
<TABLE>
<CAPTION>
Recent Performance Results
Ten Years/
6 Month 12 Month Since Inception
As of March 31, 2000 Total Return Total Return Total Return
==================================================================================================================
<S> <C> <C> <C>
ML Capital Fund, Inc. Class A Shares* + 5.65% + 4.58% +222.39%
- ------------------------------------------------------------------------------------------------------------------
ML Capital Fund, Inc. Class B Shares* + 5.10 + 3.48 +191.15
- ------------------------------------------------------------------------------------------------------------------
ML Capital Fund, Inc. Class C Shares* + 5.11 + 3.50 + 91.81
- ------------------------------------------------------------------------------------------------------------------
ML Capital Fund, Inc. Class D Shares* + 5.53 + 4.29 +100.09
- ------------------------------------------------------------------------------------------------------------------
Dow Jones Industrial Average** + 6.45 +13.36 +419.12/+214.24
- ------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index** +17.51 +17.94 +461.89/+257.06
==================================================================================================================
</TABLE>
* 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.
6
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Percent of
Industries Held Common Stocks Value Net Assets
================================================================================================================
<S> <C> <C> <C> <C>
Banking 750,000 The Chase Manhattan Corporation $ 65,390,625 0.9%
1,000,000 Wells Fargo Company 40,937,500 0.6
------------- ---
106,328,125 1.5
================================================================================================================
Banking & Financial 3,000,000 Citigroup Inc. 177,937,500 2.4
2,750,000 Mellon Financial Corporation 81,125,000 1.1
------------- ---
259,062,500 3.5
================================================================================================================
Building Materials 4,000,000 Masco Corporation 82,000,000 1.1
================================================================================================================
Chemicals 1,700,000 E.I. du Pont de Nemours and Company 89,887,500 1.2
2,250,000 +Monsanto Company 115,875,000 1.6
------------- ---
205,762,500 2.8
================================================================================================================
Computers 3,000,000 Compaq Computer Corporation 79,875,000 1.1
1,000,000 International Business Machines Corporation 118,000,000 1.6
------------- ---
197,875,000 2.7
================================================================================================================
Conglomerates 2,000,000 Honeywell International Inc. 105,375,000 1.4
================================================================================================================
Consumer Products 2,500,000 Fortune Brands, Inc. 62,500,000 0.9
2,500,000 Kimberly-Clark Corporation 140,000,000 1.9
------------- ---
202,500,000 2.8
================================================================================================================
Diversified 3,000,000 ITT Industries, Inc. 93,187,500 1.3
Companies 1,000,000 +SPX Corporation 113,937,500 1.5
2,500,000 United Technologies Corporation 157,968,750 2.2
------------- ---
365,093,750 5.0
================================================================================================================
Electrical Equipment 2,000,000 Rockwell International Corporation 83,625,000 1.1
================================================================================================================
Financial Services 1,600,000 Federal National Mortgage Association 90,300,000 1.2
2,500,000 Kansas City Southern Industries, Inc. 214,843,750 3.0
------------- ---
305,143,750 4.2
================================================================================================================
Food & Beverage 400,000 McCormick & Company Incorporated 12,900,000 0.2
65,000 Nestle SA (Registered Shares) 116,497,263 1.6
------------- ---
129,397,263 1.8
================================================================================================================
Footwear 1,500,000 Nike, Inc. (Class B) 59,437,500 0.8
================================================================================================================
Information Systems 3,000,000 Reynolds & Reynolds Company (Class A) 81,000,000 1.1
================================================================================================================
Insurance 1,000,000 American International Group, Inc. 109,500,000 1.5
2,000,000 XL Capital Ltd. (Class A) 110,750,000 1.5
------------- ---
220,250,000 3.0
================================================================================================================
Leisure/Hotels 306,200 Carnival Corporation 7,597,587 0.1
3,600,000 +Harrah's Entertainment, Inc. 66,825,000 0.9
------------- ---
74,422,587 1.0
================================================================================================================
Machinery & 295,000 Deere & Company 11,210,000 0.2
Machine Tools
================================================================================================================
</TABLE>
7
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Percent of
Industries Held Common Stocks Value Net Assets
==========================================================================================================================
<S> <C> <C> <C> <C>
Natural Gas 4,000,000 The Coastal Corporation $ 184,000,000 2.5%
1,000,000 El Paso Energy Corporation 40,375,000 0.6
4,500,000 The Williams Companies, Inc. 197,718,750 2.7
-------------- ----
422,093,750 5.8
==========================================================================================================================
Natural Resources 1,200,000 Burlington Resources Inc. 44,400,000 0.6
==========================================================================================================================
Office Equipment 1,100,000 Pitney Bowes Inc. 49,156,250 0.7
==========================================================================================================================
Oil--Integrated 2,000,000 Unocal Corporation 59,500,000 0.8
==========================================================================================================================
Oil--Service 2,000,000 Halliburton Company 82,000,000 1.1
==========================================================================================================================
Petroleum 1,300,000 Anadarko Petroleum Corporation 50,293,750 0.7
==========================================================================================================================
Pharmaceuticals 2,100,000 American Home Products Corporation 112,612,500 1.5
==========================================================================================================================
Photography 1,500,000 Eastman Kodak Company 81,468,750 1.1
==========================================================================================================================
Publishing 2,000,000 The New York Times Company (Class A) 85,875,000 1.2
==========================================================================================================================
Railroads 2,400,000 Union Pacific Corporation 93,900,000 1.3
==========================================================================================================================
Restaurants 2,700,000 McDonald's Corporation 101,418,750 1.4
==========================================================================================================================
Telecommunications 1,500,000 AT&T Corp. 84,375,000 1.1
2,000,000 Alcatel (ADR)* 87,625,000 1.2
2,500,000 Bell Atlantic Corporation 152,812,500 2.1
1,400,000 Lucent Technologies Inc. 85,050,000 1.2
1,850,000 + MCI WorldCom Inc. 83,943,750 1.1
2,000,000 Telefonaktiebolaget LM Ericsson (ADR)* 187,500,000 2.6
-------------- ----
681,306,250 9.3
==========================================================================================================================
Wireless 1,000,000 Motorola, Inc. 142,375,000 2.0
Communication-- 1,250,000 + Nextel Communications, Inc. (Class A) 185,234,375 2.5
Domestic Paging ------------- ----
& Cellular 327,609,375 4.5
==========================================================================================================================
Total Common Stocks (Cost--$3,216,402,028) 4,680,117,350 64.0
==========================================================================================================================
Face
Amount Corporate Bonds
==========================================================================================================================
Aerospace Boeing Capital Corporation:
US$ 12,500,000 6.44% due 12/20/2004 12,158,750 0.2
10,000,000 6.18% due 3/15/2005 9,404,040 0.1
30,000,000 Lockheed Martin Corporation, 7.95% due 12/01/2005 29,813,100 0.4
-------------- ----
51,375,890 0.7
==========================================================================================================================
Air Transport 10,000,000 Continental Airlines, 8% due 12/15/2005 9,227,900 0.1
Northwest Airlines, Inc.:
20,000,000 7.625% due 3/15/2005 17,589,800 0.2
5,000,000 7.875% due 3/15/2008 4,335,600 0.1
-------------- ----
31,153,300 0.4
==========================================================================================================================
Automobile 20,000,000 Hyundai Motor Co., Ltd., 7.60% due 7/15/2007 (a) 18,145,000 0.2
Manufacturer
==========================================================================================================================
</TABLE>
8
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Value Net Assets
===================================================================================================================================
<S> <C> <C> <C> <C>
Automobile US$ 16,000,000 Cummins Engine, 6.75% due 2/15/2007 $ 14,584,640 0.2%
Parts/Equipment 20,000,000 The Goodyear Tire & Rubber Company, 6.625% due 12/01/2006 18,428,800 0.3
------------ ---
33,013,440 0.5
===================================================================================================================================
Automobile Hertz Corp.:
Rental/Service 13,000,000 6% due 1/15/2003 12,456,340 0.2
10,000,000 7.625% due 8/15/2007 10,018,000 0.1
25,000,000 6.25% due 3/15/2009 22,643,750 0.3
20,000,000 Ryder Systems, Inc., 6.50% due 5/15/2005 18,731,840 0.3
------------ ---
63,849,930 0.9
===================================================================================================================================
Banking 16,000,000 Banco Nacional de Commercio Exterior SNC, 7.25% due 2/02/2004 15,240,000 0.2
30,000,000 BankAmerica Corporation, 6.75% due 9/15/2005 29,038,500 0.4
The Chase Manhattan Corporation:
14,000,000 6.50% due 8/01/2005 13,444,200 0.2
15,000,000 6.25% due 1/15/2006 14,165,400 0.2
21,000,000 First National Bank of Boston, 7.375% due 9/15/2006 20,681,850 0.3
20,000,000 First Security Corp., 7% due 7/15/2005 19,137,980 0.3
30,000,000 First Union Corp., 6.55% due 10/15/2035 28,731,000 0.4
21,500,000 Firstbank Puerto Rico, 7.625% due 12/20/2005 19,726,272 0.3
13,300,000 Household Bank, 6.50% due 7/15/2003 12,929,196 0.2
13,000,000 Norwest Financial, Inc., 6.625% due 7/15/2004 12,683,840 0.2
20,000,000 People's Bank--Bridgeport, 7.20% due 12/01/2006 18,385,800 0.2
27,500,000 Provident Bank, 6.375% due 1/15/2004 25,858,222 0.3
Union Planters Corp.:
20,000,000 6.25% due 11/01/2003 18,953,800 0.2
12,500,000 6.75% due 11/01/2005 11,878,625 0.2
------------ ---
260,854,685 3.6
===================================================================================================================================
Beverages 10,000,000 Panamerican Beverages Inc., 7.25% due 7/01/2009 9,075,000 0.1
===================================================================================================================================
Chemicals Airgas Inc.:
8,000,000 7.15% due 9/17/2001 7,982,640 0.1
13,000,000 7.14% due 3/08/2004 11,735,282 0.2
40,000,000 Equistar Chemicals LP, 6.50% due 2/15/2006 35,238,640 0.5
10,000,000 Monsanto Company, 5.75% due 12/01/2005 (a) 9,234,330 0.1
40,000,000 Union Carbide Corp., 6.79% due 6/01/2025 38,651,600 0.5
------------ ---
102,842,492 1.4
===================================================================================================================================
Electronics 22,500,000 Harris Corporation, 6.375% due 8/15/2002 22,103,775 0.3
===================================================================================================================================
Entertainment 10,000,000 News America Holdings, 7.43% due 10/01/2026 9,862,960 0.2
10,000,000 News America Inc., 6.75% due 1/09/2038 9,209,700 0.1
------------ ---
19,072,660 0.3
===================================================================================================================================
</TABLE>
9
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Value Net Assets
===================================================================================================================================
<S> <C> <C> <C> <C>
Finance US$ 35,000,000 Ford Motor Credit Co, 7.75% due 2/15/2007 $ 34,829,900 0.5%
General Motors Acceptance Corp.:
10,000,000 5.75% due 11/10/2003 9,456,200 0.1
10,000,000 6.85% due 6/17/2004 9,766,600 0.1
30,000,000 7.75% due 1/19/2010 30,276,900 0.4
Household Finance Corp.:
15,000,000 6% due 5/01/2004 14,192,865 0.2
20,000,000 7.875% due 3/01/2007 20,147,600 0.3
30,000,000 PNC Funding Corp., 6.125% due 9/01/2003 28,719,600 0.4
------------- ---
147,389,665 2.0
===================================================================================================================================
Financial GATX Capital Corporation:
Leasing 25,000,000 6.69% due 11/30/2005 23,465,000 0.3
25,000,000 7.75% due 12/01/2006 24,254,250 0.3
3,000,000 XTRA Inc., 6.50% due 1/15/2004 2,898,330 0.1
------------- ---
50,617,580 0.7
===================================================================================================================================
Financial Finova Capital Corp.:
Services 10,000,000 6.42% due 11/19/2003 9,450,000 0.1
25,000,000 7.429% due 10/14/2004 24,187,500 0.3
20,000,000 Morgan Stanley, Dean Witter, Discover & Co., 5.625% due 1/20/2004 18,861,800 0.3
20,000,000 Salomon Smith Barney Holdings, Inc., 7% due 3/15/2004 19,717,260 0.3
------------- ---
72,216,560 1.0
===================================================================================================================================
Foods Nabisco, Inc.:
21,500,000 6.125% due 2/01/2033 20,489,070 0.3
20,000,000 6.375% due 2/01/2035 18,664,400 0.2
------------- ---
39,153,470 0.5
===================================================================================================================================
Healthcare Medpartners, Inc.:
5,000,000 6.875% due 9/01/2000 4,800,000 0.1
30,000,000 7.375% due 10/01/2006 25,350,000 0.3
------------- ---
30,150,000 0.4
===================================================================================================================================
Home--Builders 28,000,000 Champion Enterprises, Inc., 7.625% due 5/15/2009 25,463,396 0.3
===================================================================================================================================
Home 10,000,000 Armstrong World, 6.50% due 8/15/2005 8,827,200 0.1
Furnishings
===================================================================================================================================
Home Interface, Inc.:
Furnishings/ 4,000,000 9.50% due 11/15/2005 3,600,000 0.0
Houseware 10,000,000 7.30% due 4/01/2008 7,600,000 0.1
------------- ---
11,200,000 0.1
===================================================================================================================================
Leisure Royal Caribbean Cruises Ltd.:
10,000,000 7.125% due 9/18/2002 9,584,200 0.1
17,500,000 7.25% due 8/15/2006 15,921,675 0.2
------------- ---
25,505,875 0.3
===================================================================================================================================
Manufacturing 20,000,000 FMC Corp., 6.75% due 5/05/2005 18,458,060 0.3
===================================================================================================================================
</TABLE>
10
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C>
Natural Gas-- US$ 27,500,000 The Coastal Corporation, 6.70% due 2/15/2027 $ 25,979,223 0.4%
Pipelines 30,000,000 Enron Corp., 6.40% due 7/15/2006 27,987,900 0.4
25,000,000 Williams Holdings of Delaware, Inc., 6.25% due 2/01/2006 23,237,000 0.3
-------------- ----
77,204,123 1.1
====================================================================================================================================
Oil & Gas 10,000,000 Compania Naviera Perez Companc S.A.C.F.I.M.F.A.,
9% due 1/30/2004 (a) 9,500,000 0.1
10,000,000 Diamond Shamrock, 7.65% due 7/01/2026 9,673,700 0.1
11,500,000 Giant Industries, Inc., 9% due 9/01/2007 (a) 10,350,000 0.2
25,000,000 Occidental Petroleum Corp., 6.50% due 4/01/2005 23,432,750 0.3
12,500,000 Occidental Petroleum Corp. (MOPPRS), 6.40% due 4/01/2013 (c) 11,906,350 0.2
25,000,000 Perez Companc SA, 8.125% due 7/15/2007 (a) 21,750,000 0.3
21,000,000 R & B Falcon Corporation, 6.75% due 4/15/2005 18,270,000 0.3
20,000,000 Tosco Corporation, 7.625% due 5/15/2006 19,805,200 0.3
10,000,000 Union Oil of California, 6.11% due 2/17/2004 9,503,500 0.1
15,000,000 United Refining Co., 10.75% due 6/15/2007 9,000,000 0.1
-------------- ----
143,191,500 2.0
====================================================================================================================================
Paper & Forest Boise Cascade Corporation:
Products 10,000,000 7.35% due 10/11/2004 9,615,800 0.1
20,000,000 7.66% due 5/27/2005 19,396,000 0.3
29,000,000 Champion International Corp., 6.65% due 12/15/2037 27,110,940 0.4
-------------- ----
56,122,740 0.8
====================================================================================================================================
Pollution Control 20,000,000 Browning-Ferris Industries, Inc., 6.375% due 1/15/2008 15,500,000 0.2
====================================================================================================================================
Publishing 20,000,000 Time Warner Inc., 7.25% due 10/15/2017 18,931,800 0.3
====================================================================================================================================
Railroads 17,000,000 Transportacion Maritima Mexicana, SA de CV, 10% due 11/15/2006 14,620,000 0.2
====================================================================================================================================
Real Estate 10,000,000 Franchise Finance Corp. of America, 6.95% due 8/29/2007 8,916,400 0.1
Investment Trusts
====================================================================================================================================
Retail--Stores Tandy Corporation:
20,000,000 6.125% due 1/15/2003 19,511,200 0.3
15,000,000 7.22% due 9/29/2004 15,093,150 0.2
-------------- ----
34,604,350 0.5
====================================================================================================================================
Telecommunications 20,000,000 Nextel Communications, Inc., 9.375% due 11/15/2009 18,400,000 0.3
10,000,000 Pacific Telecom, Inc., 6.625% due 10/20/2005 9,375,940 0.1
25,000,000 Sprint Capital Corporation, 6.90% due 5/01/2019 22,947,750 0.3
-------------- ----
50,723,690 0.7
====================================================================================================================================
Utilities-- 30,000,000 Empresa Nacional de Electricidad SA (Endesa), 7.325% due 2/01/2037 27,144,690 0.4
Electric, Gas 15,000,000 Enersis SA, 6.60% due 12/01/2026 14,169,300 0.2
& Water 20,000,000 Tata Electric Co., 8.50% due 8/19/2017 (a) 17,068,800 0.2
-------------- ----
58,382,790 0.8
====================================================================================================================================
Total Corporate Bonds (Cost--$1,599,643,266) 1,518,665,371 20.8
====================================================================================================================================
</TABLE>
11
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Face Percent of
Amount Collateralized Mortgage Obligations** Value Net Assets
==============================================================================================================================
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corporation:
US$ 911,261 6.50% due 5/15/2008 $ 879,075 0.0%
5,000,000 7% due 8/15/2008 4,875,000 0.1
13,000,000 Gold Program, 6% due 2/15/2011 11,733,540 0.1
==============================================================================================================================
Total Collateralized Mortgage Obligations (Cost--$17,654,261) 17,487,615 0.2
==============================================================================================================================
Foreign Government Obligations
==============================================================================================================================
10,000,000 Province of Mendoza, 10% due 9/04/2007 (a) 7,350,000 0.1
Republic of Argentina:
40,000,000 8.75% due 7/10/2002 (a) 37,040,000 0.5
8,000,000 7.375% due 3/31/2005 (b)(c)** 7,490,000 0.1
==============================================================================================================================
Total Foreign Government Obligations (Cost--$53,600,450) 51,880,000 0.7
==============================================================================================================================
US Government Obligations
==============================================================================================================================
US Treasury Bonds:
225,000,000 6.25% due 8/15/2023 228,199,500 3.1
50,000,000 6% due 2/15/2026 49,406,000 0.7
35,000,000 5.50% due 8/15/2028 32,451,650 0.4
US Treasury Notes:
300,000,000 5.875% due 11/15/2005 293,298,000 4.0
270,000,000 5.625% due 2/15/2006 260,803,800 3.6
35,000,000 3.625% due 1/15/2008 35,574,243 0.5
==============================================================================================================================
Total US Government Obligations (Cost--$887,018,905) 899,733,193 12.3
==============================================================================================================================
Short-Term Investments
==============================================================================================================================
Commercial 50,000,000 Morgan Stanley, Dean Witter & Co., 5.90% due 4/19/2000 49,852,500 0.7
Paper***
==============================================================================================================================
Total Short-Term Investments (Cost--$49,852,500) 49,852,500 0.7
==============================================================================================================================
Total Investments (Cost--$5,824,171,410) 7,217,736,029 98.7
Time Deposit**** 69,667,000 1.0
Other Assets Less Liabilities 24,069,310 0.3
-------------- -----
Net Assets $7,311,472,339 100.0%
============== =====
==============================================================================================================================
</TABLE>
* American Depositary Receipts (ADR).
** Subject to principal paydowns.
*** Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rates paid at the time of purchase by the Fund.
**** Time Deposit bears interest at 6.25% and matures on 4/03/2000.
+ 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) Floating rate note.
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of March 31, 2000
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$5,824,171,410) ............ $7,217,736,029
Cash ............................................................... 1,071,421
Time deposits ...................................................... 69,667,000
Receivables:
Securities sold ................................................ $ 62,626,906
Interest ....................................................... 40,882,621
Dividends ...................................................... 7,421,433
Capital shares sold ............................................ 5,621,718 116,552,678
--------------
Prepaid registration fees and other assets ......................... 159,030
--------------
Total assets ....................................................... 7,405,186,158
--------------
=============================================================================================================================
Liabilities: Payables:
Capital shares redeemed ........................................ 86,034,858
Distributor .................................................... 3,035,490
Investment adviser ............................................. 2,285,047 91,355,395
--------------
Accrued expenses and other liabilities ............................. 2,358,424
--------------
Total liabilities .................................................. 93,713,819
--------------
=============================================================================================================================
Net Assets: Net assets ......................................................... $7,311,472,339
==============
=============================================================================================================================
Net Assets Class A Shares of Common Stock, $.10 par value, 400,000,000
Consist of: shares authorized .................................................. $ 8,333,701
Class B Shares of Common Stock, $.10 par value, 500,000,000
shares authorized .................................................. 8,982,234
Class C Shares of Common Stock, $.10 par value, 200,000,000
shares authorized .................................................. 982,676
Class D Shares of Common Stock, $.10 par value, 200,000,000
shares authorized .................................................. 4,383,736
Paid-in capital in excess of par ................................... 5,572,666,510
Undistributed investment income--net ............................... 47,756,381
Undistributed realized capital gains on investments and foreign ....
currency transactions--net ......................................... 274,906,547
Unrealized appreciation on investments and foreign .................
currency transactions--net ......................................... 1,393,460,554
--------------
Net assets ......................................................... $7,311,472,339
==============
=============================================================================================================================
Net Asset Value: Class A--Based on net assets of $2,721,502,638 and 83,337,007
shares outstanding ........................................ $ 32.66
==============
Class B--Based on net assets of $2,853,698,663 and 89,822,342
shares outstanding ........................................ $ 31.77
==============
Class C--Based on net assets of $308,150,542 and 9,826,762
shares outstanding ........................................ $ 31.36
==============
Class D--Based on net assets of $1,428,120,496 and 43,837,364
shares outstanding ........................................ $ 32.58
==============
=============================================================================================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
FINANCIAL INFORMATION (continued)
Statement of Operations for the Year Ended March 31, 2000
<TABLE>
<S> <C> <C> <C>
Investment Interest and discount earned .............................. $ 234,223,357
Income: Dividends (net of $967,692 foreign withholding tax) ....... 73,140,167
Other ..................................................... 8,167
-------------
Total income .............................................. 307,371,691
-------------
==================================================================================================================
Expenses: Account maintenance and distribution fees--Class B ........ $ 40,069,311
Investment advisory fees .................................. 37,480,574
Transfer agent fees--Class B .............................. 6,615,591
Transfer agent fees--Class A .............................. 4,847,200
Account maintenance and distribution fees--Class C ........ 4,201,316
Account maintenance fees--Class D ......................... 3,928,515
Transfer agent fees--Class D .............................. 2,305,738
Transfer agent fees--Class C .............................. 731,091
Printing and shareholder reports .......................... 465,109
Custodian fees ............................................ 439,894
Professional fees ......................................... 222,962
Registration fees ......................................... 133,122
Pricing fees .............................................. 55,392
Directors' fees and expenses .............................. 43,765
Other ..................................................... 150,323
-----------
Total expenses ............................................ 101,689,903
-------------
Investment income--net .................................... 205,681,788
-------------
==================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net ...................................... 783,077,084
(Loss) on Foreign currency transactions--net .................... (379,047) 782,698,037
Investments & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net ...................................... (649,351,664)
Foreign currency transactions--net .................... (93,120) (649,444,784)
----------- -------------
Net Increase in Net Assets Resulting from Operations ...... $ 338,935,041
=============
==================================================================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year
Ended March 31,
--------------------------------------
Increase (Decrease) in Net Assets: 2000 1999
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ............................................ $ 205,681,788 $ 256,455,669
Realized gain on investments and foreign currency transactions--net 782,698,037 415,237,179
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net ............................ (649,444,784) (873,948,482)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations ... 338,935,041 (202,255,634)
---------------- ----------------
===================================================================================================================================
Dividends & Investment income--net:
Distributions to Class A ....................................................... (89,124,959) (118,803,106)
Shareholders: Class B ....................................................... (79,193,140) (102,818,160)
Class C ....................................................... (8,033,279) (11,137,417)
Class D ....................................................... (39,335,920) (38,623,542)
Realized gain on investments--net:
Class A ....................................................... (282,403,074) (129,813,411)
Class B ....................................................... (352,157,123) (188,516,486)
Class C ....................................................... (37,729,475) (18,832,977)
Class D ....................................................... (137,036,994) (45,329,436)
---------------- ----------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ..................................... (1,025,013,964) (653,874,535)
---------------- ----------------
===================================================================================================================================
Capital Share Net decrease in net assets derived from capital share transactions (2,505,092,872) (528,711,091)
Transactions: ---------------- ----------------
===================================================================================================================================
Net Assets: Total decrease in net assets ...................................... (3,191,171,795) (1,384,841,260)
Beginning of year ................................................. 10,502,644,134 11,887,485,394
---------------- ----------------
End of year* ...................................................... $ 7,311,472,339 $ 10,502,644,134
================ ================
===================================================================================================================================
*Undistributed investment income--net .............................. $ 47,756,381 $ 58,140,938
================ ================
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
Class A
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended March 31,
----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000+ 1999+ 1998+ 1997+ 1996
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ... $ 35.03 $ 37.56 $ 31.39 $ 30.90 $ 27.74
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net ............... .94 1.00 1.11 1.25 1.21
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .................... .62 (1.28) 8.14 2.43 5.41
---------- ---------- ---------- ---------- ----------
Total from investment operations ..... 1.56 (.28) 9.25 3.68 6.62
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net ........... (.94) (1.08) (1.11) (1.25) (1.16)
Realized gain on investments--net (2.99) (1.17) (1.97) (1.94) (2.30)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions .... (3.93) (2.25) (3.08) (3.19) (3.46)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ......... $ 32.66 $ 35.03 $ 37.56 $ 31.39 $ 30.90
========== ========== ========== ========== ==========
==================================================================================================================================
Total Investment Based on net asset value per share ... 4.58% (.68%) 30.71% 12.62% 24.50%
Return:* ========== ========== ========== ========== ==========
==================================================================================================================================
Ratios to Expenses ............................. .56% .57% .55% .55% .56%
Average ========== ========== ========== ========== ==========
Net Assets: Investment income--net ............... 2.74% 2.86% 3.21% 3.99% 4.09%
========== ========== ========== ========== ==========
==================================================================================================================================
Supplemental Net assets, end of year (in thousands) $2,721,503 $3,631,440 $4,155,677 $3,291,219 $3,225,758
Data: ========== ========== ========== ========== ==========
Portfolio turnover ................... 33% 33% 38% 47% 84%
========== ========== ========== ========== ==========
==================================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
16
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class B
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. For the Year Ended March 31,
----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000+ 1999+ 1998+ 1997+ 1996
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ... $ 34.25 $ 36.68 $ 30.72 $ 30.30 $ 27.28
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net ............... .57 .63 .74 .91 .90
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .................... .60 (1.25) 7.96 2.39 5.29
---------- ---------- ---------- ---------- ----------
Total from investment operations ..... 1.17 (.62) 8.70 3.30 6.19
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net ........... (.66) (.64) (.77) (.94) (.87)
Realized gain on investments--net (2.99) (1.17) (1.97) (1.94) (2.30)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions .... (3.65) (1.81) (2.74) (2.88) (3.17)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ......... $ 31.77 $ 34.25 $ 36.68 $ 30.72 $ 30.30
========== ========== ========== ========== ==========
==================================================================================================================================
Total Investment Based on net asset value per share ... 3.48% (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 ............... 1.71% 1.85% 2.19% 2.97% 3.07%
========== ========== ========== ========== ==========
==================================================================================================================================
Supplemental Net assets, end of year (in thousands) $2,853,699 $4,866,564 $5,938,708 $4,977,431 $5,025,504
Data: ========== ========== ========== ========== ==========
Portfolio turnover ................... 33% 33% 38% 47% 84%
========== ========== ========== ========== ==========
==================================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
17
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C
The following per share data and ratios have been derived ------------------------------------------------------------
from information provided in the financial statements. For the Year Ended March 31,
------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000+ 1999+ 1998+ 1997+ 1996
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ... $ 33.82 $ 36.31 $ 30.44 $ 30.08 $ 27.17
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ............... .57 .62 .73 .90 .92
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .................... .59 (1.25) 7.89 2.36 5.24
-------- -------- -------- -------- --------
Total from investment operations ..... 1.16 (.63) 8.62 3.26 6.16
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ........... (.63) (.69) (.78) (.96) (.95)
Realized gain on investments--net (2.99) (1.17) (1.97) (1.94) (2.30)
-------- -------- -------- -------- --------
Total dividends and distributions .... (3.62) (1.86) (2.75) (2.90) (3.25)
-------- -------- -------- -------- --------
Net asset value, end of year ......... $ 31.36 $ 33.82 $ 36.31 $ 30.44 $ 30.08
======== ======== ======== ======== ========
========================================================================================================================
Total Investment Based on net asset value per share ... 3.50% (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 ............... 1.70% 1.83% 2.18% 2.96% 3.08%
======== ======== ======== ======== ========
========================================================================================================================
Supplemental Net assets, end of year (in thousands) $308,150 $491,234 $512,783 $322,438 $259,131
Data: ======== ======== ======== ======== ========
Portfolio turnover ................... 33% 33% 38% 47% 84%
======== ======== ======== ======== ========
========================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
18
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D
The following per share data and ratios have been derived -----------------------------------------------------------------
from information provided in the financial statements. For the Year Ended March 31,
-----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000+ 1999+ 1998+ 1997+ 1996
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ... $ 34.97 $ 37.49 $ 31.34 $ 30.86 $ 27.72
Operating ---------- ---------- ---------- -------- --------
Performance: Investment income--net ............... .86 .91 1.02 1.17 1.16
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .................... .60 (1.28) 8.14 2.43 5.38
---------- ---------- ---------- -------- --------
Total from investment operations ..... 1.46 (.37) 9.16 3.60 6.54
---------- ---------- ---------- -------- --------
Less dividends and distributions:
Investment income--net ........... (.86) (.98) (1.04) (1.18) (1.10)
Realized gain on investments--net (2.99) (1.17) (1.97) (1.94) (2.30)
---------- ---------- ---------- -------- --------
Total dividends and distributions .... (3.85) (2.15) (3.01) (3.12) (3.40)
---------- ---------- ---------- -------- --------
Net asset value, end of year ......... $ 32.58 $ 34.97 $ 37.49 $ 31.34 $ 30.86
========== ========== ========== ======== ========
=============================================================================================================================
Total Investment Based on net asset value per share ... 4.29% (.92%) 30.40% 12.34% 24.21%
Return:* ========== ========== ========== ======== ========
=============================================================================================================================
Ratios to Expenses ............................. .81% .82% .80% .80% .81%
Average ========== ========== ========== ======== ========
Net Assets: Investment income--net ............... 2.50% 2.60% 2.95% 3.75% 3.84%
========== ========== ========== ======== ========
=============================================================================================================================
Supplemental Net assets, end of year (in thousands) $1,428,120 $1,513,406 $1,280,317 $690,116 $521,599
Data: ========== ========== ========== ======== ========
Portfolio turnover ................... 33% 33% 38% 47% 84%
========== ========== ========== ======== ========
=============================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
19
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
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 accounting
principles generally accepted in the United States of America, which may require
the use of management accruals and estimates. 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
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. 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 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
20
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
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.
(h) Reclassification--Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences of $379,047 have been reclassified between undistributed
net investment income and undistributed net realized capital gains. These
reclassifications have no effect on net assets or net asset values per share.
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 year ended March 31, 2000, 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 .............................. $9,755 $124,357
Class D .............................. $19,042 $278,507
- --------------------------------------------------------------------------------
For the year ended March 31, 2000, MLPF&S received contingent deferred sales
charges of $6,595,342 and $134,746 relating to transactions in Class B and Class
C Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $17 and $42 relating to transactions subject to front-end sales
charge waivers in Class A Shares and Class D Shares, respectively.
In addition, MLPF&S received $704,936 in commissions on the execution of
portfolio security transactions for the year ended March 31, 2000.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
During the year ended March 31, 2000, Merrill Lynch Security Pricing Service, an
affiliate of MLPF&S, received $3,691 for security price quotations to compute
the net asset value of the Fund.
Certain officers and/or directors of the Fund are officers and/or directors of
MLAM, PSI, FDS, PFD, and/or ML & Co.
21
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended March 31, 2000 were $2,947,466,726 and $6,163,576,341, respectively.
Net realized gains (losses) for the year ended March 31, 2000 and net unrealized
gains (losses) as of March 31, 2000 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments .......... $ 783,077,698 $ 1,393,564,619
Short-term investments ......... (614) --
Foreign currency
transactions ................... (379,047) (104,065)
--------------- ---------------
Total .......................... $ 782,698,037 $ 1,393,460,554
=============== ===============
- --------------------------------------------------------------------------------
As of March 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $1,390,256,700, of which $1,688,101,788 related to
appreciated securities and $297,845,088 related to depreciated securities. At
March 31, 2000 the aggregate cost of investments for Federal income tax purposes
was $5,827,479,329.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$2,505,092,872 and $528,711,091 for the years ended March 31, 2000 and March 31,
1999, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Dollar
Year Ended March 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 9,410,973 $ 319,522,039
Shares issued to shareholders
in reinvestment of dividends
and distributions ................ 10,197,919 339,057,436
----------- ---------------
Total issued ..................... 19,608,892 658,579,475
Shares redeemed .................. (39,927,027) (1,335,917,365)
----------- ---------------
Net decrease ..................... (20,318,135) $ (677,337,890)
=========== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Dollar
Year Ended March 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 10,306,641 $ 345,805,812
Shares issued to shareholders
in reinvestment of dividends
and distributions ................ 11,308,113 367,985,471
---------- ---------------
Total issued ..................... 21,614,754 713,791,283
Automatic conversion
of shares ........................ (15,428,399) (513,549,784)
Shares redeemed .................. (58,471,743) (1,910,268,273)
---------- ---------------
Net decrease ..................... (52,285,388) $(1,710,026,774)
=========== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Dollar
Year Ended March 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 1,257,880 $ 42,153,278
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 1,224,964 39,296,118
---------- -------------
Total issued ......................... 2,482,844 81,449,396
Shares redeemed ...................... (7,180,017) (231,410,305)
---------- -------------
Net decrease ......................... (4,697,173) $(149,960,909)
========== =============
- --------------------------------------------------------------------------------
22
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
- --------------------------------------------------------------------------------
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 Dollar
Year Ended March 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 7,099,032 $ 242,290,819
Automatic conversion
of shares ............................ 15,076,690 513,549,784
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 4,776,286 158,158,231
---------- -------------
Total issued ......................... 26,952,008 913,998,834
Shares redeemed ...................... (26,394,972) (881,766,133)
---------- -------------
Net increase ......................... 557,036 $ 32,232,701
========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
========== =============
- --------------------------------------------------------------------------------
5. Organizational Change:
On or about July 1, 2000, the Fund will change its name to Merrill Lynch
Balanced Capital Fund, Inc.
23
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Capital Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Capital Fund, Inc. as of March 31,
2000, the related statements of operations for the year then ended and changes
in net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at March 31, 2000 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Capital Fund, Inc. as of March 31, 2000, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods in accordance with accounting principles generally accepted in
the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
May 11, 2000
24
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions paid by Merrill
Lynch Capital Fund, Inc. during its fiscal year ended March 31, 2000:
<TABLE>
<CAPTION>
====================================================================================================================================
Record Payable Domestic Qualifying Interest from Domestic Non-Qualifying Total Long-Term
Date Date Ordinary Income Federal Obligations Ordinary Income Ordinary Income Capital Gains*
====================================================================================================================================
Class A Shares:
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
7/06/99 7/14/99 $.121300 $.082639 $.230566 $.434505 $1.069168
- ------------------------------------------------------------------------------------------------------------------------------------
12/06/99 12/10/99 $.137101 $.095031 $.272111 $.504243 $1.923317
====================================================================================================================================
Class B Shares:
====================================================================================================================================
7/06/99 7/14/99 $.095062 $.064763 $.180692 $.340517 $1.069168
- ------------------------------------------------------------------------------------------------------------------------------------
12/06/99 12/10/99 $.086638 $.060053 $.171955 $.318646 $1.923317
====================================================================================================================================
Class C Shares:
====================================================================================================================================
7/06/99 7/14/99 $.085798 $.058452 $.163082 $.307332 $1.069168
- ------------------------------------------------------------------------------------------------------------------------------------
12/06/99 12/10/99 $.087543 $.060680 $.173750 $.321973 $1.923317
====================================================================================================================================
Class D Shares:
====================================================================================================================================
7/06/99 7/14/99 $.112135 $.076395 $.213145 $.401675 $1.069168
- ------------------------------------------------------------------------------------------------------------------------------------
12/06/99 12/10/99 $.125283 $.086839 $.248654 $.460776 $1.923317
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* All long-term capital gains distributions paid by the Fund during the fiscal
year are subject to the 20% tax rate.
The qualifying domestic ordinary income qualifies for the dividends received
deduction for corporations.
The law varies in each state as to whether and what percentage of dividend
income attributable to Federal obligations is exempt from state income tax. We
recommend that you consult your tax adviser to determine if any portion of the
dividends you received are exempt from state income tax.
Please retain this information for your records.
25
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
PORTFOLIO INFORMATION (unaudited)
As of March 31, 2000
Percent of
Ten Largest Common Stock Holdings Net Assets
Kansas City Southern Industries, Inc. ........................... 3.0%
The Williams Companies, Inc. .................................... 2.7
Telefonaktiebolaget LM Ericsson (ADR) ........................... 2.6
Nextel Communications, Inc. (Class A) ........................... 2.5
The Coastal Corporation ......................................... 2.5
Citigroup Inc. .................................................. 2.4
United Technologies Corporation ................................. 2.2
Bell Atlantic Corporation ....................................... 2.1
Motorola, Inc. .................................................. 2.0
Kimberly-Clark Corporation ...................................... 1.9
Percent of
Ten Largest Industries Net Assets
Telecommunications .............................................. 10.0%
Natural Gas ..................................................... 5.8
Financial Services .............................................. 5.2
Banking ......................................................... 5.1
Diversified Companies ........................................... 5.0
Wireless Communication--
Domestic Paging & Cellular .................................... 4.5
Chemicals ....................................................... 4.2
Banking & Financial ............................................. 3.5
Insurance ....................................................... 3.0
Consumer Products ............................................... 2.8
Geographic Diversification Percent of
As of March 31, 2000 Net Assets
- --------------------------------------------------------------------------------
United States 89.3%*
- --------------------------------------------------------------------------------
Sweden 2.6
- --------------------------------------------------------------------------------
Switzerland 1.6
- --------------------------------------------------------------------------------
Bermuda 1.5
- --------------------------------------------------------------------------------
France 1.2
- --------------------------------------------------------------------------------
Argentina 1.1
- --------------------------------------------------------------------------------
Mexico 0.4
- --------------------------------------------------------------------------------
Chile 0.4
- --------------------------------------------------------------------------------
South Korea 0.2
- --------------------------------------------------------------------------------
India 0.2
- --------------------------------------------------------------------------------
Bahamas/Cayman Islands 0.2
- --------------------------------------------------------------------------------
* Includes investments in short-term securities.
26
<PAGE>
Merrill Lynch Capital Fund, Inc. March 31, 2000
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
M. Colyer Crum, Director
Laurie Simon Hodrick, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Fred G. Weiss, Director
Arthur Zeikel, Director
Robert C. Doll, Jr., 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
- --------------------------------------------------------------------------------
Donald Cecil and Edward H. Meyer, Directors of Merrill Lynch Capital Fund, Inc.
have recently retired. The Fund's Board of Directors wishes Mr. Cecil and Mr.
Meyer well in their retirements.
- --------------------------------------------------------------------------------
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
<PAGE>
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--3/00
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