-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KFbtioJgF8wVv6+U3laQApE+1OEfd0gc3VOtWU8kc5g/jNCuhhuSnCSiyYapREGE MOBGpkN2FkYj8mQQTyBdPQ== 0001193805-07-003127.txt : 20071207 0001193805-07-003127.hdr.sgml : 20071207 20071207105104 ACCESSION NUMBER: 0001193805-07-003127 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071207 DATE AS OF CHANGE: 20071207 EFFECTIVENESS DATE: 20071207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACKROCK BALANCED CAPITAL FUND, INC. CENTRAL INDEX KEY: 0000110055 IRS NUMBER: 132757134 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02405 FILM NUMBER: 071291325 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL ROAD CITY: PLAINSBORO STATE: NJ ZIP: 08536 BUSINESS PHONE: 6092823319 MAIL ADDRESS: STREET 1: P.O. BOX 9066 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH BALANCED CAPITAL FUND INC DATE OF NAME CHANGE: 20051214 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH BALANCE CAPITAL FUND INC DATE OF NAME CHANGE: 20000831 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH CAPITAL FUND INC DATE OF NAME CHANGE: 19920703 0000110055 S000002175 BLACKROCK BALANCED CAPITAL FUND, INC. C000005578 Investor A C000005579 Investor B C000005580 Investor C C000005581 Institutional C000005582 Class R N-CSR 1 e602934_ncsr-balanced.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-02405 Name of Fund: BlackRock Balanced Capital Fund, Inc. Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809 Name and address of agent for service: Donald C. Burke, Chief Executive Officer, BlackRock Balanced Capital Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011 Registrant's telephone number, including area code: (800) 441-7762 Date of fiscal year end: 09/30/2007 Date of reporting period: 10/01/2006 - 09/30/2007 Item 1 - Report to Stockholders EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS BlackRock Balanced Capital BLACKROCK Fund, Inc. ANNUAL REPORT | SEPTEMBER 30, 2007 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE BlackRock Balanced Capital Fund, Inc. ================================================================================ Table of Contents Page - -------------------------------------------------------------------------------- A Letter to Shareholders ................................................. 3 Annual Report: Fund Summary ............................................................. 4 About Fund Performance ................................................... 6 Disclosure of Expenses ................................................... 6 Financial Statements: Schedule of Investments ................................................ 7 Statement of Assets and Liabilities .................................... 9 Statement of Operations ................................................ 10 Statements of Changes in Net Assets .................................... 11 Financial Highlights ..................................................... 12 Notes to Financial Statements ............................................ 17 Report of Independent Registered Public Accounting Firm .................. 22 Important Tax Information ................................................ 22 Officers and Directors ................................................... 23 Portfolio Summary ........................................................ 24 BlackRock Fund Information ............................................... 25 Proxy Results ............................................................ 26 Mutual Fund Family ....................................................... 27 2 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 A Letter to Shareholders Dear Shareholder The September reporting period took financial markets on a wild ride. While subprime mortgage woes dominated headlines for much of 2007, troubles intensified in the final months of the period, spawning a widespread "credit crunch" that crept into other areas of the market. The U.S. Federal Reserve Board (the "Fed") and other countries' central banks stepped in to inject liquidity into the markets and bolster investor confidence. The Fed cut the discount rate, the rate banks pay to borrow money directly from the Fed, from 6.25% to 5.25% in two moves in August and September. The central bankers also cut the more widely followed federal funds target rate, which had remained unchanged at 5.25% for over a year, to 4.75% in September. After a tumultuous summer, the dust began to settle toward period-end amid speculation that the worst of the credit crunch had passed. Although heightened volatility and a weakening U.S. economy have been recurring themes throughout the past year, equity markets have displayed surprising resilience. Most recently, the credit turmoil dampened corporate merger-and- acquisition activity, a key source of strength for equity markets. However, market fundamentals have held firm, dividend payouts and share buybacks have continued to grow, and valuations remain attractive. These tailwinds generally have prevailed over the headwinds created by the slowing U.S. economy and troubled housing market. In fixed income markets, mixed economic signals and the credit market debacle resulted in a flight to quality. At the height of the uncertainty, investors shunned bonds associated with the housing and credit markets in favor of higher- quality Treasury issues. The yield on 10-year Treasury issues, which touched 5.30% in June (its highest level in five years), fell to 4.59% by period-end, while prices correspondingly rose. Against this backdrop, financial markets posted generally positive results for the six-month period, and relatively stronger returns for the full year ended September 30, 2007:
Total Returns as of September 30, 2007 6-month 12-month ========================================================================================================== U.S. equities (S&P 500 Index) +8.44% +16.44% - ---------------------------------------------------------------------------------------------------------- Small cap U.S. equities (Russell 2000 Index) +1.19 +12.34 - ---------------------------------------------------------------------------------------------------------- International equities (MSCI Europe, Australasia, Far East Index) +8.72 +24.86 - ---------------------------------------------------------------------------------------------------------- Fixed income (Lehman Brothers U.S. Aggregate Bond Index) +2.31 + 5.14 - ---------------------------------------------------------------------------------------------------------- Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +1.15 + 3.10 - ---------------------------------------------------------------------------------------------------------- High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) +0.56 + 7.62 - ----------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an index. As you navigate market volatility, we encourage you to review your investment goals with your financial professional and to make portfolio changes, as needed. For more market insight, we invite you to view "What's Ahead in 2007: Third Quarter Update" and "Are You Prepared for Volatility?" at www.blackrock.com/funds. We thank you for entrusting BlackRock with your investment assets, and we look forward to continuing to serve you in the months and years ahead. Sincerely, /s/ Robert C. Doll, Jr. Robert C. Doll, Jr. Vice Chairman, BlackRock, Inc. 3 THIS PAGE NOT PART OF YOUR FUND REPORT Fund Summary Portfolio Management Commentary How did the Fund perform? o The Fund provided positive returns for the period. Asset allocation was favorable and equities outperformed their benchmark while bonds lagged their benchmark return. What factors influenced performance? o Within the equity portfolio, our underweight position and good stock selection in financials was the primary contributor to performance, led by gains in insurance stocks Prudential Financial, Inc. and ACE Ltd. and by avoiding much of the turmoil in the mortgage and brokerage space during the final quarter of the fiscal year. Our overweight position and good stock selection in technology further contributed to returns, led by networking companies Juniper Networks, Inc. and Cisco Systems, Inc. An underweight and good stock selection in health care also contributed, largely due to a strong advance in Baxter International, Inc. o These areas of strength outweighed poor stock selection in consumer discretionary, with particular weakness in retailers Office Depot, Inc. and Limited Brands, Inc. Stock selection in materials also detracted, as we did not own enough of the strong-performing copper and gold stocks. o Within the fixed income portfolio, an overweight of mortgage pass-through securities and commercial mortgages detracted from performance, while an underweighting of corporate and agency bonds proved advantageous. Describe recent portfolio activity. o We began to transition away from stocks that had performed well and where expectations and valuations were high. Proceeds were redeployed into stocks and sectors that have underperformed, where expectations have been reduced and valuations compressed. For example, we reduced the magnitude of our overweight in the industrials sector by eliminating positions in Raytheon Co., Tyco International Ltd. and United States Steel Corp. We also moved to an underweight position in energy as crude oil exceeded $80 per barrel, selling our stake in Total SA and reducing positions in GlobalSantaFe Corp. and EnCana Corp. o By contrast, we increased our consumer discretionary weighting through the addition of selected retail names like The Home Depot, Inc. and Wal-Mart Stores, Inc. and transportation company Federal Express Corp. We further increased our technology exposure, adding to positions in Sun Microsystems, Inc. and Microsoft Corp. while introducing Micron Technology, Inc. and Texas Instruments, Inc. to the portfolio. We believe these companies will be prime beneficiaries of the unfolding technology spending cycle. o Within the fixed income portfolio, we increased exposure to high-quality bonds in the residential and commercial mortgage markets as credit spreads widened. We also reduced our underweighting to the corporate market through some additions there. Describe Fund positioning at period-end. o The Fund was invested 67.0% in equities, 31.8% in fixed income securities and 1.5% in cash equivalents at period-end. This compares to 63.1% equities, 35.6% fixed income and 1.3% cash a year ago. o The U.S. economy appears to be in decent shape and corporate balance sheets and free cash flow remain strong. We are concerned, however, that a weakening housing sector, high energy prices and unsettled liquidity conditions may slow growth and increase credit quality problems. For these reasons, we remain constructive about the longer-term prospects for equities, but are becoming more cautious in the short-term. Meanwhile, interest rates have stabilized, spreads widened and the yield curve normalized, making bonds somewhat more attractive. Expense Example
Actual Hypothetical** --------------------------------------------------- --------------------------------------------------- Beginning Ending Beginning Ending Account Value Account Value Expenses Paid Account Value Account Value Expenses Paid April 1, 2007 Sept. 30, 2007 During the Period* April 1, 2007 Sept. 30, 2007 During the Period* - ---------------------------------------------------------------------------------------------------------------------------------- Institutional ...... $1,000 $1,066.80 $2.78 $1,000 $1,022.21 $2.72 Investor A ......... $1,000 $1,065.20 $4.27 $1,000 $1,020.76 $4.18 Investor B ......... $1,000 $1,060.40 $8.89 $1,000 $1,016.27 $8.70 Investor C ......... $1,000 $1,061.00 $8.32 $1,000 $1,016.82 $8.15 Class R ............ $1,000 $1,063.40 $6.07 $1,000 $1,019.02 $5.94 - ----------------------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.54% for Institutional, .83% for Investor A, 1.73% for Investor B, 1.62% for Investor C and 1.18% for Class R), multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period shown). ** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year divided by 365. See "Disclosure of Expenses" on page 6 for further information on how expenses were calculated. 4 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Total Return Based on a $10,000 Investment A line graph depicting the growth of an investment in the Fund's Institutional and Investor A Shares compared to growth of an investment in the S&P 500 Index and the Lehman Brothers Aggregate Bond Index. Values are from September 1997 to September 2007. Lehman Brothers Institutional Investor A S&P 500 Aggregate Bond Shares*+ Shares*+ Index++ Index+++ 9/97 $10,000 $9,475 $10,000 $10,000 9/98 $9,695 $9,164 $10,905 $11,151 9/99 $10,851 $10,231 $13,937 $11,110 9/00 $11,891 $11,184 $15,788 $11,887 9/01 $10,617 $9,960 $11,585 $13,427 9/02 $9,501 $8,890 $9,212 $14,581 9/03 $11,055 $10,322 $11,459 $15,370 9/04 $12,400 $11,548 $13,049 $15,935 9/05 $13,413 $12,458 $14,647 $16,380 9/06 $14,921 $13,826 $16,228 $16,982 9/07 $16,988 $15,696 $18,896 $17,854 * Assuming maximum sales charge, if any, transaction costs and other operating expenses, including advisory fees. + The Fund, through a fully managed investment policy, utilizes equity, debt and convertible securities. ++ This unmanaged Index covers 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE issues) representing about 75% of NYSE market capitalization and 30% of NYSE issues. S&P 500 is a registered trademark of the McGraw-Hill Companies. +++ This unmanaged Index is a widely recognized market weighted index comprised of investment grade corporate bonds, rated BBB or better, mortgages and U.S. Treasury and government agency issues with at least one year to maturity. Performance Summary for the Period Ended September 30, 2007
Average Annual Total Returns* --------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------- -------------------- -------------------- 6-Month w/o sales w/sales w/o sales w/sales w/o sales w/sales Total Returns charge charge charge charge charge charge - ----------------------------------------------------------------------------------------------------------------------------------- Institutional ............................... +6.68% +13.85% -- +12.32% -- +5.44% -- Investor A .................................. +6.52 +13.52 + 7.56% +12.04 +10.84% +5.18 +4.61% Investor B .................................. +6.04 +12.57 + 8.07 +11.16 +10.89 +4.53 +4.53 Investor C .................................. +6.10 +12.62 +11.62 +11.16 +11.16 +4.36 +4.36 Class R ..................................... +6.34 +13.18 -- +11.91 -- +4.98 -- S&P 500 Index ............................... +8.44 +16.44 -- +15.45 -- +6.57 -- Lehman Brothers U.S. Aggregate Bond Index ... +2.31 + 5.14 -- + 4.13 -- +5.97 -- - -----------------------------------------------------------------------------------------------------------------------------------
* Assuming maximum sales charges. See "About Fund Performance" on page 6 for a detailed description of share classes, including any related sales charges and fees. Past performance is not indicative of future results. Portfolio Profile as of September 30, 2007 Ten Largest Common Percent of Stock Holdings Net Assets - -------------------------------------------------------------------------------- General Electric Co. ................................................ 1.7% Textron, Inc. ....................................................... 1.7 Murphy Oil Corp. .................................................... 1.7 Cisco Systems, Inc. ................................................. 1.7 Baxter International, Inc. .......................................... 1.6 Kimberly-Clark Corp. ................................................ 1.6 McDonald's Corp. .................................................... 1.6 Hewlett-Packard Co. ................................................. 1.6 American International Group, Inc. .................................. 1.6 United Technologies Corp. ........................................... 1.5 Percent of Five Largest Industries Net Assets - -------------------------------------------------------------------------------- Insurance ........................................................... 5.3% Industrial Conglomerates ............................................ 4.5 Oil, Gas & Consumable Fuels ......................................... 4.3 Pharmaceuticals ..................................................... 3.9 Computers & Peripherals ............................................. 3.9 - -------------------------------------------------------------------------------- For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry classifications for reporting ease. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 5 About Fund Performance Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I Shares were redesignated Investor A, Investor B, Investor C and Institutional Shares, respectively. Class R Shares did not change their designation. As previously communicated to shareholders, new sales charge schedules came into effect at the same time for certain of these classes. o Institutional Shares are not subject to any sales charge. Institutional Shares bear no ongoing distribution or service fees and are available only to eligible investors. o Investor A Shares incur a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). o Investor B Shares are subject to a maximum contingent deferred sales charge of 4.50% declining to 0% after six years. In addition, Investor B Shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares automatically convert to Investor A Shares after approximately eight years. (There is no initial sales charge for automatic share conversions.) All returns for periods greater than eight years reflect this conversion. o Investor C Shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. In addition, Investor C Shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. o Class R Shares do not incur a maximum initial sales charge (front-end load) or deferred sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. Class R Shares are available only to certain retirement plans. Prior to inception, Class R Share performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees. Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in each of the performance tables on page 5 assume reinvestment of all dividends and capital gain distributions, if any, 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 service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. The Fund's Administrator waived a portion of its administrative fee. Without such waiver, the Fund's performance would have been lower. Disclosure of Expenses Shareholders of this Fund may incur the following charges: (a) expenses related to transactions, including sales charges, redemption fees and exchange fees; and (b) operating expenses, including advisory fees, distribution fees including 12b-1 fees, and other Fund expenses. The expense example on page 4 (which is based on a hypothetical investment of $1,000 invested on April 1, 2007 and held through September 30, 2007) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds. The table provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled "Expenses Paid During the Period." The table also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in this Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds' shareholder reports. The expenses shown in the table are intended to highlight shareholders' ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees or exchange fees. Therefore, the hypothetical information is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher. 6 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Schedule of Investments as of September 30, 2007 (in U.S. dollars) Shares Held Common Stocks Value =============================================================================== Aerospace & Defense -- 2.6% 450,000 Honeywell International, Inc. $ 26,761,500 450,000 United Technologies Corp. 36,216,000 -------------- 62,977,500 =============================================================================== Air Freight & Logistics -- 0.3% 75,000 FedEx Corp. 7,856,250 =============================================================================== Automobiles -- 0.8% 400,000 Harley-Davidson, Inc. 18,484,000 =============================================================================== Beverages -- 0.8% 400,000 Anheuser-Busch Cos., Inc. 19,996,000 =============================================================================== Building Products -- 0.9% 900,000 Masco Corp. 20,853,000 =============================================================================== Capital Markets -- 3.7% 800,000 The Bank of New York Mellon Corp. 35,312,000 250,000 Legg Mason, Inc. 21,072,500 500,000 Morgan Stanley 31,500,000 -------------- 87,884,500 =============================================================================== Chemicals -- 1.2% 600,000 E.I. du Pont de Nemours & Co. 29,736,000 =============================================================================== Commercial Banks -- 0.7% 500,000 Wells Fargo & Co. 17,810,000 =============================================================================== Communications Equipment -- 2.7% 1,200,000 Cisco Systems, Inc. (a) 39,732,000 200,000 Juniper Networks, Inc. (a) 7,322,000 900,000 Motorola, Inc. 16,677,000 -------------- 63,731,000 =============================================================================== Computers & Peripherals -- 3.9% 750,000 Hewlett-Packard Co. 37,342,500 300,000 International Business Machines Corp. 35,340,000 3,750,000 Sun Microsystems, Inc. (a) 21,037,500 -------------- 93,720,000 =============================================================================== Consumer Finance -- 0.4% 400,000 Discover Financial Services 8,320,000 =============================================================================== Diversified Financial Services -- 2.5% 700,000 Citigroup, Inc. 32,669,000 600,000 JPMorgan Chase & Co. 27,492,000 -------------- 60,161,000 =============================================================================== Diversified Telecommunication Services -- 2.4% 600,000 AT&T Inc. 25,386,000 700,000 Verizon Communications, Inc. 30,996,000 -------------- 56,382,000 =============================================================================== Electronic Equipment & Instruments -- 0.4% 250,000 Tyco Electronics Ltd. 8,857,500 =============================================================================== Energy Equipment & Services -- 2.9% 200,000 GlobalSantaFe Corp. 15,204,000 200,000 Schlumberger Ltd. 21,000,000 500,000 Weatherford International Ltd. (a) 33,590,000 -------------- 69,794,000 =============================================================================== Food & Staples Retailing -- 0.8% 450,000 Wal-Mart Stores, Inc. 19,642,500 =============================================================================== Food Products -- 3.7% 300,000 Cadbury Schweppes Plc (b) 13,956,000 240,000 General Mills, Inc. 13,922,400 75,000 Nestle SA Registered Shares 33,691,218 900,000 Unilever NV (b) 27,765,000 -------------- 89,334,618 =============================================================================== Health Care Equipment & Supplies -- 1.6% 700,000 Baxter International, Inc. 39,396,000 =============================================================================== Health Care Providers & Services -- 0.2% 100,000 AmerisourceBergen Corp. 4,533,000 13,465 PharMerica Corp. (a) 200,897 -------------- 4,733,897 =============================================================================== Hotels, Restaurants & Leisure -- 1.6% 700,000 McDonald's Corp. 38,129,000 =============================================================================== Household Durables -- 0.6% 300,000 Sony Corp. (b) 14,418,000 =============================================================================== Household Products -- 1.6% 550,000 Kimberly-Clark Corp. 38,643,000 =============================================================================== IT Services -- 0.8% 450,000 Accenture Ltd. Class A 18,112,500 =============================================================================== Industrial Conglomerates -- 4.5% 275,000 3M Co. 25,734,500 1,000,000 General Electric Co. 41,400,000 650,000 Textron, Inc. 40,436,500 -------------- 107,571,000 =============================================================================== Insurance -- 5.3% 550,000 ACE Ltd. 33,313,500 550,000 American International Group, Inc. 37,207,500 350,000 Prudential Financial, Inc. 34,153,000 350,000 RenaissanceRe Holdings Ltd. 22,893,500 -------------- 127,567,500 =============================================================================== Internet Software & Services -- 0.8% 750,000 Yahoo! Inc. (a) 20,130,000 =============================================================================== Machinery -- 1.1% 500,000 Dover Corp. 25,475,000 =============================================================================== Media -- 2.3% 750,000 CBS Corp. Class B 23,625,000 900,000 Comcast Corp. Special Class A (a) 21,564,000 250,000 Walt Disney Co. 8,597,500 -------------- 53,786,500 =============================================================================== Metals & Mining -- 0.7% 450,000 Alcoa, Inc. 17,604,000 =============================================================================== Oil, Gas & Consumable Fuels -- 4.3% 375,000 Devon Energy Corp. 31,200,000 200,000 EnCana Corp. 12,370,000 200,000 Exxon Mobil Corp. 18,512,000 570,000 Murphy Oil Corp. 39,837,300 -------------- 101,919,300 =============================================================================== Paper & Forest Products -- 0.8% 200,000 International Paper Co. 7,174,000 400,000 MeadWestvaco Corp. 11,812,000 -------------- 18,986,000 =============================================================================== BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 7 Schedule of Investments (concluded) (in U.S. dollars) Shares Held Common Stocks Value =============================================================================== Pharmaceuticals -- 3.9% 900,000 Bristol-Myers Squibb Co. $ 25,938,000 100,000 GlaxoSmithKline Plc (b) 5,320,000 350,000 Pfizer, Inc. 8,550,500 700,000 Schering-Plough Corp. 22,141,000 725,000 Wyeth 32,298,750 -------------- 94,248,250 =============================================================================== Semiconductors & Semiconductor Equipment -- 2.6% 500,000 Applied Materials, Inc. 10,350,000 400,000 Intersil Corp. Class A 13,372,000 1,400,000 Micron Technology, Inc. (a)(e) 15,540,000 650,000 Texas Instruments, Inc. 23,783,500 -------------- 63,045,500 =============================================================================== Software -- 1.8% 350,000 Electronic Arts, Inc. (a) 19,596,500 800,000 Microsoft Corp. 23,568,000 -------------- 43,164,500 =============================================================================== Specialty Retail -- 1.3% 450,000 Home Depot, Inc. 14,598,000 750,000 Limited Brands, Inc. 17,167,500 -------------- 31,765,500 =============================================================================== Thrifts & Mortgage Finance -- 0.5% 200,000 Fannie Mae 12,162,000 - ------------------------------------------------------------------------------- Total Common Stocks (Cost -- $1,050,365,998) -- 67.0% 1,606,397,315 =============================================================================== =============================================================================== Beneficial Interest Mutual Funds =============================================================================== $609,000,000 Master Total Return Portfolio of Master Bond LLC (c) 761,759,188 - ------------------------------------------------------------------------------- Total Mutual Funds (Cost -- $762,996,589) -- 31.8% 761,759,188 =============================================================================== =============================================================================== Short-Term Securities =============================================================================== $ 24,676,281 BlackRock Liquidity Series, LLC Cash Sweep Series, 5.22% (c)(f) 24,676,281 10,800,000 BlackRock Liquidity Series, LLC Money Market Series, 5.26% (c)(d)(f) 10,800,000 - ------------------------------------------------------------------------------- Total Short-Term Securities (Cost -- $35,476,281) -- 1.5% 35,476,281 =============================================================================== Total Investments (Cost -- $1,848,838,868*) -- 100.3% 2,403,632,784 Liabilities in Excess of Other Assets -- (0.3%) (7,149,732) -------------- Net Assets -- 100.0% $2,396,483,052 ============== * The cost and unrealized appreciation (depreciation) of investments as of September 30, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost ................................ $ 1,860,276,863 =============== Gross unrealized appreciation ................. $ 567,276,531 Gross unrealized depreciation ................. (23,920,610) --------------- Net unrealized appreciation ................... $ 543,355,921 =============== (a) Non-income producing security. (b) Depositary receipts. (c) Investments in companies considered to be an affiliate of the Fund, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows: -------------------------------------------------------------------------- Net Interest Affiliate Activity Income -------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series $ (2,007,849) $ 1,097,075 BlackRock Liquidity Series, LLC Money Market Series $ (88,234,250) $ 28,597 Master Total Return Portfolio of Master Bond LLC $(125,000,000) $ 42,906,353 -------------------------------------------------------------------------- (d) Security was purchased with the cash proceeds from securities loans. (e) Security, or a portion of security, is on loan. (f) Represents the current yield as of September 30, 2007. o For Fund compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized mar-ket indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited. See Notes to Financial Statements. 8 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Statement of Assets and Liabilities As of September 30, 2007 =================================================================================================================================== Assets - ----------------------------------------------------------------------------------------------------------------------------------- Investments in unaffiliated securities, at value (including securities loaned of $9,990,000) (identified cost -- $1,050,365,998) ........................................................ $ 1,606,397,315 Investments in affiliated securities, at value (identified cost -- $798,472,870) ............. 797,235,469 Cash ......................................................................................... 34,000 Receivables: Securities sold .......................................................................... $ 6,471,177 Dividends ................................................................................ 2,263,582 Capital shares sold ...................................................................... 1,129,876 Securities lending ....................................................................... 2,810 9,867,445 --------------- Prepaid expenses and other assets ............................................................ 33,450 --------------- Total assets ................................................................................. 2,413,567,679 --------------- =================================================================================================================================== Liabilities - ----------------------------------------------------------------------------------------------------------------------------------- Collateral on securities loaned, at value .................................................... 10,800,000 Payables: Capital shares redeemed .................................................................. 4,517,264 Investment adviser ....................................................................... 763,413 Other affiliates ......................................................................... 451,371 Distributor .............................................................................. 351,020 6,083,068 --------------- Accrued expenses and other liabilities ....................................................... 201,559 --------------- Total liabilities ............................................................................ 17,084,627 --------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Net assets ................................................................................... $ 2,396,483,052 =============== =================================================================================================================================== Net Assets Consist of - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Shares of Common Stock, $.10 par value, 400,000,000 shares authorized .......... $ 4,340,005 Investor A Shares of Common Stock, $.10 par value, 200,000,000 shares authorized ............. 3,131,247 Investor B Shares of Common Stock, $.10 par value, 500,000,000 shares authorized ............. 355,437 Investor C Shares of Common Stock, $.10 par value, 200,000,000 shares authorized ............. 365,426 Class R Shares of Common Stock, $.10 par value, 500,000,000 shares authorized ................ 35,847 Paid-in capital in excess of par ............................................................. 1,694,857,555 Undistributed investment income -- net ....................................................... $ 13,380,068 Undistributed realized capital gains -- net .................................................. 125,197,184 Unrealized appreciation -- net ............................................................... 554,820,283 --------------- Total accumulated earnings -- net ............................................................ 693,397,535 --------------- Net Assets ................................................................................... $ 2,396,483,052 =============== =================================================================================================================================== Net Asset Value - ----------------------------------------------------------------------------------------------------------------------------------- Institutional -- Based on net assets of $1,271,030,611 and 43,400,050 shares outstanding ..... $ 29.29 =============== Investor A -- Based on net assets of $913,955,388 and 31,312,469 shares outstanding .......... $ 29.19 =============== Investor B -- Based on net assets of $100,807,964 and 3,554,365 shares outstanding ........... $ 28.36 =============== Investor C -- Based on net assets of $100,572,466 and 3,654,259 shares outstanding ........... $ 27.52 =============== Class R -- Based on net assets of $10,116,623 and 358,474 shares outstanding ................. $ 28.22 ===============
See Notes to Financial Statements. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 9 Statement of Operations For the Year Ended September 30, 2007 =================================================================================================================================== Investment Income - ----------------------------------------------------------------------------------------------------------------------------------- Dividends (net of $417,495 foreign withholding tax) .......................................... $ 28,531,331 Interest from affiliates ..................................................................... 1,097,075 Securities lending -- net .................................................................... 28,597 Net investment income allocated from Master Total Return Portfolio of Master Bond LLC (the "Master Portfolio"): Interest ................................................................................. 43,219,775 Dividends ................................................................................ 410,622 Securities lending -- net ................................................................ 53,574 Expenses ................................................................................. (777,618) --------------- Total investment income and net investment income allocated from the Master Portfolio ........ 72,563,356 --------------- =================================================================================================================================== Expenses - ----------------------------------------------------------------------------------------------------------------------------------- Investment advisory fees ..................................................................... $ 9,911,252 Service fees -- Investor A ................................................................... 2,301,811 Service and distribution fees -- Investor B .................................................. 1,262,229 Transfer agent fees -- Institutional ......................................................... 1,231,385 Transfer agent fees -- Investor A ............................................................ 1,136,698 Service and distribution fees -- Investor C .................................................. 1,017,814 Transfer agent fees -- Investor B ............................................................ 252,330 Printing and shareholder reports ............................................................. 165,314 Transfer agent fees -- Investor C ............................................................ 156,962 Professional fees ............................................................................ 136,218 Custodian fees ............................................................................... 95,291 Directors' fees and expenses ................................................................. 77,208 Registration fees ............................................................................ 70,476 Service and distribution fees -- Class R ..................................................... 32,609 Transfer agent fees -- Class R ............................................................... 12,552 Pricing fees ................................................................................. 1,396 Other ........................................................................................ 81,085 --------------- Total expenses before waiver ................................................................. 17,942,630 Waiver of expenses ........................................................................... (516,887) --------------- Total expenses after waiver .................................................................. 17,425,743 --------------- Investment income -- net ..................................................................... 55,137,613 --------------- =================================================================================================================================== Realized & Unrealized Gain (Loss) -- Net - ----------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) on: Investments -- net ....................................................................... 146,858,672 Foreign currency transactions -- net ..................................................... (12,014) Allocations from the Master Portfolio -- net ............................................. (4,981,158) 141,865,500 --------------- Change in unrealized appreciation/depreciation on: Investments -- net ....................................................................... 113,077,244 Foreign currency transactions -- net ..................................................... 23,789 Allocations from the Master Portfolio -- net ............................................. (2,861,992) 110,239,041 ---------------------------------- Total realized and unrealized gain -- net .................................................... 252,104,541 --------------- Net Increase in Net Assets Resulting from Operations ......................................... $ 307,242,154 ===============
See Notes to Financial Statements. 10 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Statements of Changes in Net Assets
For the Year Ended September 30, ---------------------------------- Increase (Decrease) in Net Assets: 2007 2006 =================================================================================================================================== Operations - ----------------------------------------------------------------------------------------------------------------------------------- Investment income -- net ..................................................................... $ 55,137,613 $ 54,109,786 Realized gain -- net ......................................................................... 141,865,500 108,528,049 Change in unrealized appreciation/depreciation -- net ........................................ 110,239,041 96,048,622 ---------------------------------- Net increase in net assets resulting from operations ......................................... 307,242,154 258,686,457 ---------------------------------- =================================================================================================================================== Dividends & Distributions to Shareholders - ----------------------------------------------------------------------------------------------------------------------------------- Investment income -- net: Institutional ............................................................................ (33,452,525) (25,372,004) Investor A ............................................................................... (22,511,016) (16,341,899) Investor B ............................................................................... (2,020,759) (2,094,596) Investor C ............................................................................... (1,868,011) (1,124,283) Class R .................................................................................. (147,831) (67,364) Realized gain -- net: Institutional ............................................................................ (57,419,299) (76,450,213) Investor A ............................................................................... (43,382,214) (55,980,296) Investor B ............................................................................... (6,663,649) (15,290,188) Investor C ............................................................................... (5,091,308) (6,794,035) Class R .................................................................................. (244,993) (267,806) ---------------------------------- Net decrease in net assets derived from dividends and distributions to shareholders .......... (172,801,605) (199,782,684) ---------------------------------- =================================================================================================================================== Capital Share Transactions - ----------------------------------------------------------------------------------------------------------------------------------- Net decrease in net assets derived from capital share transactions ........................... (129,180,248) (377,867,626) ---------------------------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets ...................................................... 5,260,301 (318,963,853) Beginning of year ............................................................................ 2,391,222,751 2,710,186,604 ---------------------------------- End of year* ................................................................................. $ 2,396,483,052 $ 2,391,222,751 ================================== * Undistributed investment income -- net ................................................... $ 13,380,068 $ 19,359,604 ==================================
See Notes to Financial Statements. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 11 Financial Highlights
Institutional ------------------------------------------------------------------------------------- For the Year Ended For the Period For the The following per share data and ratios September 30, April 1, 2003 Year Ended have been derived from information ------------------------------------------------------- to Sept. 30, March 31, provided in the financial statements. 2007 2006 2005 2004 2003 2003 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ..... $ 27.71 $ 27.00 $ 26.76 $ 24.31 $ 21.73 $ 27.58 ------------------------------------------------------------------------------------- Investment income -- net*** .............. .71 .63 .57 .44 .24 .65 Realized and unrealized gain (loss) -- net 2.98 2.22 1.57 2.50 2.65 (5.60) ------------------------------------------------------------------------------------- Total from investment operations ......... 3.69 2.85 2.14 2.94 2.89 (4.95) ------------------------------------------------------------------------------------- Less dividends and distributions: Investment income -- net ............. (.77) (.54) (.64) (.49) (.31) (.69) Realized gain -- net ................. (1.34) (1.60) (1.26) -- -- (.21) ------------------------------------------------------------------------------------- Total dividends and distributions ........ (2.11) (2.14) (1.90) (.49) (.31) (.90) ------------------------------------------------------------------------------------- Net asset value, end of period ........... $ 29.29 $ 27.71 $ 27.00 $ 26.76 $ 24.31 $ 21.73 =================================================================================================================================== Total Investment Return** - ----------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ....... 13.85% 11.24% 8.18% 12.17% 13.31%+ (18.09%) ===================================================================================== =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Expenses, net of waiver .................. .55%++ .59%++ .58%++ .58%++ .60%* .59% ===================================================================================== Expenses ................................. .57%++ .61%++ .61%++ .60%++ .60%* .59% ===================================================================================== Investment income -- net ................. 2.50%++ 2.40%++ 2.11%++ 1.67%++ 1.97%* 2.72% ===================================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) . $1,271,031 $1,215,143 $1,340,212 $1,405,513 $1,455,944 $1,396,989 ===================================================================================== Portfolio turnover ....................... 22% 12% 15% 17% 47% 52% =====================================================================================
* Annualized. ** Total investment returns exclude the effects of any sales charges. *** Based on average shares outstanding. + Aggregate total investment return. ++ Includes the Fund's share of the Master Portfolio's allocated expenses and/or investment income -- net. See Notes to Financial Statements. 12 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Financial Highlights (continued)
Investor A ------------------------------------------------------------------------------------- For the Year Ended For the Period For the The following per share data and ratios September 30, April 1, 2003 Year Ended have been derived from information ------------------------------------------------------- to Sept. 30, March 31, provided in the financial statements. 2007 2006 2005 2004 2003 2003 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ..... $ 27.63 $ 26.92 $ 26.69 $ 24.25 $ 21.68 $ 27.50 ------------------------------------------------------------------------------------- Investment income -- net*** .............. .63 .57 .50 .37 .21 .59 Realized and unrealized gain (loss) -- net 2.97 2.21 1.56 2.49 2.64 (5.57) ------------------------------------------------------------------------------------- Total from investment operations ......... 3.60 2.78 2.06 2.86 2.85 (4.98) ------------------------------------------------------------------------------------- Less dividends and distributions: Investment income -- net ............. (.70) (.47) (.57) (.42) (.28) (.63) Realized gain -- net ................. (1.34) (1.60) (1.26) -- -- (.21) ------------------------------------------------------------------------------------- Total dividends and distributions ........ (2.04) (2.07) (1.83) (.42) (.28) (.84) ------------------------------------------------------------------------------------- Net asset value, end of period ........... $ 29.19 $ 27.63 $ 26.92 $ 26.69 $ 24.25 $ 21.68 ===================================================================================== =================================================================================================================================== Total Investment Return** - ----------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ....... 13.52% 10.98% 7.88% 11.87% 13.16%+ (18.26%) ===================================================================================== =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Expenses, net of waiver .................. .82%++ .84%++ .83%++ .83%++ .85%* .84% ===================================================================================== Expenses ................................. .84%++ .86%++ .85%++ .84%++ .85%* .84% ===================================================================================== Investment income -- net ................. 2.23%++ 2.15%++ 1.86%++ 1.42%++ 1.71%* 2.47% ===================================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) . $ 913,955 $ 912,518 $ 965,951 $1,052,738 $1,023,861 $ 939,989 ===================================================================================== Portfolio turnover ....................... 22% 12% 15% 17% 47% 52% =====================================================================================
* Annualized. ** Total investment returns exclude the effects of sales charges. *** *** Based on average shares outstanding. + Aggregate total investment return. ++ Includes the Fund's share of the Master Portfolio's allocated expenses and/or investment income -- net. See Notes to Financial Statements. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 13 Financial Highlights (continued)
Investor B ----------------------------------------------------------------------------------- For the Year Ended For the Period For the The following per share data and ratios September 30, April 1, 2003 Year Ended have been derived from information ---------------------------------------------------- to Sept. 30, March 31, provided in the financial statements. 2007 2006 2005 2004 2003 2003 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ..... $ 26.87 $ 26.19 $ 25.98 $ 23.59 $ 21.09 $ 26.75 ----------------------------------------------------------------------------------- Investment income -- net*** .............. .39 .35 .29 .17 .11 .39 Realized and unrealized gain (loss) -- net 2.87 2.15 1.52 2.42 2.57 (5.42) ----------------------------------------------------------------------------------- Total from investment operations ......... 3.26 2.50 1.81 2.59 2.68 (5.03) ----------------------------------------------------------------------------------- Less dividends and distributions: Investment income -- net ............. (.43) (.22) (.34) (.20) (.18) (.42) Realized gain -- net ................. (1.34) (1.60) (1.26) -- -- (.21) ----------------------------------------------------------------------------------- Total dividends and distributions ........ (1.77) (1.82) (1.60) (.20) (.18) (.63) ----------------------------------------------------------------------------------- Net asset value, end of period ........... $ 28.36 $ 26.87 $ 26.19 $ 25.98 $ 23.59 $ 21.09 =================================================================================== =================================================================================================================================== Total Investment Return** - ----------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ....... 12.57% 10.10% 7.09% 10.99% 12.73%+ (18.93%) =================================================================================== =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Expenses, net of waiver .................. 1.65%++ 1.61%++ 1.61%++ 1.60%++ 1.62%* 1.62% =================================================================================== Expenses ................................. 1.67%++ 1.64%++ 1.63%++ 1.63%++ 1.62%* 1.62% =================================================================================== Investment income -- net ................. 1.43%++ 1.35%++ 1.12%++ .66%++ .95%* 1.69% =================================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) . $100,808 $157,581 $286,317 $434,115 $632,673 $680,419 =================================================================================== Portfolio turnover ....................... 22% 12% 15% 17% 47% 52% ===================================================================================
* Annualized. ** Total investment returns exclude the effects of sales charges. *** Based on average shares outstanding. + Aggregate total investment return. ++ Includes the Fund's share of the Master Portfolio's allocated expenses and/or investment income -- net. See Notes to Financial Statements. 14 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Financial Highlights (continued)
Investor C ------------------------------------------------------------------------------------- For the Year Ended For the Period For the The following per share data and ratios September 30, April 1, 2003 Year Ended have been derived from information ------------------------------------------------------ to Sept. 30, March 31, provided in the financial statements. 2007 2006 2005 2004 2003 2003 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ..... $ 26.17 $ 25.59 $ 25.45 $ 23.14 $ 20.70 $ 26.29 ----------------------------------------------------------------------------------- Investment income -- net*** .............. .39 .34 .28 .16 .11 .38 Realized and unrealized gain (loss) -- net 2.79 2.11 1.48 2.37 2.52 (5.32) ----------------------------------------------------------------------------------- Total from investment operations ......... 3.18 2.45 1.76 2.53 2.63 (4.94) ----------------------------------------------------------------------------------- Less dividends and distributions: Investment income -- net ............. (.49) (.27) (.36) (.22) (.19) (.44) Realized gain -- net ................. (1.34) (1.60) (1.26) -- -- (.21) ----------------------------------------------------------------------------------- Total dividends and distributions ........ (1.83) (1.87) (1.62) (.22) (.19) (.65) ----------------------------------------------------------------------------------- Net asset value, end of period ........... $ 27.52 $ 26.17 $ 25.59 $ 25.45 $ 23.14 $ 20.70 =================================================================================== =================================================================================================================================== Total Investment Return** - ----------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ....... 12.62% 10.13% 7.05% 10.98% 12.72%+ (18.92%) =================================================================================== =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Expenses, net of waiver .................. 1.60%++ 1.61%++ 1.61%++ 1.61%++ 1.63%* 1.63% =================================================================================== Expenses ................................. 1.63%++ 1.64%++ 1.63%++ 1.63%++ 1.63%* 1.63% =================================================================================== Investment income -- net ................. 1.45%++ 1.37%++ 1.09%++ .64%++ .93%* 1.69% =================================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) . $100,572 $101,175 $113,356 $134,013 $143,482 $137,674 =================================================================================== Portfolio turnover ....................... 22% 12% 15% 17% 47% 52% ===================================================================================
* Annualized. ** Total investment returns exclude the effects of sales charges. *** Based on average shares outstanding. + Aggregate total investment return. ++ Includes the Fund's share of the Master Portfolio's allocated expenses and/or investment income -- net. See Notes to Financial Statements. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 15 Financial Highlights (concluded)
Class R ------------------------------------------------------------------------------------ For the For the Period For the Year Ended Period January 3, The following per share data and ratios September 30, April 1, 2003 2003+++ have been derived from information ---------------------------------------------------- to Sept. 30, to March 31, provided in the financial statements. 2007 2006 2005 2004 2003 2003 ==================================================================================================================================== Per Share Operating Performance - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ..... $ 26.81 $ 26.18 $ 26.03 $ 23.71 $ 21.20 $ 22.07 ------------------------------------------------------------------------------------ Investment income -- net** ............... .50 .49 .43 .30 .24 .20 Realized and unrealized gain (loss) -- net 2.90 2.15 1.52 2.45 2.27 (1.07) ------------------------------------------------------------------------------------ Total from investment operations ......... 3.40 2.64 1.95 2.75 2.51 (.87) ------------------------------------------------------------------------------------ Less dividends and distributions: Investment income -- net ............. (.65) (.41) (.54) (.43) --+ -- Realized gain -- net ................. (1.34) (1.60) (1.26) -- -- -- ------------------------------------------------------------------------------------ Total dividends and distributions ........ (1.99) (2.01) (1.80) (.43) --+ -- ------------------------------------------------------------------------------------ Net asset value, end of period ........... $ 28.22 $ 26.81 $ 26.18 $ 26.03 $ 23.71 $ 21.20 ==================================================================================== ==================================================================================================================================== Total Investment Return - ------------------------------------------------------------------------------------------------------------------------------------ Based on net asset value per share ....... 13.18% 10.70% 7.63% 11.67% 13.31%@@ (3.94%)@@ ==================================================================================== =================================================================================================================================== Ratios to Average Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ Expenses, net of waiver .................. 1.14%++ 1.09%++ 1.08%++ 1.07%++ 1.10%* 1.09%* ==================================================================================== Expenses ................................. 1.16%++ 1.11%++ 1.11%++ 1.07%++ 1.10%* 1.09%* ==================================================================================== Investment income -- net ................. 1.87%++ 1.91%++ 1.65%++ 1.10%++ 2.07%* 2.76%* ==================================================================================== ==================================================================================================================================== Supplemental Data - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) . $10,117 $ 4,805 $ 4,349 $ 2,526 --@ --@ ==================================================================================== Portfolio turnover ....................... 22% 12% 15% 17% 47% 52% ====================================================================================
* Annualized. ** Based on average shares outstanding. + Amount is less than $(.01) per share. ++ Includes the Fund's share of the Master Portfolio's allocated expenses and/or investment income -- net. +++ Commencement of operations. @ Amount is less than $1,000. @@ Aggregate total investment return. See Notes to Financial Statements. 16 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Notes to Financial Statements 1. Significant Accounting Policies: BlackRock Balanced Capital Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund seeks to achieve its investment objective through a fully managed investment policy utilizing equity, fixed income and convertible securities. The Fund invests the fixed income portion of its assets in Master Total Return Portfolio (formerly "Master Bond Portfolio") (the "Master Portfolio"), of Master Bond LLC (the "Master LLC"), a mutual fund that has an investment objective and strategy consistent with that of the fixed income portion of the Fund. Effective June 15, 2007, the Master LLC was converted from a Delaware statutory trust to a Delaware limited liability company. The value of the Fund's investment in the Master Portfolio reflects the Fund's proportionate interest in the net assets of the Master Portfolio. The percentage of the Master Portfolio owned by the Fund at September 30, 2007 was 19.1%. The Fund's financial statements are prepared in conformity with U.S. generally accepted accounting principles, which may require the use of management accruals and estimates. Actual results may differ from these estimates. The Fund offers multiple classes of shares. Institutional Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are sold with a front-end sales charge. Investor B and Investor C Shares may be subject to a contingent deferred sales charge. Class R Shares are sold only to certain retirement plans. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A, Investor B, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor B, Investor C and Class R 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 shareholder servicing and distribution expenditures (except that Investor B shareholders may vote on certain changes to the Investor A distribution plan). Income, expenses (other than expenses attributable to a specific class) and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments -- The Fund records its proportionate investment in the Master Portfolio at fair value. Equity securities held by the Fund that are traded on stock exchanges or the NASDAQ Global Market are valued at the last sale price or official close price on the exchange, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price for long positions, and at the last available asked price for short positions. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by or under the authority of the Board of Directors of the Fund. Long positions traded in the over-the-counter ("OTC") market, NASDAQ Capital Market or Bulletin Board are valued at the last available bid price or yield equivalent obtained from one or more dealers or pricing services approved by the Board of Directors of the Fund. Short positions traded in the OTC market are valued at the last available asked price. Portfolio securities that are traded both in the OTC market and on a stock exchange are valued according to the broadest and most representative market. Effective September 4, 2007, exchange-traded options are valued at the mean price and previously were valued at the last sale price. Options traded in the OTC market are valued at the last asked price (options written) or last bid price (options purchased). Swap agreements are valued based upon quoted fair valuations received daily by the Fund from a pricing service or counterparty. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges. Valuations of short-term investment vehicles are generally based on the net asset value of the underlying investment vehicle or amortized cost. Repurchase agreements are valued at cost plus accrued interest. The Fund employs pricing services to provide certain securities prices for the Fund. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Directors of the Fund, including valuations furnished by the pricing services retained by the Fund, which may use a matrix system for valuations. The procedures of a pricing service and its valuations are reviewed by the officers of the Fund under the general supervision of the Fund's Board of Directors. Such valuations and procedures are reviewed periodically by the Board of Directors of the Fund. Generally, trading in foreign securities, as well as U.S. government securities and money market instruments, is substantially completed each day at various times prior to the close of business on the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates will generally be determined as of the close of business on the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of business on the NYSE that may not be reflected in the computation of the Fund's net asset value. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such securities, those securities will be valued at their fair value as determined in good faith by the Fund's Board of Directors or by BlackRock Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc., using a pricing service and/or procedures approved by the Fund's Board of Directors. (b) Derivative financial instruments -- The Fund may engage in various portfolio investment strategies both to increase the return of the Fund and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise due to changes in the value of the contract due to an unfavorable change in the price of the underlying security, or index, or if the counterparty does not perform under BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 17 Notes to Financial Statements (continued) the contract. The counterparty for certain instruments may pledge cash or securities as collateral. o Options -- The Fund may 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. o Swaps -- The Fund may enter into swap agreements, which are OTC contracts in which the Fund and a counterparty agree to make periodic net payments on a specified notional amount. The net payments can be made for a set period of time or may be triggered by a pre-determined credit event. The net periodic payments may be based on a fixed or variable interest rate; the change in market value of a specified security, basket of securities, or index; or the return generated by a security. These periodic payments received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. Gains or losses are realized upon termination of the swap agreements. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). Risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. (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 U.S. dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. The Fund invests in foreign securities, which may involve a number of risk factors and special considerations not present with investments in securities of U.S. corporations. (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, investment income and expenses -- Security transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. 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. Investment transactions in the Master Portfolio are accounted for on a trade date basis. The Fund records daily its proportionate share of the Master Portfolio's income, expenses and realized and unrealized gains and losses. In addition, the Fund accrues its own expenses. (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) Securities lending -- The Fund may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. Where the Fund receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Fund typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Fund receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Fund may pay reasonable finders, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Fund could experience delays and costs in gaining access to the collateral. The Fund also could suffer a loss where the value of the collateral falls below the market value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. (i) Recent accounting pronouncements -- In July 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109." FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity, including mutual funds, before being measured and recognized in the financial statements. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting 18 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Notes to Financial Statements (continued) period for fiscal years beginning after December 15, 2006. The impact on the Fund's financial statements, if any, is currently being assessed. In September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. At this time, management is evaluating the implications of FAS 157 and its impact on the Fund's financial statements, if any, has not been determined. In addition, in February 2007, Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS 159"), was issued and is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FAS 157. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. FAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. At this time, management is evaluating the implications of FAS 159 and its impact on the Fund's financial statements, if any, has not been determined. (j) Reclassifications -- U.S. generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, during the current year, $1,429,046 has been reclassified between undistributed net investment income and undistributed realized capital gains, $312,039 has been reclassified between paid-in capital in excess of par and undistributed net investment income, and $307,158 has been reclassified between paid-in capital in excess of par and undistributed realized capital gains as a result of permanent differences attributable to accounting for swap agreements, foreign currency transactions, accounting for paydowns, amortization methods on fixed income securities, gains from the sale of stock of passive foreign investment companies, and the allocation of basis adjustments. These reclassifications have no effect on net assets or net asset values per share. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund entered into an Investment Advisory agreement with the Manager. The Fund has also entered into separate Distribution Agreements and Distribution Plans with FAM Distributors, Inc. ("FAMD") and BlackRock Distributors, Inc. ("BDI") (collectively, the "Distributor"). FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc., and BDI is an affiliate of BlackRock, Inc. Merrill Lynch and Co., Inc. ("Merrill Lynch") and The PNC Financial Services Group, Inc. ("PNC") are the principal owners of BlackRock, Inc. The Manager 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. The Fund also pays an investment advisory fee to the Manager, which is the Master LLC's investment adviser, to the extent it invests its fixed income assets in the Master Portfolio. The Manager has contractually agreed to waive its management fee in the amount the Fund pays in connection with its investment in the Master Portfolio. For the year ended September 30, 2007, the Manager earned fees of $9,911,252, of which $516,887 was waived. In addition, the Manager has entered into a sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the Manager pays BIM for services it provides a monthly fee at an annual rate that is a percentage of the management fee paid by the Fund to the Manager. 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 each Distributor ongoing service 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: - -------------------------------------------------------------------------------- Service Distribution Fee Fee - -------------------------------------------------------------------------------- Investor A ....................................... .25% -- Investor B ....................................... .25% .75% Investor C ....................................... .25% .75% Class R .......................................... .25% .25% - -------------------------------------------------------------------------------- Pursuant to sub-agreements with each Distributor, broker dealers, including Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill Lynch, and each Distributor provide shareholder servicing and distribution services to the Fund. The ongoing service fee compensates the Distributor and each broker-dealer (including MLPF&S) for providing shareholder services to Investor A, Investor B, Investor C and Class R shareholders. The ongoing distribution fee compensates the Distributor and the broker-dealer for providing shareholder servicing and distribution related services to Investor B, Investor C and Class R shareholders. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 19 Notes to Financial Statements (continued) For the year ended September 30, 2007, FAMD and BDI earned underwriting discounts and direct commissions and MLPF&S and BDI earned dealer concessions on sales of the Fund's Investor A Shares, which totaled $91,464. For the year ended September 30, 2007, affiliates received contingent deferred sales charges of $107,224 and $3,957 relating to transactions in Investor B and Investor C Shares, respectively. Furthermore, affiliates received contingent deferred sales charges of $3,356 relating to transactions subject to front-end sales charge waivers in Investor A Shares. The Manager maintains a call center, which is responsible for providing certain shareholder services to the Fund, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of Fund shares. During the year ended September 30, 2007, the following amounts have been accrued by the Fund to reimburse the Manager for costs incurred running the call center, which are a component of the transfer agent fees in the accompanying Statement of Operations. - -------------------------------------------------------------------------------- Call Center Fees - -------------------------------------------------------------------------------- Institutional .................................................. $29,922 Investor A ..................................................... $41,323 Investor B ..................................................... $ 8,372 Investor C ..................................................... $ 4,514 Class R ........................................................ $ 118 - -------------------------------------------------------------------------------- The Fund has received an exemptive order from the Securities and Exchange Commission permitting it to lend portfolio securities to MLPF&S or its affiliates. Pursuant to that order, the Fund has retained BIM as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. BIM may, on behalf of the Fund, invest cash collateral received by the Fund for such loans, among other things, in a private investment company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. For the year ended September 30, 2007, BIM received $12,502 in securities lending agent fees. In addition, MLPF&S received $213,150 in commissions on the execution of portfolio security transactions for the Fund for the year ended September 30, 2007. PFPC Inc., an indirect, wholly owned subsidiary of PNC and an affiliate of the Manager, is the Fund's transfer agent. Certain officers and/or directors of the Fund are officers and/or directors of BlackRock, Inc. or its affiliates. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended September 30, 2007 were $348,182,971 and $496,819,902, respectively. 4. Capital Share Transactions: Net decrease in net assets derived from capital share transactions was $129,180,248 and $377,867,626 for the years ended September 30, 2007 and September 30, 2006, respectively. Transactions in capital shares for each class were as follows: - ------------------------------------------------------------------------------- Institutional Shares for the Year Dollar Ended September 30, 2007 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 4,091,838 $ 116,036,502 Shares issued to shareholders in reinvestment of dividends and distributions .................. 2,971,097 82,123,752 ----------------------------- Total issued ................................... 7,062,935 198,160,254 Shares redeemed ................................ (7,510,527) (212,737,057) ----------------------------- Net decrease ................................... (447,592) $ (14,576,803) ============================= - ------------------------------------------------------------------------------- Institutional Shares for the Year Dollar Ended September 30, 2006 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 2,992,590 $ 79,445,833 Shares issued to shareholders in reinvestment of dividends and distributions .................. 3,594,184 92,226,158 ----------------------------- Total issued ................................... 6,586,774 171,671,991 Shares redeemed ................................ (12,375,356) (327,209,774) ----------------------------- Net decrease ................................... (5,788,582) $(155,537,783) ============================= - ------------------------------------------------------------------------------- Investor A Shares for the Year Dollar Ended September 30, 2007 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 2,669,986 $ 75,588,618 Shares issued to shareholders in reinvestment of dividends and distributions .................. 2,102,016 57,875,366 ----------------------------- Total issued ................................... 4,772,002 133,463,984 Shares redeemed ................................ (6,485,914) (183,334,902) ----------------------------- Net decrease ................................... (1,713,912) $ (49,870,918) ============================= - ------------------------------------------------------------------------------- Investor A Shares for the Year Dollar Ended September 30, 2006 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 1,134,447 $ 30,125,921 Automatic conversion of shares ................. 3,198,038 84,617,488 Shares issued to shareholders in reinvestment of dividends and distributions .................. 2,477,720 63,422,218 ----------------------------- Total issued ................................... 6,810,205 178,165,627 Shares redeemed ................................ (9,663,151) (255,655,194) ----------------------------- Net decrease ................................... (2,852,946) $ (77,489,567) ============================= 20 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Notes to Financial Statements (concluded) - ------------------------------------------------------------------------------- Investor B Shares for the Year Dollar Ended September 30, 2007 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 413,493 $ 11,329,038 Shares issued to shareholders in reinvestment of dividends and distributions .................. 283,896 7,571,413 ----------------------------- Total issued ................................... 697,389 18,900,451 Shares redeemed ................................ (3,007,751) (82,733,457) ----------------------------- Net decrease ................................... (2,310,362) $ (63,833,006) ============================= - ------------------------------------------------------------------------------- Investor B Shares for the Year Dollar Ended September 30, 2006 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 574,992 $ 14,828,358 Shares issued to shareholders in reinvestment of dividends and distributions .................. 598,848 14,912,251 ----------------------------- Total issued ................................... 1,173,840 29,740,609 ----------------------------- Automatic conversion of shares ................. (3,290,619) (84,617,488) Shares redeemed ................................ (2,951,735) (75,997,582) ----------------------------- Total redeemed ................................. (6,242,354) (160,615,070) ----------------------------- Net decrease ................................... (5,068,514) $(130,874,461) ============================= - ------------------------------------------------------------------------------- Investor C Shares for the Year Dollar Ended September 30, 2007 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 280,175 $ 7,443,617 Shares issued to shareholders in reinvestment of dividends and distributions .................. 224,293 5,822,850 ----------------------------- Total issued ................................... 504,468 13,266,467 Shares redeemed ................................ (716,605) (19,088,822) ----------------------------- Net decrease ................................... (212,137) $ (5,822,355) ============================= - ------------------------------------------------------------------------------- Investor C Shares for the Year Dollar Ended September 30, 2006 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 243,881 $ 6,132,019 Shares issued to shareholders in reinvestment of dividends and distributions .................. 274,554 6,667,489 ----------------------------- Total issued ................................... 518,435 12,799,508 Shares redeemed ................................ (1,081,207) (27,100,870) ----------------------------- Net decrease ................................... (562,772) $ (14,301,362) ============================= - ------------------------------------------------------------------------------- Class R Shares for the Year Dollar Ended September 30, 2007 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 301,169 $ 8,276,313 Shares issued to shareholders in reinvestment of dividends and distributions .................. 14,450 387,084 ----------------------------- Total issued ................................... 315,619 8,663,397 Shares redeemed ................................ (136,363) (3,740,563) ----------------------------- Net increase ................................... 179,256 $ 4,922,834 ============================= - ------------------------------------------------------------------------------- Class R Shares for the Year Dollar Ended September 30, 2006 Shares Amount - ------------------------------------------------------------------------------- Shares sold .................................... 62,280 $ 1,597,654 Shares issued to shareholders in reinvestment of dividends and distributions .................. 13,238 329,008 ----------------------------- Total issued ................................... 75,518 1,926,662 Shares redeemed ................................ (62,385) (1,591,115) ----------------------------- Net increase ................................... 13,133 $ 335,547 ============================= 5. Short-Term Borrowings: The Fund, along with certain other funds managed by the Manager and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders, which expires November 2007. The Fund may borrow under the credit agreement to fund shareholder redemptions and for other lawful purposes other than for leverage. The Fund may borrow up to the maximum amount allowable under the Fund's current prospectus and statement of additional information, subject to various other legal, regulatory or contractual limits. The Fund pays a commitment fee of .06% per annum based on the Fund's pro rata share of the unused portion of the credit agreement. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each fund's election, the federal funds rate plus .35% or a base rate as defined in the credit agreement. The Fund did not borrow under the credit agreement during the year ended September 30, 2007. 6. Distributions to Shareholders: The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006 was as follows: - -------------------------------------------------------------------------------- 9/30/2007 9/30/2006 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary income ......................... $ 63,144,826 $ 49,241,065 Net long-term capital gains ............. 109,656,779 150,541,619 ---------------------------- Total taxable distributions ............... $172,801,605 $199,782,684 ============================ As of September 30, 2007, the components of accumulated earnings on a tax basis were as follows: - ------------------------------------------------------------------------------- Undistributed ordinary income -- net .......................... $ 30,754,834 Undistributed long-term capital gains -- net .................. 120,314,084 ------------ Total undistributed earnings -- net ........................... 151,068,918 Capital loss carryforward ..................................... -- Unrealized gains -- net ....................................... 542,328,617* ------------ Total accumulated earnings -- net ............................. $693,397,535 ============ * The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales, the tax deferral of losses on straddles, the realization for tax purposes of unrealized gains (losses) on certain futures and forward foreign currency contracts, the difference between book and tax amortization methods for premiums and discounts on fixed income securities and accounting for swap agreements. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 21 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of BlackRock Balanced Capital Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Balanced Capital Fund, Inc. as of September 30, 2007, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2007, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Balanced Capital Fund, Inc. as of September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the respective periods presented, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey November 28, 2007 Important Tax Information (Unaudited) The following information is provided with respect to the ordinary income distributions paid by BlackRock Balanced Capital Fund, Inc. during the fiscal year ended September 30, 2007:
- ------------------------------------------------------------------------------------------------------------------------- Record Date/ 12/18/2006 7/18/2007 Payable Date 12/20/2006 7/20/2007 - ------------------------------------------------------------------------------------------------------------------------- Qualified Dividend Income for Individuals* ................................................. 52.61% 38.91% Dividends Qualifying for the Dividends Received Deduction for Corporations* ................ 43.85% 32.95% Federal Obligation Interest ................................................................ 6.90% 2.85% Interest-Related Dividends for Non-U.S. Residents** ........................................ 51.01% 36.72% Short-Term Capital Gain Dividends for Non-U.S. Residents** ................................. 7.64% None - -------------------------------------------------------------------------------------------------------------------------
* The Fund hereby designates the percentage indicated above or the maximum amount allowable by law. ** Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign 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 is exempt from state income tax. Additionally, the Fund distributed long-term capital gains of $1.301403 per share to shareholders of record on December 18, 2006. 22 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 Officers and Directors as of September 30, 2007
Number of Funds and Portfolios in Position(s) Length of Fund Complex Other Public Name, Address Held with Time Overseen by Directorships and Year of Birth Fund Served Principal Occupation(s) During Past 5 Years Director Held by Director ==================================================================================================================================== Interested Director - ------------------------------------------------------------------------------------------------------------------------------------ Robert C. Doll, Jr.* Fund 2005 to Vice Chairman and Director of BlackRock, 120 Funds None P.O. Box 9011 President 2007 Inc., Global Chief Investment Officer for 161 Portfolios Princeton, NJ 08543-9011 and Equities, Chairman of the BlackRock Retail 1954 Director Operating Committee, and member of the BlackRock Executive Committee since 2006; President of the funds advised by Merrill Lynch Investment Managers, L.P. ("MLIM") and its affiliates ("MLIM/FAM-advised funds") from 2005 to 2006 and Chief Investment Officer thereof from 2001 to 2006; President of MLIM and Fund Asset Management, L.P. ("FAM") from 2001 to 2006; Co-Head (Americas Region) thereof from 2000 to 2001 and Senior Vice President from 1999 to 2001; President and Director of Princeton Services, Inc. ("Princeton Services") and President of Princeton Administrators, L.P. ("Princeton Administrators") from 2001 to 2006; Chief Investment Officer of OppenheimerFunds, Inc. in 1999 and Executive Vice President thereof from 1991 to 1999. --------------------------------------------------------------------------------------------------------- * Mr. Doll is a director, trustee or member of an advisory board of certain other investment companies for which BlackRock Advisors, LLC and its affiliates act as investment adviser. Mr. Doll is an "interested person," as defined in the Investment Company Act, of the Fund based on his positions with BlackRock, Inc. and its affiliates. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. As Fund President, Mr. Doll serves at the pleasure of the Board of Directors. ==================================================================================================================================== Independent Directors* - ------------------------------------------------------------------------------------------------------------------------------------ Donald W. Burton Director 2002 to Managing General Partner of The Burton 21 Funds Knology, Inc. P.O. Box 9095 present Partnership, Limited Partnership (an 32 Portfolios (telecommunications); Princeton, NJ 08543-9095 investment partnership) since 1979; Managing Capital Southwest 1944 General Partner of The South Atlantic (financial) Venture Funds since 1983; Member of the Investment Advisory Council of the Florida State Board of Administration since 2001. - ------------------------------------------------------------------------------------------------------------------------------------ John Francis O'Brien Director 2005 to President and Chief Executive Officer of 21 Funds Cabot Corporation P.O. Box 9095 present Allmerica Financial Corporation (financial 32 Portfolios (chemicals); Princeton, NJ 08543-9095 services holding company) from 1995 to 2002 LKQ Corporation 1943 and Director from 1995 to 2003; President of (auto parts Allmerica Investment Management Co., Inc. manufacturing); (investment adviser) from 1989 to 2002, TJX Companies, Inc. Director from 1989 to 2002 and Chairman of (retailer) the Board from 1989 to 1990; President, Chief Executive Officer and Director of First Allmerica Financial Life Insurance Company from 1989 to 2002 and Director of various other Allmerica Financial companies until 2002; Director from 1989 to 2006, Member of the Governance Nominating Committee from 2004 to 2006, Member of the Compensation Committee from 1989 to 2006 and Member of the Audit Committee from 1990 to 2004 of ABIOMED; Director, Member of the Governance and Nomination Committee and Member of the Audit Committee of Cabot Corporation since 1990; Director and Member of the Audit Committee and Compensation Committee of LKQ Corporation since 2003; Lead Director of TJX Companies, Inc. since 1996; Trustee of the Woods Hole Oceanographic Institute since 2003; Director, Ameresco, Inc. since 2006; Director, Boston Lyric Opera since 2002. - ------------------------------------------------------------------------------------------------------------------------------------ David H. Walsh Director 2003 to Director, Ruckleshaus Institute and Haub 21 Funds None P.O. Box 9095 present School of Natural Resources at the 32 Portfolios Princeton, NJ 08543-9095 University of Wyoming since 2006; Consultant 1941 with Putnam Investments from 1993 to 2003, and employed in various capacities therewith from 1973 to 1992; Director, Massachusetts Audubon Society from 1990 to 1997; Director, The National Audubon Society from 1998 to 2005; Director, The American Museum of Fly Fishing since 1997. - ------------------------------------------------------------------------------------------------------------------------------------
BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 23 Officers and Directors (concluded)
Number of Funds and Portfolios in Position(s) Length of Fund Complex Other Public Name, Address Held with Time Overseen by Directorships and Year of Birth Fund Served Principal Occupation(s) During Past 5 Years Director Held by Director ==================================================================================================================================== Independent Directors* (concluded) - ------------------------------------------------------------------------------------------------------------------------------------ Fred G. Weiss** Director 1998 to Managing Director of FGW Associates since 21 Funds Watson P.O. Box 9095 present 1997; Vice President, Planning, Investment 32 Portfolios Pharmaceuticals, Inc. Princeton, NJ 08543-9095 and Development of Warner Lambert Co. from (pharmaceutical 1941 1979 to 1997; Director of the Michael J. Fox company) Foundation for Parkinson's Research since 2000; Director of BTG International Plc (a global technology commercialization company) since 2001. --------------------------------------------------------------------------------------------------------- * Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. ** Chairman of the Board of Directors and the Audit Committee. - ------------------------------------------------------------------------------------------------------------------------------------ Position(s) Length of Name, Address Held with Time and Year of Birth Fund Served Principal Occupation(s) During Past 5 Years ==================================================================================================================================== Fund Officers* - ------------------------------------------------------------------------------------------------------------------------------------ Donald C. Burke Vice 1993 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill Lynch P.O. Box 9011 President 2007 Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM") in 2006; Princeton, NJ 08543-9011 and and First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer thereof from 1960 Treasurer 1999 to 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997. 2007 - ------------------------------------------------------------------------------------------------------------------------------------ Karen Clark Chief 2007 Managing Director of BlackRock, Inc. and Chief Compliance Officer of certain P.O. Box 9011 Compliance BlackRock-advised funds since 2007; Director of BlackRock, Inc. from 2005 to 2007; Princeton, NJ 08543-9011 Officer Principal and Senior Compliance Officer, State Street Global Advisors, from 2001 to 1965 2005; Principal Consultant, PricewaterhouseCoopers, LLP from 1998 to 2001; and Branch Chief, Division of Investment Management and Office of Compliance Inspections and Examinations, U.S. Securities and Exchange Commission, from 1993 to 1998. - ------------------------------------------------------------------------------------------------------------------------------------ Howard Surloff Secretary 2007 to Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at P.O. Box 9011 present BlackRock, Inc. since 2006. General Counsel (U.S.) of Goldman Sachs Asset Princeton, NJ 08543-9011 Management from 1993 to 2006 1965 --------------------------------------------------------------------------------------------------------- * Officers of the Fund serve at the pleasure of the Board of Directors. - ------------------------------------------------------------------------------------------------------------------------------------ Further information about the Fund's Officers and Directors is available in the Fund's Statement of Additional Information, which can be obtained without charge by calling 1-800-441-7762. - ------------------------------------------------------------------------------------------------------------------------------------
Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent PFPC Inc. Wilmington, DE 19809 Portfolio Summary of Investments Percent of Asset Mix Long-Term Investments - -------------------------------------------------------------------------------- Domestic Common Stocks ........................................ 65.2% Fixed Income Mutual Funds ..................................... 32.2 Foreign Common Stocks ......................................... 2.6 - -------------------------------------------------------------------------------- 24 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 BlackRock Fund Information BlackRock Privacy Principles BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, "Clients") and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties. If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations. BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our Web sites. BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose. We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information. Availability of Additional Information Electronic copies of most financial reports and prospectuses are available on the Fund's Web site or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund's electronic delivery program. To enroll: Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages: Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this service. Shareholders Who Hold Accounts Directly with BlackRock: 1) Access the BlackRock Web site at http://www.blackrock.com/edelivery 2) Select "eDelivery" under the "More Information" section 3) Log into your account The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called "householding" and it is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Fund at (800) 441-7762. Availability of Proxy Voting Policies and Procedures The Fund has delegated proxy voting responsibilities to BlackRock and its affiliates, subject to the general oversight of the Fund's Board of Directors. A description of the policies and procedures that BlackRock and its affiliates use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, on our Web site at www.blackrock.com, by calling (800) 441-7762, or on the Web site of the Securities and Exchange Commission (the"Commission") at http://www.sec.gov. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 25 BlackRock Fund Information (concluded) Availability of Additional Information (concluded) Availability of Proxy Voting Record Information on how proxies relating to the Fund's voting securities were voted (if any) by the Fund's previous manager during the most recent 12-month period ended June 30 is available, upon request and without charge, on our Web site at www.blackrock.com, by calling (800) 441-7762 or on the Web site of the Commission at http://www.sec.gov. Availability of Quarterly Portfolio Schedule The Fund files its complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the Commission on Form N-Q. The Fund's Forms N-Q are available on the Commission's Web site at http://www.sec.gov and may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information regarding the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also be obtained upon request, without charge, by calling (800) 441-7762. Shareholder Privileges Account Information Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at www.blackrock.com/funds. Automatic Investment Plans Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds. Systematic Withdrawal Plans Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account is at least $10,000. Retirement Plans Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans. Proxy Results During the six-month period ended September 30, 2007, the shareholders of BlackRock Balanced Capital Fund, Inc. voted on the following proposal, which was approved at a special shareholders' meeting on September 7, 2007. This proposal was part of the reorganization of the Fund's Board of Directors to take effect on or about November 1, 2007. A description of the proposal and number of shares voted are as follows:
- -------------------------------------------------------------------------------------------------------- Shares Voted Shares Withheld For From Voting - -------------------------------------------------------------------------------------------------------- To elect the Fund's Board of Directors: James H. Bodurtha 47,927,362 1,583,967 Bruce R. Bond 47,922,635 1,588,694 Donald W. Burton 47,916,534 1,594,795 Richard S. Davis 47,928,622 1,582,707 Stuart E. Eizenstat 47,928,694 1,582,635 Laurence D. Fink 47,919,286 1,592,043 Kenneth A. Froot 47,916,667 1,594,662 Henry Gabbay 47,925,197 1,586,132 Robert M. Hernandez 47,912,274 1,599,055 John F. O'Brien 47,916,470 1,594,859 Roberta Cooper Ramo 47,927,429 1,583,900 Jean Margo Reid 47,928,312 1,583,017 David H. Walsh 47,929,686 1,581,643 Fred G. Weiss 47,922,063 1,589,266 Richard R. West 47,923,125 1,588,204
26 BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 A World-Class Mutual Fund Family BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Equity Funds BlackRock All-Cap Global Resources Portfolio BlackRock Aurora Portfolio BlackRock Asset Allocation Portfolio+ BlackRock Balanced Capital Fund+ BlackRock Basic Value Fund BlackRock Capital Appreciation Portfolio BlackRock Developing Capital Markets Fund BlackRock Equity Dividend Fund BlackRock EuroFund BlackRock Focus Twenty Fund BlackRock Focus Value Fund BlackRock Fundamental Growth Fund BlackRock Global Allocation Fund+ BlackRock Global Dynamic Equity Fund BlackRock Global Financial Services Fund BlackRock Global Growth Fund BlackRock Global Opportunities Portfolio BlackRock Global Resources Portfolio BlackRock Global Science & Technology Opportunities Portfolio BlackRock Global SmallCap Fund BlackRock Healthcare Fund BlackRock Health Sciences Opportunities Portfolio* BlackRock Index Equity Portfolio* BlackRock International Fund BlackRock International Index Fund BlackRock International Opportunities Portfolio* BlackRock International Value Fund BlackRock Large Cap Core Fund BlackRock Large Cap Growth Fund BlackRock Large Cap Value Fund BlackRock Latin America Fund BlackRock Mid-Cap Growth Equity Portfolio BlackRock Mid-Cap Value Equity Portfolio BlackRock Mid Cap Value Opportunities Fund BlackRock Natural Resources Trust BlackRock Pacific Fund BlackRock Small Cap Core Equity Portfolio BlackRock Small Cap Growth Equity Portfolio BlackRock Small Cap Growth Fund II BlackRock Small Cap Index Fund BlackRock Small Cap Value Equity Portfolio* BlackRock Small/Mid-Cap Growth Portfolio BlackRock S&P 500 Index Fund BlackRock Technology Fund BlackRock U.S. Opportunities Portfolio BlackRock Utilities and Telecommunications Fund BlackRock Value Opportunities Fund Fixed Income Funds BlackRock Commodity Strategies Fund BlackRock Enhanced Income Portfolio BlackRock GNMA Portfolio BlackRock Government Income Portfolio BlackRock High Income Fund BlackRock High Yield Bond Portfolio BlackRock Inflation Protected Bond Portfolio BlackRock Intermediate Bond Portfolio II BlackRock Intermediate Government Bond Portfolio BlackRock International Bond Portfolio BlackRock Low Duration Bond Portfolio BlackRock Managed Income Portfolio BlackRock Short-Term Bond Fund BlackRock Total Return Fund BlackRock Total Return Portfolio II BlackRock World Income Fund Municipal Bond Funds BlackRock AMT-Free Municipal Bond Portfolio BlackRock California Insured Municipal Bond Fund BlackRock Delaware Municipal Bond Portfolio BlackRock Florida Municipal Bond Fund BlackRock High Yield Municipal Fund BlackRock Intermediate Municipal Fund BlackRock Kentucky Municipal Bond Portfolio BlackRock Municipal Insured Fund BlackRock National Municipal Fund BlackRock New Jersey Municipal Bond Fund BlackRock New York Municipal Bond Fund BlackRock Ohio Municipal Bond Portfolio BlackRock Pennsylvania Municipal Bond Fund BlackRock Short-Term Municipal Fund Target Risk & Target Date Funds BlackRock Prepared Portfolios Conservative Prepared Portfolio Moderate Prepared Portfolio Growth Prepared Portfolio Aggressive Growth Prepared Portfolio BlackRock Lifecycle Prepared Portfolios Prepared Portfolio 2010 Prepared Portfolio 2015 Prepared Portfolio 2020 Prepared Portfolio 2025 Prepared Portfolio 2030 Prepared Portfolio 2035 Prepared Portfolio 2040 Prepared Portfolio 2045 Prepared Portfolio 2050 * See the prospectus for information on specific limitations on investments in the fund. + Mixed asset fund. BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and certain funds are also distributed by FAM Distributors, Inc. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund's prospectus contains this and other information and is available at www.blackrock.com or by calling 800-882-0052 or from your financial advisor. The prospectus should be read carefully before investing. BLACKROCK BALANCED CAPITAL FUND, INC. SEPTEMBER 30, 2007 27 This report is transmitted to shareholders only. It 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 returns 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. BlackRock Balanced Capital Fund, Inc. P.O. Box 9011 Princeton, NJ 08543-9011 BLACKROCK #10252-9/07 Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant's principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com. Item 3 - Audit Committee Financial Expert - The registrant's board of directors or trustees, as applicable (the "board of directors") has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent: Donald W. Burton (not reappointed to the Audit Committee, effective November 1, 2007) Robert M. Hernandez (term began, effective November 1, 2007) John F. O'Brien (not reappointed to the Audit Committee, effective November 1, 2007) David H. Walsh (not reappointed to the Audit Committee, effective November 1, 2007) Fred G. Weiss Richard R. West (term began, effective November 1, 2007) Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. Item 4 - Principal Accountant Fees and Services
- ---------------------------------------------------------------------------------------------------------------------- (a) Audit Fees Fees (b) Audit-Related(1) (c) Tax Fees(2) (d) All Other Fees(3) - ---------------------------------------------------------------------------------------------------------------------- Current Previous Current Previous Current Previous Current Previous Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Entity Name Year End Year End Year End Year End Year End Year End Year End Year End - ---------------------------------------------------------------------------------------------------------------------- BlackRock Balanced Capital Fund, Inc. $37,500 $37,500 $0 $0 $6,100 $6,000 $1,042 $0 - ----------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees. 2 The nature of the services include tax compliance, tax advice and tax planning. 3 The nature of the services include a review of compliance procedures and attestation thereto. (e)(1) Audit Committee Pre-Approval Policies and Procedures: The registrant's audit committee (the "Committee") has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the registrant's affiliated service providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are a) consistent with the SEC's auditor independence rules and b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis ("general pre-approval"). However, such services will only be deemed pre-approved provided that any individual project does not exceed $5,000 attributable to the registrant or $50,000 for all of the registrants the Committee oversees. Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. (e)(2) None of the services described in each of Items 4(b) through (d) were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not Applicable (g) Affiliates' Aggregate Non-Audit Fees: -------------------------------------------------------------------- Entity Name Current Fiscal Year Previous Fiscal End Year End -------------------------------------------------------------------- BlackRock Balanced Capital Fund, Inc. $291,642 $3,056,250 -------------------------------------------------------------------- (h) The registrant's audit committee has considered and determined that the provision of non-audit services that were rendered to the registrant's investment adviser (not including any non-affiliated sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by the registrant's investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. Regulation S-X Rule 2-01(c)(7)(ii) - $284,500, 0% Item 5 - Audit Committee of Listed Registrants - Not Applicable Item 6 - Schedule of Investments - The registrant's Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form. Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies - Not Applicable Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not Applicable Item 9 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers - Not Applicable Item 10 - Submission of Matters to a Vote of Security Holders - The registrant's Nominating Committee will consider nominees to the Board recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations which include biographical information and set forth the qualifications of the proposed nominee to the registrant's Secretary. There have been no material changes to these procedures. Item 11 - Controls and Procedures 11(a) - The registrant's principal executive and principal financial officers or persons performing similar functions have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities and Exchange Act of 1934, as amended. 11(b) - There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12 - Exhibits attached hereto 12(a)(1) - Code of Ethics - See Item 2 12(a)(2) - Certifications - Attached hereto 12(a)(3) - Not Applicable 12(b) - Certifications - Attached hereto Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BlackRock Balanced Capital Fund, Inc. By: /s/ Donald C. Burke ----------------------------------- Donald C. Burke, Chief Executive Officer (principal executive officer) of BlackRock Balanced Capital Fund, Inc. Date: November 20, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Donald C. Burke ----------------------------------- Donald C. Burke, Chief Executive Officer (principal executive officer) of BlackRock Balanced Capital Fund, Inc. Date: November 20, 2007 By: /s/ Neal J. Andrews, ----------------------------------- Neal J. Andrews, Chief Financial Officer (principal financial officer) of BlackRock Balanced Capital Fund, Inc. Date: November 20, 2007 EX-99.CERT 2 e602934_ex99-cert.txt EX-99. CERT CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Donald C. Burke, Chief Executive Officer (principal executive officer) of BlackRock Balanced Capital Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of BlackRock Balanced Capital Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committees of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 20, 2007 /s/ Donald C. Burke - ---------------------- Donald C. Burke, Chief Executive Officer (principal executive officer) of BlackRock Balanced Capital Fund, Inc. EX-99. CERT CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Neal J. Andrews, Chief Financial Officer (principal financial officer) of BlackRock Balanced Capital Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of BlackRock Balanced Capital Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committees of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 20, 2007 /s/ Neal J. Andrews - ---------------------- Neal J. Andrews, Chief Financial Officer (principal financial officer) of BlackRock Balanced Capital Fund, Inc. EX-99.906CERT 3 e602934_ex99-1350cert.txt Exhibit 99.1350CERT Certification Pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes Oxley Act Pursuant to 18 U.S.C. ss. 1350, the undersigned officer of BlackRock Balanced Capital Fund, Inc. (the "Registrant"), hereby certifies, to the best of his knowledge, that the Registrant's Report on Form N-CSR for the period ended September 30, 2007, (the "Report") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 20, 2007 /s/ Donald C. Burke - ---------------------- Donald C. Burke, Chief Executive Officer (principal executive officer) of BlackRock Balanced Capital Fund, Inc. Pursuant to 18 U.S.C. ss. 1350, the undersigned officer of BlackRock Balanced Capital Fund, Inc. (the "Registrant"), hereby certifies, to the best of his knowledge, that the Registrant's Report on Form N-CSR for the period ended September 30, 2007, (the "Report") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 20, 2007 /s/ Neal J. Andrews - ---------------------- Neal J. Andrews, Chief Financial Officer (principal financial officer) of BlackRock Balanced Capital Fund, Inc. This certification is being furnished pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, as amended, and 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----