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