MERRILL LYNCH
BALANCED CAPITAL
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
September 30, 2000
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc.
DEAR SHAREHOLDER
On July 1, 2000, Merrill Lynch Capital Fund, Inc. changed its name to Merrill
Lynch Balanced Capital Fund, Inc. The Fund's management believes that the new
name better reflects the Fund's main investment strategies. The change in the
Fund's name does not connote a change in its investment objective, which remains
the same: to seek the highest total investment return through a fully managed
investment policy utilizing equity, debt (including money market) and
convertible securities. Also effective July 1, 2000, the Fund will maintain a
minimum of 25% in fixed-income securities at all times.
Economic Environment
The performance of the US financial markets during the six-month period ended
September 30, 2000 continued to be dictated by investors' changing perceptions
about the pace of economic growth, future rate of inflation and associated
course of action by the Federal Reserve Board. During the initial months of the
period, aggressive Federal Reserve Board monetary policy initiatives, including
a 50 basis point increase (0.50%) in the Federal Funds rate in May, precipitated
a sharp correction in equity prices as rising interest rates were expected to
slow economic and corporate earnings growth and compress stock market
valuations. Furthermore, value-style investing outperformed growth-style
investing as investors shifted away from the high-priced growth and technology
sectors of the market toward more defensive vehicles.
However, by mid-summer, accumulating evidence of an economic slowdown suggested
the Federal Reserve Board's tightening bias was nearing an end. Moderating
payroll employment growth, a weakening manufacturing sector and sluggish retail
sales suggested that the Federal Reserve Board had indeed engineered a soft
landing for the economy and that further increases in short-term interest rates
were unnecessary. This precipitated a sharp increase in stock prices and a
resurgence in the growth and technology categories.
By late summer, investor anxiety over the direction of the four E's (the
economy, earnings, energy and the euro), combined with numerous high-profile
earnings shortfall announcements to produce another substantial correction in
equity prices. Slowing economic growth, high energy prices and record strength
in the US dollar caused tremendous concern about the sustainability of corporate
earnings growth. This apprehension was exacerbated by third-quarter earnings
disappointments from such prominent companies as Intel Corp., Eastman Kodak
Company and Apple Computer, Inc., resulting in significant stock market
declines.
For the six-month period as a whole, the unmanaged benchmark Standard & Poor's
500 (S&P 500) Index produced a -3.60% total return. Technology stocks suffered
the most during this market correction because of the high expectations and high
valuations these stocks commanded. The unmanaged Russell 1000 Value Index had a
+2.81% total return for the same period, while the unmanaged Russell 1000 Growth
Index had a -7.93% total return for the six-month period. Fixed-income returns
were positive for the period. Long-term interest rates continued to decline
because of investor confidence in the Federal Reserve Board's ability to slow
economic growth and suppress inflationary pressures. Bonds also represented a
safe haven for investors in a deteriorating equity market. As a result, the
unmanaged Merrill Lynch Domestic Bond Master Index recorded a +4.67% total
return for the six-month period, while cash equivalents, as measured by the
unmanaged Merrill Lynch 91-Day Treasury Bill Index, had a +3.04% total return
for the same period.
Portfolio Matters
Total returns for Merrill Lynch Balanced Capital Fund, Inc.'s Class A, Class B,
Class C and Class D Shares for the six months ended September 30, 2000 were
+3.72%, +3.22%, +3.18% and +3.59%, respectively. (Fund results shown do not
reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 4 and 5 of this report to
shareholders.) The Fund performed well during this volatile and challenging
period, providing positive returns.
1
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
While recent stock price declines reduced excessively high valuations and
eliminated much of the speculative fervor that gripped the market earlier this
year, we continue to believe corporate earnings expectations remain too high
given the slowing pace of economic growth and rising cost pressures.
Consequently, we expect this highly volatile and unpredictable investment
condition to continue with a bias to the downside. We also expect our
conservative investment position to prove appropriate in the weeks and months
ahead.
Our asset allocation at September 30, 2000 was 61.6% of net assets invested in
equities, 32.8% in fixed-income securities and 5.6% in cash equivalents. This
compares to 64.4% in equities, 34.1% in fixed-income securities and 1.5% in cash
equivalents at the end of March. However, within the equity portfolio, the
precipitous decline in many stock groups during the past few months suggests to
us that some attractive new investment opportunities may be forthcoming. We
will look to take advantage of such opportunities in an effort to improve the
risk/reward profile of our equities and enhance the Fund's return potential.
Within the fixed-income portfolio, we will seek to continue to sustain overall
portfolio yield, without sacrificing overall credit quality.
Within the equity component of the portfolio, we continued to adjust our
holdings to enhance quality and better control risk during the period, adding 12
new investments, increasing positions in 10 holdings, reducing positions in 19
holdings and eliminating 15 stocks from the portfolio. Notable among the new
positions is The Boeing Company, the world's largest commercial airplane
manufacturer, which is expected to benefit from a surge in new aircraft orders,
internal restructuring efforts to improve margins and more astute capital
deployment. Coupled with its growing defense, satellite and services businesses,
we believe the company's prospects are bright and that the stock represents good
value. We also established a position in Tenet Healthcare Corporation, the
hospital management company, which we expect to benefit from a much-improved
pricing environment, as both the government-financed Medicare program and
private sector health maintenance organizations have increased reimbursement
rates for hospital services. Demographically driven admissions growth, better
pricing and ongoing cost efficiencies represent a formula for attractive
earnings and cash flow growth, which is not adequately reflected in the current
stock price, in our opinion.
In light of our concerns about the implications of a slowing economy, we
eliminated positions in several companies whose fortunes are closely tied to the
continuation of strong economic growth, such as Union Pacific Corporation, the
railroad company, Deere & Company, the farm and industrial machinery concern and
Carnival Corporation, the world's largest cruise line. We also sold our position
in Fortune Brands, Inc., the consumer products company, whose eclectic mix of
business, ranging from golf equipment to office products, had failed to generate
consistent shareholder value improvement.
Within the fixed-income portion of the portfolio, maintaining a relatively high
average duration of 5.5 years proved beneficial as domestic long-term interest
rates continued to decline. We also benefited from a narrowing in interest rates
spreads in corporate bonds. These gains were partially offset by the poor
performance of high-yield corporate bonds during the period. In order to sustain
portfolio yield in a declining interest rate environment, we reduced our
position in US Treasury securities from 36.2% of
2
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
fixed-income assets on March 31, 2000 to 31.4% on September 30, 2000, increased
investment-grade corporate bond exposure from 53.2% to 56.2% and high-yield
corporate bond exposure from 7.8% to 9.7% of fixed-income assets. Despite this
shift, the average quality ratings of our bonds held steady at A2/A, as rated by
one of the two major bond rating agencies, while the average yield-to-maturity
actually increased 8 basis points to 7.83%.
The Fund seeks to invest in above-average companies whose stocks sell at
below-average valuation levels. On average, the stocks in the portfolio have
generated comparable returns on shareholders' equity and have stronger balance
sheets, while offering faster earnings growth than the average company as
measured by the S&P 500 Index. However, these same stocks sell at an average
price/earnings ratio of 23.0 times estimated year 2000 earnings per share as
compared to 29.8 times for the S&P 500 Index, 5.2 times current book-value per
share as compared to 7.1 times for the S&P 500 Index and provide an
above-average 1.2% dividend yield as compared to 1.1% for the S&P 500 Index. We
believe this formula will provide superior risk-adjusted returns over time.
In Conclusion
We appreciate your continued interest and participation in Merrill Lynch
Balanced Capital Fund, Inc., and we look forward to assisting you with your
financial needs in the months and years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Kurt Schansinger
Kurt Schansinger
Senior Vice President and Portfolio Manager
November 3, 2000
3
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
A Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.75% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 8 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer agency
fees applicable to each class, which are deducted from the income
available to be paid to shareholders.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 9/30/00 + 9.58% + 3.83%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +11.38 +10.18
--------------------------------------------------------------------------------
Ten Years Ended 9/30/00 +13.19 +12.58
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%. (Prior to October 21, 1994, Class A Shares
were offered at a higher sales charge. Thus, actual returns would have
been lower than shown for the ten-year period.)
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 9/30/00 + 8.48% + 4.64%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +10.25 +10.25
--------------------------------------------------------------------------------
Ten Years Ended 9/30/00 +12.04 +12.04
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 9/30/00 + 8.46% + 7.50%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +10.24 +10.24
--------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/00 +12.17 +12.17
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
One Year Ended 9/30/00 + 9.32% + 3.58%
--------------------------------------------------------------------------------
Five Years Ended 9/30/00 +11.10 + 9.91
--------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/00 +13.04 +12.02
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
PERFORMANCE DATA (concluded)
Results of a $1,000 Investment Since Inception--Class A Shares
(5.25% sales charge--$947.50 net amount invested; assuming reinvestment of all
dividends and capital gains distributions)
[The following information was depicted as a mountain chart.]
Results of a $1,000 Investment Since Inception--Class A Shares
(5.25% sales charge--$947.50 net amount invested; assuming reinvestment of all
dividends and capital gains distributions)
A mountain chart depicting the growth of an investment in the Fund's Class A
Shares from $947.50 on November 8, 1973 to $23,450.44 on September 30, 2000.
Recent Performance Results
<TABLE>
<CAPTION>
Ten Years/
6 Month 12 Month Since Inception
As of September 30, 2000 Total Return Total Return Total Return
==============================================================================================================
<S> <C> <C> <C>
ML Balanced Capital Fund, Inc. Class A Shares* + 3.72% + 9.58% +245.10%
--------------------------------------------------------------------------------------------------------------
ML Balanced Capital Fund, Inc. Class B Shares* + 3.22 + 8.48 +211.67
--------------------------------------------------------------------------------------------------------------
ML Balanced Capital Fund, Inc. Class C Shares* + 3.18 + 8.46 + 97.92
--------------------------------------------------------------------------------------------------------------
ML Balanced Capital Fund, Inc. Class D Shares* + 3.59 + 9.32 +107.28
--------------------------------------------------------------------------------------------------------------
Dow Jones Industrial Average** - 1.73 + 4.60 +452.55/+208.68
--------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index** - 3.60 +13.28 +490.81/+244.21
==============================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's ten-year/since inception periods
are ten years for Class A & Class B Shares and from 10/21/94 for Class C &
Class D Shares.
** An unmanaged broad-based index comprised of common stocks. Ten years/since
inception total returns are ten years and from 10/21/94, respectively.
5
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aerospace 1,900,000 The Boeing Company $ 75,644,176 $ 119,700,000 1.9%
490,000 General Dynamics Corporation 30,870,000 30,778,125 0.5
-------------- -------------- ----
106,514,176 150,478,125 2.4
------------------------------------------------------------------------------------------------------------------------------------
Aerospace & 750,000 Northrop Grumman Corporation 58,588,727 68,156,250 1.1
Defense 1,750,000 Raytheon Company (Class B) 48,722,986 49,765,625 0.8
-------------- -------------- ----
107,311,713 117,921,875 1.9
------------------------------------------------------------------------------------------------------------------------------------
Banking 1,250,000 The Chase Manhattan Corporation 37,097,277 57,734,375 0.9
2,000,000 Wells Fargo Company 82,689,220 91,875,000 1.5
-------------- -------------- ----
119,786,497 149,609,375 2.4
------------------------------------------------------------------------------------------------------------------------------------
Banking & Financial 2,250,000 Citigroup Inc. 7,952,860 121,640,625 1.9
2,650,000 Mellon Financial Corporation 96,856,717 122,893,750 2.0
-------------- -------------- ----
104,809,577 244,534,375 3.9
------------------------------------------------------------------------------------------------------------------------------------
Beverages 2,750,000 Anheuser-Busch Companies, Inc. 103,314,819 116,359,375 1.9
------------------------------------------------------------------------------------------------------------------------------------
Building Materials 1,500,000 Masco Corporation 21,865,591 27,937,500 0.5
------------------------------------------------------------------------------------------------------------------------------------
Capital Goods 941,400 Minnesota Mining and Manufacturing
Company (3M) 84,462,671 85,785,075 1.4
------------------------------------------------------------------------------------------------------------------------------------
Chemicals 1,000,000 E.I. du Pont de Nemours and Company 57,376,944 41,437,500 0.7
------------------------------------------------------------------------------------------------------------------------------------
Communications 1,250,000 +Tellabs, Inc. 69,813,645 59,687,500 1.0
Equipment
------------------------------------------------------------------------------------------------------------------------------------
Computers 3,000,000 Compaq Computer Corporation 74,566,527 82,740,000 1.4
900,000 International Business Machines Corporation 95,101,252 101,250,000 1.6
-------------- -------------- ----
169,667,779 183,990,000 3.0
------------------------------------------------------------------------------------------------------------------------------------
Consumer Products 2,000,000 Kimberly-Clark Corporation 97,377,920 111,625,000 1.8
------------------------------------------------------------------------------------------------------------------------------------
Cosmetics 2,250,000 Avon Products, Inc. 88,893,787 91,968,750 1.5
------------------------------------------------------------------------------------------------------------------------------------
Diversified 2,500,000 ITT Industries, Inc. 84,824,992 81,093,750 1.3
Companies 750,000 +SPX Corporation 43,512,989 106,453,125 1.7
1,850,000 United Technologies Corporation 28,450,496 128,112,500 2.1
-------------- -------------- ----
156,788,477 315,659,375 5.1
------------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment 903,500 +CommScope, Inc. 21,691,493 22,135,750 0.4
------------------------------------------------------------------------------------------------------------------------------------
Financial Services 1,750,000 Federal National Mortgage Association 55,738,343 125,125,000 2.0
2,000,000 Stilwell Financial, Inc. 13,016,690 87,000,000 1.4
-------------- -------------- ----
68,755,033 212,125,000 3.4
------------------------------------------------------------------------------------------------------------------------------------
Food & Beverage 55,000 Nestle SA (Registered Shares) 57,660,037 114,556,816 1.8
------------------------------------------------------------------------------------------------------------------------------------
Footwear 1,500,000 Nike, Inc. (Class B) 65,615,311 60,093,750 1.0
------------------------------------------------------------------------------------------------------------------------------------
Hospital 3,000,000 +Tenet Healthcare Corporation 84,651,870 109,125,000 1.8
Management
------------------------------------------------------------------------------------------------------------------------------------
Insurance 1,300,000 American International Group, Inc. 21,186,000 124,393,750 2.0
1,550,000 XL Capital Ltd. (Class A) 32,854,099 113,925,000 1.8
-------------- -------------- ----
54,040,099 238,318,750 3.8
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Percent of
Industries Held Common Stocks Cost Value Net Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leisure/Hotels 2,000,000 +Harrah's Entertainment, Inc. $ 34,542,083 $ 55,000,000 0.9%
------------------------------------------------------------------------------------------------------------------------------------
Natural Gas 1,600,000 The Coastal Corporation 22,935,512 118,600,000 1.9
2,681,000 The Williams Companies, Inc. 22,507,036 113,272,250 1.8
-------------- -------------- ----
45,442,548 231,872,250 3.7
------------------------------------------------------------------------------------------------------------------------------------
Office Equipment 1,250,000 Pitney Bowes Inc. 59,831,726 49,296,875 0.8
------------------------------------------------------------------------------------------------------------------------------------
Oil--Integrated 1,750,000 Anadarko Petroleum Corporation 68,027,318 116,305,000 1.9
173,100 Unocal Corporation 4,955,187 6,134,231 0.1
-------------- -------------- ----
72,982,505 122,439,231 2.0
------------------------------------------------------------------------------------------------------------------------------------
Oil--Service 2,000,000 Halliburton Company 53,461,836 97,875,000 1.6
------------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 2,000,000 American Home Products Corporation 107,787,068 113,125,000 1.8
2,000,000 Pharmacia Corporation 82,135,406 120,375,000 1.9
-------------- -------------- ----
189,922,474 233,500,000 3.7
------------------------------------------------------------------------------------------------------------------------------------
Restaurants 2,750,000 McDonald's Corporation 68,056,324 83,015,625 1.3
------------------------------------------------------------------------------------------------------------------------------------
Telecommunications 1,000,000 Alcatel (ADR)* 30,025,188 62,875,000 1.0
1,000,000 Lucent Technologies Inc. 56,953,475 30,562,500 0.5
4,000,000 Telefonaktiebolaget LM Ericsson (ADR)* 22,419,480 59,000,000 0.9
2,500,000 Verizon Communications 160,290,968 121,093,750 2.0
1,500,000 +WorldCom, Inc. 71,858,990 45,562,500 0.7
-------------- -------------- ----
341,548,101 319,093,750 5.1
------------------------------------------------------------------------------------------------------------------------------------
Wireless 3,250,000 Motorola, Inc. 56,857,680 91,812,500 1.5
Communication-- 2,000,000 +Nextel Communications, Inc. (Class A) 18,773,589 93,500,000 1.5
Domestic Paging & -------------- -------------- ----
Cellular 75,631,269 185,312,500 3.0
------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks 2,581,816,305 3,830,754,122 61.8
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Corporate Bonds
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aerospace US$ 7,500,000 Boeing Capital Corp., 7.375% due 9/27/2010 7,492,125 7,565,100 0.1
10,000,000 Lockheed Martin Corporation,
7.95% due 12/01/2005 9,924,500 10,243,900 0.2
-------------- -------------- ----
17,416,625 17,809,000 0.3
------------------------------------------------------------------------------------------------------------------------------------
Air Transport 10,000,000 Continental Airlines, 8% due 12/15/2005 10,000,000 9,490,400 0.1
Northwest Airlines, Inc.:
20,000,000 7.625% due 3/15/2005 19,390,850 18,703,600 0.3
5,000,000 7.875% due 3/15/2008 4,473,700 4,556,650 0.1
-------------- -------------- ----
33,864,550 32,750,650 0.5
------------------------------------------------------------------------------------------------------------------------------------
Automobile 20,000,000 Hyundai Motor Co., Ltd., 7.60% due 19,916,100 18,026,080 0.3
Manufacturer 7/15/2007 (a)
------------------------------------------------------------------------------------------------------------------------------------
Automobile 16,000,000 Cummins Engine, 6.75% due 2/15/2007 15,865,120 14,812,480 0.2
Parts/Equipment 20,000,000 The Goodyear Tire & Rubber Company,
6.625% due 12/01/2006 19,920,000 18,238,200 0.3
-------------- -------------- ----
35,785,120 33,050,680 0.5
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Cost Value Net Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Automobile Hertz Corp.:
Rental/Service US$ 10,000,000 7.625% due 8/15/2007 $ 9,909,200 $ 9,911,600 0.1%
25,000,000 6.25% due 3/15/2009 23,889,900 22,489,250 0.4
20,000,000 Ryder Systems, Inc., 6.50% due 5/15/2005 19,960,600 18,860,620 0.3
-------------- -------------- ----
53,759,700 51,261,470 0.8
------------------------------------------------------------------------------------------------------------------------------------
Banking The Chase Manhattan Corporation:
14,000,000 6.50% due 8/01/2005 13,582,660 13,695,640 0.2
15,000,000 6.25% due 1/15/2006 13,892,250 14,450,550 0.2
21,000,000 First National Bank of Boston,
7.375% due 9/15/2006 20,615,700 21,035,700 0.4
20,000,000 First Security Corp., 7% due 7/15/2005 19,803,850 19,902,860 0.3
30,000,000 First Union Corp., 6.55% due 10/15/2035 29,953,350 29,098,500 0.5
21,500,000 Firstbank Puerto Rico, 7.625% due 12/20/2005 20,920,065 20,274,844 0.3
10,000,000 PNC Funding Corp., 6.125% due 2/15/2009 8,779,100 9,161,100 0.2
20,000,000 People's Bank--Bridgeport,
7.20% due 12/01/2006 19,956,700 18,645,200 0.3
27,500,000 Provident Bank, 6.375% due 1/15/2004 26,696,350 25,979,993 0.4
Union Planters Corp.:
20,000,000 6.25% due 11/01/2003 18,756,100 19,247,400 0.3
17,500,000 6.75% due 11/01/2005 16,802,475 16,793,875 0.3
-------------- -------------- ----
209,758,600 208,285,662 3.4
------------------------------------------------------------------------------------------------------------------------------------
Banks--Money 25,000,000 BankAmerica Corp., 6.625% due 10/15/2007 23,889,000 24,016,500 0.4
Center
------------------------------------------------------------------------------------------------------------------------------------
Beverages 10,000,000 Panamerican Beverages Inc.,
7.25% due 7/01/2009 10,037,500 8,847,700 0.1
------------------------------------------------------------------------------------------------------------------------------------
Chemicals Airgas Inc.:
8,000,000 7.15% due 9/17/2001 7,917,840 8,008,400 0.1
13,000,000 7.14% due 3/08/2004 12,952,100 11,811,605 0.2
40,000,000 Equistar Chemicals LP, 6.50% due 2/15/2006 38,162,416 36,141,480 0.6
20,000,000 FMC Corp., 6.75% due 5/05/2005 19,890,200 19,024,420 0.3
-------------- -------------- ----
78,922,556 74,985,905 1.2
------------------------------------------------------------------------------------------------------------------------------------
Electronics 17,500,000 Harris Corporation, 6.375% due 8/15/2002 17,467,950 17,383,975 0.3
------------------------------------------------------------------------------------------------------------------------------------
Entertainment 10,000,000 News America Holdings, 7.43% due 10/01/2026 10,070,200 9,887,240 0.2
10,000,000 News America Inc., 6.75% due 1/09/2038 10,000,000 9,323,200 0.1
20,000,000 Time Warner Inc., 7.25% due 10/15/2017 18,705,250 18,897,800 0.3
-------------- -------------- ----
38,775,450 38,108,240 0.6
------------------------------------------------------------------------------------------------------------------------------------
Finance 25,000,000 Finova Capital Corp., 7.429% due 10/14/2004 24,999,900 18,854,250 0.3
Ford Motor Credit Co.:
10,000,000 6.70% due 7/16/2004 9,630,300 9,837,300 0.2
20,000,000 7.75% due 2/15/2007 19,904,140 19,952,600 0.3
General Motors Acceptance Corporation:
10,000,000 5.75% due 11/10/2003 9,615,100 9,650,700 0.1
30,000,000 5.85% due 1/14/2009 26,484,400 26,751,600 0.4
35,000,000 Household Finance Corp., 7.875% due 3/01/2007 34,800,250 35,900,900 0.6
24,000,000 PNC Funding Corp., 6.125% due 9/01/2003 23,381,300 23,386,800 0.4
-------------- -------------- ----
148,815,390 144,334,150 2.3
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Cost Value Net Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial GATX Capital Corporation:
Leasing US$ 25,000,000 6.69% due 11/30/2005 $ 24,984,750 $ 23,788,250 0.4%
25,000,000 7.75% due 12/01/2006 24,827,000 23,887,000 0.4
3,000,000 XTRA Inc., 6.50% due 1/15/2004 2,988,330 2,932,680 0.0
-------------- -------------- ----
52,800,080 50,607,930 0.8
------------------------------------------------------------------------------------------------------------------------------------
Foods Nabisco, Inc. (b):
21,500,000 6.125% due 2/01/2033 21,405,450 20,616,135 0.3
20,000,000 6.375% due 2/01/2035 19,939,200 18,571,000 0.3
-------------- -------------- ----
41,344,650 39,187,135 0.6
------------------------------------------------------------------------------------------------------------------------------------
Healthcare 27,500,000 Medpartners, Inc., 7.375% due 10/01/2006 23,445,120 23,718,750 0.4
------------------------------------------------------------------------------------------------------------------------------------
Home--Builders 35,000,000 Champion Enterprises, Inc.,
7.625% due 5/15/2009 31,898,440 27,001,100 0.4
------------------------------------------------------------------------------------------------------------------------------------
Home 14,500,000 Armstrong World, 6.50% due 8/15/2005 13,784,150 10,797,715 0.2
Furnishings Interface, Inc.:
4,000,000 9.50% due 11/15/2005 3,885,000 3,820,000 0.1
10,000,000 7.30% due 4/01/2008 9,934,520 8,600,000 0.1
-------------- -------------- ----
27,603,670 23,217,715 0.4
------------------------------------------------------------------------------------------------------------------------------------
Industrial 10,000,000 Conagra Inc., 7.50% due 9/15/2005 9,978,800 10,080,700 0.1
------------------------------------------------------------------------------------------------------------------------------------
Industrial-- 25,000,000 Occidental Petroleum Corp.,
Energy 7.65% due 2/15/2006 25,076,100 25,331,500 0.4
------------------------------------------------------------------------------------------------------------------------------------
Industrial-- Lockheed Martin Corp.:
Manufacturing 10,000,000 7.25% due 5/15/2006 9,898,700 9,919,500 0.2
15,000,000 7.70% due 6/15/2008 15,046,750 15,097,200 0.2
-------------- -------------- ----
24,945,450 25,016,700 0.4
------------------------------------------------------------------------------------------------------------------------------------
Leisure Royal Caribbean Cruises Ltd.:
10,000,000 7.125% due 9/18/2002 9,900,050 9,720,300 0.2
20,000,000 7.25% due 8/15/2006 19,817,555 18,208,000 0.3
5,000,000 7.25% due 3/15/2018 3,864,600 3,868,850 0.1
-------------- -------------- ----
33,582,205 31,797,150 0.6
------------------------------------------------------------------------------------------------------------------------------------
Medical 5,000,000 Columbia/HCA--The Healthcare Co.,
7% due 7/01/2007 4,589,000 4,618,750 0.1
------------------------------------------------------------------------------------------------------------------------------------
Natural Gas-- 27,500,000 The Coastal Corporation, 6.70% due 2/15/2027 27,225,400 26,308,480 0.4
Pipelines 25,000,000 Williams Holdings of Delaware, Inc.,
6.25% due 2/01/2006 24,869,750 23,900,000 0.4
-------------- -------------- ----
52,095,150 50,208,480 0.8
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Face Percent of
Industries Amount Corporate Bonds Cost Value Net Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oil & Gas US$ 10,000,000 Diamond Shamrock, 7.65% due 7/01/2026 $ 9,920,000 $ 9,896,200 0.2%
11,500,000 Giant Industries, Inc., 9% due 9/01/2007 (a) 11,368,750 10,666,250 0.2
12,500,000 Occidental Petroleum Corp. (MOPPRS), 6.40%
due 4/01/2013 (b) 12,221,600 12,184,062 0.2
35,000,000 Perez Companc SA, 8.125% due 7/15/2007 (a) 32,758,130 30,100,000 0.5
21,000,000 R & B Falcon Corporation, 6.75% due 4/15/2005 20,491,300 19,608,750 0.3
20,000,000 Tosco Corporation, 7.625% due 5/15/2006 21,264,300 20,300,400 0.3
10,000,000 Union Oil of California, 6.11% due 2/17/2004 10,000,000 9,624,130 0.1
15,000,000 United Refining Co., 10.75% due 6/15/2007 15,000,000 9,900,000 0.2
-------------- -------------- ----
133,024,080 122,279,792 2.0
------------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Boise Cascade Corporation:
Products 10,000,000 7.35% due 10/11/2004 10,316,700 9,733,200 0.2
20,000,000 7.66% due 5/27/2005 20,000,000 19,634,800 0.3
29,000,000 Champion International Corp.,
6.65% due 12/15/2037 28,755,480 27,234,190 0.4
-------------- -------------- ----
59,072,180 56,602,190 0.9
------------------------------------------------------------------------------------------------------------------------------------
Pollution 20,000,000 Browning-Ferris Industries, Inc.,
Control 6.375% due 1/15/2008 19,627,200 16,100,000 0.3
------------------------------------------------------------------------------------------------------------------------------------
Railroads 17,000,000 Transportacion Maritima Mexicana, SA de CV,
10% due 11/15/2006 17,152,730 13,430,000 0.2
------------------------------------------------------------------------------------------------------------------------------------
Real Estate 10,000,000 Franchise Finance Corp. of America,
Investment 6.95% due 8/29/2007 10,000,000 9,091,500 0.2
Trusts
------------------------------------------------------------------------------------------------------------------------------------
Retail--Stores Tandy Corporation:
20,000,000 6.125% due 1/15/2003 19,971,600 19,812,200 0.3
15,000,000 7.22% due 9/29/2004 15,000,000 15,326,250 0.3
-------------- -------------- ----
34,971,600 35,138,450 0.6
------------------------------------------------------------------------------------------------------------------------------------
Telecommunications 20,000,000 Nextel Communications, Inc.,
9.375% due 11/15/2009 19,840,400 19,550,000 0.3
10,000,000 Pacific Telecom, Inc., 6.625% due 10/20/2005 10,000,000 9,583,530 0.1
25,000,000 Sprint Capital Corporation, 6.90% due 5/01/2019 23,394,600 22,104,500 0.4
-------------- -------------- ----
53,235,000 51,238,030 0.8
------------------------------------------------------------------------------------------------------------------------------------
Utilities-- 30,000,000 Empresa Nacional de Electricidad SA (Endesa),
Electric, Gas & 7.325% due 2/01/2037 30,024,500 27,630,030 0.5
Water 15,000,000 Enersis SA, 6.60% due 12/01/2026 14,350,102 14,442,150 0.2
20,000,000 Tata Electric Co., 8.50% due 8/19/2017 (a) 19,018,210 16,366,000 0.3
-------------- -------------- ----
63,392,812 58,438,180 1.0
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds 1,406,242,808 1,341,964,064 21.7
------------------------------------------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations**
------------------------------------------------------------------------------------------------------------------------------------
Freddie Mac Participation Certificates:
911,261 6.50% due 5/15/2008 870,823 883,923 0.0
4,895,292 7% due 8/15/2008 4,662,766 4,838,653 0.1
13,000,000 Gold Program, 6% due 2/15/2011 12,020,938 12,116,000 0.2
------------------------------------------------------------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations 17,554,527 17,838,576 0.3
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Face Percent of
Amount Foreign Government Obligations Cost Value Net Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US$ 10,000,000 Province of Mendoza, 10% due 9/04/2007 (a) $ 9,931,700 $ 6,600,000 0.1%
35,000,000 Republic of Argentina, 8.75% due 7/10/2002 (a) 31,404,750 32,655,000 0.5
------------------------------------------------------------------------------------------------------------------------------------
Total Foreign Government Obligations 41,336,450 39,255,000 0.6
------------------------------------------------------------------------------------------------------------------------------------
US Government Obligations
------------------------------------------------------------------------------------------------------------------------------------
US Treasury Bonds:
180,000,000 6.25% due 8/15/2023 165,899,609 183,515,400 3.0
50,000,000 6% due 2/15/2026 52,653,906 49,578,000 0.8
25,000,000 5.50% due 8/15/2028 23,211,328 23,195,250 0.3
US Treasury Notes:
100,000,000 5.875% due 11/15/2005 94,952,813 99,937,000 1.6
250,000,000 5.625% due 2/15/2006 249,112,109 246,915,000 4.0
35,000,000 3.625% due 1/15/2008 34,855,937 36,523,980 0.6
------------------------------------------------------------------------------------------------------------------------------------
Total US Government Obligations 620,685,702 639,664,630 10.3
------------------------------------------------------------------------------------------------------------------------------------
Short-Term Investments
------------------------------------------------------------------------------------------------------------------------------------
Commercial 35,000,000 AEP Inc., 6.49% due 11/01/2000 34,798,089 34,798,089 0.6
Paper*** 25,000,000 American Home Products, Inc.,
6.48% due 10/26/2000 24,883,000 24,883,000 0.4
72,435,000 General Motors Acceptance Corp.,
6.75% due 10/02/2000 72,407,837 72,407,837 1.2
25,000,000 J.P. Morgan Securities Inc.,
6.50% due 10/06/2000 24,972,917 24,972,917 0.4
25,000,000 Motorola Credit Corporation,
6.49% due 10/16/2000 24,927,889 24,927,889 0.4
35,000,000 SBC Communications Inc., 6.48% due 10/23/2000 34,855,100 34,855,100 0.6
30,000,000 Target Corporation, 6.48% due 10/27/2000 29,854,200 29,854,200 0.5
------------------------------------------------------------------------------------------------------------------------------------
US Government 38,295,000 Federal Home Loan Banks, 6.41% due 10/11/2000 38,219,995 38,219,995 0.6
Agency Freddie Mac Participation Certificates:
Obligations*** 51,974,000 6.44% due 10/03/2000 51,946,107 51,946,107 0.8
14,639,000 6.41% due 10/10/2000 14,612,934 14,612,934 0.2
------------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments 351,478,068 351,478,068 5.7
------------------------------------------------------------------------------------------------------------------------------------
Total Investments $5,019,113,860 6,220,954,460 100.4
==============
Liabilities in Excess of Other Assets (27,485,541) (0.4)
-------------- -----
Net Assets $6,193,468,919 100.0%
============== =====
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* American Depositary Receipts (ADR).
** Subject to principal paydowns.
*** Commercial Paper and certain US Government Agency Obligations are traded
on a discount basis; the interest rates shown reflect the discount rates
paid at the time of purchase by the Fund.
+ Non-income producing security.
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Floating rate note.
See Notes to Financial Statements.
11
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of September 30, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$5,019,113,860) ....... $6,220,954,460
Receivables:
Interest ................................................... $ 32,653,642
Securities sold ............................................ 20,093,603
Dividends .................................................. 3,716,900
Capital shares sold ........................................ 3,069,614 59,533,759
--------------
Prepaid registration fees and other assets .................... 159,030
--------------
Total assets .................................................. 6,280,647,249
--------------
------------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Capital shares redeemed .................................... 75,672,748
Securities purchased ....................................... 3,310,808
Distributor ................................................ 2,214,795
Investment adviser ......................................... 1,981,397 83,179,748
--------------
Accrued expenses and other liabilities ........................ 3,998,582
--------------
Total liabilities ............................................. 87,178,330
--------------
------------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .................................................... $6,193,468,919
==============
------------------------------------------------------------------------------------------------------------------------------------
Net Assets Class A Shares of Common Stock, $.10 par value, 400,000,000
Consist of: shares authorized ............................................. $ 7,605,043
Class B Shares of Common Stock, $.10 par value, 500,000,000
shares authorized ............................................. 6,796,589
Class C Shares of Common Stock, $.10 par value, 200,000,000
shares authorized ............................................. 800,729
Class D Shares of Common Stock, $.10 par value, 200,000,000
shares authorized ............................................. 4,439,959
Paid-in capital in excess of par .............................. 4,609,238,550
Undistributed investment income--net .......................... 35,408,091
Undistributed realized capital gains on investments and foreign
currency transactions--net .................................... 327,486,193
Unrealized appreciation on investments and foreign
currency transactions--net .................................... 1,201,693,765
--------------
Net assets .................................................... $6,193,468,919
==============
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value: Class A--Based on net assets of $2,426,636,386 and 76,050,430
shares outstanding ................................... $ 31.91
==============
Class B--Based on net assets of $2,108,704,872 and 67,965,893
shares outstanding ................................... $ 31.03
==============
Class C--Based on net assets of $244,961,718 and 8,007,286
shares outstanding ................................... $ 30.59
==============
Class D--Based on net assets of $1,413,165,943 and 44,399,594
shares outstanding ................................... $ 31.83
==============
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
FINANCIAL INFORMATION (continued)
Statement of Operations for the Six Months Ended September 30, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investment Interest and discount earned ....................... $ 85,718,825
Income: Dividends (net of $481,050 foreign withholding tax). 27,721,074
Other .............................................. 18,675
------------
Total income ....................................... 113,458,574
------------
-----------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees ........................... $ 13,485,089
Account maintenance and distribution fees--Class B . 12,088,639
Transfer agent fees--Class B ....................... 2,180,855
Transfer agent fees--Class A ....................... 2,060,359
Account maintenance fees--Class D .................. 1,775,423
Account maintenance and distribution fees--Class C . 1,352,496
Transfer agent fees--Class D ....................... 1,144,324
Transfer agent fees--Class C ....................... 256,935
Custodian fees ..................................... 188,666
Printing and shareholder reports ................... 147,219
Registration fees .................................. 69,062
Professional fees .................................. 58,847
Pricing fees ....................................... 31,457
Directors' fees and expenses ....................... 21,792
Other .............................................. 88,129
-------------
Total expenses ..................................... 34,949,292
------------
Investment income--net ............................. 78,509,282
------------
-----------------------------------------------------------------------------------------------------------
Realized & Realized gain from:
Unrealized Gain Investments--net ................................. 329,455,613
(Loss) on Foreign currency transactions--net ............... 258,872 329,714,485
Investments & -------------
Foreign Currency
Transactions--Net: Change in unrealized appreciation/depreciation on:
Investments--net ................................. (191,724,019)
Foreign currency transactions--net ............... (42,770) (191,766,789)
------------- ------------
Net Increase in Net Assets Resulting from Operations $216,456,978
============
-----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 2000 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net .............................................. $ 78,509,282 $ 205,681,788
Realized gain on investments and foreign currency transactions--net . 329,714,485 782,698,037
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net .................................. (191,766,789) (649,444,784)
--------------- ----------------
Net increase in net assets resulting from operations ................ 216,456,978 338,935,041
--------------- ----------------
------------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Class A .......................................................... (41,114,008) (89,124,959)
Shareholders: Class B .......................................................... (25,505,819) (79,193,140)
Class C .......................................................... (2,953,692) (8,033,279)
Class D .......................................................... (21,284,053) (39,335,920)
Realized gain on investments--net:
Class A .......................................................... (104,884,240) (282,403,074)
Class B .......................................................... (101,832,137) (352,157,123)
Class C .......................................................... (11,561,691) (37,729,475)
Class D .......................................................... (58,856,771) (137,036,994)
--------------- ----------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ....................................... (367,992,411) (1,025,013,964)
--------------- ----------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Share Net decrease in net assets derived from capital
Transactions: share transactions .................................................. (966,467,987) (2,505,092,872)
--------------- ----------------
------------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ........................................ (1,118,003,420) (3,191,171,795)
Beginning of period ................................................. 7,311,472,339 10,502,644,134
--------------- ----------------
End of period* ...................................................... $ 6,193,468,919 $ 7,311,472,339
=============== ================
------------------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net ................................ $ 35,408,091 $ 47,756,381
=============== ================
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights
<TABLE>
<CAPTION>
Class A+
----------------------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended March 31,
Sept. 30, ------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ..... $ 32.66 $ 35.03 $ 37.56 $ 31.39 $ 30.90
Operating ----------- ----------- ----------- ----------- -----------
Performance: Investment income--net ................... .45 .94 1.00 1.11 1.25
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ........................ .68 .62 (1.28) 8.14 2.43
----------- ----------- ----------- ----------- -----------
Total from investment operations ......... 1.13 1.56 (.28) 9.25 3.68
----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net ................ (.53) (.94) (1.08) (1.11) (1.25)
Realized gain on investments--net ..... (1.35) (2.99) (1.17) (1.97) (1.94)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions ........ (1.88) (3.93) (2.25) (3.08) (3.19)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ........... $ 31.91 $ 32.66 $ 35.03 $ 37.56 $ 31.39
=========== =========== =========== =========== ===========
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ....... 3.72%++ 4.58% (.68%) 30.71% 12.62%
Return:** =========== =========== =========== =========== ===========
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ................................. .58%* .56% .57% .55% .55%
Average =========== =========== =========== =========== ===========
Net Assets: Investment income--net ................... 2.82%* 2.74% 2.86% 3.21% 3.99%
=========== =========== =========== =========== ===========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) . $ 2,426,636 $ 2,721,503 $ 3,631,440 $ 4,155,677 $ 3,291,219
Data: =========== =========== =========== =========== ===========
Portfolio turnover ....................... 18% 33% 33% 38% 47%
=========== =========== =========== =========== ===========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
15
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class B+
----------------------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended March 31,
Sept. 30, ------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ..... $ 31.77 $ 34.25 $ 36.68 $ 30.72 $ 30.30
Operating ----------- ----------- ----------- ----------- -----------
Performance: Investment income--net ................... .28 .57 .63 .74 .91
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ........................ .67 .60 (1.25) 7.96 2.39
----------- ----------- ----------- ----------- -----------
Total from investment operations ......... .95 1.17 (.62) 8.70 3.30
----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net ................ (.34) (.66) (.64) (.77) (.94)
Realized gain on investments--net ..... (1.35) (2.99) (1.17) (1.97) (1.94)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions ........ (1.69) (3.65) (1.81) (2.74) (2.88)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ........... $ 31.03 $ 31.77 $ 34.25 $ 36.68 $ 30.72
=========== =========== =========== =========== ===========
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ....... 3.22%++ 3.48% (1.65%) 29.38% 11.48%
Return:** =========== =========== =========== =========== ===========
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ................................. 1.60%* 1.58% 1.59% 1.57% 1.57%
Average =========== =========== =========== =========== ===========
Net Assets: Investment income--net ................... 1.81%* 1.71% 1.85% 2.19% 2.97%
=========== =========== =========== =========== ===========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) . $ 2,108,705 $ 2,853,699 $ 4,866,564 $ 5,938,708 $ 4,977,431
Data: =========== =========== =========== =========== ===========
Portfolio turnover ....................... 18% 33% 33% 38% 47%
=========== =========== =========== =========== ===========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
16
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
<CAPTION>
Class C+
----------------------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended March 31,
Sept. 30, ------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ..... $ 31.36 $ 33.82 $ 36.31 $ 30.44 $ 30.08
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net ................... .27 .57 .62 .73 .90
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ........................ .66 .59 (1.25) 7.89 2.36
--------- --------- --------- --------- ---------
Total from investment operations ......... .93 1.16 (.63) 8.62 3.26
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net ................ (.35) (.63) (.69) (.78) (.96)
Realized gain on investments--net ..... (1.35) (2.99) (1.17) (1.97) (1.94)
--------- --------- --------- --------- ---------
Total dividends and distributions ........ (1.70) (3.62) (1.86) (2.75) (2.90)
--------- --------- --------- --------- ---------
Net asset value, end of period ........... $ 30.59 $ 31.36 $ 33.82 $ 36.31 $ 30.44
========= ========= ========= ========= =========
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ....... 3.18%++ 3.50% (1.70%) 29.40% 11.45%
Return:** ========= ========= ========= ========= =========
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ................................. 1.61%* 1.59% 1.59% 1.58% 1.58%
Average ========= ========= ========= ========= =========
Net Assets: Investment income--net ................... 1.79%* 1.70% 1.83% 2.18% 2.96%
========= ========= ========= ========= =========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) . $ 244,962 $ 308,150 $ 491,234 $ 512,783 $ 322,438
Data: ========= ========= ========= ========= =========
Portfolio turnover ....................... 18% 33% 33% 38% 47%
========= ========= ========= ========= =========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
17
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
Class D+
----------------------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended March 31,
Sept. 30, ------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ..... $ 32.58 $ 34.97 $ 37.49 $ 31.34 $ 30.86
Operating ----------- ----------- ----------- ----------- ---------
Performance: Investment income--net ................... .41 .86 .91 1.02 1.17
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ........................ .68 .60 (1.28) 8.14 2.43
----------- ----------- ----------- ----------- ---------
Total from investment operations ......... 1.09 1.46 (.37) 9.16 3.60
----------- ----------- ----------- ----------- ---------
Less dividends and distributions:
Investment income--net ................ (.49) (.86) (.98) (1.04) (1.18)
Realized gain on investments--net ..... (1.35) (2.99) (1.17) (1.97) (1.94)
----------- ----------- ----------- ----------- ---------
Total dividends and distributions ........ (1.84) (3.85) (2.15) (3.01) (3.12)
----------- ----------- ----------- ----------- ---------
Net asset value, end of period ........... $ 31.83 $ 32.58 $ 34.97 $ 37.49 $ 31.34
=========== =========== =========== =========== =========
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on net asset value per share ....... 3.59%++ 4.29% (.92%) 30.40% 12.34%
Return:** =========== =========== =========== =========== =========
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses ................................. .83%* .81% .82% .80% .80%
Average =========== =========== =========== =========== =========
Net Assets: Investment income--net ................... 2.56%* 2.50% 2.60% 2.95% 3.75%
=========== =========== =========== =========== =========
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) . $ 1,413,166 $ 1,428,120 $ 1,513,406 $ 1,280,317 $ 690,116
Data: =========== =========== =========== =========== =========
Portfolio turnover ....................... 18% 33% 33% 38% 47%
=========== =========== =========== =========== =========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
18
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Balanced Capital Fund, Inc. (the "Fund") (formerly Merrill Lynch
Capital Fund, Inc.) is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Fund's financial
statements are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal, recurring nature. The Fund offers four classes of shares under
the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C may be subject
to a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities that are traded on stock
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by or
under the authority of the Board of Directors as the primary market. Securities
that are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market. Options written
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Short-term securities are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not available are valued at fair value as determined in good faith by or under
the direction of the Fund's Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Options--The Fund is authorized to write covered call options. When the Fund
writes an option, an amount equal to the premium received by the Fund is
reflected as an asset and an equivalent liability. The amount of the liability
is subsequently marked to market to reflect the current market value of the
option written. When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written options are non-income producing investments.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to
19
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
its shareholders. Therefore, no Federal income tax provision is required. Under
the applicable foreign tax law, a withholding tax may be imposed on interest,
dividends, and capital gains at various rates.
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently recorded
when the Fund has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered
into a Distribution Agreement and Distribution Plans with FAM Distributors, Inc.
("FAMD" or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
MLIM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee
based upon the average daily value of the Fund's net assets at the following
annual rates: .50% of the Fund's average daily net assets not exceeding $250
million; .45% of average daily net assets in excess of $250 million but not
exceeding $300 million; .425% of average daily net assets in excess of $300
million but not exceeding $400 million; and .40% of average daily net assets in
excess of $400 million.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
--------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
--------------------------------------------------------------------------------
Class B ................................ .25% .75%
Class C ................................ .25% .75%
Class D ................................ .25% --
--------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended September 30, 2000, FAMD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
--------------------------------------------------------------------------------
FAMD MLPF&S
--------------------------------------------------------------------------------
Class A ............................. $3,875 $43,196
Class D ............................. $5,976 $57,276
--------------------------------------------------------------------------------
For the six months ended September 30, 2000, MLPF&S received contingent deferred
sales charges of $1,912,708 and $22,413 relating to transactions in Class B and
Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred
sales charges of $919 relating to transactions subject to front-end sales charge
waivers in Class D Shares.
In addition, MLPF&S received $288,438 in commissions on the execution of
portfolio security transactions for the six months ended September 30, 2000.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by MLIM at cost.
20
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
Certain officers and/or directors of the Fund are officers and/or directors of
MLIM, PSI, FDS, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended September 30, 2000 were $1,155,655,011 and $2,594,715,019,
respectively.
Net realized gains for the six months ended September 30, 2000 and net
unrealized gains (losses) as of September 30, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains Gains (Losses)
--------------------------------------------------------------------------------
Long-term investments .............. $329,455,613 $ 1,201,840,600
Foreign currency
transactions ....................... 258,872 (146,835)
------------ ---------------
Total .............................. $329,714,485 $ 1,201,693,765
============ ===============
--------------------------------------------------------------------------------
As of September 30, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $1,201,840,600, of which $1,428,030,650 related to
appreciated securities and $226,190,050 related to depreciated securities. At
September 30, 2000, the aggregate cost of investments for Federal income tax
purposes was $5,019,113,860.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$966,467,987 and $2,505,092,872 for the six months ended September 30, 2000 and
for the year ended March 31, 2000, respectively.
Transactions in capital shares for each class were as follows:
--------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended September 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 3,368,616 $ 107,843,611
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 4,321,107 131,923,412
----------- -------------
Total issued ........................... 7,689,723 239,767,023
Shares redeemed ........................ (14,976,300) (479,053,054)
----------- -------------
Net decrease ........................... (7,286,577) $(239,286,031)
=========== =============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares for the Dollar
Year Ended March 31, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold .......................... 9,410,973 $ 319,522,039
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 10,197,919 339,057,436
----------- ---------------
Total issued ......................... 19,608,892 658,579,475
Shares redeemed ...................... (39,927,027) (1,335,917,365)
----------- ---------------
Net decrease ......................... (20,318,135) $ (677,337,890)
============ ===============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended September 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 1,961,157 $ 61,111,730
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 3,590,468 106,816,432
----------- -------------
Total issued ........................... 5,551,625 167,928,162
Automatic conversion
of shares .............................. (6,964,820) (218,186,331)
Shares redeemed ........................ (20,443,254) (636,303,989)
----------- -------------
Net decrease ........................... (21,856,449) $(686,562,158)
=========== =============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares for the Dollar
Year Ended March 31, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold .......................... 10,306,641 $ 345,805,812
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 11,308,113 367,985,471
----------- ---------------
Total issued ......................... 21,614,754 713,791,283
Automatic conversion
of shares ............................ (15,428,399) (513,549,784)
Shares redeemed ...................... (58,471,743) (1,910,268,273)
----------- ---------------
Net decrease ......................... (52,285,388) $(1,710,026,774)
=========== ===============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended September 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 205,799 $ 6,335,641
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 415,146 12,180,380
---------- ------------
Total issued ........................... 620,945 18,516,021
Shares redeemed ........................ (2,440,421) (74,968,377)
---------- ------------
Net decrease ........................... (1,819,476) $(56,452,356)
========== ============
--------------------------------------------------------------------------------
21
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
--------------------------------------------------------------------------------
Class C Shares for the Dollar
Year Ended March 31, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ........................... 1,257,880 $ 42,153,278
Shares issued to shareholders
in reinvestment of dividends
and distributions ..................... 1,224,964 39,296,118
---------- -------------
Total issued .......................... 2,482,844 81,449,396
Shares redeemed ....................... (7,180,017) (231,410,305)
---------- -------------
Net decrease .......................... (4,697,173) $(149,960,909)
========== =============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended September 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 2,011,577 $ 64,371,200
Automatic conversion
of shares .............................. 6,789,989 218,186,331
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 2,329,418 70,977,355
----------- -------------
Total issued ........................... 11,130,984 353,534,886
Shares redeemed ........................ (10,568,754) (337,702,328)
----------- -------------
Net increase ........................... 562,230 $ 15,832,558
=========== =============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class D Shares for the Dollar
Year Ended March 31, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 7,099,032 $ 242,290,819
Automatic conversion
of shares .............................. 15,076,690 513,549,784
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 4,776,286 158,158,231
----------- -------------
Total issued ........................... 26,952,008 913,998,834
Shares redeemed ........................ (26,394,972) (881,766,133)
----------- -------------
Net increase ........................... 557,036 $ 32,232,701
=========== =============
--------------------------------------------------------------------------------
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds managed by MLIM
and its affiliates, entered into a $1,000,000,000 credit agreement with Bank of
America, N.A. and certain other lenders. The Fund may borrow money 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 .09% per annum based on the Fund's pro rata share of the
unused portion of the facility. Amounts borrowed under the facility bear
interest at a rate equal to, at each fund's election, the Federal Funds rate
plus .50% or a base rate as determined by Bank of America, N.A. The Fund did not
borrow under the facility during the six months ended September 30, 2000.
6. Reorganization Plan:
On May 1, 2000, the Fund's Board of Directors approved a plan of reorganization,
subject to shareholder approval and certain other conditions, whereby the Fund
would acquire substantially all of the assets and liabilities of Merrill Lynch
Convertible Fund, Inc. in exchange for newly issued shares of the Fund. Both
Funds are registered, open-end management investment companies that have a
similar investment objective and are managed by MLIM.
22
<PAGE>
Merrill Lynch Balanced Capital Fund, Inc. September 30, 2000
PORTFOLIO INFORMATION
As of September 30, 2000
Percent of
Ten Largest Common Stock Holdings Net Assets
United Technologies Corporation.......... 2.1%
Federal National Mortgage Association.... 2.0
American International Group, Inc........ 2.0
Mellon Financial Corporation............. 2.0
Verizon Communications................... 2.0
Citigroup Inc............................ 1.9
Pharmacia Corporation.................... 1.9
The Boeing Company....................... 1.9
The Coastal Corporation.................. 1.9
Anheuser-Busch Companies, Inc............ 1.9
Percent of
Ten Largest Industries Net Assets
Telecommunications....................... 6.0%
Banking.................................. 5.7
Diversified Companies.................... 5.1
Banking & Financial...................... 3.9
Insurance................................ 3.8
Pharmaceuticals.......................... 3.7
Natural Gas.............................. 3.7
Financial Services....................... 3.4
Wireless Communication--
Domestic Paging & Cellular............. 3.0
Computers................................ 2.9
Percent of
Geographic Diversification Net Assets
United States............................ 92.2%*
Switzerland.............................. 1.9
Bermuda.................................. 1.8
Argentina................................ 1.1
France................................... 1.0
Sweden................................... 1.0
Chile.................................... 0.4
South Korea.............................. 0.3
India.................................... 0.3
Cayman Islands........................... 0.2
Mexico................................... 0.2
* Includes investments in short-term securities.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
M. Colyer Crum, Director
Laurie Simon Hodrick, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Fred G. Weiss, Director
Arthur Zeikel, Director
Robert C. Doll, Jr., Senior Vice President
Kurt Schansinger, Senior Vice President and Portfolio Manager
Walter Cuje, Vice President
Donald C. Burke, Vice President and Treasurer
Thomas D. Jones, III, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
23
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch
Balanced Capital Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #10252--9/00
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