Purpose – This paper aims to develop a descriptive framework of the components of intellectual capital in annual reports. The paper also aims to investigate the effects of disclosure of intellectual capital on market capitalization. Design/methodology/approach – The components of intellectual capital are used as units of analysis to content analyze the annual reports of a sample of 58 Fortune 500 companies over the five-year period of 1993-1997. Findings – The frequency of disclosure of information about brand and proprietary processes has increased over the study period. The results also point to significant differences between the “new” and “old” economy sectors with respect to intellectual capital categories of brand and partnerships where there is more disclosure by “old” economy sector and information technology and intellectual property where there is more disclosure by the “new” economy sector. Finally, the results show a highly significant effect for the intellectual capital disclosure on market capitalization. Research limitations/implications – The time period is limited to the years before the market excesses of the late 1990s and the market decline of the 2000s. The results have significant implications for setting standards of disclosure of intellectual capital in annual reports. Originality/value – This is the first paper to provide information on disclosure of intellectual capital by fortune 500 companies in the USA. Its results have value for various users of annual reports who seek to understand the ways in which companies disclose information about their intellectual capital.